The NIS 2 Directive

16 April 2024 – The European Systemic Risk Board (ESRB) published the paper “Advancing macroprudential tools for cyber resilience – Operational policy tools, April 2024.”

According to the paper, the pan-European systemic cyber incident coordination framework (EU-SCICF) should build on the Digital Operational Resilience Act (DORA) for the financial sector and should complement existing frameworks (e.g. financial and cyber incident) as well as the Network and Information Security (NIS2) Directive and the Resilience of Critical Entities Directive (CER).

Read the paper at: Advancing macroprudential tools for cyber resilience – Operational policy tools, April 2024

18 September 2023 - Commission Guidelines about the relationship between the NIS 2 Directive and the Digital Operational Resilience Act (DORA).

The Commission Guidelines on the application of Article 4 (1) and (2) of the NIS 2 Directive, that was published at the Official Journal of the European Union the 18th of September 2023, covers some of the major areas of concern for entities that try to understand if they must comply with the NIS 2 Directive, or the Digital Operational Resilience Act (DORA) and other sector-specific Union legal acts.

Article 4(1) of the NIS 2 Directive provides that, where sector-specific Union legal acts (like DORA, that applies in the financial sector) require essential or important entities to adopt cybersecurity risk-management measures or to notify significant incidents, and where those requirements are at least equivalent in effect to the obligations laid down in the NIS 2 Directive, the relevant provisions of the NIS 2 Directive shall not apply to such entities. The sector-specific provisions will apply.

That provision further provides that where sector-specific Union legal acts do not cover all entities in a specific sector falling within the scope of the NIS 2 Directive, the relevant provisions of the NIS 2 Directive shall continue to apply to the entities not covered by those sector-specific Union legal acts.

Article 4(2)(a) of the NIS 2 Directive provides that cybersecurity risk-management measures that essential or important entities are required to adopt under sector-specific Union legal acts shall be considered to be equivalent in effect to the obligations laid down in the NIS 2 Directive, where those measure are at least equivalent in effect to those laid down in Article 21(1) and (2) of the NIS 2 Directive.

When assessing whether the requirements in a sector-specific Union legal act on cybersecurity risk-management measures are at least equivalent in effect to those laid down in Article 21(1) and (2) of the NIS 2 Directive, the requirements in that sector-specific Union legal act should, at a minimum, correspond to the requirements of those provisions or go beyond them, meaning that the sector-specific provisions may be more granular on substance compared to the corresponding provisions of the NIS 2 Directive.

An important consideration when assessing the equivalence of a sector-specific Union legal act with the requirements of Article 21(1) and (2) of the NIS 2 Directive is that the cybersecurity risk-management measures required by the sector-specific Union legal act should be based on an ‘all-hazard approach’.

Since threats to the security of network and information systems could have different origins, any type of event can have a negative impact on the network information systems of the entity and potentially lead to an incident. Therefore, the cybersecurity risk-management measures taken by the entity should protect not only the entity’s network and information systems, but also the physical environment of those systems from any event such as sabotage, theft, fire, flood, telecommunication or power failures, or unauthorised physical access that are capable of compromising the availability, authenticity, integrity or confidentiality of stored, transmitted or processed data or of the services offered by, or accessible via, network and information systems.

Consequently, the cybersecurity risk-management measures required by a sector-specific Union legal act should specifically address the physical and environmental security of network and information systems from systems failure, human error, malicious acts, or natural phenomena.

NIS 2 and DORA.

The Commission Guidelines about the relationship between the NIS 2 Directive and the Digital Operational Resilience Act (DORA) of 18 September 2023, further explain the following in the Appendix:

Article 1(2) of DORA provides that, in relation to financial entities covered by the NIS 2 Directive and its corresponding national transposition rules, DORA shall be considered a sector-specific Union legal act for the purposes of Article 4 of the NIS 2 Directive.

This statement is mirrored in recital (28) of the preamble to the NIS 2 Directive, which says that DORA should be considered a sector-specific Union legal act in relation to the NIS 2 Directive with regard to financial entities.

Consequently, the provisions of DORA relating to information and communication technology (ICT) risk management (Article 6 et seq.), management of ICT-related incidents and, in particular, major ICT-related incident reporting (Article 17 et seq.), as well as on digital operational resilience testing, (Art 24 et seq.) information-sharing arrangements (Article 25) and ICT third-party risk (Article 28 et seq.) shall apply instead of those provided for in the NIS 2 Directive.

