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House of Commons European Scrutiny Committee

Forty-eighth Report of Session 2010–12 Documents considered by the Committee on 7 December 2011, including the following recommendations for debate: Energy efficiency Trans-European Networks: integrated EU infrastructures EU financial instruments for the period 2014-2020 EU PNR Agreement with the United States of America (and Australia)

HC 428-xliii

House of Commons European Scrutiny Committee

Forty-eighth Report of Session 2010–12 Documents considered by the Committee on 7 December 2011, including the following recommendations for debate: Energy efficiency Trans-European Networks: integrated EU infrastructures EU financial instruments for the period 2014-2020 EU PNR Agreement with the United States of America (and Australia)

Report, together with formal minutes Ordered by The House of Commons to be printed 7 December 2011

HC 428-xliii Published on 15 December 2011 by authority of the House of Commons London: The Stationery Office Limited £0.00

Notes Numbering of documents Three separate numbering systems are used in this Report for European Union documents: Numbers in brackets are the Committee’s own reference numbers. Numbers in the form “5467/05” are Council of Ministers reference numbers. This system is also used by UK Government Departments, by the House of Commons Vote Office and for proceedings in the House. Numbers preceded by the letters COM or SEC are Commission reference numbers. Where only a Committee number is given, this usually indicates that no official text is available and the Government has submitted an “unnumbered Explanatory Memorandum” discussing what is likely to be included in the document or covering an unofficial text.

Abbreviations used in the headnotes and footnotes EC

(in “Legal base”) Treaty establishing the European Community

EM

Explanatory Memorandum (submitted by the Government to the Committee)

EP

European Parliament

EU

(in “Legal base”) Treaty on European Union

GAERC

General Affairs and External Relations Council

JHA

Justice and Home Affairs

OJ

Official Journal of the European Communities

QMV

Qualified majority voting

RIA

Regulatory Impact Assessment

SEM

Supplementary Explanatory Memorandum

TEU

Treaty on European Union

TFEU

Treaty on the Functioning of the European Union

Euros Where figures in euros have been converted to pounds sterling, this is normally at the market rate for the last working day of the previous month.

Further information Documents recommended by the Committee for debate, together with the times of forthcoming debates (where known), are listed in the European Union Documents list, which is in the House of Commons Vote Bundle on Mondays and is also available on the parliamentary website. Documents awaiting consideration by the Committee are listed in “Remaining Business”: www.parliament.uk/escom. The website also contains the Committee’s Reports. Explanatory Memoranda (EMs) can be downloaded from the Cabinet Office website: http://europeanmemorandum.cabinetoffice.gov.uk/search.aspx. Letters sent by Ministers to the Committee about documents are available for the public to inspect; anyone wishing to do so should contact the staff of the Committee (“Contacts” below).

Staff The staff of the Committee are Alistair Doherty (Clerk), David Griffiths (Clerk Adviser), Terry Byrne (Clerk Adviser), Leigh Gibson (Clerk Adviser), Peter Harborne (Clerk Adviser), Paul Hardy (Legal Adviser) (Counsel for European Legislation), Lis Partridge (Assistant to the Clerk), Hannah Lamb (Senior Committee Assistant), Shane Pathmanathan (Committee Assistant), Jim Camp (Committee Assistant), Anna Browning (Committee Assistant), Julie Evans (Committee Support Assistant), and Paula Saunderson (Office Support Assistant).

Contacts All correspondence should be addressed to the Clerk of the European Scrutiny Committee, House of Commons, 7 Millbank, London SW1P 3JA. The telephone number for general enquiries is (020) 7219 3292/5465. The Committee’s email address is [email protected]

European Scrutiny Committee, 48th Report, Session 2010–12

1

Contents Report

Page

Documents for debate 1

DECC

(32949) Energy efficiency

2

DFT/DECC/DCMS/HMT (33275) (33276) (33292) (33302) (33325) Trans-European Networks: integrated EU infrastructures

3

6

Annex

26

3

HMT

(33300) EU financial instruments for the period 2014-2020

27

4

HO

(31238) (33437) (33438) EU PNR Agreement with the United States of America

31

Documents not cleared 5

BIS

(33058) Enforcement of patent rights

43

6

BIS

(33338) (33354) (33355) (33342) Accession of the Russian Federation and Samoa to the WTO

50

7

DFT

(33048) (33059) Road transport: tachographs

55

8

HMT

(33312) Financial services: transparency

62

9

HO

(32952) (33386) European Investigation Order

66

10

HO

(33295) Smart borders

75

11

MOJ

(32804) (33447) (33488) Minimum standards for the protection of victims of crime

79

(32414) (32808) Statistics

83

12

ONS

Documents cleared 13

BIS

(33327) Corporate Social Responsibility

87

14

BIS

(33343) Help for small businesses in global markets

92

15

DCMS

(32719) The open Internet and net neutrality in Europe

95

16

DEFRA

(33070) Co-financing of structural measures for agriculture

105

17

DEFRA

(33075) Co-financing of the structural measures for fisheries

107

18

DFT

(33147) Training for seafarers

109

19

FCO

(33208) Infringement proceedings against Member States

112

2

20

21

22


FCO

FCO

FCO

(33233) (33234) (33235) (33268) (33246) (33247) (33248) (33249) (33250) (33251) (33252) (33253) Enlargement Strategy and Main Challenges 2011-12

118

Annex 1: General Affairs Council (GAC) conclusions on Montenegro

130

Annex 2: GAC conclusions on Serbia

131

(33367) An EU Special Representative (EUSR) for the Horn of Africa

132

(33387) EU enlargement: Croatia

140

Annex: 23–24 June 2011 European Council conclusions: III. CROATIA

155

23

FCO

(33388) (33389) Restrictive measures against Iran

156

24

HMT

(33296) (33297) Stability and Growth Pact: excessive deficit procedure: Greece

167

(33181) Justice and home affairs cooperation with the Eastern Partnership

173

25

HO

26

HO

(33289) EU drugs policy

176

27

HO

(33375) Free movement of workers from Bulgaria and Romania

181

Documents not raising questions of sufficient legal or political importance to warrant a substantive report to the House 28

List of documents

187

Formal minutes

190

Standing Order and membership

191


3

1 Energy efficiency (32949) 12046/11 + ADDs 1–3 COM(11) 370

Draft Directive on energy efficiency and repealing Directives 2004/8/EC and 2006/32/EC

Legal base Department Basis of consideration Previous Committee Report To be discussed in Council Committee’s assessment Committee’s decision

Articles 194(1)(c) and 194(2) TFEU; co-decision; QMV Energy & Climate Change Minister’s letter of 22 November 2011 HC 428–xxxiii (2010–12), chapter 2 (13 July 2011) See para 1.9 below Politically important For debate in European Committee A

Background 1.1 Under the headline targets in the Europe 2020 Strategy relating to climate and energy, Member States have committed themselves to achieving a 20% energy efficiency target, and, in June 2011, the Commission put forward this proposal to give legislative effect to the measures set out in its Energy Efficiency Plan. 1 The proposal contains a comprehensive set of requirements intended to promote energy efficiency within the EU, but, instead of imposing binding energy-saving targets, it would require Member States to set their own indicative national targets, taking into account the EU’s 20% target for 2020. 1.2 In particular, the draft Directive identifies the need for a proportion of public sector buildings to be refurbished each year to meet minimum energy performance standards; requires public bodies to meet high energy efficiency standards when procuring products and services; requires Member States to oblige all energy distributors or retail suppliers to meet an annual energy-saving target equal to 1.5% of their energy sales by volume; requires Member States to promote the availability of energy audits; introduces a range of requirements related to metering and billing; introduces a number of requirements for the promotion of high efficiency co-generation and efficient district heating and cooling; requires Member States to ensure that, provided they are sited where waste can be used, all new thermal electricity plant above 20MW allows for recovery of heat by means of a high efficiency co-generation unit; requires Member States to draw up and update every three years an inventory detailing the energy performance for all combustion installations and refineries with a total rated thermal input of over 50 MW; requires Member States to ensure that energy regulators pay due regard to energy efficiency in their decisions relating to the operation of gas and electricity transmission and distribution infrastructures; requires Member States to ensure that by 1 January 2014 certification and qualification

1

(32584) 7363/11: see HC 428–xxiii (2010–12), chapter 7 (5 April 2011).

4


schemes are available for providers of energy services, energy audits and energy efficiency improvement measures; requires Member States to remove non-regulatory barriers to energy efficiency, including in particular the split of incentives between landlords and tenants; and requires Member States to report annually on progress towards their national energy efficiency targets and to submit every three years a supplementary report setting out national energy efficiency policy in detail. 1.3 As we noted in our Report of 13 July 2011, the Government shares the Commission’s view that further action to improve energy efficiency is needed if the EU target of reducing primary energy consumption by 20% by 2020 is to be met, and that, as meeting this target is fundamental to the UK’s wider climate change and energy security objectives, it welcomes the proposed Directive. However, it cautioned against over-prescription, and said that there were a number of provisions which could require changes to the current policy framework for energy efficiency in the UK. 1.4 The Government also pointed out that an Impact Assessment was being prepared, and, in the meantime, it noted that the Commission’s impact assessment had indicated that costs to the total energy system in the EU would rise by between 2.6% and 4.7%, resulting in an increase in average electricity prices in the short term from €141/MWh to €146/MWh, due to the need to finance the fixed costs of investment in energy efficiency measures. However, it added that the Commission considered that in the longer term this investment would stabilise electricity prices by reducing demand, and that for most sectors there were positive impacts in terms of output and employment as increased efficiency leads to lower fuel input needs. 1.5 In drawing the proposal, and the Government’s comments on it, to the attention of the House, we commented that this was clearly a potentially important piece of legislation, and that, notwithstanding the general presumption in favour of improving energy efficiency, it appeared to have implications in terms of subsidiarity and the burdens which would be imposed on business (and ultimately consumers). For that reason, we indicated it was likely that we would wish to recommend the proposal for debate, but that, as the Government was preparing an Impact Assessment, we thought it right to await that before taking a final decision.

Minister’s letter of 22 November 2011 1.6 We have now received from the Minister of State at the Department for Energy and Climate Change (Mr Gregory Barker) a letter of 22 November 2011, enclosing an initial Impact Assessment. He says that, as the scope of a number of Articles is still unclear, it is not yet possible to assess fully the costs and benefits of the proposal, but he confirms that the proposed measures would impose additional obligations as compared with existing UK policy, whilst providing only limited apparent net economic benefits. He adds that new legislation would be needed to implement many of the provisions, and that this could present problems as many of the provisions as currently drafted are unclear and in places legally ambiguous. He also points out that other Member States have raised concerns that the principle of subsidiarity could in a number of cases be breached, as a result of the unnecessarily prescriptive nature of many of the proposals, and he says that the UK shares


5

those concerns, and will be seeking to provide greater flexibility for Member States to adopt approaches which best reflect national circumstances. 1.7 The Minister also says that, whilst the stated aim of meeting the EU’s 2020 energy saving target had widespread support, the Government’s consultations on the proposals identified a number of specific concerns. In particular: •

although the energy efficiency potential of the public sector was recognised, many questioned the ability of authorities to embark on mandatory large scale building refurbishment programmes in the current financial climate;

•

there was concern that the obligations on suppliers could have adverse impacts for the future Energy Company Obligation, and would be difficult to apply to the nondomestic sectors;

•

although the value of audits was generally recognised, there was a risk of overlap and duplication from different auditing requirements;

•

although enhanced consumer access to accurate consumption data through improved metering and billing was welcomed, it was felt that the proposal required a much quicker roll out of smart metering than under the UK’s own programme;

•

notwithstanding the potential of combined heat and power to realise energy savings, many supported an assessment of cost-efficiency before it was made mandatory.

1.8 The Minister goes on to say that the UK will seek to ensure that all the requirements are subject to a clear test of cost effectiveness, and that the proposal does not at present adequately recognise that action should only be taken when that consideration has been satisfied, particularly in relation to the renovation of public buildings, public procurement, and metering and billing provisions. In addition, it will be important to ensure that the requirements do not act as a barrier to new entrants; that disproportionate burdens on businesses are minimised, in particular as regards small and medium sized enterprises (SMEs); that the requirements on energy generation and transmission infrastructure do not inject unwanted uncertainty into pending investment decisions; that the successful operation of the EU Emissions Trading Scheme is not compromised; and that the subsidiarity principle is respected, with no competence creep on the part of the Commission. 1.9 The Minister concludes by saying that a progress report is being submitted to the Energy Council on 24 November, and that the incoming Danish Presidency is making it a priority to secure agreement in the next six months. He adds that the European Parliament has also begun consideration of the proposal, and will be voting on amendments in plenary in April 2012.

Conclusion 1.10 We are grateful to the Minister for this further information, which merely reinforces our initial misgivings about the relative costs and benefits of this proposal, and our view that — quite apart from the intrinsic significance of the subject concerned

6


— it raises a number of important issues, relating not least to the overly prescriptive nature of some of its provisions and to the principle of subsidiarity. For that reason, we are now recommending the document for debate in European Committee A.

2 Trans-European Networks: integrated EU infrastructures (a) (33275) 15629/11 + ADDs 1–2 COM(11) 650 (b) (33276) 15813/11 + ADDs 1–2 COM(11) 658 (c) (33292) 16006/11 + ADDs 1–2 COM(11) 657 (d) (33302) 16176/11 + ADDs 1–2 COM(11) 665 (e) (33325) 16499/11 COM(11) 676

Draft Regulation on Union guidelines for the development of the Trans-European Transport Network

Draft Regulation on guidelines for trans-European energy infrastructure and repealing Decision No 1364/2006/EC

Draft Regulation on guidelines for trans-European telecommunications networks and repealing Decision No 1336/97/EC

Draft Regulation establishing the Connecting Europe Facility

Commission Communication: A growth package for integrated European infrastructures

Legal base

Documents originated Deposited in Parliament

(a), (b), (c) and (d) Article 172 TFEU; co-decision; QMV (e ) — 19 October 2011 (a) and (b) 27 October 2011 (c) 28 October 2011 (d) 3 November 2011 (e) 11 November 2011


Department

Basis of consideration

Previous Committee Report Discussion in Council Committee’s assessment Committee’s decision

7

(a) Transport (b) Energy and Climate Change (c) Culture, Media and Sport (d) and (e) HM Treasury (a) EM of 7 November 2011 (b) EM of 9 November 2011 (c) EM of 15 November 2011 (d) and (e) EM of 21 November 2011 None Not known Politically important For debate on the Floor of the House

Background 2.1 Title XVI TFEU, continuing earlier treaty provisions, allows for the development of Trans-European Networks (TENs) in the areas of transport, telecommunications and energy aimed at promoting the interconnection and interoperability of national networks and access to such networks. The EU, like the Community before it, has a number of policy and financial instruments in support of those aims. 2.2 The Trans-European Transport Network (TEN-T) programme finances infrastructure projects and studies for roads, railways, inland waterways, airports, ports, satellite navigation and traffic management systems lying on the designated TEN-T network. The programme is governed by guidelines, set out in Decision No. 661/2010/EU and the TransEuropean Network Finance Regulation, Regulation (EC) No. 680/2007 which lays down the rules for granting funds for the transport and energy networks. 2.3 The guidelines for the present Trans-European Energy Network (TEN-E) are set out in Decision No. 1364/2006/EC, which lists about 550 eligible electricity and gas infrastructure projects in three categories — those of European interest, priority projects and those of common interest. The TEN-E programme is financed, like the TEN-T programme, under the rules of Regulation (EC) No. 680/2007. 2.4 The current programme has been seen as lacking focus, flexibility and a top-down approach to fill identified infrastructure gaps. 2 In November 2010 the Commission published a Communication: Energy infrastructure priorities for 2020 and beyond — A Blueprint for an integrated European energy network. 3 This was followed by the European Council, at its February 2011 meeting agreeing that “some projects that may be justified from a security of supply/solidarity perspective, but are unable to attract enough market based finance, may require some limited public finance to leverage private funding. Such projects should be selected on the basis of clear and transparent criteria”. 4

2

(31583) 9354/10 + ADD 1: see HC 428–i (2010–11), chapter 81 (8 September 2010).

3

(32215) 16302/10 + ADDs 1–3: see HC 428–xi (2010–11), chapter 15 (15 December 2010).

4

See http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/119175.pdf.

8


2.5 The Trans-European Telecommunications Network (eTEN) supports the establishment and deployment of interoperable services and applications of public interest. The guidelines for this TEN are set in Decision No. 1336/97/EC. The last programme ended in December 2006, with some of its projects continuing until 2010. From 2007 on the Commission supports the electronic services in the areas of public interest through the ICT Policy Support Programme, 5 which will run until 2013 and which is a component of the Competitiveness and Innovation Framework Programme. 6 2.6 In its June 2011 proposals for the Multiannual Financial Framework (MFF) for the period 2014–2020 7 the Commission proposed the creation of a new integrated instrument for investing in EU infrastructure priorities in transport, energy and telecommunications — a “Connecting Europe Facility”. In presenting its MFF proposals the Commission discussed the use of “Innovative Financial Instruments” for supporting, amongst other programmes, infrastructure projects and in October 2011 it published a Communication “A framework for the next generation of innovative financial instruments: the EU equity and debt platforms”. 8

The documents Connecting Europe Facility 2.7 In its Communication, document (e), the Commission introduces the package of four draft Regulations, documents (a)-(d), and briefly makes its case for the proposals as a whole, as in the extract we annex, and for each of the legislative proposals. 2.8 The draft Regulation, document (d), is to establish a “Connecting Europe Facility” for the period 2014–2020. This proposal would bring together the three TENs infrastructure funding programmes into one package. The Commission proposes an overall budget of €50 billion (£43.7 billion) for the facility in the next MFF, including €10 billion (£8.7 billion) ring-fenced in the Cohesion Fund for transport infrastructure. This figure is divided as follows: •

transport — €32 billion (£27.9 billion), including the ring-fenced finance in the Cohesion Fund;

•

energy — €9.1 billion (£7.9 billion); and

•

telecommunications — €9.2 billion (£8 billion).

An unspecified proportion of these funds would be allocated as Innovative Financial Instruments, with the aim of leveraging EU budget funds to encourage private investment on infrastructure projects in these sectors. The Regulation would allow the Commission to

5

See http://ec.europa.eu/cip/ict-psp/index_en.htm.

6

See http://ec.europa.eu/cip/.

7

(32986) 12478/11 + ADDs 1–2 (32987) 12474/11 (32988) 12480/11 (32989) 12483/11 (32994) 12475/11 + ADDs 1–3 (32998) 12484/11: see HC 428–xxxv (2010–12), chapter 1 (7 September 2011) and HC Debs, 8 November 2011, cols 170–195.

8

(33300) 16301/11: see chapter 3 in this Report.


9

transfer funds between the sectors within the €40 billion (£34.9 billion) (non-Cohesion Fund) allocation. 2.9 The rationale the Commission asserts for an integrated instrument for investing in EU infrastructure priorities focuses on: •

the decline in infrastructure spending in Europe over the last decade;

•

the need for cross-border physical interconnection to support the single market, particularly in new Member States; and

•

the benefits of a single infrastructure fund and financial framework in simplifying infrastructure funding and enabling economies of scale through cross-sector interdependency.

It says that the draft Regulation represents a simplification of the current EU legal framework concerning TEN infrastructure funding in the following respects: •

aligning assessment indicators with its Europe 2020 Strategy objectives;

•

flexibility of budget allocations;

•

centralised management, possibly through implementation via an executive agency;

•

common funding instruments;

•

common award criteria;

•

common conditions for financial assistance; and

•

common visibility of annual work programmes.

The impact assessment and its summary, which accompany the draft Regulation give further details of how the Commission formulated its proposal. 2.10 This document and documents (a)-(c) propose specific actions on transport, energy and telecommunications infrastructure. In this draft Regulation the three part Annex lists these actions. These mirror those in the individual draft policy Regulations, documents (c)(e). The proposal provides for the use of delegated acts for amending the actions specified in the Annex. The draft Regulation: •

defines the percentage rates of co-funding available for the different types of eligible projects; and

•

lays down the terms and conditions for funding, the programming and control mechanisms, and monitoring procedures.

2.11 For transport the Commission estimates the transport network needs Member States to invest €500 billion in the period 2014–2020 and the facility would:

10


•

co-finance projects that help to deliver the missing elements of the TEN-T core network (defined using the methodology explained below in relation to document (a));

•

concentrate on completing missing cross border links, removing bottlenecks and promoting intermodal transport to support growth in the EU single market;

•

allow for financial support for cross-border projects involving third countries;

•

fund works focused mainly on rail and projects that promote intermodality;

•

define in the Annex, Part 1, the horizontal priorities for the programme — the corridors which the Commission hopes will be an instrument to assist implementation and pre-identified projects that may be funded by the programme; and

•

include milestones, targets, indicators and monitoring arrangements for TEN-T in the legislative financial statement section of the Annex.

2.12 For the energy sector the Commission identifies, in the Annex, Part 2, infrastructure priority corridors and areas for electricity and gas transportation, smart grids deployment, electricity highways, cross-border carbon dioxide networks and oil transportation networks. It estimates that: •

of an approximate €1 trillion of investment in EU energy infrastructure by 2020, about €200 billion of investment is needed for electricity and gas networks of European importance alone; and

•

€100 billion of this total investment should be delivered by the market unaided, whereas the other €100 billion would require public action to leverage the necessary investments.

2.13 For telecommunications, that is digital networks and services, the Commission asserts that: •

intervention is necessary to achieve targets in the Commission Communication “A Digital Agenda for Europe”, 9 including universal coverage of 30 megabits per second (Mbps) broadband and subscriptions by 50% of households to 100 Mbps by 2020; and

•

current projected levels of investment in broadband networks are not sufficient to achieve these targets.

The Commission proposal provides for projects of common interest aimed at removing telecommunications bottlenecks that hinder the achievement of the single market. They are of broadly two types:

9

(31638) 9981/10: see HC 428–i (2010–11), chapter 28 (8 September 2010).


•

11

those that help achieve pan-EU telecommunications networks and those that support investments that will fill gaps in coverage, otherwise left by the operation of local markets.

The priorities are: •

deployment of ultra-fast broadband networks;

•

deployment of 30 Mbps broadband to areas unlikely to be supplied by market forces;

•

support for core platforms for digital service infrastructures; and

•

synergies between telecommunications and other infrastructure networks.

Guidelines for the TEN-T 2.14 With the draft Regulation, document (a) the Commission proposes the repeal of the guidelines Council Decision for the TEN-T. The intention is that the focus of TEN-T policy would move from guidelines which promote the development of the network to a Regulation defining a long term strategy up to 2050. It would place requirements on Member States and commit them to completion of a Core Network by 31 December 2030 and a Comprehensive Network by 31 December 2050. The Commission proposes a Regulation rather than a new set of guidelines, as the coverage goes beyond Member States to include regional infrastructure managers, transport operators and other public and private entities involved in transport infrastructure. 2.15 The main elements of the proposal are: •

a dual-layer approach to the TEN-T network, that is two networks — a detailed Comprehensive Network and a higher level Core Network; 10

•

the Comprehensive Network covers all modes as specified by the maps in Annex I of the draft Regulation, 11 infrastructure components, infrastructure requirements and priorities for promoting projects of common interest;

•

freight terminals, passenger stations, inland ports, maritime ports and airports would connect transport modes in order to allow multi-modal transport, with urban nodes forming key elements in the Comprehensive Network as connecting points between the different transport infrastructures;

•

ports and airports would need to meet specific passenger or freight thresholds or meet certain peripherality criteria to be included on the Comprehensive Network;

•

the Core Network would be a subset of the Comprehensive Network, which aims to link Core Nodes;

10

Maps of the proposed UK TEN-T networks are included at Annex B of the Government’s Explanatory Memorandum: see http://europeanmemorandum.cabinetoffice.gov.uk/.

11

For the 23 volumes of Annex I see http://ec.europa.eu/transport/infrastructure/connecting/revision-t_en.htm.

12


•

the Commission proposes a focus of future funding on the Core Network, giving priority to components with the highest EU added value (cross border missing links, key bottlenecks and multi-modal nodes);

•

the other elements of the Comprehensive Network would be funded only from the Cohesion Fund tranche of the facility;

•

a framework for identifying projects of common interest that will contribute to the development and establishment of TEN-T through the creation, maintenance, rehabilitation and upgrading of infrastructure, through measures to promote the resource-efficient use of infrastructure and by enabling sustainable and efficient freight transport services;

•

Core Network Corridors, defined by the Commission as an instrument to implement the Core Network — each corridor would have to involve at least three Member States and would be based on modal integration and interoperability and have a coordinated development plan and management structure;

•

European Coordinators would facilitate implementation of the corridors, focussing on corridor platforms to be established by Member States — each corridor platform would establish a multi-annual development plan, including investment and implementation plans, as a management structure and based on this information the Commission would adopt implementing acts (decisions) for each corridor;

•

regular revision of the Regulation’s Annexes (Annex II 12 shows the proposed nodes of the Core Network and Annex III13 has indicative maps of the TEN-T extended to neighbouring countries) by means of delegated acts in order to update the maps of the Comprehensive Network and a review of the Core Network by 2023; and

•

support for cooperation with neighbouring third countries in projects of mutual interest.

2.16 The Commission’s proposal defines the UK’s Core Nodes as: •

Urban — London, Birmingham, Bristol, Edinburgh, Glasgow, Leeds, Manchester, Portsmouth and Sheffield;

•

Airports — Birmingham, Edinburgh, Gatwick, Glasgow, Heathrow, Luton, Manchester and Stansted; and

•

Ports — Belfast, Bristol, Cardiff, Newport, Dover, Felixstowe, Forth (Edinburgh), Grimsby, Immingham, Liverpool, London, Southampton, Portsmouth and Tees and Hartlepool.

2.17 Core Corridors are defined in Annex I of the draft financial Regulation on the Connecting Europe Facility, document (d). The Commission proposes the UK be involved

12

See http://ec.europa.eu/transport/infrastructure/connecting/doc/revision/annexe-ii.pdf.

13

For the nine volumes of Annex III see http://ec.europa.eu/transport/infrastructure/connecting/revision-t_en.htm.


13

in the Dublin — London — Paris — Brussels Corridor which is defined as having the following components: •

Belfast — Dublin — Holyhead — Birmingham;

•

Glasgow/Edinburgh — Birmingham;

•

Birmingham — London — Lille — Brussels;

•

Dublin/Cork/Southampton — Le Havre — Paris; and

•

London — Dover — Calais — Paris.

2.18 Within the proposed Regulation would be a number of requirements placed on Member States which would apply to the Core and Comprehensive Networks (not just to projects seeking TEN-T funding). Requirements proposed for the Comprehensive Network include: Rail •

open and transparent access to freight and logistics terminals;

•

implementation of European Rail Traffic Management Systems 14 and compliance with the interoperability Directives and standards;

•

electrification of lines;

•

track gauge of 1435mm and maximum gradient of 12.5mm/m for new lines;

•

lines for conventional freight to have 22.5 ton axle load, 100kph line speed and 750m train length;

Road •

not to cross at level with railways, tramways or footpaths;

•

compliance with Directives on road and tunnel safety, interoperability of toll collection systems and intelligent transport systems;

•

accessible only from interchanges or controlled junctions;

•

prohibition of stopping and parking on the running carriageway;

Maritime transport

14

•

rail, road and, where possible, inland waterway connections;

•

open and transparent access;

See http://ec.europa.eu/transport/rail/interoperability/ertms/ertms_en.htm.

14


•

compliance with the Directives on port reception facilities of ship-generated waste and cargo residues;

•

implementation of Vessel Traffic Management and Information Services and eMaritime services; 15

Air transport •

open and transparent access; and

•

compliance with Directives on security, Single European Sky and interoperability of the European Air Traffic Management network.

2.19 There would be additional requirements for the Core Network: •

maritime, road and air transport infrastructure to make alternative clean fuels available;

•

motorways, for stretches greater than 100 miles (of which there are none in Northern Ireland) to have rest areas approximately every 50 kilometres to provide sufficient parking space for commercial road users with an appropriate level of safety and security; and

•

core airports to have rail links — at present this would affect Glasgow and Edinburgh Airports.

2.20 The Commission hopes that this draft Regulation will be in place by 2013, in advance of the next MFF. 2.21 The draft Regulation is accompanied by the Commission’s impact assessment and an executive summary of the assessment. Guidelines for energy 2.22 With the draft Regulation, document (b), the Commission proposes the repeal of the guidelines Council Decision for the TEN-E. The new Regulation would: •

establish the main objectives as identifying, and facilitating the development of, projects of common interest;

•

provide for the allocation of the costs of cross border projects and a suggestion that Member States should consider appropriate risk-related incentives;

•

define those terms which are not drawn from the Directives and Regulations which make up the “Third Package” of EU energy market liberalisation measures; 16

15

See http://www.props-sss.eu/propsknowledge/defaultinfo.aspx?areaid=44&index=2.

16

Directives 2009/28/EC, 2009/72/EC and 2009/73/EC and Regulations (EC) No 713/2009, (EC) No 714/2009, and (EC) No 715/2009.


15

•

have the Commission establish a definitive list of projects of common interest by 2013, which should fall within the categories of infrastructure set out in Annex II of the draft Regulation;

•

have the list reviewed and updated as necessary every two years;

•

have the Commission establish a regional group based on each of the 12 priority corridors / thematic areas listed in Annex I of the draft Regulation;

•

require each regional group to draw up a list of projects of common interest in accordance with a defined process;

•

require submission of regional groups lists six months before adoption of the Commission’s final list;

•

establish criteria for the projects of common interest, with further elaboration of some of the concepts used set out in Annex IV;

•

require that projects of common interest to be implemented in accordance with a designated implementation plan;

•

require project promoters to report to ACER (the Agency for the Cooperation of Energy Regulators)17 or the relevant regional group; and

•

give the Commission power to launch a call to tender on delayed projects, offer the option for other promoters to invest in the project and provide for EU coordinators to be appointed in case of delays.

2.23 In relation to granting of permits the draft Regulation would:

17

•

focus on streamlining the permit granting process, giving projects of common interest priority in national procedures and processes;

•

provide that the Commission’s list of projects of common interest would determine, for the purposes of the permit granting process, that such projects were in the public interest and were necessary;

•

have Member States streamline their environmental assessment procedures within nine months of entry into force of the legislation;

•

have the Commission issue guidance to assist Member States in defining adequate measures to ensure a consistent application of environmental assessment procedures;

•

require Member States to designate a competent authority with responsibility for facilitating and coordinating the permitting process;

•

have a final decision taken within stipulated time limits;

See http://www.acer.europa.eu/portal/page/portal/ACER_HOME.

16


•

provide two options for decision making — an integrated scheme, where a comprehensive decision would be taken by the competent authority or a coordinated scheme, where the competent authority would establish its own timeframes for decision makers and authorities;

•

allow the competent authority to make or overrule an individual decision if the evidence presented by the authority concerned was insufficient or the delay could not be adequately justified;

•

establish guidelines on how project promoters should liaise with the public, including setting up websites for the project to ensure a high level of transparency;

•

set a timeframe of three years for completion of the permit granting process, with Member States’ pre-application processes not exceeding two years; and

•

provide in Annex VI for other criteria which the permit granting process should fulfil.

2.24 In relation to regulatory matters the draft Regulation would: •

establish a framework for cost benefit analysis of certain types of projects of common interest;

•

require, within one month of entry into force of the Regulation, the European Networks of Transmission System Operators for Electricity and Gas (ENTSO-E 18 and ENTSO-G)19 to submit their methodology and cost benefit analysis, based on principles set out in Annex V, to the Commission and ACER;

•

require ACER, following receipt of this, to provide its opinion to the Commission within one month;

•

require the Commission, within three months, to deliver its opinion on the methodology;

•

have the approved methodology published on the websites of the ENTSOs, for use in all subsequent ten-year network development plans for electricity and gas produced under the Third Package;

•

have a common electricity and gas market and network model covering the priority corridors/thematic areas produced in a similar way;

•

establish that transmission system operators should bear the investment costs for certain projects of common interest;

•

provide that this would be paid for by network (distribution) users through tariffs for network access;

18

See https://www.entsoe.eu/.

19

See http://www.entsog.eu/.


17

•

require national regulatory authorities to take into consideration the actual costs incurred by transmission system operators as a result of the investments and crossborder allocation of corresponding costs;

•

establish that national regulatory authorities should ensure that appropriate incentives be granted to project promoters of certain types of projects of common interest in certain circumstances, with incentives taking account of the risk involved and the specific nature of the project;

•

require national regulatory authorities to produce a methodology and criteria for evaluating investments in electricity by 31 July 2013; and

•

allow the Commission to produce guidelines on incentives in accordance with the Third Package.

2.25 On finance for the TEN-E the Commission estimates that the total investment needed for energy infrastructures of EU importance exceeds €200 billion (£174.6 billion), that is €140 billion (£122.2 billion) for electricity, €70 billion (£61.1 billion) for gas and €2.5 billion (£2.18 billion) for carbon dioxide infrastructure. The draft Regulation would: •

establish the criteria for projects of common interest eligible for EU financial support; and

•

provide that finance should only be made available if the cost benefit analysis provided evidence that there were significant positive externalities (such as security of supply, solidarity, or innovation) or the project was not commercially viable and the project had received a cross border cost allocation decision.

Guidelines for telecommunications 2.26 In the impact assessment accompanying the draft Regulation, document (c), the Commission identifies five problems: •

high speed broadband will not attract sufficient investment to achieve the 2020 targets of the Digital Agenda for Europe;

•

competitive pressure in most telecommunications markets is insufficient to lead to sufficient investment in broadband;

•

there is no adequate strategy to roll-out broadband to areas for which not business case can be made;

•

private sector investment will not replace that of the public sector in the central elements of digital services; and

•

on-line public services stop at the border due to lack of inter-operability.

The Commission asserts that interventions are required to influence market dynamics so that investment in broadband in enhanced and to facilitate inter-operability.

18


2.27 With the draft Regulation the Commission proposes the repeal of the guidelines Council Decision for the eTEN. The new Regulation would: •

have five objectives projects of common interest — contributing to economic growth and development of the single market, improving the daily life of citizens, businesses and governments through greater interconnection and interoperability, stimulating deployment of fast and ultra-fast broadband, so facilitating transEuropean digital services, facilitating deployment of trans-European infrastructures, their interoperability and coordination at European level and their operation, maintenance and upgrading and reducing greenhouse gas emissions and protecting and improving the environment;

•

establish guidelines to govern installation of telecommunications projects of common interest, aimed at removing telecommunications bottlenecks that hinder achievement of the single market;

•

categorise projects as two broad types — those which would help achieve panEuropean telecommunications networks and those which, although confined to particular national networks, would support investments that would lead to filling of gaps in coverage that would otherwise be left by the operation of local markets;

•

list the priorities for projects of common interest as deployment of ultra-fast broadband networks, deployment of 30 Mbps broadband to areas which are unlikely to be supplied by market forces, support for core platforms for digital service infrastructures and permitting synergies between telecommunications and other infrastructure networks;

•

provide that technologies involved would not be experimental and that all projects would have to demonstrate European added value;

•

provide for cooperation with third countries and international organisations; and

•

provide for the exchange of information about projects of common interest and for the formation of an expert group drawn from all Member States to advise the Commission.

2.28 As for financing the eTEN the Commission intends that: •

the Connecting Europe Facility would combine EU support with market-based financial instruments so as to attract a wide variety of potential investors;

•

these new investors would stimulate greater telecommunications markets across Member States;

•

this in turn would result in greater investment in domestic broadband networks and facilitate greater trans-European connectivity;

•

it would continue to be responsible for the administration of grants and would determine the eligibility of projects under the facility;

competition

in

the


19

•

implementation of the financing facilities would be delegated to specialised financial institutions; and

•

grants currently available through Structural Funds and the Competitiveness and Innovation Programme would continue.

The Government’s view Connecting Europe Facility 2.29 The Financial Secretary to the Treasury (Mr Mark Hoban) tells us that the Government views the Connecting Europe Facility draft Regulation, document (d), in the context of the Commission’s proposal for the next MFF, on which its policy was explained to us first in July 2011 (and has been reiterated frequently). 20 He reminds us that the Government has been clear that, at a time of ongoing economic fragility in the EU and tight constraints on domestic public spending, the Commission’s proposal for the MFF is unrealistic — it is too large, it is not the restrained budget the Commission claims and it is incompatible with the tough decisions being taken in countries across the EU. 2.30 The Minister says that, within this context: •

the Government cannot support the huge increase in infrastructure funding proposed by the Commission for the Connecting Europe Facility — this is simply far too ambitious in the current economic circumstances;

•

a real freeze on 2011 EU Budget payments on equivalent TENs funding in these areas over the seven years of the MFF would be below €7 billion (£6.1 billion), but the Commission proposes €40 billion (£34.9 billion) commitment appropriations for the facility in the next MFF;

•

while commitment appropriations would not necessarily all translate into payment appropriations, this is nevertheless a significant rise in expenditure, in an overall MFF proposal that the Government estimates is over €100 billion (£87.3 billion) larger than a real freeze on current payment appropriations; and

•

thus in order to achieve a smaller budget, significant reprioritisation from the facility will be necessary.

2.31 The Minister continues that:

20

•

the Government welcomes the Commission’s attempt to simplify infrastructure funding through a common framework — however, at this stage, it is unclear whether the proposed Connecting Europe Facility would achieve this aim;

•

in particular, it will be important to understand how the Commission proposes to manage the three sectors centrally and how it will implement its plans to shift funding between policy area allocations; and

See footnote 6.

20


•

the Commission also needs to set out the interaction with the Cohesion Fund, which is subject to the principle of shared management — there is a risk that the link between the facility, TENs and Cohesion Fund Regulations would complicate, rather than simplify, the existing regime.

2.32 Noting that the responsible Ministers have set out fully Government views on the individual policy areas to be covered by the Connecting Europe Facility in their respective Explanatory Memoranda (reported below), the Minister summarises the Government position on each area, saying that for transport the facility proposal raises a couple of concerns: •

focussing funding entirely on the Core Network could make it harder for UK projects to secure funding for projects on the Comprehensive Network — the Commission proposes Comprehensive Network funds come from structural funds, but European Regional Development Funds exclude transport infrastructure for the UK and other developed regions;

•

implementing the Core Network through Core Corridors with a Corridor Coordinator raises concerns about additional bureaucracy, programme management costs and the principle of subsidiarity;

•

the EU would be involved in defining projects and could set binding deadlines for their implementation — the Government intends to seek clarification from the Commission on the purpose of and rationale for these Corridors;

•

the transport project portfolio is indicative and the Government is currently undertaking an Infrastructure Growth Review, which will be considering current and future infrastructure requirements and its contributions to economic growth;

•

the Department for Transport is aiming to publish a National Networks Policy Statement for consultation around the end of 2011, which will set out the Government’s views on the need for future infrastructure improvements on road and rail, and the Government will review the prospective projects for the Connecting Europe Facility when this work is completed; and

•

the draft TEN-T Regulation, document (a), also raises significant problems — it would set requirements to meet standards and implement state of the art technology across the whole TEN-T network, which would impose major financial burdens on government, local authorities and private sector infrastructure managers, and the proposed reporting and monitoring requirements would place information obligations on the same bodies, which would also have a cost.

2.33 Turning to energy the Minister says that: •

the Government welcomes the draft Regulation, document (b), and its recognition of the role the tools in the Third Package of energy market legislation will play in incentivising investment in electricity and gas networks, particularly the ten year network development plan;


21

•

it is important, however, that the proposed Regulation takes full account of the work and timetabling of the existing Member State-led North Seas Offshore Grid Initiative (included as one of the 12 priority corridors/areas), which is currently being examined for feasibility;

•

in respect of measures in the field of permit granting, it will also be important to ensure that the timeframes and regulatory measures proposed in the draft TEN-E Regulation are sufficiently flexible to enable the UK to accommodate the advances that it has already made in this field and take account wherever possible of the UK’s own pre-application and consent procedures; and

•

it will also be necessary to consider carefully the potential risk of extending EU competence, and issues of subsidiarity, in particular regarding some of the more prescriptive elements of the draft Regulation.

2.34 On the telecommunications proposal, document (c), the Minister says that: •

the rollout of infrastructure capable of delivering ever-faster broadband speeds could help to realise fully the potential economic benefits from the creation of the digital single market and the proposals contained in this document could support such a programme;

•

the Government welcomes the emphasis that the proposed facility puts on helping Member States meet the Digital Agenda for Europe aim of every EU citizen having access to superfast broadband by 2020; and

•

in the context of the aim of a real freeze in budget payments, however, the Government cannot support the significant increase in the level of telecommunication spending proposed by the Commission.

2.35 Finally the Minister says that the Government opposes the innovative financial instruments framework as it is currently proposed and that it will continue to argue that innovative financial instruments should be used to reduce the overall size of the budget, rather than increase it. Guidelines for transport 2.36 On the TNT-T draft Regulation, document (a), the Minister of State, Department for Transport (Mrs Theresa Villiers) first comments, in relation to the subsidiarity principle that: •

development of the TNT-T is within the EU competence as set by the TFEU;

•

however, the use of Core Corridors as an implementation mechanism raises concerns on the principle of subsidiarity, if the Corridor Coordinator role would allow direction to Member States on selection of infrastructure projects;

•

of concern is the implication in the proposals that they might be used to require applying certain standards to domestic transport corridors even where no TEN-T funding is being applied for — this would not be acceptable; and

22


•

the Government will also need to consider the implications of the proposal for domestic planning laws.

2.37 Turning to the policy implications of the proposal the Minister says that: •

in response to the Commission’s second consultation on the TEN-T policy review, the Government supported the dual-layer planning approach; 21

•

the Government is pleased to see that the Commission has adopted this approach;

•

there are, however, a number of very significant problems with the proposal as drafted;

•

in particular, the proposed requirements to meet standards and implement state of the art technology across the whole TEN-T network which would impose major financial burdens on the Government, local authorities and private sector infrastructure managers;

•

the general public could also be disadvantaged if limited available budgets were taken up with improvements mandated by the EU for the TEN-T network, rather than being focused on the areas where the need to improve transport links is strongest and would yield the best value for money;

•

the proposed reporting requirements would place information obligations on the same bodies which would also have a cost;

•

the Government will discuss issues with the Commission, but it cannot accept the proposal as drafted;

•

it believes the Commission should focus any requirements on projects for which Member States are seeking EU funding; and

•

in negotiations the Government will seek to ensure that decisions on which projects should be developed and invested in on national networks will remain with the Member States concerned and that financial impacts and reporting requirements are kept to a minimum.

2.38 On the financial implications of the proposed Regulation, the Minister says that:

21

•

it would place a large financial burden on Member States in terms of capital expenditure to bring the different modal elements of the transport networks up to the required standards;

•

there would also be costs on private sector infrastructure owners and managers to comply with standards and provide real-time information to passengers; and

•

the draft Regulation would also place obligations to provide information on the TEN-T to the Commission and the Corridor Coordinator.

See http://ec.europa.eu/transport/infrastructure/consultations/2010_09_15_future_policy_en.htm.


23

The Minister also reiterates the comments by Mr Hoban about the cost of the TEN-T proposals and the Connecting Europe Facility generally and the concerns about implementing the Core Network through Core Corridors with a Corridor Coordinator. 2.39 Of the Commission’s impact assessment the Minister says that: •

her department has only just received it and it is incomplete, as it does not include the associated annexes;

•

the Government’s initial analysis of the document is that it does not provide sufficient analysis of the direct impacts to Member States and private sector transport infrastructure managers and transport operators;

•

nor does it clearly define the policy proposal, attempt to put a cost on the impacts and compare the cost /benefit, which is very unfavourable using the limited figures included (€215 billion+ costs for €80 billion benefits); and

•

the Government will be undertaking more detailed analysis to assist in negotiations.

The Minister adds that the Government has developed a ‘checklist’ impact assessment 22 on the draft Regulation, which attempts to assess the impact on the different transport modes and the scale of the costs — initial estimates are £64 to £137 billion to implement the proposed requirements. Guidelines for energy 2.40 The Minister of State, Department for Energy and Climate Change (Charles Hendry) says that the Government: •

recognises the huge investments needed in EU energy infrastructure to 2020 and beyond in order to meet energy security and low carbon objectives and supports measures aimed at reducing barriers to such investment;

•

it welcomes, therefore, publication of the Commission’s draft Regulation, document (b); and

•

it also welcomes the recognition in the proposal of the role the tools in the Third Package of energy market legislation will play in encouraging investment in electricity and gas networks, particularly the ten year network development plan.

2.41 The Minister continues that: •

22

the proposal identifies the investment challenge that would need to be overcome in order to make the move to a low-carbon economy at the least cost, including the need for new technological developments such as large-scale electricity storage, electric vehicle charging points, the transport and storage of carbon dioxide and smart grids;

See Annex C to the Minister’s Explanatory Memorandum at http://europeanmemorandum.cabinetoffice.gov.uk/.

24


•

it is important that the proposed Regulation takes full account of the work and timetabling of the existing Member State-led North Seas Offshore Grid Initiative (included as one of the 12 priority corridors/areas) which is currently being examined for feasibility;

•

in respect of permitting issues, the UK has already addressed several of the concerns reflected in this proposed Regulation (including the creation of a “onestop shop” for granting the multiple permits required for some large infrastructure projects) in enactment in 2008 of the Planning Act and the subsequent designation of the energy National Policy Statements;

•

the UK regime also provides a framework of best practice for local authorities;

•

it will be important, therefore, to ensure that, during the course of negotiations, the timeframes and regulatory measures proposed in the Regulation are sufficiently flexible to enable the UK to accommodate the advances that it has already made in this field and take account wherever possible of the UK ‘s own pre-application and consent procedures — the Government is working closely with other Member States, particularly France, Germany and the Netherlands, who also have concerns about the lack of flexibility with regard to the proposed permitting procedures;

•

it will also be necessary to consider carefully the potential risk of extending EU competence, and issues of subsidiarity, in particular regarding some of the more prescriptive elements of the draft Regulation; and

•

the Government will also need to monitor the impact and read across this proposal would have with existing environmental legislation, for example the Habitats Directive and Water Framework Directive, and the level of priority expected to be accorded to projects of common interest in Member States’ own domestic legislation.

2.42 On the financial implications of the draft Regulation the Minister reiterates the comments by Mr Hoban about the cost of the TEN-E proposals and the Connecting Europe Facility generally. Guidelines for telecommunications 2.43 The Minister of State, Department for Culture, Media and Sport (Mr Edward Vaizey) says that; •

the Government welcomes the emphasis that the eTEN proposal, document (c), puts on helping Member States meet the important Digital Agenda for Europe aim of every EU citizen having access to superfast broadband by 2020;

•

however, this must be in the context of budgetary restraint — the Government cannot support spending at the levels proposed by the Commission (and the Minister reiterates the comments by Mr Hoban about the cost of the eTEN proposals and the Connecting Europe Facility generally);


25

•

the Government is concerned as to how this proposal will work in practice, as it covers such a wide remit and that the Connecting Europe Facility duplicates spend in other programmes;

•

growth and competitiveness, both of which are underpinned by innovation, are priority areas for the UK and should have a proportionately larger share of a budget that, at most, increases by no more than inflation; and

•

it is recognised that the rollout of infrastructure capable of delivering ever-faster broadband speeds is one of four main actions required in order to fully realise the potential economic benefits from the creation of the digital single market and the proposals contained in the draft Regulation would support such a requirement.

