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National health platform: Governance and legal framework

Transcript

Intro

In principle, establishing and developing a national health platform on the basis of an existing legal framework is a feasible option. However, given the innovative nature of the platform and the diversity of its anticipated tasks, it seems advisable to create a new legal structure, or perhaps even multiple ones, for its operational framework.

What factors should be weighed when selecting the appropriate legal structure?

When determining the legal framework for the national health platform, it is important to consider what features the platform should have. This is because German corporate law specifically provides for a wide variety of legal forms, each carrying its own set of advantages and drawbacks. In any case, it’s important to ensure the platform’s operational capability. Whatever the chosen legal form, it should grant the platform a legal personality, thus enabling it to bear rights and responsibilities.

It should also be aligned with the platform’s mission statement, which targets the common good, as opposed to purely profit-driven objectives. Here, too, the German legal context provides for legal structures that are more or less committed to this ethos.

Finally, and perhaps most importantly, the chosen legal form should provide flexibility. The platform is expected to take on evolving roles and tasks, some of which may not be clearly defined at its inception. Furthermore, the selected legal framework should facilitate collaboration between both private and government organizations within the platform.

Which organization could assume responsibility for the platform?

In principle, establishing and developing a national health platform on the basis of an existing legal framework is a feasible option. However, given the innovative nature of the platform and the diversity of its anticipated tasks, it seems advisable to create a new legal structure, or perhaps even multiple ones, for its operational framework.

What are the pros and cons of a private-law versus public-law form of governance?

Publicly governed legal structures are typically accessible only to governmental entities. In other words, not everyone can opt for such a legal framework but, rather, only entities at the federal, state or municipal levels of government. While public legal structures do come with certain privileges, including advantages in financing and decision-making processes,

these privileges also entail certain drawbacks. Most notably, these kinds of legal structures tend to be less adaptable and flexible. This means that when such projects take on new responsibilities, adjustments must be made to their legal basis. Furthermore, public and private actors cannot easily collaborate under the umbrella of a publicly governed legal structure.

What recommendations can be derived from this for the organizational framework of a national healthcare platform?

It’s important to choose a legal form for the national health platform that provides for operational viability, that is, a form that grants the platform a legal personality. Publicly governed legal forms seem to be less suitable for such a platform. Instead, privately held legal structures, which confer legal personality, seem preferable. Another option might be to allocate different platform responsibilities or business domains to distinct entities or businesses, each of which adopts the appropriate legal form. These companies can then, in turn, be brought together under the common umbrella of a holding company.

Disclaimer

The statements made in this interview are relevant exclusively to the German legal context. They offer a framework for guidance and should not be interpreted as providing legal counsel beyond the scope of the Trusted Health Ecosystems project.

Content

Expert

While completing her doctoral studies, Prof. Dr. Laura Schulte gained experience in the field of constitutional law as a research assistant. Her doctoral thesis focused on data protection law, and she conducted further research on this subject at various institutions, including the Queen Mary School of Law in London. From 2020 to 2023, she was employed as an attorney at BRANDI Rechtsanwälte in Bielefeld, specializing in IT and data protection law. Since August 2023, she has held the position of professor of business law at the Hochschule Bielefeld.

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    National health platform: The state as a provider of information

    Transcript

    Intro

    If we view the national health platform as a central node of a network that involves government actors, it must adhere to the legal criteria governing state bodies.

    What constitutes government public service messaging, and how does it relate to the concept of a national health platform?

    Essentially any form of activity by which the state communicates information to the public can be regarded as a form of government public service messaging. This can include, for example, providing informing about specific topics such as certain medical conditions or endorsing behaviors like walking 10,000 steps a day. It also involves issuing warnings about certain products, like the use of specific medical devices. And it doesn’t necessarily matter which government agency is the source of this information. It could come from a federal ministry, a state or regional parliament, or a local government agency.

    Why is government public service messaging subject to specific legal requirements?

    The state’s activity in terms of providing information to the public is subject to distinct legal requirements because government entities typically have access to significantly different kinds of resources for their informational activities compared to privately owned businesses. Government agencies usually attract a great deal of public attention when issuing information and enjoy a certain degree of authority and trust, particularly among patients.

