House of Commons European Scrutiny Committee Twenty-eighth Report of Session 2014–15
Documents considered by the Committee on 7 January 2015, including the following recommendations for debate: Ukraine and Russia: EU restrictive measures
Value added taxation
European Semester
HC 219-xxvii
House of Commons European Scrutiny Committee Twenty-eighth Report of Session 2014–15
Documents considered by the Committee on 7 January 2015, including the following recommendations for debate: Ukraine and Russia: EU restrictive measures
Value added taxation
European Semester
Report, together with formal minutes
Ordered by the House of Commons to be printed 7 January 2015
HC 219-xxvii Published on 16 January 2014 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 or JOIN 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 published in the House of Commons Vote Bundle each Monday, 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://europeanmemoranda.cabinetoffice.gov.uk/. Letters sent by Ministers to the Committee relating to European 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 Sarah Davies (Clerk), David Griffiths (Clerk Adviser), Terry Byrne (Clerk Adviser), Leigh Gibson (Clerk Adviser), Peter Harborne (Clerk Adviser), Arnold Ridout (Legal Adviser) (Counsel for European Legislation), Joanne Dee (Assistant Legal Adviser) (Assistant Counsel for European Legislation), Joanna Welham (Second Clerk), Julie Evans (Senior Committee Assistant), Jane Bliss and Beatrice Woods (Committee Assistants), Paula Saunderson and Ravi Abhayaratne (Office Support Assistants). Contacts All correspondence should be addressed to the Clerk of the European Scrutiny Committee, House of Commons, Telford House, 14 Tothill Street, London SW1H 9NB. The telephone number for general enquiries is (020) 7219 3292/5465. The Committee’s email address is [email protected]
European Scrutiny Committee, Twenty-eighth Report, Session 2014-15 1
Contents
Report Page
Meeting Summary 3
Documents for debate
1 BIS (36591) (36592) Ukraine and Russia: EU restrictive measures 5
2 HMT (33886) Value added taxation 11
3 HMT (36543) European Semester 18
Documents not cleared
4 DFID (34975) Food and Agriculture Organisation 23
5 FCO (34890) Free movement and public documents 26
6 FCO (36568) Restrictive measures against Iran: nuclear issues 33
7 HMT (35328) (36347) Financial services: benchmarks 39
8 HMT (35944) Financial services: occupational pension funds 42
9 HMT (36131) (36561) Financial management: investigations of fraud 46
10 HO (36329) (36328) Forced labour 50
11 ONS (35303) Statistics 54
Documents cleared
12 DFT (35896) Seafarers 56
13 FCO (36392) (36393) (36394) (36395) (36396) (36397) (36398) (36399) Enlargement Strategy and Main Challenges 2014–15 59
14 FCO (36572) The EU’s Special Representative (EUSR) to Bosnia and Herzegovina 67
Annex 1: Joint article by the Foreign Secretary and the German Foreign Minister published on 6 November 2014. 75
Annex 2: 15 December 2014 Foreign Affairs Council Conclusions on Bosnia and Herzegovina: 77
15 FCO (36579) EU training of Malian security forces 78
16 HMT (35062) Taxation 86
17 HO (36562) (36566) Repeal of obsolete EU police and criminal justice measures 89
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18 ONS (33844) Statistics 94
Documents not raising questions of sufficient legal or political importance to warrant a substantive report to the House
19 List of documents 98
Formal minutes 99
Standing Order and membership 100
European Scrutiny Committee, Twenty-eighth Report, Session 2014-15 3
Meeting Summary
The Committee considered the following documents: Ukraine and Russia: EU restrictive measures
The European Council has consistently said that it will not recognise the Russian annexation of Crimea, a position which the Government fully supports. Trade and investment bans were introduced in June and July 2014, which prohibited both the import of goods from Crimea and the investment in the development of infrastructure in the areas of transport, telecommunications or energy and export of listed key technologies for use in these sectors. New measures have now been proposed which extend some of the existing restrictions and place new prohibitions on acquiring real estate or providing services directly related to tourism in Crimea or Sevastopol. In his Explanatory Memorandum, the Minister recalls the Government’s view that the annexation of Crimea violates the UN Charter and is illegal under international law. Although these views are widely held, they are not universally supported; nor indeed is the EU’s approach to Ukraine and its relationship with Russia. We therefore recommend these new measures for debate on the floor of the House alongside the EU-Ukraine Association Agreement. The debate on this Agreement, which we recommended last October, has still not been scheduled, which we deplore.
Value added taxation This week we consider a proposal to amend the 2006 Principal VAT Directive, which consolidated the legislation governing valued added taxation in the EU, and lays down rules to ensure a consistent approach to the questions about how much VAT to charge, when it should be declared and to which jurisdiction the tax should be paid. This proposal would amend the Directive in order to clarify and harmonise the rules related to the VAT treatment of vouchers. We considered this proposal in September 2012 and, in noting its importance in relation to the efficacy of the EU’s VAT system, requested that the Government provide us with further information in due course. The Government has now provided us with a helpful update, but it remains unclear how further Council consideration will pan out. As a revised text of the draft Directive may go to the ECOFIN Council in the coming months, we recommend this document for debate in European Committee. This debate will provide members with the opportunity to explore the details of the proposed solutions to what is a complex problem and the possible consequences for UK businesses.
European Semester The annual European Semester is an EU-level framework for coordinating and assessing Member States’ structural reforms and fiscal/budgetary policy and for monitoring and addressing macroeconomic imbalances. An element of the European Semester is the Macroeconomic Imbalances Procedure, and as part of the first stage of this procedure, the Commission publishes an annual Alert Mechanism Report, which we consider this week. This Report discusses macroeconomic factors affecting the EU as a whole, presents short analyses of the macroeconomic situation of most Member States and says that the
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Commission will be conducting In Depth Reviews for 18 Member States, including the UK, during the first quarter of 2015. We recommend this document for debate in European Committee alongside three other documents, which we recommended for debate last month and which form the other element for the first stage of the European Semester: the Commission’s Annual Growth Survey, the draft Joint Employment Report, and the Autumn European Economic Forecast.
European Scrutiny Committee, Twenty-eighth Report, Session 2014-15 5
1 Ukraine and Russia: EU restrictive measures
Committee’s assessment Politically important Committee’s decision Not cleared from scrutiny; for debate on the Floor of the House together with the EU-Ukraine Association Agreement already recommended for debate
Document details Council Regulation on further restrictive measures in response to the illegal annexation of Crimea and Sevastopol Legal base Article 29 TEU; unanimity and Article 215 TFEU; QMV Department Business, Innovation and Skills Document numbers (36591), —; (36592), —
Summary and Committee’s conclusions 1.1 Following the annexation of Crimea and Sevastopol by the Russian Federation, the European Council has continued its policy of strict non-recognition, stating in its 23–24 October 2014 Conclusions that “the European Council reiterates that it will not recognize the illegal annexation of Crimea”.1 The Government has continued to support fully this policy. In line with this policy of non-recognition, the 17 November 2014 Foreign Affairs Council Conclusions stated that “the Council reiterates its commitment to fully implement its policy of non-recognition of the illegal annexation of Crimea and Sevastopol, including through further action within the context of this policy”.2 This was confirmed at the European Council on the 18–19 December: “The Union’s policy of not recognising the illegal annexation of Crimea and Sevastopol was further tightened today”.3
1.2 The existing trade and investment bans were introduced in Regulation (EU) No. 692/2014 in June 2014 (which prohibited the import of goods from Crimea) and Regulation (EU) No. 825/2014 in July (which prohibited investment in the development of infrastructure in the areas of transport, telecommunications or energy and export of listed key technologies for use in these sectors).
1.3 The new measures extend the existing restrictions on exports of goods and technologies related to the development of infrastructure, and investment and financing of entities in, and place new prohibitions on acquiring real estate in Crimea or Sevastopol and on the provision of services directly related to tourism in Crimea or Sevastopol. The Minister (Lord Livingston) says that the objective continues to be to make it more difficult for Russia to integrate the Crimean economy into the Russian economy and thus “to develop it rapidly into a showcase for its continuing interventionist policies in Ukraine and the annexation”. The Minister recalls the Government view that the annexation of Crimea violates the UN Charter and is illegal under international law, and notes its support for
1 See http://www.consilium.europa.eu/uedocs/cms_Data/docs/pressdata/en/ec/145397.pdf, para 18. 2 See http://eu-un.europa.eu/articles/en/article_15744_en.htm, para 8. 3 See http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/146411.pdf, paras 5 and 6.
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these additional measures, which he says “reflect a policy of strict non-recognition towards the annexation”. 1.4 Although widely-held, these views and the EU’s approach to Ukraine and its relationship with Russia are not universally supported. We therefore recommend that these measures be debated at the same time as the debate we have recommended on the floor of the House on the implementation of the EU-Ukraine Association Agreement.4 This will give the House the opportunity of which it has been deprived since we first made our recommendation, last October, for a floor of the House debate on the agreement that essentially sparked this crisis — to debate the EU’s, and thus the Government’s, approach, in Government time, and on the basis of a Government motion. 1.5 In the circumstances outlined by him below, and on this occasion, we do not object to the Minister having over-ridden scrutiny.
Full details of the documents: (a) Council Regulation (EU) No. 1351/2014 of 18 December 2014 amending Regulation (EU) No. 692/2014 concerning restrictive measures in response to the illegal annexation of Crimea and Sevastopol: (36591), —; (b) Council Decision 2014/933/CFSP of 18 December 2014 amending Decision 2014/386/CFSP concerning restrictive measures in response to the illegal annexation of Crimea and Sevastopol: (36592), —.
Background 1.6 The 21–22 March 2014 European Council meeting said (in paragraph 29 of the Council Conclusions):
“The European Union remains committed to uphold the sovereignty and territorial integrity of Ukraine. The European Council does not recognise the illegal referendum in Crimea, which is in clear violation of the Ukrainian Constitution. It strongly condemns the illegal annexation of Crimea and Sevastopol to the Russian Federation and will not recognise it. The European Council asks the Commission to evaluate the legal consequences of the annexation of Crimea and to propose economic, trade and financial restrictions regarding Crimea for rapid implementation.”5
1.7 Also relevant is Resolution 68/282 on the territorial integrity of Ukraine, which was adopted by the UN General Assembly on 27 March 2014, and which states:
“Noting that the referendum held in the Autonomous Republic of Crimea and the city of Sevastopol on 16 March 2014 was not authorized by Ukraine,
“1. Affirms its commitment to the sovereignty, political independence, unity and territorial integrity of Ukraine within its internationally recognized borders;
4 See (36573),—; (36574), —: Twenty-seventh Report HC 219 xxvi (2014–15), chapter 12 (17 December 2014) and (36546), —; (36545) —: Twenty-seventh Report HC 219 xxvi (2014–15), chapter 11 (17 December 2014). 5 See http://www.consilium.europa.eu/uedocs/cms_Data/docs/pressdata/en/ec/141749.pdf.
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“2. Calls upon all States to desist and refrain from actions aimed at the partial or total disruption of the national unity and territorial integrity of Ukraine, including any attempts to modify Ukraine’s borders through the threat or use of force or other unlawful means; “3. Urges all parties to pursue immediately the peaceful resolution of the situation with respect to Ukraine through direct political dialogue, to exercise restraint, to refrain from unilateral actions and inflammatory rhetoric that may increase tensions and to engage fully with international mediation efforts; “4. Welcomes the efforts of the United Nations, the Organization for Security and Cooperation in Europe and other international and regional organizations to assist Ukraine in protecting the rights of all persons in Ukraine, including the rights of persons belonging to minorities; “5. Underscores that the referendum held in the Autonomous Republic of Crimea and the city of Sevastopol on 16 March 2014, having no validity, cannot form the basis for any alteration of the status of the Autonomous Republic of Crimea or of the city of Sevastopol; “6. Calls upon all States, international organizations and specialized agencies not to recognize any alteration of the status of the Autonomous Republic of Crimea and the city of Sevastopol on the basis of the above-mentioned referendum and to refrain from any action or dealing that might be interpreted as recognizing any such altered status.”6
1.8 First, prohibition on imports from Crimea and Sevastopol were enacted on 23 June 2014; then, on 30 July 2014, those measures were extended also to cover investment (granting of loans or credit, the acquisition or extension of a participation or a joint venture) by EU persons and enterprises in enterprises established in Crimea or Sevastopol that are engaged in the creation, acquisition or development of infrastructure in the areas of transport, telecommunications or energy. Investment in activity relating to the exploitation of oil, gas or mineral resources in Crimea or Sevastopol was also banned.
1.9 The Minister of State for Trade and Investment at the Department for Business, Innovation and Skills (Lord Livingston of Parkhead) explained that these measures gave the clear message that the EU viewed the annexation as invalid and that Crimea and Sevastopol remained part of Ukrainian sovereign territory.
1.10 The Minister also noted that (as with the earlier measures) the impact on the UK economy was expected to be negligible.
1.11 Given the continuing interest in the Ukraine crisis and the EU’s response to it, we drew the adoption of these measures to the attention of the House, and left it to interested Members to pursue any questions that they feel may arise via the many means at their disposal.7
6 See http://www.un.org/en/ga/search/view_doc.asp?symbol=A/RES/68/262 for the full text of the Resolution. 7 See Ninth Report HC 219–ix (2014–15), chapter 30 (3 September 2014).
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The Council Decision and Council Regulation 1.12 In his Explanatory Memorandum of 5 January 2015, the Minister (Lord Livingston) explains that the new measures additionally:
— prohibit acquiring real estate in Crimea or Sevastopol; — introduce a ban on providing services related to tourism activities, including in the maritime sector, in Crimea or Sevastopol;
— introduce a ban on providing technical, brokering, construction, or engineering services directly relating to infrastructure in Crimea and Sevastopol;
— provide that the existing ban on joint ventures and financing of entities in Crimea or Sevastopol is extended to cover any entity from Crimea or Sevastopol (previously this covered only entities from Crimea or Sevastopol involved in transport, telecommunications, energy, or oil/gas/mineral exploration or production); and
— extend the list of goods banned for supply to Crimea or Sevastopol, and for which the provision of brokering, technical or financial services is banned.
1.13 The Minister goes on to explain that these new measures allow authorities to make exemptions to the prohibitions when necessary for:
— official purposes of consular missions or international organisations;
— the support of medical or educational establishments;
— medical use; or — the urgent prevention or mitigation of an event likely to endanger human health and safety.
1.14 Finally, he notes that:
— the prohibitions on investments in Crimea and Sevastopol (including acquiring real estate) and the provision of services directly related to tourism in Crimea or Sevastopol will apply to all new contracts and investments, and will not affect existing investments or commitments in existing contracts concluded before 20 December;
— the prohibitions on the provision of certain listed goods and technologies, and the provision of technical, brokering, construction, or engineering services directly relating to infrastructure in Crimea and Sevastopol will not apply to the execution until 21 March 2015 of an obligation arising from a contract concluded before 20 December 2014.
The Government’s view 1.15 The Minister comments as follows:
“The EU does not and will not recognise the illegal annexation of Crimea by Russia. The UK Government supports this stance, and has been clear that it believes this
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violates the UN Charter and is illegal under international law. The UK Government has supported measures which reflect a policy of strict non-recognition towards the annexation. On 18 March 2014, the PM stated that ‘President Putin should be in no doubt that Russia will face more serious consequences [for its actions in Crimea]’, while the Foreign Secretary said that in response the UK would argue ‘for the strongest position and range of measures on which agreement can be obtained in the European Union’. “The latest measures build on the range of policy actions already taken by the EU to give effect to its policy of non-recognition of the annexation. As well as the existing investment and trade restrictions, the EU has also already imposed sanctions on a number of entities and individuals culpable of abetting the annexation, and a number of companies expropriated by Russia and Russian companies benefitting from the annexation. “These latest measures are designed to prohibit EU support to the sectors from which Russia seeks to profit from Crimea’s annexation. They are not targeted at the general public in Crimea or Sevastopol. It is the Russian Federation’s illegal actions that have led to these measures, and it bears responsibility for any impact on the people of Crimea. The objective is to make it more difficult for Russia to integrate the Crimean economy with the Russian economy and to develop it rapidly into a showcase for its continuing interventionist policies in Ukraine and the annexation.” 1.16 With regard to the economic impact on the UK, the Minister says:
“The impact on the UK economy is expected to be negligible: before the initial ‘Crimean Consequences’ were introduced, OECD data showed UK investment in Ukraine to be about £200 million in 2012, or about 0.01% of the UK’s outward stock of Foreign Direct Investment. A very small proportion of this may have been invested in Crimea and Sevastopol. Data from Ukrainian Customs shows that Ukrainian imports from the UK cleared through Crimea in 2013 amounted to US$ 643,370, 90% of which (US$ 579,400) was frozen fish products. During January to March 2014 no UK exports were cleared through Crimean customs.”
1.17 In a separate letter of the same date, the Minister says:
“The new measures extend the existing restrictions on exports to Crimea or Sevastopol of goods and technologies related to the development of infrastructure in Crimea, and investment and financing of entities in Crimea or Sevastopol. The new measures also place new prohibitions on acquiring real estate in Crimea or Sevastopol and on the provision of services directly related to tourism in Crimea or Sevastopol. “The objective of the extended measures (the ‘Crimean Consequences’) continues to be to make it more difficult for Russia to integrate the Crimean economy in to the Russian economy. The new measures are targeted towards sectors through which Russia seeks to profit from the annexation and is trying to develop Crimea into a showcase for its continuing interventionist policies in Ukraine. By complying with the extended measures, UK businesses can be certain that they are not inadvertently
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abetting Russia’s policy of annexation. The exemptions provided for within the new Regulation are designed to ensure that they are not targeted at the general public in Crimea or Sevastopol. The attached Explanatory Memorandum explains the issue in full.
“The introduction of these extended measures follows growing concern about developments in eastern Ukraine and on the Crimean peninsula, particularly the continuing persecution and intimidation of the Crimean Tatar community. It has been important that the EU sends a clear and immediate signal about the costs of Russia’s interventionist policies, and is able to do so in concert with our international partners. As a result, the European Council needed to agree the above Council Decision and Council Regulation at very short notice. Following a short period of discussion within Council working groups, final texts of the Regulation and Decision were shared with Member States on Wednesday 17th December, for approval via written procedure on 18th December. Furthermore, there was a necessity for the draft documents circulated during working group discussions to remain confidential during the rapid negotiating process. This meant that there was not an opportunity to seek scrutiny from the Parliamentary Committees.
“Therefore, I felt that I needed to override scrutiny on this occasion. Decisions relating to the crisis in Ukraine continue to have to be made in response to the fast changing situation on the ground. As a result, override of scrutiny has again been regrettably unavoidable, and I would like to thank your Committee for their understanding on this matter to date.”
Previous Committee Reports None; but see Ninth Report HC 219–ix (2014–15), chapter 30 (3 September 2014) and Eighth Report HC 219–viii (2014–15), chapter 10 (16 July 2014); also see First Report HC 219–i (2014–15), chapter 28 (4 June 2014); and also see (35905), — and (35906) — : Forty- seventh Report HC 83–xlii (2013–14), chapter 23 (30 April 2014) and Forty-fifth Report HC 83–xl (2013–14), chapter 5 (2 April 2014); also see (35880), — and (35881), —: Forty- fourth Report HC 83–xxxix (2013–14), chapter 3 (26 March 2014) and (35848), — and (35849), —: Fortieth Report HC 83–xxxvii (2013–14), chapter 1 (12 March 2014).
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2 Value added taxation
Committee’s assessment Politically important Committee’s decision Not cleared from scrutiny; for debate in European Committee B
Document details Draft Regulation concerning the VAT rules for vouchers Legal base Article 113 TFEU; consultation; unanimity Department HM Treasury Document numbers (33886), 9926/12 + ADDs 1–2, COM(12) 206
Summary and Committee’s conclusions 2.1 The 2006 Principal VAT Directive consolidated the legislation governing value added taxation in the EU. In order to ensure smooth operation of the single market and equal treatment for all businesses trading across the EU, the Directive lays down rules to ensure a consistent approach to the questions about how much VAT to charge, when it should be declared and to which tax jurisdiction the tax should be paid. However, vouchers can present difficulties in relation to all these questions.
2.2 In May 2012, after a lengthy period of consultations, the Commission issued this draft Directive to amend the Principal VAT Directive, in order to clarify and harmonise the rules on the VAT treatment of vouchers. 2.3 When in September 2012 we considered this proposal we said that, whilst the proposal concerned a relatively limited aspect of VAT matters, we recognised its importance in relation to the efficacy of the EU’s VAT system. We continued that we would wish therefore, in due course, to recommend the draft Directive for debate. However, we said that we would not make that recommendation until we had from the Government, at an appropriate moment, an account of the direction Council working party discussions were going and a consequent evolving assessment of the Government view of the consequences of the proposal.
2.4 The Government now tells us that:
• after several years of intermittent official level discussion, there is a possibility that the proposal will go to the ECOFIN Council for agreement in the coming months;
• the Council working party has examined a variety of alternative ideas of VAT treatment in this area, all of which the Government has discussed with UK businesses in order that the impact of any change could be properly represented;
• the draft Directive now concentrates on face value vouchers;
• there are advantages and disadvantages to the revised text;
• there is considerable support from Member States for an approach proposed by the Italian Presidency, but not all can agree; and
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• although some further changes to the text suggested by the Government to make it more acceptable to UK businesses were accepted in principle by the Italian Presidency, in the event others were reluctant to commit to significant change without a greater understanding of the impacts — as a result the Government has to wait to see what direction the Latvian Presidency will take with this work in the New Year.
2.5 The Government has given us a helpful summary of where matters stand on this proposal. However, it is not yet clear how further Council consideration will pan out. Nevertheless, given that a revised text of the draft Directive may go the ECOFIN Council soon we recommend that the debate in European Committee, which we have foreshadowed previously, should take place now. This debate will enable Members to explore the details of the proposed solutions to what is a complex problem and their possible consequences for UK businesses.
Full details of the documents: Draft Council Directive amending Directive 2006/112/EC on the common system of value added tax, as regards the treatment of vouchers: (33886), 9926/12 + ADDs 1–2, COM(12) 206.
Background 2.6 Council Directive 2006/112/EC, the Principal VAT Directive, which entered into force on 1 January 2007, consolidated the legislation governing value added taxation in the EU. In order to ensure smooth operation of the single market and equal treatment for all businesses trading across the EU, the Directive lays down rules to ensure a consistent approach to the questions about how much VAT to charge, when it should be declared and to which tax jurisdiction the tax should be paid.
2.7 However, vouchers can present difficulties in relation to all these questions:
• even though a voucher may permit a purchase at a set price, the voucher itself may be sold at a reduced price (or may be free);
• long distribution chains can disrupt the information flow, to the extent that the redeemer of a voucher may have no knowledge of how much has been paid for the voucher; and
• where vouchers are issued for consideration, some Member States define the taxable amount as the total received from the consumer, some the face value of the voucher and some the amount of the voucher attributed to a supply made to the consumer, allowing non-taxation where there is no use. 2.8 Increasing cross-border use of vouchers and cross-border distribution and the differences in treatment between Member States is one of the main causes of double or non-taxation. There is nothing in the existing VAT legislation that addresses this. Although a number of high profile cases have gone to the Court of Justice (for instance the Lebara case, (C-520/10)) and have given clarification in a number of transactions, implementation has not always been straightforward.
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2.9 In 2006 the Commission undertook a public consultation into Modernising the value added tax treatment of vouchers and related issues. For the purposes of the consultation the Commission described vouchers thus:
• a free voucher issued without charge, normally with the intention of promoting a product or service — discount vouchers and business gifts are a subcategory of free vouchers;
• a Single Purpose voucher (SPV) would in principle carry a right to receive goods or services identified at the outset and with the same VAT rate, or to obtain a discount when acquiring those goods or services or to receive a refund at the time of the redemption by an individual redeemer (with exceptions), inside the same Member State of issue; and
• a Multi-Purpose voucher (MPV) would be any medium, other than legal tender, which carries a right to receive goods or services, or to obtain a discount, when acquiring those goods or services or to receive a refund, at the time of the redemption.8 2.10 As a result of subsequent discussions with Member States, it was decided that an impact assessment was needed before a proposal for legislative changes was made. After extensive research, the assessment was completed in 2011 and in May 2012 the Commission issued this draft Directive to amend the Principal VAT Directive, in order to clarify and harmonise the rules on the VAT treatment of vouchers. 2.11 For the purpose of the draft Directive a voucher is an instrument (which may be in physical or electronic format) which gives entitlement to the holder and imposes corresponding obligations on the issuer. The holder’s entitlements are typically for goods or services or to receive a discount or a rebate in relation to a sale or a supply. The issuer assumes an obligation to supply goods or services, to give the discount or to pay the rebate. In defining a voucher in this way the draft Directive identifies it as an object in itself, which can itself be supplied. This means that the extensive distribution services in place for vouchers would be subject to VAT. But at the same time a system for vouchers needs to recognise that while VAT on any distribution service is captured there is only one payment for the underlying goods or services for which the voucher acts as evidence of the right to receive. Thus the draft Directive would have supplying of the right to receive as a supply and that subsequent supply viewed as a single transaction.
2.12 When in September 2012 we considered this draft Directive we said that, whilst the proposal concerned a relatively limited aspect of VAT matters, we recognised its importance in relation to the efficacy of the EU’s VAT system. We continued that we would wish therefore, in due course, to recommend the draft Directive for debate. However, we said that we would not make that recommendation until the Government was able to give us an account of the direction Council working group discussions were going and a consequent evolving assessment of the Government view of the consequences of the proposal. So we looked forward to hearing further from the Government at an
8 Summary report of the consultation.
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appropriate moment with this information. Meanwhile the document remained under scrutiny.
The Minister’s letter of 18 December 2014 2.13 The Financial Secretary to the Treasury (Mr David Gauke) writes now to update us on draft Directive, saying that:
• after several years of intermittent official level discussion, there is a possibility that the proposal will go to the ECOFIN Council for agreement in the coming months;
• this would be the first time the issue has come before Ministers; and
• as the Italian Presidency ends, it seems an appropriate time to update us on this file.