2.44 The Minister adds some comments from other government departments that have an interest in the projects of common interest contained in the annex to the draft Regulation: •

with regard to the re-use of public sector information, the Government recognises the economic and social benefits that would flow from encouraging access to public sector information and removing obstacles to it being re-used;

•

the Government has launched a number of initiatives that help to promote re-use including an effective regulatory framework;

•

concerning the proposals on smart meters, they appear to be in line with Government policy;

•

with regard to the eHealth proposals, the Government believes that the Commission’s theme sits well with the objectives of the eHealth network in Directive 2011/24/EU on cross-border healthcare and with the proposed information strategy of the Department for Health; and

•

concerning the proposals on child safety, the Government welcomes the commitment of the Commission in this policy area, which is one that the Government takes seriously.

Conclusion 2.45 Although the objectives of the three TENs might be laudable, the scale of the Commission’s ambition for the 2014–2020 financial period is clearly unacceptable. And there is an obvious need to establish whether the proposed Connecting Europe Facility would be an efficient way of managing the three disparate TENs. 2.46 So, given the importance of the TENs and the proposals for the next programmes, we recommend that the documents be debated on the Floor of the House, both in regard to the financial aspects and the various programming policy proposals. And given the complexity and depth of detail of the proposals we recommend that that debate should last for three hours. Moreover, given that we expect that Members will wish to explore with the Government aspects of the proposals relevant to the responsibilities of any one of the four Departments concerned, we suggest that

26


whichever Minister leads for the Government, should be supported by Ministers from the other three Departments. 2.47 However, if the Government will not allow three hours for the debate, we recommend that it should instead take place in one of the European Committees, so allowing consideration of these important matters for an hour more than a Floor debate under the provision of Standing Order No.16.

Annex Introduction and summary of the Commission Communication “In the past decade, infrastructure spending in Europe has been, on average, on a declining path. The economic and financial crisis has, however, brought renewed interest in the need for infrastructure investment. During the economic crisis, targeted investments in infrastructure renewal or construction have been an important part of stimulus and recovery plans at EU and Member State levels, as a way of supporting aggregate demand while ensuring a long term return from money spent. Most importantly, the crisis has shown that infrastructures are crucial for Europe’s economic future. “A truly integrated Single Market, as the Monti Report indicated, 23 would not be possible without a seamless connection between all its component parts. Roads and other transport connections, electricity and gas grids, as well as broadband networks are vital for a functioning, integrated economic area and for its social and territorial cohesion. Yet, while regulatory integration advances within the EU and markets become more integrated, most recently in the energy sector with the adoption and entry into force of the third liberalisation package, cross-border physical interconnection is lagging. Missing links exist, notably in the newer Member States, creating dividing lines between the centre and peripheries of the European Union and hampering the further development of intracommunity exchanges or the growth of new economic sectors, such as e-commerce. “New infrastructure needs also arise in connection with the implementation of the Europe 2020 Strategy. Fostering Europe’s transformation into a knowledge-intensive, low-carbon and highly competitive economy requires adequate modern and flexible energy, transport and ICT infrastructure networks. The Commission has highlighted, among its priorities for growth, 24 the necessity to take forward the transport, energy and telecommunication infrastructures needed for a truly integrated single market. It also called on Member States, in the context of a reinforced economic governance, to continue playing their role, both regulatory and financial, in these crucial areas, despite the current economic crisis.

23

“A new Strategy for the Single Market at the service of Europe’s economy and society”. Report by Mario Monti to the President of the European Commission, 9 May 2010, pp. 64–65. Available at: http://ec.europa.eu/bepa/pdf/monti_report_final_10_05_2010_en.pdf.

24

Annual Growth Survey 2011, COM(11) 11.


27

“Overall investment needs for networks of European importance amount to about €1 trillion for the period up to 2020 in the three sectors mentioned above. 25 How to meet this investment challenge is one of the big questions that the European Union has to face in the next decade. While the market, through appropriate investment and pricing mechanisms, is expected to play a major role in delivering the required infrastructures, without public intervention, some of the necessary investments would not take place or will be delayed far beyond 2020. This is why the Commission today is proposing an infrastructure package, composed of a new budgetary instrument, the Connecting Europe Facility, as well as revised guidelines for transport, energy and ICT.”

3 EU financial instruments for the period 2014–2020 (33300) 16301/11 COM(11) 662

Commission Communication: A framework for the next generation of innovative financial instruments — the EU equity and debt platforms

Legal base Document originated Deposited in Parliament Department Basis of consideration Previous Committee Report Discussion in Council Committee’s assessment Committee’s decision

— 19 October 2011 3 November 2011 HM Treasury EM of 21 November 2011 None Not known Politically important For debate in European Committee B

Background 3.1 The term “innovative financial instrument” describes EU interventions other than pure grant funding and in this sense covers a broad range of cases where financial support from the EU Budget is provided in forms other than pure grants, including cases where EU grants are blended with loans from financial institutions. Innovative financial instruments in the current, 2007–2013, Financial Framework are: •

25

EU-level risk capital and equity instruments — the High Growth and Innovative SME facility, for investment in venture capital funds, with an allocation of €600 million (£524 million), and the Marguerite Fund, an equity fund for infrastructure investments, with an allocation of €80 million (£70 million);

About €500 billion in transport, €200 billion in energy and €270 billion for fast broadband infrastructures.

28


•

EU-level debt instruments — the Risk-Sharing Finance Facility, financing research, development and innovation with an allocation of €1 billion (£873 million), the SME Guarantee Facility, financing of SMEs with an allocation of €500 million (£437 million) and the Loan Guarantee Instrument for Trans-European Transport Network projects, financing of infrastructure with an allocation of €500 million (£473 million);

•

instruments combining equity and debt support — the European Progress Microfinance Facility, for support of micro-credit with an allocation of €100 million (£87 million ) and the European Energy Efficiency Fund, for investment in energy efficiency with an allocation of €125 million (£109 million);

•

instruments financed by structural funds — JESSICA for investment in urban infrastructure and JEREMIE for regional financing of SMEs; and

•

external policy instruments in pre-accession countries — the Western Balkan Investment Framework, for investment in infrastructure, SMEs and energy efficiency in the Western Balkans) and the European Fund for Southeast Europe, for economic development in South-eastern European and Southern Caucasus countries.

3.2 The Commission believes that innovative financial instruments should play an increasingly important role in the EU Budget spending under the 2014–2020 Multiannual Financial Framework (MFF). It has proposed the following instruments for the next MFF in its Communication “A Budget for Europe 2020”: 26 •

a debt instrument and an equity instrument in support of research, development and innovation;

•

a debt instrument and an equity instrument to support competitiveness and SMEs;

•

further support to microenterprise through debt and equity instruments;

•

risk sharing instruments (including the EU 2020 Project Bonds initiative) 27 and equity instruments to support infrastructure;

•

a student loan guarantee facility for masters students studying abroad;

•

a guarantee facility for finance loans to SMEs in the cultural and creative sectors;

•

an increased share of structural funds to be delivered by means of financial instruments; and

•

national and regional financial instruments under the European Social Fund.

26

(329860 12478/11 + ADDs 1–2 (32987) 12744/11 (32988) 12480/11 (32989) 12483/11 (32994) 12475/11 + ADDs 1–3 (32998) 12484/11: see HC 428–xxxv (2010–12), chapter 1 (7 September 2011) and HC Debs, 8 November 2011, cols 170–195.

27

(33336) 16626/11 + ADDs 1–2, on which we will be reporting in due course.


29

The document 3.3 This Communication presents the Commission’s view on the future design and management of innovative financial instruments. It envisages a new framework for streamlining and rationalising the design and management of the new generation of innovative financial instruments, to be called EU equity and debt platforms. The Commission suggests that the platforms would: •

be a set of common rules and guidance for equity and debt instruments (including guarantees and risk sharing) for internal policies, ensuring a consistent approach to such instruments where they are supported by the EU budget; and

•

cover distinct financial and technical parameters (such as maximum ceilings for risk-sharing arrangements or minimum levels of equity participations and other key parameters) for the design and implementation of innovative financial instruments, with a view to their streamlining and rationalisation.

3.4 The Commission says that: •

it will be discussing the proposed framework in the coming months;

•

this discussion will feed into the general framework to be created by the next Financial Regulation (which governs raising and managing the EU Budget) and the Commission’s subordinate delegated act which will replace the present Implementing Rules; and

•

it will feed into the specific legislative proposals for policy programmes for the next MFF period, which are presently being adopted by the Commission.

The Government’s view 3.5 The Financial Secretary to the Treasury (Mr Mark Hoban) says that: •

in response to the Commission’s proposal for the next MFF, the Government said that it is willing to explore the greater use of innovative financial instruments, particularly in richer regions, to replace grants with loans or project bonds; and

•

it was made clear, however, that support for this is conditional upon using innovative financial instruments to reduce, rather than supplement the overall size of the Budget.

3.6 In that context the Minister continues that: •

in this Communication the Commission says that “the intention behind an increased use of innovative financial instruments is not to replace grant funding with financial instruments [...] but to complement the grant funding by supporting projects pursuing EU policy objectives through other forms of intervention”;

•

in light of this, the Government opposes the innovative financial instruments framework as it is currently proposed because the instruments supplement, rather than replace, funding, and because the number of proposed new innovative

30


financial instruments compared to the previous MFF (and the size of the proposed MFF) is unrealistic; and •

the Government will continue to argue that innovative financial instruments should be used to reduce the overall size of the budget, rather than increase it.

3.7 The Minister continues that the Government supports a set of general principles in relation to innovative financial instruments: •

like all types of EU spending, innovative financial instruments should be confined to areas of EU value added, they should minimise deadweight and overlaps between instruments should be avoided;

•

innovative financial instruments should be financially sound — in particular, they should not result in any obligation for the Budget above the budgetary contribution;

•

innovative financial instruments should be transparent, simple, and limited in number and there should be adequate reporting of their use, financial performance, etc.; and

•

any proceeds from innovative financial instruments, or so-called “reflows”, should flow back to the EU Budget and therefore to Member States.

He adds that: •

the Government welcomes efforts to streamline and rationalise innovative financial instruments;

•

the Commission’s current proposal for the EU debt and equity platforms, however, does not contain enough detail for the Government to fully evaluate it; and

•

the Government will push for the principles highlighted by the Minister to be reflected in the content of the EU debt and equity platforms.

3.8 On the financial implications of the Commission ideas the Minister says that: •

the UK would be a potential recipient of spending linked to innovative financial instruments;

•

the size, design and distribution of innovative financial instruments across programmes will have an impact on the UK’s contribution to the MFF and on the size of the UK’s abatement; and

•

should innovative financial instruments be used to reduce the overall size of the Budget, this would also reduce the size of the UK’s contribution.

Conclusion 3.9 Clearly, proper use of innovative financial instruments might lead to some EU budgetary advantage for the UK. So we recommend this document for debate in


31

European Committee B in order that Members can explore with the Minister what form such instruments should take and how many there should be.

4 EU PNR Agreement with the United States of America (a) (31238) 17697/09 COM(09) 702

(b) (33437) 17429/11 COM(11) 805

(c) (33438) 17430/11 COM(11) 807

Draft Council Decision on the conclusion of the Agreement between the European Union and the United States of America on the processing and transfer of passenger name record (PNR) data by air carriers to the United States Department of Homeland Security (DHS) (2007 PNR Agreement)

Draft Council Decision on the signature of the Agreement between the United States of America and the European Union on the use and transfer of Passenger Name Records to the United States Department of Homeland Security Draft Council Decision on the conclusion of the Agreement between the United States of America and the European Union on the use and transfer of Passenger Name Records to the United States Department of Homeland Security

Legal base

Document originated Deposited in Parliament Department Basis of consideration

Previous Committee Report To be discussed in Council Committee’s assessment Committee’s decision

(a) Articles 82(1)(d), 87(2)(a) and 218(6)(a) TFEU; QMV; consent (b) Articles 82(1)(d), 87(2)(a) and 218(5) TFEU; QMV (c) Articles 82(1)(d), 87(2)(a) and 218(6)(a) TFEU; QMV; EP consent (b) and (c) 23 November 2011 (b) and (c) 28 November 2011 Home Office Minister’s letter of 7 November 2011, EM of 29 November 2011and Home Secretary’s letter of 5 December 2011 (a) HC 5–x (2009–10), chapter 4 (9 February 2010) (b) and (c) None 13 December 2011 Legally and politically important For debate in European Committee B together with the draft Council Decisions relating to the EUAustralia PNR Agreement (decision reported on 29 June 2011)

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Background 4.1 Following the terrorist attacks of 11 September 2001, the United States (US) passed legislation requiring air carriers operating flights to, from, or across US territory to provide the US Department of Homeland Security (DHS) and the Bureau of Customs and Border Protection (CBP) with electronic access to passenger name record (“PNR”) data held in their reservation and departure control systems. 4.2 Under EU data protection laws, personal data may only be transferred to a third (nonEU) country if that country ensures an adequate level of protection. In 2004, the Commission adopted a Decision, 28 based on a set of undertakings given by the DHS and the CBP, which recognised that the US provided an adequate level of protection for the purpose of transferring PNR data. The Decision meant that Member States could allow EU-based air carriers to transfer PNR data to the US without seeking any additional guarantees. Shortly afterwards, the Council approved an Agreement with the US on the processing and transfer of PNR data (“the 2004 Agreement”) which entered into force on 28 May 2004. 29 It allowed the CBP to access electronically PNR data held in air carriers’ reservation and departure control systems, in line with the undertakings already given to the Commission. 4.3 The European Parliament successfully challenged the legality of the Council Decision approving the conclusion of the 2004 Agreement, as well as the Commission Decision on adequacy, in an annulment action brought before the Court of Justice. Both Decisions were annulled with effect from 30 September 2006 on the grounds that neither was founded on an appropriate legal base. In light of its ruling on the legal base, the Court did not consider it necessary to consider whether the Decisions also infringed fundamental rights. 4.4 In October 2006, the EU and the US completed negotiations on an interim Agreement which applied provisionally from the date of signature (16 October 2006) and authorised the continuing transfer of PNR data to the DHS on the basis of the undertakings given by the US in 2004. The interim Agreement expired on 31 July 2007. It was replaced by a new Agreement which was signed in July 2007 (“the 2007 Agreement”). The Decision approving signature on behalf of the EU stated that the Agreement would be applied “on a provisional basis in conformity with existing domestic law as of the date of its signature, pending its entry into force.” 30 4.5 The draft Decision to approve the conclusion of the 2007 Agreement — document (a) — was deposited for scrutiny in January 2010.

Previous scrutiny of the 2007 Agreement — document (a) 4.6 Our predecessors considered the draft Decision to conclude the 2007 Agreement on 9 February 2010. The content of the Agreement, and of an accompanying US letter to the EU attached to it which sets out a number of assurances explaining DHS’s policy on

28

Commission Decision of 14 May 2004, OJ L 235, 06.07.2004, p. 11.

29

Council Decision of 17 May 2004, OJ L 183, 20.05.2004, p. 83.

30

See Council Decision 2007/551/CFSP/JHA of 23 July 2007, OJ L 204, 04.08.2007, p. 16.


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safeguarding PNR data, are described in our predecessor’s Eleventh Report, 2009–10. The Report’s conclusion expressed the then Committee’s concerns that: •

provisions on the handling, use and storage of PNR data by the DHS were not incorporated in the legally binding Agreement, but took the form of assurances in a non-binding letter attached to the Agreement;

•

the retention periods for PNR data (seven years in an active file, followed by eight years in a dormant file) were too long; and

•

there were insufficient safeguards regarding the sharing of PNR data with third countries.

4.7 Our predecessors therefore decided to keep the draft Council Decision under scrutiny and asked for progress reports on negotiations with the European Parliament, since its consent would be required before the Council could formally conclude the Agreement. 4.8 So far, the European Parliament has not given its consent to the 2007 Agreement, which therefore continues to apply on a provisional basis. The European Parliament has pressed the Commission to produce a single model for EU PNR Agreements with third countries, not least to ensure that the EU takes a consistent approach. 4.9 In September 2010, the Commission published a Communication setting out a global approach for the transfer of PNR data to third countries, accompanied by three recommendations which asked the Council to authorise the negotiation of new PNR Agreements with Australia, Canada and the US. The Communication listed the criteria — including a set of basic principles for the protection of personal data — which should guide the EU in negotiating third country PNR Agreements. These are set out in full in our Twelfth Report. 31 The Commission suggested that adherence to these criteria would lead to greater coherence, whilst also ensuring respect for private life and personal data protection. 4.10 In his Written Ministerial Statement of 20 December 2010, the Minister for Immigration (Damian Green) stated the Government’s belief that “clear PNR agreements between the EU and third countries play a vital role in removing legal uncertainty for air carriers flying to those countries, and help to ensure that PNR information can be shared quickly and securely with all necessary data protection safeguards in place where appropriate.” He added: “After due consideration of the importance of civil liberties, data protection and security concerns, the Government have decided to opt in to negotiating mandates for three PNR Agreements with Australia, Canada and the US as they believe they will pave the way for EU-third country agreements that strike the right balance between civil liberties, data protection and security of the EU. As these mandates are currently restricted so as to preserve the EU negotiating position they are not therefore depositable within Parliament. “The Government will work with the Scrutiny Committees when it considers whether to opt in to Council decisions to sign and conclude each third country 31

See HC 428–xi (2010–11), chapter 21 (15 December 2010).

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agreement. I will also in due course update Parliament on the Government’s opt-in decisions at these later stages.” 4.11 In June 2011, we agreed to waive our scrutiny reserve on two draft Council Decisions to sign and conclude a new EU-Australia PNR Agreement on the grounds that the Government wished to support their adoption and the Agreement appeared to be consistent with the principles set out in the Commission’s global approach.32 We nevertheless retained the draft Decisions under scrutiny as we noted that the Agreement with Australia was likely to be the first in a series of EU PNR Agreements with third countries and that we may therefore wish to consider it alongside proposed EU PNR Agreements with the United States and/or Canada. We also registered our deep dissatisfaction with the timetable proposed by the then Presidency for the adoption of the draft Decisions which precluded any possibility of effective consultation on the content of the Agreement and undermined Parliamentary scrutiny. The draft Decision on signature of the EU-Australia PNR Agreement was adopted by the Justice and Home Affairs Council on 22 September 2011.

The Minister’s letter of 7 November 2011 4.12 In July 2011, the Minister for Immigration (Damian Green) sent us a draft copy of the proposed new EU-US PNR Agreement accompanied by an unnumbered Explanatory Memorandum. As the text of the draft Agreement was marked limité, and was not deposited in Parliament, we were unable to disclose its content or prepare a Report to the House. We were, however, aware that the Commission’s Legal Service had expressed serious reservations about aspects of the draft Agreement, including: •

lack of proportionality as regards the purposes for which PNR data may be used;

•

lengthy data retention periods;

•

lack of independent oversight of the Agreement; and

•

inadequate provision for judicial redress.

4.13 The Minister’s letter of 7 November informed us that a number of adjustments had been made to the draft Agreement sent to us in July although he had not, at that stage, seen a revised text and that “a political understanding” had been reached. He described some of the changes which he believed had been made and expressed the UK’s support for “the idea of an EU-US Agreement”, adding that he considered PNR data to be “an absolutely vital tool in the fight against terrorism and organised crime” and that the “we should continue to cooperate with the US for the security of all our citizens.”

Draft Council Decisions to sign and conclude a new EU-US PNR Agreement — documents (b) and (c) 4.14 Document (b) is a draft Council Decision authorising the EU to sign a new PNR Agreement with the US. Once the Agreement has been signed, it then has to be sent to the 32

See HC 428–xxxi (2010–12), chapter 2 (29 June 2011).


35

European Parliament which must consent to its conclusion. If the EP gives its consent, a further draft Council Decision — document (c) — must be adopted to conclude the Agreement. The Agreement is intended to supersede the 2007 EU-US PNR Agreement which is being applied on a provisional basis. The text of the proposed Agreement is attached to both draft Council Decisions. 4.15 Articles 82(1)(d) and 87(2)(a) of the Treaty on the Functioning of the European Union (TFEU) provide the substantive legal bases for both draft Council Decisions. They provide for cooperation between national law enforcement authorities and for the processing, analysis and exchange of information relating to the prevention, detection and investigation of criminal offences. As the legal bases for the draft Council Decisions are to be found in Title V of Part Three of the TFEU, the UK’s Title V opt-in applies. 4.16 In its explanatory memorandum accompanying the two draft Council Decisions, the Commission notes that the Agreement was initialled by the Parties on 17 November 2011. It says that the Agreement is needed to provide a legal base for the transfer of PNR data from the EU to the US and to provide legal certainty for air carriers whilst also ensuring that individuals’ personal data and physical security are protected. The Commission believes that the content of the Agreement is consistent with the general criteria and principles set out in its Communication on a global approach to PNR transfers to third countries. It highlights the following “important safeguards”: •

the purposes for which PNR data may be processed are strictly limited to preventing, detecting, investigating and prosecuting terrorist offences and serious transnational crime;

•

the period during which PNR data may be retained is limited, and the data will be ‘depersonalised’ after 6 months;

•

individuals have a right of access to their PNR data, to seek rectification if it is inaccurate, and to obtain effective redress;

•

transfer of PNR data will be based on the “push method”, thus ensuring that air carriers maintain control of the information held in their databases;

•

the processing of ‘sensitive’ data (for example, data revealing an individual’s racial or ethnic origin or religious or philosophical beliefs) is only permitted in exceptional cases; and

•

compliance with the rules set out in the Agreement is subject to independent review and oversight by various Department Privacy Officers, the DHS Office of Inspector General, the Government Accountability Office and the US Congress.

The main elements of the draft Agreement Purpose, scope and use of PNR data — Articles 1–4

4.17 The purpose of the Agreement is to “ensure security and to protect the life and safety of the public” by providing for the transfer of EU-sourced PNR data to DHS for the purpose of preventing, detecting, investigating and prosecuting:

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•

terrorist offences and related crimes; and

•

other transnational crimes which are punishable by a custodial sentence of more than three years.

4.18 PNR data may be used and processed to identify individuals who should be questioned or examined more closely on their arrival in, or departure from, the US. They may also be used and processed on a case by case basis in the following circumstances: •

where necessary in view of a serious threat;

•

for the protection of vital interests of any individual; or

•

if ordered by a court.

4.19 Moreover, limitations on the use and processing of PNR data are stated to be “without prejudice to domestic law enforcement, judicial powers, or proceedings, where other violations of law or indications thereof are detected in the course of the use and processing of PNR” (Article 4(4)). Data protection safeguards — Articles 5–14

4.20 The draft Agreement includes provisions on data security and integrity, requires all processing of PNR data to be logged or documented, and prohibits US Government authorities from taking any decision based solely on the automated processing and use of PNR data if it would produce “significant adverse actions affecting the legal interests of individuals” (Article 7). DHS must make available to the public information on the use and processing of PNR data, and publicise the means whereby individuals may access their PNR data and, where appropriate, seek rectification or redress. The Agreement also sets out the basis, in accordance with US law, for seeking administrative or judicial redress. 4.21 The Agreement states that compliance with data protection safeguards is subject to “independent review and oversight by Department Privacy Officers, such as the DHS Privacy Officer” and that an additional level of independent review and oversight is provided by the DHS Office of Inspector General, the Government Accountability Office, and the US Congress (Article 14). Sensitive data — Article 6

4.22 The Agreement allows access to, processing and use of sensitive data “in exceptional circumstances where the life of an individual could be imperilled or seriously impaired.” Access in these circumstances requires the approval of a DHS senior manager, on a case by case basis. The data must be permanently deleted within 30 days of receipt by DHS, although a longer retention period may be permitted, in accordance with US law, for the purpose of a specific investigation, prosecution or enforcement action. Data retention — Article 8

4.23 The Agreement allows the retention of PNR data for up to 15 years. PNR data may be retained in an active database for the first five years, but should be “depersonalised and


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masked” after six months. After five years, the data shall be transferred to a dormant database for up to ten years. PNR data may be re-personalised during this ten year period in connection with law enforcement operations where there is “an identifiable case, threat or risk”, and only within the first five years for serious transnational crime which does not relate to terrorism. After ten years, PNR data must be fully anonymised by deleting all elements which might identify the individuals to whom the data relate. 4.24 The Agreement specifies that the need for a ten-year dormant period of data retention will be subject to review and evaluation with one year of the Agreement’s entry into force. Transmission and sharing of PNR data — Articles 15–18

4.25 The Agreement specifies that the so-called “push method” applies to the transfer of PNR data, but it also contemplates that carriers may be required to give DHS access to their PNR databases in two situations. The first is where carriers are unable, for technical reasons, to respond to a request for PNR data between or after a fixed number of routine and scheduled transfers. The second is where DHS requires access to PNR data “in exceptional circumstances in order to respond to a specific, urgent and serious threat”. 4.26 The initial transfer of PNR data should be made 96 hours before the scheduled flight departure time, but the Agreement does not stipulate a maximum number of transfers per flight, leaving these to be determined by DHS. 4.27 The Agreement requires DHS to make available to Member States’ police or judicial authorities, and to Europol and Eurojust, any relevant and appropriate analytical information it has obtained as a result of processing PNR data, and these authorities may also request access to US-held PNR data in a specific case. DHS may share PNR data with other US Government authorities, provided that they apply the same or comparable data protection safeguards and only use the data for the purposes specified in the Agreement. Transfers outside the US to third country authorities are permitted if use of the data is consistent with the purposes set out in the Agreement and comparable data protection safeguards apply. If the transfer of PNR data concerns a citizen or resident of an EU Member State, that State must be informed of the transfer. Final provisions

4.28 The remaining provisions include an Article which makes clear that, by virtue of concluding and implementing the Agreement, DHS will be deemed to provide an adequate level of protection for the processing and use of PNR data, as required by EU law, and that carriers will also be deemed to have complied with EU law. A further Article notes that the establishment of an EU PNR system (currently under consideration) may have a material effect on the EU-US Agreement and requires the Parties to consult with a view to ensuring full reciprocity, particularly as regards applicable data protection standards. 4.29 There is provision for the Agreement to be subject to a joint review within one year of its entry into force, followed by a joint evaluation after four years. An Annex to the Agreement contains a Declaration by the EU indicating that, in the context of the joint review and evaluation, it will seek information from the US on the following:

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•

transfers by the US to third countries of PNR data relating to individuals who are nationals of, or resident in, EU Member States; and

•

implementation of the conditions governing such transfers.

This information is intended to enable the EU to verify whether third countries receiving PNR data from the US guarantee standards of personal data protection comparable to those required of DHS under the Agreement.

The Government’s view 4.30 The Minister considers that the proposed Agreement is in line with the Commission’s 2010 Communication on a global approach to sharing PNR data with third countries for the following reasons: •

it limits the purposes for which PNR data may be processed;

•

it only permits sensitive personal data to be processed in exceptional circumstances;

•

it secures data against misuse and unlawful access;

•

it provides an adequate system of access and redress; and

•

it only permits data to be retained for a limited and proportionate period.

4.31 The Minister highlights a number of provisions which he considers to be an improvement on the current arrangements for PNR transfers which have applied provisionally since July 2007. Purpose, scope and definitions

4.32 The new Agreement includes a clearer definition of serious transnational crime which specifies a minimum punishment threshold of three years’ imprisonment. The Minister notes that this is line with the current version of the draft EU-PNR Directive and believes that it provides “an appropriate limitation” for the use of PNR data for serious crime purposes. 33 Data retention

4.33 The Minister says that the provisions on data retention are more restrictive than the 2007 Agreement which allows PNR data to be retained in an active database for seven years, and then transferred to a dormant database for a further eight years. Whilst he recognises that the new data retention framework is longer than that in the EU-Australia PNR Agreement (five and a half years) and the draft EU-PNR Directive (five years and 30 days), he believes that it protects the privacy rights of passengers for the following reasons:

33

See para 49 of the Minister’s Explanatory Memorandum.


39

“Most users of the DHS PNR database will only be able to view personal information for 6 months. Active retention will be limited to five years and there will be a mandatory evaluation of the dormant retention period. Data may be retained in the dormant database for up to 10 years, but after five years it may only be used for counter terrorism purposes, and not in the fight against serious transnational crime. This regime was adjusted in response to the EU’s request for a shorter and more narrowly tailored retention period. US negotiators have provided justification to negotiators from the EU Commission for retaining data for counter-terrorism purposes for up to 15 years, and for the fight against serious transnational crime for up to 10 years.”34 Sensitive data

4.34 The Minister notes that the arrangements for access to, processing and use of sensitive data are the same as in the 2007 Agreement, but “with the added protection that access is on a case by case basis with the approval of a senior DHS manager.” 35 Oversight of data protection safeguards

4.35 The Minister states that compliance with the data protection safeguards set out in the Agreement will be overseen by Department Privacy Officers, such as the DHS Privacy Officer, “who have a proven record of autonomy and will ensure complaints are investigated.”36 Compliance with fundamental rights

4.36 The Minister notes that any interference with the right to respect for private and family life and the right to protection of personal data “must be provided for by law and respect the essence of the particular right in question; and the interference must comply with the requirements of necessity and proportionality.” 37 He believes that the purpose of the Agreement — to help combat terrorism and other serious transnational crime — constitutes a legitimate objective as “PNR data has a clear value in combating these types of crime, which goes to the necessity of the measure to protect the public.” 38 He also highlights a number of data protection safeguards and considers that these “ensure sufficient protection for fundamental rights, while taking account of the particular circumstances of the US.”39

34


35


36


37


38


39


40


The UK’s opt-in

4.37 The Minister sets out the outcomes which the Government hoped to achieve when it decided to opt into the negotiating mandate for a new EU-US PNR Agreement. These were: •

independent data protection oversight;

•

provision for review of the Agreement within two years;

•

strict limitations on the transfer of PNR data for the purpose of preventing and combating terrorism and other serious transnational crime;

•

respect for the principles of necessity and proportionality;

•

respect for EU law and the EU Treaties; and

•

an adequate level of personal data protection.

4.38 The Government considers that the proposed Agreement meets these objectives and therefore intends to opt into both draft Council Decisions. The Minister continues: “The UK has long recognised the value of PNR data in combating a wide range of illicit activity — specifically, the fight against terrorism and serious crime — and we are pleased that the Commission and the US share this view. The UK, in common with other EU Member States, views the US as a key partner. A clear PNR Agreement between the EU and the US will play a vital role in providing legal certainty for air carriers flying to the US and help ensure that, where appropriate, PNR data can be shared quickly and securely with all necessary data protection safeguards in place.” 40 Impact on UK law

4.39 The Minister notes that the UK already has the ability to obtain passenger, crew and service data from carriers in advance of all movements into and out of the UK, and that the data may be shared amongst the UK Border Agency, police and HM Revenue and Customs for immigration, customs or police purposes. He says that the UK’s existing legal framework will not need to be amended if the Agreement is adopted. Timetable

4.40 Following publication of the draft Council Decisions on 23 November, the Government expects the Presidency to press for the adoption of document (b) — the draft Council Decision on signature — at the Justice and Home Affairs Council on 13 December. The Minister notes that the short time frame between publication and adoption precludes consultation of outside bodies, notably the UK’s Information Commissioner and the EU’s Article 29 Data Protection Working Party of which he is a member. He adds,

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41

however, that the Government is unaware of any issues arising from the transfer of PNR data to the US under the 2007 Agreement which is provisionally in force. 4.41 Finally, the Minister states that, in light of the expedited timetable and the importance of the Agreement to the UK, the Government intends to inform the Presidency “that it will waive its Treaty rights to three months’ opt-in consideration on this occasion in order to allow the Agreement to proceed.”41

The Home Secretary’s letter of 5 December 2011 4.42 The Home Secretary’s (Mrs Theresa May) letter notes that the Presidency plans to secure agreement to adopt the Council Decision to sign the EU-US PNR Agreement at the Justice and Home Affairs Council on 13 December. She continues: “We believe they will have sufficient votes to secure that outcome, although this remains subject to confirmation. As you can see, this gives us just under three weeks for the UK to make an opt-in decision rather than the three months to which we are entitled. “In spite of the representations that I have made at the highest level about our entitlement to a three month opt-in period, it seems that both the Presidency and US are determined to adopt the Agreement within this expedited timetable. I am equally determined that the Scrutiny Committees should be given as much opportunity as possible to consider the text. This is why an earlier version of the text was deposited with an unnumbered Explanatory Memorandum back in July.” 4.43 The Home Secretary asks us to consider the draft Council Decisions forthwith as she would “value the views of the Committee in advance of the Council.” She adds: “Ireland have informed the Presidency that they are prepared to waive their 3 month opt-in period on this occasion and opt in post-adoption.”

Conclusion 4.44 In our Thirty-fifth Report, which included a chapter on the EU-Australia PNR Agreement, we expressed our deep dissatisfaction that there were only 20 days between publication of the Agreement and the date initially proposed by the Presidency for the adoption of the draft Council Decision to approve its signature. 42 Although the timetable slipped, the Home Secretary told us then that “the UK was very clear that, under the Treaty, we should be allowed to exercise our option to allow Parliament to scrutinise the Agreement within our 3 month window for opting in.”43 Regrettably, we find ourselves in the same position again, but without a similar assurance from the Government that we should have sufficient time to scrutinise the Agreement effectively. Although the Home Secretary expresses her determination that we should 41


42

(32797) 9821/11 (32798) 9823/11: see HC 428–xxxi (2010–12), chapter 2 (29 June 2011).

43

See letter of 21 June 2011 from the Home Secretary to the Chairman of the European Scrutiny Committee. Available at: http://www.parliament.uk/documents/commons-committees/european-scrutiny/Ministerial-Correspondence-201012.pdf.

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be given as much opportunity as possible to consider the draft Agreement, the Explanatory Memorandum provided by the Minister for Immigration states categorically that the UK will “waive its Treaty rights to three months’ opt-in consideration on this occasion in order to allow the Agreement to proceed.” We do not see how a unilateral waiver of the UK’s Treaty rights can be reconciled with a commitment to ensuring proper Parliamentary scrutiny. 4.45 All the reasons set out in our Thirty-fifth Report for considering the expedited timetable to be objectionable apply with even greater force in this case. These were: •

the importance of allowing sufficient time to consult experts, notably the Information Commissioner, the Article 29 Data Protection Working Party and the European Data Protection Supervisor, as well as law enforcement bodies and carriers;

•

the Government’s commitment, in accordance with the Ashton undertakings, to allow Parliament an eight-week scrutiny period before notifying the Council Presidency of its opt-in decision, except where an earlier opt-in decision is ‘necessary’ or ‘essential’; and

•

respect for the procedures set out in Protocol 21 (the UK’s opt-in Protocol) which give the UK three months in which to decide whether to opt into an international agreement concluded pursuant to Title V of Part Three of the TFEU.

4.46 We acknowledge that the Government has done its best to keep us informed of the progress of negotiations and to submit a detailed Explanatory Memorandum within days of publication of the initialled Agreement. We understand the reasons why the Government, as the foremost advocate of an EU PNR system, would wish to associate itself with the signature and conclusion of a new Agreement with the US. However, whilst we recognise that there may be exceptional circumstances which justify an early opt-in decision so that draft EU legislation may be adopted quickly, the need for haste in this case is unclear. First, the 2007 EU PNR Agreement with the US will continue to apply on a provisional basis pending its conclusion or replacement by a successor Agreement. Second, compliance with the eight week scrutiny period for opt-in decisions would not prejudice UK participation in the proposed new Agreement, since the Government would still be able to opt in, at a later stage, to the draft Decision to conclude the Agreement or to exercise its right to request to opt in post-adoption. Indeed, these possibilities are reflected in the final provisions of the Agreement in Article 27. 4.47 We consider, moreover, that there is a wider principle at stake. It is precisely situations such as this one which test the strength of the Government’s commitment to enhanced Parliamentary scrutiny of the UK’s opt-in. We agreed to waive our scrutiny reserve for the EU-Australia PNR Agreement on the strength of assurances that it contained adequate safeguards for the protection of personal data, in line with the Commission’s global approach to transfers of PNR data to third countries. We question whether this is the case for some of the provisions in the proposed EU-US Agreement. For example, we question whether Articles 4(2) and (3) which provide for


43

the use and processing of PNR data “if ordered by a court”, or to identify individuals to be questioned or examined on arrival or departure from the US, constitute a meaningful purpose limitation. We note that the proposed data retention limit greatly exceeds the limits set out in the EU-Australia PNR Agreement and the draft EU PNR Directive. Article 13 does not appear to confer a right to effective judicial redress, merely the possibility to “seek” it, and oversight of privacy safeguards by Departmental Privacy Officers lacks the appearance of independence. 4.48 The proposed Agreement may, as the Minister’s Explanatory Memorandum hints, be the best that can be negotiated with the US and the Government may, notwithstanding the concerns highlighted in the preceding paragraph, be right in its belief that the collective security benefits outweigh any interference with individual privacy rights. We nevertheless consider that a debate is merited for two reasons. First, to register in the strongest terms our dissatisfaction with the way in which the PNR Agreements with Australia and the US have been negotiated and approved, with minimal opportunity for effective Parliamentary scrutiny. Second, to draw attention to elements of the draft Agreement with the US which raise doubts as to whether an appropriate balance has been struck between civil liberties, data protection and security. We therefore recommend that the draft Council Decisions concerning the proposed new EU-US PNR Agreement, as well as those concerning the EU-Australia PNR Agreement, should be debated in European Committee B.

5 Enforcement of patent rights (33058) 11533/11 —

Draft Agreement on a Unified Patent Court and draft Statute


— Business, Innovation and Skills Minister’s letter of 2 December 2011 HC 428–xli (2009–10), chapter 2 (9 November 2009) 5 December Legally and politically important Not cleared; further information requested

Background and previous scrutiny 5.1 The background to this proposal is set out in our earlier Report. 44 In the conclusion, we said as follows:

44

See headnote.

44


“We note that negotiations on the draft agreement are at an early stage. So rather than asking further questions now, we would be grateful for an update on the negotiations when the details of how the UPC will operate in practice for EU and European patents become clearer, such update to cover whether the concerns raised by the Minister above have been allayed. We would also be grateful for a summary of the views of UK industry on the UPC. In the meantime, the draft agreement on the UPC, document (c), remains under scrutiny”. 45

The views of the Chartered Institute of Patent Attorneys 5.2 The Chairman of the Committee received a letter from the Chartered Institute of Patent Attorneys, dated 30 November 2011, saying: “The Chartered Institute of Patent Attorneys has written to the Prime Minister and Baroness Wilcox, Minister for Intellectual Property, urging the government not to sign the draft agreement on a unitary European patent, to be discussed at the Competitiveness Council meeting in Brussels on Monday (5 December). CIPA’s position on this is shared by most of British industry. “The attached position paper explains why the draft agreement, in its current form, would be bad for the UK and both British and other European businesses. I also attach a letter from CIPA’s President, Tim Roberts, published in today’s Times. “It appears that there is inappropriate pressure being exerted on government representatives to sign this agreement next week, so that it will happen during the Polish presidency. There is no other reason at all why signature should not be delayed by a few weeks, until all parties agree that the current remaining problems have been satisfactorily solved.” 5.3 The attachment reads as follows: “We support the idea of a Unitary European Patent. But only if it is an improvement on the present system. What is currently being discussed is not. It would be worse, not better. It can and must be improved. “The amendments we must have are:

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a)

Deletion of Clauses 6–8 of the Regulation. The CJEU must not decide European patent infringement law. They are not suited to it.

b)

Non-exclusive jurisdiction. There must be a right to litigate EPO-issued national patents in existing national courts. This is vital for SMEs.

c)

German property law not to apply automatically to Unified Patents of extra-EU applicants.

d)

Transitional provisions. Five years is quite inadequate. There must be a continuing right for patentees to opt out. Also, because the system may not

pp. 17–18.


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work as planned, and will be difficult to amend, there must be a clear right and mechanism for countries to leave it. e)

Sensible provision for SPCs.

“Also, there are two features currently included which must be retained and clarified: f)

Clear rights for EPAs to represent in the Court, possibly with extra qualification.

g)

Proper privilege for advisors. Legal professional privilege and litigation privilege needs to be recognised for all patent attorneys on patent prosecution files.

“These are the key issues, but there are other amendments needed. The Government should not sign up until all the documents are ready, including the rules of court procedure.”

The Minister’s letter of 2 December 2011 5.4 The Parliamentary Secretary for Business, Innovation and Skills (Baroness Wilcox) writes as follows: “Thank you for your consideration of the Explanatory Memorandum submitted on 21 September. I am writing in response to the conclusions of the Committee’s meeting on 9 November, to give an update on negotiations and a summary of stakeholder positions as expressed to my Department. “As the draft Agreement is not an EU legislative proposal, nor is the EU as such able to become party, the Presidency has been conducting discussions in a specially convened group, the Friends of the Presidency. This group is supported by the Council secretariat, and the Commission attends in an observer capacity, assisted by a representative of the European Patent Office. More recently negotiations have moved into COREPER. “The Presidency has been focussing on ensuring that the draft Agreement is legally sound in relation to Opinion 1/09 of the Court of Justice of the EU, and the existing EU acquis. They have been less inclined to take on board amendments of a technical nature, given that the substance of the Agreement was discussed in Council working groups before the Council conclusions of December 2009. The previous version of the Agreement was the subject of EM 7928/09 which has cleared scrutiny. “The Presidency is now hoping for consensus to be reached on some political aspects before an initialling ceremony in Warsaw on 22 December. We expect that any initialling will be provisional, and on the basis that outstanding issues will be addressed satisfactorily before a Diplomatic Conference in June 2012 at which the Agreement will be adopted and signed. It will then be subject to ratification by national governments according to their usual procedures.

46


“We have been consulting stakeholders primarily through the Intellectual Property Office’s European patent reform consultation group, which last met on 29 November. This includes representatives of industry, the legal and patent attorney professions and the judiciary, as well as Government officials. In relation to the text in document 11355/11 a small group of representatives has suggested over 100 amendments, while recognising that issues would need to be focussed for discussions with the Presidency. “The main points identified by this stakeholder group were set out in a ‘Concerns of Principles’ document and subsequently prioritised as follows: •

Appropriate transitional provisions, with a wide-ranging review before the transitional arrangements end, and including the possibility for patentees not only to opt back into the jurisdiction for existing patents but also to opt out for patent applications made during the transition period

•

The possibility to initiate actions for infringement and interlocutory relief before the central division

•

Simplified language arrangements

•

Clarity and finalisation of the Rules of Procedure to ensure uniform quality of judgments

•

Inclusion of provisions on infringement of the unitary patent in the Court Agreement rather than in the unitary patent regulation

•

Technical issues including future provision for supplementary protection certificates with unitary effect.

“Additionally others have commented on the quality of the Patents County Court under recent reforms, particularly for small businesses, and consider it important that this avenue continues to be available; there is already provision for disputes to be taken to national courts rather than the UPC during the transitional period. “In recent weeks, following a bid by Germany for the seat of the central division of the court, industry has mounted an extensive lobbying campaign for the UK Government to also bid for the seat of the central division of the Court. The French Government has bid for Paris to be the seat. “For the Competitiveness Council on 5 December the Presidency have signalled their intention to have a political debate on specific aspects of the Agreement with a view to reaching a consensus, in particular: •

The location of the seats of various bodies

•

The financial contributions from states in relation to bodies they host

•

Possible methods for calculating contributions from states to costs of the court in the setting-up phase


47

•

Requests to change the language of proceedings on the grounds of convenience and fairness to the parties

•

Additional opportunities to bring actions before the central division

•

Number of ratifications for the Agreement to enter into force

•

Extending the transitional period from that previously agreed in December 2009

•

Ensuring that a broader range of provisions can be reviewed by the Administrative Committee in order to improve the functioning, efficiency and cost effectiveness of the UPC and the quality of its judgments.

“In negotiating with European partners on these issues we will be seeking the most effective solutions for users of the patent system, bearing in mind that litigants will have different requirements depending on whether they are seeking to defend or challenge patents, and according to their business models. “How the Presidency concludes the Council of 5 December will depend on the progress of discussions. There will be no vote as this is not an EU agreement. If a consensus emerges on the main outstanding points we would expect the Presidency to conclude that they will invite the 25 participating states to Warsaw to initial the agreement on 22 December. If the Court Agreement is finalised in due course, it will of course be subject to ratification by Parliament. “If it would be helpful, my officials would be very pleased to discuss the substance of the draft Agreement, and the way forward, with the Committee Clerks.”

Conclusion 5.5 We note that the Minister’s letter was dated 2 December and so could only be considered by the Committee on 7 December, two days after agreement was expected in the Competitiveness Council. The Minister does not explain her own time constraints in producing the letter, and so her approach to Parliamentary scrutiny continues to leave us very concerned. Additionally, having submitted the draft agreement as a European document for scrutiny, together with an Explanatory Memorandum, the Minister is silent on whether she wants us to release it from scrutiny, which displays a further lack of understanding of the scrutiny procedures. 5.6 We also note that the Minister has not answered a key question we raised in our previous Report, namely whether the concerns raised in the Explanatory Memorandum had been allayed. These concerns included: •

Separate jurisdictions for related validity and infringements actions on a patent case: the Minister explained that UK industry generally opposes these actions being heard separately as it could mean that cases are more expensive and/or could reach inconsistent decisions.

48


•

UK stakeholders had raised concerns that the costs of the UPC might be prohibitively high now that there will not be a contribution from the EU budget to the setting up costs of the court.

•

There were a number of language issues to be resolved. These include the operational language of the division, the language of proceedings, the language of court documents and the language of judgments. Related is the issue of translation and interpretation. Different solutions could apply to each. Some Member States had concerns that their nationals may not be able to use their own language in the UPC, and judgments may not be available in their language. However, UK industry was concerned that complex language requirements will create cost and uncertainty.

•

Patents are highly technical documents and this can present difficulties for judges if they do not have the technical know-how to understand the invention. Some European States use technically-qualified (non legally-qualified) judges and others, such as the UK, use technical experts to provide the necessary technical knowledge. UK industry was concerned that there were currently not enough suitably qualified judges to populate all of the panels of the Court of First Instance and Court of Appeals in their local, regional and central divisions.

5.7 The Minister’s letter fails to address whether these concerns have been met. They appear to us to relate to central issues in the agreement which we would have expected the UK to wish to resolve in its favour before giving political agreement. We would be grateful if the Minister could address these at the earliest opportunity. 5.8 Additionally, the Chartered Institute of Patent Attorneys letter to us demonstrates real concern that draft agreement will be disastrous for UK companies. It comments that “inappropriate pressure” is being placed on governments to sign the agreement. The attached “CIPA view” begins as follows: “We support the idea of a Unitary European Patent. But only if it is an improvement on the present system. What is currently being discussed is not. It would be worse, not better.” This is followed by seven proposed amendments it thinks necessary before the agreement will be beneficial for UK companies. 5.9 Again, we would be surprised if the UK were willing to give its agreement to an agreement in the face of such opposition from a key stakeholder organisation, so we ask the Minister to address each of the points raised by the Chartered Institute of Patent Attorneys and say why the agreement as it stands will benefit UK industry. 5.10 Finally, we note the Minister says that the Presidency has been “less inclined to take on board amendments of a technical nature, given that the substance of the Agreement was discussed in Council working groups before the Council conclusions of December 2009”. We ask the Minister to explain in more detail what this means; it sounds to us as if the Presidency has not permitted any substantive negotiations on the detailed provisions of the text.