    This means that when, for instance, a federal ministry issues a warning about the use of a specific medical device, this effectively functions as a ban on that product. Citizens are much less likely to purchase the device if the government has officially cautioned against it. In practical terms, government public service messaging can significantly influence market dynamics. It can, for example, impact other providers of digital healthcare services’ fundamental right to occupational freedom.

    What guidance can be extrapolated from this for the governance of a national platform?

    If government actors are to participate in the national health platform, the platform will need to comply with the typically stringent legal requirements that are applicable to state entities. As a rule, this will involve establishing a legal framework. Even if product warnings are not the main focus of the project, the fundamental rights of providers of digital healthcare services could plausibly be affected by such an undertaking.

    This suggests that the national health platform should be run by a non-governmental organization such as a civil society organization that enjoys more flexibility. And this wouldn’t need to rule out public funds as a source of financing, as public financing doesn’t necessaeily dictate that the chosen governance or ownership model be based in public law.

    Disclaimer

    The statements made in this interview are relevant exclusively to the German legal context. They offer a framework for guidance and should not be interpreted as providing legal counsel beyond the scope of the Trusted Health Ecosystems project.

    Content

    Expert

    While completing her doctoral studies, Prof. Dr. Laura Schulte gained experience in the field of constitutional law as a research assistant. Her doctoral thesis focused on data protection law, and she conducted further research on this subject at various institutions, including the Queen Mary School of Law in London. From 2020 to 2023, she was employed as an attorney at BRANDI Rechtsanwälte in Bielefeld, specializing in IT and data protection law. Since August 2023, she has held the position of professor of business law at the Hochschule Bielefeld.

    Your feedback is important to us

    To contact our project team, please use our form. We look forward to your message and will get back to you as soon as possible.


      Ownership: Public or private?

      Prof. Dr. Laura Schulte

      When establishing a national healthcare platform, it is crucial to identify a suitable legal structure that fulfills all the necessary requirements and effectively supports the ecosystem in which it operates. In terms of ownership, a number of different options are available, each involving a variety of advantages and disadvantages. The first question to arise at this point is whether the platform should be operated by a public or a private-sector actor.

      The challenge

      The tasks and services involved in a national health platform are complex and diverse. It is therefore absolutely essential that the platform ecosystem be set up in such a way that it can address each task and manage each service in a flexible manner, including any future tasks and services not yet identified today. Herein lies the challenge associated with finding the optimal legal structure for such an ecosystem. In any effort to do so, the following aspects must be taken into account:

      Requirements

      Alignment with the common good

      In principle, the ecosystem should not be commercially oriented. Instead, it should operate on a not-for-profit basis. All forms of revenue generated within the ecosystem should be used to extend the system itself and develop it further.

      Flexibility

      The ecosystem needs to be able to perform as yet unidentified tasks. It should therefore be open to ongoing development and innovation. In addition, both state and non-state actors should be able to work together side-by-side in the ecosystem.

      Transparency

      The actions, decisions and financing of the ecosystem, particularly when it fulfills a legal or public service mandate, should be transparent to the general public.

      Considering these requirements, two key questions arise regarding the organizational form of the ecosystem:

      1. Should an existing legal structure be utilized or should a new legal structure be created?
      2. Should the legal structure be rooted in public or private law?

      While utilizing an existing legal structure is a possibility, creating new legal structures would be more appropriate, given the need for innovation and multifunctionality within the ecosystem. Regardless of whether the ecosystem is governed by public or private law, it is important to distinguish between legal forms with and without legal personality. Legal forms organized under public law, which include the type of public institution known in Germany as an Anstalt des Öffentlichen Rechts, are privileged in a number of ways, for example with regard to their financing. On the other hand, they are also subject to stricter legal obligations than companies organized under private law, for example, in terms of the transparency of their decision-making. In addition, enterprises organized under public law are only permitted to integrate private actors uinder certain instances, which would make it even more difficult to achieve the goal of implementing the most inclusive ecosystem possible. With public enterprises, the focus is also generally on the realization of a public-oriented goal or public-service mandate, which contrasts significantly to primarily for-profit enterprises.