2.14 The Minister first elaborates on why the Principal VAT Directive needs to be amended, saying that:
• it fails to provide clear rules for vouchers and this has become more important as case law has clarified the VAT rules and the use of vouchers, particularly with the rise in technology, has increased;
• an example of this failure would be where VAT law would expect any prepayment to be subject to VAT;
• while a simple voucher (say a CD token) might be able to comply with this rule, a gift voucher for a shop would not because at the time of issue, the VAT rate of the goods and services to be provided in return for the voucher are not yet identified;
• vouchers also produce difficulties in identifying the correct tax base so the current law has had the unforeseen effect of distorting one of the key principles of VAT, that it is a tax on consumption;
• it identifies the payment that is subject to VAT as being all that the seller receives and assumes that this is the same as what the customer pays;
• however, where an issuer of a voucher is not the redeemer, this will not necessarily be the case because the issuer will make money by charging more for the voucher than he pays the redeemer;
• the matter is made worse when the voucher is distributed through a long chain of intermediaries, making the difference between what the redeemer receives and what the buyer pays even greater; and
• there is a further complication in that the buyer of a voucher receives two things (the voucher and the underlying goods and services) for each payment, whereas the VAT system more generally is intended to be based on “a supply for a consideration” concept.
2.15 The Minister continues that:
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• the VAT treatment of vouchers has been brought more into focus as a result of the need to standardise rules for telecoms top-ups and vouchers for electronically supplied services because the VAT place of supply rules for these services is changed with effect from 1 January;
• this change, with the introduction of the Mini One Stop Shop system for cross border VAT declaration, requires identical treatment of the related vouchers to be truly effective;
• it has been clear for some time, however, that a change for the voucher treatment would not be made in time for this introduction; and
• the Government has held discussions with the businesses concerned as to how any temporary difficulties can be mitigated.
2.16 The Minister comments that:
• the VAT treatment of vouchers will always be complex;
• although the Government welcomes the broad intention of the Commission proposal to solve this problem, it has failed to provide a credible solution;
• during consultation it became particularly evident that UK businesses had concerns that the draft Directive would require them to divulge commercially sensitive details in order for VAT to be collected on distribution;
• the Government subsequently engaged with a series of Presidencies to consider possible alternatives;
• the Council working party has in turn examined a variety of alternative ideas of VAT treatment in this area, all of which the Government has discussed with UK businesses in order that the impact of any change could be properly represented;
• following this engagement, the draft Directive now concentrates on face value vouchers — it does not now cover any voucher that offers merely a discount;
• it also now clearly excludes any instrument that is more generally a means of payment; and
• the new rules identify two groups of face value vouchers — SPVs and MPVs.
2.17 The Minister explains that the definition of SPVs would cover vouchers where all the information to charge the correct amount of tax is available at the time of issue of the voucher. He says that these new rules are very straightforward, the supply of the voucher at each stage of distribution is seen as a supply of the underlying goods or services, and that this approach is broadly consistent with current UK law. As for MPVs the Minister explains that:
• this definition would cover vouchers for unspecified goods or services, so that tax could not be charged at issue;
16 European Scrutiny Committee, Twenty-eighth Report, Session 2014-15
• several options therein were examined at official level, and two primary options were brought forward;
• the first would have seen all MPVs taxed along the distribution chain from issue to redemption;
• the second option, which is the version in the current text, foresees taxation at the redemption stage only;
• both of these options have positive and negative aspects;
• taxation throughout the chain would ensure that tax is collected on the base of what the consumer pays, but the appropriate VAT rate would be difficult to achieve;
• this approach would inevitably require some form of adjustment, requiring VAT rate information to pass from the redeemer to the final seller of the voucher;
• margin schemes and schemes based on a redeemer’s effective VAT rate were also considered, which would have reduced the need for adjustment, but these were deemed to be excessively burdensome and difficult to operate in cross-border situations;
• the second option would also require some transfer of information (about the final price paid for the voucher) but in easier circumstances, both in terms of the information to be passed and the timing;
• businesses would gain certainty that would aid cross-border trade (the UK is a leader in this field) and the harmonised approach would lead to less double and non-taxation; and
• this system would be easier to administer.
2.18 The Minister continues that:
• the Italian Presidency pressed for agreement based on the second option for MPVs, having concluded that the most effective and least burdensome approach would be to rule that all distribution is outside the scope of VAT, with tax to be accounted for by the redeemer based on the face value of the voucher, or if known, the amount that the customer actually pays;
• there is considerable support from Member States for this approach, but not all can agree;
• despite the broad support, it has, however, so far proved impossible to develop an approach to MPVs that will please everyone;
• a particular concern of some is that an agreement to treat all the distribution as outside the scope of VAT would mean voucher issuers and some distributors would not only no longer have to charge VAT, but would also no longer be able to deduct the VAT incurred on their costs — their business would no longer be VAT neutral and their costs would increase;
European Scrutiny Committee, Twenty-eighth Report, Session 2014-15 17
• an additional concern the Government has is that, if distribution were taken out of the scope of VAT, there is one small group of redeemers (where MPVs are distributed through a network of intermediaries acting in their own name) who could theoretically end up having to pay more VAT than they currently do because it is most unlikely that they would be able to identify what the buyer of the voucher has paid the intermediary;
• where now such redeemers account for VAT on what they receive from the issuer, in future they would have to account for VAT on the face value of the voucher;
• to get round this problem contracts would have to be amended to ensure the VAT to be accounted for is reflected in the distribution payments;
• the Government understands that for this group (which includes several High Street names) a change in distribution model is the more likely impact;
• although some further changes to the text suggested by the Government to make this more acceptable to UK businesses were accepted in principle by the Italian Presidency, in the event others were reluctant to commit to such a significant change without a greater understanding of the impacts — as a result the Government has to wait to see what direction the Latvian Presidency will take with this work in the New Year;
• though there is a grandfathering rule in the current text, Member States have already noted that it will take at least a year to implement new rules, with businesses having to reset contracts and systems; and
• the firm dates of the Directive coming into force are therefore still to be agreed.
Previous Committee Reports Eleventh Report HC 86–xi (2012–13), chapter 14 (5 September 2012).
18 European Scrutiny Committee, Twenty-eighth Report, Session 2014-15
3 European Semester
Committee’s assessment Politically important Committee’s decision Not cleared from scrutiny; for debate in European Committee B, together with other European Semester documents already recommended for debate
Document details Commission Report on the 2015 Alert Mechanism Report in connection with the Macroeconomic Imbalances Procedure Legal base — Department HM Treasury Document numbers (36543), 15988/14 + ADD 1, COM(14) 904
Summary and Committee’s conclusions 3.1 The annual European Semester is an EU-level framework for coordinating and assessing Member States’ structural reforms and fiscal/budgetary policy and for monitoring and addressing macroeconomic imbalances. An element of the European Semester process is the Macroeconomic Imbalances Procedure. The first stage of the procedure is publication by the Commission of an annual Alert Mechanism Report.
3.2 The other element for the first stage of the European Semester is an Annual Growth Survey by the Commission, which is accompanied by a draft Joint Employment Report based on employment and social developments in the autumn European Economic Forecast. We have already recommended these three documents for the 2015 cycle for debate in European Committee B, once the 2015 Alert Mechanism Report was available for that debate.
3.3 In this 2015 Alert Mechanism Report the Commission discusses macroeconomic factors affecting the EU as a whole, presents short analyses of the macroeconomic situation of most Member States and says that it will be conducting In Depth Reviews, documents for the next stage of the European Semester, for 18 Member States, including the UK, during the first quarter of 2015. 3.4 The Government reminds us of its support for the Macroeconomic Imbalances Procedure and comments briefly on the references to the UK in the Alert Mechanism Report.
3.5 As we forecast in our last Report we recommend this document for debate in European Committee B, together with the other documents for the first stage of the 2015 European Semester. The debate will enable Members to explore the Government’s approach to consideration of the documents by the various functional Councils and the March 2015 European Council and its view of their consequences for the UK. 3.6 We remind the Government that the debate should take place before the relevant functional Councils consider the documents in preparation for the European Council.
European Scrutiny Committee, Twenty-eighth Report, Session 2014-15 19
Full details of the document: Commission Report: Alert Mechanism Report 2015 (prepared in accordance with Articles 3 and 4 of Regulation (EU) No. 1176/2011 on the prevention and correction of macroeconomic imbalances): (36543), 15988/14 + ADD 1, COM(14) 904.
Background 3.7 In March 2010 the Commission proposed a “Europe 2020 Strategy”, to follow on from the Lisbon Strategy. This strategy is aimed at promoting smart, sustainable and inclusive economic growth. It was endorsed by the March 2010 European Council. During the latter half of 2010 the Council adopted, in the context of the Europe 2020 Strategy, broad guidelines for the economic policies of the Member States and the EU and guidelines for the employment policies of the Member States, together the “Europe 2020 integrated guidelines”.
3.8 The June, September and October 2010 European Councils considered and endorsed measures to increase coordination of EU economic governance, including strengthening the Stability and Growth Pact and introducing a “European Semester”.
3.9 The European Semester is an EU-level framework for coordinating and assessing Member States’ structural reforms and fiscal/budgetary policy and for monitoring and addressing macroeconomic imbalances. It attempts to exploit the synergies between these policy areas by aligning their reporting cycles, which would tie together consideration of National Reform Programmes (reports on progress and plans on structural reforms, under the Europe 2020 Strategy) and Stability and Convergence Programmes (reports on fiscal policy, under the Stability and Growth Pact).
3.10 The European Semester cycle begins with an Annual Growth Survey by the Commission, followed by a series of overarching and country specific documents from the Commission and culminating in examination of the overall and country-specific situations by the European Council. The Annual Growth Survey is accompanied by a draft Joint Employment Report which is based on employment and social developments in the European Economic Forecast, commonly referred to as the EU Autumn Forecast. On 17 December 2014 we recommended these three documents for the 2015 cycle for debate in European Committee B.9 3.11 An element of the European Semester process is the Macroeconomic Imbalances Procedure (MIP). The MIP is a mechanism designed to identify and, if necessary, correct harmful macroeconomic imbalances across the EU, which were a key cause of the current sovereign debt crisis. The first stage of the MIP is publication by the Commission of an annual Alert Mechanism Report (AMR).
The document 3.12 As is normal, the centrepiece of the AMR for the 2015 European Semester is the “scoreboard”. Each Member State is assessed against a scoreboard comprising 11
9 (36530), 15953/14 + ADD 1; (36542), 15985/14; (36560), —: see Twenty-seventh Report HC 219–xxvii (2014–15), chapter 2 (17 December 2014).
20 European Scrutiny Committee, Twenty-eighth Report, Session 2014-15
macroeconomic indicators that monitor the potential development of problematic external and internal imbalances based on data for 2013, although certain indicators are assessed with historical data over a number of years. The indicators designed to monitor external imbalances are current account balance, net international investment position, real effective exchange rate, export market share and unit labour cost index. The indicators monitoring internal imbalances are growth rate of financial liabilities, house prices, private sector credit flow, private sector debt, public sector debt and unemployment. Each macroeconomic indicator has a threshold value. For example, any country with public sector debt higher than 60% of GDP exceeds the threshold for that indicator. For certain indicators, there are more restrictive thresholds for eurozone countries, increasing the likelihood that they exceed the threshold.
3.13 The purpose of the AMR is to identify which Member States may have macroeconomic imbalances. This is based on an economic reading of the scoreboard, which takes into account additional macroeconomic indicators. If a Member State is deemed at risk, the Commission conducts a more detailed assessment contained within an In Depth Review (IDR).
3.14 The Commission recognises that most Member States improved their imbalances in the past year. It presents short country-specific analysis of all Member States, bar Cyprus. The MIP does not cover payment assistance programme countries, currently Cyprus, Greece and Romania. Nevertheless the Commission does include Greece and Romania in the country-specific analyses in this AMR.
3.15 The Commission assesses that the UK has exceeded threshold values for the same three indicators as last year, that is, those relating to general government debt, private sector debt and the change in export market shares. In the AMR’s country-specific commentary on the UK the Commission:
• notes the increase in the current account deficit, although the indicator remains just within the threshold;
• notes the deterioration in market share of exports is above threshold value, but the rate of decline is falling;
• notes levels of private sector debt to GDP, although high are declining, helped by nominal growth;
• believes that the regional variation in house price growth, together with high private indebtedness, suggests the housing sector could be vulnerable to shocks that may spill over to the overall economy;
• remains concerned about high government debt, as its growth has slowed recently but is yet to peak; and
• notes employment is growing healthily and youth unemployment has decreased.
3.16 The Commission concludes that the UK, along with Belgium, Bulgaria, Croatia, Denmark, Finland, France, Germany, Hungary, Italy, Luxembourg, Malta, Netherlands,
European Scrutiny Committee, Twenty-eighth Report, Session 2014-15 21
Portugal, Romania, Spain, Slovenia, and Sweden will have IDRs conducted. These reviews are scheduled to be published in the spring of 2015. 3.17 With regard to cross-country issues, the Commission points out that slow recovery and very low inflation have been an obstacles to the reduction of imbalances. The Commission’s view is that:
• policy responses in Member States should be adapted to their situation but considered against the wider EU context;
• examples of macroeconomic challenges in Member States that can affect the whole EU are weak domestic demand and disinflationary pressures;
• efficient investment to restore potential growth as a key priority;
• current account rebalancing remains asymmetrical across the EU, and in many cases this is driven by a lack of demand;
• much of the rebalancing in deficit countries is non-cyclical;
• the eurozone will maintain a large external surplus, with surpluses in Germany and the Netherlands above what economic fundamentals would imply;
• the range of external liabilities in the EU is wide and present risks to external sustainability;
• competitiveness has improved in several EU economies, and the decline in export market shares has eased; and
• the private sector may still have a considerable amount of deleveraging left to do.
3.18 A statistical annex to the AMR contains historical scoreboards, country specific scoreboards and indicator specific scoreboards.
The Government’s view 3.19 In his Explanatory Memorandum of 15 December 2014 the Financial Secretary to the Treasury (Mr David Gauke) says that:
• the Government takes note of the publication of the AMR;
• it supports the MIP as a means of strengthening the understanding of macroeconomic risks, particularly in the eurozone; and
• as was the case last year, the Government does not support the inclusion of auxiliary indicators in the AMR, which it considers as undermining the focus of the mechanism on preventing harmful macroeconomic imbalances.
3.20 The Minister comments that:
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• the Government notes that the UK has been found to exceed the threshold for the same three indicators as the 2014 AMR and will be subject to an IDR by the Commission;
• the analysis set out in the AMR represents the first stage in the Commission’s assessment of Member States;
• exceeding the threshold values for one or more indicators does not mean that an imbalance or excessive imbalance is present; and
• the Government considers that it will be important for the Commission to take into account the historical context behind the indicators where Member States have exceeded pre-determined thresholds.
3.21 The Minister continues that:
• the Government’s economic plan is designed to equip the UK to secure a stronger economy and a fairer society, and to help people who aspire to work hard and get on;
• this strategy is restoring the public finances to a sustainable path;
• the deficit is forecast to have halved from its 2009–10 peak in 2014–15 as a share of GDP;
• inflation is below target, supporting households and businesses, and there are record levels of people in work;
• by 2018–19, the Government is forecast to run the first surplus for 18 years; and
• the Office for Budget Responsibility’s December 2014 forecast showed the UK economy rebalancing over the forecast period.
3.22 Finally, the Minister reminds us that the UK is not subject to sanctions under the MIP or at any point in the European Semester and tells us that the ECOFIN Council will agree conclusions on the AMR in early 2015.
Previous Committee Reports None, but see Twenty-seventh Report HC 219-xxvi (2014–15), chapter 2 (17 December 2014).
European Scrutiny Committee, Twenty-eighth Report, Session 2014-15 23
4 Food and Agriculture Organisation
Committee’s assessment Legally and politically important Committee’s decision Not cleared from scrutiny; further information requested
Document details Commission Communication on the updated declaration of competences and new arrangements for the exercise of EU and Member States’ membership rights in the Food and Agriculture Organisation (FAO) Legal base — Department International Development Document numbers (34975), 10368/13, COM(13) 333
Summary and Committee’s conclusions 4.1 The FAO, established in 1945, is the oldest permanent specialised agency of the UN. It coordinates the efforts of governments and technical agencies in the development of agriculture, forestry, fisheries, and land and water resources. In 1991, the European Community became a member of the FAO. Arrangements then agreed between the Council of Ministers and the Commission set out the general division of competences in areas under the FAO’s mandate between the EU and its Member States as well as the process for coordinating joint positions and statements ahead of the meetings of FAO Governing Bodies. 4.2 The Commission says in the Communication that a new general Declaration of Competences and arrangements for the EU and Member States to exercise their membership rights in FAO meetings are required to take into account the division of competences between the EU and Member States pursuant to the Treaty of Lisbon. It also wants to make preparation for and representation in FAO meetings more efficient, effective, unified and coherent.
4.3 The proposed Declaration of Competences (Annex 1) sets out “EU competences” and “EU and Member States competences” relevant to the FAO’s activities by way of subject area. The former lists not only matters of EU exclusive competence relevant to FAO activities in line with Article 3(1) TFEU but also relevant competences shared between the EU and Member States (see Article 4(2) TFEU) but without any indication of the extent to which those shared competences remain to be exercised by the Member States (applying the principle of pre-emptive exercise by the EU set out in Article 2(2) TFEU). The latter category of “EU and Member States competences” lists relevant “parallel” EU and Member State competences (Article 4(3) and (4) TFEU) but again does not mention that Member States can exercise these competences without any pre-emptive restriction. It also lists some relevant “supporting supplementary and co-ordinating” competences, but similarly omits to point out that EU action cannot supersede Member State competence. 4.4 The Commission considers that the new arrangements (Annex 2) should mean that “all EU positions can be expressed from behind the EU nameplate” by ensuring that Council
24 European Scrutiny Committee, Twenty-eighth Report, Session 2014-15
preparatory bodies have sufficient time, in advance of FAO meetings to consider “lines to take” which reflect existing EU positions, to agree on new EU positions where necessary and to establish a common position between the EU and its Member States where agenda items are not all covered by EU competences alone.
4.5 The Government told us in July 2013 that it opposes the general nature of the Declaration of Competences, the discontinuation of specific declarations of Competences for the agenda items for each meeting, the preference for “lines to take” rather than fully agreed statements, enhancement of the co-ordinator and “spokesperson” role of EU delegation and/or Commission at the expense of the Presidency and Member States — with national “voices” supporting EU positions no longer being delivered from behind the “national nameplates”. It also strongly opposes the suggestion that for agenda items not covered by EU or common positions, Member States inform each other as well as the EU Delegation and the Commission about their draft positions and voting intentions. 4.6 It also told us that if the Communication (and its annexes) is endorsed by the Council in the form it was published (which was unlikely at the time given the level of opposition of Member States), it not only risked undermining Member State competence in the FAO, but could also set an unhelpful precedent for other international organisations. 4.7 In our Twelfth Report of 2013–14, we recognised the Government’s concerns, noting in particular the imprecise nature of the Declaration of Competences and potential inconsistency with established 2011 arrangements for EU/Member State participation in UN bodies. We therefore kept the document under scrutiny, requesting that we be kept informed of its progress and told why Council legal advice had been sought. In our Twenty-fourth Report of 2014–15 we reported on the response of the then Parliamentary Under-Secretary of State for International Development (Lynne Featherstone). We now report on the Government’s latest update in a letter dated 16 December 2014 from the former Minister’s successor, Baroness Northover. 4.8 We thank the Minister for her helpful letter.
4.9 We are encouraged that negotiations are progressing in the right direction, with the division of competences (and the attendant rights to vote) being more clearly and accurately defined in the Revised Declaration of Competences advanced under the Italian Presidency.
4.10 We note that discussions are ongoing on the question of the working arrangements governing Member State and Commission participation in FAO meetings. We wish to hear more about how these discussions have progressed the next time the Minister updates us (presumably after the Working Party meeting of 4 February 2015). 4.11 We note the Minister’s various references to seeking consensus on the document. Given the concern we expressed in our previous Reports about the Commission’s intention that the Council should only “take note” of such a significant document, we ask the Minister to explicitly confirm that it has now been established beyond doubt that the document is to be agreed by consensus.
4.12 Pending the Minister’s response, the document remains under scrutiny.
European Scrutiny Committee, Twenty-eighth Report, Session 2014-15 25
Full details of the documents: Communication from the Commission to the Council: The role of the European Union in the Food and Agriculture Organisation (FAO) after the Treaty of Lisbon: Updated Declaration of Competences and new arrangements between the Council and the Commission for the exercise of membership rights of the EU and its Member States: (34975), 10368/13, COM(13) 333.
The Minister’s letter of 16 December 2014 4.13 The Minister, referring to her predecessor’s commitment to keeping the Committee informed of developments, says: “Since December 2013 officials from the UK Representation to the UN Agencies in Rome, working closely with DEFRA and Foreign Office officials and legal advisers, have pursued UK Government objectives on the Commission’s proposal to redefine the division of EU competences on issues on FAO’s agenda. The Greek EU Presidency (January to June 2014) and current Italian Presidency have kept the item on the agenda of FAO Working Party meetings in Brussels and produced several papers with the objective of reaching consensus between the Commission and EU member states. UK Government officials have played a leading role in developing and maintaining a group of up to 20 like-minded EU member states, drafting common papers and statements of position, to ensure that the Commission understands the unity of views amongst them.
“There has been steady progress throughout the year. In June, at the end of its Presidency, Greece prematurely sought to wind up the first phase of the discussion of competences by elevating the issue for endorsement by the Committee of Permanent Representatives in Brussels (COREPER). It was not possible to reach consensus on the document at that stage and the issue was referred back to the FAO Working Party for further consideration. Officials from the UK and other EU Member States continued working to address outstanding questions, proposing amendments to the draft Declaration with a covering paper signed by 20 Member States at the end of August. A revised Declaration of Competence was approved by the Working Party under the Italian Presidency in September.
“The declaration sets out:
• those policy areas relevant to FAO where only the EU has competence to act by virtue of express provision in the Treaties;
• those areas where the EU and its Member States share competence but only the EU may act by virtue of having acquired exclusive competence, e.g. through the enactment of internal rules that may be affected by the envisaged action (importantly providing that the Member States shall act insofar as this is not the case);
• and those areas which fall within parallel competence. This part of the declaration faithfully reflects the provisions on competence which are set out in the Treaty of the Functioning of the European Union.
26 European Scrutiny Committee, Twenty-eighth Report, Session 2014-15
“The declaration then sets out that the EU should exercise membership rights (e.g. vote) when the EU has exclusive competence in relation to a matter, but that either the EU or the Member States will exercise membership rights when both have competence to act. It notes that the EU will continue the practice of submitting an “information note” to FAO before each meeting setting out who has competence and who shall exercise the right to vote in respect of each agenda item, as required by the FAO General Rules. “The focus of the discussion is now shifting to clarifying the working arrangements between the Council, member states and Commission in FAO. The Italian Presidency has drafted a paper which was the subject of an initial discussion at a FAO Working Party meeting on 25 November. Most member states took the floor to state that the draft was an acceptable basis for further discussion, but the European Commission declared that it wanted the issue immediately taken up in COREPER on the grounds that it addressed institutional issues falling outside the Working Party’s remit. Nevertheless, the Italian Presidency succeeded in starting the review in the Working Party and we hope that it can continue there, at least for the time being. UK Government officials are currently leading preparation of a like-minded paper responding to the Presidency’s paper. A resumption of the discussion of the Working Arrangements is on the agenda for the first Working Party meeting under the Latvian Presidency on 4 February 2015.”
4.14 The Minister commits to further updating the Committee in due course.
Previous Committee Reports Twenty-fourth Report HC 219–xxiii (2014–15), chapter 4 (3 December 2014); Twelfth Report HC 83–xii (2013–14), chapter 3 (17 July 2013).
5 Free movement and public documents
Committee’s assessment Legally and politically important Committee’s decision Not cleared from scrutiny; further information requested
Document details Draft Regulation on promoting the free movement of citizens and businesses by simplifying the acceptance of certain public documents in the European Union and amending Regulation (EU) No. 1024/2012 Legal base Articles 21(2) and 114(1) TFEU; co-decision; QMV Department Foreign and Commonwealth Office Document numbers (34890), 9037/13 + ADDs 1–2, COM(13) 228
European Scrutiny Committee, Twenty-eighth Report, Session 2014-15 27
Summary and Committee’s conclusions 5.1 The draft Regulation seeks to make it easier for EU citizens and businesses to exercise free movement rights by establishing a clear legal framework for the circulation of official (“public”) documents within the EU, reducing costs and bureaucracy, and strengthening administrative cooperation between Member States to prevent and detect fraud or forgery. It does so by exempting certain categories of public documents from any requirement for legalisation, meaning that they would be automatically accepted as authentic in another Member State, and by simplifying formalities relating to their use. The draft Regulation does not, however, impose any obligation to recognise the contents of the documents. So, for example, a Member State which does not recognise civil partnerships would not be required to do so on production of a civil partnership certificate issued in another Member State.
5.2 The draft Regulation would also establish a set of standardised multilingual forms for birth, death, marriage, registered partnerships and the legal status of companies which would have the same evidentiary value as the equivalent national documents and would have to be made available by the competent national authorities upon request, for the same fee and under the same conditions.
5.3 Whilst welcoming the removal of unnecessary bureaucratic procedures, and recognising the potential benefits for EU citizens and businesses living, working or trading in another Member State, the Government has expressed concern about the cost implications of the draft Regulation, as well as the possibility of “mission creep” if common format documents were eventually to replace national documents.
5.4 When we last considered the draft Regulation, in November 2014, the Minister for Europe (Mr David Lidington) told us that negotiations within the Council had resulted in substantial changes to the Commission’s original proposal. These included a significant reduction in the categories of public documents within the scope of the draft Regulation, the introduction of a new provision to limit the administrative burdens for Member States of handling requests to verify the authenticity of doubtful documents, and more robust safeguards to prevent fraud. The Minister also indicated that Member States were considering possible alternatives to standardised multilingual forms.