49

5.11 Pending the Minister’s replies to the above, the draft international agreement remains under scrutiny.

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6 Accession of the Russian Federation and Samoa to the WTO (a) (33338) 16748/11 COM(11) 720

(b) (33354) 16809/11 COM(11) 721

(c) (33355) 16812/11 COM(11) 724

(d) (33342) 16785/11 COM(11) 732

Draft Council Decision on the position to be adopted by the European Union within the relevant instances of the World Trade Organisation on the accession of the Russian Federation to the World Trade Organisation

Draft Council Decision on the signing, on behalf of the European Union, and provisional application of, the Agreement in the form of an exchange of letters between the European Union and the Government of the Russian federation regarding the preservation of commitments on trade in services contained in the current EURussia Partnership and Cooperation Agreement

Draft Council Decision on the conclusion, on behalf of the European Union, of the Agreement in the form of an exchange of letters between the European Union and the Government of the Russian federation regarding the preservation of commitments on trade in services contained in the current EU-Russia Partnership and Cooperation Agreement

Draft Council Decision on the position to be adopted by the European Union within the relevant instances of the World Trade Organisation on the accession of Samoa to the World Trade Organisation

Legal base Document originated Deposited in Parliament Department Basis of consideration Previous Committee Report To be discussed in Council Committee’s assessment Committee’s decision

Articles 91, 100(2) and 207(4), in conjunction with Article 218(9) TFEU; QMV (a)–(c) 10 November 2011 (d) 11 November 2011 (a) 14 November 2011 (b)–(d) 15 November 2011 Business, Innovation and Skills EMs of 6 December 2011 None 14 December 2011 Legally and politically important Not cleared


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Background 6.1 The process of World Trade Organisation (WTO) accession consists of two strands. First, individual WTO members agree bilateral market access arrangements with the acceding country regarding market access for industrial goods, agricultural trade, and services, the outcomes of these individual negotiations then being amalgamated into the Schedules of Commitments and the best offers granted to all WTO members on the “MostFavoured Nation” (MFN) principle. Secondly, there are discussions on the compatibility or otherwise of the trade policy regime of the acceding member with the multilateral agreements and obligations which constitute WTO membership. This process — which the Commission negotiates on behalf of the EU Member States — effectively sets out the terms and conditions of the acceding party’s membership, and, once these have been agreed, a vote must be taken in the General Council of the WTO on allowing the new member to join.

The current documents Document (a) 6.2 Document (a) is a draft Council Decision establishing an EU position on the accession of the Russian Federation, which applied to become a member in June 1993, and seeks to confirm the approval which the Commission proposes to give on behalf of the EU at the eighth WTO Ministerial Conference being held 15 to 17 December 2011. The Russian Federation’s national assembly is expected to ratify the deal in June 2012, with WTO membership following 30 days after the instrument of ratification is deposited (expected to be September 2012 at the latest), at which point it becomes subject to WTO disciplines and has the right to participate formally in WTO committees and negotiations and be subject to the WTO’s Dispute Settlement Mechanism (DSM). 6.3 As part of the accession, Russia concluded 57 agreements on market access for goods, and, on average, the final legally binding tariff ceiling for the Russian Federation will be 7.8%, compared with a 2011 average of 10%. The average tariff ceiling for agricultural products fall from 13.2% to 10.8 %; that for manufactured goods from 9.5% to 7.3%: tariffs for information technology products (currently 5.4%) will be bound at zero, in addition to which exports of such products to Russia will benefit from simplified registration and licensing conditions for goods with encryption technologies, harmonised standards and other regulatory reforms. The final bound rates will be implemented on the date of accession for more than a third of tariff lines, with another quarter to be put in place three years later: and the longest implementation period is eight years for poultry, followed by seven years for motor cars, helicopters and civil aircraft. 6.4 Important gains are also expected due to reforms in a wide range of areas, from the alignment to WTO standards as far as non-tariff measures are concerned to the elimination or reduction of trade-distorting measures, such as export duties and discriminatory pricing practices. All agricultural products will benefit from major regulatory reforms in the area of sanitary and phyto-sanitary requirements applied in Russia, and Russia has also agreed to gradually cap its domestic support subsidies to $4.4 billion by 2018, and to bind its export subsidies at zero level.

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6.5 There are 30 bilateral agreements on market access for services, with Russia having made specific commitments on 11 service sectors and on 116 sub-sectors. On telecommunications, the foreign equity limitation (currently 49%) will be eliminated after four years; foreign insurance companies will be allowed to establish branches nine years after accession; foreign banks will be allowed to establish subsidiaries; there will be no cap on foreign equity in individual banking institutions, but the overall foreign capitalisation in the Russian banking system will be limited to 50% (not including foreign capital invested in potentially privatised banks). On transport services, Russia has made commitments in maritime and road transport services, including the actual transport of freight and passengers; on distribution services, Russia will allow 100% foreign-owned companies to engage in wholesale, retail and franchise sectors upon accession to the WTO. For computer services, a high growth sector, Russia is opening the sector fully, without any restrictions, at the level of the sector as a whole. With regard to the movement of natural persons providing services (Mode 4), Russia take commitments for infra-corporate transferees and business visitors (including visitors setting up a commercial presence), without application of labour market tests or quotas, with respective lengths of stay of three years renewable and 90 days respectively. 6.6 More generally, the Russian Federation will ensure that all laws, regulations and other measures related to the Agreement on Trade-Related Investment Measures will be consistent with WTO provisions, and any inconsistent measures, including preferential tariffs or tariff exemptions, applied in reference to the investment programmes (including automobile investment programmes) and any agreements under them will be eliminated by 1 July 2018. The Russian Federation will also fully apply the provisions of the WTO Agreement on Trade-Related aspects of Intellectual Property Rights including provisions for enforcement, without recourse to any transitional period, and it will continue to take action against the operation of websites (with servers in the Russian Federation) which promote illegal distribution of content protected by copyright or related rights. It will investigate and prosecute companies which illegally distribute objects of copyright or related rights on the internet, and, by the time of accession, will apply all the rules of the Berne Convention for the Protection of Literary and Artistic Works. 6.7 The provisions of the WTO Agreement would be applied uniformly throughout the territory of the Russian Federation, including regions engaging in frontier traffic, special economic zones and other areas where special regimes for tariffs, taxes and regulations could be established. All legislation affecting trade in goods, services and intellectual property rights will be published promptly, consistently with WTO requirements. The Russian Federation will regularly update its official publications, including websites, and make these laws readily available to WTO members, individuals and enterprises. Documents (b) and (c) 6.8 The impending accession of the Russian Federation to the WTO has also given rise to a number of bilateral agreements with the EU addressing specific issues. These cover (i) a commitment 46 by the Russian Federation to gradually reduce or eliminate certain export duties, and not to introduce or increase such duties on other products; (ii) the introduction 46

(33356) 16821/11 and (33357) 16824/11: see chapter 28 of this Report.


53

of safeguards 47 to maintain EU exports on parts and components of motor vehicles, pending the phasing out by 2018 of any measures which are not compatible with the WTO Agreement on Trade-Related Investment Measures; and (iii) rules48 establishing how the implementation of a commitment by the Russian Federation to reduce its export duty on raw wood products will be applied to the EU. 6.9 We think it sufficient to simply to refer to these agreements in this Chapter of our Report without making them the subject of further substantive Reports to the House, but we are drawing specific attention to documents (b) and (c), which relate to trade in services. At present, a Partnership and Cooperation Agreement (PCA) between the European Community and Russia, signed in July 1994, contains commitments in this area, which include trade in maritime transport services and on Mode 4. When the Russian Federation accedes to the WTO, the commitment in the PCA will lapse in the light of the extensive commitments undertaken by the Russian Federation, which will be made available to the EU on a Most Favoured Nation (MFN) basis. However, the PCA commitment regarding maritime transport and Mode 4 will not be reflected in full in Russia’s WTO commitments, and consequently the bilateral agreement which the EU and Russia have reached — and which would be brought into effect by these two documents — seeks to preserve these obligations. Document (d) 6.10 The WTO Ministerial Conference on 15–17 December 2011 will also be deciding on a similar application for membership lodged by Samoa in April 1998, and this document similarly would authorise the Commission to support this application on behalf of the EU. Accession is important to Samoa in allowing it to benefit from WTO market access and global trading rules, from the transparency of the WTO trading system, and from the WTO Dispute Settlement Mechanism, and it will also mean that foreign businesses can operate in a more transparent and predictable environment, including better protection for intellectual property rights. However, compared with the accession of the Russian Federation, there is a relatively limited UK economic interest, with exports to Samoa between 2005 and 2010 averaging only £0.7 million a year.

The Government’s view 6.11 These documents are dealt with in separate Explanatory Memoranda of 6 December 2011 from the Minister for Employment Relations, Consumer and Postal Affairs at the Department for Business, Enterprise and Skills (Mr Edward Davey). 6.12 He supports the accession of Samoa to the WTO as providing a balanced but ambitious package of commitments in line with its status as a least-developed country, and he notes that the UK has also consistently supported the accession of the Russian Federation on the right terms, having worked closely with the Commission throughout the negotiations to ensure that the UK’s objectives and priorities have been taken into consideration. He says that it is a measure of the success of the package that these have 47


48


54


been met to a significant extent, and that, in acceding to the WTO, the Russian Federation will embrace a series of rules and commitments which are the foundation of an open, transparent and non-discriminatory global trading system, providing important guarantees for Russia and for the 153 other members of the WTO, and bringing Russia more firmly into the global economy, thereby making it a more attractive place to do business. He describes the outcome of the negotiations on services as very good, in that they will grant UK service suppliers significant market opportunities, whilst helping the Russian economy to modernise, thereby making it an even more attractive market. 6.13 The Minister has also commented on the application of the Mode 4 provisions to the accession of both the Russian Federation and Samoa, and to the bilateral agreement between the EU and Russia on trade in services, which he says preserves commitments either previously entered into by Russia and the EU in the existing PCA, or offered bilaterally by Russia to the EU in the course of WTO accession negotiations, which would otherwise lapse. 6.14 He says that, whilst trade in services falls within the EU’s exclusive competence postLisbon, the Government’s position is that Mode 4 provisions fall within the scope of the UK’s Title V opt-in. He notes that, whilst documents (a) and (d) do not themselves contain Mode 4 provisions, accession will enable Russia and Samoa to avail themselves of the UK’s commitments on Mode 4 under the General Agreement on Trade in Services (GATS), and therefore represents a widening of those commitments without changing their substance. The UK therefore intends to exercise the opt-in in relation to each Decision. Likewise, he considers that documents (c) and (d) also trigger the opt-in, pointing out that the UK’s Mode 4 commitments in the GATS relate to intra-corporate transferees, business visitors and contractual service suppliers, and are made available to other WTO members on a Most Favoured Nation basis, with new countries acceding to the WTO being able avail themselves of these commitments. He notes that, in relation to Mode 4, the side agreement on trade in services replicates some of these commitments, apparently for presentational purposes in order to enable Russia to make more commitments of its own on Mode 4 to the EU, but, notwithstanding this, he says that the UK proposes to exercise the opt-in in relation to these two Decisions. 6.15 The Minister also notes that there is a separate question over whether the bilateral agreement should be mixed or EU-only. He says that his department is currently discussing this issue with the Department for Transport, and is aiming to resolve it by 6 December, the argument for mixed competence being based on the transport provisions (since this remains an area of shared competence). He adds that the two departments are investigating whether the transport provisions of the agreement are in areas where the EU has already exercised competence, but he observes that any claim by the UK in favour of mixed competence would meet resistance at an EU level.

Conclusion 6.16 The draft Decisions supporting the accession to the WTO of the Russian Federation and Samoa are clearly to be welcomed on policy grounds, as are the provisions of the proposed bilateral agreement between the EU and the Russian Federation on the trade in services.


55

6.17 However, we note that the UK intends to exercise its Mode 4 opt-in rights under Title V in the absence of agreement from other Member States and the Commission, and, consequently, of a legal base. Since Mode 4 rights can affect national labour markets, they are politically sensitive as well as important — for example, the Trades Union Congress is campaigning 49 to restrict those provisions in the EU India Free Trade Agreement and in other similar EU agreements. Moreover, we have exchanged differing views with the Government on the legality of asserting opt-in rights in the absence of a Title V legal base on several previous occasions, and our view remains that such a base is necessary for the UK to exercise its opt-in rights. Consequently, we do not feel able to release these documents from scrutiny, although we recognise that, as the UK is unwilling to hold up these WTO accessions, it will signify its political agreement to these Decisions in the Council on 14 December, thus giving rise to scrutiny overrides.

7 Road transport: tachographs (a) (33048) 13189/11 COM(11) 454

Commission Communication: Digital tachograph: roadmap for future activities

(b) (33059) 13195/11 + ADDs 1–2 COM(11) 451

Draft Regulation amending Council Regulation (EEC) No 3821/85 on recording equipment in road transport and amending Regulation (EC) No 561/2006


49

(a) — (b) Article 91 TFEU; co-decision; QMV Transport Minister’s letters of 21 November and 1 and 6 December 2011 HC 428–xxxvi (2010–12), chapter 6 (14 September 2011) 12 December 2011 Politically important Not cleared; further information requested

EU-India Trade Agreement (temporary migration), June 2011 (http://www.tuc.org.uk/international/tuc-19635-f0.pdf).

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Background 7.1 The tachograph is a driver and vehicle activity recording device, required to monitor compliance with EU legislation on drivers’ hours. The use of tachographs is regulated by Council Regulation (EEC) No 3821/85. The digital tachograph was first required in new vehicles from 2006 and the paper-based analogue tachograph is still in use in older vehicles. Each driver has a unique card issued to them which must be used with the digital tachograph for each daily working period to store the driver’s activity record. To help ensure that each driver has only one card issued, most Member States exchange information relating to cards already issued. Tachographs require type-approval to ensure they meet the technical requirements before sale and use and can only be installed, calibrated and repaired by approved workshops and fitters. The digital tachograph has been required in new vehicles since 2010 in AETR (the UN-ECE’s European Agreement concerning the Work of Crews of Vehicles engaged in International Road Transport, 50 to which all Member States are party) contracting parties. 7.2 In these documents the Commission proposes a range of both technical and systembased measures for the future regulation of tachographs required in most lorries and some coaches. The specific objectives are to improve the trustworthiness of digital tachographs, increase the efficiency of enforcement and to reduce the costs of use via reduced administrative burdens. The proposed changes would take effect over the period from one year after entry into force of the draft Regulation, document (b), to 2018. 7.3 In the Communication, document (a), the Commission proposes, in addition to the draft Regulation: •

improving the security of the digital tachograph through changes to the technical annexes of Council Regulation (EEC) No 3821/85 and by providing a mandate to the European Committee for Standardisation (CEN) 51 to develop a standard for the mechanical seals used to prevent tampering;

•

improvements to the decision making process for the technical progress of tachographs, by involving the contracting parties to the AETR in a two stage process — first, the AETR would be involved in a tachograph forum expert group and then it would be adapted to allow the cooperation of the EU and AETR contracting parties in the technical adaptation of the digital tachograph;

•

exploring the possibility of the EU becoming a contracting party to the AETR; and

•

amending Directive 2006/126/EC on driving licences to address the merging of the driver tachograph card with the licence.

7.4 The draft Regulation would amend Council Regulation (EEC) No 3821/85 so as to provide for:

50

See http://live.unece.org/trans/main/sc1/sc1aetr.html.

51

The body, representative of 31 National Standards Organisations, which establishes European Standards: see http://www.cen.eu/CEN/Pages/default.aspx.


57

•

a range of technical measures — the tachograph to be connected to a Global Navigation Satellite System device to automate the recording of the daily journey start and end location, a remote (wireless) communications function to provide a signal, only on request, to allow an enforcement officer to assess whether to stop the vehicle for further checks and a harmonised interface to allow the use of Intelligent Transport Systems (ITS) with the tachograph;

•

a requirement to ensure enforcement officers are appropriately trained, with the Commission establishing the methodology for initial and continuing training;

•

mandatory electronic exchange of information on driver cards between all Member States, with the data format, access procedures and security mechanisms to be laid down by the Commission;

•

the driver licence and driver tachograph card to be incorporated as one card (this will require minor changes to Directive 2006/126/EC, for which there will be a separate legislative proposal;

•

in connection with the approval of workshops and fitters, annual audits plus unannounced audits of at least 10% of the workshops;

•

measures to avoid conflicts of interest between fitters or workshops and vehicle operators — with a ban of operators which also have an approved workshop from installing or calibrating tachographs in their own vehicles;

•

sanctions for very serious infringements of the tachograph Regulation to be of the Member State’s highest category for infringements of road transport legislation — this would not harmonise the monetary level of fines across the EU, but would require that the highest fines in a Member State to be applied; and

•

three of the vehicle exemptions from drivers’ hours legislation to be amended in terms of the distance over which the exemption applies — for carriage of live animals on certain journeys, for goods vehicles up 7.5 tonne used by universal service providers (for example, Royal Mail) and by tradesmen and for goods vehicles up to 7.5 tonne propelled by gas or electricity the distance would change from 50 kilometres to 100 kilometres.

7.5 The draft Regulation is accompanied by an impact assessment (and a summary of the assessment). In the assessment the Commission estimates EU total benefits of €515 million (£451 million), with costs of €46.5 million (£41 million). 7.6 When we considered these documents in September 2011 we: •

noted that the Government had made no comment about the proposals in the Commission Communication, document (a), in relation to the task to be given to the European Committee for Standardisation and to the EU being a party to the AETR — we asked to hear the Government’s views on these matters; and

•

commented that before considering the draft Regulation, document (b) again we wished to hear about the outcome of the Government’s consultation on the

58


proposal, its consideration of the impacts of the proposal and its consequent position on the draft Regulation. Meanwhile the documents remained under scrutiny. 52

The Minister’s letters 7.7 In his letter of 21 November 2011 the Parliamentary Under-Secretary of State, Department for Transport (Mike Penning) says, in relation to our request for comment on the proposals in the Commission’s Communication, that: •

the task to be given to the European Committee for Standardisation is to develop an agreed technical standard for the mechanical seals used on the recording equipment;

•

these seals are currently used to help prevent tampering with the equipment — their removal should cause obvious visual damage to the seal and prevent re-fitting;

•

the current absence of a standard means that seals can potentially be of variable quality and some seals might allow tampering without obvious signs;

•

establishing a standard is expected to reduce the scope for tampering and the Government is content for this task to be given to the European Committee for Standardisation;

•

the possibility of the EU being party to the AETR relates to the Commission intention to change the decision making process for the technical progress of tachographs, by involving the contracting parties to the agreement; and

•

the Government awaits the Commission’s expected application to the Council for a mandate for the EU becoming a contracting party to the agreement, in order to consider this matter and check for impacts on Member State influence.

7.8 As for the Government’s position on the draft Regulation the Minister says that this is still being developed and that it is yet to be convinced that all the measures proposed by the Commission would address the problems with the digital tachograph. He attaches an initial impact assessment and says the Government’s full impact assessment is being developed for consultation, which is planned over the next few months. 7.9 The Minister continues that:

52

•

discussion of the proposed Regulation began in September 2011;

•

the UK and many other Member States have expressed concern over the uncertainty of costs and benefits and the lack of clarity in certain articles;

•

the Polish Presidency is aiming for a partial general approach on the draft Regulation in the Transport Council on 12 December 2011;

See headnote.


59

•

this ‘partial’ general approach would exclude any agreement on articles which would provide for merging tachograph cards and driving licences;

•

the Commission has now also published a draft Directive, which would make the consequential amendments to the driving licence Directive, Directive No. 2006/126/EC, that would be required if tachograph cards and driving licences are to be merged; 53 and

•

the Government is awaiting further information from the Presidency as to how they will wish to handle discussions on this new proposal.

7.10 In his letter of 1 December 2011 the Minister reports that negotiations in Council working groups have resulted in some key developments, the most recent of which he says make the following important changes: •

the proposed ban of operators with tachograph workshops from installing or calibrating tachographs in their own vehicles has been removed — this would leave Member States to take appropriate measures to prevent conflicts of interests between workshops and operators;

•

the delegated acts proposed for the specification of the technical measures (Global Navigation Satellite System location recording, remote communications and an Intelligent Transport System interface) have been replaced with implementing acts — this change reduces the risks of increased costs and burdens via future decisions taken by the Commission, by providing for a committee decision based on a qualified majority vote;

•

the text is now clear that, in developing specifications for satellite positioning capability, the Commission may not require the use of a service that would attract a fee; and

•

the use of the remote communications facility by enforcement authorities would be optional.

The Minister comments that: •

these changes are significant in terms of minimising the costs for industry and the Government;

•

the partial general approach which the Polish Presidency is aiming for at the forthcoming Transport Council is expected to include these provisions; and

•

the Government will resist as far as possible other provisions that might still impose unnecessary burdens or additional costs on Government or industry which it thinks would add no value.

7.11 The Minister says, in relation to the Presidency’s intention to seek a partial general approach, that:

53

(33372) 16842/11 on which we will be reporting in due course.

60


•

negotiations are continuing and it is not yet clear whether it will be able to achieve its objective of this Partial General Approach;

•

due to the tight timeframes before the Transport Council it will not be possible, however, to report the outcome of further negotiations and to give us a full picture of the shape of the partial general approach in time for us to consider it ahead of the Council;

•

the Government appreciates that we may, therefore, not wish to clear the draft Regulation from scrutiny at this stage; however

•

the Government would like us to indicate that we are content for it to support a partial general approach, pending completion of scrutiny at a later date.

7.12 The Minister also tells us that the Government continues to await the Commission’s anticipated application to the Council for a mandate for the EU becoming a contracting party to the AETR. 7.13 In his letter of 6 December 2011 the Minister reports on a further Council working group meeting and expands on the case for the Government agreeing to a partial general approach on the draft Regulation at the forthcoming Transport Council. He says that: •

significant changes to the original Commission proposal have been made as a result of negotiations in Council working groups;

•

there is, however, only limited support for some of the amendments among other Member States, especially the amendment removing the ban on allowing self calibration;

•

this is a key issue for the UK due to the estimated £2.5 million annual costs a ban would have on affected businesses;

•

as most Member States already ban self calibration to prevent ‘conflict of interest’ the Government is especially isolated on this issue;

•

the current Presidency has therefore been very helpful to the Government in including this amendment and there is no assurances that the next Presidency would be as flexible;

•

in addition, the Commission has indicated that it would accept the current text in the spirit of compromise, but may want to re-introduce the proposed ban on operators calibrating their own vehicles if the general approach is not secured during the December 2011 Council and goes back to the working group for further negotiation under the Danish Presidency; and

•

it is therefore important that the Government is able to support the revised text at the Transport Council on 12 December 2011.

7.14 The Minister then reports that two further helpful amendments have been secured:


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•

the process for checking the uniqueness of driver cards issued would not change from what is undertaken now by DVLA, so avoiding potential additional costs — the original text had much heavier obligations for Member States; and

•

the training of enforcement officers would be limited to the techniques currently used and the specifics would be established by the Commission through a examination procedure and QMV, not a mere advisory procedure as in the original proposal.

7.15 The Minister reminds us that the major issue of the tachograph card and driver licence merger, which is likely to generate significant cost, will not be included in the partial general approach and will be considered under the Danish Presidency. 7.16 The Minister concludes that: •

the planned partial general approach represents a significant gain for the UK in regards to minimising costs and burdens on industry and the Government;

•

the additional costs arising from the specific changes outlined in the legislation which are not subject to future decision making under implementing acts, is estimated to be €15–30 for each newly purchased vehicle and around 5 pence per vehicle calibration each year;

•

there will be some enforcement/compliance and safety related benefits as a result, although this is very difficult to quantify;

•

industry has informally indicated that this is an acceptable outcome; and

•

the Government would be grateful if we could give scrutiny waiver on this proposal, in order to ensure that it can solidify the gains it has made during negotiations, which have gone a long way to reducing the implied costs from the original proposal.

Conclusion 7.17 We are grateful to the Minister for the information he gives us about the proposed task for the European Committee for Standardisation. However, we will continue to hold the Commission Communication, document (a), under scrutiny until we have a report on the Commission’s mandate about the EU becoming a party to the AETR. 7.18 As for the draft Regulation, document (b), we note the improvements to the text of the draft Regulation made during working group negotiations, we note also that problematic driving licence/tachograph card issue will be dealt with separately and we recognise the case the Minister makes for securing these improvements by supporting the partial general approach. So assuming the partial general approach is presented in the form last described to us we agree that the Government may, in terms of paragraph (3)(b) of the Scrutiny Reserve Resolution of 17 November 1998, support it at the Transport Council on 12 December 2011.

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7.19 We ask the Minister to let us have an account of how this issue plays out at that Council. Meanwhile the document remains under scrutiny.

8 Financial services: transparency (33312) 16353/11 + ADDs 1–2 COM(11) 683

Draft Directive amending Directive 2004/109/EC on the harmonisation of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market and Commission Directive 2007/14/EC


Articles 50 and 114 TFEU; co-decision; QMV 25 October 2011 7 November 2011 HM Treasury EM of 12 November 2011 None Not known Politically important Not cleared; further information requested

Background 8.1 Directive 2004/109/EC, the Transparency Directive, provides for transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market in the EU. Member States were required to implement the Directive by January 2007. Directive 2007/14/EC laid down detailed rules for the implementation of the Transparency Directive and there is also a Commission recommendation on the storage of regulated information. 8.2 The Transparency Directive has also been amended by Directives 2008/22/EC and 2010/78/EU, as regards implementing powers conferred on the Commission and draft technical standards developed by the European Securities and Markets Authority, and by Directive 2010/73/EU to align certain provisions of the Directive with the Prospectus Directive. 8.3 The Transparency Directive required the Council and the European Parliament to assess some of its provisions by June 2009, but the review was substantially delayed as a result of the financial crisis.


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The document 8.4 With this draft Directive the Commission proposes amending the Transparency Directive, with an overarching goal of simplifying and improving its application, for small and medium-sized issuers in particular, reducing legal uncertainties and further enhancing investor protection where necessary. The proposal has a number of specific aims, that is to: clarify the home Member State for third country issuers •

the Directive is currently unclear about which country is the home Member State for third country issuers who have to choose their home Member State;

•

this may lead to listed companies operating without being under the supervision of any Member State;

•

a default home Member State would be established for third country issuers who have not chosen their home Member State during a period of three months;

remove the requirement to publish interim management statements and/or quarterly reports •

publication of such information may not be necessary for investor protection and removing the requirement might reduce administrative burden;

•

issuers would be able to continue to publish such information if there was a strong demand from investors, but Member States would not be able to continue to impose such an obligation in their national legislation;

broaden the definition of financial instruments subject to notification requirement •

to take account of financial innovation and ensure that issuers and investors have full knowledge of the structure of corporate ownership, the definition of a financial instrument would be broadened to cover all instruments of similar economic effect to holdings of shares and entitlements to acquire shares, whether giving the right to a physical settlement or not;

harmonise the calculation of thresholds for notification of major holdings •

Member States have adopted different approaches to calculating the thresholds for notification of major holdings;

•

this fragments the market and incurs additional costs for cross-border investors;

•

holdings of shares need to be aggregated with the holdings of financial instruments for the calculation of notification thresholds;

•

notification would include the breakdown by type of financial instruments held to provide the market with detailed information on the nature of the holdings;

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•

to take into account the differences in ownership concentration, Member States would continue to be allowed to set lower national thresholds for notification of major holdings than those foreseen in the Transparency Directive, where this was necessary to ensure appropriate transparency of holdings;

enhance the current network of officially appointed storage mechanisms to facilitate cross border access to regulated information •

to achieve this the Commission would be provided with further delegated powers regarding the access to regulated information and the European Securities and Markets Authority would assist by developing draft regulatory technical standards concerning the operation of a central access point of regulated information;

•

these measures would be used to prepare for the possible creation of a single storage mechanism, ensuring storage of regulated information at the EU level;

enhance the sanctioning powers of competent authorities •

publication of sanctions could help to improve transparency and maintain confidence in the financial markets;

•

specifically, the power for competent authorities to suspend the exercise of voting rights of an issuer who had breached the notification rules on major holdings might also help to prevent a breach of these rules;

cross-refer to a new requirement proposed in revisions to the Accounting Directive 54 for large companies in the extractives and forestry sectors to disclose the material payments they make to governments •

the aim of this part of the draft Directive is to make governments accountable for the use of these resources and promote good governance, by requiring issuers to report annually on the payments they make to governments at country and project level; and

•

is dealt with further in the Government’s Explanatory Memorandum on the proposed amendments to the Accounting Directive.

8.5 The draft Directive is accompanied by the Commission’s impact assessment 55 and a summary of that assessment.

The Government’s view 8.6 The Financial Secretary to the Treasury (Mr Mark Hoban) says that:

54

(33309) 16250/11, on which we will be reporting in due course.

55

See http://ec.europa.eu/internal_market/securities/docs/transparency/modifying-proposal/20111025-impactassessment_en.pdf.


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•

the Government supports the process of review of the existing legislation and the objectives to improve the balance between the goals of investor protection, consumer confidence, efficiency, legal clarity and reduction of administrative burdens;

•

it is supportive of high levels of transparency and many of the changes being made reflect the UK’s application of the Transparency Directive;

•

it is supportive of the move towards harmonising the calculation of thresholds for notification of major holdings of voting rights and will seek to ensure there is no diminution of transparency and investor protection;

•

the Takeover Panel oversees enhanced transparency during takeover bids and the Government would not wish to see transparency reduced; and

•

the Government otherwise supports the substantive proposals as to improving this balance.

8.7 The Minister also tells us that: •

the Government broadly supports the conclusions of the analysis in the Commission’s impact assessment;

•

it is establishing a stakeholder group to give users and representatives of industry in the UK an opportunity to share views on the proposals and to gain a more developed understanding of their impact;

•

as part of its consultation with stakeholder groups, the Government will seek further information on the likely impacts on affected sectors from UK firms; and

•

it has produced a provisional assessment of the impact of the proposal.

Amongst the points made in that provisional assessment is “Overall, the costs associated with the amended directive are low and are greatly outweighed by the benefits.” 56

Conclusion 8.8 Whilst this proposal seems, as the Minister suggests, unexceptionable, we do not wish to consider it further before hearing the outcome of the Government’s consultations. Meanwhile the document remains under scrutiny.

56

For the provisional assessment see the annex to the Minister’s Explanatory Memorandum at http://europeanmemorandum.cabinetoffice.gov.uk/.

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9 European Investigation Order (a) (32952) 11735/11 — (b) (33386) — —

Draft Directive on the European Investigation Order in criminal matters

Draft Directive on the European Investigation Order in criminal matters — Follow-up document of the meeting of the “Working Party on cooperation in criminal matters” on 14 November 2011

Legal base Department Basis of consideration Previous Committee Reports

To be discussed in Council Committee’s assessment Committee’s decision

Article 82(1)(a) TFEU Home Office EM of 22 November 2011; Minister’s letters of 8 and 21 November and 6 December 2011, (a) HC 428–xxxii (2010–12), chapter 10 (6 July 2011); HC 428–xxix (2010–12), chapter 8 (8 June 2011); also see: HC 428–xxviii (2010–12), chapter 5 (24 May 2011); HC 428–xx (2010–11), chapter 3 (16 March 2011); HC 428–xi (2010–11), chapter 11 (15 December 2010); HC 428–i (2010–11), chapter 22 (8 September 2010) (b) None 13 December 2011 Legally and politically important Not cleared; further information requested

Background 9.1 The draft Directive is an initiative of Belgium, Bulgaria, Estonia, Spain, Austria, Slovenia and Sweden acting under Article 76(b) TFEU (under which a quarter or more of Member States can propose legislation in the field of judicial cooperation in criminal matters and police cooperation). Its objective is to create a single instrument, the European Investigation Order (EIO), for obtaining evidence located in another Member State in the framework of criminal proceedings. Currently judicial or law enforcement authorities have to use two different regimes: mutual legal assistance (MLA) on the one hand, and mutual recognition on the other. MLA is regulated by a number of legal instruments, 57 the most important of which is the 2000 EU MLA Convention, and may be used for all cases, irrespective of the type of investigative measure or the type of evidence concerned. Mutual 57

Council of Europe Convention on mutual assistance in criminal matters 1959, supplemented by its additional protocol of 1978 and the second additional protocol of 2001; the Benelux Treaty of 1962; the Schengen Implementing Convention of 1990; and the Convention on mutual assistance between the Member States of the EU of 2000. Many provisions of the 2000 Convention are similar to those of the second additional protocol of 2001 to the 1959 Convention, which some of the Member States also ratified, and the additional protocol from 2001. Bilateral Treaties also exist.


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recognition, on the other hand, is limited to areas covered by one of the two instruments currently adopted in the EU: the Framework Decision on the execution in the European Union of orders freezing property or evidence, 58 and the Framework Decision on the European evidence warrant (EEW) for the purpose of obtaining objects, documents and data for use in proceedings in criminal matters. 59 The EEW has not yet come into force.

Previous scrutiny 9.2 The Committee has considered Articles 1–18 of this proposal on a number of occasions, 60 and also took evidence on Articles 1–18 from the Home Secretary on 6 July 2011. 61 A general approach on these Articles was agreed at the JHA Council on 9–10 June.

Minister’s letter of 8 November 2011 9.3 The Minister for Immigration (Mr Damian Green) wrote on 8 November with the following update on the negotiation of the remainder of the proposal, namely Articles 19– 34. “As you will recall, a partial general approach to Articles 1–18 of the EIO was reached at the June 2011 Justice and Home Affairs Council. Since then negotiations under the Polish Presidency have focussed on Articles 19–34. I am writing to provide you with an update on how negotiations are progressing on these Articles. Articles 19–27 make specific provision for a number of investigative measures which are particularly complex or sensitive. These include provisions on the temporary transfer of prisoners, evidence given via video link, banking evidence and evidence collected in real time. Article 28–34 relate to the implementation of the EIO, including how it relates to other agreements. Discussions on these Articles are very much at the initial stage. Since July 2011 there have been three working groups and one Friends of the Presidency meeting on these Articles, as well as two expert meetings on intercept. No agreement on these Articles has yet been reached and there has not been any indication from the Presidency that they wish to escalate discussions to the Justice and Home Affairs Council. “Much of the discussion in the working groups has focused on how the provisions in Articles 19–27 will work in conjunction with the Articles agreed in the partial general approach to the EIO. For example, whether there is a need for additional grounds for refusal or provisions on costs, given what was agreed in Article 10 (Grounds for refusal) and Article Y (Costs). In addition there has been discussion on whether and how covert investigations, controlled deliveries and intercept should be addressed in the EIO. The main issues being discussed in relation to each of these Articles are summarised below. “Articles 19 and 20 (temporary transfer of people in custody) — negotiations have centred on whether the lack of consent of the person being temporarily transferred 58

2003/577/JHA: OJ No. L 196, 22.07.03, p. 45.

59

2008/978/JHA: OJ No. L 350, 30.12.08, p. 72.

60

See headnote.

61

HC 1416.

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should be a ground for refusal. The UK has been clear that it should be. Discussions have also focussed on what the impact should be if the issuing and executing States cannot reach an agreement on the practical arrangements of the transfer and how to ensure the drafting of Article 19 does not lead to confusion or overlap with the European Arrest Warrant. Some Member States, including the UK, have supported proposals to merge Articles 19 and 20, given their similar purposes. “Article 21 (Hearing by video conference) — there have been similar discussions to Article 19 and 20 in relation to whether lack of consent should be a ground for refusal. Questions have been raised about how these provisions relate to suspects and accused persons. Discussions have highlighted how commonplace the usage of video conferencing is, which has lead to suggestions that any additional grounds for refusal, other than those relating to suspect or accused, should be removed. “Article 22 (Hearing by telephone conference) — there has been minimal discussion on this Article and there have been questions raised as to whether there is any need for bespoke provisions on telephone conferencing or if it can just be dealt with in accordance with the provisions covered by the earlier Articles. There has also been some discussion about whether this provision could impact on current practice where telephone conferencing is used in an informal manner between Member States. “Article 23, 24 and 25 (Provision on banking evidence) — discussions have centred on whether these provisions can be extended to include financial institutions other than banks. The original drafting, particularly of Article 23, was very convoluted, and it is being considered how this can be simplified which is something the UK would support. “Article 26 and 27 (Investigative measures in real time) — initial discussions have centred on what should be included in these Articles. The UK’s view is that some forms of investigative measures, such as controlled deliveries, undercover operations and intercept, do not fit neatly within the structure of the EIO and our preference would have been for these to be excluded from its scope. However, negotiations have indicated that these investigative measures will most likely remain in the EIO. Our focus is now on ensuring executing States have sufficient flexibility and capacity to refuse an EIO relating to these measures, or to control its execution. As a result of the particular complexities and sensitivities with intercept, a group of experts from a number of Member States have been meeting outside the negotiations to discuss issues and help inform the drafting of the relevant Articles. UK experts have been taking part in the meetings which have been beneficial in reaching a common understanding of the issues. However the complexity of the issues, coupled with the different approaches and legal regimes in Member States’, means that further discussion will be required. “I understand that the Committee would appreciate the opportunity to consider a text of these Articles and we will provide one when available. I hope that this will be possible within the coming month.


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“The EIO has not been discussed in the European Parliament again since 17 March, when it was discussed in the Civil Liberties, Justice and Home Affairs (LIBE) Committee. However, in mid-October there was a Rapporteur and Shadow Rapporteur meeting on the EIO. As well as having received the UK Government briefing on the partial general approach to Articles 1–18, Shadow Rapporteurs were orally briefed by UK officials in advance of this meeting. The UK’s position received a sympathetic hearing and these briefings have helped prompt the production of the interim report by the Rapporteur which is expected soon. Once I have received the report I will write to you again with it.”

Minister’s letter of 21 November and Explanatory Memorandum of 22 November 2011 9.4 The Minister for Immigration deposited an Explanatory Memorandum on Articles 19– 34 of the proposal on 22 November, together with the most recent version of the text (document b). These were accompanied by a letter from him, in which he says: “No depositable text has been produced by the Presidency and we continue to impress upon the Presidency the importance of a depositable text for our Parliamentary processes. As an interim measure the most recent text of Articles 19– 34 and a separate document containing Article 27b–27d have been redacted and deposited with an accompanying unnumbered Explanatory Memorandum (EM). I hope that this text may be considered by your Committee prior to the December JHA Council and that, if possible, we may answer any queries you have in relation to it. The EM highlights our negotiating aims in relation to these Articles. There are further negotiations taking place prior to the December JHA Council and the text on these Articles will therefore continue to change. We will keep you informed of progress and aim to provide the Committee with any new text.” 9.5 The Explanatory Memorandum explains that the EIO aims to create a new system of mutual legal assistance in criminal matters (MLA) between EU Member States and that this Explanatory Memorandum refers to key changes in Chapters IV and V (Articles 19– 34) of the EIO since it was first published in May 2010. In particular these Articles cover: •

an extension to the provisions on banking information so that these now cover nonbanking financial institutions;

•

the inclusion of controlled deliveries and covert investigation in the EIO;

•

new provisions on the freezing of evidence;

•

new provisions on interception of telecommunications; and

•

relations to other MLA agreements.

9.6 In terms of the impact of the proposal on UK law, the Minister explains that the UK would need to bring forward secondary legislation under the European Communities Act 1972 in order to transpose and implement this Directive. At present where an incoming request for MLA asks for evidence to be obtained by the use of coercive powers such requests fall to be considered in accordance with the provisions of Part 1 of the Crime

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(International Cooperation) Act 2003 (‘CICA’). If the United Kingdom opted in to this Directive amendments would need to be made to CICA so as to require requests from EU Member States for the use of such coercive powers to be considered in accordance with the terms of the Directive. 9.7 As the Directive also touches on the transfer of prisoners for the purpose of assisting in a criminal investigation it may also be necessary to amend the provisions of UK domestic law which currently provide for the transfer of prisoners for this purpose. These provisions are found in CICA and in sections 5 and 6 of the Criminal Justice (International) Cooperation Act 1990. 9.8 In terms of policy implications, the Minister says as follows: “Chapter IV of the EIO (Articles 19–27) contain provisions on specific investigative measures including video link, obtaining banking evidence, and the temporary transfer of prisoners to give testimony in another country. Chapter V of the EIO (Articles 28–34) gives provisions for implementing the EIO including its relation to other agreements. “Temporary Transfer of Prisoners (Articles 19 and 20) “Article 19 has been amended to make clear that the prisoners transferred will continue to remain in custody for the purposes of the transfer but will not be prosecuted for further acts whilst in the State they have been transferred to (Article 19(7)). This helps ensure that there is no overlap between the purposes of an EIO and a European Arrest Warrant. Article 20 no longer gives a clear ground for refusal on the basis of consent, although it requires that the person being transferred has the opportunity to give their opinion on the transfer and for the issuing State to consider engaging the person’s legal representative. However, the UK will continue to seek the reinsertion of consent as a ground for refusal at Article 20. “Information on banking (Articles 23 and 24) “These Articles have been extended to include non-bank financial institutions (23(7)) and financial operations other than banking (24(5)). The definition of financial institutions has not yet been determined but the Presidency has proposed that this is based on the definition found in Article 3 of Directive 2005/60/EC on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing. We believe this would be a sensible approach. “Provisions on gathering of evidence in real time (Article 27) and Covert Investigations (Article 27a) “The UK had sought the exclusion of controlled deliveries and covert investigations from the scope of the EIO as both forms of investigative measures are usually solely arranged on a police to police basis. However, there are wide grounds for refusal which can be applied and an EIO for both these forms of investigative measures may be refused if the measure would not be authorised in a ‘similar national case’. The Issuing and Executing States are also required to reach agreement on the practical


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arrangements for these measures. We are therefore now content with the proposed text. “Interception (Articles 27b to 27d) “The provisions on interception of communications, intended to replace the existing provisions with the 2000 EU Convention on Mutual Assistance in Criminal Matters (EU MLAC), are still under discussion. Article 27b reproduces the key safeguards in the EU MLAC, including the ability to refuse a request if interception would not be authorised in a similar national case, and Article 27d replaces the notification requirements in EU MLAC. However, we have concerns with Article 27c, intended to replace EU MLAC Article 19 — which was written to address the situation of satellite telephony where the base station was located in only one Member State. Unfortunately the article as currently drafted goes further than the EU MLAC provisions and places an obligation on Member States to be able to intercept communications that would go beyond the requirements of MLA. The drafting and inconsistent terminology mean the intention of Article 27c is unclear and we would not be able to support the intercept provisions as they currently stand. “Freezing of Evidence (Articles 27e and 27f) “The initial draft of the EIO stated that the draft Directive would substitute the provisions on the freezing of evidence in the Freezing Orders Framework Decision 2003/577/JHA, although no specific provisions on this were given. The new Articles 27e and 27f are based on the provisions found in the Framework Decision 2003/577/JHA — including the provision of 24 hour deadlines for the execution of freezing of evidence requests. Our preference in negotiations has been for the EIO to cover both freezing of evidence and freezing assets, thereby completely replacing the Framework Decision 2003/577/JHA. However the prospect of a future Commission package on confiscation, which is likely to include freezing of assets, has discouraged support for this approach from the Presidency and other Member States. Our view is that the current text is acceptable to the UK. “Relations to other Agreements (Article 29) “Article 29 gives details of the relationship between the EIO and other instruments in the field of MLA. This includes instruments it will replace in order to cover the vast majority of MLA between EU Member States. The UK’s expectation is that one of the instruments the EIO will replace is the European Evidence Warrant Framework Decision 2008/978/JHA (EEW). However, there is some ambiguity in the drafting of Article 29(3) which we are seeking to have clarified. The UK’s aim is to ensure that the EIO will repeal the EEW and that there will be no obligation to transpose the EEW into UK law. There have also been questions raised as to the implications the EIO may have for the Naples II Convention (a convention on mutual assistance and cooperation between customs administrations) and we are seeking clarity on this too.”

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Minister’s letter of 7 December 2011 9.9 The Minister writes with a further update on the negotiations before the JHA Council on 13–14 December in the following terms: “I am writing in order to update you on the EIO negotiations in advance of the Justice and Home Affairs (JHA) Council on 13 and 14 December 2011. Since I last wrote to you on 21 November there have been several changes to the text of the EIO and I attach the most recent Working Group document. Please note that these have had to be redacted in some respects. This letter highlights key amendments between the most recent draft and the draft I provided you with on 21 November. I can confirm that the Presidency will seek to conclude on a Council General Approach to the EIO at the December JHA Council. I appreciate your Committee’s efforts to consider the document prior to Council. “Article 20 “Consent has not been reinserted as a ground for refusal. An amendment has been made at 20(1a) that the opinion of the person being transferred is transmitted to the executing authority. A recital (footnote 9) explains that the issuing State may apply legal conditions to the transfer, for example, requiring consent. While our preference was to revert to the original drafting, there is an emphasis on the issuing State to consider the person’s views on the transfer and the provisions make clear that in so far as a person is detained in the UK is concerned, their temporary transfer under an EIO can be made contingent on their consent. This is not a widely used measure and, as the cost of the transfer rests with the issuing State, that may well also discourage the use of this provision . “Article 21 “A recital has been added at footnote 11, which encourages consideration of the use of videoconferencing for the hearing of suspected or accused persons as an alternative to issuing a European Arrest Warrant. “Article 23 and 24 “While there have not been any further amendments to these Articles, our view is that the recitals at footnotes 12, 13 and 14 are useful clarification of what may be obtained under these Articles. “Articles 27b–27d “In relation to 27b, it is likely that an additional Recital will be added along the lines of that found at footnote 16: “Possibilities to cooperate under the provisions on interception of telecommunications [Article 27b] should not be limited to real time telephone conversations, but could also cover collection of data associated with telecommunications, allowing competent authorities to issue an EIO for the purposes of obtaining less intrusive data on telecommunications.


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“The UK would use an interception warrant when intercepting communications and related communications data. Article 27b itself remains limited to interception of communications. Additionally, Article 27b allows a Member State to refuse a request for interception where such a request would not be authorised in a similar national case. The UK would therefore regard a request for communications data as a special investigative measure more generally under the EIO rather than a request for assistance under the specific interception of communications provisions since a request to use intercept for that would not be authorised in a similar national case. We do not consider that the recital will alter our ability to do this. “Article 27c has been deleted. The UK had objections to this Article on the basis that its effect would have been to go beyond the proper scope of Mutual Legal Assistance (MLA) by imposing obligations relating to interception of communications capabilities to be placed on communications service providers in Member States. Implementation would also have had the potential to generate significant costs at national level and may also have encouraged communications service providers to move outside the EU. It is for Member States to determine what their interception capabilities should be. In its place there is likely to be a recital, as found at footnote 23. Such a recital would be acceptable to the UK on the basis that it places no unacceptable obligations on Member States but simply notes the importance of making available technical assistance on interception. “Articles 27e and 27f “Article 27e still relates to the freezing, and in particular the provisions covered by the Freezing Orders Framework Decision 2003/577/JHA. However, there have been amendments to 27e so that this now refers to ‘provisional measures’. These amendments are based on the principle that, while an EIO is issued to request a certain investigative measure to be undertaken in the executing State, it may be accompanied by a request for a provisional measure to be undertaken as well. A recital has also been proposed at footnote 27 which explains that provisional measures may apply to any item, including financial assets. This gives greater flexibility in the way this Article is interpreted. Article 27f, which was recently introduced, has now been deleted. “Article 29 “There have been further amendments to Article 29(2) in order to make clear that there is no obligation to transpose the European Evidence Warrant Framework Decision 2008/978/JHA. We welcome efforts to eliminate any ambiguity in the drafting and are pleased that footnote 29 makes clear that this paragraph will not be submitted to Council so that this can be given further consideration. “Article 32 “Member States have sought to add specific reference to the interception of communications provisions in Article 32 (which requires a report by the Commission on the application of the Directive). Such a reference does not expand the scope of the Article since the interception provisions, like all others, would in any

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case fall within such a review, and this language tracks closely a similar provision in the Data Retention Directive. There are no additional obligations on Member States.

