The Council presidency and European Parliament negotiators reached a provisional agreement on a proposal to streamline certain rules regarding artificial intelligence (AI).
The proposal forms part of the so-called ‘Omnibus VII’ legislative package in the EU’s simplification agenda. The package includes proposals for two regulations aiming to simplify the EU’s digital legislative framework and the implementation of harmonised rules on AI.
“Today’s agreement on the AI act significantly supports our companies by reducing recurring administrative costs. It ensures legal certainty and a smoother and more harmonised implementation of the rules across the Union, strengthening EU’s digital sovereignty and overall competitiveness. At the same time, we are stepping up the protection of children targeting risks linked to the AI systems. This agreement is clear evidence of our institutions’ ability to act swiftly and deliver on our commitments. It marks the first deliverable under the ‘One Europe, One Market’ roadmap agreed by the three institutions, well within the set deadline.” – Marilena Raouna, Deputy Minister for European affairs of the Republic of Cyprus
The Commission had proposed to adjust the timeline for applying rules on high-risk AI systems by up to 16 months, so that the rules start to apply once the Commission confirms the needed standards and tools are available. The Commission had also proposed further targeted amendments to the AI act that would extend certain regulatory exemptions granted to SMEs also to small mid-caps (SMCs), reduce requirements in a very limited number of cases, extend the possibility to process sensitive personal data for bias detection and mitigation, reinforce the AI Office’s powers and reduce governance fragmentation. Given that provisions on high-risk AI systems are due to enter into force on 2 August 2026, the co-legislators have treated the proposal with utmost priority, and, in that perspective, broadly maintained the thrust of the Commission’s proposal.
Main amendments introduced by the co-legislators
The co-legislators added a new provision in the AI act, prohibiting AI practices regarding the generation of non-consensual sexual and intimate content or child sexual abuse material (CSAM). The provisional agreement also introduces a fixed timeline for the delayed application of high-risk rules: the new application dates would be 2 December 2027 for stand-alone high-risk AI systems and 2 August 2028 for high-risk AI systems embedded in products.
Furthermore, the provisional agreement reinstates the obligation for providers to register AI systems in the EU database for high-risk systems, where they consider their systems to be exempted from classification as high-risk. It also reinstates the standard of strict necessity for the processing of special categories of personal data for the purpose of ensuring bias detection and correction.
The provisional agreement postpones the deadline for the establishment of AI regulatory sandboxes by competent authorities at national level until 2 August 2027 and reduces the grace period for providers to implement transparency solutions for artificially generated content from 6 months to 3 months, with the new deadline set on 2 December 2026. The deal between the co-legislators also clarifies the competences of the AI Office for the supervision of AI systems based on general-purpose AI models where the model and that system are developed by the same provider by listing exceptions where national authorities remain competent, including law enforcement, border management, judicial authorities and financial institutions.
As for the AI act’s rules for industrial AI and their interplay with sectoral legislation in sectors such as medical devices, toys, lifts, machinery and watercraft, a compromise was found between the co-legislators on a mechanism that allows to resolve situations in which sectoral law has similar AI-specific requirements to the AI act, by limiting the latter’s application in those specific cases through implementing acts. In addition to this, a compromise was found to exempt the machinery regulation from direct applicability of the AI act. The Commission was also empowered to adopt delegated acts under the machinery regulation which would add health and safety requirements in respect of AI systems that are classified as high-risk pursuant to the AI act. This solution effectively addresses any possible overlaps between the high-risk requirements from the AI act and those from sectoral legislation. The provisional agreement also adds a new obligation for the Commission to provide guidance to assist economic operators of high-risk AI systems covered by sectoral harmonisation legislation in complying with the high-risk requirements of the AI act in a manner that minimises compliance burden.
Next steps
Today’s provisional agreement must be now endorsed by the Council and the European Parliament before being submitted to a legal/linguistic revision with a view to the formal adoption of the legislative act by the co-legislators in the coming weeks.
Background
In October 2024, the European Council called on all EU institutions, member states and stakeholders, as a matter of priority, to take work forward, notably in response to the challenges identified in the reports by Enrico Letta (‘Much more than a market’) and Mario Draghi (‘The future of European competitiveness’). The Budapest declaration of 8 November 2024 subsequently called for ‘launching a simplification revolution’, by ensuring a clear, simple and smart regulatory framework for businesses and drastically reducing administrative, regulatory and reporting burdens, in particular for SMEs.
Since February 2025, as a follow-up to the call by EU Leaders at that and subsequent meetings, the Commission has put forward ten ‘Omnibus’ packages aiming to simplify existing legislation on sustainability, investment, agriculture, small mid-caps, digitalisation and common specifications, defence readiness, chemical products, digital issues including on AI, environment, the automotive sector and food and feed safety.
 