5.5 We noted that limiting the scope of the draft Regulation to exclude company documents would substantially reduce the potential benefits of the proposal and asked the Minister to explain how this could be reconciled with the Government’s Red Tape Challenge which seeks to cut unnecessary regulation and costs for business. We also sought further information on the other changes described by the Minister, as well as an assessment of the prospects and timescale for achieving a general approach on the draft Regulation within the Council. 5.6 We thank the Minister for providing a detailed response to the questions raised in our earlier Report. We accept that the appropriate legal base for the draft Regulation, as well as an accurate cost and benefit assessment, can only be settled once the scope of the draft Regulation has been established.
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5.7 As we have previously indicated, we can see some advantage in limiting the categories of documents within the scope of the draft Regulation, so that its practical impact and the adequacy of the safeguards to prevent fraud and ensure authenticity can be properly tested. A blanket exclusion of company documents would, however, substantially reduce the potential benefits of the proposal for businesses trading within the internal market. We ask the Minister to keep us informed of developments concerning the scope of the draft Regulation, both within the Council and during trilogue negotiations with the European Parliament.
5.8 We note the Minister’s concern that the introduction of standardised multilingual EU forms might lead to competence creep if, as a consequence, the EU asserts exclusive external competence for matters contained within them. The Minister refers, in particular, to a recent Opinion of the Court of Justice establishing that the EU has exclusive external competence in relation to the 1980 Hague Convention on child abduction.10 We agree that the Government should remain vigilant to the risk of such competence creep whilst noting, however, that the conditions governing the use and acceptance of standardised multilingual EU forms under the draft Regulation bear little similarity to the circumstances described in Opinion 1/13. In particular, the draft Regulation expressly provides that the forms are not mandatory and that they “shall not produce legal effects as regards the recognition of their content” when presented in another Member State. 11 The alternatives described by the Minister all have a number of disadvantages. We ask him to keep us informed of developments, including the cost and practical implications of any of the options likely to be agreed by the Council.
5.9 We are grateful to the Minister for providing further details of the agreement reached on procedures to verify the authenticity of doubtful documents. We note, however, that these procedures do not appear to require the production of the original document if a certified copy is available. As the Minister previously indicated that the Government had secured wording to enable a Member State to insist on the production of original documents as a precaution against fraud, we ask him to clarify the circumstances in which a Member State would be entitled to do so.
5.10 The Minister indicates that there is a reasonable prospect of securing a general approach within the Council during the Latvian Presidency. We look forward to receiving progress reports addressing the issues we have raised in this, and our previous Reports. Meanwhile, the draft Regulation remains under scrutiny.
Full details of the documents: Draft Regulation on promoting the free movement of citizens and businesses by simplifying the acceptance of certain public documents in the European Union and amending Regulation (EU) No. 1024/2012: (34890), 9037/13 + ADDs 1–2, COM(13) 228.
10 Opinion 1/13 issued on 14 October 2014. 11 Article 15 of the draft Regulation.
European Scrutiny Committee, Twenty-eighth Report, Session 2014-15 29
Background 5.11 Our earlier Reports, listed at the end of this chapter, set out in greater detail the content of the draft Regulation and the Government’s position.
5.12 The draft Regulation cites a dual legal base to reflect its dual purpose of facilitating the exercise of free movement rights by EU citizens and businesses — Article 21(2) of the Treaty on the Functioning of the European Union (TFEU) concerning the free movement rights of EU citizens, and Article 114(1) on the internal market.
5.13 The Government does not expect the draft Regulation to have a significant impact on UK law as the UK does not require the legalisation of documents for use in the UK. There would, however, be administrative costs involved in establishing a UK Central Authority to handle requests from other Member States for information or verification of the authenticity of public documents in case of doubt, in making available standardised multilingual forms for certain categories of public document, and in upgrading IT systems. The Government has made clear that, during the course of negotiations, it will seek to minimise the financial and administrative impact of the draft Regulation (a concern which also emerged from scrutiny of the proposal by the Scottish Parliament and the Northern Ireland Assembly), ensure adequate safeguards (including the right to insist on the production of original documents in certain circumstances), and guard against the possibility of “mission creep”. 5.14 The Government has provided a preliminary assessment of the potential costs and benefits of the draft Regulation — these are set out in our Forty-seventh Report of Session 2013–14 — and a revised assessment (in our Twenty-second Report agreed on 26 November 2014), whilst noting that the figures will need to be reviewed in light of any changes in scope.
5.15 The European Parliament (EP) agreed its First Reading position on the draft Regulation at its plenary session in February 2014.12 It said that the categories of documents included within the scope of the draft Regulation should be expanded (for example, to include documents relating to immigration status, educational qualifications, and disability) and that there should be much wider acceptance of uncertified copies and translations of public documents. The EP also proposed increasing the categories of documents for which Member States would be required to make available standardised multilingual forms. The Government considers the inclusion of a considerably larger category of documents to be “unacceptable”.13
The Minister’s letter of 19 December 2014 5.16 In his latest letter, the Minister (Mr David Lidington) provides the additional information we requested in our Twenty-second Report, agreed on 26 November 2014. Our questions are reproduced in bold type, followed by the Minister’s response.
12 See http://www.europarl.europa.eu/oeil/popups/ficheprocedure.do?reference=2013/0119(COD)&l=en. 13 See letter of 23 April 2014 from the Minister for Europe (Mr David Lidington) to the Chair of the European Scrutiny Committee.
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5.17 Our first question concerned the reduced scope of the draft Regulation and the Government’s revised cost and benefit assessment: “The Minister’s description of the latest Presidency text suggests that business documents are to be excluded from the scope of the draft Regulation. This would appear to be reflected in the revised cost and benefit assessment provided by the Minister which reduces the potential benefits by half (from around £2 million based on the Commission’s original proposal to £900,000 per annum) and sets out a more conservative estimate of annual costs. We ask the Minister whether he supports the removal of business documents and, if so, how this can be reconciled with the Government’s Red Tape Challenge which seeks to cut unnecessary regulation and costs for business. “I support the abolition of apostilles 14 on public documents generally which is in line with the Government’s Red Tape Challenge. An overwhelming majority of Member States support narrowing the scope of documents to civil status/personal categories only. The UK also favours a narrower scope, at least initially, in order to minimise the burden of rolling out a new system and we have therefore been able to agree the Presidency guidelines reducing the scope which will now be used as a platform for further discussions. The Commission and European Parliament strongly support the inclusion of company documents and indications are that documents confirming company details will be added to the list again later in the negotiation process. We have said that in principle we would support their inclusion. Verifying the authenticity of such company documents where there are doubts would not present us with a great burden since a verification system is already provided under the Services Directive. However, there are some categories, for example documents relating to land registry and intellectual property, where the very small number of documents used in other Member States means that setting up a verification system for cases of doubt would cause a disproportionate amount of work and we would not actively support the inclusion of those categories in the scope for this reason.”
5.18 Our second question concerned the proposed introduction of standardised multilingual forms for certain categories of documents: “The Minister says that the UK has encouraged Member States to consider alternatives to standardised multilingual forms. We ask him to explain whether the Government opposes the introduction of such forms in principle, even for a limited category of documents, and to provide some indication of the alternatives under consideration within the Council as well as the costs and benefits associated with their introduction.
“We have resisted EU common format standard forms, in the main due to concerns that ‘creep’ might eventually lead to EU multilingual documents replacing national documents, and also some concerns over the likely costs of producing them. A recent European Court of Justice decision 1/13 of 14 October
14 An apostille is a seal of authenticity attached to an official document by the issuing authority.
European Scrutiny Committee, Twenty-eighth Report, Session 2014-15 31
2014 which gave the EU exclusive external competence in another dossier (Child Abduction) leads to a risk that the EU would be granted exclusive external competence in any issues which give them internal competence under this Regulation, making it more important to the UK not to have any civil status document with evidentiary value which could be considered as an EU form.
“The alternatives which have been suggested are explained below. In all cases, personal data, where entered, would be in the original language i.e. not translated. Calculated costs are subject to variables which will be affected by the final agreed format. The biggest cost factor will be staff time required to input the data. Member States will not be allowed under the Regulation to charge more for one of these alternatives than for the existing national form. “The original proposal was to have common format stand-alone multilingual forms which would have their own evidentiary value and could be used instead of a national certificate. Each form would have pre-translated information fields into which personal data would be entered by officials. On the basis that we estimate as many as 25,000 forms relating to birth, marriage and death would be issued per annum in England & Wales, the production cost is likely to be more than the £9.25 currently charged for such certificates in England & Wales. There would be a higher per-certificate production cost for the devolved administrations who could expect to issue a far smaller number. “The first alternative would be similar to the original proposal except that the forms would not have independent evidentiary value. These multilingual translations would need to be attached to, or presented with, the original national document. They would have pre-translated information fields into which personal data would be entered by officials but the information fields might differ slightly across Member States in line with the underlying national documents. Production costs would be similar to the original proposal, with possible marginal savings on security features.
“A second alternative would be similar to the first but personal data would not be entered, thereby generating a saving in officials’ time and in cost. These generic translations would also have pre-translated information fields. This would be easier to administer, but may not command widespread support amongst Member States because it would move some distance from the Commission’s original proposal.
“A third alternative would be very similar to the original proposal of autonomous multilingual forms with independent evidentiary value, except that these would be designed by individual Member States rather than the EU and would have pre- translated information fields into which personal data would be entered by officials. But this proposal would carry the risk that individual national designs might be confusing. Production costs would be similar to the original proposal, with a likely higher domestic design cost but cheaper adaptation of IT and similar per-form production costs.
32 European Scrutiny Committee, Twenty-eighth Report, Session 2014-15
“The Government is in ongoing discussion with other Member States and the Commission to determine the most appropriate model which will also generate the widest support.”
5.19 Our third question concerned the inclusion in the draft Regulation of additional provisions to minimise the administrative burden for Member States:
“We would welcome further details of the agreement reached on procedures to minimise the burden for the UK of requests from other Member States to verify the authenticity of doubtful documents, and on the circumstances in which Member States would be entitled to require the production of an original document. “The revised text now incorporates an additional provision on procedures to be followed for the verification mechanism and limitations on requests and outcomes. This was suggested by the UK in order to minimise the number of verification requests sent through the system and to ensure that verifications are handled in a reasonable timeframe. Under the current draft, which is the subject of ongoing discussion, this sets out the steps to be followed where authorities have reasonable doubt as to a document’s authenticity as being to:
• Check the available templates of documents in the repository of the Internal Market Information System (IMI).
• If a doubt remains, Member States’ authorities may submit a request for information through IMI to the issuing or relevant Central Authority.
• ‘Reasonable doubt’ may relate in particular to: the authenticity of the signature, the capacity in which the person signing the document has acted, the identity of the seal or stamp, any sign that the document may have been falsified or tampered with.
• Requests for information are to set out the grounds on which they are based and [be] accompanied by a copy of the public document concerned or of its certified copy.
• The authorities are to reply to such requests within the shortest possible period of time and if the authenticity of the document or of its certified copy is not confirmed, the requesting authority shall not be obliged to accept it.”
5.20 Finally, we asked the Minister for his assessment of the prospects and timescale for achieving a general approach within the Council and for sight of a revised Presidency text before that stage is reached. We also asked him to inform us of any changes to the legal base to reflect changes to the scope of the draft Regulation. He replies:
“There is a reasonable prospect of achieving a general approach within the Council within the next six months. I will keep you informed of any substantial developments, including changes to the legal base. However you will wish to note that if certain categories of business document are added back into the scope in the future, the legal base would likely remain unchanged.”
European Scrutiny Committee, Twenty-eighth Report, Session 2014-15 33
Previous Committee Reports Fifth Report HC 83–v (2013–14), chapter 6 (12 June 2013); Eighth Report HC 83–viii (2013–14), chapter 7 (3 July 2013); Forty-seventh Report HC 83–xlii (2013–14), chapter 7 (30 April 2014); Twenty-second Report HC 219–xxi (2014–15), chapter 6 (26 November 2014).
6 Restrictive measures against Iran: nuclear issues
Committee’s assessment Legally and politically important Committee’s decision Not cleared from scrutiny; further information requested
Document details Council Decision concerning restrictive measures against Iran Legal base Article 29 TEU; unanimity Department Foreign and Commonwealth Office Document number (36568), —
Summary and Committee’s conclusions 6.1 As well as implementing the measures contained in UNSCR 1929 of 9 June 2010, Council Decision 2010/413/CFSP imposed additional EU sanctions in the energy sector, the financial sector, trade, the Iranian transport sector in particular the Islamic Republic of Iran Shipping Line and its subsidiaries and air cargo; and new visa bans and asset freezes, especially on the Islamic Revolutionary Guard Corps.
6.2 Council Decision 2014/829/CFSP of 25 November 2014, amending Decision 2010/413/CFSP concerning restrictive measures against Iran, extended the suspension of restrictive measures specified in the Joint Plan of Action, agreed between the E3+3 and Iran, from 24 November 2014 until 30 June 2015. The full background is set out in our most recent relevant Report,15 and is briefly summarised below (see paragraphs 6.9–6.13)
6.3 This Council Decision extends the expiry date of an existing exemption to the freezing of funds and economic resources from 31 December 2014 until 30 June 2015 and relists one individual, Gholam Hossein Golparvar (Golparvar) and one entity, National Iranian Tanker Company (NITC).
6.4 The Minister for Europe (Mr David Lidington) explains that the purpose of the above exemption is to allow EU Member States to recover debts owed by Iran: “For example, an EU state may have paid under contract for the provision of oil from Iran before 23 January 2012 but has not yet received the oil from Iran” (see paragraph 6.19 below for full details).
15 See (36529), —: Twenty-fifth Report HC 219–xxiv (2014–15), chapter 15 (10 December 2014).
34 European Scrutiny Committee, Twenty-eighth Report, Session 2014-15
6.5 The Minister also explains that Golparvar and NITC had their original listings annulled following adverse General Court judgments;16 the EU Council reviewed the Court judgments and the evidence basis for the proposed new listings, and agreed that both Golparvar and NITC should be relisted, and that these relistings should occur in early 2015; but that due to “the confidential nature of EU Council negotiations, and of the evidence supporting these two relistings”, he is unable to disclose detail of the evidential basis (see paragraph 6.20 below for the reasons for the relistings). 6.6 The Minister also notes that under the Joint Plan of Action (JPoA) agreed by the E3+3 and Iran in November 2013, and recently extended until 30 June 2015, the E3+3 is able to maintain pressure on Iran; and that these relistings are thus consistent with the principles agreed as part of the JPoA. 6.7 We draw these developments to the attention of the House because of the importance of these measures and of ensuring that they are properly implemented.
6.8 We note that the judgment annulling restrictive measures against Gholam Golparvar was delivered as long ago as 12 December 2013 (and not earlier in 2014 as stated by the Minister), and the judgment in respect of the National Iranian Tanker Company on 3 July 2014. In each case the General Court maintained the effect of the relevant legislation for a further period, which provided an opportunity for the relisting to be made without a break in the continuity of the restrictive measures. These periods appear to have expired. If this is indeed the case we ask the Minister why the opportunity was not taken to maintain continuity, and whether the delay in relisting has had any adverse effect of the effectiveness of the restrictive measures.
Full details of the documents: Council Decision amending Council Decision 2010/413/CFSP concerning restrictive measures against Iran: (36568), —.
Background 6.9 As the Committee’s previous Reports illustrate in detail, the EU has been engaged since December 2006 in a “dual track” strategy — with both engagement and restrictive measures — regarding Iran's nuclear activities, not simply implementing in the EU, but also strengthening in that context, successive UN Security Council Resolutions (UNSCRs). 6.10 UNSCR 1929 of 9 June 2010 imposed a number of further restrictive measures which in broad terms:
— reaffirmed that Iran shall cooperate fully with the IAEA; — banned new Iranian nuclear facilities and banned Iranian nuclear investment in third countries;
— banned exports of several major categories of arms, and further restricted Iran's ballistic missile programme;
16 Cases T-565/12 and T-58/12.
European Scrutiny Committee, Twenty-eighth Report, Session 2014-15 35
— 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).
Council Decision 2010/413/CFSP 6.11 As well as implementing the measures contained in UNSCR 1929, the EU imposed 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).
6.12 Council Decision 2010/413/CFSP 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.
6.13 A further package of EU sanctions was adopted by the 15 October 2012 Foreign Affairs Council. The Committee cleared the relevant Council Decision on 31 October 2012. The Council Regulation required to implement the October package was adopted on 21 December 2012. It includes:
• Finance: a financial cut-off, prohibiting all but specifically licensed trade with a notification system for humanitarian payments up to €100,000 and other payments (€40,000); a full listing of the Central Bank of Iran except to permit channels for the provision of liquidity and repayment of debts; a full ban on the public provision of
36 European Scrutiny Committee, Twenty-eighth Report, Session 2014-15
export credit guarantees (adding short term to the already prohibited medium and long term);
• Energy sector: a gas embargo: a further ban on exporting equipment for the Iranian Energy Sector; a ban on construction of oil tankers;
• Trade: bans on exporting graphite and metals that can be used in Iran's nuclear programme; naval equipment for ship building and maintenance; software for integrating industrial processes;
• Transport: bans on the flagging and classification of Iranian oil tankers and cargo vessels; and on the leasing/chartering of vessels for the transport or storage of Iranian oil; and
• New Designations: the Council Decision and Council Implementing Regulation imposed an asset freeze on further Iranian companies and updated the entries for three already listed entities.17 6.14 On 24 November 2013 in Geneva, the Foreign Ministers of the E3+3 (China, France, Germany, Russia, the United Kingdom and the United States), supported by the EU High Representative, reached an agreement with Iran — the Joint Plan of Action (JPoA). The 17 January 2014 EEAS Fact Sheet on the negotiations describes the JPoA thus: “The Joint Plan of Action is an interim agreement setting out an approach towards reaching a long-term comprehensive solution. As a first step, it includes the implementation, by both sides, of a series of voluntary measures, for a duration of six months. This first step could be renewed by mutual agreement.
“A Joint Commission of the E3/EU+3 and Iran will be established to monitor the implementation of these measures, with the IAEA responsible for the verification of nuclear-related measures. The Joint Plan of Action also includes elements for the final step — i.e. the common goal of reaching a final, comprehensive solution which would lead to the full resolution of the international community's concerns about Iran's nuclear programme, along with UN Security Council resolutions.”18
6.15 The E3+3 and Iran first agreed on 19 July 2014 to extend the JPoA for a further four months until 24 November 2014, i.e., the anniversary of agreement on the JPoA. Both sides agreed to continue to implement all measures agreed under the Geneva interim deal that had not yet expired, which meant that the limited sanctions relief under the JPoA would remain in place until 24 November 2014.19 In summary:
• the US agreed to pause efforts to reduce crude oil sales to Iran’s oil customers, repatriate an amount to be agreed of oil revenue held abroad, and suspend oil- related insurance and transport costs;
17 For the full background, see the European External Action Service (EEAS) fact sheet on the European Union and Iran. 18 See http://eeas.europa.eu/statements/docs/2013/131219_02_en.pdf. 19 See the “Background” section in Twenty-fifth Report HC 219–xxiv (2014–15), chapter 15 (10 December 2014) for full details of the commitments entered into by Iran on the one hand and the EU and USA on the other.
European Scrutiny Committee, Twenty-eighth Report, Session 2014-15 37
• the EU and US agreed to suspend sanctions on petrochemical exports, and sanctions on imports of gold and precious metals;
• the US agreed to suspend sanctions on the auto industry, and allow licensing on the civil aviation sector;
• no new nuclear-related sanctions would be implemented by the UN, EU and US Administration;
• the US agreed to establish a financial channel to facilitate humanitarian and legitimate trade, including for payments to international organisations, and for Iranians studying abroad; and
• the EU agreed to increase the thresholds for authorisation of financial transactions for humanitarian and non-sanctioned trade.20 6.16 It was hoped that this would provide the additional time needed to conclude an agreement. However, on 24 November 2014, the then EU High Representative and the Iranian Foreign Minister issued a statement noting that: while some ideas had been developed, more work was required to assess and finalize them as appropriate; they, together with the Foreign Ministers of the E3+3, had therefore agreed to continue these diplomatic efforts; and it had accordingly been decided to extend the measures of the Joint Plan of Action to allow for further negotiations until 30 June 2015.21
Council Decision 2014/829/CFSP of 25 November 2014 6.17 This Council Decision extended the suspension of restrictive measures specified in the Joint Plan of Action, agreed between the E3+3 and Iran until 30 June 2015.
6.18 We cleared it from scrutiny at our meeting on 10 December 2014.22
The draft Council Decision 6.19 In his Explanatory Memorandum of 15 December 2014, the Minister for Europe (Mr David Lidington) explains the draft Council Decision thus:
Exemption extension “The current EU Iran Decision (2010/413/CFSP) allows an exemption to the general EU oil embargo where a transaction pertains to a contract concluded before 23 January 2012, and where the proceeds from the supply of such oil is for reimbursement of outstanding amounts (Article 3(c)2). The legislation also provides that the asset freeze should not apply to such transactions as referred to above until 31 December 2014 (Article 20(14)). The Council has decided that this date should be
20 Also see Ninth Report HC 219–ix (2014–15), chapter 41 (3 September 2014). 21 See http://eeas.europa.eu/statements-eeas/2014/141124_02_en.htm. 22 See Twenty-fifth Report HC 219–xxiv (2014–15), chapter 15 (10 December 2014).
38 European Scrutiny Committee, Twenty-eighth Report, Session 2014-15
extended to 30 June 2015, in line with the extension of the Joint Plan of Action (JPoA) agreed between the E3+3 and Iran. “The purpose of the above provision is to allow EU Member States to recover debts owed by Iran. For example, an EU state may have paid under contract for the provision of oil from Iran before 23 January 2012 but has not yet received the oil from Iran.”
The Government’s view 6.20 The Minister says:
“The amendment of this provision is not directly related to the sanctions relief as part of the Joint Plan of Action agreed with Iran. This provision does not alter the level of pressure on Iran, and indeed the shipments of oil under this provision take resources away from Iran, and give them to the EU (Iran will be exporting oil for which it has already received payment). It allows for the continued application of an exemption that has existed throughout the period of the Joint Plan of Action. For these reasons HMG supports the amendment.
Relistings “Golparvar and NITC had their original listings annulled following adverse General Court judgments earlier this year. The EU Council reviewed the Court judgments and the evidence basis for the proposed new listings. The EU Council agreed that both Golparvar and NITC should be relisted, and that these relistings should occur in early 2015. Due to the confidential nature of EU Council negotiations, and of the evidence supporting these two relistings, it is not possible to disclose detail of the evidential basis.
“The statement of reasons for NITC’s relisting reads: “The National Iranian Tanker Company provides financial support to the Government of Iran through its shareholders the Iranian State Retirement Fund, the Iranian Social Security Organization, and the Oil Industry Employees Retirement and Savings Fund, which are State-controlled entities. Moreover, NITC is one of the largest operators of crude oil. Accordingly NITC provides logistical support to the Government of Iran through the transport of Iranian oil.
“The statement of reasons for Golparvar’s relisting reads: “Mr Golparvar acts on behalf of IRISL and companies associated with it. He has been commercial director of IRISL, as well as Managing Director and shareholder of the SAPID Shipping Company, non-executive director and shareholder of HDSL, and shareholder of Rhabaran Omid Darya Ship Management Company, which are designated by the EU as acting on behalf of IRISL.”
The Government’s view 6.21 The Minister says:
European Scrutiny Committee, Twenty-eighth Report, Session 2014-15 39
“Under the Joint Plan of Action (JPoA) agreed by the E3+3 and Iran in November 2013 and recently extended until 30 June 2015, the E3+3 is able to maintain pressure on Iran. These relistings are thus consistent with the principles agreed as part of the JPoA.”
Previous Committee Reports None, but see Twenty-fifth Report HC 219–xxiv (2014–15), chapter 15 (10 December 2014); Ninth Report HC 219–ix (2014–15), chapter 41 (3 September 2014); also see (35964) — and (35965) —: Forty-seventh Report HC 86–xlii (2012–13), chapter 11 (30 April 2014) and (35712) 18163/13: Thirty-first Report HC 83–xxviii (2013–14), chapter 15 (22 January 2014), and the earlier Reports referred to therein.
7 Financial services: benchmarks
Committee’s assessment (a) Legally and politically important (b) Politically important Committee’s decision Not cleared from scrutiny; further information requested
Document details (a) Draft Regulation about benchmarks used in the financial services sector; (b) Opinion of the European Central Bank on document (a) Legal base (a) Article 114 TFEU; co-decision; QMV (b) — Department HM Treasury Document numbers (a) (35328), 13985/13 + ADDs 1–2, COM(13) 641 (b) (36347), —
Summary and Committee’s conclusions 7.1 The draft Regulation (document (a)), held under scrutiny since October 2013, concerns indices used as benchmarks23 in financial instruments, financial contracts or to measure the performance of investment funds. It seeks to improve governance of the benchmark process, prevent conflict of interests of benchmark administrators24 and contributors, 25 enhance the quality and accuracy of input data and methodologies used by administrators and ensure adequate protection for consumers and investors using benchmarks.
23 Defined in the proposal as “any index by reference to which the amount payable under a financial instrument or a financial contract, or the value of a financial instrument is determined or an index that is used to measure the performance of an investment fund”. 24 Defined in the proposal as “the natural or legal person that has control over the provision of a benchmark”. In practical terms this means those responsible for the establishment, design, production and dissemination of a Benchmark. 25 Defined in the proposal as “a natural or legal person contributing input data”. This is data used by the administrator to determine the benchmark.
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7.2 The House of Commons is the only national parliament to have issued a Reasoned Opinion on this proposal (in November 2013). This challenged the supposed benefits of EU level action — the enhancement of the single market, the promotion of cross-border transactions and the protection of consumers — as being outweighed by potential disadvantages. Disbenefits included the unsuitability of harmonised rules to a wide variety of specific benchmarks, non-alignment with the International Organisation of Securities Commissions (IOSCO) standards, increased regulatory burdens on benchmark administrators and contributors, the risk to the independence of national statistics authorities and the lack of provision for third country benchmarks. The Commission responded to the Reasoned Opinion, maintaining that the proposal was justified. In January 2014, the ECB published an Opinion which favoured the original proposal and its wide scope (the scrutiny issues relating to the document’s delayed deposit have been addressed as indicated in our previous Report).