      Irrespective of the question as to whether the ecosystem’s structure should come under public or private law, we can generally distinguish between legal forms that have their own legal personality under the law and those that do not. Legal forms that do not have their own legal personality include, for example, partnerships (Personengesellschaften) and those municipal agencies known in Germany as Regiebetriebe, which are publicly owned and operated. Considering the allocation of multiple complex tasks within an ecosystem, it becomes apparent that legal forms lacking independence are unlikely to be suitable as potential ecosystem structures. This is particularly important as stakeholders need the ability to independently undertake legal actions, including entering into contracts with service providers. On the other hand, corporations (Körperschaften) are recognized as independent legal entities with the capacity to hold rights and obligations. The legal capacity to hold rights and obligations will thus constitute an indispensable prerequisite for the structure of the ecosystem.

      Background

      In principle, a distinction can be made between two forms of legal association: on the one hand, partnerships – e.g. the civil-law partnership – and, on the other hand, corporations – e.g. the association with legal capacity, the stock corporation or the limited liability companies. In general, there are two forms of legal association, namely partnerships (e.g., a Gesellschaft bürgerlichen Rechts or “GbR” under the German Civil Code) and corporations (Körperschaften), which include associations that have been granted legal capacity, stock corporations and limited liability companies.

      Partnerships (Personengesellschaften) are generally not granted full legal capacity, which means they are restricted in their ability to acquire and exercise rights. In addition, they are at their core focused on the natural persons behind the partnership. This factor tends to make it more difficult for actors to move in and out of a company. In other words, considering the overarching objective of the national health platform in Germany, the reasonable conclusion here would be that partnerships are fundamentally unsuitable as a structural form for the ecosystem.

      Corporations (Körperschaften) are permanent associations of persons for the purpose of achieving a function that goes beyond the individual. In contrast to partnerships, they operate independently of any changes with regard to individual members. Most corporations are legal persons, which means they can be bearers of rights and obligations, that is, they can enter into contracts. Corporations can also be organized under both private and public law.

      Public corporations (Körperschaften des öffentlichen Rechts) are associations created by the act of a sovereign state and tasked with carrying out a public service. These corporations are owned by their members, who have a significant influence on policy and decision-making. Membership can be voluntary, but in some cases it can also be compulsory by law.

      Organizational forms under public law are not available to everyone, however. Instead, they serve exclusively to fulfil a public task or statutory mandate. Accordingly, corporations under public law have certain unique powers and privileges. In particular, they can exercise public authority within the scope of their respective statutory mandate.

      The downside of this privileged public position is a relatively low degree of flexibility, at least in practical terms. For example, as government or quasi-government institutions, they are obliged to comply with fundamental rights. Indeed, corporations under public law are frequently rooted in a legal basis. This means that any change in orientation, competency or task may require an adjustment to their legal basis.

      Public law institutions (Anstalten des öffentlichen Rechts) are aggregations of material resources (e.g., buildings, equipment) and personal resources (personnel) brought together for the purpose of managing a public institution. They are legal persons to whom certain tasks have been assigned, whether by law or by statute, and who have also been entrusted with fulfilling a public mission. As a rule, these public institutions and/or their services are placed at the disposal of citizens. Some examples of institutions under public law in Germany are public broadcasting corporations, universities and savings banks. These public law institutions have their own legal personality that allows them to carry out their activities independently.

      Foundations (Stiftungen) can be organized under both private and public law. In general, foundations are designed to enable the management of assets for the benefit of specific purposes. Foundations under public law are usually created by the state via some kind of law or decree, which makes their establishment and subsequent development a rather bureaucratic process. It is also relatively difficult to integrate private-sector actors, which can be financed by a foundation, but only integrated into its decision-making processes to a limited extent. A foundation under public law is financially dependent on public budgets and grants. In practical terms, this means that it is comparatively difficult to secure a foundation’s long-term financing and thus its long-term operation. Indeed, the performance of such a foundation is likely to be directly dependent upon each new government’s budget.

      “For the role of operator, having the status of a legal person under private law provides flexibility and makes it possible for private and state actors to work alongside one another.”

      Prof. Dr. Laura Schulte

      Organizational forms under public law thus offer very little versatility and are therefore not well-suited to serve as operators of a national health platform. They are frequently rooted in legislation, which means that any increase in their tasks or competencies may require a time-consuming amendment to the law. Furthermore, all forms of organization under public law are directly obliged to comply with fundamental rights.