Member States should therefore not apply the provisions of the NIS 2 Directive on cybersecurity risk-management and reporting obligations, and supervision and enforcement, to financial entities covered by DORA.

November 28, 2022 - the Council adopts the NIS 2 Directive.

The NIS 2 Directive replaces and repeals the NIS Directive (Directive 2016/1148/EC). NIS 2 will improve cybersecurity risk management and will introduce reporting obligations across sectors such as energy, transport, health and digital infrastructure.

Next step: The directive will be published in the Official Journal of the European Union in the coming days, and will enter into force on the twentieth day following this publication.

Member states must incorporate the provisions of the NIS 2 Directive into national law in 21 months from the entry into force of the directive.

November 10, 2022 - the European Parliament adopts the NIS 2 Directive.

The NIS 2 Directive replaces and repeals the NIS Directive (Directive 2016/1148/EC).

Next step: The Council of the European Union must formally adopt the text of the NIS 2 Directive.

May 13, 2022 - Strengthening EU-wide cybersecurity and resilience – provisional agreement by the Council and the European Parliament

The Council and the European Parliament agreed on measures for a high common level of cybersecurity across the Union, to further improve the resilience and incident response capacities of both the public and private sector and the EU as a whole.

Once adopted, the new directive, called ‘NIS2’, will replace the current directive on security of network and information systems (the NIS directive).

Stronger risk and incident management and cooperation

NIS2 will set the baseline for cybersecurity risk management measures and reporting obligations across all sectors that are covered by the directive, such as energy, transport, health and digital infrastructure.

The revised directive aims to remove divergences in cybersecurity requirements and in implementation of cybersecurity measures in different member states. To achieve this, it sets out minimum rules for a regulatory framework and lays down mechanisms for effective cooperation among relevant authorities in each member state. It updates the list of sectors and activities subject to cybersecurity obligations, and provides for remedies and sanctions to ensure enforcement.

The directive will formally establish the European Cyber Crises Liaison Organisation Network, EU-CyCLONe, which will support the coordinated management of large-scale cybersecurity incidents.

Widening of the scope of the rules

While under the old NIS directive member states were responsible for determining which entities would meet the criteria to qualify as operators of essential services, the new NIS2 directive introduces a size-cap rule. This means that all medium-sized and large entities operating within the sectors or providing services covered by the directive will fall within its scope.

While the agreement between the European Parliament and the Council maintains this general rule, the provisionally agreed text includes additional provisions to ensure proportionality, a higher level of risk management and clear-cut criticality criteria for determining the entities covered.

The text also clarifies that the directive will not apply to entities carrying out activities in areas such as defence or national security, public security, law enforcement and the judiciary. Parliaments and central banks are also excluded from the scope.

As public administrations are also often targets of cyberattacks, NIS2 will apply to public administration entities at central and regional level. In addition, member states may decide that it applies to such entities at local level too.

Other changes introduced by the co-legislators

The European Parliament and the Council have aligned the text with sector-specific legislation, in particular the regulation on digital operational resilience for the financial sector (DORA) and the directive on the resilience of critical entities (CER), to provide legal clarity and ensure coherence between NIS2 and these acts.

A voluntary peer-learning mechanism will increase mutual trust and learning from good practices and experiences, thereby contributing to achieving a high common level of cybersecurity.

The two co-legislators have also streamlined the reporting obligations in order to avoid causing over-reporting and creating an excessive burden on the entities covered.

Member states will have 21 months from the entry into force of the directive in which to incorporate the provisions into their national law.

Next steps

The provisional agreement concluded today is now subject to approval by the Council and the European Parliament.

On the Council’s side, the French presidency intends to submit the agreement to the Council’s Permanent Representatives Committee for approval soon.

A revised Directive on Security of Network and Information Systems (NIS 2 Directive).

16.12.2020 - The European Commission adopted a proposal for a revised Directive on Security of Network and Information Systems (NIS 2 Directive).

In spite of its notable achievements, the Directive on the security of network and information systems (NIS Directive), has by now also proven its limitations. The digital transformation of society (intensified by the COVID-19 crisis) has expanded the threat landscape and is bringing about new challenges, which require adapted and innovative responses.