7.3 The Government reports on progress achieved since its last update in November 2014 on the negotiation of document (a). There continues to be movement towards a more proportionate and relative approach to regulation of benchmarks, which is also more aligned with IOSCO and therefore more favourable to the UK’s position.
7.4 We thank the Economic Secretary to the Treasury (Andrea Leadsom) for this helpful update on the proposed Regulation. We welcome the continued development of the proposal towards a more proportionate treatment of benchmarks, better aligned with IOSCO standards.
7.5 We expect the Minister to report to us before any General Approach is agreed. When she does, we would:
i) welcome her comments on press reports that the compromise text (a version of 9 September 2014) includes Institutions for Occupational Retirement Provision (IORPS) under the definition of “supervised entities” and therefore restricts their use of benchmarks to those “which are robust” and “provided by administrators that meet prescriptive requirements”.26 We would be interested to learn whether the Government considers this a prudent development for holders of pensions or an unwelcome constraint on investment in pensions; and ii) request that if the changes to the original proposal (as reflected in the compromise text) continue apace and are sufficiently significant, the Minister should consider, for transparency reasons, depositing with us the proposed General Approach text together with an Explanatory Memorandum.
7.6 Pending the Minister’s next update, we retain both documents under scrutiny.
Full details of the documents: (a) Draft Regulation on indices used as benchmarks in financial instruments and financial contracts: (35328), 13985/13 + ADDs 1–2, COM(13) 641; (b) Opinion of the European Central Bank of 7 January 2014 on indices used as benchmarks in financial instruments and financial contracts (CON/2014/2): (36347), —.
26 Newsletter of Pensions Europe, 4/2104: “IORPS could see their use of benchmarks restricted”
European Scrutiny Committee, Twenty-eighth Report, Session 2014-15 41
Background and previous scrutiny 7.7 The background to document (a), an account of its provisions, the draft Reasoned Opinion and our assessment of the Commission’s response are set out in our Twentieth, Twenty-third, Thirty-ninth and Forty-seventh Reports of 2013–14. The debate on the Reasoned Opinion took place on 28 November 2013.27 An account of the ECB Opinion (document (b)) is provided in our Fifteenth and Twenty-second Reports of 2014–15.28
Minister’s letter of 16 December 2014 7.8 The Economic Secretary to the Treasury provides the following update on progress in the negotiations of the Regulation. She informs us first about the latest compromise text circulated by the Italian Presidency on 1 December and the changes made which she considers to be improvements: “Firstly, it allows for a transitional period in which significant discretion is given to national competent authorities to decide whether benchmark administrators should be authorised or registered by their regulator. Institutions who are already supervised will also only have to register rather than go through a full authorisation. This goes towards our objective of ensuring regulators can focus their resources on bringing large and economically important benchmark administrators under supervisory focus.
“Furthermore, the proposal now contains many appropriate delegations which will allow many of the requirements to be suitability calibrated according to the specific characteristics of benchmark administrators such as their size or the sector they cover. “It is also welcome that benchmarks based on regulated data (such as data from trading venues) are now exempted from some of the Regulation’s requirements. This is appropriate and proportionate since such regulated data is already subject to strict regulatory requirements.” 7.9 She then notes that further improvements could be made in respect of the treatment of non-EU benchmarks. However, she says that the Italian Presidency’s alternative approach for recognising non-EU administrators, based on other regimes in other EU legislation is to be welcomed. She says that the new approach “represents a sensible basis for a suitable regime”. However, the Government “will continue to take opportunities as the negotiation progresses, including in trilogues, to secure clarifications and improvements to ensure the regime will work in practice”. Judging this to be an important issue, the Minister adds that ensuring a workable regime, based on IOSCO, remains a “key objective”.
7.10 She also recognises that further pressure needs to be brought to bear “for national competent authorities to have the final say on the authorisation and supervision of benchmark administrators”.
27 Stg Co Deb, European Standing Committee B, 28 November 2013 cols. 3–10. 28 Fifteenth Report, HC 219–xv (2014–15), chapter 8 (22 October 2014).
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7.11 She ends her letter by saying that the Government will continue to press for further improvements (without saying what they are) before being able to agree a General Approach on the proposal. However, she believes that “negotiations under the Italian Presidency have brought us close to an acceptable text”.
Previous Committee Reports (a) Twenty-second Report HC 219–xxi, (2014–15), chapter 8, (26 November 2014); Fifteenth Report HC 219–xv (2014–15), chapter 8 (22 October 2014); Forty-seventh Report HC 83–xlii (2013–14), chapter 12 (30 April 2014); Twenty-third Report HC 83–xxi (2013– 14), chapter 5 (20 November 2013); Twentieth Report HC 83–xix (2013–14), chapter 4 (30 October 2013): (35328), 13985/13; (b) Twenty-second Report HC 219–xxi, (2014–15), chapter 8, (26 November 2014); Fifteenth Report HC 219–xv (2014–15), chapter 8 (22 October 2014): (36347), —.
8 Financial services: occupational pension funds
Committee’s assessment Legally and politically important Committee’s decision Not cleared from scrutiny; further information requested
Document details Draft Directive to consolidate and amend legislation on the activities and supervision of institutions for occupational retirement provision Legal base Articles 53, 62 and 114(1) TFEU; co-decision; QMV Department HM Treasury Document numbers (35944), 8633/14 + ADDs 1–5, COM(14) 167
Summary and Committee’s conclusions 8.1 Institutions for Occupational Retirement Provision, or IORPs, more commonly known as occupational pension funds, are collective schemes which manage financial assets on behalf of employers in order to provide retirement benefits for their employees. The IORP Directive, Directive 2003/41/EC, sets out a minimum harmonisation framework for occupational pension schemes and their supervision, including rules which oblige occupational pension funds to invest their assets prudently, in the best interest of members and beneficiaries.
8.2 This draft Directive to recast (revise) the IORP Directive is confined to new rules on the governance of schemes and the information that schemes should provide to their beneficiaries.
8.3 Both we and the Government have been concerned about the lack of justification for the proposal, subsidiarity issues and the practical consequences of the measure. We have asked to hear from the Government about its continued efforts to forestall the draft
European Scrutiny Committee, Twenty-eighth Report, Session 2014-15 43
Directive, including the results of its detailed consideration, with the UK pensions sector, of the potential impact of the proposal. Early last month it told us that there was now a considerably amended and more flexible Presidency text, that the Presidency hoped to secure COREPER agreement to a General Approach, that the Government would not support such a General Approach and that, in effect, it still hoped to see the proposal aborted. However, it did not meet our request for the results of its consideration of the proposal’s possible impact. We presumed that, if necessary, the Government would continue to oppose the measure if it were to go to the Council, both on substantive and parliamentary scrutiny grounds. We asked, when it confirmed this to us, to have also the assessment of impacts we requested previously.
8.4 The Government tells us now that on 10 December 2014 the Presidency did indeed present the extensively amended version of the draft Directive for adoption as a General Approach and that, regrettably, the UK was the only Member State not to support the compromise. We learn further that attention will now turn to the European Parliament’s ECON Committee, which has yet to begin consideration of the draft Directive and that the Government will engage with MEPs to ensure they are fully aware of the concerns that this proposal raises. We are asked for any view we might have about the Government engaging MEPs on this file. 8.5 As to our request for the Government’s assessment of impacts of the draft Directive, it explains why the considerable continuing uncertainty about how this proposal may develop means a full impact assessment on it would be of limited use, but that it is engaging with key stakeholders about their views of the Presidency compromise text. The Government also asks us for any assessment we make of that compromise text.
8.6 We are grateful for this account of developments that the Government gives us and look forward to hearing about the outcome of its discussions with stakeholders about the Presidency compromise text adopted as the Council’s General Approach. Meanwhile the document remains under scrutiny.
8.7 Concerning our own view of the agreed text, we do not have a sufficient knowledge of occupational pension fund matters to offer useful comment. Moreover, even if we had that detailed knowledge, our ability to comment sensibly would be hampered as we have no knowledge of the iterations between the Commission’s original text and the General Approach text and of the reasoning for changes finally adopted. We draw the developments on this proposal to the attention of the Treasury Committee. 8.8 As for how the Government might engage MEPs on this proposal, we presume that, whilst it will take any opportunity to improve the text, against the possibility that the draft Directive may actually be enacted, the Government will strive to reinforce doubts in the European Parliament about any need at all for this proposal.
Full details of the documents: Draft Directive on the activities and supervision of institutions for occupational retirement provision (recast): (35944), 8633/14 + ADDs 1–5, COM(14) 167.
44 European Scrutiny Committee, Twenty-eighth Report, Session 2014-15
Background 8.9 Institutions for Occupational Retirement Provision, or IORPs, more commonly known as occupational pension funds, are collective schemes which manage financial assets on behalf of employers in order to provide retirement benefits for their employees. There are around 125,000 such schemes operating within the EU, managing assets of around €2.5 trillion (£1.96 trillion) for around 75 million beneficiaries. The vast majority of these schemes are located in just four Member States: Germany, the Republic of Ireland, the Netherlands and the United Kingdom. Occupational pension funds do not play a significant part in pension provision outside of these four Member States.
8.10 The IORP Directive, Directive 2003/41/EC, sets out a minimum harmonisation framework for occupational pension schemes and their supervision, including rules which oblige occupational pension funds to invest their assets prudently, in the best interest of members and beneficiaries.
8.11 In March the Commission presented this draft Directive to recast (consolidate and revise) the IORP Directive. It was confined to new rules on the governance of schemes and the information that schemes should provide to their beneficiaries.
8.12 Both we and the Government have been concerned about the lack of justification for the proposal, subsidiarity issues and the practical consequences of the measure. When we considered the matter, in July, we said that, before considering the document further we wished to hear from the Government about its continued efforts to forestall the draft Directive, including the results of its detailed consideration, with the UK pensions sector, of the potential impact of the proposal.
8.13 Early last month the Government told us that there was now a considerably amended and more flexible Presidency text, that the Presidency hoped to secure COREPER agreement to a General Approach, that the Government would not support such a General Approach and that, in effect, it still hoped to see the proposal aborted. However, the Government made no attempt to meet our request for the results of its consideration, with the UK pensions sector, of the proposal’s possible impact.
8.14 We said that we presumed that, if necessary, the Government would continue to oppose the measure if it were to go to the Council, both on substantive and parliamentary scrutiny grounds. We asked, when it confirmed this to us, to have also the assessment of impacts we requested previously. Meanwhile the document remained under scrutiny.
The Minister’s letter of 14 December 2014 8.15 The Economic Secretary to the Treasury (Andrea Leadsom) writes now to update following discussion that took place at COREPER on 10 December 2014, saying that the Presidency did indeed present the extensively amended version of the draft Directive for adoption as a General Approach and that, regrettably, the UK was the only Member State not to support the compromise. The Minister then reiterates the three key reasons why the Government cannot support the compromise:
• both Houses of Parliament have expressed serious concern about the proposal and have placed the dossier under scrutiny reserves, which remain in place;
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• while the amendments to the Commission’s original proposal are welcome, and appear to address many of the Government’s key concerns about the impact of it on IORPs and IORP members, more time is needed to thoroughly consider the changes, to consult national parliaments and to seek the views of IORP stakeholders; and
• even allowing for the Presidency amendments, fundamental concerns about the proposal remain — no clear need for this legislation has been established and the policy development process for this proposal has been particularly poor.
8.16 The Minister adds that the Government has repeatedly made it clear that we, as well as the Lords European Union Committee, have expressed serious concerns about the IORP proposal and both committees continue to hold the proposal under scrutiny reserve.
8.17 The Minister says that:
• now that a General Approach has been reached in COREPER, attention will turn to the European Parliament’s ECON Committee, which has yet to begin consideration of the draft Directive;
• the Government will engage with MEPs to ensure they are fully aware of the concerns that this proposal raises;
• early indications are that the European Parliament may also have concerns that the case for this legislation has not been made;
• serious reservations about the Commission’s impact assessment for the proposal were set out in a recent report from the European Parliament’s Impact Assessment Unit; and
• given the extensive experience the Committee has in working with the European Parliament, she would be very interested in any views we might have about engaging MEPs on this file.
8.18 Turning to our request for the Government’s assessment of impacts of the draft Directive, the Minister says that:
• the Government would not normally undertake a full economic impact assessment on a proposal which is at an early stage in the legislative process and before key amendments have been made;
• a full assessment would usually be made as part of transposition preparations for a proposal which is close to completing, or has already completed, the legislative process;
• in the case of this proposal it was clear from the beginning of Council discussions that there was little support for adopting the proposal in anything like its original form;
46 European Scrutiny Committee, Twenty-eighth Report, Session 2014-15
• concerns with the original proposal were so fundamental that an assessment of impacts was not needed to justify those concerns — a full impact assessment on it would therefore have been of limited use;
• it is only very recently that progress has been made in amending the Commission proposal and those amendments are very extensive;
• it would appear that the amendments made by the Presidency go a long way to addressing our concerns about the practical impact of the draft Directive on occupational pension schemes and scheme members;
• but there have been limited opportunities to consult stakeholders in the IORP sector to get a better understanding of likely impacts, particularly in relation to the latest text presented at COREPER;
• the Government will be seeking the views of key stakeholders on the Presidency compromise text early in the New Year and she will report back to us with those views; and
• she has arranged for us to have a copy of that compromise text and would be very interested in any assessment we make of it.
Previous Committee Reports Fiftieth Report HC 83–xlv (2013–14), chapter 6 (14 May 2014), First Report HC 219–i (2014–15), chapter 13 (4 June 2014), Sixth Report HC 219–vi (2014–15), chapter 3 (9 July 2014) and Twenty-fifth Report HC 219–xxiv (2014–15), chapter 7 (10 December 2014).
9 Financial management: investigations of fraud
Committee’s assessment Politically important Committee’s decision Not cleared from scrutiny; further information requested
Document details (a) Draft Regulation to create a “Controller of procedural guarantees” for those under investigation by the European Anti-Fraud Office and for authorising its investigative measures in relation to members of EU institutions (b) European Court of Auditors Opinion on the draft Regulation Legal base (a) Article 325; co-decision; QMV; (b) — Department HM Treasury Document numbers (a) (36131), 10943/14 + ADD 1, COM(14) 340 (b) (36561), 16042/14, —
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Summary and Committee’s conclusions 9.1 The European Anti-Fraud Office (OLAF) was established to enhance the effectiveness of action to combat fraud and other illegal activities detrimental to the EU’s interests. With this draft Regulation, document (a), the Commission proposes amendments to Regulation (EU, EURATOM) No. 883/2013, which governs OLAF’s management of its investigations, to further strengthen the procedural guarantees set out in that Regulation. To achieve this, the Commission proposes introduction of a Controller of Procedural Guarantees, charged with:
• reviewing complaints lodged by those under investigation about violation of their procedural guarantees; and
• authorising OLAF to conduct certain investigative measures in relation to members of EU institutions. 9.2 In July 2014 we heard that the Government regards a Controller of Procedural Guarantees, a concept which has been rejected previously by the Council, as unnecessary. We hoped that negotiation of this premature proposal would be postponed until the need for some change, if any, to the OLAF Regulation became clearer. We asked to hear from the Government, before we would consider the issues again, about developments in the Council consideration. Meanwhile the document remained under scrutiny. 9.3 The European Court of Auditors has now issued this Opinion, document (b), on the draft Regulation, which supports the proposal for a Controller of Procedural Guarantees and makes several suggestions for enhancing the text.
9.4 The Government reiterates to us its opposition to creation of a Controller of Procedural Guarantees, notes that the Opinion will be taken into consideration by Member States and the Commission, reports that the proposal was discussed in July 2014 at official level, where the UK joined the overwhelming majority of Member States in declaring the proposal to be premature and potentially unnecessary and tells us further discussion of the draft Regulation has yet to be scheduled under the Latvian Presidency.
9.5 We share the Government’s continued opposition to this proposal and note that its concern is shared by the majority of other Member States. As for the European Court of Auditors Opinion we ask the Government to tell us how it is playing into Council consideration of the draft, if and when resumed. Meanwhile both the documents remain under scrutiny.
Full details of the documents: (a) Draft Regulation amending Regulation (EU, Euratom) No. 883/2013 as regards the establishment of a controller of procedural guarantees: (36131), 10943/14 + ADD 1, COM(14) 340; (b) European Court of Auditors Opinion No. 6/2014 concerning a draft Regulation amending Regulation (EU, Euratom) No. 883/2013 as regards the establishment of a controller of procedural guarantees: (36561), 16042/14, —.
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Background 9.6 The European Anti-Fraud Office (OLAF) was established in April 1999 to enhance the effectiveness of action to combat fraud and other illegal activities detrimental to the EU’s interests. OLAF’s management of its investigations is governed by Regulation (EU, Euratom) No. 883/2013 (replacing a 1999 Regulation), which came into force on 1 October 2013. 9.7 During negotiation of the Regulation a Commission proposal for a “Review Adviser” within OLAF, in relation to procedural guarantees, was rejected by the Council, because of cost implications. In July 2013 a Commission Communication,29 accompanying a draft Regulation to establish a European Public Prosecutor’s Office (EPPO), 30 suggested creation of “Controller of procedural safeguards” for OLAF investigations.
9.8 In June 2014, with this draft Regulation, document (a), the Commission proposed amendments to Regulation (EU, Euratom) No. 883/2013 to further strengthen the procedural guarantees set out in Article 9 of that Regulation. To achieve this, the Commission proposed introduction of a Controller of Procedural Guarantees (CPG), charged with:
• reviewing complaints lodged by those under investigation about violation of their procedural guarantees; and
• authorising OLAF to conduct certain investigative measures in relation to members of EU institutions. 9.9 The draft Regulation was accompanied by the Commission’s analysis of impacts which considered existing measures to ensure respect for procedural guarantees and available options to improve them, concluding that appointment of a CPG would be the most effective way to strengthen procedural safeguards. 9.10 When we considered this proposal, in July 2014, we heard that the Government regards a CPG as unnecessary, as those with grievances already have recourse to the European Court of Justice, the European Ombudsman and the European Data Protection Officer for redress, and the proposal is very premature because of possible consequences for OLAF of adoption of the draft Regulation for an EPPO, which is still under negotiation.
9.11 We hoped that negotiation of this premature proposal would be postponed until the need for some change, if any, to the OLAF Regulation became clearer. We asked to hear from the Government, before we would consider the issues again, about developments in the Council’s anti-fraud working group. Meanwhile the document remained under scrutiny.
29 (35215) 12554/13: see Fifteenth Report, HC 83–xv (2013–14), chapter 3 (11 September 2013) and Eighteenth Report, HC 83–xvii (2013–14), chapter 6 (16 October 2013). 30 (35217), 12558/13 + ADDs 1–2: see Fifteenth Report HC 83–xv (2013–14), chapter 1 (11 September 2013), Nineteenth Report HC 83–xviii (2013–14), chapter 6 (23 October 2013) and HC Deb, 22 October 2013, cols. 262–74; (35613) 17176/13: Thirty-first Report HC 83–xxviii (2013–14), chapter 8 (22 January 2014) and Forty-fifth Report HC 83–xl (2013–14), chapter 10 (2 April 2014) and (36044) 9834/1/14: Fourth Report, HC 219–iv (2014–15), chapter 6 (25 June 2014).
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The new document 9.12 The European Court of Auditors (ECA) has issued this Opinion, document (b), on the Commission’s draft Regulation. The ECA supports introduction of a CPG, which it considers to be a means of introducing necessary external and independent control of the legality of OLAF’s investigations.
9.13 The ECA identifies several means of enhancing the Commission’s proposal and recommends steps to take to achieve this, which include:
• increasing the CPG’s independence by ensuring that neither the CPG nor its secretariat is administratively attached to the Commission or any other institution involved in its appointment;
• empowering the CPG to manage alleged violations of fundamental rights and procedural guarantees under EU law in relation to ongoing OLAF investigations;
• mandating that the prior written authorisation of the CPG is required for OLAF to conduct on-the-spot inspections and for specified categories of cases, including when OLAF intends to prolong an investigation beyond two years; and
• stipulating in the OLAF Regulation that such specified cases amount to an act that may adversely affect the person being investigated, thus allowing for an application to the EU courts for interim protection measures.
9.14 The ECA concludes that any reform should ensure that OLAF remains strong and effective, notes the importance of potential for justifiable investigative acts to be undermined by the perception of insufficient safeguards and considers that the Commission’s proposal seeks to enhance the effectiveness of OLAF’s investigations.
The Government’s view 9.15 In his Explanatory Memorandum of 15 December 2014 the Financial Secretary to the Treasury (Mr David Gauke) says that the Government notes the ECA’s support for the Commission’s proposal and the recommendations to enhance the proposal. He comments that while it supports strict adherence to procedures in OLAF’s investigations, it remains of the view that establishing a CPG is unnecessary, especially as those with grievances have recourse to seek redress from the European Court of Justice, the European Ombudsman and the European Data Protection Officer.
9.16 The Minister tells us that:
• the draft Regulation was discussed in July 2014 at an official level working group on combating fraud, where the UK joined the overwhelming majority of Member States in declaring the proposal to be premature and potentially unnecessary (the concept of a review adviser having been rejected by the Council);
• the ECA Opinion will be taken into consideration by Member States and the Commission; and
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• further discussion of the Commission’s proposal has yet to be scheduled under the Latvian Presidency.
Previous Committee Reports Eighth Report HC 219–viii (2014–15), chapter 8 (16 July 2014).
10 Forced labour
Committee’s assessment Legally and politically important Committee’s decision Not cleared from scrutiny; further information requested
Document details (a) Draft Council Decision authorising Member States to ratify the Protocol of 2014 to the Forced Labour Convention 1930 of the International Labour Organisation with regard to matters related to social policy (b) Draft Council Decision authorising Member States to ratify the Protocol of 2014 to the Forced Labour Convention 1930 of the International Labour Organisation with regard to matters related to judicial cooperation in criminal matters Legal base (a) Articles 153(1)(a) and (b) and 218(6)(a)(v) TFEU; QMV; EP consent; (b) Articles 82(2) and 218(6)(a)(v) TFEU; QMV; EP consent Department Home Office Document numbers (a) (36329), 13158/14, COM(14) 563; (b) (36328), 13157/14, COM(14) 559
Summary and Committee’s conclusions 10.1 The purpose of these draft Decisions is to authorise Member States to ratify a new Protocol to the Forced Labour Convention. The aim of the Convention is to “suppress the use of forced or compulsory labour in all its forms within the shortest possible period”.31 It was agreed by the General Conference of the International Labour Organisation (ILO) in 1930 and has been ratified by all Member States. The Protocol, agreed in June 2014, contains additional measures for the prevention and elimination of the use of forced labour and the protection of victims. 10.2 Membership of the ILO is only open to state parties. The EU participates as an observer, without voting rights. The Commission considers that the EU has exclusive
31 Article 1 of the Convention.
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competence in the areas covered by the Protocol and that, as a consequence, EU authorisation is necessary to enable Member States to ratify the Protocol. It has proposed two draft Decisions, the first — document (a) (“the social policy Decision”) — concerning the working environment and working conditions, and the second — document (b) (“the judicial cooperation Decision”) — concerning judicial cooperation in criminal matters, in particular human trafficking and the rights of victims of crime.32 Document (b) includes a Title V (justice and home affairs) legal base. The Commission considers that the UK is automatically bound, by virtue of its participation in EU Directives on human trafficking and the rights of victims of crime, and that the UK’s opt-in does not apply. 10.3 The Government rejects the Commission’s analysis. It contends that the EU does not have exclusive competence for any matters covered by the Protocol and, as a consequence, there is no requirement for the EU to authorise Member States to ratify it. The Government also contends that, if the draft Decisions are to proceed, the judicial cooperation Decision (document (b)) is subject to the UK’s Title V opt-in.
10.4 When we considered the draft Decisions at our meeting on 10 December 2014, we indicated that we were unwilling to clear them from scrutiny ahead of discussions at the Employment, Social Policy, Health and Consumer Affairs (EPSCO) Council on 11 December. In her latest letter, the Minister for Modern Slavery and Organised Crime (Karen Bradley) describes the revised proposals put forward by the then Italian Presidency before the EPSCO Council, explains that the Government has decided against opting into the judicial cooperation Decision, and confirms that, in the event of a vote, the Government intends to vote against the social policy Decision. 10.5 We understand that the draft Decisions were not put forward for adoption at the EPSCO Council on 11 December. In her latest letter, the Minister refers to possible adoption at a subsequent EPSCO Council on 17 December, although we can find no record of such a meeting taking place. We ask the Minister to clarify whether there have been further discussions or agreement and, if not, how she expects the incoming Latvian Presidency to take forward the draft Decisions.
10.6 We note that the Government has decided not to opt into the judicial cooperation Decision (document (b)) and intends to vote against the social policy Decision (document (a)) if it is brought to a future Council for agreement. We ask the Minister whether other Member States agree with the Commission’s analysis that the UK’s Title V opt-in does not apply to the judicial cooperation Decision and whether the Government considers that the UK would be bound by it, if adopted.
10.7 We remind the Minister that, if the draft Decisions are adopted at a future Council, contrary to the Government’s wishes, we expect to hear what steps the UK intends to take, within the Council and within the ILO, to record its objection to the assertion of exclusive EU external competence and to make clear that the UK is
32 Two Council Decisions are needed because all Member States are bound by the EU’s social policy acquis and are therefore entitled to vote for the first Council Decision, document (a). By contrast, a different decision making procedure, excluding Denmark, applies to the second draft Decision, document (b), as it is a Title V (justice and home affairs) measure.
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ratifying the Protocol on its own behalf. Meanwhile, we look forward to receiving further progress reports and retain both draft Decisions under scrutiny.
Full details of the documents: (a) Draft Council Decision authorising Member States to ratify, in the interest of the European Union, the Protocol of 2014 to the Forced Labour Convention, 1930, of the International Labour Organisation with regard to matters related to social policy: (36329), 13158/14, COM(14) 563; (b) Draft Council Decision authorising Member States to ratify, in the interest of the European Union, the Protocol of 2014 to the Forced Labour Convention, 1930, of the International Labour Organisation with regard to matters related to judicial cooperation in criminal matters: (36328), 13157/14, COM(14) 559.