Conclusion 9.10 We thank the Minister for his letters and Explanatory Memorandum and recognise the efforts that he and his officials have made in keeping the Committee informed of developments in the negotiations of Articles 19–34. 9.11 We are also of the view that recent negotiations have seen considerable improvements in those Articles from the UK’s perspective. 9.12 We do not, however, propose to waive the scrutiny reserve resolution so that the UK can give its consent to a general approach on the proposal at the JHA Council on 13 December. We say this not because of outstanding concerns about Articles 19–34, but because we understand that the general approach to be agreed on 13 December is not a “partial” general approach, applying only to Articles 19–34, but a general approach on the whole of the proposed Directive, so including Articles 1–18. On the 8 June 2011 the Committee concluded that it could not waive the scrutiny reserve resolution so that a partial general approach on Articles 1–18 could be agreed at the JHA Council on 9 June. It did so because of outstanding concerns about the sufficiency of territoriality, dual criminality and proportionality safeguards. It is for consistency with the Committee’s earlier conclusions that we feel unable to waive the scrutiny reserve on this occasion. 9.13 We would be grateful to be informed of the outcome of the JHA Council. In the meantime, document (a) covering Articles 1–18 and document (b) covering Articles 19–34 remain under scrutiny.


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10 Smart borders (33295) 16049/11 COM(11) 680

Commission Communication: Smart borders — options and the way ahead


— 25 October 2011 3 November 2011 Home Office EM of 17 November 2011 None No date set Politically important Do not clear; further information requested

The Commission Communication 10.1 The Communication sets out the Commission’s ideas for developing a system of “smart” border controls which would seek to strengthen the management and control of travel flows at the EU’s external borders while also speeding up border crossings for trusted frequent travellers. It responds to the request made by the European Council in June “to ensure that new technologies are harnessed to meet the challenges of border control” and to introduce an EU entry/exit system and a registered traveller programme. 62 10.2 The Communication recognises that the introduction of technology-based smart borders will require long-term political commitment and significant investment. The Commission therefore sets out the objectives of an EU system of smart borders, the means for achieving them, the practical implications, and a crude estimate of costs. It says that, once the European Parliament and Council have decided how to proceed, it will produce a full impact assessment. 10.3 The Commission estimates that some 700 million border crossings are made each year at the EU’s external land, sea and air borders, of which roughly a third involve third country (non-EU) nationals. It suggests that these flows, which are set to increase, present two challenges for Member States participating in the Schengen free movement area. The first concerns the efficient monitoring of travel flows into and out of the Schengen area, especially with a view to assessing the risk of abuse. The Commission notes that most illegal immigrants enter the EU lawfully but then “overstay” (exceed the period for which they are authorised to remain within the EU). The second challenge is to make border crossings faster and simpler for trusted regular travellers who meet all the entry criteria and present little risk of abuse.

62

See European Council Conclusions 23/24 June 2011: http://register.consilium.europa.eu/pdf/en/11/st00/st00023.en11.pdf.

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10.4 To meet these challenges, the Commission advocates the introduction of an EU Entry/Exit System (“EES”) and an EU Registered Travellers Programme (“RTP”). The first would replace the existing system of manual stamps at the point of entry and exit with “an electronic registry” showing when and where a third country national entered and left the Schengen free movement area. This would make it easier to calculate the period of authorised stay and to detect overstayers, while also providing valuable data for a broader assessment of the risks associated with particular categories of third country nationals, for example, those who require visas and those who are exempt. An EU system would ensure that entry and exit records could be matched where, for example, a third country national enters the Schengen area through one Member States and leaves it through another. 10.5 The RTP would enable “frequent, pre-vetted and pre-screened” third country nationals to cross the Schengen external border more quickly by making use, where possible, of new technologies such as Automated Border Control systems. Both systems, the Commission suggests, would help to enhance evidence-based policy making and provide a more accurate basis for risk assessment, particularly in connection with EU visa liberalisation measures or EU visa facilitation agreements with third countries. 10.6 The Commission notes that the EES and RTP would both be based on Article 77 of the Treaty on the Functioning of the European Union (TFEU) which provides for a common EU policy on visas and border controls, including “the efficient monitoring of the crossing of external borders”, and would require changes to the Schengen Borders Code. The Commission says that the EES and RTP should be established simultaneously in order to minimise the overall development costs. It advocates the creation of a central database with national interfaces connecting to it and suggests that this could be combined with a token system for registered travellers. Each token issued to a registered traveller would contain a unique identifier which would provide access to centrally stored alphanumeric 63 and biometric data. 10.7 The Commission suggests that, during the first phase of development of smart borders, the central database would only record alphanumeric data, with biometric identifiers included later on, following an evaluation of the impact of the new systems on border management. The biometric identifiers would be the same as those used for existing or planned EU IT systems (Eurodac, VIS and SIS II) — in most cases fingerprints or, if not available, a digital facial image. 10.8 The Commission estimates initial development costs for the EES over a three year period as €200 million, of which 75% would relate to infrastructure costs in participating Member States. Yearly operating costs thereafter are likely to be in the region of €100 million, of which the bulk would be incurred at national level. It says that the costs would be similar for the RTP, but overall costs would be reduced by 30% if both systems were built on a common technical platform. Moreover, the administrative costs of handling RTP applications would be offset by payment of an application fee. 10.9 Implementation of the RTP would require participating Member States to invest in automated gates. Whilst the costs of automation are likely to be substantial, the

63

Alphanumeric data might include name, nationality and passport number.


77

Commission notes that Member States may be able to seek EU co-funding. It says that its proposals for the Multiannual Financial Framework from 2014–20 include provision, in the budget allocation for the proposed new EU Internal Security Fund, for the setting up, development and initial operation of the EES and RTP. The Commission also suggests that automation could generate significant longer term cost savings, potentially reducing by around 40% the human resources needed for border control. 10.10 The Commission emphasises the need for the development of the EES and RTP to adhere to the principles set out in its earlier Communication on information management in the area of freedom, security and justice. 64 These include, in particular, adequate safeguards for the protection of personal data. It says that the newly established IT Agency responsible for Eurodac, VIS and SIS II would also oversee the development and operation of the EES and RTP. The Commission expects to publish legislative proposals to establish an EES and RTP in the first half of 2012, following discussions with the European Parliament, Council and European Data Protection Supervisor.

The Government’s view 10.11 The Minister for Immigration (Damian Green) notes that any legislative proposals to establish the EES and RTP will be based on Article 77 TFEU and build on the border control elements of the Schengen acquis. As the UK does not participate in these elements of the acquis, it will not take part in the adoption of the proposed EU measures and will not be bound by them. 10.12 The Minister says that the EES is “intended to generate reliable data on overstayers in particular, and travel flows in general.” Although data generated by the EES would mainly be used by the Commission to evaluate visa liberalisation measures and EU visa facilitation agreements with third countries, he notes that “the system is also intended to automatically calculate the authorised stay and issue an alert to the competent national authorities when there is no exit record on the expiry of the authorised stay.” 65 “ 10.13 The Minister observes that the proposed budget allocation for the EU’s new Internal Security Fund in the Commission’s Multiannual Financial Framework for 2014–20 includes provision for start-up, development and initial operation costs, and adds: “These funds relate to external borders initiatives from which the UK is excluded and to which we are not expected to contribute.” 66 10.14 The Minister highlights “shared principles” common to the systems proposed by the Commission and those currently in operation or planning within the UK. He continues: “We support the use of technology to facilitate a quicker and more convenient way for legitimate travellers to pass through passport control. We also welcome proposals which are aimed at reducing illegal migration to the EU. There are some similarities with the UK’s e-Borders project which enables detailed information about individual 64

See HC 428–ii (2010–11), chapter 12 (15 September 2010); HC 428–v (2010–11), chapter 7 (27 October 2010); and HC 428–xiv (2010–11), chapter 12 (26 January 2011).

65


66


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travellers to be electronically collected before, during and after passing through ports of entry/exit, and in an increased ability to identify overstayers and count migrants in and out. The Commission indicates that the EES will not use Advanced Passenger Information (API), as used the in UK and other API systems, as it does not meet the need of the EES to indicate that a person has crossed a border, may rely on inaccurate information and would be problematic to operate on the large numbers of Schengen external land borders.” 67 10.15 The Minister notes that the proposed RTP is similar in concept to the UK’s Iris Recognition Immigration System (IRIS) where registered travellers are able to enter the UK more quickly through automated gates at certain airports. IRIS users are not, however, required to pay a fee.

Conclusion 10.16 The Commission’s proposals for developing a system of “smart” border controls bear some similarity to the UK’s e-Borders project. Whilst the UK will not participate in any new EU Entry-Exit System or Registered Traveller Programme, it is particularly well-placed to advise on the difficulties and delays which may be encountered when implementing new technology-based border control systems on such a broad scale. If new EU systems are to be introduced, we believe that it is in the UK’s interests to engage actively with their development and efficient operation, not only, as the Minister indicates, because of their potential to reduce illegal immigration to the EU, but also because of their impact on UK citizens travelling to and from the Schengen free movement area. 10.17 In light of the substantial investment that will be required to implement the EU Entry-Exit System and Registered Traveller Programme, and the uncertainty as to the extent of any contribution from the EU budget, we ask the Minister to tell us whether he considers the budget allocation proposed by the Commission for the border control elements of the new Internal Security Fund for 2014–20 to be justified. Meanwhile, the Communication remains under scrutiny.

67



79

11 Minimum standards for the protection of victims of crime (a) (32804) 10610/11 COM(11) 275 + ADDs 1–2

Draft Directive establishing minimum standards on the rights, support and protection of victims of crime

( b) (33447) — —


(c) (33488) — —



Article 82(2) TFEU; co-decision; QMV Justice Ministers’ letters of 28 November and 5 December HC 428–xxix (2010–12), chapter 4 (8 June 2011) 14 December 2011 Legally and politically important (a) and (b) Cleared (c) Not cleared; further information requested

Background 11.1 According to Article 1 of the proposed Directive, its aim is to ensure that all victims of crime receive appropriate protection and support; are able to participate in criminal proceedings and are recognised and treated in a respectful, sensitive and professional manner without discrimination of any kind, in all contacts with any public authority, victim support or restorative justice service. 11.2 The proposed Directive will replace the 2001 Council Framework Decision on the standing of victims in criminal proceedings68 (“the Framework Decision”) in participating Member States. It is part of a package of measures on victims adopted by the Commission, which includes a Communication on strengthening victims’ rights in the EU and a proposal for a Regulation on mutual recognition of protection measures in civil matters. 69 This proposal is intended to be the first step on a Roadmap to strengthen the rights of

68

2001/220/JHA

69

See the previous chapter of this Report.

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victims, which was tabled by the Hungarian Presidency in April 2011 and is intended to be adopted as a Resolution at the Justice and Home Affairs Council on 10 June 2011. 11.3 The Stockholm Programme asked the Commission and the Member States to examine how to improve legislation and practical support measures for the protection of victims. The Commission conducted an impact assessment and concluded that it was necessary to replace the 2001 Framework Decision with a new Directive to amend and expand its provisions.

Previous scrutiny 11.4 In our Report of 8 June, we recommended that the Government’s decision on whether to opt into this proposal be debated on the Floor of the House, together with related Commission proposals on victims’ rights. The debate took place on 11 July. 70 In the meantime, we kept the proposal under scrutiny pending further updates on the negotiations.

The Minister’s letter of 28 November 2011 11.5 The Lord Chancellor and Secretary of State for Justice (Mr Kenneth Clarke) writes in the following terms: “I am writing to provide you with an update on the proposed EU Directive establishing minimum standards on the rights, support and protection of victims of crime and to seek your Committee’s agreement to grant a waiver based upon progress so far and amendments we expect to secure during the final working group next week. A copy of the latest text has been deposited today. I appreciate that the speed of negotiations has limited the time available for detailed scrutiny of the proposal. “As you are aware, the Government opted in to this proposed Directive in August. Negotiations have proceeded with some speed, and the Presidency is planning to seek agreement for a General Approach at the next meeting of the Justice and Home Affairs Council on 14 December. The text that has been deposited is the latest version of the proposal and is due to be discussed further at an official level working group on 28–30 November. I am confident that you will agree that this is a significant improvement on the original proposal and I will update you following next week’s working group on further developments. “The UK’s main objectives in negotiations have been to ensure that the Directive is compatible with the role of victims in the UK’s common law legal systems; to clarify the obligations in the Directive; and to ensure that the obligations do not place a disproportionate burden on Member States. “To ensure that the differing role of victims in the legal systems of Member States is reflected is particularly relevant to those articles relating to interpretation and translation (now Article 7), the right to be heard (Article 9), and the reimbursement 70

HC Deb, 11 July, cols. 11–128.


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of victims’ expenses (Article 13). Agreement has been secured in negotiations that the rights in all of these articles should be afforded according to the victim’s role in proceedings. I am considering proposals on this which include amendments to the relevant articles that clarify that the rights afforded are applicable in accordance with the victim’s role in the relevant justice system, and an accompanying recital to clearly define what is meant by this term. I will update you on the outcome of these considerations in my next letter. “Considerable progress has been made during negotiations on clarifying the obligations in the Directive and ensuring that they do not place a disproportionate burden on Member States. Significantly, the definition of ‘victim’ in Article 2 has now been clarified so that there is flexibility for Member States to establish procedures to define the number of family members of deceased victims to whom the Directive applies. I am satisfied that this is a proportionate and appropriate definition. “I am also pleased that the support rights for victims in Article 8 (previously Article 7) are now clearly linked to the needs of victims in relation to their participation in criminal proceedings, and are in line with the provisions already agreed in the Directive on trafficking in human beings and the Directive on combating the sexual abuse, sexual exploitation of children and child pornography. Amendments have been secured to Article 19 (formerly Article 20) relating to the protection of victims during criminal investigations, to clarify that it does not confer a requirement for all victims to be interviewed, which we were concerned would be a disproportionate burden in very minor cases. Notably, Article 24 on the training of practitioners now also addresses our concerns about ensuring the independence of the judiciary and voluntary organisations. “In addition to the clarification and amendments that have been sought, you will wish to be aware that the provisions in the Directive relating to the identification of vulnerable victims (Article 21, formerly Article 18) have been significantly amended during negotiations. The categories of victims who should be presumed vulnerable have been removed, with the exception of children, with emphasis placed instead on individual needs assessments to determine vulnerability. The provisions in Article 22 (formerly Article 21) have also been amended to ensure that they include sufficient flexibility for Member States to implement them successfully. The Government is content that as a minimum standard for Member States the approach that has been taken is satisfactory. “I am confident that the requirements in the remaining articles in the Directive are broadly compatible with existing practice in the UK, which continues to be held up by the European Commission as an example of best practice on supporting victims. Rapid progress is being made on the outstanding issues and I will write to you again shortly to provide a further update. I hope that this will give you sufficient reassurance to allow you to grant a waiver on this proposal.”

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The Minister’s letter of 5 December 2011 11.6 The Minister of State at the Ministry of Justice (Lord McNally) writes further to the Secretary of State’s letter, in the following terms: “The Justice Secretary wrote to you on the 28 November with an update on the proposed EU Directive establishing minimum standards on the rights, support and protection of victims of crime and to seek your Committee’s agreement to granting a waiver to the Parliamentary scrutiny reserve based upon progress so far and amendments we expected to secure during the final working group. “The working group took place on 28–30 November and I am now in a position to provide a further update. The latest version of the text has also been deposited for your consideration. Good progress was made in these negotiations and I hope this will further reassure so that the Committee is able to lift its scrutiny reservation on this text. “In the Justice Secretary’s letter he stated that Article 7 on interpretation and translation, and Article 13 on the reimbursement of victims’ expenses are now defined in the text to be afforded “in accordance with the role of victims in the relevant criminal justice system” The definition of the role of the victim in the recitals allows the UK to limit rights to where the victim is obliged or requested to participate actively in proceedings and reflects the role of victims in our system. The right to be heard in Article 9 is qualified by a recital that allows this right to be exercised in writing which is in line with the current Victim Personal Statement scheme. “An amendment has been secured to the text of Article 5 that allows exceptions to the need to provide reasons for a decision to end proceedings when, as a matter of national law, reasons for the decision are confidential or a result of a jury trial. This amendment had not been sought previously but following further consideration it was decided these exceptions should be made explicit in the text and I am pleased we have been able to do so. “Some points remain for further discussion prior to JHA Council on 14 December and negotiations are continuing at Counsellor and Ambassador level. I am confident that the requirements in the Directive are broadly consistent with current UK practice and that we will be able to agree the text. Any changes to current practice are likely to be of benefit to victims and should be possible to accommodate within our criminal justice systems. I hope that this will give you sufficient reassurance to allow you to lift your scrutiny reservation on this proposal.”

Conclusion 11.7 The UK’s main objectives in negotiations have been to ensure that the Directive is compatible with the role of victims in the UK’s common law legal systems; to clarify the obligations in the Directive; and to ensure that the obligations do not place a disproportionate burden on Member States.


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11.8 We congratulate the Government on its success in achieving these objectives. In these circumstances the Committee accedes to the Minister’s request to lift the scrutiny reserve on the most recently deposited text, document (b), so that a general approach on the proposal can be reached in the Council on 14th December. We do this pursuant to paragraph (3)(b) of the Scrutiny Reserve Resolution of 17 November 1998. 11.9 We would be grateful to be informed by letter of any further amendments to the text agreed on 14 December. In the meantime, we clear documents (a) and (b) from scrutiny, they having been superseded by document (c), which remains under scrutiny.

12 Statistics (a) (32414) 5053/11 + ADDs 1–26 COM(10) 774 (b) (32808) 10632/11 —

Draft Regulation on the European system of national and regional accounts in the European Union (Text with EEA relevance)

ECB Opinion on a draft Regulation on the European system of national and regional accounts in the European Union (CON/2011/44)

Legal base Department Basis of consideration Previous Committee Reports

Discussion in Council Committee’s assessment Committee’s decision

(a) Article 338 TFEU; co-decision; QMV (b) — Office for National Statistics (a) Minister’s letter of 1 September 2011 (b) EM of 19 August 2011 (a) HC 428–xv (2010–11), chapter 6 (2 February 2011) and HC 428–xxxv (2010–12), chapter 7 (7 September 2011) (b) HC 428–xxxv (2010–12), chapter 7 (7 September 2011) Not known Politically important Not cleared; further information requested

Background 12.1 Each Member State’s National Accounts and Regional Accounts are compiled in line with definitions, accounting rules and classifications as laid out by the European System of Accounts, ESA 1995, established by Regulation (EC) No 2223/96. The ESA 1995 system was set up to meet the requirements of the economic, social and regional policy of the EU.

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And it allows monitoring of the economies of the Member States and of the economic and monetary union, through the use of comparable, up-to-date and reliable information on the structure and developments in the economic situation of each Member State or region. 12.2 The draft Regulation, document (a), presented by the Commission in December 2010, is to revise the existing EU guidelines for producing National Accounts and Regional Accounts to reflect the new economic environment, advances in methodological research and needs of users. The proposal is to embody an updated European System of Accounts, ESA 2010, revising ESA 1995 to reflect changes since 1995. ESA 2010 follows on from a revised International System of National Accounts, SNA 2008, published in 2009 by the IMF, the OECD, the UN Statistical Division, the World Bank and Eurostat. It reflects developments such as new industries and products, the impact of globalisation and the expansion of financial services. 12.3 The draft Regulation has an annex providing a methodology on common standards, definitions, classifications and accounting rules. The annex has 24 chapters, dealing with overarching points, such as “general features and basic principles” (Chapter 1) or “quarterly national accounts” (Chapter 12), and a range of more detailed matters, such as “distributive transactions” (Chapter 4) or “contracts, leases and licences” (Chapter 15). A second annex sets out the programme required from Member States for transmitting for EU purposes the accounts, data and tables compiled according to the methodology to specified deadlines. 12.4 The draft Regulation: •

would be extended to the European Economic Area;

•

is expected to be implemented by Member States by September 2014 — ESA 2010 will gradually replace all other systems as a reference framework of common standards, classifications and accounting rules for drawing up accounts of the Member States, so that results are comparable between Member States; and

•

would empower the Commission to adopt delegated acts for the purposes of amending the two annexes — the Commission would carry out appropriate consultations during its preparatory work, including at expert level.

12.5 The European Central Bank (ECB) Opinion, document (b), comments on the draft Regulation, document (a). In it the ECB welcomes the intended consistency of the statistical concepts and definitions described within the proposed Regulation with, for example, the UN’s SNA 2008, the sixth edition of the IMF’s Balance of Payments and International Investment Position Manual, the fourth edition of the OECD Benchmark Definition of Foreign Direct Investment Position Manual and with the EU industrial activity classification, NACE Rev.2. It also welcomes the proposed consistency and harmonisation of methodologies. In consequence of more detailed technical comments the ECB proposes nine amendments to the draft Regulation. 12.6 In September 2011, when we last considered this matter in the light of a report on Council working group discussion and of the Government’s comments on the ECB Opinion, we said that:


85

•

before considering the documents further we wanted to have another report of the working group discussions, by the end of November 2011 (or earlier if they were concluded before then); and

•

we wanted to hear in particular whether developments had undermined the Government’s original welcome for the proposal or whether the text emerging still met the UK’s interests.

Meanwhile the documents remained under scrutiny. 71

The Minister’s letter of 1 September 2011 12.7 The Minister for the Cabinet Office (Mr Francis Maude) tells us that the Council Working Party on Statistics (CWPS) under the Hungarian Presidency began discussion of the Commission proposals and this process has continued under the Polish Presidency and that the CWPS has appropriate expert representatives from all Member States and has met monthly on this subject since April 2011, with two extra meetings, in May 2011 and November 2011. 12.8 The Minister says that the Government has made significant contributions to each meeting, which have discussed the key articles, in particular, Article 1, Subject matter, Article 2, Methodology, Article 3, Transmission of data to the Commission and Article 6, Derogations. 12.9 On methodology the Minister says that the Commission (Eurostat) has established various task forces to help develop and improve the methodology, in particular: •

treatment of financial intermediation services indirectly measured, measuring banks’ activity covering interest paid or received on loans and deposits;

•

capitalisation of research and development expenditure, including a test exercise to establish the reliability of the data;

•

a handbook on Quarterly National Accounts;

•

goods sent abroad for processing;

•

a manual on Regional Accounts; and

•

a handbook on Prices and Volumes.

The Minister continues that:

71

•

all Member States, including the UK, have submitted derogations covering the proposed Transmission Programme as requested by the Commission;

•

these derogations have formed a key input in the subsequent discussions, which will lead to a revised Transmission Programme reflecting the compromises agreed in the CWPS meetings;

See headnote.

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•

the CWPS has agreed the removal of certain requirements which the UK has driven and/or fully supported;

•

major removals to date include Regional Government Final Consumption Expenditure and reduced levels of industrial detail for several tables;

•

on the other hand, some additional requirements such as number of government employees and hours worked are likely to be incorporated;

•

a further round of derogations based on the revised Transmission Programme will be sought next year;

•

these will allow Member States additional time beyond September 2014, reflecting the need to develop methods, data collection and systems developments for specific parts of the final Transmission Programme; and

•

any derogation at that stage will need to be agreed as part of the Regulation.

The Minister then reports that: •

the Commission (Eurostat) has completed a process whereby Member States could apply for grants to aid the implementation of the adopted Regulation by September 2014; and

•

the Government has been successful in securing monies for two grants covering specific areas of the accounting framework.

Finally the Minister says that these issues are expected to continue under discussion well into the Danish Presidency starting in January 2012. 12.10 Turning to Office for National Statistics preparations for the new Regulation, once adopted, the Minister says that: •

the Office for National Statistics is setting up governance structures and resourced workstreams to meet the proposed implementation date of September 2014;

•

the impact of this proposal will affect a range of economic statistics produced by Office for National Statistics covering the National Accounts, Regional Accounts, Balance of Payments, Public Sector Finance and Environmental Accounts;

•

given the integrated manner in which many economic statistics are produced by the Office for National Statistics, this change will form a major programme of work;

•

the impact of data changes will affect Office for National Statistics customers and suppliers, including other government departments; and

•

the Office for National Statistics will have close regard to these interactions, as part of the work programme.


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Conclusion 12.11 We are grateful to the Minister for this further account of developments on the draft Regulation. Before considering the documents further we should like to have another report of the working group discussions, towards the end of the Danish Presidency (or earlier if they are concluded before then). We continue to want to hear in particular whether developments have undermined the Government’s original welcome for the proposal or whether the text emerging still meets the UK’s interests. Meanwhile the documents remain under scrutiny.

13 Corporate Social Responsibility (33327) 16606/11 COM(11) 681

Commission Communication: A renewed EU Strategy 2011–14 for Corporate Social Responsibility

Legal base Document originated Deposited in Parliament Department Basis of consideration Previous Committee Report Committee’s assessment Committee’s decision

— 25 October 2011 11 November 2011 Business, Innovation and Skills EM of 24 November 2011 None Politically important Cleared

Background 13.1 The EU’s Europe 2020 Strategy, which is intended to promote smart, sustainable and inclusive growth, is accompanied by seven “flagship initiatives” setting out a range of measures and policy tools to tackle so-called “bottlenecks to growth” and to help Member States deliver the Europe 2020 goals. One of these flagship initiatives, entitled An Industrial Policy for the Globalisation Era, calls for the development of a renewed EU Strategy on Corporate Social Responsibility (CSR) “as a key element in ensuring long term employee and consumer trust.” 72 The Commission believes that CSR can make a significant contribution to achieving the Europe 2020 goals by encouraging the development of sustainable business models which command high levels of trust and which are conducive to innovation and growth.

72

See HC 428–ix (2010–11), chapter 14, (24 November 2010).

88


The Communication 13.2 The Communication is a response to the economic crisis and its social consequences which, the Commission suggests, “have to some extent damaged consumer confidence and levels of trust in business” and “focused public attention on the social and ethical performance of enterprises.” 73 The document sets out the Commission’s vision for a renewed EU Strategy on CSR, based on a new definition of CSR, and proposes an Agenda for Action for the period 2011–14 which is intended to ensure that: •

the views of all stakeholders are taken into account;

•

businesses have a better understanding of what is expected of them;

•

responsible business conduct is recognised and rewarded;

•

self-regulation may be further developed as a tool for implementing CSR;

•

there is adequate transparency on social and environmental issues;

•

the importance of respect for human rights is recognised; and

•

the scope for complementary regulation to underpin CSR is acknowledged.

A new definition of Corporate Social Responsibility 13.3 The Commission proposes a new, broad definition of CSR as “the responsibility of enterprises for their impacts on society.” 74 This definition is intended to encompass principles and guidelines developed within a variety of international frameworks (for example, the OECD, UN and the ILO) whilst also recognising the evolving nature of CSR. 13.4 The Commission recognises that CSR should be business-led and based on voluntary action, with sufficient flexibility to develop approaches that meet the needs and capabilities of different types and sizes of businesses. It suggests, however, that there is scope for public authorities to establish principles and guidelines which may be used to benchmark policies and practices within business, and that there may be a limited role for regulation to promote transparency, create market incentives to reward responsible business conduct, and to ensure corporate accountability. 13.5 The Commission suggests, on the basis of existing international principles and guidelines, that CSR should encompass, as a minimum, human rights, labour and employment practices (including integration of disabled people), environmental issues, anti-corruption and bribery measures, active engagement with local communities and consumers, and “good tax governance” based on the principles of transparency, exchange of information and fair tax competition.

73

See p. 4, para 1.3 of the Communication.

74



89

An Agenda for Action 2011–14 13.6 The proposed Agenda for Action sets out a number of initiatives which the Commission intends to take, as well as suggestions for action to be taken by businesses, Member States and other stakeholder groups. The Commission says that it will “at all times take account of the particular characteristics of SMEs, especially their limited resources, and avoid creating unnecessary administrative burdens.”75 EU-level actions

13.7 The Commission believes that the EU can play an important role in enhancing the visibility of CSR by creating EU-level platforms to disseminate good practice, foster peer learning and support capacity-building, especially for SMEs. It therefore proposes to: •

launch a European award scheme for CSR partnerships between businesses and other stakeholders in 2012;

•

create multi-stakeholder CSR platforms in a variety of business sectors in which businesses, employees and other stakeholders would be encouraged to make public commitments on CSR; and

•

develop a code of good practice in 2012 to underpin efforts by businesses to implement CSR by means of self-regulation.

13.8 The Commission suggest that CSR is an important tool for increasing trust in business and says it will: •

initiate an open debate on the role of business in the 21st century and carry out periodic surveys on levels of trust in business and attitudes towards CSR; and

•

consider whether changes are needed to the Unfair Commercial Practices Directive in order to tackle misleading marketing, especially as regards the environmental impact of products.

13.9 The Commission believes that the EU should do more to “leverage policies in the field of consumption, public procurement and investment to strengthen market incentives for CSR.” 76 So, for example, consumers should be able to make informed and sustainable choices, investors should have access to relevant non-financial information, and public procurement should take into account social and environmental factors. The Commission says that it will: •

consider ways of ensuring that social and environmental factors are better integrated into public procurement as part of its review of the EU’s Public Procurement Directives;

•

consider introducing a requirement for all investment funds and financial institutions to inform all their clients of any ethical or responsible investment

75

See p. 8, para 4 of the Communication.

76


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criteria which they apply or any standards or codes of practice to which they adhere; and •

propose legislation on the transparency of social and environmental information provided by businesses.

13.10 The Communication highlights the importance of education as a tool for raising awareness of CSR and for encouraging sustainable development and responsible citizenship. The Commission says that it will: •

provide further financial support for education and training projects on CSR under the EU’s Lifelong Learning and Youth in Action Programmes;

•

encourage further research and innovation in the CSR field under the EU’s existing and future R&D programmes; and

•

launch an action in 2012 to raise awareness of the importance of CSR amongst education professionals and businesses.

13.11 The Commission suggests that its advocacy of CSR can help to promote the EU’s values and interests externally, but says that there is a need for improved coherence between EU policies affecting businesses and EU human rights policy. The Commission calls for better implementation of UN Guiding Principles on Business and Human Rights and says it will: •

develop human rights guidance during 2012 for various industrial sectors, and for SMEs, based on the UN Guiding Principles; and

•

publish a report by the end of 2012 identifying EU priorities regarding implementation of the UN Guiding Principles, followed by periodic progress reports thereafter.

Action by Member States

13.12 The Commission recognises the importance of national, regional and local initiatives to support and promote CSR. It therefore invites Member States to develop their own action plans on CSR during 2012 and says that it will establish a peer review mechanism to monitor progress. These national action plans should include measures for implementing the UN Guiding Principles on Business and Human Rights which seek to ensure that companies take responsibility for respecting human rights, especially when operating in countries where the State fails to do so. Action by businesses

13.13 The Commission says that there is a need for businesses within the EU to “renew their efforts” in meeting internationally recognised principle and guidelines on CSR in order to ensure that they have a positive impact in foreign economies and societies. 77 It

77

The Commission highlights the UN Global Compact, the OECD Guidelines for Multinational Enterprises, and the iSO 26000 Guidance Standard on Social Responsibility.


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urges all large businesses to make a commitment, by 2014, to integrate these principles and guidelines into their own CSR policies, and says that all European companies should comply with the UN’s Guiding Principles on Business and Human Rights. It also calls on all EU-based multinational companies to ensure respect for the ILO Tri-partite Declaration of Principles Concerning Multinational Enterprises and Social Policy by 2014. Monitoring

13.14 The Commission indicates that progress in implementing the Agenda for Action will be subject to review in 2014. Meanwhile, it urges European business leaders (including those within the financial sector) to act as advocates for CSR and to encourage a much larger number EU businesses to develop CSR policies based on responsible business practices and to set clear targets to be achieved by 2015 and 2020.

The Government’s view 13.15 The Minister for Corporate Responsibility (Mr Edward Davey) says that the Communication, whilst building on an existing EU framework on CSR, is also intended as a response to the economic crisis and the perceived need to renew trust in business. He notes that the Commission’s definition of CSR, and its view that it benefits both businesses and society, is broadly consistent with UK Government policy on CSR. He adds: “The UK Government also agrees that CSR policy should continue to focus on voluntary initiatives by business with public authorities playing a role in facilitating information-sharing, building capability and sharing good practice.” 78 13.16 The Government welcomes the references made by the Commission to compliance with existing international standards and principles, including the UN Guidelines on Business and Human Rights. However, the Minister also highlights two concerns. 13.17 First, the Minister indicates that the Government is seeking further information from the Commission on its proposal to require companies to report on the social and environmental aspects of their businesses and says that the Government will wish to minimise burdens and costs for all businesses, especially SMEs. 13.18 Second, the Minister notes that the Commission is considering legislative amendments to existing Directives on Unfair Commercial Practices and on Public Procurement and may propose legislation on information disclosure by investment funds. He reiterates the Government’s concern to limit regulatory burdens for business and says that there may be scope to achieve the goals set out in the Communication by nonlegislative means.

Conclusion 13.19 The Communication presents corporate social responsibility as a powerful tool for generating sustainable and inclusive growth, in line with the Europe 2020 Strategy.

78


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Whilst the objectives of the proposed Agenda for Action are undoubtedly desirable, the means for achieving them will require careful scrutiny to ensure that they respect the division of competences between the EU and Member States, particularly in areas such as education and training. Moreover, any action taken at EU level, especially if it creates additional regulatory burdens, should be necessary and proportionate and demonstrate clear added value. 13.20 The Communication is a wide-ranging document which touches on issues which we think are likely to be of interest to the House. However, we believe that the merits or otherwise of its contents can best be examined as and when individual proposals are put forward to implement it. We therefore clear the Communication from scrutiny.

14 Help for small businesses in global markets (33343) 16764/11 COM(11) 702

Commission Communication: Small Business, Big World: a new partnership to help SMEs seize global opportunities


— 9 November2011 15 November 2011 Business, Innovation and Skills 28 November 2011 None, but see footnotes No date set Politically important Cleared

Background 14.1 In September 2008, a Commission Communication 79 (Think Small First: A “Small Business Act” for Europe) endeavoured to create a new policy framework for small and medium-sized enterprises (SMEs) by establishing the “think small first” principle in SME policy-making at EU and Member State level, and by setting a number of broad policy objectives. This was followed in February 2010 by a further Communication, 80 which sought to take stock of the implementation of the Act during its first two years; to set out new actions to respond to the challenges resulting from the economic crisis; and to propose ways of improving the uptake and implementation of the Act. This included addressing

79

(29791) 11262/08: see HC 16–xxix (2007–08), chapter 8 (10 September 2008).

80

(32560) 7017/11: see HC 428–xxi (2010–12), chapter 6 (23 March 2011).


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SMEs financing needs, enhancing their market access, aiding their contribution to a resource-efficient economy, promoting entrepreneurship, and strengthening the governance of the Small Business Act.

The current document 14.2 The Commission says that exports to expanding markets in third countries can be a solid source of economic growth in the EU, and that, since only 13% of SMEs are currently active in those markets, it is important to promote such activities, bearing in mind the particular difficulties which SMEs encounter and the fact that they are usually less well equipped than larger enterprises to tackle these. It has therefore produced this further Communication, which aims to set out a new strategy to support coherent trade promotion efforts by mapping existing support services at European and Member State level; proposing the provision of services to address any needs identified; and encouraging the sharing of information between Member States, with the potential for joint working on trade promotion activities. 14.3 The Communication identifies five key objectives: •

to provide SMEs with easily accessible and adequate information on how to expand their business outside the EU;

•

to improve the coherence of support activities across the EU;

•

to improve the cost-effectiveness of support activities;

•

to fill existing gaps in support services; and

•

to establish a level playing field and provide equal access to trade promotion support services for SMEs from all Member States.

It goes on to identify a range of initiatives at EU-level and by Member States to support SMEs entering new markets, in particular those outside the EU, and suggests rationalising those led by the EU and encouraging simpler access to the range of export services currently available across the EU. It also proposes the establishment of a web portal to signpost SMEs to information on third-country markets and how to access them. 14.4 More specifically, the Commission makes the following proposals: Mapping of Existing Services

An in-depth mapping exercise of existing export support services within and outside the EU to identify possible gaps and overlaps, and to assess the need for any further action. It suggests that best practice should be exchanged between governmental organisations, including the establishment of an annual forum for this purpose. Wider Provision of Services to SMEs

Any gaps identified by such an exercise be filled, and synergies of existing support be maximised, with the recently-established Commission business centres in India,

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China and Thailand being evaluated, so that the need for any further centres can be established. It notes the range of providers, such as European chambers of commerce or equivalent bodies, national chambers and similar organisations, and suggests that, if services are provided by some Member States but not others, those which do so should consider making their support services available to SMEs from other Member States on an equivalent basis, with this perhaps being encouraged through financial incentives under a new Business Competitiveness and SMEs Programme for the 2014–2020 multi-annual financial framework. Sector and Cluster Initiatives

In view the importance to SMEs of collaborative action, this should be encouraged on an inter-EU basis through sector and cluster initiatives as a way accessing new opportunities, including the financing of training and awareness. Prioritisation and Market Access

Priority markets for EU SMEs should be identified, and efforts focussed on addressing the specific issues affecting them in those markets, with a commitment to pursue business-friendly environments in enlargement, neighbourhood and developing countries, and with increased efforts being made to address market access issues in third countries. In particular, the Commission recognises the opportunities in the Southern Mediterranean/North African region, and considers ways of developing strong partnerships between the region and EU SMEs.

The Government’s view 14.5 In his Explanatory Memorandum of 28 November 2011, the Minister of State for Trade and Investment at the Department for Business, Innovation and Skills (Lord Green of Hurstpierpoint) says that there are no direct policy implications for the UK from this Communication, and that in general the UK welcomes the Commission’s efforts to help encourage more SMEs to export. However, it would like to ensure that any services provided at the EU level have clear added-value, and it believes that the Commission’s main efforts to improve market access for SMEs should focus on improving opportunities within the Single Market and tackling trade barriers outside the EU, for example through trade negotiations and enforcing existing legislation. 14.6 The Minister also comments that the Commission’s efforts to map existing support services and identify possible gaps in the current services offered could be useful for the UK, and he welcomes the opportunity of joint working with some other Member States, whilst questioning the analogy which the Commission draws between shared diplomatic and consular activities and the opening up by Member States of services in non-member countries to all EU SMEs. He considers that the proposed EU online portal may help to identify the range of different support services available across Europe, but says that the UK will be keen to ensure it complements existing information in a coherent manner, and to understand how the Commission plans to keep it updated. He adds that it should also clearly signpost UK based companies to the UK Trade & Investment (UKTI) website.


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14.7 The Minister notes that the Commission’s strategy indicates a number of potential measures which may be taken forward as part of a new Business Competitiveness and SMEs Programme for 2014–2020, including financial incentives to facilitate cross-border cooperation among service providers, EU SME Centres in non-EU markets and encouraging transnational cluster cooperation. He adds that this programme will replace the non-innovation elements of the Competitiveness and Innovation Programme (2007– 13) and will be the subject of a separate explanatory memorandum. He also says that the recently announced EU Trade Defence Instruments Modernisation process will provide a further useful opportunity to address the ease with which SMEs can participate in trade defence (anti-dumping, anti-subsidy and safeguard) investigations: likewise, the EU tariff and suspensions regime evaluation also provides a welcome and timely opportunity to assess what more might be done to promote SME interests within this scheme.

Conclusion 14.8 This is the latest in a series of Communications which the Commission has put forward addressing the needs of small and medium-sized enterprises, and, although we think it right to draw it to the attention of the House, it does not in our view raise any issues requiring further consideration. We are therefore clearing it.

15 The open Internet and net neutrality in Europe (32719) 9350/11 COM(11) 222

Commission Communication: The open internet and net neutrality in Europe

Legal base Department Basis of consideration Previous Committee Report


— Culture, Media and Sport Minister’s letter of 15 November 2011 HC 428–xxviii (2010–12), chapter 1 (24 May 2011), chapter 4 (27 October 2010) and (31638) 9981/10: HC 428–i (2010–11), chapter 28 (8 September 2010) 13 December 2011 Telecoms Council Politically important Cleared

Background 15.1 The EU regulatory framework agreed in 2002 consisted of the: — Framework Directive setting out the main principles, objectives and procedures for an EU regulatory policy regarding the provision of electronic communications services and networks.

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— Access and Interconnection Directive stipulating procedures and principles for imposing pro-competitive obligations regarding access to and interconnection of networks on operators with significant market power. — Authorisation Directive introducing a system of general authorisation, instead of individual or class licences, to facilitate entry in the market and reduce administrative burdens on operators. — Universal Service Directive requiring a minimum level of availability and affordability of basic electronic communications services and guaranteeing a set of basic rights for users and consumers of electronic communications services. — Privacy and Electronic Communications Directive setting out rules for the protection of privacy and of personal data processed in relation to communications over public communication networks. 15.2 In addition, the Radio Spectrum Decision established principles and procedures for the development and implementation of an internal and external EU radio spectrum policy. 15.3 The Framework also established a number of committees and policy groups to manage and implement the new system: — Communications Committee: which advises on implementation issues; — European Regulators Group: to facilitate consistent application of the regime; — Radio Spectrum Policy Group: to enable Member States, the Commission and stakeholders to coordinate the use of radio spectrum; — Radio Spectrum Committee: to deal with technical issues around harmonisation of radio frequency allocation across Europe. 15.4 In this fast-developing sector, it was decided in 2007 that the regulatory framework needed revision, with a view to ensuring that it continued to serve the best interests of consumers and industry in today’s marketplace. An agreement on the EU Telecoms Reform was reached by the European Parliament and Council of Ministers on 4 November 2009, after two years of discussion during the legislative process. It consists of: — the “Better Regulation” Directive; 81 — the “Citizens’ Rights” Directive; 82 and — the Regulation establishing the BEREC and the Office.83

81

Directive 2009/140/EC of the European Parliament and of the Council of 25 November 2009 amending Directives 2002/21/EC on a common regulatory framework for electronic communications networks and services, 2002/19/EC on access to, and interconnection of, electronic communications networks and associated facilities, and 2002/20/EC on the authorisation of electronic communications networks and services. See OJ No. L337, 18.12.09, p.37.

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Directive 2009/136/EC of the European Parliament and of the Council of 25 November 2009 amending Directive 2002/22/EC on universal service and users’ rights relating to electronic communications networks and services, Directive 2002/58/EC concerning the processing of personal data and the protection of privacy in the electronic communications sector and Regulation (EC) No 2006/2004 on cooperation between national authorities responsible for the enforcement of consumer protection laws. See OJ No. L337, 18.12.09, p.11.


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15.5 BEREC (Body of European Regulators of Electronic Communications) replaced the European Regulators Group. 84 15.6 The new rules are due to be transposed into national laws of the 27 Member States by May 2011. The main elements of the reform package 85 are at Annex 1 of chapter 4 of our Report of 27 October 2010.86

A Digital Agenda for Europe 15.7 On 8 September 2010 we considered the Commission’s over-arching Communication, “A Digital Agenda for Europe”, one of the flagship initiatives of the EU 2020 Strategy. It focuses on seven priority areas, and foresees some 100 follow-up actions, of which 31 would be legislative. The seven areas are: — creating a digital Single Market; — greater interoperability; — boosting Internet trust and security; — much faster Internet access; — more investment in research and development; — enhancing digital literacy skills and inclusion; and — applying information and communications technologies to address challenges facing society like climate change and the ageing population. Progress towards achieving the Communication’s objectives would be measured against a number of specific targets, for example: •

by 2013, broadband coverage for all EU citizens and, by 2020, fast broadband coverage at 30 Megabits per second for all EU citizens, with at least half European households subscribing to broadband access at 100 Megabits per second;

•

by 2015, 50% of the EU population should be shopping online, with 20% of the population using cross-border online services;

83

Regulation (EC) No 1211/2009 of the European Parliament and of the Council of 25 November 2009 establishing the Body of European Regulators for Electronic Communications (BEREC) and the Office. See OJ No. L337, 18.12.09, p.1.

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The European Regulators Group for electronic communications networks and services was set up by the Commission to provide a suitable mechanism for encouraging cooperation and coordination between national regulatory authorities and the Commission, in order to promote the development of the internal market for electronic communications networks and services. Building on this experience, the Body of European Regulators for Electronic Communications (BEREC) and its support Office were created within the recently approved reform of the EU Telecom rules to improve the consistency of implementation of the EU regulatory framework. The first meetings of the Board of Regulators of BEREC and the Management Committee of the Office were held in Brussels on 28 January 2010. In July 2010, Member States decided that its permanent seat will be in Riga. See http://berec.europa.eu/Default.htm for further information on BEREC.

85

The full text is available at See OJ No. L337, 18.12.09: http://eurlex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2009:337:FULL:EN:PDF.

86

See headnote: (31965) 13872/10: HC 428–v (2010–11), chapter 4 (27 October 2010).

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•

by 2015, regular Internet use increased from 60% to 75%, and in the case of disadvantaged people from 41% to 60%;

•

by 2015, halve the proportion of people who have never used the Internet (from 30% to 15%);

•

by 2015, 50% of EU citizens should be using online public services, with more than half of them returning filled in forms via the Internet; and

•

by 2020, doubling EU Member States’ total annual public spending on ICT Research and Development to €11 billion. 87

Commission Declaration on Net Neutrality 15.8 The Digital Agenda also recalls the Commission’s Declaration on Net Neutrality, which is the final component of the December 2009 regulatory package, whereby the Commission made the following Declaration: “The Commission attaches high importance to preserving the open and neutral character of the Internet, taking full account of the will of the co-legislators now to enshrine net neutrality as a policy objective and regulatory principle to be promoted by national regulatory authorities,(1) alongside the strengthening of related transparency requirements(2) and the creation of safeguard powers for national regulatory authorities to prevent the degradation of services and the hindering or slowing down of traffic over public networks.(3) 88 The Commission will monitor closely the implementation of these provisions in the Member States, introducing a particular focus on how the ‘net freedoms’ of European citizens are being safeguarded in its annual Progress Report to the European Parliament and the Council. In the meantime, the Commission will monitor the impact of market and technological developments on ‘net freedoms’ reporting to the European Parliament and Council before the end of 2010 on whether additional guidance is required, and will invoke its existing competition law powers to deal with any anti-competitive practices that may emerge.” 89

The Commission Communication 15.9 The Communication is based on a public consultation: which ran over the Summer of 2010; attracted over 300 responses from wide-range of stakeholders; with responses and an overview of same available on the Commission’s website; and a Joint Summit, organised by the Commission and the European Parliament, which took place in November 2010 and was attended by a wide-range of stakeholders.

87

See headnote: (31638) 9981/10: HC 428–i (2010–11), chapter 28 (8 September 2010).

88

(1) Article 8(4)(g) Framework Directive; (2) Articles 20(1)(b) and 21(3)(c) and (d) of the Universal Service Directive; and (3) Article 22(3) of the Universal Service Directive.

89

See OJ No. L337, 18.12.09, p.69: available at http://eurlex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2009:337:FULL:EN:PDF.


