House of Commons European Scrutiny Committee Thirty-first Report of Session 2002-03
Documents considered by the Committee on 10 September 2003, including:
Reduced rates of VAT Recovery of Northern hake stock
HC 63-xxxi
House of Commons European Scrutiny Committee Thirty-first Report of Session 2002-03
Documents considered by the Committee on 10 September 2003, including:
Reduced rates of VAT Recovery of Northern hake stock
Report, together with formal minutes
Ordered by the House of Commons to be printed 10 September 2003
HC 63-xxxi Published on 24 September 2003 by authority of the House of Commons London: The Stationery Office Limited £0.00 ESC, 31st Report, 2002-03
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 ‘5467/03’ are Council of Ministers reference numbers. This system is also used by UK Government Departments, by the House of Commons Vote Office and for proceedings in the House.
Numbers preceded by the letters COM or SEC are Commission reference numbers.
Where only a Committee number is given, this usually indicates that no official text is available and the Government has submitted an ‘unnumbered Explanatory Memorandum’ discussing what is likely to be included in the document or covering an unofficial text.
Abbreviations used in the headnotes and footnotes EC (in ‘Legal base’) Treaty establishing the European Community EM Explanatory Memorandum (submitted by the Government to the Committee) EP European Parliament EU (in ‘Legal base’) Treaty on European Union GAERC General Affairs and External Relations Council JHA Justice and Home Affairs OJ Official Journal of the European Communities QMV Qualified majority voting RIA Regulatory Impact Assessment SEM Supplementary Explanatory Memorandum
Euros Where figures in euros have been converted to pounds sterling, this is normally at the market rate for the last working day of the previous month.
Further information Documents recommended by the Committee for debate, together with the times of forthcoming debates (where known), are listed in the European Union Documents list, which is in the House of Commons Vote Bundle on Mondays and is also available on the parliamentary web–site.
Documents awaiting consideration by the Committee are listed in ‘Remaining Business’: www.parliament.uk/parliamentary_committees/european_scrutiny.cfm. The web–site also contains the Committee’s Reports.
Contacts All correspondence should be addressed to the Clerk of the European Scrutiny Committee, House of Commons, 7 Millbank, London SW1P 3JA. The telephone number for general enquiries is 020 7219 3292/5465. The Committee’s e-mail address is [email protected]
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Contents
Report Page
Documents for debate
1 C&E (24783) Reduced rates of VAT 3
2 DEFRA (24692) Recovery of Northern hake stock 5
Documents not cleared
3 C&E (24790) Customs 8
4 DFID (24748) (24749) Operations financed under the decentralised cooperation Regulation 12
5 DOH (24316) European health insurance card 16
6 FCO (24741) Human rights and democratisation in the Mediterranean region 18
7 HO (24513) Carriers’ obligation to communicate passenger information 22
Documents cleared
8 C&E (19221) Reduced levy on New Zealand dairy imports 24
9 DEFRA (24166) Identification and registration system for sheep and goats 26
10 DFT (24727) Euro-Mediterranean transport network 28
11 DFT (24768) (24780) Single European Sky 30
12 DTI (24609) Company law 32
13 DTI (24659) Statutory audit in the European Union 34
14 DTI (24760) Implementation by the accession states of regional policy 37
15 DWP (24551) Protection of workers from risks arising from physical agents (electromagnetic fields and waves) 40
16 FSA (24798) Labelling of ingredients in foodstuffs 42
Documents not raising questions of sufficient legal or political importance to warrant a substantive report to the House
17 List of documents 45
Appendix 1: reports on Council meetings held during a recess 49
Formal minutes 53
Standing order and membership 54
2 ESC, 31st Report, 2002-03
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1 Reduced rates of VAT
(24783) Draft Council Directive amending Directive 77/388/EEC as regards 11817/03 reduced rates of Value Added Tax. COM(03) 397
Legal base Article 93 EC; consultation; QMV Document originated 23 July 2003 Deposited in Parliament 29 July 2003 Department HM Customs and Excise Basis of consideration EM of 29 August 2003 Previous Committee Report None To be discussed in Council Not known Committee’s assessment Politically important Committee’s decision For debate in European Standing Committee B
Background 1.1 Member States are required to set a normal rate of VAT of at least 15%. At present there are three categories of allowable reduced rates of VAT. These are:
• up to two reduced rates of at least 5% for a range of goods and services listed in Annex H to the Sixth VAT Directive;
• experimentally, reduced rates for a small range of labour-intensive services listed in Annex K to the Sixth VAT Directive;
• transitional derogations allowing Member States to retain zero rates or rates below 5% for specified goods and services or for particular regions or islands.
1.2 The Council is required to review, on the basis of a Commission report, reduced rates of VAT.
The document 1.3 The Commission proposes a Directive to rationalise the system of reduced rates of VAT. It uses the explanatory memorandum for its draft also as the biennial report for the Council’s review of the system.
1.4 The Commission argues that the objective of the Community’s VAT system has been a simple, harmonised regime with a minimum normal rate of 15% and a minimum reduced rate of 5% for a very select group of goods and services to be used optionally (but widely) by Member States. It holds that if all goods and services were taxed at broadly the same rates throughout the EU, this would simplify the VAT system for businesses and remove any question of VAT rates distorting competition within the Single Market. The Commission sees no intrinsic value in the application of reduced rates as policy instruments and proposes that the use of reduced rates be rationalised.
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1.5 The Commission proposes amending the Sixth VAT Directive so that:
• Member States would be allowed to apply a VAT rate below the standard rate only to goods and services included in the Annex H list;
• the provisions allowing Member States to retain their derogations would be abolished. Annex H would be expanded to provide coverage for those goods and services for which several Member States currently give relief under their derogations or under the labour-intensive services experiment, and would allow other Member States to follow suit. If not included in Annex H the standard rate of VAT would apply;
• those Member States currently taxing goods and services on the Annex H list at rates below 5 percent would be allowed to continue doing so; and
• the Annex H provisions would be reviewed every five years.
1.6 The proposed new Annex H list includes a number of new items, such as restaurant services, gas and electricity services, cut flowers and house repairs, providing coverage for reliefs currently applied in several other Member States. However, there is no coverage or inadequate coverage for a number of the reliefs currently applied under the UK’s transitional derogations, in particular for children’s clothing and footwear, and for a number of the zero rates benefiting charities and disabled people.
The Government’s view 1.7 The Paymaster General (Dawn Primarolo) tells us:
“Zero rates have been a fundamental part of the UK tax system since VAT was introduced in 1973, and many of them were translated directly from the old Purchase Tax, which preceded VAT. They save consumers in the UK around £20 billion each year, and they give the greatest benefit as a proportion of income to the lowest-income households.
“As they stand, the Commission’s proposals make no provision or inadequate provision for the continued zero rating in the UK of children’s clothing and footwear, of several reliefs targeted at charities and disabled people, and of a number of other specific items. In total, they would add more than £1 billion of VAT to annual expenditure in the UK, with the biggest impact falling on low-income families, charities and disabled people. As the proposal stands the Government believes that there could be a damaging and regressive social impact of withdrawing reliefs on essential goods.
“The Government therefore considers the proposals as they relate to zero rates unacceptable in their current form. The Government will not accept any proposals that would harm its social objectives or undermine the fairness of the UK’s VAT system.
“The Commission’s approach to this review has significantly narrowed the scope to consider the introduction of new reduced rates. However, as well as defending our zero rates, the Government will continue to press its long-standing proposals for
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reduced rates on repairs to listed places of worship and on the purchase of energy saving materials for DIY installation.”
Conclusion 1.8 This proposal would, as drafted, significantly limit the Government’s ability to apply a VAT system suited to the UK’s requirements. We note the Government’s intention to resist these unwelcome developments. We recommend that the matter be debated in European Standing Committee B so that Members can explore with Ministers how best to ensure drafting that retains the Government’s current ability to apply VAT flexibly.
2 Recovery of Northern hake stock
(24692) Draft Council Regulation establishing measures for the recovery of 10980/03 the Northern hake stock. COM(03) 374
Legal base Article 37 EC; consultation; QMV Document originated 27 June 2003 Deposited in Parliament 2 July 2003 Department Environment, Food and Rural Affairs Basis of consideration EM of 27 August 2003 Previous Committee Report None, but see footnotes To be discussed in Council 13-14 October 2003 Committee’s assessment Politically important Committee’s decision For debate in European Standing Committee A (see paragraph 2.10 below)
Background 2.1 While the general state of the fish stocks in Community waters has given rise to concern, the International Council for the Exploration of the Sea (ICES) identified in November 2000 particular problems in respect of the cod stocks in the North Sea and West of Scotland and the Northern hake stock. The Fisheries Council therefore agreed in December 2000 that the Community should establish a recovery plan for these stocks.
2.2 The Commission accordingly put forward in December 2001 proposals1 which included the setting of quantitative targets for the adult populations in question, and of
1 (23079) 15245/01; see HC 152-xxii (2001-02), paragraph 13 (20 March 2002), HC 152-xxxvii (2001-02), paragraph 2 (17 July 2002), HC 63-v (2002-03), paragraph 3 (18 December 2002), HC 63-vii (2002-03), paragraph 1 (15 January 2003) and HC 63-xvi (2002-03), paragraph 3 (26 March 2003).
6 ESC, 31st Report, 2002-03
multi-annual total allowable catches (TACs) aimed at assisting biomass to increase annually by 30% in the case of cod and 15% in the case of hake. At the same time, effort limits would be applied to all fishing vessels authorised to land cod and/or hake, linked to their average catch of those species in the period 1998-2000. These were discussed by the Council at various times in 2002, but, in the event, it only proved possible to decide at the end of the year, in the context of the overall agreement on TACs and quotas for 2003, a temporary measure covering the period from 1 February to 31 December 2003. This was, however, coupled with the intention to put in place after 1 July 2003 a more sophisticated regime, based on a proposal to be brought forward by the Commission by 15 February, and agreed by the Council by the end of March.
The current proposal 2.3 Notwithstanding this intended timetable, the Commission came forward with such a proposal only in May 2003, which was moreover confined to cod.2 It has now produced in the current document a separate proposal for Northern hake, covering the North Sea, Skagerrak and Kattegat, English Channel, west of Scotland, Irish and Celtic Seas, west of Ireland, and Bay of Biscay. As with the proposal for cod, there would be two guideline figures — the first (143,000 tonnes) representing the lowest size of adult stock consistent with a precautionary approach, whilst the second (103,000 tonnes) would specify the absolute minimum level below which the stock would be in significant danger of total collapse.
2.4 If the estimated stock level is below the recommended level, but above or only slightly above the minimum level, the total allowable catch (TAC) will be set so as to aim for a 10% increase in stock size the following year. In addition, this arrangement would be subject to the principle that the largest annual change, in either direction, in any TAC from one year to the next should not be greater than 15% after the first year of implementation of the plan, though the setting of TACs would also be subject to the proviso that the precautionary fishing mortality rate recommended by the scientists as being the maximum compatible with sustainable exploitation should not be exceeded. More severe measures are proposed if the estimated stock is well below the minimum level. On the other hand, once a stock has been restored to the precautionary target level for two consecutive years, it would be open to the Council to adopt a different management plan of the kind provided for more generally under Council Regulation 2371/2002.
2.5 The proposal also deals with the management of fishing effort in those areas containing the majority of the hake stock (west of Scotland, Celtic Sea, Bay of Biscay and western Channel), the Commission taking the view that, in the other areas, the measures already proposed for cod will provide sufficient protection for the small quantities of Northern hake found there. The Commission says that it is now proposing a considerably simpler approach than in its earlier proposals, and one which also differs from the interim measure (under which a fixed number of days at sea per month was specified for each vessel in different categories, depending on the gear used). The overall historical fishing effort of all vessels catching hake in the areas in question would be calculated, the reduction required to match the selected TAC would be determined, and this reduction distributed across
2 (24515) 9081/03; see HC 63-xxv (2002-03), paragraph 1 (18 June 2003).
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Member States in proportion to how much hake they have landed during the relevant reference period as compared with total Community landings. Member States would then be free to distribute these efforts limits (expressed in kilowatt-days) among their vessels on a fully transferable basis within the geographical area to which they apply. The approach proposed would also include a number of features eventually incorporated in the interim scheme, such as the exact definition of what constitutes a day absent from port, and the way in which exemptions under exceptional circumstances should be calculated.