Background 10.8 Our earlier Reports, listed at the end of the chapter, describe the basis on which the Commission seeks to assert that the EU has exclusive competence to authorise Member States to ratify the Protocol, as well as the Government’s reasons for believing that Member States alone are entitled to do so, without requiring prior authorisation from the EU.
10.9 As we have already made clear, we consider that the Government has good grounds for arguing, in this case, that the criteria for establishing exclusive EU external competence for the matters covered by the Protocol have not been met, given that the relevant EU acquis and the Protocol itself are based on minimum standards. The Government’s position is, in our view, weakened by its acquiescence, on previous occasions, in the assertion of exclusive EU external competence in relation to other ILO Conventions which suggests a lack of consistency for which no convincing explanation has yet been given.
10.10 In advance of the EPSCO Council to be held on 11 December, the Minister wrote to inform us that the Presidency might split document (b) — the judicial cooperation Decision concerning the criminal law aspects of the Protocol — into two separate measures, one covering areas of exclusive EU competence, the other areas in which competence was shared with Member States. We indicated that such an approach would be futile since it would be tantamount to accepting that the EU had some, albeit limited, degree of exclusive external competence, whereas the Government’s position was that it lacked any such competence. In the circumstances, we suggested that it would be inconceivable for the UK to support the adoption of the draft Decisions at the 11 December EPSCO Council, given the Government’s position on competence. We asked the Minister for a clearer indication of the UK’s voting intentions as well as the Government’s opt-in decision in relation to document (b). We also asked her to report back to us on the outcome of the Council. We added that, if the draft Decisions were adopted at the EPSCO Council, contrary to the Government’s wishes, we expected the Minister to explain what steps the UK would take, within the Council and within the ILO, to record its objection to the assertion of exclusive EU external competence and to make clear that the UK would only proceed to ratify the Protocol on its own behalf.
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The Minister’s letter of 17 December 2014 10.11 The Minister (Karen Bradley) explains the approach taken by the Italian Presidency in the run-up to the EPSCO Council on 11 December:
“Following interventions by the UK and a number of other Member States, the Italian Presidency has circulated revised draft Council Decisions. The Presidency did not, as initially indicated, split the Judicial Cooperation Decision into two, one covering areas of exclusive EU external competence and one covering areas of shared competence. Instead, the Recitals to both the social policy and single judicial cooperation decision now seek to limit their scope to areas of exclusive EU competence.” 10.12 The Minister reiterates the Government’s position on competence and explains that the UK will not support the adoption of either draft Decision: “The Government continues to consider that the existing EU internal rules, upon which the Commission’s claim to exclusive external competence is based, only contain minimum standards. Minimum standards cannot be said to ‘affect common rules or alter their scope’, in line with Article 3(2) TFEU, and so cannot generate exclusive EU competence. Therefore competence in this area remains shared between the EU and Member States. Where competence is shared, the Council must decide whether the EU should exercise that competence; it is the position of this Government that Member States should take action.
“Therefore, whilst the Government supports, and will ratify the 2014 Protocol, we do not support the EU authorising, or compelling, Member States to ratify the Protocol. The Government has decided not to opt into the Judicial Cooperation Decision and will vote against the Social Policy Decision.
The UK is dedicated to tackling modern slavery and we remain committed to ratifying the Protocol, noting existing EU legislation, but we do not accept the role that is proposed for the EU in this activity.”
10.13 The Minister indicates that the UK was one of around eight Member States that objected to the Presidency’s revised proposals, and adds:
“It is currently unclear whether the Presidency will still seek to put the decisions to the EPSCO Council on 17 December.”
Previous Committee Reports Twenty-fifth Report HC 219–xxiv (2014–15), chapter 8 (10 December 2014); Twentieth Report HC 219–xix (2014–15), chapter 6 (19 November 2014) and Thirteenth Report HC 219–xiii (2014–15), chapter 24 (15 October 2014). Also see (35961), 8988/14: Second Report HC 219–ii (2014–15), chapter 18 (11 June 2014) and Fiftieth Report HC 83–xlv (2013–14), chapter 9 (14 May 2014).
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11 Statistics
Committee’s assessment Politically important Committee’s decision Not cleared from scrutiny; further information requested
Document details Draft Regulation about Commission powers in relation to EU external trade statistics Legal base Article 338 TFEU; co-decision; QMV Department Office for National Statistics Document numbers (35303), 13517/13, COM(13) 579
Summary and Committee’s conclusions 11.1 Regulation (EC) 471/2009 concerning statistics on EU trade with non-Member States, contains pre-Lisbon Treaty provisions about the comitology powers of the Commission. This draft Regulation would replace the remaining pre-Lisbon comitology provisions in Regulation (EC) 471/2009 with powers allowing the Commission to adopt delegated and implementing acts.
11.2 When we considered this proposal previously, we noted, whilst accepting the Government’s case for its general support for the proposal, its intention to secure improvements in the text, in order to properly circumscribe the Commission’s use of delegated acts.
11.3 The Government tells us now of its progress in meeting its objective. But it also tells us of the Presidency’s rush, after much delay, to force final agreement on the draft Regulation.
11.4 While we recognise the progress made in negotiation of this proposal, the Presidency’s precipitate rush to final agreement is regrettable. Nevertheless, we note the Government’s intention to abstain, on parliamentary scrutiny grounds, from voting on the proposal. We look forward to a full account from the Government of the outcome of the Presidency’s efforts. Meanwhile the document remains under scrutiny.
Full details of the documents: Draft Regulation amending Regulation (EC) No. 471/2009 on Community statistics relating to external trade with non-member countries as regards conferring of delegated and implementing powers upon the Commission for the adoption of certain measures: (35303), 13517/13, COM(13) 579.
Background 11.5 Regulation (EC) 223/2009, commonly referred to as the “European Statistical Law”, is the framework legislation for the European Statistical System (ESS), comprising the Commission’s statistical office (Eurostat) and producers of official statistics in Member States. All other legislation under which EU statistics are produced must be made in accordance with the European Statistical Law.
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11.6 Regulation (EC) 471/2009 concerns statistics on EU trade with non-Member States. It contains pre-Lisbon Treaty provisions about the comitology powers of the Commission. The Commission’s comitology committee for statistics is the European Statistical System Committee (ESSC), which oversees the full range of EU statistics and of which the UK's National Statistician is a member.
11.7 This draft Regulation would replace the comitology provisions in Regulation (EC) 471/2009 with powers allowing the Commission to adopt delegated and implementing acts. For statistics, a delegated act, on which the ESSC advises, can be used to amend the detail of requirements to ensure that data collected remained topical and relevant. The proposed Regulation includes a clause restricting the scope of the changes, as follows: “The Commission should ensure that these delegated acts do not impose a significant additional administrative burden on the Member States or on the respondent units”. A statistics implementing act is used to ensure a common approach among Member States to implementing aspects of the Regulation’s requirements. An implementing act can only be adopted with the agreement of Member States through QMV in the ESSC.
11.8 When we considered this proposal, in October 2013, we noted, whilst accepting the Government’s case for its general support for the proposal, its intention to secure improvements in the text, in order to properly circumscribe the Commission’s use of delegated acts. So we asked, before we would consider the proposal further, to hear about the Government’s progress in this regard. Meanwhile the document remained under scrutiny.
The Minister’s letter of 16 December 2014 11.9 The Minister for Civil Society, Cabinet Office (Mr Rob Wilson) writes now to update us on the Government’s efforts to properly circumscribe the Commission’s use of delegated acts, telling us that:
• the Government has so far been able to secure amendments that oblige the Commission to ensure that delegated acts do not impose a significant additional burden on Member States or respondents to relevant statistical surveys, and to ensure appropriate consultation with experts in developing any proposed delegated acts; and
• the Council and the European Parliament will have the right to review the delegated powers after a period of five years.
11.10 However, the Minister also says, in relation to the timetable for consideration of the proposal, that:
• following initial discussion at working party level under the Greek Presidency there was a long period of inactivity;
• the Italian Presidency announced only at the Council Working Party on Statistics on 10 December 2014 that the position described to us had been secured in trilogue;
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• the Presidency also announced its intention to seek Coreper final approval of the text at its meeting on 17 December 2014;
• he is sorry, therefore, that he has been unable to inform of this in time for us to formally scrutinise the final proposal, due to the prohibitive timetable imposed by the Presidency;
• he was instructing the UK Permanent Representative to abstain from voting at the Coreper meeting on the grounds of a parliamentary scrutiny reservation still being in place;
• none of the proposed changes being put to Coreper are in dispute between the European Parliament and the Council, except that the Commission’s obligation to consult with experts on the preparation of delegated acts is currently set out in the recitals rather than the Articles of the compromise text being placed before Coreper;
• the Government was therefore seeking to strengthen this provision by seeking its inclusion within the main Articles; and
• he would update us again once Coreper have considered the proposal.
Previous Committee Reports Seventeenth Report HC 83–xvi (2013–14), chapter 13 (9 October 2013).
12 Seafarers
Committee’s assessment Legally and politically important Committee’s decision Cleared from scrutiny
Document details Draft Council Decision concerning the Code of the Maritime Labour Convention Legal base Articles 153 and 218 (9) TFEU Department Transport Document numbers (35896), 7978/14 + ADD 1, COM(14) 161
Summary and Committee’s conclusions 12.1 In April 2014 we considered this draft Council Decision to require Member States to accept the then current draft of the amendments, except for ‘non-substantial changes’, to the International Labour Organisation’s Maritime Labour Convention due for adoption at an International Labour Conference in June 2014.
12.2 We shared the Government’s concerns about the ambiguity of this proposal, the Commission’s apparent wish to extend the scope of EU competence and the premature timing of the draft Decision, we endorsed the Government’s intention to oppose the
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measure and, given the uncertainties about the proposal, we asked to hear from the Government as to how Council working group consideration of it was progressing. 12.3 The Government tells us now, very belatedly, but with apologies for an administrative oversight, that, although there was some sympathy for the UK position, only one other Member State joined the Government in voting against the proposal, which was therefore adopted by QMV in May 2014. We are also told that the amendments were, with minor changes, adopted at the International Labour Conference and that the Government was content with the amendments themselves, as adjusted.
12.4 It is highly regrettable that we have only now been informed of these developments. Nevertheless, in the circumstances, particularly the Government’s efforts to prevent the Council Decision being adopted in its proposed form, we now clear the document from scrutiny.
Full details of the documents: Draft Council Decision on the position to be adopted on behalf of the European Union at the 103rd session of the International Labour Conference concerning amendments to the Code of the Maritime Labour Convention: (35896), 7978/14 + ADD 1, COM(14) 161.
Background 12.5 The International Labour Organisation’s Maritime Labour Convention, 2006 (MLC),33 which came into force on 20 August 2013, establishes minimum living and working standards for seafarers. 12.6 Council Decision 2007/431/EC authorised Member States to ratify the MLC in respect of the provisions falling within EU competence. Aspects of the Convention which fall within EU competence have been included in a European Social Partners Agreement, which is implemented by Council Directive 2009/13/EC. This includes provisions of the MLC Code’s Standard A2.5, on repatriation of seafarers, and Standard A4.2, on shipowner liability for injury and death, which became part of EU law through that Directive.
12.7 It was expected that amendments to the MLC Code would be considered at the 103rd International Labour Conference from 28 May to 12 June 2014. With this draft Council Decision the Commission proposed, in March 2014, that Member States be required to accept the then current draft of the amendments, except for ‘non-substantial changes’. The amendments in question principally concerned Standard A2.5 and Standard A4.2 and related to the liability of shipowners with respect to abandonment of seafarers and compensation for claims for death and personal injury, together with the shipowner's financial security relating to each of these areas. The proposed Decision was accompanied by a document setting out the amendments.
12.8 The amendments to the MLC Code which were under discussion were agreed at the Joint International Maritime Organization/International Labour Organisation Ad Hoc Expert Working Group on Liability and Compensation Regarding Claims for Death, Personal Injury and Abandonment of Seafarers, in March 2009. However, the MLC Code
33 See http://www.ilo.org/global/standards/maritime-labour-convention/text/lang--en/index.htm.
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could not be amended before it came into force 2013. The first meeting of the International Labour Organisation Special Tripartite Committee (STC), which considered amendments to the MLC Code, since that entry into force took place from 7 to 11 April 2014.
12.9 We shared the Government’s concerns about the ambiguity of this proposal, the Commission’s apparent wish to extend the scope of EU competence and the premature timing of the draft Decision and we endorsed the Government’s intention to oppose the measure. Given the uncertainties about the proposal we asked to hear from the Government as to how Council working group consideration of it was progressing. Meanwhile the document remained under scrutiny.
The Minister’s letter of 18 December 2014 12.10 In his letter of 18 December 2014 the Minister of State, Department for Transport (Mr John Hayes) very belatedly, and with apologies, writes to bring us up to date with developments on the proposal.
12.11 After recalling what we had been told previously about the Government’s position on this draft Council Decision, the Minister tells us that:
• despite some sympathetic views of several other Member States, and Government encouragement to them to vote against the measure, only one Member State joined the UK in voting against the proposal;
• Eleven other Member States also had concerns about the use of Article 218(9) TFEU, but nevertheless did not vote against the Decision, although some made statements;
• under QMV the Decision was therefore adopted on 26 May 2014 and published in the Official Journal as Council Decision 2014/346/EU on 6 June 2014; and
• the Government accompanied its opposition with a Statement to the effect that it did not oppose the MLC amendments themselves, but the wording of the Council Decision.
12.12 The Minister continues that:
• there was concern when the proposal was first issued (prior to the STC, where the amendments were being finalised) that the effect might be to bind Member States to accept the amendments to the MLC as originally drafted except for ‘non- substantial changes’, as opposed to being able to agree sensible, but substantial, changes;
• the Commission confirmed, however, that this was not the case, and in any case the text of the Decision was not finalised prior to the STC;
• EU coordination meetings took place at the STC, but the Commission did not speak for the EU;
• the Presidency led where there was full agreement, but Member States were permitted to make their own interventions;
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• the minor adjustments to the text of the MLC amendments which were agreed at the STC resulted in MLC amendments with which the Government was fully satisfied;
• the text of the MLC amendments were finalised at the STC and adopted unamended at the International Labour Conference; and
• the Government was content with the text of the MLC amendments themselves following the minor adjustments agreed at the STC.
Previous Committee Reports Forty-sixth Report HC 83–xli (2013–14), chapter 4 (9 April 2014).
13 Enlargement Strategy and Main Challenges 2014–15
Committee’s assessment Politically important Committee’s decision Cleared from scrutiny
Document details Commission Communication on EU enlargement strategy and Main Challenges 2014–15 and 2014 Country Progress Reports on Montenegro, Serbia, Turkey, the former Yugoslav Republic of Macedonia, Albania, Bosnia and Herzegovina, and Kosovo Legal base — Department Foreign and Commonwealth Office Document numbers (a) (36392), 14152/14 + ADD 1, COM(14) 700 (b) (36393), 14153/14 + ADD 1, SWD(14) 301 (c) (36394), 14154/14 + ADD 1, SWD(14) 302 (d) (36395), 14155/14 + ADD 1, SWD(14) 307 (e) (36396), 14156/14 + ADD 1, SWD(14) 303 (f) (36397), 14157/14 + ADD 1, SWD(14) 304 (g) (36398), 14158/14 + ADD 1, SWD(14) 305 (h) (36399), 14159/14 + ADD 1, SWD(14) 306
Summary and Committee’s conclusions 13.1 The Commission published its latest annual package of reports on 10 October 2014. The Commission Communication, “Enlargement Strategy and Main Challenges 2014– 2015”, provides a statement of the EU’s evolving enlargement strategy, an assessment of progress, and a look forward to the challenges and priorities for 2015. This is accompanied by the customary set of comprehensive Progress Reports for each of the enlargement countries (including candidate and aspirant countries). Iceland remains a candidate country, but its Government decided to suspend accession negotiations in 2013. The other candidate countries are Albania, Macedonia, Montenegro, Serbia and Turkey. Potential
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candidate countries (those without formal Candidate Status but with an agreed EU perspective) are Bosnia and Herzegovina (BiH) and Kosovo. 13.2 All in all, 2014 was seen as a year of fitful progress. In Albania and Macedonia, the opposition was boycotting parliament and thus blocking reforms. In Kosovo, a government had yet to be formed after the June elections; and in Bosnia and Herzegovina (BiH), the Commission’s reference to a lack of collective will suggested that it did not expect long- standing political inertia to be resolved by October’s elections. Problems with “rule of law/good governance” issues predominated in Montenegro — so much so that the Commission indicated that it might slow down the accession process (the first fruits, perhaps, of “front-loading” this area, and adjusting the rate of progress accordingly). In the case of Turkey, there was a litany of concerns about the erosion of fundamental freedoms and the separation of powers. Serbia was the country about which the Commission appeared to be most hopeful — even though it was the least supportive of what was regarded as a benefit of the process, viz., alignment with the EU’s foreign policy priorities, where the new Government preferred to sustain active relations with Russia and to welcome President Putin in Belgrade as recently as 16 October.
13.3 The Minister for Europe (Mr David Lidington) welcomed the Commission’s “fair and balanced assessment of progress and challenges in EU enlargement countries and of the enlargement process itself”, which he said was “closely aligned with the Government’s priorities on enlargement, highlighting the importance of addressing the fundamentals first and the need for firm but fair conditionality”, and which “focuses correctly on the central challenges of the rule of law, judicial reform and the fight against organised crime and corruption; economic governance and competitiveness; the importance of strengthening democratic institutions and public administration reform, and protecting fundamental rights; and the need for good neighbourly relations and dispute resolution”.
13.4 The Minister welcomed the call for enlargement countries’ consolidated efforts to tackle illegal migration and improve border management, which were:
“particular Government priorities on which it wishes to see greater activity and enforcement in enlargement countries. The Government welcomes the focus on human trafficking, but noted through the Reports less progress in tackling it in Montenegro, Macedonia and Kosovo than in the other countries. Moreover, the Government would like to see the absence of laws against trafficking of minors addressed, and continued development of asylum and national referral systems in line with EU standards.”
13.5 At that stage, the Minister said, the Government was only able to provide an initial position on the Reports; as conclusions on EU enlargement would be adopted at the General Affairs Council on 16 December, with any formal decisions to be endorsed at the European Council on 18–19 December, there was time for further developments in the interim; the Government did not foresee any major decisions being taken on the accession progress of individual enlargement countries in the context of this Annual Enlargement Package but, in terms of its position, intended to take a final decision nearer December, which would give time for its own considered analysis, in the light of any further progress countries made and the outcomes of discussions in the relevant Council working groups;
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the Government stated that it would keep Parliament updated over the autumn on developments in its position. 13.6 This was reminiscent of his caveat, at the same juncture a year ago, with respect to the Commission’s recommendation that Albania be granted candidate status; that had begun a lengthy exchange between the Minister and the Committee, which we dealt with further in a separate chapter of our Report.34 13.7 So far as these documents were concerned (which, together, run to several hundred pages), we were, once more, grateful to the Minister and his officials for his extremely helpful Explanatory Memorandum.
13.8 We looked forward to being updated over the next several weeks, particularly with regard to those countries in which political deadlock was hindering the process; and/or those where the Commission was emphasising the need to move beyond legislation and build a track record of implementation.
13.9 On this occasion, we noted that the Minister did not foresee any major decisions being taken by the December General Affairs or European Council on the accession progress of individual enlargement countries. We also noted that the incoming President of the Commission had publicly stated that there would be no further enlargement during the next five years. 13.10 We also noted that, against that sort of background — what one had described as the “ring of fire” that is the EU’s “near neighbourhood”35 — concern was bound to arise that public support for EU-inspired reforms might be undermined unless the economic benefits were more tangible. We accordingly asked the Minister to tell us more about the German-led initiative to encourage the west Balkan states to work together on regional projects, particularly in energy and transport.
13.11 We also asked him to explain how changes embodied in the IPA-II would enable the EU to focus on fewer and bigger projects.36 13.12 In the meantime, we retained the documents under scrutiny.37
13.13 The substance of the Minister’s response is set out below (see paragraphs 13.20– 13.24 below for full details). It is worth highlighting his basic approach, which we endorse:
“It is right that the Commission holds enlargement countries to account where necessary for not having made reasonable progress towards the Copenhagen Criteria. This is a consequence of the added rigour with which it is assessing enlargement countries, notably under the “New Approach”. The Government is ready to wait as long as necessary for enlargement countries to evidence a
34 See (36110), 10582/14: HC 219–xvi (2014–15), chapter 8 (29 October 2014). 35 See “Europe’s ring of fire” in The Economist, 20 September 2014. 36 Also see (36371), 13769/14 at chapter 9 of our 29 October 2014 Report, where we deal with the Commission’s 2013 Annual Report on Financial Assistance for Enlargment, i.e., the IPA and IPA-II and related financial instruments. 37 See HC 219–xvi (2014–15), chapter 4 (29 October 2014).
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sufficient track record of reform, recognising that many Western Balkans countries embark on their EU path from a lower starting point compared to countries from previous enlargement rounds.”
13.14 We now clear the Commission Communication and country progress reports from scrutiny.
13.15 Though the substance of the Minister’s response is satisfactory, the timing leaves significant room for improvement (see paragraph 13.25 below). Although no adverse consequences have resulted from the failure on the part of the Minister’s office to send his otherwise timely response until the eve of the Christmas recess — i.e., well after the relevant Council meetings, and too late for us to deal with until now — that is a happy coincidence. We note that the Minister has apologised for a “genuine administrative mistake in my office”. We will let the matter rest here for the time being: but note the Minister’s assurance that he has “put in place measures to ensure that this does not happen again”.
Full details of the documents: (a) Commission Communication: Enlargement Strategy and Main Challenges 2014–15: (36392), 14152/14 + ADD 1, COM(14) 700; (b) Commission Staff Working Document: Montenegro 2014 Progress Report: (36393), 14153/14 + ADD 1, SWD(14) 301; (c) Commission Staff Working Document: Serbia 2014 Progress Report: (36394), 14154/14 + ADD 1, SWD(14) 302; (d) Commission Staff Working Document: Turkey 2014 Progress Report: (36395), 14155/14 + ADD 1, SWD(14) 307; (e) Commission Staff Working Document: The former Yugoslav Republic of Macedonia 2014 Progress Report: (36396), 14156/14 + ADD 1, SWD(14) 303; (f) Commission Staff Working Document: Albania 2014 Progress Report: (36397), 14157/14 + ADD 1, SWD(14) 304: (g) Commission Staff Working Document: Bosnia and Herzegovina 2014 Progress Report: (36398), 14158/14 + ADD 1, SWD(14) 305; (h) Commission Staff Working Document: Kosovo 2014 Progress Report: (36399), 14159/14 + ADD 1, SWD(14) 306.
Background 13.16 The Copenhagen criteria require: — the stability of institutions guaranteeing democracy, the rule of law, human rights and respect for and protection of minorities; and
— a functioning market economy able to cope with the competitive pressure and market forces within the Union.
13.17 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.
13.18 The Commission’s annual report and accompanying country progress reports have traditionally provided the basis for the Council to take stock and give direction to accession
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negotiations and pre-accession reform priorities (the Council being responsible for decisions on the admission of new Member States). 13.19 This year’s “Strategy” Communication is subtitled “Completing the Foundations for Credibility”: reflecting the shift in recent years to “frontloading” the core priorities — rule of law, economic governance, and public administration reform — in accession negotiations and enhancing the monitoring of candidate countries. The tenth anniversary of the historic accession of ten new Member States in 2004 is noted, with mention of the expanded business opportunities, increased trade and investment (with foreign direct investment from the rest of the world to the EU doubling as a percentage of GDP, from 15.2% of GDP in 2004 to 30.5% in 2012) and better quality of life in those countries.
13.20 The Commission asserts that the accession process is rigorous, built on strict but fair conditionality, established criteria and treating each country on its merits. The Strategy underlines the positive impact of their EU perspective on the western Balkan countries (enhancing stability, improving regional relations, deepening cooperation with the EU on key foreign policy issues, leveraging economic, political and social reform). But it also underlines how much each of the candidate and aspirant countries has to do with regard to implementation, especially in tackling corruption and organised crime, reforming public administration, judicial reform and in those areas encompassed by the fundamental freedoms of European society (embedding a parliamentary process, respecting minority rights, ensuring media freedom etc.). 13.21 The Minister’s summaries of, and other detailed views on, the Commission Communication and each of the Country Progress Reports are set out in our previous Report.38
The Minister's letter of 11 November 2014 13.22 The Minister responds as follows:
“The Government agrees that progress has not been consistent and that there are areas for concern. Major challenges remain, notably around the rule of law, tackling organised crime and corruption, and improving economic governance. However, we also recognise significant progress that has been made. Albania, for instance, has continued to make inroads into tackling organised crime and corruption, demonstrating that its reform ambition is long-term and substantive. Serbia, too, has taken an energetic approach to the first year of its accession negotiations.
“It is right that the Commission holds enlargement countries to account where necessary for not having made reasonable progress towards the Copenhagen Criteria. This is a consequence of the added rigour with which it is assessing enlargement countries, notably under the “New Approach”. The Government is ready to wait as long as necessary for enlargement countries to evidence a sufficient track record of reform, recognising that many Western Balkans countries embark on
38 See HC 219–xvi (2014–15), chapter 4 (29 October 2014).
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their EU path from a lower starting point compared to countries from previous enlargement rounds.” 13.23 The Minister then updates his assessment and comments on our observations on a country-by-country basis:
“The Government continues to monitor closely progress in Albania, where a parliamentary boycott by opposition parties remains in place, and understands the OSCE is working on a Code of Conduct for Parliamentarians to help improve the quality of Parliamentary debate. The Government continues to encourage the Albanian government and opposition parties to engage in constructive debate, using parliament as the proper forum in which to take forward discussion of reform, and continues to monitor reform efforts, particularly in the judicial sector where major structural reform is needed. Inclusive debate is taking place about the shape of judicial reform in Albania, including measures to tackle judicial corruption. I am keen to see discussion translated into action, through a properly thought-through judicial reform process supported by the international community. “The Government remains committed to supporting Bosnia and Herzegovina through its current challenging phase and beyond. After a relatively negative election campaign, we have since been encouraged by the more positive focus of the parties during coalition negotiations. The Government welcomes the sense of urgency to form governments at all levels, and the consensus that exists for Bosnia and Herzegovina to move quickly forward along its European path. We are urging the parties to tackle broader socio-economic reforms, alongside the long-running and important political and constitutional questions in line with our recent joint UK/Germany initiative launched by the Foreign Secretary and his German counterpart in Berlin on 5 November.