      The participatory rights of third parties, such as service providers in the health care sector, can also be partially derived from a public law institution’s binding obligation to comply with fundamental rights. Furthermore, public institutions are subject to certain requirements when it comes to any competitive action they undertake, and some of these rules may be stricter than those that apply to non-governmental actors (see The state as a provider of information: What is the government allowed to do?). And, finally, it is often difficult to integrate private actors into organizational forms operating under public law.

      It should be noted, however, that state actors – which include federal, state and municipal governments as well as their individual subdivisions – can also take advantage of organizational forms under private law. In practice, this means that if and when government agencies are participants in the ecosystem, it does not automatically follow that the ecosystem must have a legal structure under public law. The potential legal forms for the ecosystem under private law in Germany include an association (Verein), a limited liability company (GmbH) and a stock company (Aktiengesellschaft or AG).

      Overview - Legal structures under private law in Germany

      Association (Verein)

      In Germany, a Verein is considered to be a voluntary, long-term association of several persons who come together in pursuit of a particular purpose. In principle, state actors and private-sector actors can work side-by-side in a Verein.

      In the case of a Verein, it is only possible to limit liability vis-à-vis third parties to a certain extent. In particular, we should take note here of the general personal liability of the members of the executive board – including the entirety of their private assets – vis-à-vis third parties, at least to the extent that the Verein is held responsible for damages to third parties. The question of how the ecosystem would be financed in the form of a Verein raises some additional challenges; above all, it is likely that membership fees would be insufficient to provide the project with a continuous flow of adequate financial means, especially in its initial phase.

      Limited liability company (GmbH)

      A GmbH is a limited liability company that has its own legal personality and acts as a legal entity via its own corporate bodies. In principle, the liability of a GmbH is restricted to the level of company assets. Shareholders in a GmbH can be natural persons or legal persons. Although the shareholders have a share in the GmbH’s assets, they do not assume any personal liability as a result of their participation in the company.

      Limited liability company (non-profit GmbH)

      A non-profit GmbH is a special form of limited liability company. A non-profit GmbH combines the business advantages and framework of a GmbH with the advantages of non-profit tax law, thus making it an attractive legal form for the social sector. However, the earnings generated by the company may be used solely in the service of achieving the company’s non-profit objectives.

      Stock company (Aktiengesellschaft or AG)

      A stock company known as an Aktiengesellschaft (AG) typically unites a large number of shareholders who have invested their capital in the company in return for dividends taken from the income it generates. The profit-driven mandate of an AG is simply not in line with the non-profit objectives of the ecosystem.

      Stock company (non-profit stock company)

      German law also recognizes companies known as gemeinnützige AGs or gAGs, which are stock companies not aimed at making a profit. The focus on non-profit objectives – such as the promotion of science and research, public health, user information and consumer protection – is rewarded in the form of tax breaks in favour of the gAG. The downside of the special tax status of the gAG is the relatively strict set of regulations associated with non-profit tax law. It should be noted, in particular, that a gAG’s non-profit status would be jeopardized if more than half of its capital were used to finance its administration and fundraising, or if the commercial business operations of a gAG were to enter into competition with non-advantaged, for-profit businesses of the same or similar type to a greater extent than is unavoidable when fulfilling the tax-privileged purposes.

      Otherwise, the legal requirements determining the organization of a gAG correspond to the provisions applicable to a regular AG. In particular, the gAG also has an executive board, a supervisory board and an annual general meeting. The executive board is responsible for the gAG’s management, which must be aimed towards the exclusive and direct fulfilment of the legally defined objectives of the gAG.

      Holding company

      It is possible for the ecosystem’s individual services to be operated by different companies (Gesellschaften), each with a different legal form which, however, could be brought together under the common umbrella of a holding company (Holdinggesellschaften). A holding company is a structural form whose main purpose is to hold an interest in one or several legally independent companies on a long-term basis.

      There are two distinct types of holding companies that could function as “umbrella organizations” for the ecosystem under consideration here: an operative holding and a management holding. An operative holding is comparable to a parent company (Mutterkonzern) upon which subsidiaries are dependent in terms of strategy and personnel. In contrast, a management holding has no operational business of its own, but still determines the strategic objectives of its subsidiaries.