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The Net Neutrality Debate 15.10 The Commission begins by noting the speed at which Internet connectivity has grown over the past 15 years, with commensurate increases in the value of associated European businesses, unprecedented levels of innovation, the facilitation of cross-border trade, leading to further development of the Single Market and erosion of barriers between Member States. The Commission also notes the importance in this process of the relative ease of entry to, and absence of barriers, within the Internet. It underlines the importance of heavy investment in infrastructure; the European model of managing markets with procompetition regulation; and the application of European competition rules, as the basis of a proliferation of new digital content and services delivered by affordable broadband packages: this, in turn, has driven consumer demand, with traffic projections predicted to increase at large rates. 15.11 Although, the Commission says, there is no accepted definition of net neutrality, it notes that the 2002 Framework directive places an obligation on National Regulatory Authorities (NRAs) to ensure that end-users have the ability to access and distribute information or run services and applications of their choice (subject to applicable law and without prejudice to measures used to counter illegal activities). The Commission sees the core issue as being how the need for openness can be reconciled with key issues relating to the traffic management required to ensure quality-of-service. 15.12 The Commission emphasises that, for the EU regulatory framework to work, consumers must have clear and meaningful information in order to choose which goods and services they wish to purchase; and the right to switch providers where cost, quality of service and any restrictions on specific content and services are factors when making such a choice. Within a competitive environment, this consumer behaviour should drive business behaviours such as pricing adaptation and abstention from blocking of services. The Commission notes the interaction of the new requirements of the amended Telecommunications Framework with issues relating to net neutrality: — new transparency requirements (Article 21, Universal Services directive) whereby consumers have to be advised, in advance, of: •

any restrictions on accessing services and applications;

•

any traffic management procedures in place; and

•

how the latter may impact of quality of service.;

— faster switching times between operators (Article 30(4), Universal Services directive); — the availability of maximum contract lengths of 12 months (Article 30(5), Universal Services directive); — a new requirement to ensure that conditions of contract cancellation do not act as a disincentive to change providers (Article 30(6), Universal Services directive); and — new powers for NRAs to set minimum quality of service requirements (Article 22(3) Universal Service directive).

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15.13 The Commission says that traffic management techniques and blocking will need to comply with EU privacy law (such as those rights afforded by the Data Protection and ePrivacy directives), under certain circumstances, when the data being traffic managed is personal data, and have due regard to the EU Charter of Fundamental Rights. Findings to date 15.14 The Commission examined four areas: blocking; traffic management methodologies; consumers and quality of service; and other approaches outside the EU. Blocking 15.15 The Commission notes “blocking” or “throttling” of lawful traffic was one of the main issues raised during the public consultation and net neutrality summit. Blocking can take the form of either making it difficult to access or outright restriction of certain services or websites on the Internet (for example, mobile Internet operators blocking voice over Internet protocol (VoIP) traffic). Throttling, a technique employed to manage traffic and minimize congestion, may be used to degrade (for example, slow down) certain type of traffic and so affect the quality of content, such as video streaming provided to consumers by a competitor. 15.16 BEREC’s (the Body of European Regulators for Electronic Communications) “state of play” survey amongst its members i.e. the NRAs and the national-level public consultations conducted by the UK and French regulators found that: — there had been some instances of unequal treatment of data by certain providers; — concerns had been voiced by both users and content providers; — Peer-to-peer file-sharing or video streaming traffic had been “throttled” in six Member States (including the UK); — the blocking of, or charging extra for, Voice over Internet Protocol (VoIP) in mobile networks also occurred in six Member States. — many concerns are resolved voluntarily (usually following NRA action or negative media reporting); — there is at present insufficient evidence to substantiate concern regarding the spread of blocking along with potential risks that charging structures would undermine innovation and that a single Internet connection may not be able to provide all services of choice if blocking did spread. Traffic Management 15.17 The Commission examines three types of traffic management: — Packet differentiation: this allows different classes of traffic to be treated differently e.g. for services that require real-time communication such as live streaming of audio, thus providing a certain minimum quality of service for users.


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— IP routing: this allows ISPs (Internet Service Providers) to route data packet traffic down different paths to avoid congestion or provide a better service. — Filtering: this allows ISPs to be able to block harmful traffic before reaching its intended destination. 15.18 The Commission notes that responses to the public consultation indicated that such activities were not new; could lead to enhanced consumer experience; were necessary; and, if used to address congestion and security issues, did not undermine the principle of net neutrality. There was: — a concern that traffic management could be used in an anti-competitive manner; — a general consensus that operators and ISPs were free to work up business models to suit (subject to applicable law); — a call for NRAs to work with operators to consider how consumer information regarding traffic management was meaningful; and — that any principles should apply equally to mobile and fixed networks, as per the EU Telecom Framework’s technology neutral approach. The Commission concludes with a commitment, working with BEREC, to monitor the situation. Consumers and quality of service 15.19 The Commission notes transparency as a key issue within the net neutrality debate in order to allow consumers to make informed choices. BEREC has indicated that the majority of NRAs have received complaints regarding the discrepancy between advertised and actual speeds for Internet connections and that, when considering the complex technical nature of multiplicities of service offerings, there is a clear need for balance between simplicity and the provision of meaningful and appropriately detailed information. Some stakeholders took the view that NRAs should be able to use new provisions with the EU Telecoms Framework, with MEPs looking to BEREC to lead on further work on quality of service indicators. The international context 15.20 The Commission notes that, in the United States, the Federal Communications Commission (FCC) has reinforced its commitment to the openness of the Internet by adopting four key principles around the consumer’s ability freely to access content, services and devices of their choice and by pro-competition statements, which the Commission sees as generally in line with the EU Telecoms Framework. It highlights the introduction of new rules on transparency in December 2010, along with clarification regarding blocking on both fixed and mobile broadband (in effect, preventing all blocking on fixed networks but allowing an incremental approach on mobile networks, whereby operators cannot block services that would compete with their own voice or video services). 15.21 The Commission further notes that:

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— some countries have adopted non-binding guidelines, such as Norway in February 2009, that entitle users with an Internet connection to: predefined capacity and quality of connection; access to good, services and content of choice; and experience no discrimination; — the Canada Radio-television and Telecommunications Commission issued a new framework on net neutrality with increased transparency requirements placed on ISPs, as well as a requirement that traffic management only be undertaken as a last resort; and — Chile became the first country to legislate on net neutrality in August 2010; and concludes with a commitment to keep international developments under review to inform its own decision making processes, The way ahead 15.22 The Commission concludes that its consultation exercises demonstrated public endorsement of the importance of maintaining an open Internet and reiterates its commitment to this objective. It judges that the revised EU Telecoms Framework should contribute towards producing competitive outcomes, but that time is needed to allow these new requirements to “bed down” in order to ascertain their full effects. The Commission and BEREC are continuing to examine the issues that arose as part of the public consultation, for example, switching; blocking and throttling; and transparency; and reserves the right to assess under Articles 101 and 102 TFEU any activities related to traffic management that may restrict or distort competition. 15.23 Further potential action includes: — publishing any further evidence that comes to light following BEREC’s investigations, including on blocking or throttling, by the end 2011; — depending on this evidence, and implementation of the new EU Telecoms Framework, to consider the need for additional guidance; — if significant problems persist, and if transparency and ease of switching are not proving to be sufficient to ensure required levels of competition and choice for consumers within a single Internet connection by allowing access to, and distribution of content of choice, consider more stringent measures (including the direct prohibition of blocking of lawful services). 15.24 Any legislative proposals in this area: would be subject to a full in-depth assessment of their impact on compliance with the EU Charter of Fundamental Rights; and should avoid deterring investment or innovation; create new business opportunities; lead to more efficient use of networks; and preserve consumer rights. 15.25 With all this in mind, the Commission says that it will continue its dialogue with Member States to ensure the rapid development of broadband to reduce pressures on data traffic.


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15.26 In his Explanatory Memorandum of 13 May 2011, the Minister for Culture, Communications and Creative Industries at the Department of Culture, Media and Sport (Mr Edward Vaizey) welcomed the Communication, agreed with the Commission’s stated objective of preserving the open and neutral character of the Internet and expressed his appreciation of the work that the Commission and BEREC continue to do in this area. 15.27 Given the 25 May 2011 deadline for implementation of the revised Electronic Communications Framework, he regarded it as a timely reminder of Member States’ new responsibilities regarding transparency, switching and the ability to access applications and services. 15.28 He described the Government’s policy as largely in line with that expressed by the Commission and said that he would continue to work closely with them and BEREC to ensure consistency in the Government’s approach on Net Neutrality and the effective implementation of the revised framework. 15.29 He went on to note that the Broadband Stakeholder Group (BSG) in the UK had already published a pilot transparency code of practice, which included a “Key Facts Indicator” form that all major ISPs and Mobile Network Operators had agreed to complete and publish on their websites. This would, he said, provide consumers with standardised and easy to understand information on traffic management policies and the practical effects of these policies, should they want it. 15.30 The Minister concluded by: — looking forward to the ongoing work of BEREC, as directed by the Commission, and to the publication of their further assessment of the market, and any evidence of discriminatory behaviour by operators, at the end of the year; — noting that, in the UK, under the revised Framework, Ofcom would have the appropriate backstop powers to intervene to set minimum quality of service guidelines if it is considered necessary.

Our assessment 15.31 Although the Communication had no legislative dimension or other immediate implications, we drew it to the attention of the House because of the importance of the issues that it discusses. 15.32 The Minister referred to the likelihood of the Communication being discussed at the 27 May Telecoms Council and of the adoption of Conclusions later in the year. There was also the prospect of further guidance, and possibly legislation, from the Commission. 15.33 We therefore asked to hear more from the Minister before any Conclusions were adopted about their suitability and about what the Commission’s thinking then was more generally about the way ahead.

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15.34 In the meantime we retained the Communication under scrutiny. 90

The Minister’s letter of 15 November 2011 15.35 The Minister writes to update the Committee on the negotiations that have taken place on this dossier, which he does as follows: Council Conclusions “The UK has taken part in the negotiation of Council Conclusions following the Commission’s adoption of the Communication. The proposed conclusions are in line with UK policy and the UK position has therefore been to ensure clarity and balance as opposed to any substantial change in policy. “The proposed Conclusions recognise the importance of preserving the open character of the Internet and ensuring the maintenance of a robust best efforts Internet while also noting the need to encourage investment in infrastructure though allowing flexibility in business models which can respond to consumer demand. “The Conclusions call for continued monitoring of the market to ensure persistent problems do not arise while also respecting domestic initiatives, such as the work the Broadband Stakeholder Group are doing in the UK with regards to an industry wide agreement on non-discrimination and net neutrality. They also give due weight to the existing powers given to national regulatory authorities in the revised electronic communications framework with regards to transparency and minimum quality of service requirements, noting the need to take full account of the effectiveness of these powers before considering the need for additional legislation. “Domestically Ofcom have committed to continue to monitor the market and HMG believes they have the appropriate powers to deal with any problems if and when they arise. The Broadband Stakeholder Group will continue to work with Industry towards an agreement on non-discrimination and pilot for their traffic management transparency code of practice is due to finish at the end of December at which point signatories (which include every major Internet service provider and mobile network operator) will revise the code based on feedback received. “BEREC (The Body of European Regulators for Electronic Communications) are due to publish guidelines on minimum quality of service and transparency early next year and will also issue a report on instances of persistent blocking of degradation. The Commission will take this into account and assess the need for additional measures taking full account of domestic self-regulatory initiatives and the effectiveness of existing powers. “Negotiations on the Council Conclusions are nearing completion and the Conclusions are set to be agreed at the Telecoms Council on 13 December 2011.”

90

See headnote: HC 428–xxviii (2010–12), chapter 1 (24 May 2011).


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Conclusion 15.36 We are grateful to the Minister for his timely and full update on the negotiations on the Council Conclusions, the outcome of which appears to be satisfactory. 15.37 We now clear the document.

16 Co-financing of structural measures for agriculture (33070) 13397/11 COM(11) 481

Draft Regulation amending Council Regulation (EC) No 1698/2005 as regards certain provisions relating to financial management for certain Member States experiencing or threatened with serious difficulties with respect to their financial stability


Articles 42 and 43 TFEU; co-decision; QMV Environment, Food & Rural Affairs Minster’s letters of 15 November and 30 November 2011 HC 428–xxxvi (2010–12), chapter 5 (14 September 2011) See para 16.8 below Politically important Cleared

Background 16.1 Council Regulation (EC) No 1698/2005 sets out the basis on which financial assistance is provided for rural development under the European Agricultural Fund for Rural Development (EAFRD). Part of the funding comes from the EU and part from Member States, in accordance with the principle of co-financing, with the maximum EU financial contribution being of the order of 75–80% for regions eligible under the Convergence Objective, as compared with 50–55% for other regions. 16.2 The Commission was concerned that, in order to ensure the smooth implementation of the programmes in question, the burden on Member States currently experiencing financial difficulties needed to be eased, and it therefore proposed in August 2011 that the rate of EU co-funding should be increased for those Member States which have had financial assistance made available through the European Financial Stabilisation Mechanism, or the EU Balance of Payments Facility for non-euro members. This would increase the EU budget share to 95% in the convergence regions and to 85% elsewhere, and, whilst the Commission estimated that this could increase payment appropriations by €470 million in 2012, it said that, as the total budget envelope would remain unchanged, there would be a decrease in payments at the end of the period.

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16.3 As we noted in our Report of 14 September 2011, the Government supports the principle of co-financing and sound budget management, and was willing to ease the implementation of EU funds in a way which was properly targeted and avoided undue pressure on the EU budget. However, it also drew attention to the possibility of the Commission being asked to submit a draft amending budget if the payment appropriations entered in the 2012 budget were insufficient, and it stressed that any approach should respect the UK’s objective of achieving real budgetary restraint at EU level. 16.4 We commented that, as with a similar proposal 91 relating to the Structural and Cohesion Fund programmes, there appeared to be a degree of ambivalence in the Government’s approach, and we asked for a clearer indication of its position on the implications which the proposal — and a corresponding proposal 92 on the European Fisheries Fund (EFF) — would have for achieving an EU budget freeze in 2012.

Minister’s letters of 15 November and 5 December 2011 16.5 We received from the Minister of State for Agriculture and Food at the Department for Environment, Food & Rural Affairs (Mr James Paice) a letter of 15 November 2011 stating that the UK considered this to be a temporary derogation, which would only be available for eligible Member States until the end of 31 December 2013, and that it had requested Commission and Council declarations on budgetary impact and co-financing in 2014–20 similar to those provided on the Structural and Cohesion Funds (SCF). He added that this position had been supported by a number of other Member States, and that there had been informal indications that the Commission would be looking to amend its proposal. He also said that he did not expect this to affect final negotiations on the 2012 EU budget, and that ensuring this was a temporary derogation and limiting eligibility should reduce any possible increase. 16.6 When we considered this at our meeting on 23 November 2011, we took the view that the Minister’s letter was helpful up to a point, but, as it was based on “indications” rather than hard evidence, we felt it would be premature to make a further Report to the House or to clear the document until we had received confirmation of the actual position. However, as DEFRA officials had indicated that the UK was likely to come under pressure in the Council the following week to agree these arrangements, our Chairman replied saying that, if the position should by then have been clarified to the Government’s satisfaction, we would not want to prevent it from giving its agreement, but he asked for a further update when the position had been established more clearly. 16.7 We have now received a letter of 30 November 2011 from the Minister, in which he says that the Commission has accepted all the UK’s points, namely that: •

the decisions made on the proposal should mirror — as far as possible — those for the SCF and European Fisheries Fund (EFF);

91

(33065) 13400/11: see HC 428–xxxvi (2010–-12) chapter 3 (14 September 2011) and HC 428–xxxvii (2010–12) chapter 11 (12 October 2011).

92

(33075) 13407/11: see chapter 17.


107

•

the proposal should be a temporary derogation from the existing co-financing rules;

•

it should only be made available for eligible Member States until the end of 31 December 2013, mirroring the SCF and EFF proposals; and

He adds that it has also received similar Commission and Council declarations on budgetary and co-financing in 2014–20 to those appended to the SCF proposal. 16.8 The Minister says that the proposal, with the inclusion of the UK’s amendments has been agreed by other Member States and by the Commission. It has since been agreed at the trilogue as a first reading deal, and will be returning for final Council agreement.

Conclusion 16.9 We are grateful to the Minister for this further information, and we are now content to clear the document.

17 Co-financing of the structural measures for fisheries (33075) 13407/11 COM(11) 484

Draft Regulation amending Council Regulation (EC) No 1198/2006 on the European Fisheries Fund as regards certain provisions relating to financial management for certain Member States experiencing or threatened with serious difficulties with respect to their financial stability


Article 43(2) TFEU; co-decision; QMV Environment, Food & Rural Affairs Minister’s letter of 5 December 2011 HC 428–xxxvi (2010–12) chapter 5 (14 September 2011) See para 17.6 below Politically important Cleared

Background 17.1 Council Regulation (EC) 1198/2006 sets out the basis on which financial assistance is provided under the European Fisheries Fund (EFF). Part of the funding comes from the EU and part from Member States, in accordance with the principle of co-financing, with the maximum EU contribution being of the order of 75–80% for regions eligible under the Convergence Objective, as compared with 50–55% for other regions.

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17.2 However, the Commission was concerned that, in order to ensure the smooth implementation of the programmes in question, the burden on Member States currently experiencing financial difficulties needed to be eased. It therefore proposed in August 2011 that, for those Member States which have had financial assistance made available through the European Financial Stabilisation Mechanism, or the EU Balance of Payments Facility for non-euro members, the rate of co-financing under the EFF should be increased by up to 10 percentage points, it being estimated that this could increase payment appropriations by €20 million in 2012. 17.3 As we noted in our Report of 14 September 2011, the Government supported the principle of co-financing and sound budget management, and was willing to ease the implementation of EU funds in a way which was properly targeted and avoided undue pressure on the budget. However, in its comments on the comparable proposal 93 relating to the European Agricultural Fund for Rural Development (EAFRD), the Government had drawn attention to the possibility of the Commission being asked to submit a draft amending budget if the payment appropriations entered in the 2012 budget are insufficient to cover expenditure, and it stressed that any approach should respect the UK’s objective of achieving real budgetary restraint at EU level. 17.4 We commented that, as with the similar proposal 94 relating to the Structural and Cohesion Fund (SCF) programmes, there appeared to be a degree of ambivalence in the Government’s approach, and we asked for a clearer indication of its position on the implications which this proposal and that on the EAFRD would have for achieving an EU budget freeze in 2012. In the meantime, we said that we were holding the two proposals under scrutiny.

Minister’s letter of 5 December 2011 17.5 We have now received a letter of 5 December 2011 from the Parliamentary UnderSecretary for Natural Environment and Fisheries at the Department for Environment, Food & Rural Affairs (Mr Richard Benyon). He says that the UK has taken a robust position throughout the negotiations at official level on its three key objectives of avoiding any upward pressure on the level of payments in the 2012 and 2013 EU Budgets; of avoiding undermining the principle of co-financing; and of supporting the recovery efforts of Ireland, Portugal, Greece, Romania, Latvia and Hungary. He says that the Commission presented a compromise text on 17 November, and that the UK sought a number of assurances that: •

the decisions made on the proposal should mirror — as far as possible — those for the SCF and EAFRD;

•

the proposal should be a temporary derogation from the existing co-financing rules;

93

(33070) 13397/11: see chapter 16.

94

(33065) 13400/11: see HC 428–xxxvi (2010–12) chapter 3 (14 September 2011) and HC 428–xxxvii (2010–12) chapter 11 (12 October 2011).


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•

it should only be made available for eligible Member States until the end of 31 December 2013, mirroring the SCF and EAFRD proposals; and

•

there would be similar Commission and Council declarations on budgetary and co-financing in 2014–20 as those appended to the SCF proposal.

17.6 The Minister says that the UK received support from a number of Member States, and that a compromise text has been agreed, and will now go to the European Parliament for their consideration.

Conclusion 17.7 We are grateful to the Minister for this further information, and we are now clearing the proposal.

18 Training for seafarers (33147) 14256/11 COM (11) 555

Draft Directive amending Directive 2008/106/EC on the minimum level of training for seafarers


Article 100(2) TFEU; co-decision; QMV Transport Minister’s letter of 21 November 2011 HC 428–xxxix (2010–12), chapter 3 (26 October 2011) 12 December 2011 Politically important Cleared

Background 18.1 The International Maritime Organisation’s International Convention on Standards of Training, Certification and Watchkeeping for Seafarers (STCW Convention) is part of the international regulatory framework for shipping. All Member States, including the UK, are parties to the STCW Convention. 18.2 In 2010 changes to the STCW Convention were adopted in Manila. They are known as the Manila Amendment. The main changes are: •

strengthened provisions concerning training and assessment, the issue of certificates of competency and prevention of fraudulent practices;

•

updated standards relating to medical fitness, fitness for duty and alcohol abuse;

110


•

new requirements concerning certification for able seafarers and for electrotechnical officers and security related training for all seafarers;

•

updated requirements for personnel on certain types of ships; and

•

clarification and simplification of the definition of “certificate”.

All Member States, including the UK, were involved in the review of the STCW Convention launched by the International Maritime Organisation in 2007 and which culminated in the Manila Amendment. 18.3 All previous amendments to the STCW Convention have been transposed into EU law by means of Directives. 18.4 The Commission presents this draft Directive to incorporate the provisions of the Manila Amendment into EU law, so avoiding conflict between EU obligations and the international obligations of its Member States. However the draft Directive includes two additional requirements which are not part of the Manila Amendment: •

a change to the timeframe for the Commission to recognise the training and certification of seafarers from third countries for use on EU flagged ships from three months to 18 months; and

•

a requirement for Member States to submit the details of individual seafarers with issued or endorsed certificates to the Commission, through a database developed by the European Maritime Safety Agency, in order to gather concise and up to date information about the seafaring profession within the EU.

18.5 When we considered this proposal, in October 2011, we commented that whilst, like the Government, we had no difficulty with the generality of the draft Directive, we shared the concern about the proposed requirement for submission to the Commission of details of individual seafarer certification, both in relation to an anonymising question and to the costs involved. So before considering the matter further we asked to hear about progress in disposing of this issue in discussion of the proposal. Meanwhile the document remained under scrutiny. 95

The Minister’s letter 18.6 The Parliamentary Under-Secretary of State, Department for Transport (Mike Penning) writes now to tell us, on the proposed requirement for submission of details of individual seafarer certification, that: •

95

while the UK was isolated in questioning the merit of an EU database of seafarer certification, the Government was successful, nevertheless, in obtaining an amendment to the proposed Directive to ensure that the anonymisation of seafarer personal data is made a mandatory pre-condition of the obligation to transfer data;

See headnote.


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•

the Commission has confirmed that funding for the database is already provided for the next financial period within the budget of the European Maritime Safety Agency;

•

as for any future decisions on maintenance and upgrading of the anonymising software, the Government has successfully negotiated an amendment which would require an implementing act to be agreed to determine measures for transmitting data — anonymisation and costs are inherent to the process of transmitting data and as such this provision would allow it to influence any future discussions; and

•

the Government has discussed its concerns with the European Maritime Safety Agency over the ease and cost of extracting data from national databases and converting it for inclusion in the database managed by the agency — it is encouraged that there is to be a degree of flexibility and that advice will be offered by the agency to national administrations.

18.7 The Minister also says that as a result of the Government’s negotiations: •

the use of delegated acts would now be limited to amending the Directive only with regards to further updates to the STCW Convention;

•

there is now specific language in the text which would prevent the use of delegated acts to override the provisions requiring the anonymisation of data before transmission;

•

Member States would now have 18 months to implement the changes in the Directive which reflect the STCW amendments, thus replicating the deadline agreed between States and the International Maritime Organisation; and

•

with regard to the European Maritime Safety Agency database, the obligation to transfer data would only begin after 24 months following adoption of the Directive.

18.8 The Minister concludes that: •

overall the Government believes that the proposal as substantially amended in negotiations addresses its earlier concerns;

•

the Presidency is hoping that a general approach can be reached at the Transport Council on 12 December 2011; and

•

the Government expects that this can be achieved.

Conclusion 18.9 We are grateful to the Minister for this account of where matters now stand on this draft Directive. Having no further questions to ask we clear the document.

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19 Infringement proceedings against Member States (33208) 15050/11 + ADDs 1–4 COM(11) 588

28th Annual Report on monitoring the application of EU Law (2010)


— 29 September 2011 12 October 2011 Foreign and Commonwealth Office EM of 31 October 2011 None None planned Legally important Cleared; further information requested

The document 19.1 As in previous years, this annual report provides an overview of key statistical data on the infringement proceedings the Commission has brought against Member States under Article 258 TFEU (and its precursor, Article 226 TEC) “for failure to fulfil an obligation under the Treaties”. Proceedings are brought by the Commission either acting on its own initiative, or as a consequence of complaints received from EU businesses and citizens. General statistics 19.2 In 2010, the acquis of the EU consisted of about 8,400 Regulations and nearly 2,000 Directives in addition to the primary law (the Treaties). Number of cases according to their origin

19.3 At the end of 2010 the infringement database contained nearly 2,100 active infringement cases. Compared with the same figure for the end of the previous year (nearly 2,900 cases), the number of ongoing proceedings fell by almost 30% in 2010. This is partly due to the fact that new complaints and new own initiative cases are registered and dealt with in either the CHAP or the EU Pilot databases. The success rate for problem-solving in EU Pilot also contributed significantly to the reduction in the number of infringement proceedings for those Member States, which have participated in EU Pilot since its implementation in April 2008. 19.4 At the end of 2009, 53% of the active cases originated from complaints; this figure has decreased (by more than 10%) to slightly more than 40% in 2010. 739 open cases (around 35% of all cases) originated from the Commission’s own initiative cases. This is less than the number in 2009 (925).


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19.5 The Commission closed 987 complaint-based and own initiative cases during 2010 (2009: 1,389). Most of these closures (431 decisions) occurred before sending the letter of formal notice to the Member State and came about because the Member States took appropriate action in response to the Commission’s request to comply with EU law. 19.6 A further 312 cases were closed after sending the letter of formal notice and before sending a reasoned opinion to the Member State (2009: 341) and 130 after sending the reasoned opinion but before referring the matter to the Court of Justice (2009: 151). Thus, these figures show that in 88% of the closures, the case did not reach the Court of Justice because Member States corrected the legal problems raised by the Commission before it would have been necessary to initiate the next stage in the infringement proceedings. Number of cases according to Member States and policy areas 19.7 Italy is the Member State against which the most infringement proceedings were ongoing by the end of 2010 (176 open cases), followed by Belgium (159) and Greece (157). Malta, Lithuania and Latvia are the three Member States with the lowest number of open infringements cases (25, 27 and 32 cases, respectively). Italy and Greece were also the Member States against which the most new infringement proceedings were started in 2010 (90 and 89, respectively), followed by the United Kingdom (75 new cases in 2010). The fewest new proceedings (19) were opened against Lithuania in 2010; Denmark and Malta ranked second and third with 22 and 25 new cases, respectively. And even though Italy and Greece were able to close approximately 40% of their new cases in the same year, they carried over the most new cases to 2011 (49 and 50 cases, respectively). The number of cases to be carried over was also relatively high for Poland and Spain (40 new cases each). The smallest carryover took place for Malta (8), Denmark (10) and Lithuania (11). 19.8 The three most infringement-prone policy areas (environment, internal market and taxation) account for 52% of all infringement cases. More than one fifth of all active cases (444) are associated with environmental legislation, with internal market and taxation cases (326 and 324, respectively) each amounting to 15% of all infringements. 19.9 However it was not in any of the above three policy areas that the most new infringement proceedings were opened in 2010. It was in the sector of health and consumer protection that most of the new cases (273) were opened, 254 being noncommunication 96 cases. Dossiers relating to environment and internal market gave rise to the second and third highest number in 2010 (229 and 191 cases, respectively). However, the Commission closed the majority of the new non-communication cases on health and consumer protection by the end of 2010, leaving only 62 active. By contrast, around two thirds of the new proceedings were still open in the fields of environment, internal market and transport (148, 131 and 116 cases, respectively), where the carry-over of new cases to 2011 was the highest. 19.10 The Commission concludes as follows:

96

Cases where the Member State concerned failed to fulfil its obligation to notify measures to transpose a Directive.

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“In general the number of ongoing infringement proceedings decreased in 2010 compared with previous years. Although at this stage it is not possible to identify all the reasons for this tendency, one explanation is the setting up of EU Pilot, which helps to clarify and solve satisfactorily some issues regarding application of EU law raised by the Commission, thus putting an end to problems without being necessary to launch infringement proceedings. Environment, internal market and taxation legislation remain at the top of the policy fields involved in infringements, whilst issues related to environment, free movement of persons and fundamental rights attracted the most petitions to the European Parliament.”97 Key issues Late Transposition

19.11 On average Member States had to transpose more Directives in 2010 than in 2009 (111 as compared to 71 Directives). In parallel, the Commission had to launch a considerably higher number of non-communication cases in 2010 (855 cases) than in 2009 (531). Although more than half of these newly opened non-communication cases were closed, 410 still remained unresolved at the end of 2010. So, together with the remaining 60 non-communication cases accumulated from previous years, a total of 470 noncommunication cases were pending at the end of 2010. 19.12 This last figure represents a nearly 15% increase in the number of open noncommunication cases since the beginning of 2010, when there were only 407 such cases. 19.13 The transposition process is managed most effectively in Denmark and Malta (five open non-communication cases each), whilst it takes more time in Italy (34 cases) and Poland (32 cases). 19.14 Very frequently, a large number of Member States miss the transposition deadline for a given Directive. Once the Commission opens the infringement proceedings, notification of national measures increase sharply, which allows the proceedings to be closed. Out of the 792 non-communication cases closed by the Commission in 2010, 558 proceedings were closed after sending a letter of formal notice and before sending a reasoned opinion to Member States. Thereafter, further delayed transposition occurs only in a minority of Member States. 19.15 The Commission says it will be able to deal more effectively with long-term delays in implementation by invoking Article 260(3) TFEU. This provision allows the Court to apply financial sanctions at the stage of the first referral to the Court under Article 258 TFEU. Previously, financial sanctions for non-communication cases could only be applied in a two-stage procedure, after a Member State had failed to comply with an earlier judgment of the Court. The Commission hopes that this power will contribute significantly to enhancing the timely transposition of EU law by the Member States.

97

p. 5 of report.


115

Sector-specific aspects

19.16 Transposition delays occur mainly in the fields of environment (115 active cases), transport (104) and internal market and services (78). 19.17 For EU environmental legislation, deadlines are regularly missed by a large number of Member States, normally resolved after the launch of infringement proceedings, and protracted delays can be seen in a minority of Member States. An example of particularly slow transposition is the Directive 98 on environmental liability with regard to the prevention and remedying of environmental damage. Just four Member States transposed it on time and the Court of Justice had to deliver judgments against seven Member States. 19.18 Following periods of intense legislative activity in 2009 and 2010, particularly in the field of financial services, the Commission was faced with a sharp increase in noncommunication cases in this area of internal market regulation. Late transposition was often due to the broad scope of the legislation concerned or, in the banking sector for instance, where the EU set relatively short deadlines for transposition (between one and 15 months) because of the urgency of responding to the financial crisis. 19.19 Late transposition frequently affects transport Directives, particularly those regulating road and maritime transport. Member States often cited lack of sufficient expertise and resources and complex internal decision-making processes in the Member States as a source of delay. Member States also called for more technical support from the Commission before the deadline for transposition. 19.20 Problems with late transposition are rare in policy areas having a stable acquis of Directives (for example agricultural policy). EU legislation in the fields of enterprise and industry, employment and social affairs, as well as indirect taxation are other areas for which no major difficulties over timely transposition were observed. 19.21 The Commission concludes as follows: “There are still clearly identified areas where late transposition of Directives is a frequent pattern, such as environment, internal market, transport and judicial cooperation, fundamental rights and citizenship. The Lisbon Treaty has given an additional instrument to the Commission that could help to change this unsatisfactory situation (Article 260(3) TFEU).” 99 Improved working methods for the management of cases relating to the application of EU law 19.22 With the introduction of CHAP in September 2009, the Commission now has an IT tool which is specifically designed for the registration and management of complaints and enquiries by European citizens on the application of EU law by a Member State. CHAP ensures proper and timely assignment of complaints to the competent Commission

98

2004/35/EC.

99

p. 7 of the report.

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departments as well as systematic feedback to the complainants in line with the 2002 Communication on relations with the complainant regarding infringements of EU law. 19.23 4,035 cases were created in CHAP in 2010 (83% complaints and 17% enquiries). The five Member States most concerned are: Italy (12%), Spain (11.4%), Germany (9.5%), the United Kingdom (7.5%) and France (6.9%). 19.24 52.5% of complaints were closed directly in CHAP on the basis of a comprehensive response by the Commission and a further 14% were closed on the grounds of lack of EU competence. For 17% of the cases the examination continued via EU Pilot and 9% were transferred into infringement proceedings. 19.25 The EU Pilot scheme has been operating since April 2008 with the aim of providing quicker and better answers to questions raised by citizens or businesses and solutions to those problems arising in the application of EU law. It is also designed to improve communication and cooperation between the Commission services and Member State authorities on the application, implementation of EU law or the conformity of the law in a Member State with EU law. 19.26 The Commission services can lodge enquiries and complaints received from citizens and businesses as well as own-initiative cases in EU Pilot. This includes issues raised with the Commission in the European Parliament Petitions’ Committee or via a letter from a Member of the European Parliament. 19.27 Since its implementation, EU Pilot has proved very positive and shows how the Commission and the participating Member States are cooperating to find solutions that give full and quick effect to EU law for the benefit of citizens and businesses. The Commission examines every case and launches infringement proceedings if no solution compatible with EU law is found. On 31 December 2010, 81% of the responses provided by Member States had been assessed as acceptable by the Commission while about 160 cases were transferred to the NIF database in order to allow the Commission to launch infringement proceeding by sending a letter of formal notice under Article 258 TFEU. 19.28 In 2008, 15 Member States volunteered to participate in EU Pilot. Following the success of the project, the Commission decided in its first EU Pilot Evaluation Report adopted in March 2010 to invite the remaining 12 Member States to join the project. At the end of 2010, three further Member States joined the project. 100 19.29 The Commission concludes as follows: “The Commission will develop further its databases for the management of cases related to the application of EU law. The Commission will explore the extension of EU Pilot as an instrument of problem-solving and prevention to all Member States. The general approach pursued by the Commission is to ensure systematic registration of all complaints/enquiries on the application of EU law, to seek swift

100 The 18 Member States are: Austria, Bulgaria, Czech Republic, Denmark, Estonia, Germany, Finland, Hungary, Ireland, Italy, Lithuania, the Netherlands, Portugal, Slovakia, Slovenia, Sweden, Spain and the United Kingdom.


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problem-solving by using EU Pilot and, where necessary, to launch and pursue vigorously infringement proceedings.”101 19.30 The report then covers “enforcement issues” and “preventive measures”, which are of less relevance for the purposes of this Report.

The Government’s view 19.31 In his Explanatory Memorandum, dated 31 October 2011, the Minister for Europe (Mr David Lidington) says that the changes to infringement proceedings are a result of the implementation of the Lisbon Treaty provisions. The amendments to Articles 258 and 260 TFEU (the latter in particular) speed up the infringement process and give wider-ranging powers to the Commission, effectively making it easier for the Court of Justice to impose sanctions on non-compliant Member States. The UK, however, has to date never been fined for an infraction, including failure to implement EU law. 19.32 The Minister comments that the EU Pilot scheme aims to find quicker and better responses to enquiries and positive solutions to complaints concerning questions on the correct interpretation, implementation and application of EU law and that the UK participates in it voluntarily. 19.33 Finally, the Minister says that better and swifter enforcement of EU law is in the best interest of the UK in the context of ensuring consistency across all Member States.

Conclusion 19.34 This is the first annual Commission report on infringement proceedings that we have decided to report fully to the House. 19.35 We do so for the useful insight it gives into how many infringement proceedings were brought in 2010, against which Member States, covering what areas of policy and, finally, how many are resolved before they reach the Court of Justice. 19.36 We note that the UK followed Greece and Italy with the third highest number of infringement cases started against it in 2010 (90, 89 and 75 respectively). Whilst we also note that to date the UK has never been fined for an infringement, including failure to implement EU law, we would be grateful to the Minister for an explanation of why so many infringement cases were started against the UK in 2010, and a broad indication of the policy areas which attracted the most cases. 19.37 Finally, we note the positive impact which the dispute-resolution processes under the EU Pilot is having on increasing the number of proceedings which settle. 19.38 We clear the document from scrutiny, but look forward to the Minister’s response to our questions above.

101 p. 9 of the report.

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20 Enlargement Strategy and Main Challenges 2011–12 (33233) 15608/11 COM(11) 666

Commission Communication: Enlargement Strategy and Main Challenges 2011–2012

(33234) 15618/11 COM(11) 667

Commission Opinion on Croatia’s application for EU membership

(33235) 15620/11 COM(11) 668

Commission Opinion on Serbia’s application for EU membership

(33268) 15707/11 SEC(11) 1208

Commission Staff Working Document: Analytical Report accompanying the Commission’s Opinion on Serbia’s application for EU membership

(33246) 15609/11 SEC(11) 1200

Commission Staff Working Document: Croatia 2011 Progress Report

(33247) 15611/11 SEC(11) 1201

Commission Staff Working Document: Turkey 2011 Progress Report

(33248) 15612/11 SEC(11) 1202

Commission Staff Working Document: Iceland 2011 Progress Report

(33249) 15613/11 SEC(11) 1203

Commission Staff Working Document: The former Yugoslav Republic of Macedonia 2011 Progress Report

(33250) 15614/11 SEC(11) 1204

Commission Staff Working Document: Montenegro 2011 Progress Report

(33251) 15615/11 SEC(11) 1205

Commission Staff Working Document: Albania 2011 Progress Report

(33252) 15616/11 SEC(11) 1206

Commission Staff Working Document: Bosnia and Herzegovina 2011 Progress Report


(33253) 15617/11 SEC(11) 1207

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Commission Staff Working Document: Kosovo 102 2011 Progress Report

Legal base Documents originated Documents deposited Department Basis of consideration Previous Committee Report To be discussed in Council Committee’s assessment Committee’s decision

— 12 October 2011 18 October 2011 Foreign and Commonwealth Office Minister’s letter of 1 December 2011 HC 428–xli (2010–12), chapter 9 (9 November 2011) 5 December 2010 General Affairs Council Politically important Cleared; further information requested

Background 20.1 The Council is responsible for decisions on the admission of new Member States; the Commission’s annual report has traditionally provided the basis for the Council to take stock and give direction to the accession negotiations and pre-accession reform priorities. The Commission Communication accordingly provides a statement of the EU’s evolving enlargement strategy, an assessment of progress, and a look forward to the challenges and priorities for 2012. 20.2 We considered the Commission’s latest “enlargement” package at our meeting on 9 November 2011. The main document was the Commission Communication “Enlargement Strategy and Main Challenges 2011–2012”. This was accompanied by a set of comprehensive Progress Reports on Croatia, Iceland, Macedonia, Montenegro and Turkey (Candidate countries) and Bosnia and Herzegovina (BiH), Albania, Kosovo (aspirant countries). This year the Commission also produced an additional Communication on Serbia, with its Opinion on Serbia’s application to be granted Candidate country status, accompanied by an analytical Report; and an Opinion on Croatia’s accession. 20.3 The Progress Reports analysed the progress made by individual countries in meeting the Copenhagen criteria for membership, that is, political and economic criteria, as well as the capacity to assume the obligations of membership. The political criteria require the stability of institutions guaranteeing democracy, the rule of law, human rights and respect for and protection of minorities. The economic criteria require a functioning market economy able to cope with the competitive pressure and market forces within the Union. The ability to assume the obligations of membership is based on progress in transposing and implementing the acquis (the body of EU law). For the purposes of accession negotiations this is split into 35 chapters ranging from the free movement of goods, through the judiciary and fundamental rights, to the environment and financial control. The reports on formal candidate countries — Croatia, Turkey, Iceland and Macedonia — 102 Under UNSCR 1244/99.

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set out in detail progress on each of the accession negotiation chapters. For the remaining countries, the reports covered a wide range of issues in line with the political and economic reforms required by their Stabilisation and Association Agreements (SAAs) with the European Union (for all except Kosovo, which does not have an SAA, but which is part of the Stabilisation and Association Dialogue). 20.4 All these documents are summarised in our previous Report. In broad terms, most countries got (some or many) good marks; however, important reforms were delayed in a number of them, often as a result of internal political developments and conflicts, and were particularly serious in Bosnia and Herzegovina and Albania. Good governance, the rule of law, administrative capacity, unemployment, economic reform and social inclusion remained major challenges in most countries. There were concerning developments in the area of freedom of expression in the media. Differences over status continued to affect negatively both Kosovo and the region, with recent events in Northern Kosovo causing grave concern. The name question concerning the former Yugoslav Republic of Macedonia remained unsolved. 103 20.5 The Communication concluded with some 27 general and country-specific Conclusions and Recommendations. 20.6 In his Explanatory Memorandum of 7 November 2011, the Minister for Europe (Mr David Lidington) described the Commission’s package as a fair and balanced assessment of progress and the main challenges and a credible and useful basis for developing the Government’s approach to EU enlargement policy over the coming year. He explained that the Strategy and reports provided the basis for in-depth discussion in the relevant working groups, which would culminate in the adoption of conclusions on EU enlargement at the 5 December General Affairs Council, and potentially endorsement of any decisions at the December European Council. The Government would, he said, take a final view on the recommendations of the Commission in late November, based, inter alia, on further progress achieved in each country. 20.7 The Minister then summarised the main conclusions and recommendations of the enlargement strategy, followed by a summary of the further detail found in each individual country progress reports. 20.8 The Minister regarded the following recommendations as being of particular note (his comments are in italics): •

“A recommendation to open accession negotiations with Montenegro;

•

“A recommendation to grant Serbia Candidate Status, on the understanding that Serbia re-engages in the Dialogue with Kosovo and implements agreements reached to date. A recommendation on the opening of accession negotiations based on progress on one key priority, focused on normalisation of relations with Kosovo.

103 See paras 9.4–9.23 of chapter 9 of our Report (see headnote).


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“The Government supports the membership aspirations of any European country that shares our values and their right to progress towards membership on the basis of their own merits. We are committed to concluding accession negotiations only when the UK is confident that a candidate country is able to meet the political, economic and legal obligations of membership. We therefore welcome the Commission’s assessments which are in line with these principles. The Government welcomes the Strategy’s emphasis in these reports on promoting the rule of law and tackling difficult issues such as corruption early in the negotiating. The Government also welcomes the focus on regional co-operation and good neighbourly relations as essential elements. “The Government aims to use the enlargement process as a tool to promote reform and reconciliation. In that light we have emphasised to countries the need to study the Commission’s assessments, and to make maximum progress before the December European Council takes a final decision on the Commission’s recommendations. The Government therefore intends to take a final decision on the recommendations made at a later date, when progress can be most fully assessed.” 20.9 The Minister then summarised and commented upon the country-specific sections in the main Commission Communication, the individual Country Progress Reports and the Commission Opinions. 104 Concerning the Commission recommendations to which he drew attention, the Minister said: Montenegro “The Commission notes Montenegro’s good progress in fulfilling the political criteria, achieving overall satisfactory results, in particular that Montenegro has successfully addressed the seven key priorities identified in the Commission’s 2010 Opinion. The Commission considers that Montenegro has achieved the necessary degree of compliance with the membership criteria and in particular the political criteria, and recommends that accession negotiations be opened with Montenegro. The Commission, however, also notes that sustained efforts are required in further developing a track record in the area of rule of law, and in particular with respect to high level corruption and organised crime cases. The Commission also therefore proposes applying the new approach of negotiating chapters on judiciary and fundamental rights, and justice, freedom and security early in the accession process. The Commission will place particular attention on monitoring Montenegro’s progress on rule of law and anti-discrimination in order to help maintain reform momentum in these areas. “The Government welcomes the Commission’s assessment, and looks forward to making a full assessment of progress ahead of the December European Council.” Serbia “The Strategy includes the Commission’s conclusions and recommendations on Serbia’s application to join the EU. In the Annex dealing specifically with Serbia’s

104 See paras 9.27–9.29 of chapter 9 of our Report (see headnote).

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membership application, the Commission notes Serbia has progressed considerably towards fulfilling the political criteria, and in implementing its Stabilisation and Association Agreement (SAA). Serbia has reached a fully satisfactory level in cooperation with the ICTY. Serbia has made some progress on regional cooperation, taking an increasingly active role in fostering reconciliation in the region. As regards the economic criteria, the Annex notes Serbia has taken steps towards establishing a functioning market economy and has a degree of macroeconomic stability, but that further efforts are needed to restructure the economy and improve the business environment. “Assuming further alignment and continued implementation, Serbia would be in a position to fulfil its obligations against nearly all the acquis fields in the medium term (5 years), but will need to focus particular attention on the areas of agriculture and rural development, judiciary and fundamental rights, justice, freedom, security and financial control. The fields of environment and climate change will require significant attention. Serbia is well on its way to sufficiently filling the political criteria and conditions of the Stabilisation and Association process, provided that progress continues and that practical solutions are found to the problems with Kosovo. “In light of the progress made, the Commission recommends the Council should grant candidate status to Serbia, on the understanding it re-engages in the EU facilitated dialogue with Kosovo and implements the agreements reached in that dialogue so far. It also recommends that accession negotiations be opened once Serbia has achieved further significant progress in the Key Priority of normalising its relations with Kosovo. The Commission will present a report on progress on this Key Priority as soon as sufficient progress has been reached. “The Government welcomes the Commission’s assessment of Serbia’s progress. The Government notes the Commission’s recommendations for further progress, particularly on normalisation of relations with Kosovo. The Government looks forward to making a full assessment of Serbia’s progress, including on the issues highlighted, by the December European Council.” Kosovo “The Strategy underlines the commitment shown by the Kosovo Government towards Kosovo’s European Perspective, notably through sustained efforts in areas such as visa and trade policy, and the establishment of a National Council for EU Integration. The Strategy also calls for greater reform efforts to address corruption, organised crime and weak administrative capacity. The Strategy highlights the steps that will be taken in support of Kosovo’s European Perspective, including the launching of a Rule of Law Structured Dialogue, a Visa Liberalisation Dialogue and a review of the Commission’s 2009 study to ensure Kosovo further benefits from the EU accession process. “The Strategy notes that the integration of Kosovo Serbs south of the Ibar has improved, but expresses concern that inter-ethnic tensions persist in northern Kosovo, calling on all concerned in Kosovo to defuse tensions and cooperate with the


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EU’s Rule of Law Mission (EULEX). The Commission underlines the importance of Kosovo launching a comprehensive agenda for the north. It notes the progress made in the EU-facilitated Dialogue between Kosovo and Serbia, and calls for continued constructive efforts and for existing agreements to be implemented. Finally, the Strategy outlines the Commission’s support for the EULEX investigation into Senator Dick Marty’s report for the Parliamentary Assembly of the Council of Europe alleging organised crime, including organ trafficking, committed in the period during and after the Kosovo conflict. “The Government shares these assessments and welcomes the recommendations.” “The central theme of the Kosovo report is that whilst progress has been made in some limited areas, substantial reforms are still required. Areas where the Commission assesses progress has been made include judicial reform, Kosovo’s commitment to the European agenda, migration — notably on readmission and reintegration of returnees — and Kosovo’s constructive engagement in the Dialogue with Belgrade. “As with last year’s report, the Commission assesses that major challenges remain concerning rule of law — notably corruption and organised crime — and strengthening of public administration. The report draws attention to the inconsistent cooperation with EULEX. The report also expresses concern about respect for minorities, the minimal role played by civil society in the democratic process and environmental protection. It also criticises the Kosovo Government for going off-track with the IMF Stand-by Arrangement. The Commission underlines the need for those people living in northern Kosovo to benefit from Kosovo’s European Perspective and in this context urges Kosovo to launch a comprehensive agenda for the north. “The Kosovo Government has reacted positively to the report. PM Thaci welcomed the report and confirmed that over the coming year his Government would focus on the three strategic priorities of fighting organized crime and corruption, sustainable economic development and reforming public administration. Minister of European Integration Citaku declared that the opening of the visa dialogue was ‘one of the biggest achievements since Kosovo’s declaration of independence’, adding that the report reflected the ‘real and factual situation’ in Kosovo. “The Commission’s report is in line with our own assessment of the progress made by Kosovo in the past twelve months as well as the priority areas for reform. The positive reaction from the Kosovo Government, boosted by the Commission’s Kosovo conditionality in the Serbia avis, provides a solid framework in which Kosovo can continue to drive forward those reforms fundamental for Kosovo’s continued progress towards EU integration. [...] “The UK continues to be a strong supporter of the EU-facilitated Dialogue between Kosovo and Serbia. We view it as essential for building practical cooperation between Kosovo and Serbia, for moving them in a more stable fashion towards EU membership

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and for improving the lives of all citizens in both countries. To date, agreements have been secured on cadastral and civil registries, freedom of movement and customs stamps. However, the process has stalled due to ongoing Serbian obstruction on customs arrangements. We continue to urge both sides to engage constructively and flexibly to implement agreements already reached and move forward into further areas such as telecommunications and energy.” 20.10 Finally, the Minister summarised the Commission Opinion on Serbia as follows (his comments again being in italics): “The Opinion notes that substantial reforms undertaken over recent years have enabled Serbia to progress considerably towards meeting the political criteria which provide for the guarantee of democracy, rule of law, human rights and respect for and protection of minorities. In particular, it draws positive attention to: the extent to which the constitutional, legislative and institutional framework aligns with European standards and Serbia’s focus on EU integration; the strengthening of parliamentary procedures; the end of ‘blank resignations’ for MPs; improvements to the framework for rule of law (following reforms targeting the judiciary, anticorruption and organised crime); Serbia’s significantly improved fully satisfactory cooperation with the International Criminal Tribunal for the former Yugoslavia (as demonstrated by the arrests of Ratko Mladic and Goran Hadzic this year); and the significant steps it has taken to foster reconciliation, particularly with Croatia, Bosnia and Herzegovina and Montenegro. The Opinion also notes however that further strengthening is required in the areas of: the legislative process and parliamentary scrutiny; independent regulatory bodies; the judiciary, the fight against organised crime and corruption; and implementation of human rights legislation. “The Opinion also notes that Serbia has more to do on relations with Kosovo. The agreements reached in the EU facilitated Dialogue need to be implemented, and further results are needed in the Dialogue to implement the principles of regional cooperation and to provide solutions on such acquis related matters as telecoms and energy. All sides need to play their part in defusing the tension in northern Kosovo and allowing free movement of persons and goods. “In terms of meeting the economic criteria, the Commission notes that Serbia has achieved a track record of implementing economic reforms, leading to a degree of macroeconomic stability. The global economic and financial crisis disrupted the steady growth of the past decade, but recent progress was noted on strengthening the financial framework and public finances, privatisation and liberalisation of trade. Areas for further improvement include: further speeding up privatisation and liberalisation; improving the business environment; and tackling unemployment, labour market rigidities and the informal economy. “The Opinion positively assesses Serbia’s ability to assume the obligations of EU membership. Serbia generally respects its commitment under the Stabilisation and Association Agreement and has made good progress in adopting legislation which aligns with the EU acquis, though further significant efforts would be needed in the fields of environment and climate change. Serbia is well on its way to sufficiently filling the political criteria and conditions of the Stabilisation and Association


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process, provided that progress continues and that practical solutions are found to the problems with Kosovo. “The Commission recommends the Council should grant candidate status to Serbia, on the understanding it re-engages in the dialogue with Kosovo and implements the agreements reached in that dialogue so far. It also recommends that accession negotiations be opened once Serbia has achieved further significant progress in normalising its relations with Kosovo. “The Government welcomes the Commission’s assessment of Serbia’s progress. The Government notes the Commission’s recommendations for further progress, particularly on normalisation of relations with Kosovo, but also across all areas where reform is required. The Government looks forward to making a full assessment of Serbia’s progress, including on the issues highlighted, by the December European Council.”

