The European Parliament announced a "provisional agreement" aimed at improving cybersecurity and resilience of both public and private sector entities in the European Union.
The revised directive, called "NIS2" (short for network and information systems), is expected to replace the existing legislation on cybersecurity that was established in July 2016.
The revamp sets ground rules, requiring companies in energy, transport, financial markets, health, and digital infrastructure sectors to adhere to risk management measures and reporting obligations.
Among the provisions in the new legislation are flagging cybersecurity incidents to authorities within 24 hours, patching software vulnerabilities, and readying risk management measures to secure networks, failing which can incur monetary penalties.
"The directive will formally establish the European Cyber Crises Liaison Organization Network, EU-CyCLONe, which will support the coordinated management of large-scale cybersecurity incidents," the Council of the European Union said in a statement last week.
The development closely follows the European Commission's plans to "detect, report, block, and remove" child sexual abuse images and videos from online service providers, including messaging apps, prompting concerns that it may undermine end-to-end encryption (E2EE) protections.
The draft version of NIS2 explicitly spells out that the use of E2EE "should be reconciled with the Member States' powers to ensure the protection of their essential security interests and public security, and to permit the investigation, detection and prosecution of criminal offenses in compliance with Union law."
It also stresses that "solutions for lawful access to information in end-to-end encrypted communications should maintain the effectiveness of encryption in protecting privacy and security of communications, while providing an effective response to crime."
That said, the directive will not apply to organizations in verticals such as defense, national security, public security, law enforcement, judiciary, parliaments, and central banks.
As part of the proposed agreement, the European Union member states are mandated to incorporate the provisions into their national law within a period of 21 months from when the directive goes into force.
"The number, magnitude, sophistication, frequency and impact of cybersecurity incidents are increasing, and present a major threat to the functioning of network and information systems," the Council noted in the draft.
"Cybersecurity preparedness and effectiveness are therefore now more essential than ever to the proper functioning of the internal market."