2.6 As regards monitoring and control, the Commission says that the current proposal remains largely unchanged from the earlier proposal, and includes details of prior notification, the requirement to land Northern hake at designated ports, and stowage and transport conditions. However, the previous proposal regarding the use of the satellite- based vessel monitoring system has been removed, as this will be addressed in a new Regulation on this issue, to be adopted as part of the reform of the CFP. Similarly, technical conservation measures are being dealt with in a separate proposal.3
2.7 Finally, the Commission notes that, if implemented, the effort limitation measures in this proposal would directly affect those vessels fishing for species other than hake, and that there will also be implications for the TACs set for such species.
The Government’s view 2.8 In his Explanatory Memorandum of 27 August 2003, the Parliamentary Under- Secretary of State (Commons) at the Department for Environment, Food and Rural Affairs (Mr Ben Bradshaw) says that the UK accepts the need to bring fishing effort into better balance with the available hake stocks, but that the Government will wish to consider very carefully how to balance the action required to conserve stocks with the need to minimise the adverse economic impact of restrictions on fishing operations. He adds that other issues which will need careful study include:
• the likely effectiveness of the mechanisms proposed in achieving a recovery of the stocks;
• the extent to which the methodology envisaged will ensure a balanced impact between the various Member States whose fleets would be affected;
• the need to ensure than the means of applying effort control do not impose unnecessary bureaucracy and cost on either the UK industry or the Fisheries Departments;
• the need to identify, in consultation with the industry, how effort would most appropriately be allocated among the relevant vessels, and what would be a realistic timescale for implementing the measure.
2.9 More specifically, the Minister says that the proposal would potentially impose new costs on hake fishermen operating in Northern waters, but that the level of these costs will depend upon the extent of the cuts required in current effort levels, and the method chosen
3 (24074) 15255/02; see HC 63-xxx (2002-03), paragraph 12 (16 July 2003).
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to administer the arrangements. He adds that the Fisheries Departments are consulting representatives of the catching sector, and that a Regulatory Impact Assessment will be provided.
Conclusion 2.10 As was perhaps to be expected, the form of this proposal, and indeed much of its content, is similar to that of the recovery plan already put forward for cod (on which we reported on 18 June, recommending a debate in European Standing Committee A). It is therefore likely to raise much the same issues, and consequently we believe that it too should be debated in European Standing Committee A. We suggest that, if the necessary arrangements can be made in time, it should be debated together with the recovery plan for cod, which the Standing Committee is to consider on 18 September.
3 Customs
(24790) Commission Communication on a simple and paperless environment 11837/03 for customs and trade. COM(03) 452 Commission Communication on the role of customs in the integrated management of external borders.
Draft Regulation to amend Council Regulation (EEC) No 2913/92 establishing the Community Customs Code.
Legal base (For the draft Regulation) Articles 26, 95, 133 and 135 EC; co-decision; QMV Document originated 24 July 2003 Deposited in Parliament 30 July 2003 Department HM Customs and Excise Basis of consideration Three EMs of 18 August 2003 Previous Committee Report None To be discussed in Council Not known Committee’s assessment Legally and politically important Committee’s decision Not cleared; further information requested
The document 3.1 This document is in three parts. In the first part the Commission suggests simplification and rationalisation of customs regulations and procedures. Here the Commission’s key proposals are:
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• reduction of the large variety of the current customs procedures and regimes to some basic procedures;
• all transactions between the trader and the administration normally to be handled electronically;
• provision of pre-arrival and pre-departure information to allow controls related to assessed risks to determine the admissibility of goods at the frontier and fiscal and trade policy controls to be performed inland at the traders’ premises;
• Community customs administrations to act as if they were a single administration;
• customs administrations to be able to share data electronically with other public authorities.
3.2 To achieve this framework the Commission proposes a review and consolidation of customs legislation. In particular, legislation would:
• provide for electronic declaration as the norm;
• significantly reduce the number of existing customs procedures and other regimes;
• align simplified procedures to electronic treatment and extend their scope and use;
• redefine the roles of inland and frontier customs offices and the rights and responsibilities of traders and freight forwarders; and
• provide for a single guarantee to cover all customs business regimes and procedures and for a single European authorization for central simplified clearance, valid throughout the Community, to be granted by one Member State.
3.3 In the second part of the document the Commission proposes rationalization of the management of customs controls through a common strategy for goods. In December 2001 the European Council commissioned a strategy for the surveillance and control of the EU’s external borders. Its aim was to improve immigration and other controls, whilst facilitating the movement of legitimate travellers and trade. The Commission proposes strengthening of border controls on goods that pose a threat to Member State’s security.
3.4 The strategy includes the introduction of a common framework of risk management at the external border. The key points are:
• rationalising customs controls at the external border of the Community so that fiscal controls are dealt with inland, allowing a focus on admissibility at the external frontier;
• establishing a common approach to the risks related to goods within a common mechanism for co-operation. The Commission proposes that all the services concerned (customs, police, health, environment etc.) should work together to establish priorities and define common risk profiles;
• ensuring an adequate level of human resources and equipment at the external frontiers;
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• establishing a legal and regulatory framework integrating the security dimension into customs work;
• reinforcing cooperation with police and the other authorities at the external frontier when work and missions overlap.
3.5 The third part of the document is a draft Regulation to amend the Community Customs Code Regulation to:
• provide for a standardised format for pre-arrival and pre-departure information and lay down timescales for its submission;
• broaden the range of ‘competent authorities’ to play a role in customs controls and the range of legislation to be enforced. This covers functions to support and enforce restrictions administered by government departments, other than Customs, and to allow them to be carried out in a shared electronic environment;
• introduce risk and risk management as an explicit element of customs controls; and
• provide for information exchange between the customs authorities of the Member States, between them and the Commission and between customs authorities and other authorities.
The Government’s view 3.6 On the Commission Communication on simplification of customs legislation and procedures the Paymaster General (Dawn Primarolo) tells us:
“The Government supports the strategic goals set out in this Communication. They fully accord with its vision for the future Customs and international trade environment as outlined in the Customs Blueprint for International Trade. The individual proposals, which will follow the Communication, will support implementation of the Customs Blueprint in the UK.”
3.7 As for the Communication on the role of customs in the integrated management of external borders the Minister says:
“The Government welcomes the Commission’s thinking on locating controls of international trade increasingly inland and allowing customs posts at the external border to focus on admissibility controls.
“The Government agrees that security controls on the movement of goods should be based on risk assessment but should be sufficiently flexible to take account of national risks. Therefore, such controls are essentially for Member States, and should be based on the sharing of best practice, the exchange of information and the development of common frameworks rather than unnecessary harmonisation. The Government will examine the detail of Commission proposals to take forward this Communication. It will assess whether the proposals strike the right balance in this respect, and within the wider context of the on-going work on border controls on the movement of people across the external frontier.”
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3.8 In relation to the draft Regulation the Minister tells us:
“The Government welcomes the proposed regulation, which would improve the management of pre-arrival and pre-departure information, by providing consistency for both Customs and the trade. The 24-hour deadline for submission of the information aligns this requirement with that already agreed in the US under the Advance Manifesting Procedures in respect of maritime (sea) traffic. Additional burdens on trade will be minimised by the provision of special deadlines for certain types of traffic (e.g. fast parcel operators) and for authorised traders, who have an appropriate record of compliance with Customs requirements. In relation to risk management the overall approach is welcomed since it emphasises a common framework for control, rather than common controls, using best practice. The Government will be playing a key part in the development of the risk management framework.”
Conclusion 3.9 We welcome the intention both to simplify customs procedures and to rationalise the customs role in the management of the Community’s external borders. But we note that the draft Regulation would allow access by non-customs agencies to the electronically-based information of customs administrations. We should be grateful if the Minister would let us know the Information Commissioner’s view of this particular aspect of the proposals. Meanwhile we hold the document under scrutiny.
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4 Operations financed under the decentralised cooperation Regulation
(a) (24748) Commission Communication — overall assessment of the operations 11465/03 financed by the Community under the regulation of decentralised COM(03) 412 cooperation.
(b) (24749) 11466/03 Draft Regulation extending and amending Council Regulation COM(03) 413 1659/98 on decentralised cooperation.
Legal base (a) —; (b) Article 179 (1) EC; QMV Documents originated 11 July 2003 Deposited in Parliament 21 July 2003 Department International Development Basis of consideration EMs of 28 July 2003 Previous Committee Report None To be discussed in Council No date set Committee’s assessment Politically important Committee’s decision Not cleared; further information requested
The proposed Regulation and the Commission Communication 4.1 The Communication outlines the findings of an assessment of operations financed under the “decentralised cooperation” budget line, B7-6002. It was created in 1992 to promote a more participative approach to development cooperation in all developing countries, and to incorporate better the concept of decentralised cooperation into the development cooperation programmes financed by the Commission. It is intended to support operations and initiatives that promote:
• A more participatory approach to development that is responsive to the needs and initiatives of people in developing countries;
• A contribution to the diversification and reinforcement of civil society and grassroots democracy in the countries concerned.
4.2 It is intended as a catalyst to promoting political and social dialogue in the beneficiary countries, to support local development, and to involve local partners in development cooperation and the programming process.
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4.3 The assessment was commissioned to fulfil the Commission’s obligations under the existing Regulation,4 which is due to expire on 31 December 2003, and also to help it to decide whether to extend the budget line’s legal base. After taking into account the conclusions and recommendations of the assessment, the Commission proposes to amend and extend the legal base for a further three years. In order to make a clearer distinction between decentralised cooperation and NGO5 co-financing budget lines, the Commission proposes to:
• define the value added by decentralised cooperation more precisely; and
• to target each budget line’s potential partners more specifically. To this end it proposes to replace Article 3 with a text which provides a broader definition of potential partners for decentralised cooperation, so that it reads:
“The cooperation partners eligible for financial support under this Regulation shall be decentralised cooperation agents in the Community or the developing countries, such as: local (including municipal) authorities, non-governmental organisations, local traders’ associations and local citizens’ groups, cooperatives, trade unions, economic and social actors organisations, consumer organisations, women’s and youth organisations, teaching and research institutions, universities, churches, media, political foundations and any non-governmental association likely to contribute to development”.
4.4 The report assesses:
• consistency with the principles of decentralised cooperation and with other Community instruments;
• relevance to decentralised cooperation partners; and
• management of the budget line.
4.5 According to the report, there is very little documentation on the impact and results of projects but, since 2000, there has been a greater emphasis on building institutions, rather than building capacity in specific areas. The creation of the B7-6002 budget line has been a trigger for discussion on the concept of decentralised cooperation. This has paved the way for the changes introduced in the Cotonou Agreement on the participation of civil society.
4.6 The report concludes that, though relevant, decentralised cooperation lacks consistency and is not sufficiently coordinated, and a lack of resources prevents it from achieving the desired impact. Added value came from the instrument’s flexibility, particularly making it possible for partners from the South, that is the developing world, to conclude contracts directly with the Commission. The fact that 40% of these partners were NGOs meant that the decentralised cooperation line had not yet managed to involve all the categories of partners who, potentially, could benefit.
4 Regulation (EC) No. 1659/98, extended and amended by Regulation (EC) No. 955/2002. 5 Non-governmental organisation.
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4.7 Assessing the management of the budget line, the report says that the line had been massively over-subscribed, leaving the selectors and the applicants frustrated. The selection process lacked transparency, particularly as far as the partners from the South were concerned, and information on how to draw up proposals was inadequate. The failure to monitor and evaluate projects is severely criticised, with the management of the project cycle heavily dominated by evaluation at the expense of monitoring which, despite the small number of projects financed, had been confined to contractual and budgetary issues. There was still no real evaluation system. Furthermore, there had been a failure to capitalise on experience, identify good practice and disseminate results, despite these obligations being listed in the operational guide.
4.8 The recommendations concentrate on suggestions for improving the consistency and quality of the proposals and the results achieved, for cost-effectiveness and for targeting the budget line more precisely in the new Regulation. Two options are put forward on targeting, each with its pros and cons. Targeting could be at broad geographic areas, or confined exclusively to the ACP countries.6
4.9 Options to improve the quality of the proposals include:
• the use of networks to increase the transfer of know-how from North to South; technical assistance networks for partners in the South; increased monitoring and evaluation to improve knowledge of the impact of operations and to provide a sounder basis for future decisions; and
• improved website content.