Now any disruption, even one initially confined to one entity or one sector, can have cascading effects more broadly, potentially resulting in far-reaching and long-lasting negative impacts in the delivery of services across the whole internal market.

To address these challenges, as announced in the Communication on Shaping Europe’s Digital Future, the Commission accelerated the Directive’s review to the end of 2020, carried out an impact assessment and presented a new legislative proposal.

This proposal is part of a package of measures to improve further the resilience and incident response capacities of public and private entities, competent authorities and the Union as a whole in the field of cybersecurity and critical infrastructure protection. It is in line with the Commission’s priorities to make Europe fit for the digital age and to build a future-ready economy that works for the people.

Cybersecurity is a priority in the Commission’s response to the COVID-19 crisis. The package includes a new Strategy on Cybersecurity with the aim of strengthening the Union’s strategic autonomy to improve its resilience and collective response and to build an open and global internet. Finally, the package contains a proposal for a directive on the resilience of critical operators of essential services, which aims to mitigate physical threats against such operators.

This proposal builds on and repeals Directive (EU) 2016/1148 on security of network and information systems (NIS Directive), which is the first piece of EU-wide legislation on cybersecurity and provides legal measures to boost the overall level of cybersecurity in the Union. The NIS Directive has:

(1) contributed to improving cybersecurity capabilities at national level by requiring Member States to adopt national cybersecurity strategies and to appoint cybersecurity authorities;

(2) increased cooperation between Member States at Union level by setting up various fora facilitating the exchange of strategic and operational information; and

(3) improved the cyber resilience of public and private entities in seven specific sectors (energy, transport, banking, financial market infrastructures, healthcare, drinking water supply and distribution, and digital infrastructures) and across three digital services (online marketplaces, online search engines and cloud computing services) by requiring Member States to ensure that operators of essential services and digital service providers put in place cybersecurity requirements and report incidents.

The proposal modernises the existing legal framework taking account of the increased digitisation of the internal market in recent years and an evolving cybersecurity threat landscape. Both developments have been further amplified since the onset of the COVID-19 crisis. The proposal also addresses several weaknesses that prevented the NIS Directive from unlocking its full potential.

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

The evaluation on the functioning of the NIS Directive, conducted for the purposes of the Impact Assessment, identified the following issues:

(1) the low level of cyber resilience of businesses operating in the EU;

(2) the inconsistent resilience across Member States and sectors; and

(3) the low level of joint situational awareness and lack of joint crisis response. For example, certain major hospitals in a Member State do not fall within the scope of the NIS Directive and hence are not required to implement the resulting security measures, while in another Member State almost every single healthcare provider in the country is covered by the NIS security requirements.

Being an initiative within the Regulatory Fitness Programme (REFIT), the proposal aims at reducing the regulatory burden for competent authorities and compliance costs for public and private entities. Most notably, this is achieved by abolishing the obligation of competent authorities to identify operators of essential services and by increasing the level of harmonisation of security and reporting requirements to facilitate regulatory compliance for entities providing cross-border services. At the same time, competent authorities will also be given a number of new tasks, including the supervision of entities in sectors so far not covered by the NIS Directive.

16.12.2020 - The Proposal for a directive on measures for a high common level of cybersecurity across the Union, repealing Directive (EU) 2016/1148

16.12.2020 - Annexes to the Proposal for a directive on measures for a high common level of cybersecurity across the Union, repealing Directive (EU) 2016/1148

The NIS 2 Directive, European Parliament, A high common level of cybersecurity in the EU

European Council - Strengthening EU-wide cybersecurity and resilience.

NIS 2 will set the baseline for cybersecurity risk management measures and reporting obligations across all sectors that are covered by the directive, such as energy, transport, health and digital infrastructure.

The revised directive aims to remove divergences in cybersecurity requirements and in implementation of cybersecurity measures in different member states. To achieve this, it sets out minimum rules for a regulatory framework and lays down mechanisms for effective cooperation among relevant authorities in each member state. It updates the list of sectors and activities subject to cybersecurity obligations, and provides for remedies and sanctions to ensure enforcement.

The directive will formally establish the European Cyber Crises Liaison Organisation Network, EU-CyCLONe, which will support the coordinated management of large-scale cybersecurity incidents.