“The Government agrees with the Committee’s assessment that Kosovo has made “fitful progress”. Encouragingly, the areas in which Kosovo has made progress are the immediate priorities faced in the last year, for example the well-organised elections, early progress on the Dialogue with Serbia, the extension of EULEX’s mandate and the initialling of the Stabilisation and Association Agreement with the EU. The areas identified in the Report as needing further progress are longer-term but equally important. The Commission is right to draw attention to these, notably in rule of law, governance and the economy. One barrier to progress is that Kosovo has still not formed a government. As a test of Kosovo’s political maturity, it is important that the elected parliamentary representatives agree a course of action themselves, rather than have a solution imposed by the international community. President Jahjaga is working to facilitate this outcome, and we have made clear that we will support any decisions she makes. If she is ultimately unable to unlock the situation, Kosovo will head to new elections. I will update the Committee when there is further movement on this issue. “The Government continues to closely monitor progress in Macedonia where, as in Albania, a parliamentary boycott by opposition parties remains in place. The UK continues to encourage government and opposition parties to engage in constructive debate, using parliament as the proper forum. I am concerned at backsliding on
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reform. We will be working with our EU partners over the coming year to deliver coordinated messages to all stakeholders in Macedonia on the importance of resolving the political crisis, improving media freedom, and developing a joint approach to a multi-ethnic society. The Government continues to believe the best way to address these concerns is through the opening of accession negotiations and the scrutiny of individual Chapters.
“The Government also concurs with the Committee’s analysis of Montenegro. Despite the opening of Chapters 23 and 24, and key judicial and prosecutorial appointments, this was a year of lost momentum, due to political polarisation and public sector capacity weaknesses. The Report’s criticism of Montenegro — for its disappointing track record on implementation, delays in electoral law reform and anti-corruption legislation — was fair. The Government considers the explicit reference in the Report to the “overall balance clause” — the freezing of the opening and closing of other Chapters until progress is achieved on rule-of-law — a timely warning to Montenegro. We do not believe that the situation requires the overall pace of negotiations to be slowed at this time, but will continue to monitor closely how Montenegro rises to the challenge. The Government expects outstanding electoral reform and anti-corruption legislation, revised Action Plans for Chapters 23 and 24, and enhanced roles for parliamentary committees to improve the quality of the EU legislative process to be in place in the next few months.
“Serbia faces many challenges on its path to EU accession, but has made steady progress since starting negotiations in January. However, one of the areas of concern we share with the Report is around Serbia’s failure to align fully with EU foreign policy positions — particularly in response to Russian involvement in Ukraine. Serbia has close historical and social ties with Russia, and strong economic links, and as a result has refused to join the EU in imposing sanctions on Russia — although Serbia has reiterated its support for Ukraine’s territorial integrity, including Crimea. In theory, Serbia does not need to align its foreign policy with the EU’s ahead of opening Chapter 31 on Foreign, Security and Defence Policy. But in the spirit of its entry into accession negotiations, it should be aligning its foreign policy fully now — both rhetorically and with the EU’s restrictive measures. While understanding the sensitivity of this issue for Serbia, the UK and other Member States have made it clear to the Serbian government that alignment with EU foreign policy positions is a key element of EU accession.
“The Report on Turkey contains robust criticism on the erosion, through a series of legislative measures, of the independence and impartiality of the judiciary, restrictions on freedom of expression and the wider response to corruption allegations against the government. The Report also correctly highlights the key role that the Turkish Constitutional Court has played in reversing a number of provisions in recent legislation. In particular, through the overturning of bans on YouTube and Twitter, the Constitutional Court has proved itself to be a genuine guarantor of fundamental rights in Turkey. Further reform is needed to strengthen the independence, impartiality and efficiency of the Turkish judicial system.
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“The Turkish government’s response to the Report has been constructive, and centred on the publication of an updated EU Strategy, consisting of a “National Action Plan for EU Accession” and “Communications Strategy” which combine to set out priorities for political and socio-economic reform. With a focus on the technical alignment process, the Action Plan sets out primary and secondary legislation that is planned under each Chapter, giving a clear indication of concrete action that will be taken. Given the inconsistent progress seen in 2014, particularly on fundamental rights and rule of law, I look forward to this Action Plan acting as a catalyst for improvement in the coming year.” 13.24 Then, turning to the Committee’s request for further information on the German-led initiative to encourage regional cooperation, the Minister says:
“This centred on a Conference hosted by Chancellor Merkel in Berlin on 28 August, attended by Heads of Government of the Western Balkans countries. The Conference, to which prospective future hosts, Austria and France, were also invited, was intended as the first in an annual series, spanning 2014–2018. Western Balkans countries agreed at the Conference that, by the time of next year’s Conference (to be hosted by Austria), Serbia and Kosovo should have completed full implementation of the 19 April 2013 agreement on normalisation, and Bosnia should have formed a new government. At the Conference, Economics Ministers of Western Balkans countries sought more investment in the region, underlining the importance of joint projects in the region for prospective European investment. Albania, for instance, proposed an Adriatic-Ionian highway, railway infrastructure, logistical centres and ports, and broadband connections. Countries further agreed to cooperate on energy and to overcome challenges implementing the Energy Community Framework.
“The Government believes Germany’s initiative has given a helpful impetus to regional cooperation. It looks forward to the discussion being taken forward under the Regional Cooperation Council and through the Western Balkans Investment Framework, as set out in the Commission’s Enlargement Strategy. The UK welcomes Germany’s focus on energy, given both the primacy of energy security in current EU discussions, and the importance the Commission has accorded connectivity in the energy and transport sectors.” 13.25 Lastly, concerning Instrument for Pre-Accession (IPA) funding, the Minister says:
“The Government welcomes the reforms introduced by IPA II. Programme activities during 2014 -2020 will be more closely linked to individual country strategies, which have been agreed by Member States. The sector-based approach is a positive step. The Government is also pleased that the ‘fundamentals first’ principle is reflected in EU assistance programming. In particular, the emphasis on the rule of law in the region remains a top priority for the UK. The “New Approach” also provides greater recognition that progress on successful reforms should be rewarded through a performance reserve. These changes should help to focus EU assistance on fewer and bigger projects that are better targeted at specific areas and achieve improved results.”
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The Minister's letter of 2 January 2015 13.26 The Minister writes as follows:
“I would like to apologise for the unacceptable delay in providing an update to the Committee on the European Commission Communication on EU Enlargement Strategy and Challenges 2014–15, and 2014 Country Progress Reports on Montenegro, Serbia, Turkey, the former Yugoslav Republic of Macedonia, Albania, Bosnia and Herzegovina, and Kosovo. This was caused by a genuine administrative mistake in my office, for which I apologise. “My original letter should have reached the Committee on the 11 November, in time for your consideration before the December General Affairs Council. However, I regret that the letter was not transmitted and our mistake did not come to light until 16 December. My officials have now provided a copy of the letter, and spoken to the clerks to explain the delay.
“I fully appreciate that we did not meet the high standards we set ourselves for engaging with the Committee. I would like to reassure you that we have put in place measures to ensure that this does not happen again.”
Previous Committee Reports Sixteenth Report HC 219–xvi (2014–15), chapter 4 (29 October 2014).
14 The EU’s Special Representative (EUSR) to Bosnia and Herzegovina
Committee’s assessment Politically important Committee’s decision Cleared from scrutiny; further information requested
Document details Council Decision appointing a new European Union Special Representative in Bosnia and Herzegovina Legal base Articles 31 (2) and 33 TEU; QMV Department Foreign and Commonwealth Office Document number (36572), —
Summary and Committee’s conclusions 14.1 Council Decision 2011/426/CFSP appointed Peter Sørensen as the EU’s Special Representative (EUSR) to Bosnia and Herzegovina (BiH) with a mandate until 30 June 2015.
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14.2 Following the appointment of Mr Sørensen to another function, the Council proposes to appoint Mr Lars-Gunnar Wigemark as the new EUSR in BiH from 1 March 2015. He would continue with the same mandate, as set out in Council Decision 2011/426/CFSP (see “Background” below for details).
14.3 The objective of the EUSR is to assist in the creation of a stable, viable, peaceful and multi-ethnic BiH, co-operating peacefully with its neighbours and irreversibly on track towards EU membership. To this end, the EUSR offers advice and facilitation in the local political progress, co-ordinates the activities of EU actors in BiH and provides EU actors and EU Heads of Mission with regular reporting on the local political situation. The EUSR also undertakes significant outreach work, aimed at communicating to the BiH population the benefits of EU integration and why certain reforms are necessary to realise them. 14.4 The current political framework emerged from the 1995 Dayton Agreement, which ended a bitter three-and-a half-year war. Nineteen years later, a country of four million inhabitants remains divided by mistrust between the various ethnic groups, the upshot of which has been political stagnation, a lack of badly needed reform and the consequential stagnation of the Bosnian EU accession process. On 6 November 2014, the British and German foreign ministers met their eight western Balkan counterparts (at the sixth Aspen Institute conference on the Western Balkans at the British Embassy in Berlin) and then proposed a new joint initiative.
14.5 The two Foreign Ministers set out the key points of their reform initiative in a joint article that was published in the German daily newspaper “Frankfurter Rundschau” and as an “open letter” in Bosnia and Herzegovina and neighbouring countries (see the second Annex to this chapter of our Report). Their proposals are focused on improvements in economic and social policy and good governance, so as to create jobs, strengthen the rule of law and reduce corruption and criminality. The two foreign ministers called on the political leaders of Bosnia and Herzegovina to commit in writing to “making the country’s institutions fit” at all levels as a precondition for working effectively with the European Union; and urged them to draw up a broad reform agenda with the European Union to help the country make progress on the road towards EU membership. They said:
“We are extending an offer to the people of Bosnia and Herzegovina and to the politicians they have elected: if they implement the necessary reforms, we will work to achieve progress on the country’s path towards Europe.”
14.6 They also promised actively to seek broad-based political support for their initiative from neighbouring Croatia and Serbia, EU partners and the USA. However, the most important factor, they argue, is leadership on the part of Bosnian politicians, who must have the interests of their whole country at heart, regardless of ethnic affiliations.39
14.7 This initiative was followed up on 5 December 2014 by the EU High Representative/Vice-President, Federica Mogherini, and the Enlargement Commissioner, Johannes Hahn. In a statement at the end of their visit to Sarajevo, the HR said:
39 See http://www.auswaertiges- amt.de/EN/Aussenpolitik/Laender/Aktuelle_Artikel/BosnienUndHerzegowina/141006_Steinmeier_Hammond_Neustart _Bosnien.html.
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“From our side this would mean not lowering the bar and changing the EU conditionality — that is not something that is on the agenda — but it might mean that we can look at how the sequence can be changed or can be better addressed to make sure that there are some concrete deliverables in terms of reforms, starting from the economic and social reforms and getting also to the functionality of the state” (see “Background” below for details).
14.8 The initiative was subsequently endorsed by the 15 December 2014 Foreign Affairs Council, who invited HR Mogherini and Commissioner Hahn:
“to continue engaging with the BiH leadership to secure at the earliest its irrevocable commitment to undertake reforms in the framework of the EU accession process… [in order to]… establish functionality and efficiency at all levels of government and allow Bosnia and Herzegovina to prepare itself for future EU membership” (see second annex to this chapter of our Report).
14.9 The appointment of Mr Wigemark — described by the Minister for Europe (Mr David Lidington) as “a senior Swedish diplomat with close to 30 years of experience, most recently as EU Head of Delegation to Pakistan”, and endorsed by him — thus comes at a crucial moment after nearly two decades of endeavours by the International Community. It is accordingly unfortunate that the EU lost a key interlocutor at this juncture and now has to rely on a short-term appointment with no apparent regional experience. The Minister says that he expects “swift Commission action to fill the position on a longer term basis next spring, assuming the mandate of the EUSR is renewed”.
14.10 That assumption, and the fact that the previous High Representative decided to leave the appointment until her successor took office, reflects a much wider uncertainty over the future of EUSRs as a whole. As the Minister will recall, Baroness Ashton wished to incorporate all the EUSRs into the European External Action Service (EEAS), thereby turning them from special representatives agreed by the Council into ones who would be appointed by, and report only to, the High Representative — a proposal that the Committee has said it would find disturbing because it would undermine Member State control of an important element in Common Foreign and Security Policy.40 We would therefore like the Minister to provide, within ten working days, an update on where this proposal now stands, in the aftermath of HR Mogherini’s appointment.
14.11 At the same time, we would like to know the background to Mr Sørensen’s premature departure — why he left, whether it had anything to do with this political tussle over the future of EUSRs and what his new appointment is.
14.12 In the meantime, we clear this Council Decision from scrutiny.
Full details of the documents: Council Decision appointing a new European Union Special Representative in Bosnia and Herzegovina: (36572), —.
40 For the full background to this issue, see our Report of 4 June 2014: First Report HC 219–i (2014–15), chapter 27.
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Background 14.13 The internationally brokered Dayton Agreement ended the 1992–1995 war in BiH. It established BiH as a state comprising two Entities, each with a high degree of autonomy: the Republika Srpska (RS) and the Federation (FBiH). It also designated the Office of the High Representative (OHR) to oversee the implementation of the civilian aspects of the Peace Agreement on behalf of the international community and coordinate the activities of the civilian organisations operating in BiH.
14.14 The Peace Implementation Council (PIC) — 55 countries and international organisations that sponsor and direct the peace implementation process — oversees all this. The PIC Steering Board nominates the HR; the UN Security Council (which approved the Dayton Agreement and the deployment of international troops in BiH) then endorses the nomination. The Steering Board also provides the HR with political guidance. The Steering Board members are Canada, France, Germany, Italy, Japan, Russia, United Kingdom, United States, the Presidency of the European Union, the European Commission, and the Organisation of the Islamic Conference (OIC), which is represented by Turkey. In Sarajevo, the HR chairs weekly meetings of the Ambassadors to BiH of the Steering Board members. In addition, the Steering Board meets at the level of political directors three times a year. From the outset the HR was “double-hatted” as EUSR.
14.15 The longstanding goal has always been for BiH to work its way towards European accession. But things have not gone according to plan. The BiH authorities need to deliver five objectives (well established, approved by the PIC SB and all previously recognized by BiH authorities as obligations) revolving around creating a sustainable, multi-ethnic, democratic, law-based State, and fulfil two conditions — signing of a BiH Stabilisation and Association Agreement, and a positive assessment of the situation in BiH by the PIC SB based on full compliance with the Dayton Agreement. Delivery or fulfilment of these “Five Objectives and Two Conditions” has, however, proved elusive.
14.16 On 1 September 2011 Peter Sørensen was appointed EUSR to BiH. He was appointed also Head of the EU Delegation in BiH, in a double-hatted role. Previously the EUSR position had been double-hatted with the High Representative role in BiH. This was decoupled on 1 September 2011 when the mandate of the EUSR was transferred from Valentin Inzko (who remains High Representative) to Peter Srensen. Srensen will continue in the roles of EUSR and EU Head of Delegation.
14.17 The mandate of the EUSR is to:
• offer the Union’s advice and facilitate the political process;
• ensure consistency and coherence of Union action;
• facilitate progress on political, economic and European priorities;
• monitor and advise the executive and legislative authorities at all levels of government in BiH and liaise with BiH authorities and political parties;
• ensure the implementation of the Union’s efforts in the whole range of activities in the field of the rule of law and the security sector reform promote overall Union
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coordination of, and give local political direction to Union efforts in tackling organised crime and corruption, and in this context, provide the HR and the Commission with assessments and advice as necessary;
• without prejudice to the military chain of command, offer the EU Force Commander political guidance on military issues with a local political dimension, in particular concerning sensitive operations, relations with local authorities and with the local media. Consult with the EU Force Commander before taking political action that may have an impact on the security situation;
• coordinate and implement the Union’s communication efforts on EU issues towards the public in BiH;
• promote the process of EU integration through targeted public diplomacy and EU outreach activities designed to ensure a broader understanding and support from the BiH public on EU related matters, including by means of engagement of local civil society actors;
• contribute to the development and consolidation of respect for human rights and fundamental freedoms in BiH, in accordance with the EU human rights policy and EU Guidelines on Human Rights;
• engage with relevant BiH authorities on their full cooperation with the International Criminal Tribunal for the former Yugoslavia (ICTY);
• in line with the EU integration process, advise, assist, facilitate and monitor political dialogue on the necessary constitutional changes;
• maintain close contacts and consultations with the High Representative in Bosnia and Herzegovina and other relevant international organisations working in the country;
• provide advice to the High Representative as necessary concerning natural or legal persons on whom restrictive measures could be imposed in view of the situation in BiH; and
• without prejudice to the applicable chains of command, help to ensure that all Union instruments in the field are applied coherently to attain the Union’s policy objectives.
14.18 The most recent Council Decision, which we considered at our meeting on 11 June 2014, authorised a slightly reduced Year 2 budget to fund the existing mandate. At that time, the Minister for Europe (Mr David Lidington) recalled that in March 2011 the EU agreed a strategy for BiH: in broad terms, an enhanced EU presence in BiH, led by the EUSR, with a focus on moving BiH towards its EU future; the three conditions for BiH’s Stabilisation and Association Agreement (SAA) to come into force; and retaining what he described as the important safeguards of the executive civilian mandate of the OHR and the military executive mandate of the EU’s peacekeeping troops in Operation EUFOR Althea. He noted that Peter Sørensen had strengthened the EU’s visibility and political impact in BiH, taking the lead in supporting BiH in EU-related matters; Sørensen was a respected and trusted interlocutor who carried real weight with key Bosnian politicians from all three constituent parties (Bosniak, Bosnian Serb and Bosnian Croat); the EUSR
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mandate remained critical to galvanising BiH’s leaders into making the reforms needed to allow them to submit a credible application for candidate status. The Minister also highlighted the need to maintain “a balance of incentives and deterrents to encourage EU- related reforms, whilst retaining international safeguards such as the OHR and EUFOR Operation Althea’s executive mandate”. The April Foreign Affairs Council (FAC) Conclusions41 had acknowledged a need for a reinvigorated EU push in BiH, aimed at addressing the population’s legitimate concerns through a broadened EU agenda, and increased outreach activities to the BiH population, in particular in the months preceding October’s general elections, in which the EUSR’s Office took the leading role. 14.19 With regard to the relationship between the EUSR and the OHR, the Minister said:
“In line with the EU strategy adopted in March 2011, the EU presence has, to date, coexisted successfully with the High Representative. The UK will continue to insist that the Office of the High Representative (OHR) remain in place (or is potentially ‘off-shored’ — located outside BiH with the High Representative’s executive powers retained if the security situation becomes sufficiently stable) until the set of five conditions and two objectives (known as the ‘5+2’) agreed by the international community for the closure of the OHR are met. The Peace Implementation Council (PIC) will continue to review progress against these ‘5+2’ at its regular meetings. Approval of the EUSR budget does not prejudice a future PIC decision regarding closure of the OHR. Both the OHR and EUSR continue to work together effectively on the ground and focus on complementary tasks.”
14.20 The April 2014 Foreign Affairs Council Conclusions to which the Minister referred:
— noted that the EU integration process had stalled due to the lack of political will on the part of the BiH politicians and the continued use of unacceptable, secessionist and divisive, rhetoric and ideas; — said that Council had heard the public protests and calls by BiH citizens to improve the social and economic situation in the country, and that all BiH citizens, including the younger generation, needed to be given new opportunities; — strongly urged the BiH institutions and elected leaders to reach out to the people, engage with civil society and provide responsible and immediate answers to their legitimate concerns; and
— emphasized that it was the collective responsibility of all BiH political leaders and that, ahead of the general elections in October 2014, “more needs to be done, not less”.42
14.21 We noted that these Council Conclusions illustrated all too clearly the challenges facing the EUSR (and the OHR) over the next 12 months, and looked forward to hearing from the Minister about the extent to which they have been overcome when he next submitted the EUSR mandate for scrutiny. 43
41 Available at http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/EN/foraff/142228.pdf, pp.11 and 12. 42 See http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/EN/foraff/142228.pdf, p.11. 43 See (36036), —: Second Report HC 219–ii (2014–15), chapter 12 (11 June 2014).
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The draft Council Decision 14.22 The draft Council Decision appoints Mr Lars-Gunnar Wigemark as the new EUSR in BiH from 1 March 2015 until 30 June 2015.
14.23 In his Explanatory Memorandum of 18 December 2014, the Minister for Europe (Mr David Lidington) describes Mr Wigemark as “a senior Swedish diplomat with close to 30 years of experience, most recently as EU Head of Delegation to Pakistan”. He goes on to explain that:
— the need has arisen “due to the early departure of Peter Srensen to another position” on 31 October 2014; — the previous High Representative, Baroness Ashton, decided to leave appointment decisions to the incoming High Representative;
— the changeover of the Commission resulted in an unavoidable delay;
— the position is being covered by the current interim Head of Delegation; — although such appointments are normally for one year, Mr Wigemark’s appointment is for a four month period only, from 1 March 2015 until the end of the present mandate; and
— he is expected to be concurrently appointed as both EUSR and Head of the EU Delegation.
The Government’s view 14.24 Beyond that, the Minister says:
“We expect swift Commission action to fill the position on a longer term basis next spring, assuming the mandate of the EUSR is renewed.”
14.25 In the meantime, the Minister comments as follows:
“The objective of the EUSR is to assist in the creation of a stable, viable, peaceful and multi-ethnic BiH, co-operating peacefully with its neighbours and irreversibly on track towards EU membership. To this end, the EUSR offers advice and facilitation in the local political progress, co-ordinates the activities of EU actors in BiH and provides EU actors and EU Heads of Mission with regular reporting on the local political situation. The EUSR also undertakes significant outreach work, aimed at communicating to the BiH population the benefits of EU integration and why certain reforms are necessary to realise them. “BiH is still beset by the terrible consequences of a war which ended two decades ago. Deeply entrenched ethnic divisions have led to political and economic stagnation and stymied much needed reform. February’s protests were a direct response to the country’s economic stagnation.
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“The result has been economic and social malaise, which was only exacerbated by catastrophic flooding in the spring of this year (costing some 15% of GDP). State, Entity and Cantonal level elections were held on 12 October 2014. The performance of the new parliament over the next four years will be crucial in determining their future. The Foreign Secretary believes that, if the new government is able to demonstrate a willingness and an ability to make progress on this broader reform agenda, then we should recognise this through matched progress on the path to the EU. This is why the Foreign Secretary and his German counterpart launched a new initiative in Berlin on 5 November to inject momentum into BiH’s EU accession process.
“The reinforcement of the EU’s presence through a single EUSR/Head of EU Delegation figurehead, with the ability to make effective use of the incentives offered by the EU, as well as to advise on possible recourse to restrictive measures, is an important and welcome part of this process. The UK therefore supports the appointment of Mr Lars-Gunnar Wigemark as EUSR/Head of EU Delegation in BiH.
“The EUSR role is crucial in supporting High Representative Mogherini’s mandate under the new EU initiative towards BiH’s EU accession, which was endorsed by the December 2014 Foreign Affairs Council in Brussels.”
14.26 On 5 December 2014, after visiting BiH with the Enlargement Commissioner, Johannes Hahn, the EU High Representative/Vice-President, Federica Mogherini, said that the November FAC had discussed the way in which “we could profit from the post- electoral period in Bosnia and Herzegovina and new start in Brussels that we have with a new Commission” and “see if there is a will, not only in the people of Bosnia and Herzegovina, but also in the political leadership and institutions to start a new phase, a new process to move things”. She went on to say that, after meetings with civil society, the Presidency, the leaders of political parties, their overall impression was that civil society was “more than ready” to have the country moving forward towards the European Union and that there was “a relevant and significant political will … in the institutions and the political leadership to meet these expectations and start working on a new basis”.
14.27 She then went on to say:
“From our side this would mean not lowering the bar and changing the EU conditionality — that is not something that is on the agenda — but it might mean that we can look at how the sequence can be changed or can be better addressed to make sure that there are some concrete deliverables in terms of reforms, starting from the economic and social reforms and getting also to the functionality of the state. “This is something that we will report to the Foreign Ministers of the European Union in a little bit more than a week, on December 15. We will report about the meetings we have had today and the assessment of the existing political will that we have found today to move forward on this way. And we will have the discussion with the Ministers about the engagement of the EU in this process given the political will
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that we find in the country, as I said, not only, but firstly in a population, but also in the institutions and in the political leadership. “We know that this is not going to be just about signing something. It is about starting a process of delivering to the people, and I think, we think, it is a good opportunity for the country, for the institutions, for the political leadership of this country to move forward. We have an opportunity to close with the divisions or the problems of the past and have a fresh look at the way in which Bosnia and Herzegovina can fulfil its being part of the EU family.
“We always say that all countries of the Western Balkans have a future in the EU and we have to make it real now, together, with the sense of ownership, here in Sarajevo and all parts of the country and with a sense of responsibility and being ready to cooperate from the European Union side.”44
14.28 Subsequently, the Foreign Affairs Council adopted the Conclusions set out in the second Annex to this chapter of our Report.
Previous Committee Reports None, but see (36036), —: Second Report HC 219–ii (2014–15), chapter 12 (11 June 2014); (35032), —: Seventh Report HC 83–vii (2013–14), chapter 12 (26 June 2013); also see (33960), —: Fourth Report HC 86–iv (2012–13), chapter 23 (14 June 2012) and (34725), —: Thirty-fourth Report HC 86–xxxiv (2012–13), chapter 12 (13 March 2013): (32951), —: Thirty-sixth Report HC 428–xxxii (2010–12), chapter 17 (6 July 2011); (32579), —: Twenty-second Report HC 428–xx (2010–12), chapter 8 (16 March 2011); and (31844), (31856–66) and (31884), —: First Report HC 428–i (2010–12), chapter 66 (8 September 2010).