Our assessment 20.11 We expressed our appreciation to the Minister of his detailed and helpful Explanatory Memorandum. 20.12 We reported this to the House in equal detail not simply because of the widespread interest in the enlargement question but also because, in a number of cases, important decisions were on the horizon. 20.13 The first concerned Croatia’s impending accession. Central to this process was the EU Common Position on Judiciary and Fundamental Rights (Negotiation Chapter 23). 20.14 Having allowed Bulgaria and Romania to accede to the EU despite inadequate preparation and subsequent poor performance on a range of “good governance” issues, a new chapter 23 was introduced in the EU accession process, dealing with the judiciary and fundamental freedoms. Before the chapter could close, (as the Minister for Europe put it on an earlier occasion) a “comprehensive and robust set of benchmarks” would need to be met, covering: judicial transparency, impartiality and efficiency; tackling corruption; protecting minority rights; resolving outstanding refugee return issues; protection of human rights; and — crucially — full cooperation with the International Criminal Tribunal for (former) Yugoslavia (ICTY). Croatia would need to show a track record of implementation across all these areas. 20.15 The Common Position is the European Commission’s assessment of Croatia’s progress. It recommended that the chapter required no further negotiations, and underlined the importance of Croatia continuing to develop a track record of implementation across the board. The chapter was formally adopted (without discussion) at the July European Council. In endorsing it, the Secretary of State for Justice and the Minister for Europe made much of the irreversibility of the process, and of the monitoring that would be undertaken during the two years before Croatia would accede. 20.16 The Committee took the view that Croatia still had much to do over the next two years if, at the end, it could truly be said to have reached the point that — despite four years of post-accession assistance and monitoring under its Cooperation and Verification

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Mechanism — the Commission was still seeking of both Bulgaria and Romania; and that pre-accession monitoring was likely to have little impact, once an accession timetable had been set. The Committee accordingly recommended it for debate on the Floor of the House at its meeting on 19 July 2011. That debate finally took place on 22 November 2011. 105 We deal with the aftermath, and in particular the Council Decision on the admission of Croatia to the European Union, elsewhere in this Report. 106 20.17 We noted once more that the same considerations apply in the case of Serbia. As the Minister noted, the Commission’s analysis gave Serbia a lot of good marks and recommended that negotiations for accession should be opened — but only after Serbia achieves further significant progress in meeting the following key priority: “Further steps to normalise relations with Kosovo in line with the conditions of the Stabilisation and Association Process by: fully respecting the principles of inclusive regional cooperation; fully respecting the provisions of the Energy Community Treaty; finding solutions for telecommunications and mutual acceptance of diplomas; by continuing to implement in good faith all agreements reached; and by cooperating actively with EULEX107 in order for it to exercise its functions in all parts of Kosovo.” 108 20.18 The Commission said that it would present a report on Serbia’s implementation of the above key priority as soon as sufficient progress had been achieved. The Minister also looked forward to making a full assessment of Serbia’s progress, including on the issues highlighted, by the December European Council. 20.19 It thus seemed to the Committee that, sufficient progress or otherwise, the Minister plainly expected a report of some sort before the December General Affairs Council and subsequent European Council. With presidential elections due in Serbia next Spring, we noted that concerted efforts were already underway by the Serbian government to convince Member States and the Commission that agreement should be forthcoming before the end of the year, notwithstanding that the Pristina-Belgrade Dialogue was deadlocked and the slim likelihood of the Commission’s key priority being met in the next six weeks or so. The consideration of Serbia’s progress thus far showed that, when the crunch came, the desire to encourage “pro-European” forces prevails over the need to demonstrate clear adherence to conditionality. 20.20 Yet, the Committee noted, it was the failure to require clear, prior adherence to conditionality that had led the Union to where it continues to be with both Bulgaria and Romania, i.e., still awaiting a level of performance on key areas of good governance that

105 See HC Deb, 22 November 2011, cols. 233–255. The text of the debate is also available at http://www.publications.parliament.uk/pa/cm201011/cmhansrd/cm111122/debtext/1111220003.htm#111122108000001. 106 See (33387) — at chapter 22 of this Report. 107 The EU’s largest ESDP mission: 1900 strong, with a focus on local ownership and capacity building, through mentoring, monitoring and advice, and aim to advance the goal of a stable, viable, peaceful, democratic, multiethnic Kosovo, contributing to regional cooperation and stability and committed to the rule of law and to the protection of minorities. For the Committee’s consideration of the latest Council Decision on EULEX, see (33307) —: HC 428-xli (2010-12), chapter 16, (9 November 2011). 108 See headnote.


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should have been demonstrated prior to accession, the absence of which continues to threaten the EU’s own internal security. 20.21 We therefore asked the Minister to deposit whatever further progress report or reports were produced prior to the December meetings, along with his views, so that the House could also consider the basis of the key decisions that the Minister anticipated. 20.22 Until then, we retained these documents under scrutiny. 20.23 In view of its “rolling inquiry” into EU Enlargement and Foreign Policy, we also drew them to the attention of the Foreign Affairs Committee. 109 20.24 On 25 November 2011, the President of the European Council, issued the following statement following a meeting with Serbian President Boris Tadić: “The European Council at its meeting on 9 December 2011 will consider the Commission’s Opinion on Serbia’s application for European Union membership. I welcomed President Tadić’s personal engagement and determination in striving to meet the economic and political criteria for membership of the European Union. “While acknowledging the latest results in the dialogue between Belgrade and Pristina, I encouraged President Tadić to take further steps to assure EU Member States that Serbia is seriously engaged in the dialogue with Kosovo and that it is implementing in good faith the agreements reached so far. Regional cooperation and good neighbourly relations are essential parts of the enlargement process. The European Council will judge each country on its own merits, based on fair and rigorous conditionality. “Today’s meeting with President Tadić gave me once again the opportunity to reaffirm the EU’s commitment to the European perspective of the Western Balkans with the aim to reinforce peace, democracy and stability in Europe.” 110

The Minister’s letter of 1 December 2011 20.25 On Serbia, the Minister responds as follows: “As regards the decision for candidate status, I can confirm that we expect no further reports before the European Council on 9 December. In coming to a decision on whether to grant Serbia candidate status, we will be looking at whether they have reengaged in the dialogue with Kosovo and implemented existing agreements. But we are looking for more than the bare minimum — simply turning up to a dialogue meeting is not enough. We need credible reassurance that Serbia is serious about improving its relationship with Kosovo. We have taken every opportunity to impress this upon Serbian Ministers and officials both at home and abroad, including a meeting between the Prime Minister and President Tadic on 16 November.

109 See headnote: HC 428–xli (2010–12), chapter 9 (9 November 2011). 110 See http://www.consilium.europa.eu/uedocs/cms_Data/docs/pressdata/en/ec/126335.pdf.

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“In terms of progress made since the Opinion, you may like to be aware that the seventh round of dialogue took place on 21–22 November. Agreement was reached on mutual recognition of university diplomas and discussion took place on Kosovo’s representation in regional fora and border management, though agreements were not reached. In terms of implementation of existing agreements, some progress can be reported. The Serbian government has ordered implementation of a past agreement of civil registry and progress was expected by the end of the month on border management and cadastral/land registry. However, road blocks erected by Kosovo-Serbs in northern Kosovo are still in place meaning true freedom of movement is not guaranteed. A further meeting of the dialogue was planned for 30 November. We have been clear with Belgrade that we expect agreements to be reached and implementation demonstrated if we are to be convinced to support candidate status. We will be monitoring their progress until the last possible moment before coming to a view. “As regards the decision on accession negotiations, we expect a further report from the Commission when they deem enough has been done by Serbia on the key priority to significantly normalise relations with Kosovo. As the Committee intimated in its conclusions on the EM, there is little chance of Serbia having met this before the December European Council and we do not expect to see a Commission report until next year at the earliest. Again, I am clear that the bare minimum will not be enough here. We will need credible reassurance that Serbia is genuinely committed to improving their relationship with Kosovo before we would consider opening negotiations. When the Commission presents its report on this key priority, I will of course deposit this with you.” 20.26 The Minister then goes on to provide an update on other decisions to be taken at the December European Council as follows: “Aside from the decision on candidate status for Serbia and the signing of Croatia’s Accession Treaty, decisions will also be taken on the Commission’s recommendations to open accession negotiations with Montenegro and whether to endorse the Commission’s proposed ‘new approach’ to tackling the difficult chapters 23 and 24 early in the negotiation process. “Regarding Montenegro, having fully assessed the Commission’s report and on the basis of our own diplomatic reporting, we agree that Montenegro has achieved the necessary degree of compliance, especially against the seven key priorities set in 2010, to move to the next stage. We will therefore be supporting the opening of accession negotiations at the December European Council. “We welcome the Commission’s emphasis on the need to maintain reform momentum, especially implementation of legislation and policies concerning rule of law. To that end, we are supportive of the proposal to tackle the difficult chapters 23 and 24 early on in the negotiations process, and to apply this approach, when devised, to Montenegro.


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“It therefore follows that we will also be supporting the Commission’s proposed new approach to tackling difficult chapters 23 111 and 24112 early in the accession process. The proposal is very much in line with the UK desire to learn lessons from Croatia to enhance the credibility of the enlargement process and its ability to deliver, and increase Member State and Commission leverage with the candidate countries at all stages. If the proposal is adopted at the European Council we will be working closely with partners and the Commission to develop the approach. 20.27 The Minister concludes by expressing the hope that: — his letter has addressed the Committee’s concerns regarding Serbia and Croatia and provided a useful update on other matters of interest; — as the Committee will not meet before 7 December because of its pre-Presidency visit to Denmark, it will appreciate the need for him to override the scrutiny reserve on the documents that we considered on 7 November at the 5 December General Affairs Council (GAC). 20.28 After that meeting, the GAC issued Conclusions on enlargement and the association process. 113 The sections on Montenegro and Serbia are at Annex 1 and 2 respectively of this chapter of our Report.

Conclusion 20.29 The Government’s position on Montenegro is clear: it will be supporting the opening of accession negotiations at the December European Council. 20.30 The Government’s position on Serbia, however, is still not clear. Only at the very last minute will it decide whether Serbia has moved sufficiently far along the road of implementing the requirements set out in the Opinion, the Minister’s letter and the GAC conclusions for it to be appropriate to grant it candidate status, or whether more needs to be done on a sustained basis for this to be merited. As the Minister says in his letter, the decision on whether to grant Serbia candidate status hinges on whether they have re-engaged in the dialogue with Kosovo and implemented existing agreements and whether, in doing so, they have done more than the bare minimum and provided credible reassurance that Serbia is serious about improving its relationship with Kosovo. 20.31 Since the time of writing, we understand that a further Pristina-Belgrade Dialogue meeting took place from 30 November to 2 December which saw a new agreement reached on integrated border management (in addition to the agreement reached on university diplomas on 22 November) and discussion on Kosovo’s participation in regional fora and the issues of energy and telecoms. We also understand that, in the past week. President Tadić has set up an Office for Expert and Operational Issues to deal with implementation and that, following calls from him,

111 Judiciary and Fundamental Rights. 112 Justice, Freedom and Security. 113 Available at http://www.consilium.europa.eu/uedocs/cms_Data/docs/pressdata/EN/genaff/126577.pdf.

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barricades erected by Kosovo-Serbs have also started to come down in several locations, although many still persist. In short, it would seem that, such development having taken place over the past week and with another round of dialogue or further movement on implementation before the 9 December European Council being possible, the Government wishes to wait until the last moment, and take all evidence into account at that point, before coming to a view. 20.32 This is unsatisfactory from the point of view of prior Parliamentary scrutiny, but is, it seems, all that is possible at this juncture. The GAC having discussed the enlargement package and issued conclusions, there is nothing further to be gained by keeping these documents under scrutiny. We accordingly now clear them. 20.33 However, we should be grateful if the Minister would write to us again, as soon as he is able to share the Government’s position with us, explaining what it is, and why, and the basis upon which the European Council arrived at its final determination. 20.34 In view of its “rolling inquiry” into EU Enlargement and Foreign Policy, we are also drawing this chapter of our Report to the attention of the Foreign Affairs Committee.

Annex 1: General Affairs Council (GAC) conclusions on Montenegro “39. The Council welcomes the Commission’s assessment on the good progress made by Montenegro, achieving overall satisfactory results, notably in the key priorities set out by the EU in 2010 in view of opening accession negotiations. Montenegro has achieved a high degree of compliance with the membership criteria, notably the political criteria and has further progressed towards establishing a market economy. The country has also continued to implement smoothly the obligations under the Stabilisation and Association Agreement. Montenegro is in a position to take on the obligations of membership in the medium term in most of the acquis fields. “40. In light of the progress made by Montenegro the Council takes note of the Commission’s recommendation which will be considered by the European Council in line with established practice. “41. The Council recalls that full implementation of the reforms, especially in the key area of rule of law, is essential. In this respect, the Council underlines that continuing efforts in implementing reforms, with particular focus on the area of rule of law and fundamental rights, especially the fight against corruption and organised crime, so as to ensure a solid track record, will remain essential throughout Montenegro’s accession negotiations’ process. In this respect, it notes positively the Commission’s proposal for a new approach as regards chapters on judiciary and fundamental rights and justice, freedom and security.”


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Annex 2: GAC conclusions on Serbia “50. The Council welcomes the Commission’s Opinion on Serbia’s application for EU membership. Serbia made considerable progress towards fulfilling the political criteria set by the Copenhagen European Council and the Stabilisation and Association Process requirements. The Council acknowledges that Serbia has reached a fully satisfactory level in its cooperation with ICTY with the arrest of Ratko Mladic and Goran Hadzic. Continued full cooperation with ICTY remains essential. It also welcomes the fact that Serbia has taken an increasingly active role in fostering reconciliation in the region, in particular with Bosnia and Herzegovina and Croatia. As regards the economic criteria, Serbia has taken important steps towards establishing a functioning market economy and achieved a certain degree of macroeconomic stability. Serbia has built up a positive track record in implementing its obligations under the Stabilisation and Association Agreement and the Interim Agreement. Serbia would be in a position to take on the obligations of membership in the medium term, in nearly all acquis fields. “51. The momentum of reforms in pursuing the necessary degree of compliance with the membership criteria, including consistent implementation of adopted legislation, needs to be maintained, with particular attention to the rule of law. Specific attention should be given to the non-discriminatory treatment of national minorities and to improving business environment. “52. The Council reiterates its full support for the Belgrade-Pristina Dialogue and welcomes progress to date, particularly on customs, acceptance of university diplomas, civil registry, free movement of persons, cadastre and IBM. It calls on both parties to engage constructively on the full range of issues, tackling them at an early date and in a constructive spirit. The Council calls for continued implementation of agreements reached to date in order to arrive at concrete results swiftly, effectively, and in a sustained manner. The Council underlines the importance of the Dialogue for progress on inclusive regional cooperation, including trade. The Council recalls that the Dialogue, and agreements reached through the Dialogue, will continue to be of crucial importance for both parties as they take further steps towards fulfilling their EU perspective, and calls upon both parties to intensify their work in the coming period, with a view to achieving the objectives set out in the European Commission’s Communication on Enlargement Strategy and Main Challenges 2011–2012. “53. In light of the progress achieved so far by Serbia and taking note that Serbia has already reengaged in the dialogue and is moving swiftly to the implementation in good faith of agreements reached, the Council takes note of the positive assessment of the Commission and the recommendation to grant candidate status which will be considered by the European Council, in line with established practice. The Council expects Serbia to address the question of regional cooperation. “54. The Council notes that the opening of accession negotiations will be considered by the European Council, in line with established practice, once the Commission has assessed that Serbia has achieved the necessary degree of compliance with the membership criteria, in particular the key priority of taking steps towards a visible and sustainable improvement of relations with Kosovo, in line with the conditions of the Stabilisation and Association Process, outlined in the Commission’s Opinion, notably by fully respecting the principles

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of inclusive regional cooperation; fully respecting the provisions of the Energy Community Treaty; finding solutions for telecommunications; by continuing to implement in good faith all agreements reached; and by cooperating actively with EULEX. The Council invites the Commission to present a report on Serbia’s implementation of the key priority as soon as sufficient progress has been achieved. “55. The Council attaches great importance to EULEX and KFOR being unhindered in the execution of their mandates.”

21 An EU Special Representative (EUSR) for the Horn of Africa (33367) — —

Council Decision appointing the European Union Special Representative for the Horn of Africa


Articles 28, 31(2) and 33 TEU; QMV Foreign and Commonwealth Office EM of 18 November 2011 and Minister’s letter of 6 December 2011 None; but see (33288) —: HC 428–xl (2010–12), chapter 11 (2 November 2011) December 2011 Politically important Cleared

Background 21.1 In December 2009, under the Swedish EU Presidency, the EU adopted “An EU policy on the Horn of Africa — towards a comprehensive strategy”. Since adoption, Member States have called on the EU to build on this and ensure that its responses to the various threats from the region (particularly piracy) are coherent, cohesive and tackle the root causes of the issues.

The Council Secretariat Paper 21.2 At our meeting on 2 November, we considered a Council Secretariat paper that was the outcome of this process thus far. For the purpose of this paper, the Horn of Africa is


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defined as the countries belonging to the Inter-Governmental Authority on Development (IGAD)114 — Djibouti, Eritrea, Ethiopia, Kenya, Somalia, Sudan, South Sudan and Uganda. 21.3 As the Executive Summary noted, the political evolution of the Horn of Africa over the past 50 years has been unusually turbulent. What the EU wishes to do, therefore, is to support the people of the region in achieving greater peace, stability, security, prosperity and accountable government. 21.4 The annex to the paper analysed the manifold challenges affecting the IGAD member countries: — unaccountable governance and/or corruption mixed with societal tensions or grievance have been violently manifested in some parts of the Horn; — the absence of the rule of law or an administrative vacuum has permitted piracy and terrorism, for example, to flourish in Somalia, and armed groups such as the Lord’s Resistance Army to subsist in remote border areas, with the former having now reached a scale that threatens international security and, directly, the interests of EU Member States; — inter-state rivalry, often over disputed borders, use of water resources or as a result of forced movements of people, also risks breaking into conflict between states as well as within them; — persistent poverty, often the result of conflict, which destroys the stability on which economic growth and investment depend; — the livelihoods of large numbers of people affected by extreme poverty and food insecurity in the Horn is made worse by erratic rainfall and crop yields, a mix of the effects of climate change and inadequate policy interventions; — migration, resulting from dwindling resources, growing population pressure from high birth rates, and refugee flows in response to political unrest, as well as traditional nomadism across modern borders, is a challenge strongly felt in the region and beyond; — small arms proliferation, resulting from conflicts within the region and beyond makes previous disputes over resources more violent and more difficult to mediate by peaceful means; — lack of employment for young people, encouraging political radicalisation or criminality that, in the case of piracy, threatens not just regional but world-wide economic activity; — the absence of a regional organisation effective enough to mediate disputes and foster cooperation: IGAD has been slowly building its capacity, but must continue to develop the capacities of its Secretariat to resolve political problems and regional conflict. 114 The Intergovernmental Authority on Development (IGAD) in Eastern Africa was created in 1996 to supersede the Intergovernmental Authority on Drought and Development (IGADD) which was founded in 1986. The IGAD mission is to assist and complement the efforts of the Member States to achieve, through increased cooperation: Food Security and environmental protection; promotion and maintenance of peace and security and humanitarian affairs; and economic cooperation and integration. For full information on IGAD, see http://www.au.int/en/recs/igad.

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21.5 The paper sets out a proposed Strategic Framework for the EU to achieve its objectives of peace, stability, security, prosperity and accountable government in the Horn of Africa. The EU proposes to achieve this through: — assisting all countries in the region to build robust and accountable political structures; working with the countries of the region and with international organisations to resolve conflicts and avoid future potential conflicts between or within countries; — ensuring that, until that is achieved, the insecurity in the region does not threaten the security of others beyond its borders; — supporting efforts to promote economic growth of all countries; and — supporting political and economic regional co-operation. 21.6 The High Representative and the European External Action Service, a new EU Special Representative (EUSR), EU Delegations in the region, the European Commission and Member States will work together to implement this Framework (see our previous Report for further details). 21.7 Specific actions, in the form of sub-strategies and action plans, will be subject to subsequent decisions by the Commission, Council and Member States. 21.8 The Minister for Europe supported the Strategic Framework, which he believed will help the EU engage more effectively in the Horn of Africa, and which he said was in line with the UK’s own priorities for the region. Rather than proposing a radically new approach, the Minister said the strategy would enable the EU to make its engagement in the Horn of Africa more effective through consistent, coherent and complementary use of its instruments, re-enforcing its political co-ordination, and focusing more clearly on the underlying challenges of the region. Noting that Somalia’s continuing need for considerable attention is reflected in the Strategic Framework, the Minister says that one of its key aims is to address the adverse effects of piracy through the full range of relevant EU instruments. He fully supported this, saying that the UK had consistently pushed for the EU to adopt a more comprehensive response to piracy that dealt with the root causes of the problem, and that the Strategic Framework will contribute to this through implementing a more cohesive approach that included doing more on judicial treatment of pirates, driving forward projects on land to contribute to the rule of law and economic development as well as building up the maritime security capacities of countries and other partners in the region. 21.9 The Minister also supported the proposed new EU Special Representative, which he said would enhance the coherence, quality, impact and visibility of the EU’s action in the Horn of Africa. The EUSR would work closely with the extant EUSR for Sudan and South Sudan.

UN Security Council resolution 2015 (2011) 21.10 On 24 October, gravely concerned by the growing threat of piracy and armed robbery at sea off the coast of Somalia, and by the increased violence employed by pirates, and also strongly condemning the practice of hostage-taking by suspected pirates, the UN


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Security Council unanimously adopted resolution 2015 (2011). This resolution requests that the Secretary-General, in conjunction with the United Nations Office on Drugs and Crime (UNODC) and the United Nations Development Programme (UNDP), further consults with Somalia and regional States on the kind of international assistance required to help make specialized anti-piracy courts in Somalia and other States in the region operational, as well as the procedural arrangements required for the transfer of apprehended pirates; and to provide to the Council within 90 days detailed implementation proposals for the establishment of such courts. The Council underlined the importance of such courts having jurisdiction to be exercised over not only suspects captured at sea, but also anyone inciting or intentionally facilitating piracy operations; this would include key figures of criminal networks involved in piracy who illicitly plan, organize, facilitate, or finance and profit from such attacks. Recognizing that any increase in prosecution capacity must necessarily be accompanied by a related increase in prison capacity, the Council called upon both Somali authorities, UNODC, UNDP and other international partners to support the construction and responsible operation of prisons in Somalia in accordance with international law. The Council also called upon Member States, regional organizations and other appropriate partners to support efforts to establish specialized anti-piracy courts in the region by making or facilitating arrangements for the provision of international experts, including those from the Somali diaspora. 115 21.11 On 28 October 2011, the European Union issued the following statement: “The European Union High Representative for Foreign Affairs and Security Policy Catherine Ashton and The Australian Minister for Foreign Affairs Kevin Rudd cochaired a forum on piracy in the margins of the Commonwealth Heads of Government Meeting in Perth, Australia, attended by Indian Ocean Rim countries and stakeholders promoting security in Somalia and off the Horn of Africa. “The forum underlined its deep concern at the threat posed by piracy and armed robbery against ships in the Indian Ocean. Somali piracy raised the costs of international trade and harmed the fishing and tourist industries of East African and Indian Ocean coastal and island states. “Noting United Nations Security Council Resolution 2015 passed on 24 October 2011, the forum endorsed the international efforts to restore peace and stability in Somalia. Diplomatic efforts to address the drivers of Somali piracy through initiatives to build governance, security and economic livelihoods on land in Somalia were one crucial way to address the root causes of piracy off the Horn of Africa. The forum also endorsed the targeted international and regional approaches to tackling piracy. “Participants welcomed the work of the Commonwealth, the EU, regional and international organisations, notably the UN and its contact group on piracy, coalitions of countries and individual states in countering piracy in the Indian Ocean region. Participants agreed that regional ownership and burden sharing was essential and therefore attached great importance to support the regional anti-piracy strategy

115 See http://www.un.org/News/Press/docs/2011/sc10419.doc.htm for the text of UN Security Council resolution 2015 (2011).

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and action plan adopted in Mauritius in October 2010 by the Eastern and Southern African and the Indian Ocean regions. “The meeting also noted the opportunities offered by the significant number of countries who shared a common legal heritage and the opportunities this presented to the Commonwealth, other international organisations and states in the delivery of legal assistance and support to criminal justice systems. Noting the forum was held in the margins of CHOGM 2011, the participants encouraged common law countries to work together in support of criminal justice approaches to countering piracy and urged the Commonwealth Secretariat to keep this work under active consideration. “Australia agreed to host a larger follow-up event in 2012 in Perth designed to deepen and broaden the international community’s understanding of the drivers of piracy and to explore options to reduce piracy in Somalia. The Perth 2012 event could also compare Indian Ocean piracy with piracy in the Gulf of Guinea and South-East Asia. “Forum on Indian Ocean Piracy participants: Antigua & Barbuda, Australia, Bangladesh, Brunei Darussalam, Canada, Cyprus, European Union, India, Kenya, Malaysia, Maldives, Mauritius, Mozambique, New Zealand, Nigeria, Pakistan, Seychelles, Singapore, South Africa, Sri Lanka, Tanzania, Uganda, UK and UAE.”116

Our assessment 21.12 Given the timeliness of the EU Strategy and its evident political importance, we drew it to the attention of the House. 21.13 The only point about which we asked for further information was the proposal for a new EUSR for the Horn of Africa. It was not immediately apparent to us why, with an EUSR for Sudan and South Sudan, and for the African Union (AU) in Ethiopia, such a further EUSR was necessary in order to “enhance the coherence, quality, impact and visibility of the EU’s action”. We therefore asked the Minister, when he submitted his Explanatory Memorandum on the Council Decision that would be required to appoint this new EUSR, and which would set out his or her mandate, to provide the explanation that the paper did not, along with details of the proposed budget (and a reminder of the costs of the EUSRs for Sudan and South Sudan and for the AU). 21.14 In the meantime, we cleared the Council Secretariat paper from scrutiny. 117

The draft Council Decision 21.15 EUSRs are appointed by the Council through a Council Decision (formerly a Joint Action) where the Council agrees with the High Representative that an additional EU presence on the ground is needed to deliver the political objectives of the Union.

116 The statement is available at http://www.consilium.europa.eu/uedocs/cms_Data/docs/pressdata/EN/foraff/125719.pdf. 117 See headnote: (33288) —: HC 428–xl (2010–12), chapter 11 (2 November 2011).


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21.16 This Council Decision sets out a proposal to appoint a new European Union Special Representative (EUSR) for the Horn of Africa so as to maximise the impact of EU activity in the Horn of Africa by appointing an EUSR to bring coherence to the various strands of EU work in the region. The new EUSR will be tasked with ensuring that the EU plays a full role in regional stability and Somalia’s Djibouti Peace Process by enhancing the quality, intensity and impact of the EU’s multi-faceted engagement in the Horn of Africa. Initial priority will be given to Somalia, including the regional dimension of the conflict and piracy, with its root causes in the instability of that country. Regarding piracy, the EUSR will contribute to developing and implementing a coherent, effective and balanced EU approach, encompassing all strands of EU action, political, security and development and will be the EU’s key interlocutor with the international community, including the Indian Ocean region.

The Government’s view 21.17 In his Explanatory Memorandum of 18 November 2011, the Minister of Europe (Mr David Lidington) recalls that, ahead of the March meeting of the EU Foreign Affairs Council, the Foreign Secretary and then Italian Foreign Minister Frattini wrote a joint letter to the High Representative, Baroness Ashton, in which they said that the EU needed to step up its political efforts to deliver a comprehensive EU approach to the Horn of Africa and Somalia that brought together the EU’s political, development and security work to maximum effect, and that one instrument may be an EU Special Representative. 21.18 The Minister judges that (the Minister’s emphasis) a new EUSR for the Horn of Africa would add significant value to the EU’s work by: a) “Providing coherence and coordination to the EU’s Brussels- and regionally-based machinery, in order to maximise the EU’s leverage on political, security and defence work in the region. This would include a particular focus on Somalia, co-ordinating the various strands of EU’s work, including on: the EU Training Mission (EUTM); coordinating donor support to areas most affected by piracy; wider support to the military efforts on piracy where EUNAVFOR is the key player, and; EU support for the African Union Mission in Somalia (AMISOM); b) “Providing the EU with a regional perspective/approach to the Horn of Africa (particularly important for Somalia where the regional stakeholders hold a lot of influence); c) “Adding impetus to the EU’s Horn of Africa strategic framework; d) “Lobbying key international actors, including non-traditional partners in the Gulf region and countries that are active on, for example, counter-piracy (India, China, South Korea); and, e) “Coordinating the EU response to any future crises in the region.” 21.19 The Minister then refers to the question that the Committee posed in its Report of 2 November report on the EU Strategic Framework, and says that:

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“The post of EUSR for Sudan and South Sudan is already stretched after its mandate was expanded to include work on the Lord’s Resistance Army, as a result of the proposal for an EUSR for the Great Lakes being scrapped. The EUSR for the AU has a similarly extensive mandate. We judge that existing EUSRs for Sudan and South Sudan and for the AU do not have the capacity to be able to focus and deliver the wide range of objectives set out in the mandate and a new EUSR is therefore required. Furthermore, we believe that the urgency of the political, security and humanitarian situation in Somalia and the Horn of Africa necessitates a dedicated EUSR to drive EU engagement forward. “The EUSR would be located in Brussels, where they would be able to actively manage the EU’s work on the Horn of Africa and improve co-ordination between different EU bodies. “An EUSR would be able to direct and facilitate the delivery of EU money available for work on Somalia (including approximately €25m for counter-piracy work on land), on which progress so far has been slow. “The EUSR role would complement that of the EU Head of Delegation in Nairobi, who provides regional co-ordination on Somalia issues. Basing the EUSR role in Brussels would avoid any overlap of responsibility between the two roles. “All partners support the appointment of an EUSR for the Horn of Africa.” 21.20 With regard to the Financial Implications of appointing a new EUSR for the Horn of Africa, the Minister says that he agreed to the appointment of the EUSR on the basis that it had to be funded from the EU’s existing external spend budget, and that the current proposal meets this pre-condition. 21.21 Regarding the Committee’s request in its 2 November report on the EU Strategic Framework to be reminded of the costs of the EUSRs for Sudan and South Sudan and for the AU, the Minister says that the overall situation is: — EUSR for the Horn of Africa = €670,000 (for six months); — EUSR for the African Union = €1,280,000 per annum; and — EUSR for Sudan and South Sudan = €1,820,000 per annum 21.22 With regard to timing, the Minister says that the draft Council Decision is expected to be tabled for agreement at EU Foreign Affairs Council in December 2011. He notes that the European External Action Service (EEAS) are currently interviewing candidates put forward by Greece (Alexander Rondos), Italy (Ambassador Raffaele de Lutio, who is currently Ambassador to Luxembourg), Spain (Ambassador Ramon Gil-Casares, who is currently Ambassador to Khartoum) and Romania (Ambassador Gheorghe Dumitru). The Minister concludes by saying that he will inform the Committee as soon as the EEAS put forward a final candidate for Member States’ approval.


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The Minister’s letter of 6 December 2011 21.23 In his letter of 6 December 2011, the Minister for Africa, the UN, Overseas Territories and Conflict Issues (Mr Henry Bellingham) says that, further to the proposal in the draft Council Decision, the High Representative for Foreign Affairs and Security Policy (Baroness Ashton) wrote to Ambassadors of the EU Political and Security Committee on 5 December to propose Mr Alexander Rondos for the position. The Minister describes Mr Rondos as a Greek diplomat with extensive experience in the Greek Prime Minister’s office, Ministry of Foreign Affairs and international organisations, including the World Bank, with experience in African matters and who has worked in East Africa during his career, ad as a credible candidate who would make a significant contribution to the role. The Minister also notes that other Member States have also signalled that they approve of the proposed appointment.

Conclusion 21.24 We are grateful to the Ministers for their helpful Explanatory Memorandum and letter, which, along with the Council Decision, we are reporting to the House because of the importance of the issues that the new EUSR has been appointed to tackle. 21.25 We now clear the Council Decision.

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22 EU enlargement: Croatia (33387) — —

Council Decision on the admission of the Republic of Croatia to the European Union



— Foreign and Commonwealth Office EM and Minister’s letter of 24 November 2011 None; but see (32992) —: HC 428 xxxiv (2010–12), chapter 1 (19 July 2011) and (33233) 15608/11, 33234 15618/11 and (33246) 15609/11: HC 428–xli, chapter 9 (9 November 2011); also see (32600) 7377/11: HC 428–xxx (2010–12), chapter 18 (22 June 2011) and HC 428–xxiii (2010–11), chapter 11 (5 April 2011); (32179) 16321/10: HC 428–x (2010–11), chapter 19 (8 December 2010); and (31824) 12558/10 (31825) 12562/10: HC 428–i (2010–11), chapter 65 (8 September 2010) and HC 428–iv (2010–11), chapter 12 (20 October 2010) 5 December 2011 General Affairs Council Politically important Cleared

Background 22.1 The previous Committee engaged in extensive exchanges with the previous government about the question of conditionality in the enlargement process, looking back at the experience derived from the post-accession monitoring of Bulgaria and Romania and ahead with respect to Croatia. Having allowed Bulgaria and Romania to accede to the EU despite sub-standard preparation and subsequent poor performance on a range of “good governance” issues, the EU accession process was strengthened in a number of significant ways to ensure that candidate states did not just adopt laws consistent with the EU acquis but also built the administrative and judicial capacity to ensure that those laws would be properly implemented. A new Chapter 23 was introduced; for Croatia, it involves both opening and closing benchmarks revolving around judicial reform, the handling of domestic war crimes, the fight against corruption the treatment of minorities and returning refugees, the protection of human rights and cooperation with the International Criminal Tribunal for the Former Yugoslavia (ICTY); unanimity is required for the chapter to be opened; and, once opened, to be closed. 22.2 Last summer, Croatia’s Chapter 23 negotiations were finally opened. In June 2010, the Minister for Europe (Mr David Lidington) said that agreement had finally been reached on “setting rigorous benchmarks in the areas we want”. Before the chapter could close, this “comprehensive and robust set of benchmarks” would need to be met (31 in all, compared


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with the three-six that most other chapters had), covering a range of important issues including: judicial transparency, impartiality and efficiency; tackling corruption; protecting minority rights; resolving outstanding refugee return issues; protection of human rights; and — crucially — full cooperation with the International Criminal Tribunal for (former) Yugoslavia (ICTY). The Government had, the Minister said, also secured clarification that Croatia would need to show a track record of implementation across all these areas. 22.3 The Minister noted that the UK had sought and secured agreement to a closing benchmark within this chapter stating that: “Full cooperation with the ICTY remains a requirement for Croatia’s progress throughout the accession process, including for the provisional closure of this chapter, in line with the negotiating framework adopted by the Council on 3 October 2005.”[the Minister’s emphasis and italics.] 22.4 We asked the Minister to expand on this, and say, in judging what constituted “full” cooperation, to what extent the Council would depend upon the assessment in this regard of the ICTY Chief Prosecutor. In his response, the Minister said: “The previous Government publicly defined ‘full co-operation’ with ICTY as committed and sustained activity demonstrating one hundred per cent effort and political will. I want us to maintain this yardstick and apply it consistently across the region. In the light of concerns raised by the Prosecutor we expect Croatia to demonstrate, in particular, continued efforts to meet requests for documents, and to take all appropriate steps to conduct a credible investigation to find them.”118 22.5 As we noted in our Report, 119 conditionality in the enlargement process is important not only in the case of Croatia, but also in that of Serbia, where a similar potential conflict between appropriate conditionality on the one hand, and Serbia’s desire to move to the next stage in the accession process and Member States’ desire to reinforce the direction of travel of the present government’s politics on the other, has been apparent. 22.6 At our meeting on 8 December 2010, the Committee considered the Commission’s Communication on its “Enlargement Strategy and Main Challenges 2010–2011”. Our Report included what the Minister for Europe described as the Government’s “guiding principles for the UK’s approach to EU enlargement”, which he said would “ensure that EU enlargement remains sustainable by satisfactorily upholding conditionality so that each applicant joins the EU only when it is ready to do so.” 22.7 The Minister noted that, though steady overall progress had been made since negotiations opened in October 2005, Croatia needed to make further progress in the field of judiciary and fundamental rights — in particular, to build up track records in relation to the independence and efficiency of the judiciary, the fight against corruption and organised crime, respect for and protection of minorities, including refugee return and war crimes trials. With regard to cooperation with the ICTY, he pointed to renewed reference to full cooperation as a requirement for Croatia’s progress through the accession process, and for

118 (31824) 12558/10 (31825) 12562/10: see HC 428–iv (2010–11), chapter 12 (20 October 2010). 119 Ibid.

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the full accomplishment of the Chapter 23 closing benchmarks as a means to removing the need to consider another cooperation and verification mechanism. He said that the Government agreed with this approach and would require evidence of a track record of implementation of reform before agreeing to closure of Chapter 23. The Government would also continue to press upon Croatia the need to cooperate fully with the ICTY; this was, he said, requirement for closure of accession negotiations. 120

The Commission’s March 2011 progress report 22.8 The Commission said that, though Croatia had made considerable progress in the field of judiciary and fundamental rights, further work remained to be done, in particular to establish convincing track-records in the field of the judiciary and the fight against corruption, to address impunity for war crimes and to settle the outstanding refugee return issues. Accordingly, the Commission: — encouraged Croatia to redouble its efforts to meet all closing benchmarks set out in the EU’s Chapter 23 opening negotiating position, and in particular, to address the remaining issues set out in its Communication; — would continue to monitor Croatia’s progress closely and further support Croatia, through technical expertise and financial assistance, to enable it to meet the benchmarks; — as soon it had ascertained that Croatia had met all closing benchmarks, would submit a closing benchmark report and draft closing EU position to the Council, in line with established procedures. 22.9 In their joint Explanatory Memorandum of 30 March 2011, the Secretary of State for Justice (Mr Kenneth Clarke) and the Minister for Europe described the report as an accurate and objective assessment which usefully pointed out what further actions Croatia must undertake in order to meet the benchmarks, and noted that Croatia had stated its strong political commitment to carrying out the necessary reforms as soon as possible. 22.10 Their detailed comments are set out in our Report. Finally, the Ministers noted that the timing of the closure of Chapter 23 depended on the Croatia’s progress in fulfilling the benchmarks, and that further discussion in the relevant Council working group was likely to take place in May.

Our assessment 22.11 We noted that Croatia had a good deal further to go before Chapter 23 could be provisionally closed. Of particular concern was recruitment of judges and prosecutors; the implementation of the civil code; the overwhelming backlog of cases; impunity from war crimes; and the backlog of housing appeals for returnees. We said that we would monitor the progress of Chapter 23 very closely to ensure that the mistakes made with Bulgaria and Romania were not repeated.

120 See headnote: see (32179) 16321/10: HC 428–x (2010–11), chapter 19 (8 December 2010).


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22.12 We also noted that the next part of this process would follow publication of the next report by the ICTY Chief Prosecutor, and asked the Minister to include the text of what the Chief Prosecutor had to say, as well as his comments on it, when he wrote to us about it. 22.13 In the meantime, we cleared the document.121

The Committee’s letter to the Minister for Europe and his response 22.14 The Committee then wrote to the Minister after the ICTY conviction, at the end of a three-year trial, of two Croat generals —Ante Gotovina and Mladen Markac — of war crimes committed in 1995. His response included his reiteration of “the UK’s commitment to ensure that this chapter is closed on the basis of a thorough technical assessment against the benchmarks, including establishing the necessary track records to ensure that reforms are sustainable” and his statement that “I stand by that commitment.” 122

Subsequent developments 22.15 On 10 June 2011 the Commissioner for Enlargement and Neighbourhood Policy, Stefan Füle, issued the following statement: “I am particularly glad to announce that today the Commission has completed its negotiations with Croatia. This means that, as far as the Commission is concerned, the work is completed. Now it is up to the Member States to make the final evaluation of the negotiations and decide whether the negotiations can be officially concluded and the Accession Treaty signed.” 22.16 The Commissioner went on to express his confidence that this would happen because negotiations “have been in depth and substantial … structured along 35 different chapters covering the complete range of areas which fall under the competence of the European Union [for each of which] Croatia had to fulfil clear criteria to open and to close the negotiations.” 22.17 Recalling the Commission’s regular Progress Reports, the Commissioner said: “Croatia has been asked not only to adopt new laws and regulations, but also to implement them and prove to be able to do so. In one word, Croatia had to prove to have taken irreversible course of action. “We will continue to work with Croatia until the moment when it will join the European Union, closely monitoring and reporting about the implementation of the commitments taken by Croatia to be achieved before the date of accession.” 22.18 Recalling that negotiations began in October 2005, and other aspects of the outcome, the Commissioner said: •

“the judiciary system has been reformed to make it more efficient. New judges and prosecutors will be appointed on the basis of their professional merits;

121 See headnote: HC428–xiii (2010–11), chapter 11 (5 April 2011). 122 See (32992) —: paras 1.19–1.21 of chapter 1 of HC 428-xxxiv (2010–12) of 19 July 2011.

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•

“effectively fighting corruption will provide a secure legal environment for all the citizens;

•

“human rights, minority rights, civil liberties have been upheld.”

22.19 The Commissioner concluded by expressing his confidence that: “today’s new stage on the path of Croatia joining the European Union will be a tremendous signal to the rest of the Western Balkan countries and its people as it can help to create a new momentum needed for the enlargement process to continue and accelerate in that region.” 123 22.20 On 10 June also, the Presidency also issued a statement in which it welcomed the Commission’s assessment; congratulated the Croatian government on its achievements; and said that “it will do its utmost to gain the full support from the Member States, in order to achieve this during its term”. 22.21 The Presidency statement referred to remarks on 10 June by the Commissioner for Justice, Fundamental Rights and Citizenship, Viviane Reding, regarding the chapter on the judiciary as the last stumbling block of Croatia’s accession, in which she said that she did not believe last year that Croatians could do it, “but in one year, they have completely reformed their judiciary system and have made it irreversible.” 124 22.22 The Presidency statement also referred to remarks by the Prime Minister of Hungary on 30 May that: — “It would be wrong to delay Croatia’s accession to the EU; — “If no results are achieved, this could keep Balkan countries off the European track, we will be risking the region’s stability; — “If we cannot offer a real perspective, we will lose face; and — “The accession of the country would make European integration palpable for the region, strengthening the stability of the Western Balkans and its commitment to the values of the EU.” 125

Our assessment 22.23 The political pressure to move to the next stage was self-evident. However, it was not as clear to us as it apparently was to the Commissioners that Croatia had yet addressed the outstanding “good governance” issues arising from the last Progress Report; provided the tangible results regarding the judiciary and the fight against corruption and organised crime that the Commission said were essential for the credibility of the EU’s enlargement

123 The full text of the Commissioner’s statement is available at: http://europa.eu/rapid/pressReleasesAction.do?reference=MEMO/11/399&format=HTML&aged=0&language=EN&gui Language=en. 124 The Commissioner’s statement is available at: http://tvnewsroom.consilium.europa.eu/story/index/vocabulary_id/events/term_id/226/story_id/16307/media_id/40794. 125 The full text of the Presidency statement is available at: http://www.eu2011.hu/news/commission-croatia-can-join-eu-2013.