While under the old NIS directive member states were responsible for determining which entities would meet the criteria to qualify as operators of essential services, the new NIS2 directive introduces a size-cap rule. This means that all medium-sized and large entities operating within the sectors or providing services covered by the directive will fall within its scope.

While the Council’s position maintains this general rule, it includes additional provisions to ensure proportionality, a higher level of risk management and clear-cut criticality criteria for determining the entities covered.

The Council text also clarifies that the directive will not apply to entities carrying out activities in areas such as defence or national security, public security, law enforcement and the judiciary. Parliaments and central banks are also excluded from the scope.

As public administrations are also often targets of cyberattacks, NIS2 will apply to public administration entities of central governments. In addition, member states may decide that it applies to such entities at regional and local level too.

The first NIS directive, main elements.

The NIS Directive provides legal measures to boost the overall level of cybersecurity in the EU, in order to contribute to the overall functioning of the internal market. It is based on 3 main pillars:

1. In order to achieve a high level of preparedness of Member States, the NIS Directive requires Member States to adopt a national strategy on the security of network and information systems. Member States are also required to designate national Computer Security Incident Response Teams (CSIRTs), who are responsible for risk and incident handling, a competent national NIS authority, and a single point of contact (SPOC). The SPOC has to exercise a liaison function to ensure cross-border cooperation between the Member State authorities with the relevant authorities in other Member States and with the NIS Cooperation Group.

2. The NIS Directive establishes the NIS Cooperation Group to support and facilitate strategic cooperation and the exchange of information among Member States, and the CSIRTs Network, which promotes swift and effective operational cooperation between national CSIRTs.

3. The NIS Directive ensures that cybersecurity measures are taken across seven sectors, which are vital for our economy and society and which rely heavily on ICT, such as energy, transport, banking, financial market infrastructures, drinking water, healthcare and digital infrastructure.

Public and private entities identified by the Member States as operators of essential services (OES) in these sectors are required to undertake a cybersecurity risk assessment and put in place appropriate and proportionate security measures. They are required to notify serious incidents to the relevant authorities. And, providers of key digital services (digital service providers or DSPs), such as search engines, cloud computing services and online marketplaces, have to comply with the security and notification requirements under the Directive. At the same time, the latter are subject to a so-called ‘light-touch’ regulatory regime, which entails, among other measures, that they are under the jurisdiction of one Member State for the whole EU and are not subjected to ex-ante supervisory measures.

The new NIS 2 directive, main elements.

The new Commission proposal aims to address the deficiencies of the previous NIS Directive, to adapt it to the current needs and make it future-proof.

To this end, the Commission proposal expands the scope of the current NIS Directive by adding new sectors based on their how crucial they are for the economy and society, and by introducing a clear size cap — meaning that all medium and large companies in selected sectors will be included in the scope. At the same time, it leaves some flexibility for Member States to identify smaller entities with a high security risk profile.

The proposal also eliminates the distinction between operators of essential services and digital service providers. Entities would be classified based on their importance, and divided into essential and important categories, which will be subjected to different supervisory regimes.

The proposal strengthens and streamlines security and reporting requirements for companies by imposing a risk management approach, which provides a minimum list of basic security elements that have to be applied. The proposal introduces more precise provisions on the process for incident reporting, content of the reports and timelines.

Furthermore, the Commission proposes to address security of supply chains and supplier relationships by requiring individual companies to address cybersecurity risks in supply chains and supplier relationships. At European level, the proposal strengthens supply chain cybersecurity for key information and communication technologies. Member States in cooperation with the Commission and ENISA, may carry out coordinated risk assessments of critical supply chains, building on the successful approach taken in the context of the Commission Recommendation on Cybersecurity of 5G networks.

The proposal introduces more stringent supervisory measures for national authorities, stricter enforcement requirements and aims at harmonising sanctions regimes across Member States.

The proposal also enhances the role of the Cooperation Group in shaping strategic policy decisions and increases information sharing and cooperation between Member State authorities. It also enhances operational cooperation including on cyber crisis management.

The Commission proposal also establishes a basic framework with responsible key actors on coordinated vulnerability disclosure for newly discovered vulnerabilities across the EU and creates EU registry in this area, operated by the EU agency for cybersecurity (ENISA).