Annex 1: Joint article by the Foreign Secretary and the German Foreign Minister published on 6 November 2014. “There is one country at the heart of Europe still beset by the terrible consequences of a war which ended two decades ago. Deeply entrenched ethnic divisions in Bosnia and Herzogovina have led to political stagnation and stymied much needed reform. The result has been economic and social malaise, which was only exacerbated by catastrophic flooding in the spring of this year. Last month the country’s citizens elected a new parliament. Its performance over the next four years will be crucial in determining their future.
“The UK and Germany have already invested a great deal in Bosnia and Herzegovina over the last 20 years: our soldiers and police officers have taken part in NATO and EU missions to stabilise the country, and we have promoted the country’s economic development alongside our involvement at the political level. The fact that our efforts have not yet borne fruit is not a reason to give up and turn away.
44 See http://ec.europa.eu/commission/2014–2019/hahn/announcements/remarks-high-representativevice-president- federica-mogherini-end-visit-bosnia-and-herzegovina_en.
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“On the contrary, we must redouble our efforts to help Bosnia and Herzogovina transform its fortunes. “What the country desperately needs is stability and economic prosperity coupled with functioning democratic and judicial institutions. Accomplishing this requires far-reaching reforms which have been delayed far too long. While history shows us that the prospect of EU accession can encourage countries to enact essential reforms, for Bosnia and Herzegovina, riven with ethnic political divisions, it has not been able to work its magic. A new approach is essential.
“This evening we will be presenting our ideas for recasting Bosnia and Herzegovina’s EU accession process, when foreign ministers from the region gather at the British Embassy in Berlin for the Aspen Institute’s conference on South-Eastern Europe. These proposals primarily focus on those economic and social policies, as well as good governance and the rule of law, which will have the biggest impact on the lives of ordinary Bosnians and Herzegovinians: policies to deliver jobs and the rule of law, and to reduce corruption and criminality. “The first step we are seeking is for Bosnia and Herzegovina’s political leaders to make a written commitment to do two things: first, to deliver institutional reforms at all levels of the State, designed to make it more functional and able to work effectively with the EU; and secondly, to agree with the EU a roadmap for a broad reform agenda to advance the country on its path to EU accession.
“This approach is not about lowering the bar to EU membership. Difficult constitutional amendments, such as safeguarding the voting rights for all citizens of Bosnia and Herzegovina (the Sejdic-Finci problem), will still need to be addressed. But what we are proposing is a step by step process of reform starting with a focus on genuine economic improvements and gradually increasing the functionality of state institutions — an approach that is closely bound up with progress on Bosnia and Herzegovina’s path toward the EU.
“Nor is this a return to the days of the international community imposing legislation on Bosnia and Herzegovina. We are making a proposal and an offer to the people of Bosnia and Herzegovina and the politicians they have elected: if they enact the reforms then we will advocate for progress on the European path.
“Germany and the United Kingdom are setting the ball rolling today; we are actively seeking the broad-based political support needed for success. We need our partners in the neighbouring states of Croatia and Serbia, as well as our partners in the EU and the USA to work alongside us. But above all, we are calling on Bosnia and Herzegovina’s politicians to adopt an approach that demonstrates leadership for all of the country, irrespective of ethnic interests.
“Bosnia and Herzegovina needs a vision for the future that matches its status as a country at the heart of Europe. Its people deserve the rule of law, low crime rates, good public services, jobs and prosperity just as much as the citizens of neighbouring European states. Today we are offering the people of Bosnia and Herzegovina a way forward. We sincerely hope they will grasp it.”
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Annex 2: 15 December 2014 Foreign Affairs Council Conclusions on Bosnia and Herzegovina: “1. The Council reiterates its unequivocal commitment to Bosnia and Herzegovina's EU perspective. The Council also reaffirms its unequivocal commitment to the territorial integrity of Bosnia and Herzegovina as a sovereign and united country.
“2. The Council welcomes the Compact for Growth and Jobs to shift the focus towards reforms and issues of direct concern to citizens, in the wake of the widespread, citizen-led protests in early 2014 which underlined the fragility of the socio-economic situation. “3. The Council welcomes the recent visit of HR Mogherini and Commissioner Hahn to Sarajevo and their engagement in the revitalisation of the reform process in Bosnia and Herzegovina. The Council agreed on a renewed EU approach towards Bosnia and Herzegovina on its EU accession path throughout which all conditions, including the implementation of the Sejdic-Finci ruling,45 will have to be met. The Council calls on BiH political leadership to anchor the reforms necessary for EU integration in the work of all relevant institutions.
“4. The Council invites HR Mogherini and Commissioner Hahn to continue engaging with the BiH leadership to secure at the earliest its irrevocable written commitment to undertake reforms in the framework of the EU accession process. The overall objective is to establish functionality and efficiency at all levels of government and allow Bosnia and Herzegovina to prepare itself for future EU membership. The text will also contain a commitment to work out in consultation with the EU an initial agenda for reforms, in line with the EU acquis. The reform agenda should be developed and implemented in consultation with civil society. This agenda should include first and foremost reforms under the Copenhagen criteria (socio-economic reforms including the ‘Compact for Growth and Jobs’, rule of law, good governance) and also agreed functionality issues (including the EU coordination mechanism). The BiH leadership will also commit to make progress, at a later stage, on further reforms in order to enhance functionality and effectiveness of the different levels of government. “5. The Council invites HR Mogherini and Commissioner Hahn to regularly report on progress in bringing about this written commitment and on how this is reflected in the work of all relevant institutions.
45 Sejdić and Finci v. Bosnia and Herzegovina (27996/06 and 34836/06) was a case (merged from two) decided by the Grand Chamber of the European Court of Human Rights in December 2009. The 1995 BiH, created as part of the Dayton Agreement, included power-sharing provisions whereby posts in the tripartite Presidency and the House of Peoples (upper house of the national parliament) were reserved for ethnic Bosniaks, Bosnian Serbs and Bosnian Croats only. The applicants, being a Roma and a Jew, contested these provisions. The Court found that applicants' ineligibility to stand for election to the House of Peoples violated Article 14 of the European Convention on Human Rights (ban of discrimination in the field of Convention rights) taken in conjunction with Article 3 of Protocol No. 1 (free elections), and that their ineligibility to stand for election to the Presidency violated Article 1 of Protocol No. 12 (general ban of discrimination). In October 2011, the BiH set in motion a process of constitutional reform, including changing the election provisions. In November 2014, the Foreign Secretary and his German counterpart sent an "open letter" to the people of BiH, which pledged substantive progress towards Bosnia's EU membership if Bosnia's politicians gave a written commitment to implement a package of reforms, including compliance with the Sejdic and Finci ruling.
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“6. Once the written commitment has been agreed by the BiH Presidency, signed by the BiH political leaders and endorsed by the BiH Parliament, the Council will decide on the entry into force of the Stabilisation and Association Agreement.
“7. Meaningful progress on the implementation of the agenda for reforms, including the ‘Compact for Growth and Jobs’, will be necessary for a membership application to be considered by the EU. When requesting the Commission's Opinion on the membership application, the Council will ask the Commission to pay particular attention to the implementation of the Sejdic-Finci ruling.
“8. The Council underlines the crucial importance of swift government formation and calls on the country's leaders to ensure that this takes place.”46
15 EU training of Malian security forces
Committee’s assessment Politically important Committee’s decision Cleared from scrutiny; further information requested
Document details Council Decision launching the CSDP mission in Mali (EUCAP Sahel Mali) Legal base Articles 28, 42(4) and 43(2) TEU; unanimity Department Foreign and Commonwealth Office Document number (36579), —
Summary and Committee’s conclusions 15.1 Mali has been in crisis since March 2012, when the military overthrew the government and, then, a coalition of separatist Tuareg rebels and militant Islamist armed groups with links to Al-Qaeda in the Islamic Maghreb pushed the national army out of the north of the country. In late 2012, it was agreed to create a military intervention force (now known as AMISA), under the auspices of the Economic Community of West African States (ECOWAS), which would attempt to retake the north. However, in January 2013, the prospect that the entire country might fall to the rebels before AMISA could become operational provoked an urgent French military intervention.
15.2 The restoration of security and lasting peace in Mali is a major issue for the stability of the Sahel region and, in the wider sense, for Africa and Europe.47 On 18 February 2013, at the request of the Malian authorities, and in accordance with United Nations Security Council Resolution 2085 (2012), the EU launched a training mission for Malian armed forces, EUTM Mali. That mission (to which 28 States, including 23 Member States, are
46 Available at http://italia2014.eu/media/4325/council-conclusions-on-bosnia-and-herzegovina.pdf. 47 See EU and Sahel fact sheet for full information.
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contributing military personnel) aims to support the training and reorganisation of the Malian Armed Forces and to help improve its military capacity, in order to allow, under civilian authority, the restoration of the country’s territorial integrity. The mission would not be involved in combat operations (and has not been). This Mission is now into its second mandate of training and advising the Malian armed forces.
15.3 On 15 April 2014 the Council established a further CSDP civilian mission to support the internal security forces in Mali — EUCAP Sahel Mali, as an additional contribution to the EU’s overall support to stability, institutional reform and the full restoration of state authority throughout the country. The mission will support the Malian state to ensure constitutional and democratic order and the conditions for lasting peace as well as to maintain its authority throughout the entire territory. The mission will deliver strategic advice and training for the three internal security forces in Mali, i.e. the police, Gendarmerie and Garde Nationale, and coordinate with international partners, with a view to:
— improving their operational efficacy;
— re-establishing the chain of command; — reinforcing the role of the judicial and administrative authorities in the management and supervision of their missions, and
— facilitating their redeployment to the north of Mali.48 15.4 This further Council Decision would authorise the launch of EUCAP Sahel Mali as of 15 January 2015, with a 24 month mandate and a Year 1 budget of €11.4 million, from the overall CFSP Budget. The UK would also separately fund a political adviser.
15.5 The Minister for Europe (Mr David Lidington) explains that EUCAP Sahel Mali is designed to mirror the CSDP Mission in neighbouring Niger — EUCAP Sahel Niger — which has been building the capacity of the civilian security sector there since 2012 and which, after a slow start, has “turned itself around and is now delivering effectively”. He further explains that the lack of a comprehensive peace agreement in Mali has meant that the Malian state has been unable to re-establish its authority across much of the northern part of the country; basic services including law-enforcement, justice and education are still lacking; the UN Mission (MINUSMA), mandated to lead on security and justice sector reform in Mali, will be EUCAP Sahel Mali’s principal international partner in delivering the extra security capacity.
15.6 The Minister describes the overall objective by the end of the mandate as:
“for the security forces to be more capable to provide public security, particularly in the north; to have greater control over the territory; and for the chain of command to be strengthened. In addition, the penal chain will be more robust and effective.” 15.7 He notes that the mission’s exit strategy will be “defined in more detail as part of a Strategic Review after the first year”, but at this stage:
48 See EUCAP Sahel Mali for full information.
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“there is consensus among EU Member States that the Malian government, the EDF, other EU instruments, the UN and bilateral partners will all have a role in providing advice at Ministerial level, human resources advice, advice in managing training schools as well as training teacher trainers.”
15.8 As the “Background” section of our Report recalls, the Committee has been engaged already on two fronts in connection with the first of these two missions, EUTM Mali — avoiding an unending commitment and “upstream” scrutiny of the process. In the case of the new mission, the Minister clearly set out his pre-conditions a year ago, including that any new CSDP mission should have “a focused, measureable mandate”, be “up-front about the potential challenges”, and have “achievable aims” and “a clear, achievable exit strategy” (see paragraphs 15.15–15.16 below for full details). 15.9 It is plain that we are not there yet: there is no mention of the potential challenges, nor is a focused and measurable mandate discernible. Moreover, an exit strategy is at least a year away — which raises the other longstanding point of discussion, regarding how the Committee can be engaged in the Strategic Review process of such missions, so as to avoid being where we are now, presented with a fait accompli in the form of a Council Decision requiring urgent attention. That issue remains unresolved. In any event, we would like the Minister to write to us in the autumn, when the House has returned from the conference recess, to bring us up to date on how the new mission is performing — as he notes, its counterpart in Niger got off to a slow start — and what the position then is with regard to concretising a proper exit strategy and whether the Committee is to be given sight of the Strategic Review before any decision is presented regarding the Year 2 budget.
15.10 In the meantime, we clear this Council Decision.
Full details of the documents: Council Decision launching the CSDP mission in Mali (EUCAP Sahel Mali) and amending Decision 2014/219/CFSP: (36599) —.
Background 15.11 In the words of the current House of Commons Library research paper:
“Mali has been in crisis since March 2012, when the military overthrew the government of Amadou Toumani Touré. Within weeks of the coup, a coalition of separatist Tuareg rebels and militant Islamist armed groups with links to Al-Qaeda in the Islamic Maghreb pushed the national army out of the north of the country. The coalition split up quickly, leaving the militant Islamists largely in control. A weak and ineffective transitional government has been in existence in the south of the country since April but the north remained beyond its control. In late 2012, it was agreed to create a military intervention force, under the auspices of the Economic Community of West African States (ECOWAS), which would attempt to retake the north, but it was not expected to be battle-ready until September 2013. At the same time, political negotiations began to try and draw parts of the rebel coalition into a political process. However, on 9 January 2013, a sudden military push southwards by rebels appeared to open up the possibility that the entire country might fall to them in the near future. This provoked an urgent French military
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intervention from 11 January onwards to stop the rebel advance and, indeed, roll it back. This is being achieved. However, the rebels are re-grouping and will turn to insurgency.
“Concerns are being raised about the need for French and Malian forces to uphold humanitarian and human rights law during the current military operation in Mali. Malian forces have been accused of serious human rights abuses. As the ECOWAS force, known as AFISMA, assembles and deploys, these concerns will extend to it as well. The agreed EU training mission that has been agreed, along with the UK training initiative for Anglophone troops involved, will need to respond to such concerns. The UK is not currently in a combat role in Mali, although some worry about gradual ‘mission creep’.”49 15.12 The Council Decision establishing that training mission — EUTM Mali — was debated in European Committee B on 16 January 2013.50 The EU’s overall political objective is to enable the Malian authorities to: restore constitutional order, supporting a roadmap to free and open elections in 2013; extend the State’s authority throughout the country; and tackle the terrorist threat and organised crime. EUTM Mali aims at strengthening conditions for a proper political control by legitimate civilian authorities of the Malian Armed Forces. The Mission’s parameters were to be: non-involvement in combat operations; the provision to the Malian Armed Forces of training and advice in command and control, logistical chain and human resources, and international humanitarian law, protection of civilians and human rights; strengthening conditions for a proper political control by legitimate civilian authorities of the Malian Armed Forces; to be conducted in close coordination with other factors involved in the support to the Malian Armed Forces, in particular the UN and ECOWAS (the Economic Community of West African States). The budget was €12.3 million, to cover its 15 month duration. An extraordinary FAC meeting on 17 January 2013 adopted the Council Decision and thus authorised its establishment.51 15.13 By July 2013, EUTM Mali was approximately 550 strong, comprising:
— approximately 200 instructors, of which approximately 100 are infantry trainers; — 150 troops providing force protection, from France (1 company), Czech Republic and Spain (one platoon each);
— 150 staff officers and NCOs at the Main Headquarters in Bamako and the Forward Headquarters in Koulikoro, responsible for command and control, liaison with the Malian authorities, medical support and logistics; — a small cell in Brussels responsible for co-ordination between the Mission and the EU apparatus.
49 See “The crisis in Mali: current military action and upholding humanitarian law”: SN06531 of 11 March 2013. 50 The record of the debate is available at Gen Co Deb, European Standing Committee B, 16 January 2013, cols. 3–24. 51 For the full background and the Committee’s earlier consideration, see (34646): Thirteenth Report HC 86–xxxi (2012– 13), chapter 13 (6 February 2013) and (34550)—: Twenty-fifth Report HC 86–xxv (2012–13), chapter 2 (19 December 2012).
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15.14 Twenty-two Member States had provided personnel. France was by far the largest contributor. The UK was providing 33 military trainers, four HQ staff and one Human Rights trainer.
15.15 As our previous Reports on EUTM Mali relate, the Committee has long underlined the danger of “mission creep” in all CSDP missions. Here, the element of “mission creep” at this early stage was budgetary: double the original estimate, and clearly the likelihood of more to come. The Committee said that it expected to hear more when the Minister wrote about the mid-term review and asked, when he did so, to provide his assessment of EUTM Mali’s achievements-against-benchmarks thus far, of progress towards achieving the EU’s overall objectives and of the likelihood of attaining the planned exit at the end of the 15- month mandate.52 15.16 In January 2014, as part of an update on CSDP in the Sahel, the Minister for Europe flagged up the likelihood of this new mission. He had given it “a cautious welcome” but, “mindful of the need for any new CSDP activity to be effective and represent good value for money”, had clearly set out his pre-conditions, viz., any new CSDP mission should: complement the work of other actors, principally MINUSMA; have a focused, measureable mandate; be up-front about the potential challenges; have achievable aims and a clear, achievable exit strategy; prioritise training of officers who will eventually deploy to northern Mali, where the need is greatest; work closely with the other CSDP Missions to deliver the EU Strategy for the Sahel, sharing good practice, learning lessons and avoiding duplication; and consider early and realistically how it will be staffed.
Council Decision 2014/219/CFSP 15.17 On 15 April 2014, the Council adopted this Decision, authorising the conduct of a civilian mission in Mali (EUCAP Sahel Mali) in support of the Malian internal security forces (ISF): police, gendarmerie, National Guard. Its objectives are to allow the Malian authorities to restore and maintain constitutional and democratic order and the conditions for lasting peace in Mali, and to restore and maintain State authority and legitimacy throughout the territory of Mali by means of an effective redeployment of its administration. With “the support of the Malian dynamic in restoring State authority”, and in close coordination with other international actors, in particular MINUSMA, EUCAP Sahel Mali shall assist and advise the ISF in the implementation of the security reform set out by the new Government, with a view to:
— improving their operational efficacy;
— re-establishing their respective hierarchical chains; — reinforcing the role of judicial and administrative authorities with regard to the management and supervision of their missions; and
— facilitating their redeployment to the north of the country.53
52 See (34664), —: Thirty-second Report HC 86–xxxii (2012–13), chapter 14 and Eighth Report HC 83–viii (2013–14), chapter 17 (3 July 2013). 53 See Council Decision of 15 April 2014 on CSDP Mission in Mali.
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15.18 In clearing this Council Decision from scrutiny, the Committee noted that, although the EEAS seemed to have stepped back from the very ambitious objectives outlined in the Minister’s letter of 3 January 2014, they were nonetheless very challenging, given the starting point with the security forces — poor relations with the authorities and the general population; insufficient training and equipment; a lack of infrastructure; a chain of command not fit for purpose; disorganised human resources management; endemic clientelism and corruption; and a general a lack of credibility. 15.19 The aim accordingly appeared to be more realistic: the security forces to be better at ensuring public security, with greater control over their territory, a more effective penal chain, a strengthened chain of command and operating more effectively. Given the starting point, they could hardly fail to be achieved. 15.20 Nonetheless, it was already envisaged that this mission would run for at least four years, with an exit strategy that would not be defined until the time of the first Strategic Review; and that the EU would be involved for years thereafter through the EDF and other EU instruments, in providing advice at Ministerial level, human resources advice, advice in managing training schools as well as training teacher trainers. This was, we noted, very reminiscent of the EU’s approach in the Democratic Republic of Congo: however, what might be called “Stage 1” had lasted a great deal longer than originally envisaged, while “Stage 2” had yet to be initiated.
15.21 The first Strategic Review would thus be of particular importance. However, the Minister did not say when it would take place. Moreover, as he was aware, we had been in extensive and as yet unresolved discussion over our wish to be involved in the scrutiny of such Strategic Reviews, given that they determine the way ahead and that, by the time that the ensuing Council Decisions are submitted for scrutiny, the die is effectively cast. 15.22 For now, as the Minister noted, there would be a second Council Decision in the autumn, prior to the mission’s launch. At that stage, as well as demonstrating how the fully fleshed-out Mission would meet his pre-conditions, we hoped that the Minister would have more to say about the exit strategy and the sort of timeline and scope that Member States envisaged for longer-term EU involvement (and that our discussions on the general question of the Committee’s involvement in the Strategic Review process as a whole would have been resolved to our satisfaction).
The draft Council Decision 15.23 The draft Council Decision authorises the launch of EUCAP Sahel Mali. The objectives of the mission are summarised thus by the Minister in his Explanatory Memorandum of 18 December 2014:
“to assist the Malian authorities to restore constitutional and democratic order and the conditions for lasting peace in Mali, and to restore and maintain state authority and legitimacy throughout the territory of Mali through an effective redeployment of its administration.”
15.24 The mission’s first mandate will be for 24 months.
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The Government’s view 15.25 The Minister notes that Mali remains a fragile democracy. He says that EUCAP Sahel Mali has been established to mirror the EUCAP Sahel Niger CSDP Mission in neighbouring Niger which has been building the capacity of the civilian security sector there since 2012, and which he says, after “a slow start”, has “turned itself around and is now delivering effectively”. 15.26 He continues as follows:
“The lack of a comprehensive peace agreement in Mali has mean that the Malian state has been unable to re-establish its authority cross much of the northern part of the country. Basic services including law-enforcement, justice and education are still lacking, and the UN Mission (MINUSMA), mandated to lead on security and justice sector reform in Mali, will be EUCAP’s principal international partner in delivering the extra security capacity.
“The Mission will focus its initial efforts on enabling officers to deploy to northern Mali where the need for security apparatus is most acute. In order to achieve its objectives, the mission will: i. “Provide strategic advice on the security forces human resources: The mission will embed experts in the management structures of the national police, National Guard and Gendarmerie to identify the strengths and weaknesses of each service and to produce a needs analysis in terms of training and management oversight and control. The experts will also encourage the forces to create mechanisms to coordinate better with each other and with ministers. Experts will also identify pieces of legislation that need to be put in place and will assist in creating an annual human resources plan. Finally they will support the services in defining their training needs and draft a training plan both for basic initial training and ongoing training needs, with modules on this, human rights and gender equality. This work will all be recorded in a human resources database for each force. ii. “Training: The mission will embed experts in the security forces to identify the strengths and weaknesses in terms of training and will define the content of training programmes. Planning has identified that a third of the Gendarmerie and Police will need training and a quarter of the National Guard and they will focus on community police and middle management. The mission anticipates training in general surveillance and community policing, forensics, criminal law and procedures, treatment of evidence, public order, human rights and the fight against organised crime and terrorism. Trainers will be identified and trained. Finally, the impact of training will be monitored and evaluated. iii. “Coordination: Given the large international community present in Mali, donor coordination has been identified as particularly important to the mission’s success. Structures for coordination with MINUSMA, in particular, will be created. Communication channels will be opened and some staff collocated to facilitate this and to identify synergies and to reduce the risks of duplication. The mission will also coordinate closely with the EUSR’s office
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and with other CSDP missions present in the region as well as bilateral programmes. “The overall objective by the end of the mandate is for the security forces to be more capable to provide public security, particularly in the north; to have greater control over the territory; and for the chain of command to be strengthened. In addition, the penal chain will be more robust and effective. The mission’s exit strategy will be defined in more detail as part of a Strategic Review after the first year, but at this stage there is consensus among EU Member States that the Malian government, the EDF, other EU instruments, the UN and bilateral partners will all have a role in providing advice at Ministerial level, human resources advice, advice in managing training schools as well as training teacher trainers.” 15.27 With regard to the Financial Implications, the Minister says:
“EUCAP Sahel Mali’s preliminary budget will total €11.4 million and will be funded from the Common Foreign and Security Policy budget. The UK contributes a proportion to the pre-agreed CFSP budget, not the individual programmes within it. Funds for EUCAP’s budget will be found within existing resources in the CFSP budget.
“The budget will be broken down as follows:
“Personnel Costs: €5,669,223 “Staff will include a Head of Mission, 25 contracted staff to include positions such as mission support, finance, logistics, security etc., 50 seconded experts and 30 assistants who will be local staff. The costs will include salaries where appropriate, per Diems and insurance.
“Mission Expenditure: €258,628 “Staff will be expected to travel to Brussels to coordinate with the Institutions involved in management and direction of the mission, as well as travel throughout the Sahel to coordinate with other CSDP missions, particularly EUCAP Sahel Niger and EUTM in Mali.
“Running Expenditure: €3,711,870 “This heading includes the costs of transporting and running vehicles donated from surplus from other CSDP missions and the CSDP Warehouse, office and accommodation costs, communication costs, and security services, as well as training and small project costs.
“Capital Expenditure: €1,518,912 “This includes costs for IT equipment, communications equipment, office furniture and equipment such as air conditioners and generators for the office and the accommodation, building works and security upgrades and equipment and medical equipment and supplies
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“Representation: €15,900
“This budget line funds the mission’s public facing activities.
“Contingencies: €225,467
“This can only be used with prior written approval of the Commission. “In addition to the core costs funded from the CFSP budget, the UK is funding a Political Adviser for the mission. The cost for this position will come from the Conflict Pool and will cost approximately £80,000.”
Previous Committee Reports None, but see (35889), —: Forty-fourth Report HC 83–xxxix (2013–14), chapter 16 (26 March 2014) and the earlier Reports referred to therein.
16 Taxation
Committee’s assessment Politically important Committee’s decision Cleared from scrutiny (decision reported on 3 December 2014)
Document details Draft Council Directive concerning information exchange in the field of taxation Legal base Article 115 TFEU; consultation; unanimity Department HM Treasury Document numbers (35062), 10243/13, COM(13) 348
Summary and Committee’s conclusions 16.1 With this draft Directive the Commission proposed amendment of Council Directive 2011/16/EU on administrative cooperation in the field of taxation.
16.2 We cleared the proposal from scrutiny in December 2014, but wished the Government to address questions we had about the scrutiny process in this case.
16.3 The Government now explains how the scrutiny failure arose and the measures it has taken in the Treasury departments to avoid this situation for the future. It also takes the opportunity to give us some further information about the proposal itself.