      The most significant advantage of this type of holding is flexibility, as each subsidiary is able to develop strategies for its own field of business. As a legal structure, the holding company is not regulated by German law and is therefore not bound to a specific legal form. In fact, holding companies are frequently operated in the legal form of a limited liability company (GmbH) or stock company (AG).

      Conclusion

      In order to effectively pursue its objectives and have the legal capacity to act, the ecosystem must have the ability to bear rights and obligations. This means that any legal structure that does not have legal capacity should be automatically ruled out as an option. Partnerships, for example, do not meet the requirements of a participatory infrastructure for the health care system and should not be considered as a legal entity with ownership of the prospective national digital ecosystem.

      While a structure under public law is technically possible, it would pose challenges for private-sector actors when it comes to participating in the project as a whole. To achieve the broadest possible level of participation and a high degree of flexibility, the most ideal organizational framework would therefore involve a legal structure under private law. This would offer a relatively large degree of flexibility with regard to structural adjustments and the cooperation of both private and state actors on the project.

      Furthermore, considering the diverse range of functions performed by the ecosystem, a holding structure appears to be an ideal choice. Under this structure, a parent company would manage subsidiaries, each of which could undertake different tasks within the ecosystem. This allows for efficient coordination and management of the ecosystem’s various functions.

      (Published on 27.09.2023. The statements in this article refer exclusively to the legal situation in Germany. They represent a guideline and not individual legal advice that goes beyond the Trusted Health Ecosystems project.)

      Author

      While completing her doctoral studies, Laura Schulte gained experience in the field of constitutional law as a research assistant. Her doctoral thesis focused on data protection law, and she conducted further research on this subject at various institutions, including the Queen Mary School of Law in London. From 2020 to 2023, she was employed as an attorney at BRANDI Rechtsanwälte in Bielefeld, specializing in IT and data protection law. Since August 2023, she has held the position of professor of business law at the Hochschule Bielefeld.

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      The state as a provider of information: What is the government allowed to do?

      When developing a structural model for a prospective national health platform, it seems reasonable to assume, at least at first, that some kind of state-run service would be the most ideal provider. We should not forget, however, that the provision of information by the state – which we define as the communication of a range of information, warnings and recommendations – is subject to specific legal standards and guidelines. In the following, we examine the extent to which information can and should be provided by the state, if at all, and under what circumstances it is even possible and/or advisable to operate a national health platform in the form of a state-run information service.

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        The state as a provider of information: What is the government allowed to do?

        Prof. Dr. Laura Schulte

        When developing a structural model for a prospective national health platform, it seems reasonable to assume, at least at first, that some kind of state-run service would be the most ideal provider. We should not forget, however, that the provision of information by the state – which we define as the communication of a range of information, warnings and recommendations – is subject to specific legal standards and guidelines. In the following, we examine the extent to which information can and should be provided by the state, if at all, and under what circumstances it is even possible and/or advisable to operate a national health platform in the form of a state-run information service.

        The challenge

        All government action – especially any action relating to fundamental rights – is based on the assumption that it have some kind of legal justification that can be verified retroactively by a court of law. This assumption itself is anchored in the principle of the rule of law, which is a key element of the Grundgesetz, Germany’s constitution. Among other things, Article 20 (3) of the Grundgesetz stipulates that “the executive [shall be bound by] law and justice.” Every state action that has the potential to impact the fundamental rights of third parties must therefore be examined to determine its legal legitimacy and justification.

        The provision of information by a state authority must be seen as a form of “state action,” given that the action is aimed at informing the general public. The minimum prerequisite can thus be drawn from the principle of the rule of law, which stipulates that the state authority act within the scope of the task assigned to it. In this regard, the provision of information to the public can be legitimized, at least in principle, as an annex to the government’s performance of tasks (Schoch, NVwZ 2011). However, in and of itself, a general allocation of the task of developing and overseeing a government information service is insufficient to secure the legal basis of the prospective platform.