To enhance the line’s specific nature, it is suggested that the decentralised cooperation line is distinguished from the NGO cofinancing line, participation is fostered, and the role of Northern NGOs changed to one of offering experience and know-how. It is also proposed that the line’s financial resources are increased and that the minimum size of projects is, in some instances, reduced.
4.10 The Commission says that it favours geographical targeting that focuses on countries where traditional aid instruments are unable to make a significant contribution to participatory development.
The Government’s view 4.11 The Secretary of State for International Development (Baroness Amos) says that the Government believes the B7-6002 budget heading is still important as a complementary instrument, particularly where traditional instruments fail, are inappropriate, or have limited impact, although this must be part of a package of overall improvements. The Minister comments that the Commission’s suggestion on targeting shows that it is modernising its thinking with regards to development: “However, more structured coordination, better monitoring and evaluation, wider involvement of all categories of decentralised cooperation actors and better targeting would make this a more effective
6 African, Caribbean and Pacific countries which are signatories to the Lomé Convention and its successor, the ACP-EC Partnership Agreement, known as the Cotonou Agreement.
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budget line”. The Government therefore, supports the Commission’s proposal to amend and extend the legal base for a further three years.
4.12 On the issue of mainstreaming decentralised cooperation into regional programmes, the Minister says that at the moment this could lead to potential geographical issues.
“Once deconcentration has fully taken place, (probably by 2005/2006), it may be appropriate to mainstream the issue into regional regulations, as part of the negotiations on the Financial Perspectives 2006-2013.”
4.13 The Minister adds:
“The UK Government is content with the proposed wording of the amended Regulation. It is encouraging that Article 1 recognises the need for a more participatory approach and the need to take into account varying needs and conditions when adopting country approaches. This is in line with our own thinking, and also with the recent Commission Communication on the role of non- state actors in EC Development Policy (COM(2002) 598 Final).7 The expansion of Article 3 to include a wider definition of potential actors is also welcome”.
4.14 On the assessment, the Minister says that the Government strongly welcomes the focus on poverty reduction and the focus on the role of Southern (developing country) partners. The focus on the transfer of ‘know-how’ from North to South, technical assistance for actors in the South, and the changing role of northern NGOs to one of offering experience are all essential in building up the capacity of southern civil society.
4.15 On the financial implications of the amended Regulation, the Minister says:
“This is a small budget line — the proposal specifies a reference amount of €18 million over 3 years (of which the UK would contribute €3.4 million per annum). The UK welcomes this increase although we would like to see some information on staffing/administration costs. We would welcome improvements to the monitoring and evaluation, but would not want a significant increase on staffing/administration costs to allow this. The Communication suggests that improvement to the selection process would provide more time for monitoring activities — it is important that this happens in practice”.
Conclusion 4.16 Whilst welcoming the principle of decentralised cooperation, and acknowledging that new practices take time to bed in, we are disappointed that the assessment reveals that the Commission appears to be incapable of structuring its development programmes without incorporating fundamental defects. We ask the Minister to comment on why she thinks this is the case. We refer, for instance, to the severe criticism in the report of the failure to monitor and evaluate projects and the comment that there is still no real evaluation system, and that there is a failure to capitalise on experience.
7 (23985) 14105/02; see HC 63-vi (2002-03), paragraph2 (8 January 2003).
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4.17 The budget line proposed is small and its predecessor was heavily over-subscribed. We wonder whether the changes proposed by the Commission will remedy this situation soon enough to avoid further frustration amongst selectors and applicants, and ask the Minister for her view. Like her, we also wish to seea more precise forecast of the staffing and administrative costs than given in the financial statement attached to the proposal to amend the Regulation.
4.18 We shall hold these documents under scrutiny, awaiting the Minister’s reply.
5 European health insurance card
(24316) Commission Communication on the introduction of a European 6924/03 health insurance card. COM(03) 73
Legal base — Document originated 17 February 2003 Deposited in Parliament 4 March 2003 Department Health Basis of consideration EM of 17 March 2003 and Minister’s letter of 15 July 2003 Previous Committee Report None To be discussed in Council No date set Committee’s assessment Politically important Committee’s decision Not cleared; further information awaited
Background 5.1 According to the Commission, the Barcelona meeting of the European Council decided that, as part of the overall aim of removing obstacles to geographical mobility by 2005, a European health insurance card should be created, which would replace all the paper forms currently needed for an individual to receive health treatment in another Member State, thereby simplifying procedures, but without changing existing rights and obligations. The Commission has set out in this Communication ways in which this objective might be achieved.
The current document 5.2 The Commission suggests that the introduction of a single, personalised card should in the first instance replace by 1 June 2004 form E111, which covers those temporarily visiting another Member State on holiday or business trips, and would involve either adapting existing national cards or each Member State introducing a new European card. At a later stage, other forms relating to temporary stays would be included, such as those covering
ESC, 31st Report, 2002-03 17
employees posted to another country (E128), international road transport (E110), students (E128) and job seekers (E119). Initially, the card would provide information on its face, but the longer-term aim is to have a smart card containing encoded information.
5.3 In putting forward its proposal, the Commission recognises the great differences between the Member States’ arrangements in this area, and that any card at Community level will need to take this diversity into account, with implementation being gradual and flexible, and the means strictly proportional to the objective. However, it also suggests that the European card would need to have common features enabling it to be recognised and used in all Member States, and that, in order to maximise its benefits, certain other steps ought to be taken, such as providing the same entitlement to all categories of insured persons, and reducing the additional formalities imposed in some Member States when health care is sought.
The Government’s view 5.4 In his Explanatory Memorandum of 17 March 2003, the Minister of State at the Department of Health (Mr John Hutton) said that the proposal had a number of important policy implications so far as the UK is concerned. He added that, whilst the Government was generally supportive of proposals to simplify bureaucracy, detailed consideration would need to be given to how such a card should be produced in the UK, and that it would be important to ensure that the financial and administrative burdens of producing it, particularly in the case of a smart card, did not exceed the benefits to citizens and the administration.
5.5 The Minister also indicated that a full Regulatory Impact Assessment would be provided as soon as possible, and, in view of this, we decided to defer our consideration of the document until that was available. However, we have since received a copy of a letter which the Minister sent on 15 July to the Chairman of the House of Lords Select Committee on the European Union, in which he explains that he is not yet in a position to provide the promised Assessment because many of the practicalities involved are still being examined.
5.6 More specifically, the Minister says that the issues to be decided include identifying precisely to whom the card should be issued — for example, whether to all UK residents, or merely those who apply for it — its length of validity, and whether it should be card, laminate or plastic. However, he suggests that, although the extra costs which will undoubtedly arise at the first stage of introduction in the UK cannot yet be quantified accurately pending decisions on the numbers to be issued, the production site and method, and a variety of technical issues, there may be cost savings as current methods of issuing paper forms run down. He also believes that any eventual movement to an electronic card would have “substantial” cost implications, partly from the need to produce such a card for UK residents, but more particularly to enable those produced by other Member States to be read by service providers in this country, such as hospitals, general practitioners, dentists or pharmacists. In addition, the Minister points out any smart card scheme would need to take into account parallel developments across Government, such as the Home Office’s proposed entitlement cards scheme, and that in practice this stage of the proposal is
18 ESC, 31st Report, 2002-03
unlikely to come about unless and until there is a perceived need for such an undertaking for reasons of UK national policy and practice.
5.7 The Minister concludes by saying that work is in hand to provide detailed cost information, and that he will write further when this is available.
Conclusion 5.8 Unlike some of the more nebulous initiatives undertaken by the Community, this measure would appear to be of some direct and tangible benefit to individuals. However, we note the practical concerns raised by the Minister, and that he will be providing further information on the likely costs involved. In view of this, we are at this stage simply reporting these developments to the House, and will consider the matter again when we have received the further information he has promised.
6 Human rights and democratisation in the Mediterranean region
(24741) Commission Communication: Reinvigorating EU actions on Human 9696/03 Rights and democratisation with Mediterranean partners — COM(03) 294 Strategic guidelines.
Legal base — Document originated 21 May 2003 Deposited in Parliament 17 July 2003 Department Foreign and Commonwealth Office Basis of consideration EM of 17 July 2003 Previous Committee Report None To be discussed in Council Autumn; no date set Committee’s assessment Politically important Committee’s decision Not cleared; further information requested
Background 6.1 Since the adoption of the Charter of Fundamental Rights in December 2000,8 the promotion of democracy, the rule of law and respect for human rights and fundamental freedoms has been one of the core objectives of the EU’s external policies. The June 2001 Council welcomed the Commission Communication on the European Union’s Role in Promoting Human Rights and Democratisation in Third Countries,9 which commended a
8 OJ No. C 364, 18.12.2000, pp. 1-22. 9 (22446) 9336/01;see HC 152-i (2001-02), paragraph 49 (18 July 2001).
ESC, 31st Report, 2002-03 19
more pro-active approach, and reaffirmed the EU’s determination to promote stable, democratic environments, founded on the full enjoyment of human rights.
The Commission Communication 6.2 The Communication describes the situation in the MEDA10 countries as varied and complex, but notes that the UNDP11 Arab Human Development report of 2002 identified three “deficits”. These related to freedom, the marginalisation of women and the uneven and discriminatory pattern of education. In relation to governance, the Communication comments:
“The Arab countries12 fall considerably below world average on all of six variables of governance used in the UNDP report, except for ‘rule of law’ where they slightly exceed the average. In many MEDA countries, a powerful executive branch exerts significant control and is subject to inadequate checks and balances from the legislative and judicial branches. Obsolete norms of legitimacy can prevail. Representative democratic structures are weak and not always genuine. Women remain marginalised in economic and political structures and are broadly discriminated against in law and custom”.
6.3 On human rights, the Commission says that Morocco, Jordan and the Palestinian Authority have engaged in a broadly positive process of reform but that, generally speaking, standards in the region fall short of compliance with international norms. Promotion of these and of democracy has been complicated by the emergence of religious extremism as a powerful political alternative. Human rights defenders and non- governmental organisations (NGOs) practising advocacy of human rights face legal and administrative constraints, and are frequently marginalised and sometimes repressed. Insufficient progress has been made on regulatory frameworks and their application, institutional capacity, education and participation of civil society in the promotion and protection of human rights. The situation can be summarised as follows:
“— Deficits in governance hamper the development of democratic values, and the promotion and protection of Human Rights;
— Marginalisation of women undermine political representation and hamper economic and social development;
— Implementation of international Human Rights conventions is poor;
— Legal and judicial systems lack sufficient independence;
— NGOs working in the civil and political spheres are weak, severely circumscribed in their action and cut off from international networking;
10 MEDA is the main EU programme of assistance to Algeria, Cyprus, Egypt, Israel, Jordan, Lebanon, Malta, Morocco, Syria, Tunisia, Turkey and West Bank/Gaza Strip. 11 United Nations Development Programme. 12 The UNDP report covered many more Arab countries than the MEDA partner countries dealt with in this Communication.
20 ESC, 31st Report, 2002-03
— Education, though relatively better funded than in many other developing countries, is unevenly dispensed, does not serve to overcome traditional discriminatory patterns and is ill adapted to the requirements of the modern economy;13
— Authoritarianism and poor economic and social performance favour political marginalisation and provide fuel for radical movements and violence; and
— Some political interpretations of Islam exploit cultural differences to question the universality of Human Rights.”
6.4 Israel is described as presenting characteristics which are distinctly different from those of the other MEDA partners:
“It functions as a well established parliamentary democracy, with an effective separation of powers, a functioning system of governance, and active participation of NGOs and civil society in all internal aspects of political and social life. However, Israel’s compliance with internationally accepted standards of Human Rights is not satisfactory. Two important specific areas need to be tackled. Firstly, the issue of reconciling the declared Jewish nature of the State of Israel with the rights of Israel’s non-Jewish minorities. Secondly, the violation of Human Rights in the context of the occupation of Palestinian territories.14 There is an urgent need to place compliance with universal human rights standards and humanitarian law by all parties involved in the Israeli/Palestinian conflict as a central factor in the efforts to put the Middle East peace process back on track. This will require a special effort by the EU and the setting up of an appropriate strategy”.