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process; or established the sort of track record that we, and it would seem the Minister, had in mind when it came to ensuring that there was no repetition of the situation in which the Union continues to find itself with respect to Bulgaria and Romania. We looked forward to hearing from the Minister about this in due course. 22.24 In the meantime, we reported these developments to the House. 126

The EU Common Position 22.25 The Common Position assessed the progress made by Croatia in this area, recommended that the chapter required no further negotiations, and underlined the importance of Croatia continuing to develop a track record of implementation across the board. The chapter was provisionally closed at an intergovernmental accession conference with Croatia on 30 June and was formally adopted — without discussion — at the July European Council. 22.26 In their joint Explanatory Memorandum of 7 July 2011, the Secretary of State for Justice (Mr Kenneth Clarke) and the Minister for Europe (Mr David Lidington) said that Croatia had undertaken significant reform efforts in the area of the judiciary and fundamental rights over the past six years. Their detailed comments are set out in our most recent Report. 127 In general terms, the Ministers said that Croatia had responded to the Commission’s March 2011 Interim Report on Chapter 23 with determination to address the outstanding issues; a series of legislative amendments had been passed over the last four months in order to further consolidate reforms and meet the chapter benchmarks. The Commission’s benchmark assessment report recognised these efforts; it distinguished between those benchmarks that had been “met” and those that had been “sufficiently met”. Many of the benchmarks required not only legislation and institutional change, but a track record of implementation. Those benchmarks that had been “sufficiently met” were generally those which had an initial track record of implementation that required consolidation in the period up to accession to enable further substantive results to flow from these reforms. 22.27 The Ministers agreed with the Commission’s detailed analysis and view that the closing benchmarks could be considered to have been sufficiently met; and also that further results should follow on the basis of Croatia’s continuing efforts. They noted that, to help ensure this, the Government had worked to secure enhanced monitoring in the period before accession, to ensure that Croatia stuck to the path of reform and that all EU requirements were fully met by the time of accession. 22.28 The Ministers then recalled that: — in its Interim Report on Chapter 23 (of March 2011) the Commission noted that further work was needed in a number of areas: recruitment of judges and prosecutors; implementation of the civil code; backlog of cases; impunity from war crimes, and the backlog of housing appeals for returnees;

126 See headnote: (32600) 7377/11: HC 428–xxx (2010–11), chapter 18 (22 June 2011). 127 See (32992) —: HC 428-xxxiv (2010–12), chapter 1 (19 July 2011).

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— the Committee had expressed an interest in developments in these areas as well as an update following the recent report by the ICTY Chief Prosecutor. 22.29 They then noted that: — the recruitment and further career management of judges and prosecutors had been improved; a timetable on planned judicial appointments in accordance with the revised selection criteria would enable the Commission to monitor further development of this track record; — Croatia had developed a track record of implementing the Criminal and Civil Procedure Codes; continued reform of civil procedures and further consolidation of a track record of implementation was nonetheless still required; — between December 2009 and December 2010 the overall number of pending cases before the courts had fallen from 795,722 to 785,561; the Commission emphasised the need to continue efforts to reduce the case backlog across all courts, particularly in old civil and enforcement cases; — a new Strategy for the Investigation and Prosecution of War Crimes Committed in the Period 1991 and 1995 had been adopted in February 2011 to deal in particular with the issue of impunity in war crimes; the Ministry of Interior and the State Attorney’s Office had each adopted operational plans; a joint report from them and the Ministry of Justice was adopted by the Croatian Government in April; priority war crimes cases were being identified at national and regional level, with special investigative teams being established in particularly sensitive cases; revised legislation adopted in May 2011 made the four war crimes chambers competent for all new cases; staffing had also been increased in the chambers. 22.30 The Ministers then said that: the Commission’s assessment report stated that Croatia had largely implemented its Action Plan on the Housing Care Programme for returning refugees, meeting the 2008 target and fulfilling 95% of the 2009 target; the backlog of appeals had been reduced; and that reinforced administrative capacity should maintain this. 22.31 With regard to cooperation with the ICTY, the Ministers noted that “full cooperation with this body is one of the benchmarks included in Chapter 23”, and that on 6 June 2011 the ICTY Chief Prosecutor gave a report to the UNSC stating: “For Croatia, in general, timely and adequate responses were received concerning our requests for witnesses and evidence. However, during the reporting period, limited progress was made in locating the missing military documents concerning Operation Storm. Nevertheless, on 15 April 2011, the Trial Chamber rendered its judgement in the Gotovina et al. case and found that the crimes against Gotovina and Markac were proven based on the evidence submitted at trial. It is, however, unfortunate that in the aftermath of the Judgement, the highest state officials failed to comment objectively on the outcome of the case.”


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22.32 The Ministers then recalled the 15 April 2011 conviction by the ICTY Trial Chamber of Ante Gotovina and Mladen Markac (and sentencing to 24 and 18 years imprisonment respectively) and the acquittal of Ivan Cermak, and commented as follows: “The Government is a longstanding supporter of the ICTY and of international justice. The Government shares Chief Prosecutor Brammertz’s disappointment that the missing artillery documents have not been found, but believes that Croatia continues to cooperate with the ICTY and encourages them to continue to do so. Since the Gotovina verdict Croatia has continued to investigate the whereabouts of the missing artillery documents requested, and is liaising with Chief Prosecutor Brammertz on this issue. “In terms of the comments made by state officials on the outcome of the case, Croatian Prime Minister Kosor stated her Government’s intention to “do everything within its legal possibilities to repeal this qualification [that the Croatian state leadership acted in a joint criminal enterprise] before the Appeals Chamber”. We note that Croatia itself is not a party to the trial but the judges’ findings are subject to an appeal and the defendants have indicated their intention to exercise this option. “In its assessment of this benchmark, the Commission considered that the Croatian Government continues to cooperate with the ICTY and has explored important new avenues in its investigations. It encourages Croatia to continue its efforts. The Government agrees with this assessment and recommendation.” 22.33 The Ministers concluded by noting that: this chapter would be closely monitored in the period up to accession; Croatia’s accession treaty was expected to be signed at the 9 December European Council; and accession was envisaged for 1 July 2013.

The Minister for Europe’s letter of 4 July 2011 22.34 The Minister began his long and detailed letter by saying that the Committee’s Reports raised some important concerns about the need for Croatia to address outstanding “good governance” issues and to avoid repeating the situation in which the EU finds itself with respect to Bulgaria and Romania. 22.35 He reiterated his earlier indication that the Government shared these concerns and had made clear that UK agreement to the conclusion of negotiations could only on the basis of a thorough technical assessment (by the Commission) against the benchmarks, including the necessary track records to ensure that reforms are sustainable. 22.36 His detailed comments are set out in paragraphs 1.44–1.52 of our 19 July meeting. 128 They included that: — the strengthening of the EU enlargement process meant that Croatia’s accession negotiations had been more rigorous than those with previous candidate countries and Croatia was consequently better prepared for membership;

128 See (32992) —: HC 428-xxxiv (2010–12), chapter 1 (19 July 2011).

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— the Government fully supported the shift towards more robust conditionality as essential to maintain the credibility of the EU enlargement process, wanted Croatia’s accession to set a positive example for the rest of the Western Balkans and encourage reforms that would promote peace, stability, prosperity and democratic freedoms in that region, and had accordingly negotiated hard to ensure that EU decisions taken as part of Croatia’s accession process were not politicised, but were based upon facts; — since the Commission’s March Interim Report, Croatia had accelerated its efforts, which had enabled the Commission to judge that the benchmarks had been sufficiently met and that the chapter could be closed, having concluded that: •

across the board an appropriate legal framework and the necessary implementing structures and institutions are generally in place, administrative capacity was being continuously strengthened and track records of results had been established or continue to be developed, thereby ensuring the overall sustainability of reforms;

•

provided Croatia continued its efforts, and met the commitments it hd undertaken, further concrete results should follow.

— the Government welcomed the Commission’s detailed analysis of Croatia’s progress and agrees with its overall assessment. 22.37 The Minister then said that: — the Commission’s recommendation to close Chapter 23 was accompanied by separate recommendations for monitoring and safeguard arrangements, as well as for the financial and budgetary provisions for Croatia’s accession; — The Government had been determined that Croatia should continue its positive direction of travel by consolidating and fully embedding the reforms carried out to ensure that Croatia fully met EU requirements across the board by the time it acceded; — to make the monitoring arrangements as robust as possible, the Government had secured a number of improvements to the EU Common Position, backed by strong language in the 24 June European Council Conclusions viz: “Croatia should continue its reform efforts with the same vigour, in particular as regards the judiciary and fundamental rights, so as to be able to assume fully the obligations of membership from the date of accession. Monitoring up to accession of these reform efforts will give the necessary assurance to Croatia and current Member States. The Council, acting by qualified majority on a proposal from the Commission, may take all appropriate measures.”129 — these provisions would be written into Croatia’s Accession Treaty, which he expected to be signed by the end of the year;

129 The full European Council conclusions are available at http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/123075.pdf; the section on Croatia is at the Annex to this chapter of our Report.


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22.38 The Minister also attached the EU Common Positions for Chapters 23, 33 (Financial and Budgetary Provisions), and 35, Part 7, which he said would be formally adopted (without discussion) at a Ministerial Council in July, probably the Economic and Finance Council on 12 July. 22.39 The Minister also noted that Parliament would be required to ratify Croatia’s accession treaty after signature by all relevant parties, and that: “Under the provisions of the EU Bill, an Act of Parliament will continue to be required before the Government can ratify accession treaties, in accordance with clause 2 of that legislation. An assessment would also be required of all treaty changes in accordance with clause 4 of the Bill. However, you will be aware that clause 4(4) of the EU Bill would provide that accession treaties would not in principle require a referendum, as they would not themselves constitute a transfer of power or competence from the UK to the EU.” 22.40 The Minister concluded his letter by expressing a willingness to discuss Croatian accession in more detail in a debate if the Committee was so minded.

Our assessment 22.41 While the irreversibility of the changes was, we noted, a matter of judgement, they did not guarantee forward momentum. And it was plain that Croatia still had much to do over the next two years if, at the end, it could truly be said to have reached the point that the Commission is still seeking of both Bulgaria and Romania, viz: •

an autonomously functioning, stable judiciary, which is able to detect and sanction conflicts of interests, corruption and organised crime and preserve the rule of law;

•

concrete cases of indictments, trials and convictions regarding high-level corruption and organised crime; and

•

a legal system capable of implementing the laws in an independent and efficient way.

22.42 The process of systematically tackling war crimes appeared to have barely begun. ICTY Chief Prosecutor Brammertz’s latest report hardly sounded like a ringing endorsement of Croatian cooperation, which to us at least still fell some way short of “full”. The overall case backlog might have fallen by a further 10,000, but there were still 785, 561 to go. In sum, it seemed that a great deal of further implementation would have to have been accomplished by July 2013 if Croatia was to be able to achieve a track record that demonstrated that she was truly ready for accession. 22.43 Moreover, at the end of this process, notwithstanding what the Minister said about having secured improvements to the EU Common Position, backed by strong language in the 24 June European Council Conclusions, any further “appropriate measures” would be subject to Qualified Majority Voting. Rather than providing reassurance, it strongly suggested to us at least that the deal was effectively done: and even if it was not, then the experience of the Cooperation and Verification Mechanism in Bulgaria and Romania was hardly encouraging. Chapter 23 notwithstanding, there appeared to us to be loud and

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unwelcome echoes of that earlier accession process, and further evidence (c.f. the Hungarian Presidency’s remarks in paragraph 22.22 above) that what was judged to be more important was the political imperative of giving (in the words of the European Council conclusions) “a new momentum to the European perspective of the Western Balkans”. 22.44 We noted that Croatia’s accession Treaty would have to be approved by the House. But, before then, we concluded that the Minister’s suggestion should be taken up, and that — given the importance of ensuring the integrity of the enlargement process — the outcome thus far should be debated on the Floor of the House. 22.45 That debate finally took place on 22 November 2011. 130

The draft Council Decision 22.46 In the draft Council Decision, the Council states that it has decided to accept Croatia’s application for admission. It adds that the conditions of admission and the adjustments to the Treaty on European Union, the Treaty on the Functioning of the European Union and the Treaty establishing the European Atomic Energy Community, entailed by such admission, are to be the subject of an agreement between the Member States and the Republic of Croatia. 22.47 The 5 December 2011 General Affairs Council is expected to adopt the Council Decision, the final formal clearance before the planned signature of the Croatian EU Accession Treaty on the morning of 9 December 2011, in the margins of the European Council.

The Government’s view 22.48 In his Explanatory Memorandum of 24 November 2011, the Minister for Europe (Mr David Lidington) recalls that the Government agreed to closure of the accession negotiations with Croatia in July, and approved the final text of the draft Treaty in October; and says that the European Parliament approved the Treaty at Committee stage on 18 November and that final approval is expected in plenary on 30 November. 22.49 The Minister then comments as follows: “The Explanatory Memorandum of 7 July 2011 on Chapter 23 noted that Croatia has undertaken significant reform efforts in the area of the judiciary and fundamental rights over the past six years. Croatia has worked to improve the independence, impartiality, efficiency and professionalism of the judiciary. It has improved its handling of domestic war crimes trials, strengthened the fight against corruption, and increased protection of fundamental rights.

130 See HC Deb, 22 November 2011, cols. 233–255. The text of the debate is also available at http://www.publications.parliament.uk/pa/cm201011/cmhansrd/cm111122/debtext/1111220003.htm#111122108000001.


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“The Explanatory Memorandum reported on progress in the fields of Criminal Procedure, reducing case back log and in making further progress on cooperation with the International Criminal Tribunal for former Yugoslavia (ICTY) (full cooperation being a benchmark for Chapter 23). In its assessment of this benchmark, the Commission considered that the Croatian Government continues to cooperate with the ICTY and has explored important new avenues in its investigations. It encourages Croatia to continue its efforts. The Government agreed with this assessment and recommendation. “The Government agreed with the Commission’s detailed analysis and view that the closing benchmarks can be considered to be sufficiently met. “The subsequent Explanatory Memorandum of 7 November 2011, on the Commission’s 12 October Enlargement Strategy and Progress Reports for 2011–12, noted that continuous monitoring is being undertaken to ensure that further progress is being achieved. 131 “The Enlargement Strategy noted that accession negotiations were concluded in June 2011 and Croatia needed to maintain momentum on remaining reforms and to finalise work to align fully with the acquis before accession. It noted that Croatia continued to meet the political criteria and that substantial progress had been made in all areas. The Strategy noted that Croatia has made substantial progress on judiciary and fundamental rights and that reform of the judiciary has continued but requires constant attention. The Strategy further noted that Croatia continued to cooperate with the International Criminal Tribunal for the former Yugoslavia (ICTY) but had been unable to fully account for certain missing military documents. “In the Explanatory Memorandum, the Government agreed with the Commission’s assessment and welcomed the Strategy’s focus on the importance of continued progress on reform in Croatia, particularly in the areas of ICTY cooperation and judiciary and fundamental rights. “The Explanatory Memorandum also highlighted the continued progress of Croatia as illustrated in the Commission’s Progress Reports. The Progress Report stated that the Commission received a strong mandate to monitor closely Croatia’s fulfilment of the commitments undertaken and states that Croatia must now maintain momentum on remaining reforms and finalise work to align fully with the acquis before accession. It noted that Croatia continues to meet the political criteria and that substantial progress has been made in all areas, including rule of law, and results are becoming tangible. “Examples. The Report stated that Croatia has continued to progress well, including on regional cooperation and good neighbourly relations and on the economic criteria, with a high degree of alignment in most chapters of the negotiations, but that additional efforts are needed in certain areas to strengthen administrative capacity.”

131 For the Committee’s consideration of the Commission’s Enlargement Strategy for 2011–12, Opinion and Progress Report on Croatia, see (33233) 15608/11, 33234 15618/11 and (33246) 15609/11: HC 428–xli, chapter 9 (9 November 2011).

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The Minister’s letter of 24 November 2011 22.50 The Minister recalls that during the debate on Croatia’s EU Accession, he informed the House that he had recently heard from the Commission that it would propose that the draft Council Decision on Croatia’s accession be agreed at the 5 December General Affairs Council, to enable the treaty of accession to be signed by heads of state and Government when they meet at the European Council on 9 December. 22.51 The Minister goes on to note that, though the draft decision has only recently been issued by the Commission, it was anticipated in two earlier Explanatory Memoranda in July and November to which he refers in his accompanying Explanatory Memorandum of the same date. In this context, the Minister says, he was also grateful for the opportunity to debate the closure of Croatia’s EU’s accession negotiations on the Floor the House on 22 November. 22.52 The Minister then notes that, since the Committee is not holding a meeting in the week of 28 November, due to its visit to Copenhagen to discuss the upcoming Danish Presidency, there will not be an opportunity to scrutinise this document before it needs to be agreed at the GAC: “Enlargement is a priority for this government, and is an issue on which there is widespread cross-party support. I therefore hope you understand the need to override scrutiny on this issue.”

Conclusion 22.53 There is nothing in what the Minister has to say now that adds to what he has said previously. By the same token, our views remain as set out in our most recent Report on Croatia’s accession process (c.f. paragraph 22.41–22.43 above). 22.54 During the Floor of the House debate on the EU Common Position that we considered at that meeting, the Minister made a number of important remarks. He noted that conditionality is of critical importance to protect the credibility of the enlargement process and to encourage future EU expansion.132 That, as we have said on many occasions, is the consideration that has guided all our endeavours thus far. Pace the Hungarian Presidency and some others, the need is not to see accession as a matter of saving face or sending a signal to the other Balkan countries, but about sending the right signal. And this would not be achieved were conditionality to be compromised, as it has been in previous accessions. Post-accession measures have not worked hitherto, and there is no reason to believe that they could be made to work in future. The need, and the best signal, is for Croatia to be ready beyond doubt for accession in 18 months time. 22.55 It is thus notable that the Minister said in the debate that his support for the Common Position does not mean that he accepted at that point that Croatia had done all that needed to be done, nor indeed had the European Commission made that conclusion. 132 HC Deb, 22 November 2011, col 237.


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22.56 It is also notable that he described the key judgment as being whether Croatia will be able to assume in full (our emphasis) the obligations of EU membership from the date of its proposed accession on 1 July 2013, and recalled that the Commission had also underlined the importance of Croatia continuing to develop a track record of implementation across the board (ditto). The Minister also expressed his determination that Croatia should fully meet EU requirements across the board, and particularly over Chapter 23, by the time of accession, and to see that there is no backsliding. 22.57 He also stated his expectation that each of the Commission’s six-monthly reports on Chapter 23 will show clear progress, and undertook to write to the Committee in order to draw its attention to the conclusions of that document. 133 We look forward to receiving his letter. 22.58 The Minister also noted that a comprehensive monitoring report will be presented to the European Parliament and to the Council in the autumn of 2012, and that these six-monthly reports, together with the comprehensive report next autumn, will allow both Governments and Parliaments right across the European Union to assess Croatian progress towards full alignment with the acquis and with European standards by the time of accession. 22.59 The Minister also stated that the Government completely accepts that Croatia still has more to do; that a number of judicial reforms are still at a very early stage; that the long-standing issue of case backlogs in old civil cases and enforcement decisions remains a problem; and that he will be looking for rapid progress once the new enforcement law and public enforcement agency become operational in January 2012. 22.60 The Minister also welcomed the adoption of the new strategy on impunity that recognises the existence of uninvestigated and unprosecuted crimes, and the creation of new dedicated specialist chambers for war crimes trials, but also stated that, although the handling of domestic war crimes cases has improved, the issue of impunity needs to be thoroughly addressed. He also described continued full co-operation with the International Criminal Tribunal for the Former Yugoslavia as also particularly important. 134 22.61 In its most recent Progress Report, the Commission states that more needs to be done to establish a track record in the effective handling of organised crime and corruption and local and high-level corruption cases, including cases related to public procurement and the judiciary. Although clearly seized of the importance of these issues, it will be important that the Croatian Government effectively implements these measures prior to accession. 22.62 There also remains a substantial backlog of housing appeals from those refugees wishing to return and fewer than half the available housing units have been handed over to successful applicants.

133 HC Deb, 22 November 2011, col 240. 134 Ibid.

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22.63 Also, if “full co-operation” with ICTY is defined as “committed and sustained activity demonstrating one hundred per cent effort and political will” (c.f. paragraph 22.4 above), then there is plainly more for the Croatian government to do in this key area too. 22.64 These, then, are some of the benchmarks that we expect to figure prominently in the monitoring reports. We look forward to receiving these reports and the Minister’s assessment of the extent to which they show that adequate and timely progress continues to be made and, if not, what action he thinks should be taken. 22.65 In winding up, the Minister described the process that the House debated as deliberately designed to enable us to learn from the failures of that experience; and the decision to be made by the December European Council as not whether to admit Croatia to the European Union immediately, but: “[...] whether by July 2013, on the basis of the evidence that we have so far and the intent declared by the Croatian leadership so far, Croatia will be in a position to move smoothly towards accepting all the responsibilities of EU membership.” 135 22.66 Between the signing of the accession treaty and Croatia’s joining the European Union, the Minister said: “[...] we shall have the process of pre-accession monitoring that I have described, as well as the three safeguard clauses that are written into the treaty and are powerful mechanisms for ensuring that Croatia continues to make the progress that it has promised. Finally, all 27 members of the EU — including this Parliament — must vote to ratify Croatian accession, which in this instance means primary legislation. To inform its judgment on whether Croatia has met the standards required, the House should have access to the sequence of monitoring reports from the European commission and the reports from the chief prosecutor of the International Criminal Tribunal for the Former Yugoslavia. Therefore, when this House takes the decision on whether to ratify Croatian accession, it will have available to it the evidence about the progress that Croatia has still to make.”136 22.67 In these circumstances and on this occasion, the Committee does not take issue with the over-riding of scrutiny, and now clears this Council Decision. 22.68 Otherwise, the Committee looks forward to continuing to scrutinise this process as it enters the next, determining phase. 22.69 In view of its “rolling inquiry” into EU Enlargement and Foreign Policy, we are also drawing this chapter of our Report to the attention of the Foreign Affairs Committee.

135 Ibid, col 255. 136 Ibid.


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Annex: 23–24 June 2011 European Council conclusions: III. CROATIA “31. The European Council commends Croatia for its intensive efforts, which have allowed accession negotiations to reach their final stage. The ongoing examination of the remaining negotiating chapters by the Council is being conducted in full respect of strict conditionality and in line with the negotiating framework. In the light of the progress made and the Commission’s positive assessment, the European Council invited the Council to take all necessary decisions for the conclusion of the accession negotiations with Croatia by the end of June 2011 on the basis of the draft common positions recently presented by the Commission, with a view to the signing of the Accession Treaty before the end of the year. Croatia should continue its reform efforts with the same vigour, in particular as regards the judiciary and fundamental rights, so as to be able to assume fully the obligations of membership from the date of accession. Monitoring up to accession of these reform efforts will give the necessary assurance to Croatia and current Member States. The Council, acting by qualified majority on a proposal from the Commission, may take all appropriate measures. “32. These developments bring a new momentum to the European perspective of the Western Balkans, provided these countries continue on the path of reform. The European Council will return to this matter at its December 2011 meeting. In this context, it welcomes the arrest and transfer to the Hague Tribunal of Ratko Mladic, which constitutes a positive step for international justice as well as for Serbia’s EU perspective.”

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23 Restrictive measures against Iran (33388) — —

Council Decision amending Council Decision 2010/413/CFSP concerning restrictive measures against Iran

(33389) — —

Council Implementing Regulation implementing Regulation (EU) No.961/2010 on restrictive measures against Iran



(a) Article 29 TEU; unanimity (b) Article 215 (2) TFEU; QMV Foreign and Commonwealth Office EM and Minister’s letters of 24 November 2011 None; but see (31779) —: HC 428–i (2010–11), chapter 61 (8 September 2010); (31905) —: HC 428– ii (2010–11), chapter 24 (15 September 2010); and (31937) —: HC 428–iii (2010–11), chapter 15 (13 October 2010) 1 December 2011 Foreign Affairs Council Politically important Cleared

Background 23.1 On 23 December 2006, the UN Security Council adopted Resolution 1737, which imposed a number of sanctions on Iran. In broad terms UNSCR 1737: •

prohibited the sale/transfer to Iran — and also the export by Iran or export from Iran — of certain goods and technologies that could contribute to sensitive activities (enrichment related, reprocessing and heavy water activities and the development of nuclear weapons delivery systems);

•

prohibited technical or financial assistance related to these activities;

•

froze the assets of named individuals and entities involved in, associated with or providing support to Iran’s sensitive nuclear and missile programmes;

•

called on signatory States to “exercise vigilance” about the travel to or through their territories of individuals involved in, associated with or providing support to Iran’s sensitive nuclear and missile programmes and required them to inform the Security Council when named individuals do so; and

•

called on States to prevent Iranian nationals from studying sensitive subjects.


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23.2 On 7 February 2007 the then Committee cleared Common Position 2007/140/CFSP, which enabled EU Member States to fulfil their obligation to implement these restrictions. It was subsequently adopted by the Council on 27 February 2007. 23.3 In his Explanatory Memorandum of 10 July 2008, the then Minister for Europe (Mr Jim Murphy) recalled the adoption of UNSCR 1803 imposing further restrictive measures against Iran, and explained that the measures were to be given effect in the EU by the adoption of a Common Position amending Council Common Position 2007/140/CFSP. The previous Government was “keen to build on this by adding to the Common Position additional clarity and detail on the UN’s call for financial vigilance measures as well as extensions of the list of prohibited items, restriction of export credits and increased inspections and reporting requirements on cargoes of certain Iranian carriers.” The extension of the restrictive measures was “important in the increasing pressure being placed on Iran by the international community”, and represented “a significant further measure, building upon the designation of further individuals and entities, including Bank Melli, adopted on 23 June 2008.” The UK remained committed to a dual track strategy of sanctions and engagement, but Iran had still not complied with four successive Security Council Resolutions; it was important to continue to take steps to prevent the financing and proliferation of Iran’s nuclear and missile programmes. The measures, particularly in the area of financial vigilance, in the amended Common Position meant that European implementation would be concrete and robust. The notification burdens on transactions with Bank Saderat and increased vigilance over transactions with Iranian linked banks were particularly significant; combined with extension of the list of prohibited items, restriction of export credits and increased inspections and reporting requirements on cargoes on certain Iranian carriers, the amended Common Position provided “a clear message to Iran.” 23.4 The then Committee concluded that no questions arose about the document, and that time would tell if the policy of “sanctions + engagement” was effective, and accordingly cleared the document.137 23.5 Then, in a further Explanatory Memorandum of 2 October 2008, the then Minister for Europe said that the complementary implementing Council Regulation further defined the clarity and detail provided in the Common Position on the UN’s call for financial vigilance measures as well as extensions of the list of prohibited items, restriction of export credits and increased inspections and reporting requirements on cargoes of Iranian carriers. He continued as follows: “The UNSCR was not as strong as the UK would have preferred but it usefully went beyond the more proliferation focused measures in earlier resolutions by introducing restrictions on export credits and the activities of Iranian banks. The extension of restrictive measures is an important element in the increasing pressure being placed on Iran by the international community. “These represent a significant further measure, building upon the designation of further individuals and entities, including Bank Melli (a major Iranian bank listed for

137 See headnote: (29812) — and (29813) —: HC 16–xxvii (2007–08), chapters 16 and 17 (16 July 2008).

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providing or attempting to provide financial support for companies which are involved in or procure goods for Iran’s nuclear and missile programmes), adopted on 23 June 2008.” 23.6 The then Minister talked of a “refreshed offer” by the E3+3 to Iran thus: “On 19 July the E3+3 (the UK, France, Germany, the US, Russia, China) presented a new offer of incentives to Iran in return for the suspension of enrichment related activities. The Iranians delivered a reply to Javier Solana, High Representative for the Common Foreign Security Policy, on 5 August. They failed to provide a clear response to the offer. E3+3 countries have expressed disappointment that Iran failed to give a clear positive response, reiterated their commitment to both engagement and sanctions tracks and made Iran aware that the E3+3 are examining further measures in the absence of a positive response.” 23.7 The Minister then reaffirmed the previous government’s commitment to “a dual-track strategy of increasing sanctions while offering genuine engagement” and continued as follows: “Iran has still not complied with four successive Security Council Resolutions. The IAEA (International Atomic Energy Agency) issued a report on Iran on 15 September. The report highlighted Iran’s continuing failure to meet UNSCRs by continuing its enrichment programme and installation of new cascades. This is the second report in a row that has noted Iran’s failure to answer the IAEA’s questions relating to studies with a possible military dimension. Dr ElBaradei (IAEA Director General) reported that, ‘The Agency, regrettably, has not been able to make any substantive progress on the alleged studies and other associated key remaining issues which remain of serious concern’. Dr ElBaradei noted his ‘serious concerns’ about these issues in May.” 23.8 He went on to say that: “The Government believes that it is important to continue to take steps to prevent the financing and proliferation of Iran’s nuclear and missile programmes through increasing the weight and effectiveness of sanctions. The UK has played a leading role in pursuing restrictive measures at the EU as well as the UN level. For example, the measures adopted in the Common Position on 7 August provided a robust implementation of UNSCR 1803, going beyond it in several areas. The UK fully supports this extension of measures. The Government believes that notification burdens on transactions with Bank Saderat and increased vigilance over transactions with Iranian linked banks are particularly significant.” 23.9 The then Minister went on to note that on 29 September the UN had adopted a new Security Council Resolution against Iran: “The Resolution sent a clear signal to Iran. It demonstrated the continued resolve of the E3+3 to ensure that Iran does not continue on the path towards a nuclear weapon. It reaffirmed the strategy of engagement plus sanctions and drew attention to Iran’s defiance of IAEA inspectors. We will continue to press for stronger UN measures.”


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23.10 Turning to the situation in Iran, the then Minister said: “Despite the rhetoric of the Government of Iran there are early signs of an internal debate beginning in Iran over the E3+3’s recent offer of negotiations and incentives if Iran suspends the enrichment of uranium. “Media reports also indicate that investors have become increasingly nervous over investing in Iranian enterprises, blaming the political tensions surrounding Tehran’s nuclear programme. Stronger sanctions, particularly increasing vigilance over Iranian financial institutions appear to be having an impact.” 23.11 Summing up, the then Minister concluded: “At present Iran is enriching uranium for which it has no credible civilian need. The United Kingdom, with our E3+3 partners, is pursuing a dual-track strategy to persuade Iran to engage in negotiations to lead to an agreement on the future of its nuclear programme that is acceptable to the international community, the IAEA, and Iran. This involves engagement on one hand, and pressure on the other. The E3+3 made a generous offer in June 2006, refreshed in June 2008. This offers Iran all it needs to pursue a modern nuclear industry, in a less proliferation-sensitive manner, as well as a range of other benefits. Javier Solana, on behalf of the E3+3, has met the Iranian Chief Nuclear Negotiator (Sa’id Jalili) a number of times, but Iran has so far failed to take up the offer. As for pressure, the UN Security Council has passed three sanctions resolutions against Iran. The EU has implemented each of these by going beyond the requirements of the UN text. The US also has unilateral sanctions in place against Iran.” 23.12 Given the high level of public concern about Iran’s nuclear activities, as well as clearing the Regulation, the then Committee reported this exposition of the Government’s approach and assessment to the House (and, for the same reason, also forwarded that chapter of its Report to the Foreign Affairs Committee). 138

Council Decision 2010/413/CFSP 23.13 In his Explanatory Memorandum of 9 July 2010, the Minister for Europe (Mr David Lidington) noted that on 9 June 2010, the UN Security Council adopted Resolution 1929 on Iran’s nuclear programme and its failure to comply with its international obligations, which imposed a number of further restrictive measures against Iran and which, he said, in broad terms: — reaffirmed that Iran shall cooperate fully with the International Atomic Energy Agency; — stopped new Iranian nuclear facilities and banned Iranian nuclear investment in third countries; — imposed total bans on exports of several major categories of arms, and further restrictions on Iran’s ballistic missile programme;

138 See headnote: (29912) 12463/08: HC16–xxx (2007–08) chapter 16 (8 October 2008).

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— froze the assets of 40 entities, including one bank subsidiary, several Islamic Revolutionary Guard Corps companies, and three Islamic Republic of Iran Shipping Lines subsidiaries, which had been involved in multiple sanctions violations cases; — froze the assets of and banned travel by one senior nuclear scientist; — implemented a regime for inspecting suspected illicit cargoes and authorising their seizure and disposal; — placed restrictions on financial services, including insurance and reinsurance, where there was suspicion of a proliferation link; — banned existing and new correspondent banking relationships where there were proliferation concerns; — established a Panel of Experts to advise and assist on sanctions implementation; and — reaffirmed the dual track strategy (of pressure and diplomacy). 23.14 The Minister then explained that EU Heads of Government welcomed the UN resolution in a Council Declaration on 17 June 2010, which invited the EU Foreign Affairs Council to adopt a Council Decision at its next session, on 26 July, to implement the measures contained in UNSCR 1929, as well as additional EU sanctions in the following areas: — the energy sector, including the prohibition of investment, technical assistance and transfers of technologies, equipment and service; — the financial sector, including additional asset freezes against banks and restrictions on banking and insurance; — trade, including a broad ranging ban on dual use goods and trade insurance; — the Iranian transport sector in particular the Islamic Republic of Iran Shipping Line (IRISL) and its subsidiaries and air cargo; and — new visa bans and asset freezes, especially on the Islamic Revolutionary Guard Corps (IRGC). 23.15 Consequently, the Minister said, the EU Council Secretariat produced a draft Council Decision that incorporated all of these elements in addition to the latest UN measures. 23.16 With regard to the Fundamental Rights aspects of the Decision, the Minister said that: — the procedures for designating individuals as subject to travel restrictions and asset freezes were compliant with fundamental rights. Individuals might be listed only where evidence suggested that they were engaged in activities listed under Articles 18(1)(b) and 19(1)(b) of the draft Decision. Member States could grant exemptions from the travel ban and asset freeze for specified reasons including, inter alia, where travel or


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payments were justified on the grounds of humanitarian need by application to the UN Sanctions Committee on Iran; — the draft Decision said that the Council would communicate their listing to designated persons and entities, so as to give them an opportunity to present observations. Where observations were submitted or where substantial new evidence was presented, the Council would review its decision in the light of those observations and inform the person or entity concerned accordingly. In addition, the travel ban and asset freezing measures would be reviewed at regular intervals and at least every 12 months; and — challenges to a listing could be brought before the General Court; and challenges to the application of a travel ban or asset freeze (for example, grant of exemptions) could be brought in the courts of the Member State concerned. 23.17 The Minister went on to say that the Government was “committed to tough additional EU sanctions against Iran, aimed at halting its proliferation sensitive activity and making it comply with its international obligations”, and continued as follows: “The UN Security Council has sent a strong signal that Iran’s continued failure to comply with its international obligations cannot be ignored. The Government believes that the UN resolution is a clear response to continuing Iranian noncooperation with the international community over its nuclear programme, which continues in contravention of previous UNSCRs and IAEA Board resolutions. “It is clear that Iran has so far failed to reassure the international community, or the IAEA, that its programme is exclusively peaceful. The UK urges Iran to allow the IAEA the access it seeks to enable it do so, including answering their questions about the alleged military studies. “The Government is deeply concerned by the revelations last year about the construction of the covert enrichment facility of Qom. And given that Iran continues to increase its stockpile of Low Enriched Uranium — a critical step towards a nuclear weapon — in defiance of six UNSCRs, and with no apparent civil use, the Government, along with the rest of the international community, remains critically concerned about Iranian intentions. “The Government has said many times that we do not question or challenge Iran’s right to peaceful nuclear energy. But with that right comes important responsibilities which Iran has continually failed to accept. We continue to make clear to Iran that the E3+3 remain willing to meet to pursue a diplomatic resolution to the nuclear issue. “The United Kingdom has been pressing hard for tough action by the EU to accompany and reinforce the recent UN resolution. The European Council Declaration on 17 June sent a clear and strong signal of our unity and resolve. “The Government welcomes the strong additional restrictive measures that are included in the draft Council Decision, which sends a strong message to the Iranian regime and the international community of the EU’s resolve to halt Iran’s nuclear proliferation sensitive activity and make it return to the negotiating table. The

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measures under negotiation will have a tangible impact on the Iranian regime’s ability to finance nuclear proliferation activity, through freezing the assets of additional banks, close monitoring of all financial transactions with Iran and by cutting revenue to the regime through sanctions against the energy sector. The extended ban on dual use goods and the targeting of the transport sector will make it more difficult for Iran to acquire the goods and technology needed to advance its nuclear activity. The contribution of key individuals and entities to proliferation sensitive activity will be hit by additional asset freezes and travel bans, particularly the Iranian Revolutionary Guard Corps (IRGC).” 23.18 The Council Decision was adopted by the 26 July 2010 Foreign Affairs Council, together with a Regulation (Council Regulation (EU) 961/2010) extending the list of entities and individuals subject to an assets freeze. 139 23.19 We cleared both documents at our first and second meetings on 8 and 15 September 2010. 140

The further draft Council Decision 23.20 This Council Decision and Council Implementing Regulation enable the European Union to add further additional individuals and entities to the Annex of Council Regulation 960/2010, subjecting them to an assets freeze and travel ban.

The Government’s view 23.21 In his Explanatory Memorandum of 24 November 2011, Minister for Europe (Mr David Lidington) reiterates the Government’s commitment to “tough additional EU sanctions against Iran, aimed at halting its proliferation sensitive activity and making it comply with its international obligations”. 23.22 The Minister continues as follows: “Iran has continued to flout its international obligations. As the November 2011 International Atomic Energy Agency report and the subsequent Board of Governors resolutions demonstrates, Iran continues on its path towards developing nuclear weapons capability. In response to this, HMG announced on 21 November that it was requiring the UK financial sector to sever all ties with Iranian banks, including the Central Bank of Iran, with immediate effect. “The United Kingdom is determined to press for further robust action against Iran in the UN and EU to send a clear message to the Iranian regime that its continued violation of UN Security Council resolutions and Nuclear Non Proliferation Treaty obligations is unacceptable and that the Iranian government must resume serious and meaningful negotiations without delay.

139 The Iran conclusions are at pages 10 and 11 of the Conclusions of the 26 July 2010 Foreign Affairs Council, available at http://www.consilium.europa.eu/uedocs/cms_Data/docs/pressdata/EN/foraff/115976.pdf. 140 See headnote: (31779) —: HC 428–i (2010–11), chapter 61 (8 September 2010) and (31905) —: HC 428–ii (2010–11), chapter 24 (15 September 2010)


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“The designation by the European Union of further individuals and entities who contribute to the development of Iran’s nuclear proliferation sensitive activity or those who assist in the circumvention of sanctions is an important step. The UK Government believes that targeting key individuals and entities is among the most effective measures to target Iran’s proliferation sensitive activity. For individuals, in addition to the stigma of being internationally blacklisted, being subject to sanctions prevents travel to acquire new knowledge and contacts. The asset freezing of entities is an effective tool to impact the revenue available for proliferation sensitive activity and will also helped disrupt the transport of goods for use in Iran’s nuclear programme. “We are pressing for these measures to be backed with a further expansion of the scope of the EU sanctions, as mandated by Heads of Government in the Conclusions of the October European Council. 141 “We remain clear that the dual track policy of pressure and engagement remains in place. Sanctions in place are targeted, proportionate and reversible. Iran is faced with a stark choice: further international isolation and increased economic pressure, or, respect for international obligations and the lifting of sanctions.” 23.23 The Minister concludes by noting that the Council Decision and Regulation are due to be adopted at the 1 December 2011 Foreign Affairs Council.

The Minister’s letter of 24 November 2011 23.24 The Minister begins by expressing his regret that due the urgency of the measures to be adopted he finds himself having to agree to the adoption of this Council Decision and Regulation before the Committee has had an opportunity to scrutinise the documents. 23.25 He then continues as follows: “The recent November IAEA report142 and the subsequent Board of Governors resolution 143 demonstrate the further progress of the possible military dimensions of

141 The European Council’s Declaration is reproduced at the Annex to this chapter of our Report. The European Council Conclusions are available at http://register.consilium.europa.eu/pdf/en/09/st15/st15265.en09.pdf. 142 Available at http://www.guardian.co.uk/world/interactive/2011/nov/09/iran-nuclear-programme-iaea-report. 143 According to the IAEA Division of Public Information: “At the end of deliberations beginning 17 November, the IAEA Board of Governors adopted a resolution on the implementation of safeguards and relevant provisions of the UN Security Council resolutions in the Islamic Republic of Iran. “The resolution expresses deep and increasing concern about the unresolved issues regarding the Iranian nuclear program, including those which need to be clarified to exclude the existence of possible military dimensions. It also stresses the need for Iran and the Agency to “intensify their dialogue” aiming at the urgent resolution of all outstanding substantive issues for the purpose of providing clarifications regarding those issues. “The resolution urges Iran once again to comply fully and without delay with its obligations under relevant resolutions of the UN Security Council, and to meet the requirements of the IAEA Board of Governors. Expressing continuing support for a diplomatic solution, the resolution calls on Iran to engage seriously and without preconditions in talks aimed at restoring international confidence in the exclusively peaceful nature of Iran’s nuclear program. “It further requests the Director General to include in his progress report to the March 2012 meeting of the Board of Governors an assessment of the implementation of this resolution. “The resolution on the implementation of safeguards in http://www.iaea.org/newscenter/news/2011/iran-resolution.html. .

Iran

was

adopted

by

a

majority.”

See

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Iran’s nuclear programme. In the wake of the IAEA report the British Government acted on 21 November to sever all financial ties between the UK financial sector and Iranian banks. We believe it is an urgent priority that the European Union agree a robust response to Iran, including acting to prevent Iran acquiring the goods needed to develop its nuclear programme and halting the financial flows that fund the programme. The Decision and Regulation in question allow further entities and individuals to be subject to an assets freeze and travel ban in all 27 EU Member States. On 23 October, the European Council invited the Foreign Affairs Council to prepare new restrictive measures on Iran and we are, therefore, considering proposals in this regard in the finance sector, the transport sector and oil and gas sectors”. 23.26 The Minister concludes by reiterating the seriousness with which he regards his responsibility to keep the Committee informed on issues concerning sanctions, but says that the need for the override of scrutiny on this occasion was, regrettably, unavoidable; and by saying that, given the serious nature of events in Iran, and the possibility of further measures, his officials would be happy to update the Committee on the situation in Iran in due course.

Conclusion 23.27 Although these measures raise no questions in and of themselves, we are reporting them to the House because of the importance of the political situation that gave rise to them. 23.28 Relations between the United Kingdom and Iran have deteriorated drastically in the wake of the subsequent over-running of the British Embassy compounds and Residence in Tehran and the consequent expulsion from the United Kingdom of all Iranian diplomats. On 1 December 2011, the Foreign Affairs Council issued the following statement: “The Council is outraged by the attack on the British Embassy in Tehran and utterly condemns it. It is a violation of the Vienna Convention. It also deplores the decision to expel the British Ambassador from Tehran. The Council considers these actions against the UK as actions against the European Union as a whole. The EU is taking appropriate measures in response.”144 23.29 On the same day, the Foreign Affairs Council issued Conclusions that: — reiterated its serious and deepening concerns over the nature of Iran’s nuclear programme, and in particular over the findings on Iranian activities relating to the development of military nuclear technology, as reflected in the latest IAEA report; — strongly supported the resolution adopted by the IAEA Board of Governors, which the Council says expresses deep and increasing concerns about unresolved issues and stresses the grave concern posed by Iran’s continued refusal to comply with its international obligations and to fully co-operate with the IAEA; 144 See http://www.consilium.europa.eu/uedocs/cms_Data/docs/pressdata/EN/foraff/126492.pdf.


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— confirmed that it had designated a further 180 entities and individuals to be subject to restrictive measures, which include entities and individuals directly involved in Iran’s nuclear activities, which are in violation of UNSC resolutions; entities and individuals owned, controlled or acting on behalf of the Islamic Republic of Iran Shipping Line (IRISL); and members of, as well as entities controlled by, the Islamic Revolutionary Guards Corps (IRGC); — further agreed that, given the seriousness of the situation, including the acceleration of the near 20% uranium enrichment activities by Iran, in violation of six UNSC resolutions and eleven IAEA Board resolutions, and the installation of centrifuges at a previously undeclared and deeply buried site near Qom, as detailed in the IAEA report, the EU should extend the scope of its restrictive measures against Iran; — agreed to broaden existing sanctions by examining, in close coordination with international partners, additional measures including measures aimed at severely affecting the Iranian financial system, in the transport sector, in the energy sector, measures against the Iranian Revolutionary Guard Corps, as well as in other areas; — tasked preparatory Council bodies to further elaborate these measures for adoption, no later than by the next Foreign Affairs Council; — again reaffirmed the longstanding commitment of the European Union to work for a diplomatic solution of the Iranian nuclear issue in accordance with the dual track approach; — calls upon Iran to respond positively to the offer of negotiations in the EU High Representative’s latest letter by demonstrating its readiness to seriously address existing concerns on the nuclear issue; — reaffirmed that the objective of the EU remains to achieve a comprehensive and long-term settlement which would build international confidence in the exclusively peaceful nature of the Iranian nuclear programme, while respecting Iran’s legitimate rights to the peaceful uses of nuclear energy under the NPT. 145 23.30 In the meantime, we now clear the documents, and, in the circumstances and on this occasion, do not object to the Minister having agreed to their adoption prior to scrutiny.

145 See http://www.consilium.europa.eu/uedocs/cms_Data/docs/pressdata/EN/foraff/126493.pdf.

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Annex 1: Declaration on Iran by the European Council on 23 October 2011 “The European Council remains fully committed to finding a diplomatic solution to the issue of Iran’s nuclear programme and urges Iran to fully co-operate in this effort. The European Council reaffirms its grave concern over the development of Iran’s nuclear programme and Iran’s persistent failure to meet its international obligations. The recent disclosure of a facility intended for enrichment near Qom has further deepened its concerns. “The European Council urges Iran to heed the requirements of UNSC resolutions and to cooperate fully with the IAEA to resolve all remaining issues and to rebuild confidence in the exclusively peaceful nature of Iran’s nuclear programme. “The European Council also calls upon Iran to agree with IAEA to the scheme of nuclear fuel supply for the Teheran research reactor which would contribute to building confidence while responding to Iran’s need for medical radio-isotopes. “Progress on the Iranian nuclear issue would pave the way for enhanced relations between the EU and Iran and open the way to mutually beneficial cooperation in the political, economic, security and technical fields. “The European Council will continue to review all aspects of the Iranian nuclear issue and will decide in the context of the dual track approach on our next steps. “The European Council deplores the continued violations of human rights in Iran. It is deeply concerned about the use of the death penalty, the violent suppression of dissent and the mass trials in post-electoral Iran against journalists, human rights defenders and political activists. “The European Council expresses its continuing concern about the situation of staff members of European Union Missions and European citizens in Iran who recently have been on trial, and calls upon their prompt and unconditional release.”