16.4 We note what the Government says and hope to see no further lapses in the scrutiny process by Treasury departments.
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Full details of the documents: Draft Council Directive amending Directive 2011/16/EU as regards mandatory automatic exchange of information in the field of taxation: (35062), 10243/13, COM(13) 348.
Background 16.5 The Directive on administrative cooperation in the field of taxation, Council Directive 2011/16/EU, provides for the automatic exchange of information between Member States. With this draft Directive the Commission proposed amendment of the existing Directive on administrative cooperation. 16.6 When, on 3 December 2014, we last considered this proposal the Government told us that the Council had reached political agreement on the proposal on 14 October 2014, while we still held it under scrutiny, and that it was to be formally adopted on 9 December 2014. It explained the rationale for the proposal, how it would be implemented and its consequences for the Savings Directive and third country agreements. But the Government did not explain the scrutiny breach, although it said that new Treasury procedures should avoid such lapses in the future.
16.7 We saw no reason to continue to hold this document under scrutiny and accordingly cleared it from scrutiny. However, we were disappointed that the Government had not seen fit to properly explain the scrutiny lapse. We noted and accepted the statement that new Treasury procedures should avoid such lapses in the future, but we still required the Government to provide us with the fuller explanation we had requested previously.
The Minister’s letter of 15 December 2014 16.8 The Financial Secretary to the Treasury (Mr David Gauke) first confirms that the draft Directive was adopted at the ECOFIN Council on 9 December 2014.
16.9 Turning to the scrutiny issues, the Minister:
• apologises again for the delay in keeping us informed and for failing to seek scrutiny clearance in time for the October 2014 ECOFIN Council; and
• saying again that in this particular case a number of factors came together which contributed to the oversight, explains that negotiating responsibility was split between HMRC and the Treasury, and lead official responsibility within the Treasury on this dossier changed in July 2014 as did the lead official in UKREP Brussels. 16.10 The Minister continues, in regard to changes made by the Treasury Departments, that:
• in addition to their existing systems and guidance they have reviewed and upgraded their scrutiny tracking tools and guidance and will be providing additional training for officials working on EU business;
• he is confident that taken together these measures will help ensure that this incident is not repeated; and
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• he has asked senior officials to ensure that these improved arrangements are implemented. 16.11 The Minister tells us that he has responded similarly to the Lords European Union Committee about the scrutiny issues and also takes this opportunity to tell us of his response to two requests for information on the draft Directive by that Committee. He says first, in relation to a request for more detail on the implementation costs of the Directive and more precision on the cost range, that:
• the Government’s discussions with industry to inform its assessment remain ongoing;
• it continues to believe that the implementation cost will be closer to the upper range of the Crown Dependencies figure of £110 million rather than the estimated costs of the US’s Foreign Account Tax Compliance Act (FATCA);
• the reason for this is that the requirements of the Directive have been designed to be very close to the requirements already placed upon financial institutions by FATCA and the Crown Dependency and Gibraltar (CD) agreements;
• whilst the scope of the Directive is wider than FATCA/CD agreements and more financial institutions will need to report, this is mitigated by the large number of institutions which have already implemented a very similar system for the FACTCA/CD reporting; and
• the Government believes this should reduce their implementation costs significantly.
16.12 On the second question, about the timing, in relation to transposition, of the publication of the consultation response, the draft legislation and the associated impact assessment, the Minister says that:
• the Government expects the consultation response to be published alongside the draft legislation; and
• due to the constrained availability of legal resource it now expects the legislation to be published in the New Year.
Previous Committee Reports Ninth Report HC 83–ix (2013–14), chapter 9 (10 July 2013); Thirteenth Report HC 219– xiii (2014–15), chapter 18 (15 October 2014) and Twenty-fourth Report HC 219–xxiii (2014–15), chapter 12 (3 December 2014).
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17 Repeal of obsolete EU police and criminal justice measures
Committee’s assessment Legally and politically important Committee’s decision Cleared from scrutiny
Document details (a) Draft Regulation repealing certain acts in the field of police cooperation and judicial cooperation in criminal matters (b) Draft Decision repealing certain acts in the field of police cooperation and judicial cooperation in criminal matters Legal base (a) Articles 82(1), 83(1), 87(2) and 88(2) TFEU; co- decision; QMV; (b) Articles 82(1)(d) and 87(2)(a) and (c) TFEU; co-decision; QMV Department Home Office Document numbers (a) (36562), 16334/14, COM(14) 715; (b) (36566), 16593/14, COM(14) 714
Summary and Committee’s conclusions 17.1 The draft Regulation and Decision together repeal 12 EU police and criminal justice measures which are now considered to be obsolete. The proposals form part of the Commission’s wider Regulatory Fitness and Performance Programme (REFIT) which includes a commitment to screen EU measures in the field of police cooperation and judicial cooperation in criminal matters and identify those which could be repealed. 17.2 The repeal proposals follow on from the expiry of a five-year transitional period contained in Protocol No. 36 to the EU Treaties concerning the powers of the EU institutions in relation to EU police and criminal justice measures. The expiry of the transitional period is significant for two reasons. First, with effect from 1 December 2014, the UK ceased to be bound by a certain number of EU police and criminal justice measures adopted before the Lisbon Treaty entered into force on 1 December 2009, following the Government’s decision to exercise the UK’s block opt-out (see below). Second, from the same date, Member States participating in these pre-Lisbon measures were bound to accept the full jurisdiction of the Court of Justice and the enforcement powers of the Commission. 17.3 The draft Regulation — document (a) — repeals eight pre-Lisbon police and criminal justice measures; the draft Decision — document (b) — repeals four. All of these measures were within the scope of the UK’s 2014 block opt-out and ceased to apply to the UK on 1 December 2014 but remain in force for other Member States. 17.4 In separate Explanatory Memoranda on the draft Regulation and draft Decision, the Minister for Modern Slavery and Organised Crime (Karen Bradley) explains that none of the measures contained in the repeal proposals apply to the UK but provides a brief assessment of the Commission’s justification for their repeal.
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17.5 We welcome the repeal of obsolete measures as a means of enhancing transparency and legal certainty. We accept that, as the 12 measures to be repealed by the draft Regulation and draft Decision ceased to apply to the UK on 1 December 2014, the Commission proposals have minimal practical, legal or policy implications for the UK and we are content to clear them from scrutiny.
17.6 We do, however, draw the attention of the House to the Government’s view that the UK’s Title V (justice and home affairs) opt-in Protocol does not apply. 54 The Government normally takes a strict approach to the application of this Protocol to measures which cite a Title V legal base, an approach we support. A strict approach would indicate that, as the draft Regulation — document (a) — has Title V legal bases, the Protocol should apply. This would be consistent with the wording of the Protocol itself which does not include any express exceptions. Accordingly, we consider that the Government should assert that the opt-in Protocol is engaged but should also decide not to exercise the right to opt into the draft Regulation.
17.7 The same reasoning does not apply to the draft Decision — document (b) — as it is a Schengen-building measure in respect of which the Schengen Protocol, which has a different effect, applies.55
Full details of the documents: (a) Draft Regulation of the European Parliament and of the Council repealing certain acts in the field of police cooperation and judicial cooperation in criminal matters: (36562), 16334/14, COM(14) 715; (b) Draft Decision of the European Parliament and of the Council repealing certain acts in the field of police cooperation and judicial cooperation in criminal matters: (36566), 16593/14, COM(14) 714.
Background 17.8 Article 10 of Protocol No. 36 on Transitional Provisions, annexed to the EU Treaties, allows the UK to opt out en masse of EU police and criminal justice measures adopted before the Lisbon Treaty entered into force on 1 December 2009. It also allows the UK to apply to rejoin individual measures subject to this block opt-out. On 24 July 2013, the Prime Minister formally notified the EU institutions that the UK had decided to exercise its block opt-out, with effect from 1 December 2014. On 20 November 2014, the Prime Minister notified the EU institutions of the UK’s wish to participate in 35 measures subject to the UK’s block opt-out. UK participation in these 35 measures was confirmed by the adoption, publication and entry into force on 1 December 2014 of a Council Decision covering six Schengen-related measures and a Commission Decision covering the remaining 29 non-Schengen measures. The Reports listed at the end of this chapter provide a detailed overview of the block opt-out process and the Government’s decision to rejoin the 35 measures.
54 See Protocol No. 21 on the Position of the United Kingdom and Ireland in respect of the Area of Freedom, Security and Justice. 55 See Protocol No. 19 on the Schengen acquis integrated into the framework of the European Union.
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The draft Regulation — document (a) 17.9 The draft Regulation proposes the repeal of eight pre-Lisbon EU police and criminal justice measures adopted between 1996 and 1998. They are:
• Council Joint Action 96/610/JHA establishing a Directory of specialised counter- terrorism competences;
• Council Joint Action 96/699/JHA on the exchange of information on the chemical profiling of drugs;
• Council Joint Action 96/747/JHA establishing a Directory of specialised competences to tackle international organised crime;
• Council Joint Action 96/750/JHA on the approximation of laws to combat drug addiction and illegal drug trafficking;
• Council Joint Action 97/339/JHA on the sharing of information to maintain law and order and security;
• Council Joint Action 97/372/JHA on the sharing of information and intelligence on customs and policing matters;
• Council Joint Action 98/427/JHA on good practice in mutual legal assistance in criminal matters; and
• Council Act of 3 December 1998 laying down staff regulations applicable to Europol employees. 17.10 According to the Commission, these measures are obsolete because they have “exhausted all their effects”, have been superseded by subsequent EU acts, or are temporary in nature and are no longer relevant. Their repeal is necessary to ensure legal certainty and clarity. 17.11 The draft Regulation cites various legal bases in Title V of Part Three of the Treaty on the Functioning of the European Union (TFEU) covering aspects of judicial cooperation in criminal matters and police cooperation. Recitals to the draft Regulation state that Denmark, Ireland and the UK are not taking part in its adoption.
The draft Decision — document (b) 17.12 The draft Decision proposes the repeal of four Schengen-related pre-Lisbon EU police and criminal justice measures adopted between 1993 and 2008. They are:
• A Decision of the Schengen Executive Committee (SCH/Com-ex (93) 14) on improving practical judicial cooperation to combat drug trafficking;
• A Declaration of the Schengen Executive Committee (SCH/Com-ex (97) decl. 13 rev 2) concerning the abduction of minors;
• A Decision of the Schengen Executive Committee (SCH/Com-ex (98) 52) establishing a Handbook on cross-border police cooperation; and
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• Council Decision 2008/173/EC concerning tests for the second generation Schengen Information System (SIS II). 17.13 The Commission considers that the measures are obsolete. The draft Decision is based on provisions of the TFEU concerning judicial cooperation in criminal matters and aspects of police cooperation. The recitals to the draft Decision indicate that Denmark and the UK are not participating in its adoption. The repeal provisions will apply to all of the remaining EU Member States, as well as third countries associated with Schengen (Iceland, Norway, Switzerland and Liechtenstein).
The Minister’s Explanatory Memorandum of 5 January 2015 on the draft Regulation — document (a) 17.14 The Minister (Karen Bradley) notes that the eight measures contained in the draft Regulation were subject to the UK’s block opt-out and are not included in the 35 measures which the UK has rejoined. As a consequence, their repeal would have “no direct effect on the UK”.56 She continues:
“The Government supports the European Commission’s efforts to repeal obsolete and defunct measures as part of the better regulation agenda, REFIT. The Government believes the UK’s decision to scrutinise closely the utility of all pre- Lisbon measures has helped to encourage the steps now being undertaken by the European Commission.
“The UK’s assessment of the acquis was much wider than the REFIT programme and the UK has rejoined a much smaller set of measures that add value in the fight against cross-border crime.”57 17.15 The Minister explains that the eight measures contained in the draft Regulation were considered by the Friends of Presidency Group which was established to examine a number of issues concerning the expiry of the five-year transitional period set out in Article 10 of Protocol No. 36 to the EU Treaties. She agrees with the Commission’s assessment that the eight measures are obsolete, defunct, or no longer necessary. In many cases, the activities pursued under the Joint Actions to be repealed have been taken over by Europol or by other EU measures in which the UK participates, such as the EU Convention on Mutual Assistance in Criminal Matters, Council Decisions establishing national Football Information Points, and the Naples II Convention and Customs Information System which strengthen cross-border cooperation between judicial, police and customs authorities. 17.16 Although the draft Regulation cites Title V (justice and home affairs) legal bases, the Minister says that the UK’s Title V opt-in does not apply because the proposal concerns measures “from which the UK opted out on 1 December 2014”.58 She adds that the Commission recognises that the recital describing the UK’s position should be amended to
56 See para 13 of the Minister’s Explanatory Memorandum. 57 See paras 18–19 of the Minister’s Explanatory Memorandum. 58 See para 9 of the Minister’s Explanatory Memorandum.
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reflect the wording contained in the equivalent recital in document (b). She expects it to be amended as follows: “On 24 July 2013, the United Kingdom made the notification referred to in the first subparagraph of Article 10(4) of Protocol (No 36) on transitional provisions that it does not accept, with respect to the acts referred to in Article 10(1) of that Protocol, the powers of the institutions referred to in Article 10(1) of Protocol. As a consequence, all acts referred to in Article 10(1) of that Protocol shall cease to apply to the United Kingdom as from 1 December 2014. On 20 November 2014 the United Kingdom made the notification referred to in Article 10(5) of that Protocol. The United Kingdom notified, with effect on 1 December 2014, its wish to participate in 35 acts which would otherwise cease to apply to it as from the same date pursuant to Article 10(4) of the same Protocol. This list of 35 notified acts does not include the ones referred to in this Decision. The United Kingdom is therefore not taking part in the adoption of this Decision” (sic).59
The Minister’s Explanatory Memorandum of 5 January 2015 on the draft Decision — document (b) 17.17 As with the draft Regulation, the Minister (Karen Bradley) notes that the four measures contained in the draft Decision were subject to the UK’s block opt-out, are not included in the 35 measures which the UK has rejoined, and that their repeal “will not impact on the UK”.60 She reiterates the Government’s support for the European Commission’s efforts to repeal obsolete and defunct measures as part of the better regulation agenda and agrees with its assessment that the four measures are obsolete or, in the case of the Handbook on cross-border police cooperation, have been superseded by more up-to-date guidance and best practice.
17.18 The Minister says that, despite the citation of Title V legal bases, the UK’s Title V opt-in does not apply to the draft Decision as it concerns the repeal of measures from which the UK has already opted out, with effect from 1 December 2014. As a consequence, the UK will not take part in the adoption of the draft Decision.
17.19 The Minister explains that there was an initial discussion of the draft Decision and draft Regulation by JHA Counsellors on 15 December 2014 and expects the proposals to be adopted in 2015.
Previous Committee Reports None, but see the following Reports of the European Scrutiny, Home Affairs and Justice Committees are relevant: Thirty-seventh Report HC 798 (2012–13), (22 March 2013); Eighth Report HC 605 (2013–14), (31 October 2013); Ninth Report HC 615 (2013–14), (31 October 2013); Twenty-first Report HC 683 (2013–14), (7 November 2013); First Joint Report from the European Scrutiny, Home Affairs and Justice Committees HC 1177 (2013–14), (26 March 2014); Seventeenth Report HC 762 (2014–15), (4 November 2014);
59 See para 10 of the Minister’s Explanatory Memorandum. The Minister has reproduced the equivalent recital from document (b). It should be further revised to substitute “this Regulation” for “this Decision”. 60 See para 5 of the Minister’s Explanatory Memorandum.
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Nineteenth Report HC 219–xviii (2014–15), chapter 2 (5 November 2014); Twenty-fourth Report HC 219–xxiii (2014–15), chapter 14 (3 December 2014); and Twenty-fifth Report HC 219–xxiv (2014–15), chapter 19 (10 December 2014). See also the following Reports of the European Union Committee in the House of Lords: Thirteenth Report HL Paper 159 (2012–13), (23 April 2013); Fifth Report HL Paper 69 (2013–14), (31 October 2013).
18 Statistics
Committee’s assessment Legally and politically important Committee’s decision Cleared from scrutiny (by Resolution of the House of 20 January 2014)
Document details Draft Regulation to amend the European Statistical Law Legal base Article 338 TFEU; co-decision; QMV Department Office for National Statistics Document numbers (33844), 9122/12, COM(12) 167
Summary and Committee’s conclusions 18.1 Regulation (EC) 223/2009 is the framework legislation for the European Statistical System. All other legislation under which EU statistics are produced must be made in accordance with that Regulation. In April 2012, the Commission proposed amendments to four key features of the framework Regulation — the coordinating role of the National Statistical Institutes of Member States, the role and professional independence of the heads of those institutes, self-assessment of the EU statistics produced by a Member State and a published statement of confidence in them and enhanced access to administrative data. The draft Regulation was cleared from scrutiny after debate in January 2014 in European Committee B.
18.2 The Government has now told us of a new addition to the text of the draft Regulation which gives cause for concern and which was being put to COREPER for agreement on 19 December 2014. This addition was about the possibility of inspections by the Commission to investigate whether or not a Member State should be subject to sanction for misrepresenting statistical data. The Government holds that if any relevant sectoral legislation made on the basis of Article 338 TFEU (governing statistics) seeks to create a power to impose fines, that power would be unlawful, and any subsidiary power to investigate which was inseparably linked to it would also be impermissible under Article 338. Therefore the Government was going to vote against the draft Regulation at COREPER and, in the event that the proposal received a qualified majority in support, would make a Minute statement to the effect that it considers the provisions of sanctions regimes that are not foreseen by the Treaty as illegal. 18.3 We note the Government’s concern about this addition to the draft Regulation and await its promised account of the outcome of the COREPER meeting.
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Full details of the documents: Draft Regulation amending Regulation (EC) No. 223/2009 on European statistics: (33844), 9122/12, COM(12) 167.
Background 18.4 Regulation (EC) 223/2009, commonly referred to as the “European Statistical Law”, is the framework legislation for the European Statistical System, comprising the Commission’s statistical office (Eurostat) and producers of official statistics in Member States. All other legislation under which EU statistics are produced must be made in accordance with the European Statistical Law. 18.5 In April 2012, the Commission proposed with this draft Regulation amendments to four key features of the European Statistical Law:
• the coordinating role of the National Statistical Institutes (NSI) of Member States;
• the role and professional independence of the head of an NSI;
• self-assessment of the EU statistics produced by a Member State and a published statement of confidence in them; and
• enhanced access to administrative data.
18.6 The draft Regulation was cleared from scrutiny after debate on 20 January 2014 in European Committee B.61
The Minister’s letter of 16 December 2014 18.7 The Minister for Civil Society, Cabinet Office (Mr Rob Wilson) wrote to tell us of a significant development in the negotiation of the draft Regulation. He said that:
• the compromise text, which was discussed during the European Committee debate, was rejected by COREPER in February 2014 because of concerns by a small number of Member States about the proposed relationship between the Director General of Eurostat and the European Parliament;
• no further information on developments had been communicated by either the Greek or Italian Presidencies until very recently;
• however, the Italian Presidency informed Member States on 5 December 2014 it had been discussing a new compromise with the European Parliament and the Commission and this was presented to Member States for agreement at COREPER on 10 December 2014;
• following calls from the UK and other Member States, discussion of the new compromise was postponed until the COREPER meeting on 19 December 2014 to allow Member States to adequately scrutinise the amended text;
61 Gen Co Debs, European Committee B, 20 January 2014, cols 3–10.
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• the Government had now finished its analysis of the text, after receiving legal advice from its own and Council legal experts; and
• he apologised therefore for not being able to inform us, given the recent pace of events, at an earlier point before the new proposal was due for adoption by Council at COREPER.
18.8 The Minister reported that the Government did not consider most of the new amendments to the text as a cause for concern, particularly with respect to any of its previous concerns about subsidiarity, which we had shared, regarding the original Commission proposal. He summarised these recent amendments as follows:
• relations between the European Statistical System and the European System of Central Banks — Article 5, paragraph 1.2: wording had been tidied-up to ensure clarity with respect to the principles of institutional autonomy of the actors involved and the appropriate cooperation between the two systems, including a clear indication that national arrangements for cooperation between NSIs and national Central Banks shall be respected;
• the head of the NSI — Article 5a: wording has been added that stipulates that when recruiting him/her Member States will ensure that there are equal opportunities, notably as regards gender; and
• Director-General of Eurostat — Article 6, new paragraph: the Commission has agreed that the Director General will appear before the European Parliament immediately after his/her appointment.
18.9 The Minister continued that a new addition to the text does give cause for concern. He told us that this follows a proposal from the European Parliament and is about inspection visits in Member States, in a new Article 12(3b). He explained that:
• this refers to on-site inspections by the Commission to investigate whether or not a Member State should be subject to sanction for misrepresenting statistical data;
• it provides that such sanctions and related inspection visits could only be envisaged when they are subject to, and conditional upon, sectoral legislation agreed by both the Council and the European Parliament for specific circumstances;
• advice from Treasury Solicitor’s Department indicates, however, that if any relevant sectoral legislation made on the basis of Article 338 TFEU (governing statistics) sought to create a power to impose fines, that power would be unlawful, and any subsidiary power to investigate which was inseparably linked to it would also be impermissible under Article 338;
• although final arbitration of such matters in the future would be for the European Courts of Justice to decide upon, the Government was not prepared to accept that the illegality of such sanction regimes should be brought into question due to badly drafted law made under an unreasonable timeframe;
• he was therefore instructing the UK’s Permanent Representative to vote against the regulation at COREPER;
European Scrutiny Committee, Twenty-eighth Report, Session 2014-15 97
• in the event that the proposal received a qualified majority in support, he was instructing the Permanent Representative to make a Minute statement to the effect that the Government considers the provisions of sanctions regimes that are not foreseen by the Treaty as illegal; and
• he would update us on the outcome as soon as possible.
Previous Committee Reports Third Report HC 86–iii (2012–13), chapter 10 (23 May 2012), Nineteenth Report HC 86– xix (2012–13), chapter 9 (7 November 2012), Twenty-seventh Report HC 86–xxvii (2012– 13), chapter 5 (16 January 2013), Twenty-ninth Report HC 86–xxix (2012–13), chapter 6 (23 January 2013), Thirty-eighth Report HC 86–xxxvii (2012–13), chapter 5 (26 March 2013) and Thirteenth Report HC 83–xiii (2013–14), chapter 5 (4 September 2013).
98 European Scrutiny Committee, Twenty-eighth Report, Session 2014-15
19 Documents not raising questions of sufficient legal or political importance to warrant a substantive report to the House
Department for Business, Innovation and Skills
(36563) Commission Annual Report on the Implementation of the EU- 16572/14 Colombia/Peru Trade Agreement. COM(14) 718
(36564) Draft Regulation on repealing Council Regulation (EEC) No. 3030/93 16579/14 on common rules for imports of certain textile products from third COM(14) 707 countries.
Department of Energy and Climate Change
(36536) Report on the annual accounts of the Fuel Cells and Hydrogen Joint — Undertaking for the financial year 2013 together with the Joint — Undertaking’s replies.
Department for Transport
(36544) Commission 27th Report on the implementation in 2011–2012 of 16144/14 Regulation (EC) No. 561/2006 on the harmonisation of certain social + ADD 1 legislation relating to road transport and of Directive 2002/15/EC on COM(14) 709 the organisation of the working time of persons performing mobile road transport activities.
HM Treasury
(36548) Commission Communication on the Economic Governance Review 16236/14 Report on the application of Regulations (EU) No. 1173/2011, COM(14) 905 1174/2011, 1175/2011, 1176/2011, 1177/2011, 472/2013 and 473/2013.
Home Office
(36556) Draft Council Decision on subjecting 4-methyl-5–(4-methylphenyl)- 16240/14 4,5-dihydrooxazol-2-amine (4,4'-DMAR) and 1-cyclohexyl-4–(1,2- COM(14) 716 diphenylethyl)piperazine (MT-45) to control measures.
European Scrutiny Committee, Twenty-eighth Report, Session 2014-15 99
Formal minutes
Wednesday 7 January 2015
Members present:
Sir William Cash, in the Chair
Andrew Bingham Kelvin Hopkins Mr James Clappison Jacob Rees-Mogg Michael Connarty Henry Smith Geraint Davies Mr Michael Thornton Nia Griffith
Mr Jacob Rees-Mogg declared a pecuniary interest in relation to the documents covered in chapters 7 and 8 in this report, in accordance with the Resolution of the House of 13 July 1992.
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 19 read and agreed to. Resolved, That the Report be the Twenty-eighth Report of the Committee to the House.
Ordered, That the Chair make the Report to the House.
****
[Adjourned till Monday 12 January at 4.00pm.
100 European Scrutiny Committee, Twenty-eighth Report, Session 2014-15
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) 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; v) 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 Sir William Cash MP (Conservative, Stone) (Chair) Andrew Bingham MP (Conservative, High Peak) Mr James Clappison MP (Conservative, Hertsmere) Michael Connarty MP (Labour, Linlithgow and East Falkirk) Geraint Davies MP (Labour/Cooperative, Swansea West) Julie Elliott MP (Labour, Sunderland Central) Stephen Gilbert MP (Liberal Democrat, St Austell and Newquay) Nia Griffith MP (Labour, Llanelli) Chris Heaton-Harris MP (Conservative, Daventry) Kelvin Hopkins MP (Labour, Luton North) Chris Kelly MP (Conservative, Dudley South) Stephen Phillips MP (Conservative, Sleaford and North Hykeham) Jacob Rees-Mogg MP ( Conservative, North East Somerset) Mrs Linda Riordan MP (Labour/Cooperative, Halifax) Henry Smith MP (Conservative, Crawley) Mr Michael Thornton MP (Liberal Democrat, Eastleigh) The following members were also members of the committee during the parliament: Mr Joe Benton MP (Labour, Bootle) Jim Dobbin MP (Labour/Co-op, Heywood and Middleton) Tim Farron MP (Liberal Democrat, Westmorland and Lonsdale) Penny Mordaunt MP (Conservative, Portsmouth North)
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Sandra Osborne MP (Labour, Ayr, Carrick and Cumnock) Ian Swales MP (Liberal Democrat, Redcar)