6.5 The Communication sets out working guidelines to achieve the EU’s goal, in cooperation with those Mediterranean partner countries in the Barcelona Process which are not EU accession states or candidates. It makes ten recommendations which include;
• the systematic inclusion of human rights and democracy issues in all dialogues which take place on an institutionalised basis, such as the Association Councils and Committees. It suggests that the EU should also be ready to discuss issues concerning human rights within the EU, for example the situation of immigrants in the EU, at the request of the MEDA partners;
• Commission Delegations coordinating with Member States’ embassies in analysing the situation in each Mediterranean partner country and producing regular updates; and
• “mainstreaming” the promotion of human rights and democracy in MEDA programmes. The finalisation in 2001 of Country Strategy Papers (2002-2006) for most MEDA partner countries is described as a major step forward in integrating a
13 UNDP recommendations on education are of crucial importance for the region.The Commission will address these recommendations within the framework of the MEDA Regional and National Indicative Programmes. 14 In this context, the European Union has repeatedly drawn attention to the human rights obligations of all parties to the conflict, inter alia through its resolutions and statements at the UN Commission of Human Rights in Geneva and at the Third Committee of the UN General Assembly.
ESC, 31st Report, 2002-03 21
human rights and democracy dimension in the overall approach of the Commission to its assistance to these partners.
6.6 The Communication concludes that the EU and the Mediterranean partners have an impressive array of instruments at their disposal to allow them to pursue their shared, core objectives of promotion of the rule of law, democratisation and the respect of human rights and fundamental freedoms.
6.7 The main instruments for cooperation are the MEDA programme and the European Initiative for Democracy and Human Rights (EIDHR).15 The EIDHR receives €100 million from the EU budget for the promotion of human rights and democratisation in third countries world-wide, in particular through NGOs and international organisations. Funds can be channelled directly and are not subject to prior negotiation with third country governments. In 2002 to 2004, EIDHR concentrated on a limited number of priorities which included support for the abolition of the death penalty and combatting torture, racism and xenophobia. The Communication recommends that its strategy towards the Mediterranean partners should be revised.
6.8 The Communication identifies ten areas where the existing instruments could be used more effectively: These include recommendations outlined above, but also include:
“— Regular contacts between Commission Delegations and civil society, in close coordination with EU Member States’ embassies;
— the development of MEDA National Action Plans on Human Rights and democracy with those partners willing to engage in such an exercise;
— the establishment of Regional Action Plans on Human Rights and democracy issues with MEDA partners willing to develop further cooperation on concrete issues;
— Increased attention to Human Rights and democratisation issues in the Commission’s Country Strategy Papers and greater account taken of progress made in these areas in the National Indicative Programmes, including through a special additional facility;
— improved focus on Human Rights and democratisation issues in the Commission’s Regional Strategy and Regional Indicative Programme;
— enhanced complementarity between the MEDA programme and the European Initiative for Democracy and Human Rights;
— enhanced efforts at all levels in the area of improvement of electoral frameworks.”
15 This Initiative is based on Council Regulation EC No. 975/1999 and EC No. 976/1999 of 29 April 1999 — OJ L 120/8 of 8 May 1999.
22 ESC, 31st Report, 2002-03
The Government’s view 6.9 The Minister for Europe (Mr Denis MacShane) says that the Government fully supports the Barcelona Process and the core objective of the EU’s external policies of promoting democracy, the rule of law, respect of human rights and fundamental freedoms. He comments that it is particularly important that action in the region addresses some of the issues raised by the UNDP Arab Human Development Report 2002, given its detailed analysis from inside the Arab world. The strategic guidelines provided by the Commission Communication will provide a strong basis for taking this agenda forward.
Conclusion 6.10 We ask the Minister to comment on the reaction of the MEDA partners to the implementation by the EU of those guidelines which have already been put into practice. Which partners have not wished to cooperate in the way suggested by the Commission and for what reasons? We also ask him to tell us, after the General Affairs and External Relations Council at which this Communication is discussed, whether any reservations about the recommendations were expressed by the Member States.
6.11 Meanwhile, we shall not clear the document.
7 Carriers’ obligation to communicate passenger information
(24513) Draft Council Directive on the obligation of carriers to communicate 7161/03 passenger data. —
Legal base Articles 62(2)(a) and 63(3)(b) EC; consultation; unanimity Department Home Office Basis of consideration Minister’s letter of 31 July 2003 Previous Committee Report HC 63-xxix (2002-03), paragraph 11 (10 July 2003) To be discussed in Council Date not set Committee’s assessment Politically important Committee’s decision Not cleared; further information requested
The document 7.1 This document, a Spanish initiative, aims to combat illegal immigration — firstly by giving the authorities advance information on passengers arriving in the EU and secondly by monitoring third-country nationals who legally enter the European Union but then overstay.
ESC, 31st Report, 2002-03 23
7.2 When we first considered the proposal, in July, we considered that it was inadequate and imprecise in its present form, and were pleased to learn that it was likely to be substantially redrafted. We asked a number of questions, and kept the document under scrutiny.
The Minister’s letter 7.3 The Parliamentary Under-Secretary of State at the Home Office (Caroline Flint) has now responded. With regard to our question about the scope of the draft Directive, she recognises that the draft implies that the proposal is intended to apply to airlines only. She tells us that the UK will be seeking to clarify the intended scope of the measure during discussions on a revised text.
7.4 We asked for the Minister’s views on whether it was appropriate for an instrument adopted under the EC Treaty to fix the amount of the fine to be imposed on carriers. (We considered the provisions of Article 2(1)(a) and (b) to be matters for a framework decision under the EU Treaty, rather than for a Directive.) The Minister tells us that the Government considers the current wording to be appropriate for a Directive. She continues:
“Under Article 2 (1) Member States are required to take necessary measures to ensure that sanctions are dissuasive, effective and proportionate, giving either a minimum or a maximum level of sanction. The Government’s view with regard to first pillar instruments such as this is that they should define activities which are or are not prohibited but should not specify that criminal sanctions should be used for their enforcement. In this particular case, the Directive does not require criminal sanctions. The suggested form of words used, ‘dissuasive, effective and proportionate’, is very similar to those used in other first pillar instruments, an example of which is Council Directive 2001/51/EC relating to carriers liability.”
7.5 Since we were concerned that the proposal might raise issues about data protection and the invasion of the privacy of individuals, we asked whether the Information Commissioner had been consulted about the draft instrument. The Minister tells us that he has not yet been consulted.
7.6 The Minister agrees to send us a copy of the Regulatory Impact Assessment on the proposal when it is available. Finally, she tells us that the Government does intend to opt into the measure and has already taken the necessary steps to do so.
Conclusion 7.7 We thank the Minister for her prompt response. We note that the Government intends to opt into the proposal. It would have been helpful to have been informed of this in the Explanatory Memorandum.
7.8 We repeat our concerns (which we hope the Government still shares) about aspects of this document. In particular, we remain of the view that Article 2(1) does indeed impose a penalty of a criminal nature, and specifies its minimum and maximum amount. Such a provision should, in our view, be adopted under the EU Treaty. It is
24 ESC, 31st Report, 2002-03
welcome news that the UK will be seeking to clarify the scope of the proposal in negotiations on a revised text.
7.9 We note that the Information Commissioner has not yet been consulted on the draft document. We urge the Minister to consult him.
7.10 We shall keep the proposal under scrutiny until we have the Regulatory Impact Assessment and the revised text.
8 Reduced levy on New Zealand dairy imports
(19221) Special Report No. 4/98 by the Court of Auditors on Importation of 9384/98 reduced rates of levy into the Community and disposal of New — Zealand milk products.
Legal base — Department HM Customs & Excise Basis of consideration Minister’s letter of 18 July 2003 Previous Committee Report HC 155-xxxiv (1997-98), paragraph 4 (15 July 1998), HC 34-xv (1998-99), paragraph 1 (30 March 1999) and HC 23-xxii (1999-2000), paragraph 1 (21 June 2000) To be discussed in Council Not applicable Committee’s assessment Politically important Committee’s decision Cleared
Background 8.1 Ever since the UK joined the European Community in 1973, specified quantities of New Zealand butter have been entitled to enter the Community at greatly reduced rates of levy, provided the butter concerned is indeed of New Zealand origin, and meets certain other conditions. In addition to the licence required by all imports of dairy products, New Zealand butter requires a document providing evidence that it meets the eligibility conditions and is within the quota limit. New Zealand cheese also benefits, to a more limited extent, from a similar concessionary arrangement.
8.2 These arrangements were reported upon in April 1998 by the Court of Auditors, which found Amajor weaknesses@ in the controls exercised by the UK authorities, and in the Commission=s oversight. As a result, the Court said that its audit had identified under- payments of import levies amounting to some €410 million and undue payments of export refunds amounting to €57,000. Of these sums, only about €118 million was said to be recoverable (because debts can be pursued only when they have been established by a
ESC, 31st Report, 2002-03 25
demand within three years of their arising). The implications of this — not least in terms of the potential implications for the Community budget and the UK Exchequer — were the subject of lengthy Reports by our predecessors on 15 September 1998, 30 March 1999 and 21 June 2000. In particular, they noted in the latter case that, due to the further legal action already in train, it was likely to be some time yet before the extent of any liability arising from the past irregularities could be established, and they therefore decided to withhold clearance until the position on this was clearer. They also noted that a further report by the Court of Auditors on the subject was likely to be published later that year.
Minister’s letter of 18 July 2003 8.3 We have now received a letter of 18 July 2003 from the Paymaster General (Dawn Primarolo). She says that the separate Report which the Court of Auditors had been expected to produce had not materialized, but that the issue had been mentioned in the Court’s Annual Report for the 1999 financial year, in which it had generally commended the action taken by Customs and Excise to protect the Community’s financial interest. She adds that the Court has also acknowledged that a strategy had been adopted to ensure that effective controls were in place and had been executed, since when there had been no significant problems with imports of New Zealand dairy products.
8.4 On the earlier difficulties identified by the Court, the Minister says that the sums at stake have now been resolved in principle, after protracted litigation (including hearings in the House of Lords and VAT and Duties Tribunals) on a number of technical issues, including technical disputes. In the latter case, the Commission has granted remissions of major parts of the debts, and, following recent scientific advice regarding the reliability of butterfat content (and subsequent legal advice), the final amount will be subject to further major reductions. She says that it is not yet possible to put a precise figure on the final sum, but that the early indications are that it will be a small fraction of the estimated £290 million16 thought originally to be at stake. The Minister adds that the result — which she anticipates will be reached by the end of this year — is expected to be a full and final revision of the debts, with the importers admitting liability, the outstanding balance being paid in full, and all potential claims against Customs and Excise and the Community being abandoned. Similarly, there is not expected to be any actual loss to the Community budget.
Conclusion
8.5 We are grateful to the Minister for this further information, in the light which we are now clearing this document.
16 This figure was later revised to £323 million.
26 ESC, 31st Report, 2002-03
9 Identification and registration system for sheep and goats
(24166) Draft Council Regulation establishing a system for the identification 15829/02 and registration of ovine and caprine animals and amending COM(02) 729 Regulation (EEC) No. 3508/92.
Legal base Article 37 EC; consultation; QMV Department Environment, Food and Rural Affairs Basis of consideration Second SEM of 27 August 2003 Previous Committee Report HC 63-x (2002-03), paragraph 4 (29 January 2003) and HC 63-xix (2002-03), paragraph 1 (30 April 2003) To be discussed in Council No date set Committee’s assessment Politically important Committee’s decision Cleared (by Resolution of the House on 14 July 2003); request to be kept informed
Background 9.1 Council Directive 92/102/EEC establishes a system for the identification and registration of animals, principally in order to enable veterinary checks to be carried out, but also to identify certain types of livestock eligible for Community aid schemes to be identified. Its main provision requires Member States to maintain an up-to-date list of all holdings on which animals covered by the Directive are kept, and to ensure that the owners maintain a register stating the number of animals present on the holding, together with a record of all births, deaths and movements. In the latter case, information also has to be provided, on at least an aggregate basis, showing the date of movement, and the holding of origin or destination. In the case of cattle, each animal must be identified individually by an ear tag, whereas other animals may simply be marked in such a way as to make it possible to identify the holding from which they have come.