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24 Stability and Growth Pact: excessive deficit procedure: Greece (a) (33296) 15930/11 COM(11) 703

(b) (33297) 16081/11 COM(11) 705

Draft Council Decision amending Council Decision 2010/xxx/EU of 12 July 2011 addressed to Greece with a view to reinforcing and deepening fiscal surveillance and giving notice to Greece to take measures for the deficit reduction judged necessary to remedy the situation of excessive deficit Commission Communication: Follow-up to the Council Decision 2010/xxx/EU of 12 July 2011 addressed to Greece, with a view to reinforcing and deepening fiscal surveillance and giving notice to Greece to take measures for the deficit reduction judged necessary to remedy the situation of excessive deficit

Legal base

Documents originated Deposited in Parliament Department Basis of consideration Previous Committee Report Discussed in Council Committee’s assessment Committee’s decision

(a) Article 126(9) and 136 TFEU; —; QMV of eurozone Member States, less Greece (b) — 26 October 2011 3 November 2011 HM Treasury EM of 14 November 2011 None Not known Politically important Cleared

Background 24.1 The Stability and Growth Pact adopted by the Amsterdam European Council in June 1997 emphasised the obligation of Member States to avoid excessive government deficits, defined as the ratio of a planned or actual deficit to gross domestic product (GDP) at market prices in excess of a “reference value” of 3%. 146 Each year the Council of Economic and Finance Ministers (ECOFIN) issues an Opinion on the updated stability or convergence programme of each Member State. 147 These Opinions, which are not binding on Member States, are based on a recommendation from the Commission. The economic content of the programmes is assessed with reference to the Commission’s current economic forecasts. If a Member State’s programme is found wanting, it may be invited by ECOFIN, in a Recommendation, to make adjustments to its economic policies, though

146 This obligation does not apply to Member States, including the UK, whilst they remain outside the eurozone, but they are required to endeavour to avoid excessive deficits. 147 The 17 Member States (Austria, Belgium, Cyprus, Germany, Estonia, Greece, Finland, France, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia and Spain) that have adopted the euro have Stability Programmes, whereas the other 10 Member States (including the UK) produce Convergence Programmes.

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such Recommendations are likewise not binding on Member States. This whole procedure is essentially the Pact’s preventative arm. 24.2 On the other hand, the Pact also endorsed a dissuasive or corrective arm involving action in cases of an excessive government deficit — the excessive deficit procedure provided for in Article 126 TFEU and the relevant Protocol. This procedure consists of Commission reports followed by a stepped series of Council Recommendations (the final two steps do not apply to non-members of the eurozone). Failure to comply with the final stage of Recommendations allows ECOFIN to require publication of additional information by the Member State concerned before issuing bonds and securities, to invite the European Investment Bank to reconsider its lending policy for the Member State concerned, to require a non-interest-bearing deposit from the Member State concerned whilst its deficit remains uncorrected, or to impose appropriate fines on the Member State concerned. 24.3 On 10 May 2010 a Council Decision, 2010/320/EU, was addressed to Greece with a view to: •

reinforcing and deepening Commission surveillance of Greece; and

•

setting out the measures that Greece would need to take to end the present excessive deficit situation “as rapidly as possible, at the latest, by the deadline of 2014” and to comply with the conditionality for the granting of the joint eurozone/IMF package of support. 148

24.4 In September and December 2010 and March and July 2011, following assessments by the Commission of Greece’s response, the Council addressed four further Decisions to Greece amending the May 2010 Decision.149

The documents 24.5 These two documents are a follow-up to the July 2011 Council Decision addressed to Greece. They aim to: •

reinforce and deepen fiscal surveillance of Greece by the Commission; and

•

set out the measures that Greece will need to take to end the present situation of excessive deficit “without delay [...] by the end of June 2014” and comply with the conditionality for the granting of the joint eurozone/IMF package of support.

As a result of the events that followed the announcement, by the then Greek Prime Minister, of a referendum on the second programme of financial assistance agreed on 26 October 2011, the Council is withholding any decision on this item until further notice. Following the appointment of a new Greek Government, it is likely that a decision on the

148 (31615) 9443/10: see HC 428–i (2010–11), chapter 69 (8 September 2010) and (31611) 9606/10 (31796) 12119/10: see HC 428–i (2010–11), chapter 7 (8 September 2010). 149 (31896) 12936/10 (31897) 12937/10: see HC 428–v (2010–11), chapter 13 (27 October 2010), (32338) 17753/10 (32339) 17752/10: see HC 428–xx (2010–11), chapter 10 (16 March 2011), (32567) 7001/11 + ADD 1 (32611) 6754/11: see HC 428–xxiii (2010–11), chapter 12 (5 April 2011) and (32991) 12408/11 (33016) 12352/1/11: see HC 428–xxxvi (2010–12), chapter 23 (14 September 2011).


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disbursement will be made as soon as the new government passes legislation to implement the October 2011 agreement. 24.6 In its Communication, document (b), the Commission assesses the progress made by Greece in implementing the measures set out by the Council Decision of 12 July 2011. It is based on a report by the Commission, the IMF and the European Central Bank (ECB) in the context of the economic adjustment programme and the quarterly report by the Greek Ministry of Finance on 19 August 2011. 24.7 The Commission outlines Greece’s fiscal consolidation plans — the general government budget deficit is set to be kept below the following ceilings: •

€17.1 billion (£14.9 billion) or 7.8% of GDP in 2011;

•

€14.9 billion (£13 billion) or 7.0% of GDP in 2012;

•

€11.4 billion (£10 billion) or 5.3% of GDP in 2013; and

•

€6.4 billion (£5.9 billion) or 2.9% of GDP in 2014.

The Commission reports that some progress has been made in the implementation of the programme — most performance criteria for end-July 2011 were met: •

state primary spending was €33.5 billion (£29.2 billion) compared to a target of €34.7 billion (£30.3 billion);

•

government primary cash balance was €-4.9 billion (£-4.3 billion) against an objective of €-5.1 billion (£-4.5 billion); however

•

on the contrary, the target for non-accumulation of arrears to suppliers was missed, with accumulated arrears of €6.5 billion (£5.7 billion).

The Commission continues that, while a complete set of figures for end-September 2011 is not yet available, the available data suggest that: •

the €5.1 billion (£4.5 billion) target for the general government primary cash balance was missed by a small margin;

•

the target for the non-accumulation of domestic arrears is also likely to be missed, as there are increasing arrears owed by the state and hospitals; and

•

the target for state primary spending of €44.5 billion (£38.9 billion) was met.

24.8 The Commission then looks forward to prospects for 2011 and 2012–14, saying that: •

in the Medium Term Fiscal Strategy adopted in June 2011 additional measures, worth 3% of GDP in 2011, were planned on top of the measures already included in the 2011 budget — these measures were considered then to be sufficient to meet the 2011 deficit target;

•

from the Commission, IMF and ECB’s latest review of the Greek financial assistance programme, however, gaps from the deficit targets emerged in 2011 through to 2014;

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•

a deficit of 8.9% for 2011 and 7.0% for 2012 is estimated, against targets of 7.6% and 6.5%;

•

this is due to a deeper-than-expected contraction of the economy, with forecasts of -5.5% GDP in 2011 and -3.9% in 2012, compared with forecasts in the previous review of -3.8% and 0.6% respectively, and delays in implementing some of the budgetary measures announced in the Medium Term Fiscal Strategy

•

“in view of these slippages and given the late moment of the year, the achievement of the fiscal target for 2011 is no longer realistic”;

•

the Greek Government committed itself, however, to adopt additional measures prior to the sixth disbursement;

•

these measures, aimed at keeping the deficit for 2011 within the range of 0.7 to 1.5% of GDP above the target and correcting the fiscal slippages for 2012, are a reduction in tax exemptions, of €2.8 billion (£2.4 billion) in 2012, a permanent levy on real estate, of €1.7 billion (£1.5 billion) in 2011, an immediate implementation of the revised wage grid for civil servants, a reduction of €101 million (£88 million) in 2011 with a carryover of €552 million (£482 million) for 2012, a reduction in main and supplementary pension, of €219 million (£191 million) in 2011 with a carryover of €446 million (£389 million) in 2012 and a cap on the Green Fund spending, of €360 million (£314 million) in 2012;

•

the Government will also move to final adoption of some measures, already included in the Medium Term Fiscal Strategy, which require ministerial decisions;

•

these include excise duties on energy, regulation on health benefits, labour reserve and centralising non-viable public sector entities;

•

progress has been made on this structural reforms, though in some cases more slowly than planned;

•

reforms to tax administration, aimed at improving the efficiency of tax administration and controls, improving project management and developing an anti-evasion strategy, have been legislated for and adopted by Parliament;

•

structural reforms to budgetary institutions are also progressing with the reorganisation of the General Accounting Office;

•

progress has been made in ensuring timely provision of fiscal data, although quality and scope need to improve further, fiscal management on the expenditure side also needs to improve and while publication of data on arrears is now an established feature of the fiscal statistics in Greece, improvements in the timeliness of data are necessary;

•

important steps have been made in implementing the privatisation programme, with the creation of a professionally managed privatisation fund;


171

•

however, due to delays in the preparation of the assets for privatisation, and to some extent the worsened market conditions, revenues in 2011 will be lower than expected; and

•

the Government, however, remains committed to the overall revenue target of €35 billion (£30.6 billion) by the end of 2014 and €50 billion (£43.7 billion) by end of 2015.

24.9 The Commission concludes that, that despite the fiscal slippages in 2011, Greece is taking the necessary actions to implement the policies that would put an end to the excessive deficit by 2014, as required by the Council Decision of 12 July 2011. 24.10 In the light of the Commission Communication, the Council is recommended to amend its Decision of 12 July 2011, as in document (a). The provisions include: •

measures to be taken without delay, such as a law to freeze the indexation of main and supplementary pensions through 2015, transfer to the privatisation fund of a number of assets, including shares of Greek banks, and appointment of legal, technical and financial advisors for the privatisations planned until end-2012;

•

measures for adoption by the end of December 2011, such as a budget for 2012 in line with the Medium Term Fiscal Strategy targets and the Council Decision’s deficit ceilings, a more streamlined and effective public service and a substantial reform of the taxation system;

•

measures for adoption by the end of March 2012, including advancing the functional review of social programmes and some health and pharmaceutical measures, including extending e-prescription for both the national health service and contracted health providers; and

•

measures for adoption by the end of June 2012 including preparing measures for adoption in the 2012 and 2013 budgets and a comprehensive review of public expenditure programmes, focussing on pensions and social transfers, reducing defence spending, restructuring central and local administration and further rationalisation of the healthcare system.

24.11 Additionally, under the new Decision: •

the current deadline for the correction of the excessive deficit, 2014, would remain;

•

quarterly reviews of Greece’s progress would continue;

•

the Commission and the Council would assess reports submitted by the Greek Government on measures taken to comply with the new Decision; and

•

the Commission could continue to indicate other measures needed to fulfil the targets set out in the Decision.

The Government’s view 24.12 The Financial Secretary to the Treasury (Mr Mark Hoban) first says that:

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•

the Government’s position on Greece has been to welcome the decision by the eurozone on 26 October 2011 on a second programme for Greece, including harder debt restructuring of Greece’s debt through private sector involvement and a clear commitment to bring Greece’s debt onto a more sustainable level;

•

as regards the recent events, the Government made clear that, while Greece has to make its own decisions, it is important that all parties ultimately stick to the deal agreed in October 2011; and

•

this is a very important part of recovery — not just in the eurozone, but for the whole world, including the UK.

24.13 The Minister comments that the Commission Communication, document (b), does not have any direct policy implications for the UK — however the Government will be monitoring the situation closely as this issue is of importance to all Member States. He says that the Government broadly agrees with the Commission’s assessment. 24.14 The Minister also says that there are no direct financial implications for the UK arising from either of documents. But he adds that: •

on 10 May 2010 the General Affairs Council took note of the conclusions of the Member States, adopted on 5 May 2010, that “Member States whose currency is the euro have decided to provide stability support to Greece in an intergovernmental framework via pooled bilateral loans. The EU Member States entrust the Commission with the tasks in relation to the coordination and management of the stability support set out in an inter-creditor agreement to be concluded by the euro area Member States providing the support” — as the UK is not in the eurozone there are no financial implications arising from these loans to the UK;

•

the IMF will follow normal procedures in financing its stand-by arrangement with Greece, subject to Greece meeting the required conditions — the IMF borrows resources from its members to finance its ongoing lending operations, contributions are drawn widely across members’ “quota subscriptions” to the IMF as well as through bilateral loans and the UK participates in these arrangements along with other IMF members;

•

UK loans to the IMF are held as part of the Official Reserves and do not add to public sector net debt as they are treated as financial assets; and

•

there are a number of safeguards to protect UK contributions to the IMF — these include the conditions attached to IMF programmes, the IMF’s provision of support through installments and the IMF’s status as a preferred creditor.

Conclusion 24.15 We are grateful to the Minister for the information he gives us about these developments in relation to Greece’s fiscal situation and clear the documents from scrutiny.


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25 Justice and home affairs cooperation with the Eastern Partnership (33181) 14864/11 COM(11) 564

Commission Communication: Cooperation in the Area of Justice and Home Affairs within the Eastern Partnership

Legal base Document originated Deposited in Parliament Department Basis of consideration Previous Committee Report Committee’s assessment Committee’s decision

— 26 September 2011 3 October 2011 Home Office Minister’s letter of 22 November 2011 HC 428–xxxix (2010–12), chapter 5 (26 October 2011) Politically important Cleared; further information awaited

Background and previous scrutiny 25.1 The Eastern Partnership provides a multilateral framework for developing deeper political ties and economic integration between EU Member States, on the one hand, and Armenia, Azerbaijan, Belarus, Georgia, the Republic of Moldova and Ukraine (“the Eastern partners”) on the other. The Partnership is based on the principles of differentiation and conditionality. Partner countries which demonstrate a commitment to “the principles of international law and to fundamental values, including democracy, the rule of law and the respect for human rights and fundamental freedoms, as well as to market economy, sustainable development and good governance” 150 will have the opportunity to enter into comprehensive bilateral Association Agreements with the EU. 25.2 Deeper cooperation in the field of justice and home affairs (JHA) is likely to be a substantial component of future Association Agreements with the EU’s Eastern partners. The Communication therefore seeks to identify the principles which should guide JHA cooperation and suggests that mobility should feature as “a core objective” of the Eastern Partnership, with the long-term goal of establishing “a Common JHA space between the EU and its Eastern partners.” Our Forty-fourth Report provides a detailed description of the content of the Communication. 25.3 Whilst we recognised that enhanced political and operational cooperation in the JHA field could play an important role in promoting the rule of law, strengthening respect for fundamental rights, and preventing and combating serious and organised crime, we noted that the Communication also highlighted “major shortcomings” on fundamental issues such as judicial reform as well as worrying evidence on the incidence of human trafficking

150 See the Joint Declaration issued at the Prague Eastern Partnership Summit on 7 May 2009 — http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/er/107589.pdf.

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and other forms of serious cross-border criminality. Given these concerns, we asked the Government: •

whether it agreed that mobility should be considered a core objective of EU policy towards its Eastern partners; and

•

what the creation of a Common JHA Space would mean in practice and how easily this aspiration could be reconciled with the principles of differentiation and conditionality which are intended to underpin political and operational cooperation with each Eastern partner country.

25.4 We noted also that Stockholm Programme, in which the European Council sets out the EU’s priorities in the field of justice and home affairs for the period 2010–14, calls specifically for the establishment of a Human Rights Action Plan to ensure that the EU’s values — respect for human dignity, freedom, democracy, equality, the rule of law and respect for human rights — are adequately reflected and promoted in the EU’s external relations in the JHA field. 151 We asked the Government whether a Human Rights Plan had been developed and to provide us with a copy. We also highlighted the recent conviction of the former Ukrainian Prime Minister, Yulia Tymoshenko, following a trial which the EU’s High Representative described as “politically motivated”, 152 as illustrative of the fragility of the rule of law and respect for universal values in one of the EU’s key Eastern partners, and asked whether the Government was willing to endorse deeper political and operational cooperation with Ukraine, in light of recent events, and with other Eastern partners should they fall short of international human rights standards.

The Minister’s letter of 22 November 2011 25.5 The Parliamentary Under Secretary for Crime and Security (James Brokenshire) says that the reference in the Communication to the establishment of a Common JHA Space is intended to convey a long-term strategic vision for the Eastern partners, which contemplates “the fullest possible alignment of JHA legislation “to complement increased economic engagement. He continues: “Our eastern neighbours stand to benefit greatly from the Partnership framework, but HMG firmly endorses the underpinning principles of differentiation and conditionality. The degree to which these countries have addressed key requirements (such as promoting human rights and instilling the rule of law) has varied considerably to date. Any further advancement of practical cooperation will be strictly conditional on the progress made by each country on implementing tangible reforms. During the recent Eastern Partnership Summit in Warsaw (29–30 September), the Deputy Prime Minister conveyed the UK’s support for meaningful integration between the EUI and its Eastern neighbours, but emphasised that there can be no short cuts.”

151 See the Stockholm Programme, paragraph 7.2 — http://eurlex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2010:115:0001:0038:EN:PDF. 152 See Declaration by the High Representative Catherine Ashton on behalf of the EU, 11 October 2011 — http://www.consilium.europa.eu/uedocs/cms_Data/docs/pressdata/en/cfsp/125033.pdf.


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25.6 Notwithstanding the inclusion of enhanced mobility as a core objective of the Eastern Partnership, the Minister says that the Government “remain alert to the potential risks posed by illegal migration, human trafficking and other forms of serious cross-border criminality from the region.” He adds that the purpose of Mobility Partnerships is to ensure that the movement of persons is well-managed. 25.7 Turning to the establishment of a Human Rights Action Plan, the Minister tells us that the EU is in the early stages of developing a Human Rights Strategy. He says that “the UK has conveyed to the European External Action Service (EEAS) and the High Representative that we would like a robust and focussed strategy through which real results can be delivered on the ground” and that the FCO will be writing to us separately on this matter and providing a copy of the Strategy “in due course.” 25.8 He notes that EU Heads of Mission have recently agreed a comprehensive Human Rights Country Strategy for Ukraine which will be published once it has been formally approved by Member States. He continues: “This country-specific strategy identifies the top priorities for EU action on human rights and democracy in Ukraine, defines the key objectives to be pursued by the EU and describes the concrete activities to be carried out to attain these objectives. This useful tool will underpin our engagement with Ukraine which remains an important neighbour and a closer relationship with the EU will benefit all parties economically and in terms of mutual security. “However, we have already made it abundantly clear that deeper integration is dependent on Ukraine respecting the fundamental principles of democracy, human rights, fundamental freedoms and the rule of law. Signature and ratification of the EU-Ukraine Association Agreement (including a Deep and Comprehensive Free Trade Area) are in jeopardy if Ukraine does not take immediate action to demonstrate that it respects our core values. The UK has publicly condemned the sentencing of Yuliya Tymoshenko and detention of other opposition leaders in Ukraine. Such serious lapses in international human rights standards will continue to be challenged in the most robust manner.” 25.9 The Minister says that this broader political framework will condition bilateral operational cooperation between the UK Border Agency and Ukrainian authorities responsible for migration. He adds that UKBA has “shared experience with Ukrainian colleagues in managing migration flows and tackling the associated threats and signed a Declaration of Intention which emphasises the prevention of irregular migration and disruption of related criminal activities.” 25.10 In conclusion, the Minister states: “Addressing key JHA challenges may take time, but our Eastern partners will need ongoing political and operational support as they work to achieve democracy, prosperity and stability in the longer term.”

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Conclusion 25.11 We thank the Minister for his letter and for the information he has provided on recent developments with regard to Ukraine. 25.12 We remain unclear whether the Human Rights Strategy referred to by the Minister is the same as the Human Rights Action Plan envisaged in the Stockholm Programme which relates specifically to the external dimension of EU policies in the area of freedom, security and justice. If so, it is disappointing to note that, 18 months on from the elaboration of the Stockholm Programme, the EU is still only in the early stages of developing its Strategy/Action Plan. As our earlier Report noted, a comprehensive Human Rights Action Plan would seem to be an essential precursor to any more detailed policy document setting out concrete proposals for enhanced justice and home affairs cooperation with third countries. 25.13 We look forward to receiving further information on the content of the Strategy currently being developed by the EU. Meanwhile, we clear the Communication from scrutiny.

26 EU drugs policy (33289) 15983/11 COM(11) 689

Commission Communication: Towards a stronger European response to drugs


— 25 October 2011 28 October 2011 Home Office EM of 11 November 2011 None Presented to the JHA Council on 27 October 2011 Politically important Cleared

Background 26.1 The EU’s current Drugs Strategy will expire in 2012. It has been implemented by two successive Action Plans, the latest covering the period 2009–12. The Stockholm Programme, which establishes the EU’s priorities in the field of justice and home affairs from 2010–14, called for a detailed evaluation of the EU’s Drugs Action Plan for 2009–12 as the basis for developing a new EU Drugs Strategy from 2013 onwards. It stated that the new Strategy should be founded on three principles:


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•

improved coordination and cooperation both internally, within the EU, and externally, with source and transit countries for illicit drugs;

•

greater involvement of civil society; and

•

better access to reliable data.

26.2 The Commission expects to complete its evaluation by the end of 2011. Meanwhile, it has published a Communication which calls for “a strong and decisive” EU response to illicit drugs where EU action has “clear added value.” 153

The Commission Communication 26.3 The Communication sets out a range of possible EU measures, including legislative action, in the following areas: drug trafficking; drug precursors; the confiscation and recovery of criminal assets; new psychoactive substances; demand reduction; drugged driving; and international cooperation. The Commission believes that “swift, strong and effective” EU action is needed in order to “protect and improve the well-being of society and of the individual, to protect public health, to offer a high level of security for the general public and to take a balanced, integrated approach to the drugs problem.” 154 It invites the European Parliament, Council, civil society and other interested stakeholders to consider whether the measures it proposes in its Communication provide an effective EU response. Drug trafficking 26.4 The Commission describes drug trafficking as one of the biggest cross-border law enforcement challenges confronting the EU but says that existing EU legislation — a 2004 Framework Decision establishing minimum rules on the constituent elements of offences linked to drug trafficking and on penalties — is inadequate. According to the Commission, the Framework Decision has “scarcely led to any alignment of national measures in the fight against drug trafficking.”155 It therefore suggests that new EU legislation is needed to ensure closer approximation of drug trafficking offences and sanctions which, in turn, should strengthen trust between Member States’ judicial authorities and enhance crossborder cooperation. The new EU law would: •

target major cross-border drug trafficking and organised criminal networks and “explore” minimum common aggravating or mitigating circumstances;

•

strengthen the definition of offences and sanctions; and

•

include stronger reporting obligations for Member States on their implementing legislation and its practical impact.

153 See p. 3 of the Communication. 154 See p. 10 of the Communication. 155 See p. 4 of the Communication.

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26.5 In addition, the Commission highlights the need for more reliable data on the illicit drugs markets. It says that it will develop “key indicators” for monitoring drug markets, drug-related crime and drug supply reduction. Drug precursors 26.6 Drug precursors are chemicals which have legitimate industrial applications but which may also be used to make illicit drugs or psychoactive substances. Existing EU legislation provides for the control and monitoring within the EU of certain chemical substances which are most likely to be used as drug precursors, as well as the monitoring of trade between the EU and third countries. The Commission suggests that these rules should be strengthened and says that it is “currently assessing the impacts of several policy options, with the aim of presenting legislative proposals to increase the efficiency of rules preventing illicit diversion, while allowing legitimate trade in precursors without excessive administrative burden.” 156 26.7 In addition, the Commission highlights its efforts to conclude an agreement with Russia to prevent the diversion of drug precursors and indicates that it will seek to strengthen international cooperation, especially with Latin American countries and with China. Confiscation and recovery of criminal assets 26.8 The Commission emphasises the importance of tracing, freezing, seizing and confiscating the proceeds of crime and says that existing EU laws have not been effective enough. It therefore intends to propose new, stronger EU legislation on the confiscation and recovery of criminal assets, which will be based on harmonised minimum rules, and on the mutual recognition of freezing and confiscation orders. The Commission will also review the EU’s anti-money laundering legislation and consider ways in which it can be strengthened. New psychoactive substances 26.9 The Commission highlights the dramatic increase in the number of new psychoactive substances which mimic the effects of illicit drugs. Although there is an existing EU procedure to report the emergence of new psychoactive substances and, following an EUlevel risk assessment, to classify them as illicit drugs, the Commission suggests that it is too cumbersome and reactive to deal effectively with such a highly innovative and adaptable market. It says that stronger EU legislation is needed to improve the monitoring and risk assessment of new psychoactive substances, to respond more quickly where there is an immediate health risk, and to ensure that there is a better alignment of laws in the field of drug control, product and food safety, consumer protection and medicines which may apply to new psychoactive substances.

156 See pp. 5–6 of the Communication.


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Demand reduction 26.10 Demand reduction covers a wide range of measures from prevention to treatment, rehabilitation and social reintegration. The effectiveness of EU interventions in these areas have so far been limited, with the Commission highlighting continuing major differences in the coverage and quality of drug-related services across the EU. It says that it will collaborate with the European Monitoring Centre for Drugs and Drug Addiction (EMCDDA), Member States and practitioners involved in drug-related services in order to develop minimum quality standards on drug prevention, treatment and harm reduction. 26.11 In addition, the Commission advocates EU action to support and promote measures which seek to reduce health and social harms associated with drug dependence. These might include educational programmes to discourage young people from taking up drugs, early intervention to prevent addiction, action to prevent and control infections amongst those injecting drugs, and rehabilitation and reintegration programmes. Drugged driving 26.12 The Commission says that it is considering possible EU action to address the adverse effects of driving under the influence of illicit drugs or psychoactive substances in order to improve road safety. EU measures might include ways of improving the reliability of roadside testing devices or the provision of appropriate training support for road traffic officers. International cooperation 26.13 The Commission suggests that a stronger EU response to illicit drugs will necessitate deeper EU engagement with neighbouring countries, strategic partners and countries along the two principal drugs routes into the EU (from Latin America via West Africa and from Afghanistan via the Western Balkans or Central Asia). This enhanced engagement should be based on “a balanced and comprehensive approach with full respect for human rights.” 157 It would include law enforcement cooperation and capacity building to help third countries tackle drug trafficking and abuse, as well as demand reduction measures in countries of origin and transit.

The Government’s view 26.14 The Minister of State for Crime Prevention and Anti-Social Behaviour Reduction (Lord Henley) notes that Article 168 of the Treaty on the Functioning of the European Union (TFEU) makes provision for the EU to complement action taken by the Member States to reduce drugs-related health damage, including information and prevention. He adds that proposed EU legislative measures on the criminal elements of drug trafficking, new psychoactive substances, money laundering and the confiscation and recovery of criminal assets are likely to be based on Articles in Title V of Part Three of the TFEU and will therefore be subject to the UK’s Title V opt-in Protocol.

157 See p. 9 of the Communication.

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26.15 The Minister broadly supports the action proposed in the Communication, commenting: “As the drugs trade crosses EU borders and relies on the sharing of intelligence and cross-EU enforcement cooperation, EU action in this area is very important.” 158 He adds, however, that future legislative proposals will require careful examination to ensure that they comply with the subsidiarity principle. 26.16 The Minister highlights the Government’s concern regarding the rapid emergence of new psychoactive substances and supports “greater discussion and cooperation on this issue at a European level in order to share experience, intelligence and best practice.” 159 26.17 The Minister questions the Commission’s assessment that the 2004 Framework Decision on drug trafficking has produced no real alignment in Member States’ laws but accepts that there is scope to strengthen compliance in some Member States. He agrees with the Commission’s analysis of the weaknesses in existing EU procedures to tackle new psychoactive substances and believes that they need to be improved to allow swift and effective action at EU level. 26.18 The Minister agrees that there is a need to maintain “a proportionate control” on the movement of drug precursors in order to minimise the diversion of chemicals from the licit to the illicit market. He expresses a degree of caution regarding possible EU action on the confiscation and recovery of criminal assets and the mutual recognition of freezing and confiscation orders on the basis that the UK “already has robust and wide-ranging proceeds of crime and money laundering legislation that provides for cooperation across Member States.” 160 26.19 The Minister notes that the Financial Action Task Force (FATF) will be proposing changes to global standards to counter money laundering and terrorist financing in February 2012 and that these revised standards will therefore need to be reflected in any proposals to amend existing EU legislation on money laundering. 26.20 The Minister expects the Commission to publish the legislative proposals outlined in the Communication during the course of 2012, followed by minimum quality standards on drug prevention, treatment and harm reduction and a set of key indicators for monitoring the drugs market in 2013.

Conclusion 26.21 The Communication sets out the Commission’s initial thinking on the future direction of EU drugs policy. It advocates a more visible and muscular EU approach to the multifaceted challenges presented by the trade in, and trafficking and consumption of, illicit drugs or psychoactive substances, with particular emphasis on the strengthening of existing EU laws and the possible introduction of new EU legislation.

158 See para 19 of the Minister’s Explanatory Memorandum. 159 See para 20 of the Minister’s Explanatory Memorandum. 160 See para 28 of the Minister’s Explanatory Memorandum.


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26.22 The Communication provides little information, at this stage, on the detailed content of future legislative proposals and, whilst we think that it merits a Report to the House because of its political importance, we are content to clear the document from scrutiny. In so doing, we agree with the Government that each new measure based on the Communication will require careful examination to ensure that it complies with the principle of subsidiarity and with the limitations placed on EU action in the EU Treaties.

27 Free movement of workers from Bulgaria and Romania (33375) 16923/11 COM(11) 729

Commission Report to the Council on the Functioning of the Transitional Arrangements on Free Movement of Workers from Bulgaria and Romania

+ ADD 1

Commission Staff Working Paper


— 11 November 2011 18 November 2011 Home Office EM of 29 November 2011 and Minister’s letter of 23 November 2011 None No date set Politically important Cleared; further information requested

Background 27.1 The 2005 Act of Accession setting out detailed arrangements for the accession of Bulgaria and Romania (“the EU-2”) to the European Union includes transitional provisions on the free movement of persons which enable Member States to impose temporary restrictions on access by Bulgarian and Romanian workers (“EU-2 workers”) to their labour markets. The restrictions may be imposed for up to seven years from the date of accession — 1 January 2007 — and are divided into three distinct phases: •

for an initial two year period, Member States may continue to apply their national laws on access to their labour markets (phase 1);

•

Member States may extend the application of their national laws for a further three years (phase 2), provided they have notified their intention to do so before the end of phase 1; and

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•

where a Member State has notified the Commission that the lifting of national restrictions would result in “serious disturbances of its labour market or threat thereof”, it may continue to apply its national laws until the end of the seven year transitional period (phase 3). 161

27.2 The Council reviewed the application of the transitional provisions on the free movement of persons in December 2008, shortly before the expiry of phase 1. Bulgaria and Romania are each entitled to request one further review before the transitional provisions cease to apply, on 31 December 2013. Both decided to exercise their right to request a review in June 2011. The review must be completed within six months of their request and will be based on a report produced by the Commission.

The Commission Report 27.3 The purpose of the Commission’s Report is to provide the evidence base necessary to enable the Council to conduct its review of the functioning of the transitional provisions described above. The Report considers the existing restrictions on labour market access for EU-2 workers as well as the scope for applying the phase 3 transitional arrangements. It then provides an assessment of the extent of labour mobility within the EU by EU-2 workers and its impact on both sending and receiving countries. Much of the data focus on the impact in the 15 Member States (“the EU-15”) which belonged to the EU before the “big bang” enlargement in 2004. Existing restrictions on labour market access 27.4 The Report notes that Bulgarian and, until recently, Romanian workers have free access to the labour markets of 15 Member States. In August 2011, Spain invoked a safeguard clause enabling it to re-introduce restrictions for Romanian workers until 31 December 2012 because of its concern that unrestricted labour market access might seriously threaten levels of employment. 162 27.5 The Commission states that free movement is a fundamental freedom guaranteed by EU law and that any derogation must be interpreted strictly. Although the Commission’s approval is not needed to maintain national restrictions on labour market access during phase 3 — from 1 January 2012 to 31 December 2013 — it says that Member States must nevertheless demonstrate that free access would create an actual or potential “serious disturbance” to their labour markets. This must be backed up with “data and convincing arguments . . . that goes beyond simply citing the unemployment rate.” 163 The extent of labour mobility 27.6 The Report draws on data from the EU’s Labour Force Survey for 2010 and academic studies to estimate the number of EU-2 nationals resident in other Member States, the

161 See Article 23 of the Act of Accession and Annexes VI and VII. 162 Apart from Spain, the other Member States which have lifted restrictions are the Czech Republic, Denmark, Estonia, Greece, Cyprus, Latvia, Lithuania, Hungary, Poland, Portugal, Slovenia, Slovakia, Finland and Sweden. 163 See p. 5, para 1.5 of the Report.


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main destination countries, trends in mobility flows, and the impact of transitional arrangements on mobility. The data suggest that: •

around 2.9 million EU-2 nationals of all ages were resident in other Member States at the end of 2010 (up from 1.4 million just before accession at the end of 2006), representing 0.6% of the total population of those States;

•

Italy and Spain were the main destination countries, together accounting for 70% of all EU-2 nationals resident in another Member State;

•

Romanians constituted the largest group of working-age citizens living in another Member State in 2010 (at 27%), followed by Poles (21%);

•

since accession, around 3.1% of the Romanian working age population and 2.1% of the equivalent Bulgarian population have moved to other Member States, but the data indicate that labour mobility was already significant before 2007;

•

intra-EU mobility flows follow trends within the economy, peaking during periods of strong economic growth and dropping significantly with the onset of the economic and financial crisis and the reduction in labour demand; and

•

the impact of opening labour markets to EU-2 workers at a relatively early stage has been very limited, whereas Member States which continue to apply transitional measures have experienced significant inflows.

27.7 The Commission concludes that restrictions on labour market access have “only had a limited influence on the distribution of intra-EU mobility and that mobility flows are driven by other factors, such as general labour demand, network effects through existing foreign population and language.”164 It says that there is no evidence of a direct link between the scale of EU-2 labour flows and the transitional arrangements put in place to restrict access. Possible reasons include the prevalence of undeclared work in those Member States imposing restrictions, as well as the relatively high share of self-employed Bulgarians and Romanians to whom labour market restrictions do not apply. The main characteristics of mobile workers 27.8 The Commission notes that 85% of Bulgarians and Romanians living in another Member State are of working age (15–64), of which 62% are under the age of 35. Most are low or medium-skilled workers, with only 14% qualifying as highly-skilled. Although their employment rate generally compares favourably to the average employment rate in the main destination countries, low skills levels mean that they have been badly affected by economic recession. Economic and labour market impacts 27.9 The Report cites a number of studies which indicate that EU-2 labour mobility has had an overall positive (albeit modest) impact on aggregate GDP in the EU and moderate

164 See p. 8, para 2.4 of the Report.

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effects on GDP per capita. The significant outflows of EU-2 nationals have had a negative impact on GDP in Bulgaria and Romania, although this has been partially off-set by increased remittances representing around 3% of GDP in both countries. 27.10 The Commission says that “there is no evidence of a disproportionate use of benefits” by mobile EU-2 nationals, but that mobility flows have in some cases placed a strain on education, housing and health care services at a local level. 165 Recent studies indicate that the impact on public finances in receiving countries is “negligible or positive at national level.”166 Moreover, the impact of EU-2 labour mobility on wages and the employment of local workers is also considered to be marginal, depressing wages by an average of 0.24% and increasing the average unemployment rate in the EU by around 0.02%. The Commission acknowledges, however, that the impact may well be greater in certain sectors or skills groups. 27.11 Overall, the Commission suggests that mobile EU-2 workers have “played a very minor role in the labour market crisis of individual countries,” adding that they accounted for only 1% of all unemployed people in the EU-15, as compared to 4.1% of recently arrived third country nationals. 167 It says that EU-2 labour mobility is unlikely to create a brain drain in Bulgaria and Romania as the proportion of highly skilled workers seeking employment in other Member States is relatively low, but some impact may be felt in certain sectors, notably health. The Commission suggests that the migration of EU-2 nationals may well have peaked, as those who wanted to move have already done so. It believes that, with the possible exception of Italy and Spain, EU-2 labour mobility has not led to serious labour market disturbances. It says that, where these exist, they are attributable to other factors, such as the economic crisis and structural labour market problems. 27.12 In conclusion, the Commission asserts that “restricting the free movement of workers is not the answer to high unemployment in Europe.” It continues: “The freedom of movement of workers is one of the fundamental freedoms of EU law. It makes a positive contribution to labour markets throughout Europe and therefore is a key element of the Europe 2020 Strategy to which all Member States have subscribed. It is a powerful and positive symbol of what Europe means for the individual EU citizen.” 168

The Government’s view 27.13 The Minister for Immigration (Damian Green) explains that the Accession (Immigration and Worker Authorisation) Regulations 2006, and subsequent amending Regulations, impose restrictions on the access of EU-2 nationals to the UK’s labour market. He continues:

165 See p. 10, para 4.2 of the Report. 166 Ibid. 167 See p. 11, para 4.4 of the Report. 168 See p. 13, para 5 of the Report.


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“Their effect is to restrict EU-2 nationals’ employment to skilled work, which may be subject to a labour market test, for the first 12 months of their employment in the UK. There are also specific quota-based arrangements under which EU-2 nationals may access lower skilled employment in the agricultural and food processing sectors.” 169 27.14 The Minister notes that the UK is entitled to extend these restrictions to the end of 2013 if it considers that their removal presents an actual or potential risk of serious disturbance to the UK labour market. He says that “labour market conditions, and the extent to which they are affected by migration, are very uncertain in the current economic circumstances.” 170 The Government has therefore sought advice from the independent Migration Advisory Committee (MAC) on the labour market grounds for extending the existing restrictions. The Minister continues: “The MAC’s findings, published on 4 November, are that, on the basis of the indicators of labour market performance which it has used, the UK labour market is currently in a state of serious disturbance and that lifting the current restrictions at this stage would risk negative impacts on the labour market.” 171 27.15 The Minister believes that the MAC’s report provides the required standard of evidence and argument requested by the Commission to justify the retention of labour market restrictions. He adds that the Government announced in a Written Ministerial Statement of 23 November that the UK’s current market restrictions are a proportionate means of addressing any disturbance and that they will remain in place until the end of 2013.

The Minister’s letter of 23 November 2011 27.16 The Minister’s letter informs us of the Government’s decision to maintain labour market restrictions for EU-2 nationals until the end of 2013.

Conclusion 27.17 The Commission Report draws on a number of academic studies, as well as data from the EU’s Labour Force Survey, in an attempt to provide an overall assessment of the impact of EU-2 labour mobility on Bulgaria and Romania and on other Member States. The Report tends to support the Government’s view that “labour market conditions, and the extent to which they are affected by migration, are very uncertain in the current economic circumstances.” Whereas the Commission, however, concludes that “there is no evidence of a direct link between the magnitude of labour flows from EU-2 Member States and the transitional arrangements in place”, the Minister’s Written Ministerial Statement draws a different conclusion. It says that, because of the uncertainty, “the Government are firmly of the view that transitional measures are

169 See para 15 of the Minister’s Explanatory Memorandum. 170 See para 16 of the Minister’s Explanatory Memorandum. 171 See para 17 of the Minister’s Explanatory Memorandum.

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required to mitigate the impacts of labour migration when countries newly accede to the EU.” 27.18 We note that the Report will be submitted for consideration by the Council, as part of its review of the functioning of the transitional provisions on free movement, and that the Commission has no power to prevent Member States from maintaining restrictions on EU-2 access to their national labour markets, in accordance with the procedures set out in the Act of Accession. We therefore see no need to hold the Report under scrutiny but, in clearing it, ask the Minister to inform us of the outcome of the Council’s review.


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28 Documents not raising questions of sufficient legal or political importance to warrant a substantive report to the House Department for Business, Innovation and Skills (33317) 16318/11 COM(11) 685

Commission Communication: “Responsible Business” package.

(33318) 16473/11 + ADD 1 COM(11) 693

22nd Annual Report from the Commission on Implementation of the Structural Funds (2010).

(33320) 16337/11 COM(11) 716

Draft Council Decision on a European Union position concerning the decision by the WTO General Council on the extension of the WTO waiver in order to implement the EU autonomous trade preferential regime for the Western Balkans.

(33347) 16726/11 COM(11) 704

Draft Regulation amending Regulation (EC) No. 428/2009 setting up a Community Regime for the control of exports, transfer, brokering and transit of dual use items.

(33348) 16758/11 COM(11) 726

Draft Council Decision on the signing, on behalf of the European Union, and provisional application of, the Agreement in the form of an Exchange of Letters between the European Union and the Russian Federation relating to the administration of tariff-rate quotas applying to exports of wood from the Russian Federation to the European Union and the Protocol between the European Union and the Government of the Russian Federation on technical modalities pursuant to that Agreement.

(33349) 16770/11 COM(11) 715

Draft Regulation repealing Council Regulation (EC) No 1342/2007 on administering certain restrictions on imports of certain steel products from the Russian Federation.

(33350) 16771/11 COM(11) 722

Draft Council Decision on the conclusion, on behalf of the European Union, of the Agreement in the form of an Exchange of Letters between the European Union and the Russian Federation relating to the administration of tariff-rate quotas applying to exports of wood from the Russian Federation to the European Union and the Protocol between the European Union and the Government of the Russian Federation on technical modalities pursuant to that Agreement.

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(33352) 16800/11 COM(11) 723

Draft Council Decision on the signing, on behalf of the European Union, and provisional application, of the Agreement between the European Union and the Government of the Russian Federation on trade in parts and components of motor vehicles between the European Union and the Russian Federation.

(33353) 16803/11 COM(11) 725

Draft Council Decision on the conclusion, on behalf of the European Union, of the Agreement between the European Union and the Government of the Russian Federation on trade in parts and components of motor vehicles between the European Union and the Russian Federation.

(33356) 16821/11 COM(11) 728

Draft Council Decision on the signing, on behalf of the European Union, and provisional application of the Agreement in the form of an Exchange of Letters between the European Union and the Russian Federation regarding the introduction or increase by the Russian Federation of export duties on raw materials.

(33357) 16824/11 COM(11) 727

Draft Council Decision on the conclusion, on behalf of the European Union, of the Agreement in the form of an Exchange of Letters between the European Union and the Russian Federation regarding the introduction or increase by the Russian Federation of export duties on raw materials.

Department for Energy and Climate Change (33346) 16717/11 SEC(11) 1330

Draft Council decision on the position to be taken by the European Union in the EEA Joint Committee concerning an amendment to Annex IV (Energy) to the EEA Agreement.

Department for Environment, Food and Rural Affairs (33221) 15357/11 + ADD 1 COM(11) 639

Second Interim Commission Report on the implementation of the remote sensing applications and on the use of the financial resources made available to it under Council Regulation (EC) No.78/2008.

(33377) 16953/11 COM(11) 744

Draft Regulation on fixing for the 2012 fishing year the guide prices and Union producer prices for certain fishery products pursuant to Regulation (EC) No.104/2000.

(33457) 17396/11 COM(11) 799

Draft Regulation fixing for 2012 the fishing opportunities for certain fish stocks and groups of fish stocks applicable in the Black Sea.


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Foreign and Commonwealth Office (33344) 11952/11 COM(11) 719

Joint draft Regulation amending Council Regulation (EU) No 1284/2009 imposing certain specific restrictive measures in respect of the Republic of Guinea.

(33471) — —

Council Decision concerning the temporary reception by Member States of the European Union of certain Palestinians.

Department for Work and Pensions (33378) 16954/11 COM(11) 708

Draft Council Directive amending Directive 98/8/EC of the European Parliament and of the Council to include flufenoxuron as an active substance for product-type 8 in Annex I thereto.

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Formal minutes Wednesday 7 December 2011 Members present: Mr William Cash, in the Chair Mr James Clappison Michael Connarty Nia Griffith

Chris Kelly Henry Smith

1. Scrutiny of Documents The Committee deliberated. Draft Report, proposed by the Chair, brought up and read. Ordered, That the draft Report be read a second time, paragraph by paragraph. Paragraphs 1.1 to 9.10 read and agreed to. Paragraph 9.11 read, amended and agreed to. Paragraph 9.12 read, amended and agreed to. Paragraph 9.13 read, amended and agreed to. Paragraph 9.14 read, amended and agreed to. Paragraphs 10.1 to 20.33 read and agreed to. Paragraph 20.34 read, amended and agreed to. Paragraphs 21.1 to 22.68 read and agreed to. Paragraph 22.69 read, amended and agreed to. Paragraphs 23.1 to 28 read and agreed to. Resolved, That the Report be the Forty-eighth Report of the Committee to the House. Ordered, That the Chair make the Report to the House. 2. Scrutiny of Pre-Council Written Ministerial Statements The Committee considered Pre-Council Ministerial Statements. ************ [Adjourned till Wednesday 14 December at 2.00 pm.


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Standing Order and membership The European Scrutiny Committee is appointed under Standing Order No.143 to examine European Union documents and— a)

to report its opinion on the legal and political importance of each such document and, where it considers appropriate, to report also on the reasons for its opinion and on any matters of principle, policy or law which may be affected;

b)

to make recommendations for the further consideration of any such document pursuant to Standing Order No. 119 (European Committees); and

c)

to consider any issue arising upon any such document or group of documents, or related matters.

The expression “European Union document” covers — i)

any proposal under the Community Treaties for legislation by the Council or the Council acting jointly with the European Parliament;

ii)

any document which is published for submission to the European Council, the Council or the European Central Bank;

iii) any proposal for a common strategy, a joint action or a common position under Title V of the Treaty on European Union which is prepared for submission to the Council or to the European Council; iv) v)

any proposal for a common position, framework decision, decision or a convention under Title VI of the Treaty on European Union which is prepared for submission to the Council; any document (not falling within (ii), (iii) or (iv) above) which is published by one Union institution for or with a view to submission to another Union institution and which does not relate exclusively to consideration of any proposal for legislation;

vi)

any other document relating to European Union matters deposited in the House by a Minister of the Crown.

The Committee’s powers are set out in Standing Order No. 143. The scrutiny reserve resolution, passed by the House, provides that Ministers should not give agreement to EU proposals which have not been cleared by the European Scrutiny Committee, or on which, when they have been recommended by the Committee for debate, the House has not yet agreed a resolution. The scrutiny reserve resolution is printed with the House’s Standing Orders, which are available at www.parliament.uk.

Current membership Mr William Cash MP (Conservative, Stone) (Chair) Mr James Clappison MP (Conservative, Hertsmere) Michael Connarty MP (Labour, Linlithgow and East Falkirk) Jim Dobbin MP (Labour/Co-op, Heywood and Middleton) Julie Elliott MP (Labour, Sunderland Central) Tim Farron MP (Liberal Democrat, Westmorland and Lonsdale) Nia Griffith MP (Labour, Llanelli) Chris Heaton-Harris MP (Conservative, Daventry) Kelvin Hopkins MP (Labour, Luton North) Chris Kelly MP (Conservative, Dudley South) Penny Mordaunt MP (Conservative, Portsmouth North) Sandra Osborne MP (Labour, Ayr, Carrick and Cumnock) Stephen Phillips MP (Conservative, Sleaford and North Hykeham) Jacob Rees-Mogg MP (Conservative, North East Somerset) Henry Smith MP (Conservative, Crawley) Ian Swales MP (Liberal Democrat, Redcar)