 
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With the EU Biotech Act marking a major push to strengthen Europe’s biotechnology sector, new OECD research offers a timely check on where the bloc stands. The evidence shows that Europe still lags competitors in biotech start-up creation, patenting and venture capital funding. This blog unpacks the gap and explores how agile regulation and smarter financing tools can help EU policymakers build a more competitive biotechnology start-up ecosystem.
Biotechnology has the potential to drive economic growth and high-value job creation, deliver life-saving treatments, and offer sustainable alternatives in manufacturing. The European Commission’s publication of the EU Biotech Act Part I (with a Part II focused on non-health biotechnologies and the broader bioeconomy expected in late 2026) reflects the scale of that ambition.
New OECD research suggests that the bloc has significant ground to make up: across indicators including start-up creation, patenting activity, and venture capital investment, the EU trails other major research economies.
Why Europe’s biotech research prowess isn’t producing start-ups
The European Union is a recognised world leader in foundational biotechnology research. In 2022, it held 21% of the global share of the top 10 most cited publications in biology, biomedical research and clinical medicine, close to the United States’ 22% and China’s 24%. Yet this strength is not translating into commercial activity. Data from the OECD Start-ups Database shows the EU has consistently produced around half as many biotechnology start-ups as the US over the past two decades. Whilst this gap has narrowed in recent years, this appears to be driven by a contraction in the US rather than growth in Europe.
This points to weaknesses in the EU biotechnology innovation ecosystem, ones that become clearer when examining two key enablers of start-up creation: intellectual property and funding.
Shortcomings in European patenting and VC funding
Patenting reflects an ecosystem’s ability to turn R&D into commercially viable intellectual property and is critical for start-ups seeking to protect innovations and secure financing. Yet, between 2000 and 2022, EU biotechnology start-ups fell steadily behind their US counterparts in patent filing. The gap peaked in 2022 with US start-ups filing almost four times as many patents. While this partly reflects the larger number of US start-ups, it still points to a comparative weakness in European biotechnology innovation.

Venture capital is particularly important to biotech start-ups, which face long development cycles, high upfront R&D costs and complex regulatory processes, making early-stage funding critical for survival and growth. Here too, the EU lags significantly. OECD analysis shows the US has consistently outpaced the EU in biotech venture capital investment over the past decade, peaking in 2021 when US funding was up to 10 times greater.

How EU biotechnology regulation impacts innovation and investment
These gaps reflect many interconnected factors, from entrepreneurship culture to international competition. But regulation deserves particular attention, given its direct influence on investment patterns and start-up development.
OECD research has found that EU biotechnology regulation is both complex and fragmented, with overlapping rules at both the European and Member State level creating uncertainty for innovators. In some cases, existing legislation even works actively against biotechnology adoption. The Fertilizing Products Regulation, for example, only permits microbial strains in fertilizer products if they are not genetically modified, effectively blocking novel biotech alternatives to traditional chemical fertilisers.
Beyond complexity, the EU regulatory approval process is notably slow. Strict data requirements and limited scope for derogation and pre-submission consultations between innovators and regulators all contribute to lengthy and costly timelines. In contrast, jurisdictions like the US and Singapore routinely offer pre-submission consultations, helping innovators clarify expectations and avoid delays. The difference in outcomes is notable. Industry studies suggest that approving genetically modified crops for food and feed, for example, can take up to 6 years in the EU, compared to 1.8 years in the United States, 1 year in Australia, and 5 months in Canada.
What can EU policymakers do to boost biotech start-up competitiveness?
OECD research points to agile regulation as a way to make approval processes more adaptable. In practice, this means tools like regulatory sandboxes and innovation testbeds that allow for controlled real-world experimentation, and early structured engagement between regulators and innovators to streamline complex approval pathways.
Strategic foresight approaches and participatory technology assessments can also help by identifying where these tools are most needed across the policy cycle (see diagram below).
The United Kingdom’s Engineering Biology Sandbox Fund offers a concrete example. In 2024, it provided £1.6 million to the Food Standards Agency Cell-Cultivated Product (CCP) Sandbox Programme, which allowed regulators to build familiarity with novel technologies while helping participating companies reduce approval timelines and attract scale-up investment.

Smarter financing can also help close the gap. De-risking tools – such as risk transfer mechanisms, blended finance structures, and public co-investment and guarantees – can support biotech start-ups at the costly stages of demonstration and scale-up, where private capital is the hardest to attract. Demand-side measures can work alongside these efforts. The United States Department of Agriculture’s BioPreferred Program, for example, requires federal buyers to prefer bio-based products across 139 categories (e.g. paints, lubricants), backed by a database of almost 10 000 products. This kind of demand gives investors confidence that markets exist for biotechnology innovations, a signal that European policymakers could replicate.
Can the EU Biotech be a game changer for biotechnology start-ups?
The EU Biotech Act Part I appears to address several of the barriers and solutions outlined above. For example, it introduces regulatory sandboxes to allow controlled experimentation with novel technologies, expands pre-submission consultations to help innovators navigate regulatory submission processes, creates a strategic project designation to fast-track funding and regulatory clearance, and establishes a €10 billion Health Biotechnology Investment Pilot with the European Investment Bank to mobilise private capital through risk-sharing instruments.
These are substantive measures. But their long-term impact will depend on whether regulation becomes more agile in practice, and whether financing instruments reach biotech start-ups at the costly stages of demonstration and scale-up. Closing the gap in biotechnology start-up creation, venture capital investment and patenting will require measures designed with start-ups explicitly in mind: faster, simpler and more accessible pathways that turn Europe’s research excellence into commercial activity.

Click here to access the interactive charts.
 
 
 

Compliments of the Organisation for Economic Co-operation and Development

The post OECD | Biotech Start-Ups in Europe: Why Does the EU Lag Behind Competitors and What Can Policymakers do About it? first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.