9.2 As we noted in our Reports of 29 January and 30 April 2003, the Commission put forward the current document in December 2002, following the foot-and-mouth crisis. The main changes proposed were that:
• all sheep and goats born after 1 July 2003, or intended for intra-Community trade, should be tagged in each ear within one month of birth, with an individual identification number;
• as from 1 July 2003, farm registers should contain precise information on the identity of all animals on the holding, as well as on births, deaths, and movements onto or from the holding;
ESC, 31st Report, 2002-03 27
• as from 1 July 2003, documents should be issued by the Member State to accompany each batch of sheep or goats being moved;
• as from 1 July 2004, Member States should have in place a central register of holdings keeping sheep and goats;
• as from 1 July 2005, each Member State should have set up a computerised central database; and
• Member States may allow one ear tag to be replaced with an electronic identifier, with this becoming mandatory from 1 July 2006.
9.3 The proposal also amends Regulation (EEC) No. 3508/92 in order to establish that the granting of aid, such as the Sheep Annual Premium payment, should be dependent on compliance with these conditions.
9.4 Our earlier Reports noted that the UK supported the objective of the proposal, and had in place measures which satisfied some of its key elements. Nevertheless, the Government considered that the proposal would give rise to major implementation problems, especially in the UK, which has the largest number of sheep and goats of any Member State, and also on average moves each sheep more often. In particular, it believed that electronic identification and associated systems would need to be introduced on a widespread basis in order to record the details of individual sheep and goats routinely, and that technical guidance would be crucial to their implementation throughout the Community. These difficulties were illustrated by the cost figures contained in the Regulatory Impact Assessment provided by the Government in April 2003 (and quoted in our later Report), and we therefore recommended that the proposal be debated in European Standing Committee A. That debate duly took place on 9 July 2003.
Second supplementary Explanatory Memorandum 9.5 In a second supplementary Explanatory Memorandum of 27 August 2003, the Parliamentary Under-Secretary of State (Commons) at the Department for Environment, Food and Rural Affairs (Mr Ben Bradshaw) has provided an updated Regulatory Impact Assessment in the light of the Government’s recent consultation exercise, though this appears merely to confirm the figures contained in the earlier Assessment. He also confirms that there remain major problems with the implementation of the proposal as drafted, and he says that, although the Government stressed during the debate in European Standing Committee A its commitment to improving the traceability of sheep and goats, the Commission’s proposals would impose unacceptable burdens on the UK sheep industry, which would not be proportionate to the disease risk.
9.6 The Minister also points out that the proposed date of 1 July 2003 for the implementation of double tagging and individual animal recording has now passed, and that, at a Council Working Group held on 8-9 July to discuss the proposal, the majority of Member States indicated that they could not accept it in its present form. The Commission was therefore asked to bring forward a revised proposal after the summer break.
28 ESC, 31st Report, 2002-03
Conclusion 9.7 Given the debate held in European Standing Committee A on 9 July, we think it sufficient simply to draw this latest information to the attention of the House. In doing so, we note that the Commission has been asked to bring forward a revised proposal, and we would be glad if the Government would continue to keep us informed of any significant developments.
10 Euro-Mediterranean transport network
(24727) Commission Communication on the development of a Euro- 11118/03 Mediterranean Transport Network. COM(03) 376
Legal base — Document originated 24 June 2003 Deposited in Parliament 11 July 2003 Department Transport Basis of consideration EM of 20 August 2003 Previous Committee Report None To be discussed in Council 9/10 October 2003 Committee’s assessment Politically important Committee’s decision Cleared
The document 10.1 In this Communication the Commission says it is now essential to develop a Euro- Mediterranean transport network, with links both between the Mediterranean partners (non-Member States bordering the Mediterranean) and with the existing trans-European transport network. It claims that Mediterranean partners need to be able to benefit from an enlarged European Union, while the Union needs a stable and prosperous area on its southern and eastern fringes. The Commission also says that modern, efficient transport networks are essential for the proper functioning of the Euro-Mediterranean free trade area which is due to be created by 2010, and are a powerful factor in regional and sub- regional integration between the Mediterranean partners.
10.2 The Commission also argues that the Mediterranean region’s investment needs in this sector are very substantial and are likely to increase considerably over the next few years. It notes that recently there have been international trade negotiations to open up further the transport markets. Additionally, the Commission believes new needs and constraints have come to the fore in recent years which directly affect the Mediterranean transport sector. These include the development of tourism, safety and security concerns linked to the risks
ESC, 31st Report, 2002-03 29
involved in shipping oil and gas, international terrorism, and the growing importance of the Mediterranean as a transit area, in particular owing to increased traffic from Asia.
10.3 The Commission suggests that development of a Euro-Mediterranean transport network would require:
• planning of the network and identification of priority regional infrastructure projects;
• mobilisation of the funding (public and private) necessary for completion of the network;
• incorporation of common transport policy objectives relating to maritime safety, air transport, security in maritime and air transport and Galileo.
10.4 The Commission concludes by stressing the need to boost sub-regional co-operation. This would allow greater use of complementary transport infrastructure and help integrate the markets, making it easier to establish a Euro-Mediterranean transport network.
The Government’s view 10.5 The Minister of State, Department of Transport (Dr Kim Howells) tells us:
“The Government believes that the UK’s location means that the direct effect of these proposals will be less keenly felt here than in other Member States. However, the Government recognises that many of the benefits to the EU which the Commission anticipates from the further development of Euro-Mediterranean transport infrastructure could indirectly benefit the UK,
“The Government supports the methodology outlined to define the Euro- Mediterranean network. This builds on the previous exercise carried out to identify a core transport network in the candidate countries (the so-called “TINA” process). It is also consistent with the approach adopted by the High Level Group chaired by Karel Van Miert that presented recommendations to the Commission recently on priorities for the future development of the transport trans-European network (TEN) in the enlarged Union.
“The Government supports the Commission’s intention to explore arrangements for mobilising funding sources and believes that the involvement of private capital both in the development of the Euro-Mediterranean network and in the development of the existing TEN should be strongly encouraged. Given the financial pressures on the existing TEN network within the European Union it is pleased that there is no suggestion to divert an element of funding from the current TEN-T budget to support this initiative.
“Although recognising the importance of co-operation on safety and security issues, they are two distinct and different specialisations and the Government questions whether setting up an Euro-Mediterranean institute for Safety and Security is practicable. It is not clear how such an organisation would be resourced, how it would co-ordinate its efforts with existing work programmes of international bodies
30 ESC, 31st Report, 2002-03
such as the European Civil Aviation Conference (ECAC), or indeed what its remit would be given the existence of these other bodies.”
Conclusion 10.6 This document discusses important issues for the Mediterranean region and we agree with the Minister that there would be indirect benefit for the UK in further development of Euro-Mediterranean transport infrastructure. But we note the Minister’s caution in relation to financing and safety and security issues and presume the Government will resist any inappropriate budgetary or legislative proposals, if such emerge. On that basis we are content to clear the document.
11 Single European Sky
(a) (24768) Outcome of the European Parliament’s second reading of draft 10821/03 Regulations on air navigation service provision, on the use of — airspace and on interoperability of the air traffic management network in the Single European Sky.
(b) (24780) Outcome of the European Parliament’s second reading of the draft 10820/03 framework Regulation for the Single European Sky. —
Legal base Article 80(2) EC; co-decision; QMV Documents originated 7 July 2003 Deposited in Parliament (a) 25 July 2003 (b) 29 July 2003 Department Transport Basis of consideration EM of 21 August 2003 Previous Committee Report None; but see (24095) 14964/02: HC 63-vii (2002-03), paragraph 11 (15 January 2003) To be discussed in Council Not known Committee’s assessment Politically important Committee’s decision Cleared
Background 11.1 The Single European Sky initiative, launched in 1999, is intended to reduce air traffic delays, enhance air safety and minimise the environmental impact of air travel through
ESC, 31st Report, 2002-03 31
more efficient airspace design and more direct routing of aircraft. The Commission=s proposals for creating a Single European Sky included:
• establishing routes regardless of national frontiers in order to maximise use of airspace;
• ensuring better coordination between civil and military use of airspace; and
• separating regulation and service provision in air traffic management and air traffic control within Member States and within Eurocontrol.17
We and our predecessors have considered the proposals for a Single European Sky on several occasions, most recently in January this year.18 The subject was debated on the floor of the House on 24 June 2002.19 The House, in noting the proposals, endorsed the Government=s general support for the Single European Sky, its wish for a strong regulatory body and clear separation between that body and service providers and its opposition to military aviation being covered by the proposed Regulations.
The documents 11.2 The documents record 50 amendments made in the European Parliament’s second reading to the texts of the draft Regulations adopted by the Council. Many of these amendments subvert the Council’s common position excluding military interests from the scope of the draft Regulations and committing Member States to secure enhanced cooperation with the military. The Italian Presidency is beginning the conciliation process this month with a view to securing acceptance of that Council compromise.
The Government’s view 11.3 The Parliamentary Under-Secretary of State, Department of Transport (Mr Tony McNulty) tells us:
“The Government continues to support the establishment of Single Sky. We consider it offers genuine benefits to the aviation industry and the travelling public. Whilst we welcome the European Parliament’s keen interest in Single Sky, we were disappointed that it felt unable to support the hard won compromise covering the civil/military dimension of Single Sky. We believe the Council will be able to persuade the Parliament during the forthcoming conciliation of the need to retain the common position excluding the military from the scope of the Single Sky legislation.”
11.4 The Minister sets out for us in a lengthy but helpful annex to his Explanatory Memorandum the Government’s view of each of the amendments, highlighting the 20 it would have difficulty in accepting. Most of these relate to the civil/military issue. Some relate to aspects of the provision of air navigation services, use of air space and
17 The European Organisation for the Safety of Air Navigation. 18 See headnote. 19 HC Deb, 24 June 2002, cols 678-698.
32 ESC, 31st Report, 2002-03
interoperability and for a few the Government’s objection is less to the principle underlying the amendment than to the specific action or timing implied by the wording.
11.5 The Minister also tells us that ongoing consultations with stakeholders, including National Air Traffic Services Ltd and the Civil Aviation Authority, indicate that they believe the Single Sky is the way forward and are keen for rapid implementation. He also attaches to his Explanatory Memorandum a partial Regulatory Impact Assessment which sets out the perceived benefits of the European Single Sky and the fewer benefits of implementing Single Sky objectives through domestic legislation.
Conclusion 11.6 As noted above, the House has endorsed the Government’s support for the principle of the European Single Sky whilst resisting inclusion of military aviation within the scope of the legislation. Given the Minister’s confidence that the Italian Presidency will be able to persuade the European Parliament not to insist on such inclusion, we are content to clear this document.
12 Company law
(24609) Commission Communication: modernising company law and 10041/03 enhancing corporate governance in the European Union — a plan to COM(03) 284 move forward.
Legal base — Department Trade and Industry Basis of consideration Minister’s letter of 12 August 2003 Previous Committee Report HC 63- xxviii (2002-03), paragraph 13 (2 July 2003) To be discussed in Council No date set Committee’s assessment Legally and politically important Committee’s decision Cleared (decision reported on 2 July 2003)
Background 12.1 We considered the Commission Communication on 2 July. We noted that it covered the themes of corporate governance, capital maintenance and alteration, groups and ‘pyramids’,20 corporate restructuring and mobility and new forms of incorporation. We also noted the explanation by the Minister that a number of the proposals contained in the Action Plan were simply a restatement of EU commitments which had already been agreed or which were under way, this being the case with the proposals on cross-border mergers,
20 Defined by the High Level Group as chains of holding companies with ultimate control based on a small total investment and achieved by extensive use of minority shareholdings.
ESC, 31st Report, 2002-03 33
change of seat, and pan-European forms of incorporation. We also noted that, in relation to the possibility of new forms of incorporation, such as the European Private Company, the appendix to the Explanatory Memorandum indicated that there was little perceived need for such new forms of incorporation in the UK.
12.2 We agreed with the Minister that, in considering individual proposals under the Action Plan, it would be appropriate to ensure that these genuinely contributed to increased access for UK companies to EU capital markets, increased cross-border shareholder activism, reduced burdens on business and led to improved corporate governance.
12.3 We were content to clear the document, but we asked the Minister to explain further the basis for her view that there was a lack of any perceived need in the UK for new forms of incorporation, such as the European Private Company.
The Minister’s reply 12.4 In her letter of 12 August 2003, the Minister of State for Industry and the Regions and the Deputy Minister for Women and Equality ( Jacqui Smith) refers to the establishment of the Company Law Review in 1998. The Review was established to consider whether company law, partnership law and other legislation which establishes a legal form of business activity provide an adequate choice of legal vehicle for business at all levels. The Minister informs us that, following consultation, the Review concluded that there was no general need to create new legal corporate forms and that to do so might have disadvantages for small companies, notably by creating transitional problems as companies grew and expanded whilst still being bound by rules specific to small companies.