        Background

        One area in which state action clearly requires legitimization is when the government issues official consumer product warnings as part of its efforts to provide consumer-protection information (Voßkuhle and Kaiser, JuS 2018). These warnings are typically targeted at specific products or providers, which can impinge on the business operations of the manufacturers and/or providers involved. In such instances, the affected companies have the right to invoke their constitutionally protected freedom to pursue their profession (Article 12, Grundgesetz) as well as safeguard their personal rights (such as the right to self-determination and self-preservation).

        In dogmatic terms – that is, as far as Germany’s Federal Constitutional Court is concerned – the state’s action in providing information does not constitute an encroachment carried out in the form of a legal act, at least not in the traditional sense of the term. Still, the impact of the provision of such information is very similar to that of an encroachment in the traditional sense. It is therefore reasonable to interpret such state action as being the equivalent to an encroachment (Voßkuhle and Kaiser, JuS 2018).

        According to criteria set forth by German’s Federal Constitutional Court, it will be necessary to determine whether the provision of information by the government has an impact on market competition.

        “When examining the broader collection of information by government agencies, it is essential to assess the extent to which the state provider competes with private-sector entities.”

        Prof. Dr. Laura Schulte

        In this regard, Germany’s Federal Constitutional Court has laid down the following minimum prerequisites which must be met to ensure the legality of state-run information activities: (1) there must be an identifiable state task to be carried out; (2) the rules of order, procedure and responsibility must be adhered to in the fulfillment of the task;  (3) the information must be factually accurate and its content truthful; and (4) as a whole, the act of providing the information must be appropriate and in proportion to the task.

        And, even if government agencies comply with each and every one of these laws, it is still possible for markets to be impacted by their actions. Indeed, a state often has other means at its disposal when seeking to position itself in front of the general public; for example, it can draw on public funds to finance its efforts. For this reason, the public often considers information provided by state agencies to have greater relevance and credibility than information disseminated by third parties. If a government agency is seen as engaging in a private-sector action, the first step is to determine whether there is any justification for this action and whether their action results in any impact on competitors. It is also important to determine whether the information disseminated to the public comes from the public authority itself or from a third party (see also: Ownership: Public or private?)

        Conclusion

        Given the statements made so far, and especially considering the goal of establishing a platform model firmly rooted in the law, the idea of a national health platform operated by the state must be viewed critically. Although the project is by no means focused on the issuance of product warnings and other direct disadvantages suffered by actors, it is nevertheless true that other providers of digital health information and services could be impacted, if only indirectly.

        It is therefore advisable to advocate for a structural approach that does not involve the direct provision of information by a state-run agency. It should also be noted that the partial funding of a national health platform by the government does not automatically imply that responsibility for the platform must also be in government hands. Instead, an open structural model, managed by civil society actors, could serve as an information “hub” and serve as a foundation for additional services.

        To prevent excessive limitations being placed on the activities of private-sector actors, it is advisable to have a platform that is not administered by the state. Efforts should also be made to ensure that companies operating on the market are not excluded or put at a disadvantage.

        (Published on 27.09.2023. The statements in this article refer exclusively to the legal situation in Germany. They represent a guideline and not individual legal advice that goes beyond the Trusted Health Ecosystems project.)

        Bibliography

        Schoch, NVwZ 2011, 193 (196) with reference to OVG Hamburg, NVwZ-RR 2008, 241.

        Voßkuhle and Kaiser, JuS 2018, 343 (344) with reference to BVerfG, NJW 2002, 2621 – Glykolwei.

        Author

        While completing her doctoral studies, Prof. Dr. Schulte gained experience in the field of constitutional law as a research assistant. Her doctoral thesis focused on data protection law, and she conducted further research on this subject at various institutions, including the Queen Mary School of Law in London. From 2020 to 2023, she was employed as an attorney at BRANDI Rechtsanwälte in Bielefeld, specializing in IT and data protection law. Since August 2023, she has held the position of professor of business law at the Hochschule Bielefeld.

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        Ownership: Public or private?

        When establishing a national healthcare platform, it is crucial to identify a suitable legal structure that fulfills all the necessary requirements and effectively supports the ecosystem in which it operates. In terms of ownership, a number of different options are available, each involving a variety of advantages and disadvantages. The first question to arise at this point is whether the platform should be operated by a public or a private-sector actor.

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        Your feedback is important to us

        To contact our project team, please use our form. We look forward to your message and will get back to you as soon as possible.