12.5 The Minister adds that the only area in which the Review did recommend a new separate form of incorporation was in relation to charities, and that this work is now being taken forward in the context of a proposed Charities Bill. The Minister also points out that since the completion of the Review the Government has proposed the creation of a new type of company, the Community Interest Company, which would be designed for social enterprises which wish to use their profits and assets for the public good. The Minister explains that it is the Government’s intention to introduce legislation as soon as parliamentary time allows.
12.6 In relation specifically to the Commission Communication, the Minister makes this final comment:
“The Department of Trade and Industry held round table consultation meetings with key business and other stakeholders following the issue of the consultation document by the EU High Level Group of Company Law Experts in May last year, again following publication of the final report of the High Level Group in November 2002 and, most recently, in the last few weeks to consider the Commission Action Plan. At each of these meetings, the issues of the perceived need for alternative forms of European corporate vehicle has been raised (particularly the issue of the Private European Company). It has consistently been the case that stakeholders have expressed the view that they saw little need for such alternative forms.”
34 ESC, 31st Report, 2002-03
Conclusion 12.7 We cleared the document on 2 July, but we are grateful to the Minister for her comprehensive reply to our question. It is clear from this that there is no general need for the creation of new forms of incorporation. We have no further questions.
13 Statutory audit in the European Union
(24659) Commission Communication — ‘Reinforcing the statutory audit in 10739/03 the EU’. COM(03) 286
Legal base — Document originated 21 May 2003 Deposited in Parliament 26 June 2003 Department Trade and Industry Basis of consideration EM of 10 July 2003 Previous Committee Report None To be discussed in Council No date set Committee’s assessment Legally and politically important Committee’s decision Cleared
Background 13.1 Conditions for the approval of statutory auditors were the subject of a Directive adopted by the Council in 1984 (the ‘8th Directive’21). This was followed by a Commission Green Paper in 1996 on ‘The Role, Position and Liability of the Statutory Auditor in the EU’ and a further communication from the Commission in 1998. The Commission issued recommendations in 2000 and 2002 on quality assurance for statutory auditors and on their independence.
13.2 The present Communication is prompted by the collapse of the Enron Corporation, and the reaction to that event, including the enactment of the Sarbanes-Oxley Act in the United States as a measure to restore the confidence of investors. The Commission believes that further initiatives are required to reinforce the confidence of investors in capital markets and to enhance public trust in the audit function in the EU.
21 OJ No L 126 of 12.5.84, p.20.
ESC, 31st Report, 2002-03 35
The Commission Communication 13.3 The Commission Communication sets out ten proposed measures, not all of which are legislative in character, which are designed to reinforce the role of statutory audit in the EU.
13.4 The first of these is a proposal to modernise the 8th Company Law Directive. The aim would be to provide a comprehensive legal basis for all statutory audits conducted within the EU and which, to the extent appropriate, would also apply to non-EU firms carrying out audit work in relation to companies listed on the EU capital markets. The Commission points out that the present 8th Directive is concerned essentially with the approval of auditors and lacks provisions on public oversight, disciplinary systems and systems for quality assurance. Moreover, the 8th Directive does not refer to the use of auditing standards, requirements for independence or to codes of ethics. The Commission intends to adopt a principles-based approach, setting out clear principles in the EU legislation, with such implementing measures including guidance and recommendations on best practice as may be necessary.
13.5 The second of the proposals is one to create an Audit Regulatory Committee. The Commission argues that there is a need to shift the balance between the representatives of the public interest and those of the audit profession in favour of the former and proposes that the 8th Directive should be amended to provide for the creation of an Audit Regulatory Committee chaired by the Commission and composed of representatives of the Member States.
13.6 Thirdly, the Commission proposes the use of International Standards on Auditing22 for all EU statutory audits from 2005. A fourth measure is the proposal to set out minimum standards on public oversight in the 8th Directive and to develop an ‘EU coordination mechanism to bring together the national systems into a cohesive, efficient pan-European network’. The Commission again envisages chairing a committee of representatives of Member States to encourage convergence of principles and development of best practice. A further three proposed measures involve consideration of amendments to the 8th Directive on such issues as quality assurance systems, discipline, disclosure requirements and principles of auditor independence. Also under consideration are principles for inclusion in an amended 8th Directive on the appointment, dismissal and remuneration of auditors and on internal controls.
13.7 Finally, the Commission has noted the concern of the audit profession with regard to joint and several liability, which has the result that claimants can seek to recover their entire loss from one party, ‘regardless of proportionality’. The Commission replies that auditor liability is primarily ‘a driver for audit quality’ and does not consider that harmonisation or capping of auditor liability is necessary. The Commission nevertheless indicates that it may be necessary to examine the broader economic impact of present liability regimes.
22 These are standards developed by the International Auditing and Assurance Standards Board, a standing technical committee of IFAC, the International Federation of Accountants.
36 ESC, 31st Report, 2002-03
The Government’s view 13.8 In her Explanatory Memorandum of 10 July 2003 the Minister for Industry and the Regions and Deputy Minister for Women and Equality (Jacqui Smith) explains that the Government supports the Commission’s objectives subject to certain important caveats. The Minister explains that whilst it is important to harmonise the approach to statutory audit, such harmonisation should be at the level of principles rather than detailed rules, and that such principles should be flexible in their operation, respecting the Treaty principles of subsidiarity and proportionality, and respecting the diversity of approaches within the Member States.
13.9 The Minister notes with concern that the Commission intends that the Audit Regulatory Committee should adopt ‘appropriate implementing measures’ under the comitology23 procedure. The Minister explains that it is the Government’s view that this should not be used as a means of imposing detailed and inflexible rules to implement the principles, and that it will continue to underline the importance of this point.
13.10 More generally, the Minister comments as follows:
“It is in Europe’s, and the UK’s, interest to ensure all Member States have sufficiently robust minimum standards. It is particularly important for the UK that progress is made in raising standards across the EU, as the UK has the greatest number of listed companies, accountancy and audit firms and, we would argue, the most developed regulatory regime. This is especially important in the context of EU-US negotiations over the impact of the US Sarbanes Oxley legislation, where differences between national systems within the EU could be used by the US as a justification for not recognising EU regimes as equivalent to their own regime.
Most of the important detail of the Commission’s proposals is not yet available. It is impossible to make a full judgement on the proposals until the Commission come forward with the draft Modernised Directive itself, which they plan to do around November 2003. And even then, much will depend on the powers and scope of the Audit Regulatory Committee that the Directive will establish.”
13.11 The Minister indicates that the Government will be consulting widely on the proposals, and will submit its comments to the Commission in the early autumn. The Minister adds that the Commission plans to issue a draft of possible amendments to the 8th Directive by mid-November.
Conclusion 13.12 We are grateful to the Minister for her helpful Explanatory Memorandum. We agree with the points she makes about the need for the approach to statutory audit to be based on principles rather than detailed rules at EU level.
23 The procedure whereby certain legislative functions may be delegated to committees formed of the Commission and representatives of the Member States pursuant to Council Decision 1999/468/EC.
ESC, 31st Report, 2002-03 37
13.13 We accept the Minister’s point that because much of the important detail in the Commission’s proposals is not yet available it is impossible to reach a final judgement on them at this stage. We shall look forward to an early sight of the proposed amendments to the 8th Directive and will take a particular interest in the composition, role and powers of the envisaged Audit Regulatory Committee.
13.14 In the meantime, we are content to clear the present document.
14 Implementation by the accession states of regional policy
(24760) Commission Communication on the European Parliament and the 11578/03 Council on the implementation of commitments undertaken by the COM(03) 433 acceding countries in the context of accession negotiations on chapter 21 — Regional Policy and Coordination of Structural Instruments.
+ADD 1 Commission Staff Working Paper.
Legal base — Document originated 16 July 2003 Deposited in Parliament 24 July 2003 Department Trade and Industry Basis of consideration EM of 13 August 2003 Previous Committee Report None To be discussed in Council No date set Committee’s assessment Politically important Committee’s decision Cleared
Background 14.1 At the Brussels European Council in October 2002, the Commission made a commitment, under Chapter 21 of the accession negotiations, to produce a report in July 2003 on progress made by the accession states in their preparations for implementing regional policy and coordinating the Structural Instruments. The new Member States will be eligible for €22 billion from the Structural and Cohesion Funds (SCF) for the period 2004-2006, but the Commission says that it will not be able to approve Community funding until all the conditions set out in the Structural and Cohesion Funds Regulations are satisfied. The accession states have committed themselves to put in place the necessary administrative structures, as well as the monitoring and control procedures which, the Commission points out, are indispensable to the sound implementation of the funds, before the end of 2003.
38 ESC, 31st Report, 2002-03
The Commission Communication 14.2 The main points made include:
• The legislative framework
Public procurement legislation still does not fully comply with EC legislation. Further work is also required on budgetary management legislation. However, progress has been made on competition and state aid legislation and significant progress has been made in all the accession states on environmental protection. However, there is still work to be done on environmental impact assessments, nature protection and waste management.
• The institutional framework
Although overall progress has been made on inter-ministerial coordination the Commission remains concerned about this issue. The accession states appear to be aware of financial control requirements and the Commission judges that the internal audit arrangements should be adequate, but the question of the independence of the Paying Authorities, in their role of certifying the regularity of co-financed expenditure, needs to be rapidly resolved.
• Administrative capacity
The Commission feels that particular attention should be paid to reinforcing the administrative capacity of regional and local administrations. Also, the public administrations of the accession states are experiencing difficulties in attracting and retaining suitable staff.
• Programming capacity
Despite some delays in the submission of the programming documents, the accession states have made significant progress, but the documents often appear to lack a coherent strategic framework due to difficulties in achieving effective inter- ministerial co-ordination.
14.3 The Commission says that these issues must be given urgent attention. It undertakes to be a constructive partner in ensuring that the accession states establish “the best possible implementation conditions”, which it is confident that they will do.
The Staff Working Paper
14.4 This document provides detailed information on the assessment of management and control systems in each of the acceding countries. The data is based principally on information provided by these countries following detailed questionnaires sent out by the Commission. Account is also taken of information relating to the commitments made in the framework of Chapter 21, the implementation of pre-accession instruments, the programming exercise and missions to the relevant countries.
ESC, 31st Report, 2002-03 39
14.5 The Commission recalls that it also undertook, at the 2002 Brussels European Council, to produce a comprehensive monitoring report in November this year on the implementation of all the commitments made in the negotiations by the accession states.
The Government’s view 14.6 The Parliamentary Under-Secretary of State for Small Business and Enterprise at the Department of Trade and Industry (Mr Nigel Griffiths) says that, while no direct policy implications arise from this report, the reform of the Structural and Cohesion Funds for the post 2006-period is likely to affect the UK’s contribution to the EC budget. The financial implications of this eventual reform will be considered as a part of the negotiations on the next Financial Perspective.
14.7 The Minister outlines briefly the UK’s involvement in a number of current Structural Fund Twinning projects under the PHARE programme, which allow experts from the Member States to provide administrative and technical expertise to the accession states to help prepare them for using the Funds.
Conclusion 14.8 Although the Commission expresses its confidence that the accession states will establish “the best possible implementation conditions”, this report does not give grounds for optimism that the necessary preparations will have been completed by the end of this year. We note the Commission’s assurance that Community funding will not be approved in the absence of compliance with all the conditions set out in the Structural and Cohesion Fund Regulations and ask the Minister to ensure that we are informed in a timely fashion of any intention by the Council to authorise the Commission to ease these conditions.
14.9 We also ask the Minister to ensure that we are given ample opportunity to scrutinise the additional comprehensive monitoring report which the Commission intends to issue in November 2003.
14.10 We now clear this document.
40 ESC, 31st Report, 2002-03
15 Protection of workers from risks arising from physical agents (electromagnetic fields and waves)
(24551) Draft Directive on the minimum health and safety requirements — regarding the exposure of workers to the risks arising from physical — agents (electromagnetic fields and waves).
Department Work and Pensions Basis of consideration Minister’s letter of 26 August 2003 Previous Committee Report HC 63-xxviii (2002-03), paragraph 4 (2 July 2003) To be discussed in Council 20-21 October 2003 Committee’s assessment Politically important Committee’s decision Cleared
Background 15.1 Council Directive 89/931/EEC24 provides a framework for the introduction of measures to improve the safety and health of workers at work by laying down the general principles to be followed. In February 1993, the Commission put forward a proposal25 for a further, more specific Directive, which would have set out harmonised requirements for protection against noise, vibration, optical radiation and non-ionising electro-magnetic radiation. A key requirement was that worker exposure should be assessed; and, where it is found to exceed certain specified limits, employers would have to introduce programmes to reduce risk by technological or organisational means. They would also have to restrict access to areas presenting risks; provide personal protective equipment, information and training for workers, health surveillance, and a choice of work equipment and design of work places. A subsequent version of the proposal was produced in July 199426 following the Opinion of the European Parliament, but was not adopted.
15.2 The Council has, however, since considered individual measures dealing with protection against vibration27 and noise,28 and the current document — which was put forward by the Danish Presidency in December 2002 — addresses the acute risks arising from exposure at work29 to high levels of electromagnetic fields and waves (EMFs). As we noted in our Report of 2 July 2003, the Government has identified a number of important differences between this text and those produced earlier. These include:
• a reduction in the number of risk assessment levels;
24 OJ No. L 183, 29.6.89, p.1. 25 (14430) 5059/93; see HC 79-xxv (1992-93), paragraph 5 (21 April 1993). 26 (15504) 8392/94; see HC 48-xxvi (1993-94), paragraph 11 (19 October 1994). 27 (19934) C ; see HC 34-xiii (1998-99), paragraph 7 (17 March 1999),HC 34-xviii (1998-99), paragraph 5 (5 May 1999), HC 23-xxx (1999-2000), paragraph 10 (22 November 2000) and HC 28-i (2000-01), paragraph 7 (13 December 2000). 28 (22228) - ; see HC 152-i (2001-02), paragraph 40 (18 July 2001). 29 It does not apply to any wider public exposure, arising (for example) from mobile telephones or overhead power lines, and nor is it concerned with long-term exposure effects.
ESC, 31st Report, 2002-03 41
• the inclusion of action values, based on reference levels set by the International Commission on Non-Ionising Radiation Protection (ICNIRP);
• the removal of a requirement for the mandatory use of personal protection equipment;
• an entitlement to health surveillance when exposure reaches the reference levels.
15.3 The Government also expressed concern in an accompanying initial Regulatory Impact Assessment that the approach in the draft proposal differs from that currently in force in country, in that, once the electromagnetic field strength exceeds the relevant reference level, it requires exposure to be reduced to a minimum, whereas the UK approach merely requires further investigations to be carried out to ensure that the (higher) exposure limits set by the ICNIRP have not yet been exceeded. Since the UK believes that, compliance with those exposure limits affords sufficient protection and control to prevent any instance of ill health, it is concerned that the proposal may result in unnecessary costs being imposed, and its aim in the negotiations has been to align the proposal more closely with the ICNIRP approach, so as to ensure a minimal impact on industry, whilst avoiding risks to worker health and safety.
15.4 In our conclusion, we noted that the text now on the table has been poorly drafted and uses a bewildering array of terms to describe the different exposure levels at which steps might need to be taken. Nevertheless, we said that it appeared from the comments in the Explanatory Memorandum and Regulatory Impact Assessment that the benefits were likely to be negligible, but the costs — where these can be assessed — extremely high. We therefore suggested that that there was, on the face of it, a strong case for our recommending a debate in European Standing Committee C, but we added that much would clearly depend upon any further Regulatory Impact Assessments which the HSE was able to make, and, more particularly, on whether there was any likelihood of the proposal in its present form being adopted. Consequently, we decided for the time being to continue to hold the document under scrutiny, and to await further developments. In doing so, we also stressed the importance of the Government keeping us informed of the progress of discussions in the Council, and of it alerting us if it appeared that an agreement might be in sight. We added that we expected the Government to maintain a scrutiny reserve until we had been able to take a further view.
Minister’s letter of 26 August 2003 15.5 We have since received a letter of 26 August 2003 from the Minister of State for Work and Pensions (Mr Des Browne), in which he says that, as a result of a number of meetings held at official level the Italian Presidency is aiming to reach political agreement in the Council on 20-21 October. He adds that, although no Member State has opposed the principle of a Directive, a number of significant revisions have been made to the text circulated by the Danish Presidency, as a result of which the proposal is now broadly in line with the concepts of which the ICNIRP guidelines are based. In particular:
• it is now explicit in the text that there is no risk to exposure below these limit values;
• the various limit values proposed are now the same as those used under the ICNIRP;
42 ESC, 31st Report, 2002-03
• in particular, there is an increasing acceptance by the other Member States and the Commission that any action should be geared to exposure, rather than reference, values;
• the text now focuses on preventing or reducing risk (which can be achieved by compliance with the limit values) rather than reducing exposure (which has no benefit below those values); and
• the detailed requirements on health surveillance have been removed and have been replaced by a broad provision for “appropriate” surveillance.
15.6 As a result, the Minister says that the potential costs of the measure have been significantly reduced as compared with those in the earlier Regulatory Impact Assessment, which were derived from inappropriate requirements which have since been removed. He adds that the revised cost implications will be drawn out in a further Regulatory Impact Assessment, which will be produced once political agreement has been reached in the Council.
Conclusion 15.7 We have noted from this further information provided by the Minister that the approach proposed would now be broadly in line with that currently applicable in the UK, and that, as a result, many of the concerns expressed earlier by the Government about the possibility of unnecessary costs being imposed would no longer arise. In view of this, we are now content to clear the document.
16 Labelling of ingredients in foodstuffs
(24798) Amended draft Directive amending Directive 2000/13/EC on the 11872/03 indication of the ingredients present in foodstuffs. COM(03) 466
Legal base Article 95EC; co-decision; QMV Document originated 23 July 2003 Deposited in Parliament 1 August 2003 Department Food Standards Agency Basis of consideration EM of 29 August 2003 Previous Committee Report None, but see footnote 30 To be discussed in Council 22-23 September 2003 Committee’s assessment Politically important Committee’s decision Cleared
ESC, 31st Report, 2002-03 43
Background 16.1 In addition to laying down general principles, Community legislation on the labelling of foodstuffs contains detailed provisions regarding the listing of ingredients. According to the Commission, these rules, which were introduced at a time when food production was less complex and people ate far fewer processed foods, often mean that consumers are badly informed about the exact composition of purchased foodstuffs. It says that, even though this would inevitably make ingredient lists longer, consumers have consistently expressed the wish for better information about foodstuffs, particularly in the light of recent food scares, including problems arising with allergies, which are often caused by such common foods as milk, fruits, eggs and shellfish.
16.2 It therefore proposed30 in September 2001 various amendments, which — together with a number of new derogations intended to prevent the ingredient list becoming too unwieldy — were set out out in some length in our Report of 26 June 2002. One of the changes proposed would make it compulsory to list certain specified allergens31 whenever they are used in foods, and we noted in our Report of 20 November 2002 that we had been told in a supplementary Explanatory Memorandum from the then Parliamentary Under Secretary of State for Public Health at the Department of Health (Ms Hazel Blears) that, following discussions in the Council, the Scientific Committee for Food had been asked by the Commission to advise on the possibility that the allergenicity of certain derived ingredients could have been removed during the production process, and on whether those ingredients could in that event be removed from the list. The Minister added that, if the Scientific Committee did not advise on such exclusions before the proposal came into effect, consumers could be faced with information which incorrectly flagged up ingredients as potentially allergenic, and that this could result in costly label changes which would ultimately prove to be unnecessary, and confusing for consumers.
The current document 16.3 The current document reflects an amendment adopted by the European Parliament at its second reading in July 2003, which would require the Commission to develop a list of ingredients, which, although derived from allergenic ingredients, are not themselves allergenic. These would then be excluded from the proposed requirement to be labelled in all circumstances and with reference to a source allergen, although the general labelling rules would still apply. An interim list would be established within 12 months, and a final list within four years of the Directive entering into force, following in each case a consultation with the European Food Safety Authority.
The Government’s view 16.4 In her Explanatory Memorandum of 29 August 2003, the present Parliamentary Under-Secretary of State (Miss Melanie Johnson) says that this amendment is helpful in that it avoids requiring derivatives of allergenic ingredients to be labelled in a way which
30 (22636) 11834/01; see HC 152-xxxiv (2001-02), paragraph 11 (26 June 2002) and HC 63-i (2002-03), paragraph 24 (20 November 2002). 31 Cereals containing gluten, crustaceans, eggs, fish, peanuts, soyabeans, milk and dairy products, nuts and sesame seeds (and any resultant products), and sulphite at concentrations of at least 10mg/kg.
44 ESC, 31st Report, 2002-03
implies they are themselves allergenic when scientific evidence indicates that this is not the case. She says that the Government therefore supports the amendment, including the development of an interim list, which will ensure a smooth transition to the new arrangements pending development of the final list. The Minister also points out that, to the extent that the amendment would reduce the number of label changes needing to be made, it might in some cases reduce the associated costs to businesses, put at around £1,000 per product, and that increased consumer confidence arising from more informative labelling should in any case benefit businesses.
Conclusion 16.5 In clearing this document, we are drawing this development to the attention of the House.
ESC, 31st Report, 2002-03 45
17 Documents not raising questions of sufficient legal or political importance to warrant a substantive report to the House
Department for Constitutional Affairs
(24695) Commission First Report on the implementation of the Data 11043/03 Protection Directive (95/46/EC). COM(03) 265
Department for Environment, Food and Rural Affairs
(24709) Draft Council Decision concerning the conclusion, on behalf of the 11136/03 European Community, of the 1998 Protocol to the 1979 Convention COM(03) 332 on Long Range Transboundary Air Pollution on Persistent Organic Pollutants.
(24797) Commission Opinion pursuant to Article 251(2),third subparagraph, 11862/03 point (c) of the EC Treaty, on the European Parliament's amendments COM(03) 461 to the Council's common position regarding the draft Regulation concerning the traceability and labelling of genetically modified organisms and traceability of food and feed products produced from genetically modified organisms and amending Directive 2001/18/EC.
Food Standards Agency
(24765) Commission Opinion pursuant to Article 251(2), third subparagraph, 11695/03 point (c) of the EC Treaty, on the European Parliament's amendments COM(03) 447 to the Council's Common Position regarding the draft Regulation on additives for use in animal nutrition.
(24781) Commission Opinion pursuant to Article 251(2), third subparagraph, 11804/03 point (c) of the EC Treaty, on the European Parliament's amendments COM(03) 459 to the Council's common position regarding the draft regulation on genetically modified food and feed.
(24794) Amended draft Directive repealing certain Directives on the hygiene 11797/03 of foodstuffs and the health conditions for the production and COM(03) 455 placing on the market of certain products of animal origin intended for human consumption, and amending Directives 89/662/EEC and 91/67/EEC.
46 ESC, 31st Report, 2002-03
Foreign and Commonwealth Office
(24740) Joint Action amending the Joint Action 2003/445/CFSP renewing the — mandate of the EU Special Representative to the Middle East Peace — Process.
(24745) Council Decision concerning the conclusion of agreements under — Article 24 between the European Union and third country — contributors to the European Union Military Operation in the Democratic Republic of Congo.
(24889) Council Decision concerning the conclusion of agreements under — Article 24 between the European Union and non-EU third country — contributors to the European Union Military Operation in the Former Yugoslav Republic of Macedonia.
(24890) Council Decision on the extension of the European Union Military — Operation in the former Yugoslav Republic of Macedonia. —
Home Office
(24746) Draft Council Decision amending Point 1.2 of Part II of the Common 10072/03 Consular Instructions. —
Department of Trade and Industry
(24686) Commission Report on the Implementation of Council Directive 9740/03 96/34/EC of 3rd June 1996 on the framework agreement on parental COM(03) 358 leave concluded by UNICE, CEEP and the ETUC.
(24730) Draft Council Decision relating to the conclusion on behalf of the 11277/03 European Community of Council of Europe Convention No. 180 on COM(03) 398 information and legal cooperation on information society services.
(24736) Draft Council Decision on the conclusion of bilateral Agreements 11392/03 laying down a procedure for the provision of information in the field COM(03) 404 of technical regulations and of rules on information society services between the European Community and the Republic of Cyprus, the European Community and the Government of the Republic of Hungary.
(24779) Draft Council Decision on the signing of the Agreement for scientific 11785/03 and technological cooperation between the European Community COM(03) 438 and the United Mexican States.
ESC, 31st Report, 2002-03 47
(24784) Draft Council Decision concerning the Community position within the 11828/03 Association Committee established by the Europe Agreement COM(03) 435 between the European Communities and their Member States and Hungary on the addition of Annexes to the Protocol to the Europe Agreement on Conformity Assessment and Acceptance of Industrial Products (PECA).
(24785) Draft Council Decision concerning the Community position within the 11844/03 Association Council established by the Europe Agreement between COM(03) 450 the European Communities and their Member States and the Czech Republic on the addition of Annexes to the Protocol to the Europe Agreement on Conformity Assessment and Acceptance of Industrial Products (PECA).
(24792) Draft Council Regulation amending Regulation (EC) No.1601/2001 10169/03 imposing a definitive anti-dumping duty and definitively collecting COM(03) 342 the provisional anti-dumping duty imposed on imports of certain iron or steel ropes and cables originating in the Czech Republic, Russia, Thailand and Turkey.
HM Treasury
(24713) Recommendation for a Council Decision on the approval of certain 11193/03 amendments to be made to Articles 3 and 7 of the Monetary COM(03) 387 Agreement between the Italian Republic, on behalf of the European Community, and the Vatican City State and, on its behalf, the Holy See and authorising the Italian Republic to give effect to these amendments.
(24722) Commission Report to the budgetary authority on guarantees 11214/03 covered by the general budget - situation at 31 December 2002. ADD 1 COM(03) 396
24737) Commission Annual Report on the Guarantee Fund and its 11402/03 management in 2002. COM(03) 405
(24766) Draft Decision on the mobilisation of the EU Solidarity Fund 11706/03 according to point 3 of the Interinstitutional Agreement of 7 COM(03) 431 November 2002 between the European Parliament, the Council and the Commission on the financing of the European Union Solidarity Fund, supplementing the Interinstitutional Agreement of 6 May 1999 on budgetary discipline and improvement of the budgetary procedure.
48 ESC, 31st Report, 2002-03
(24769) Draft Commission Regulation on a standard financial regulation for 11612/03 the executive agencies pursuant to Council Regulation (EC) No. SEC(03) 803 58/2003 laying down the statute for executive agencies to be entrusted with certain tasks in the management of Community programmes.
Department for Work and Pensions
(24693) Draft Council Decision establishing a Social Protection Committee. 11000/03 COM(03) 305
(24804) Commission Opinion pursuant to Article 251(2),third subparagraph, 11903/03 point(c) of the EC Treaty, on the European Parliament's amendments COM(03) 460 to the Council's Common Position regarding the draft Directive amending Council Directive 96/82/EC of 9 December 1996 on the control of major-accident hazards involving dangerous substances.
ESC, 31st Report, 2002-03 49
Appendix 1: reports on Council meetings held during a recess
When the House is sitting, we table a written Question on the day of each meeting of the Council of Ministers asking for a report on the Council meeting and on the activities of UK Ministers in it. However, for Council meetings taking place when the House is in recess we ask Departments to write to us instead. Replies concerning meetings during the summer recess are published below.
Letter from the Secretary of State for Environment, Food and Rural Affairs (Mrs Margaret Beckett) to the Chairman of the Committee
Agriculture and Fisheries Counci:22 July 2003 My Hon Friend the Parliamentary Secretary and I represented the United Kingdom at a meeting of the Agriculture and Fisheries Council in Brussels on 22 July 2003.
As this was their first meeting in the chair, the Italian Presidency set out its work programme for the remainder of the year. This will include the adoption of legal texts formalising the CAP reform agreement reached in June, the launching of proposals for reform of the sugar and certain Mediterranean regimes, and co-ordinating the WTO negotiations at Cancun, Mexico in September. The Presidency plans two conferences on Mediterranean Fisheries and Agriculture questions. The relationship between EU agriculture and that in developing counties will be the theme of the Informal Ministerial meeting in Sicily in September. Other dossiers to be taken forward will include GMOs (co- existence with non-GMO agriculture), rural employment and organic farming.
This Council concluded its discussions of two food hygiene proposals, which impose a new requirement on food businesses to adopt specific hygiene procedures and make changes to the veterinary inspection regime. It was agreed to allow an 18-month implementation period. The Council was thus able to reach a common position on the package and, subject to agreement by the European Parliament, formal texts will be adopted in the Autumn.
The Commission signalled that it is on the verge of agreeing draft guidance to Member States on how to manage the co-existence of GM and other crops. Pending Commission agreement, Commissioner Fischler was not in a position to indicate its likely content. The guidelines were subsequently issued by the Commission on 23 July.
Following on from work under the Greek Presidency, the Presidency proposed some conclusions on the importance of rural employment which, inter alia, called on the Commission to carry out a broad study of employment prospects, not just in agriculture, in the rural areas. The conclusions were unanimously agreed.
Under AoB, Commissioner Byrne gave the customary two monthly report on developments regarding BSE. There was no discussion. The Commission informed the Council of its plan for a conference on the future for Rural Development in Salzburg in
50 ESC, 31st Report, 2002-03
November. France and a number of delegations reported problems arising from continued drought.
The Commission reported on preparations for the WTO Ministerial in Cancun, Mexico, in September and circulated a paper which set out the impact of the recent CAP reform deal in a WTO context. I supported the Commission and other Member States in stressing the importance of getting the EU’s trading partners to recognise the scale and scope of the newly agreed reforms.
With reference to fisheries the Commission presented its proposals for long-term measures for the recovery of cod and hake stocks, and there was an initial discussion of the key elements. We argued that recovery plans were needed for these stocks, that a close dialogue was needed with the fishing industry, and that measures which can contribute to recovery plans could include closed areas and other technical measures as well as limits on fishing effort. The proposals will now be examined by officials in preparation for decision in the Autumn.
The presidency noted that work was in hand with the intention that the Council would reach agreement in September on the proposal for regulation of fishing effort in western waters.
31 July 2003
Letter from the Minister for Europe at the Foreign and Commonwealth Office (Mr Denis MacShane) to the Chairman of the Committee General Affairs and External Relations Council: 21 July I am writing to inform you of the outcome of discussions held at the 21 July General Affairs and External Relations Council in Brussels, in place of my reply to the usual Parliamentary Question.
The Secretary of State for Foreign and Commonwealth Affairs represented the UK at the General Affairs and External Relations Council (GAERC) in Brussels on 21 July.
Conclusions on the Middle East Peace Process, Iran, Iraq, Western Balkans, Operation Concordia in Macedonia, EU-Africa relations, the Great Lakes, Operation Artemis in the Democratic Republic of Congo, the International Criminal Court and on prospects for the Fifth WTO Ministerial Conference in Cancun were agreed by consensus. The texts of these Conclusions are attached. No formal votes were taken.
General Affairs Session
Debate on the Presidency’s Work Programme The Presidency introduced its programme for the next six moths. Discussion mainly focused on the need for effective planning for the Inter Governmental Conference later this year.
ESC, 31st Report, 2002-03 51
Progress of work in other Council Configurations The Presidency gave a standard progress report on work in other Councils (Agriculture and Finance).
External Relations Session
Middle East Peace Process The Council agreed Conclusions, which included a call for all parties to strictly adhere to the cease-fire agreement. They also welcomed the efforts of regional partners, namely Egypt and Jordan, who have been playing an active part in this context.
The EU held separate meetings with Israeli Foreign Minister Shalom and Nabil Sha’ath, Palestinian foreign minister-equivalent. Both Ministers acknowledged the EU’s role in helping to deliver the Roadmap. Both men recognised the role that the EU had played and continued to play in the Quartet. They underscored the need for both sides to implement fully obligations under the Roadmap and welcomed the appointment of Mr Marc Otte as the new EU Special Representative on the Middle East Peace Process, in succession to Mr Miguel Moratinos.
Iraq The Council agreed Conclusions. It welcomed the establishment of the Governing Council in Iraq and repeated the EU's readiness to participate in the reconstruction of Iraq within the framework of UN Security Council Resolution 1483. The Council looked ahead to the planned Donors Conference in October, where it was agreed that the EU would play an important role. The Commission circulated a focused and useful non-paper on the suggested shape of the EU's contribution to Iraqi reconstruction.
Iran The Council agreed Conclusions, building on the robust Conclusions agreed at the last GAERC on 16 June. The Council's message to Iran was that closer economic co-operation would only be achieved if the country made progress on the EU's four main areas of concern: human rights; terrorism; non-proliferation; and the Middle East Peace Process. A key EU concern is that Iran signs and implements the Additional Protocol to its IAEA Safeguards agreement. The Council made clear that it would review further steps of cooperation between the EU and Iran in September in the light of Mr El-Baradei's second report to the IAEA Board of Governors.
The Death Penalty The Presidency sought Partners' preliminary views on how the EU might approach, at the next meeting of the UN General Assembly, the issue of the Death Penalty.
52 ESC, 31st Report, 2002-03
Western Balkans Mr Patten announced that the Commission would launch a feasibility study on opening negotiations for a Stabilisation and Association Agreement with Serbia and Montenegro (SaM), once the State Union Assembly had endorsed SaM's Internal Market and Trade Action Plan. No definitive date was set for the completion of the study. The Council agreed to extend Operation Concordia in Macedonia and remitted to officials work on finalising the detailed arrangements. There were Council Conclusions on Operation Concordia and the Balkans in general; the latter re-emphasised the EU’s support for an early start to the Belgrade-Pristina Dialogue.
EU-Africa The Council agreed Conclusions on EU-Africa and the Democratic Republic of Congo (DRC). The Presidency reported on the outcome of the Ministerial Troika which was held in the margins of the African Union Summit in Maputo on 11 July. The Secretary General/High Representative Javier Solana debriefed on his visit to the Great Lakes region. He praised the results of Operation Artemis (ESDP military operation in DRC) and described how the EU’s positive contribution to the humanitarian effort in Ituri in DRC had been widely recognised across the region.
Preparation for Fifth WTO Ministerial Conference, Cancun The Council agreed Conclusions that would form the basis of its position for the forthcoming Ministerial in Cancun, Mexico.
6 August 2003
ESC, 31st Report, 2002-03 53
Formal minutes
Wednesday 10 September 2003
Members present:
Mr Jimmy Hood, in the Chair
Mr Richard Bacon Mr Jim Marshall Mr William Cash Miss Anne McIntosh Mr Michael Connarty Angus Robertson Mr Terry Davis Mr Anthony Steen Jim Dobbin Mr Bill Tynan Mr Mark Hendrick
The Committee deliberated.
Draft Report, proposed by the Chairman, brought up and read.
Ordered, That the draft Report be read a second time, paragraph by paragraph.
Paragraphs 1.1 to 17 read and agreed to.
Resolved, That the Report be the Thirty-first Report of the Committee to the House.
Ordered, That the Chairman do make the Report to the House.
Ordered, That the following Papers be appended to the Report: Letter from the Secretary of State for the Environment, Food and Rural Affairs (Mrs Margaret Beckett) to the Chairman of the Committee reporting the outcome of the Agriculture and Fisheries Council on 22 July 2003, and letter from the Minister for Europe (Mr Denis MacShane) to the Chairman of the Committee reporting the outcome of the General Affairs and External Relations Council on 21 July 2003.—(The Chairman.)
[Adjourned till Wednesday 17 September at half-past Two o’clock.
54 ESC, 31st Report, 2002-03
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 Standing 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 Jimmy Hood MP (Labour, Clydesdale) (Chairman) Richard Bacon MP (Conservative, South Norfolk) Colin Breed MP (Liberal Democrat, Cornwall South East) William Cash MP (Conservative, Stone) Michael Connarty MP (Labour, Falkirk East) Tony Cunningham MP (Labour, Workington) Wayne David MP (Labour, Caerphilly) Terry Davis MP (Labour, Birmingham Hodge Hill) Jim Dobbin MP (Labour, Heywood and Middleton) Mark Hendrick MP (Labour, Preston) Anne McIntosh MP (Conservative, Vale of York) Jim Marshall MP (Labour, Leicester South) Angus Robertson MP (SNP, Moray) John Robertson MP (Labour, Glasgow Anniesland) Anthony Steen MP (Conservative, Totnes) Bill Tynan MP (Labour, Hamilton South)