thirty-seventh report of session 2013–14 · numbers in brackets are the committee’s own...

HC 83-xxxiv

House of Commons

European Scrutiny Committee

Thirty-seventh Report of Session 2013–14 Documents considered by the Committee on 26 February 2014, including the following recommendations for debate:

EU industrial policy Climate and energy policy: 2020 to 2030 High volume hydraulic fracturing (fracking) in the EU

HC 83-xxxiv Published on 11 March 2014

by authority of the House of Commons

House of Commons

European Scrutiny Committee

Thirty-seventh Report of Session 2013–14 Documents considered by the Committee on 26 February 2014, including the following recommendations for debate:

EU industrial policy Climate and energy policy: 2020 to 2030 High volume hydraulic fracturing (fracking) in the EU

Report, together with formal minutes

Ordered by The House of Commons to be printed 26 February 2014

London: The Stationery Office Limited £17.50

Notes

Numbering of documents

Three separate numbering systems are used in this Report for European Union documents:

Numbers in brackets are the Committee’s own reference numbers.

Numbers in the form “5467/05” are Council of Ministers reference numbers. This system is also used by

UK Government Departments, by the House of Commons Vote Office and for proceedings in the House.

Numbers preceded by the letters COM or SEC or JOIN are Commission reference numbers.

Where only a Committee number is given, this usually indicates that no official text is available and the

Government has submitted an “unnumbered Explanatory Memorandum” discussing what is likely to be included

in the document or covering an unofficial text.

Abbreviations used in the headnotes and footnotes

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

EM Explanatory Memorandum (submitted by the Government to the Committee)*

EP European Parliament

EU (in “Legal base”) Treaty on European Union

GAERC General Affairs and External Relations Council

JHA Justice and Home Affairs

OJ Official Journal of the European Communities

QMV Qualified majority voting

RIA Regulatory Impact Assessment

SEM Supplementary Explanatory Memorandum

TEU Treaty on European Union

TFEU Treaty on the Functioning of the European Union

Euros

Where figures in euros have been converted to pounds sterling, this is normally at the market rate for the last

working day of the previous month.

Further information

Documents recommended by the Committee for debate, together with the times of forthcoming debates (where

known), are listed in the European Union Documents list, which is published in the House of Commons Vote

Bundle each Monday, and is also available on the parliamentary website. Documents awaiting consideration by

the Committee are listed in “Remaining Business”: www.parliament.uk/escom. The website also contains the

Committee’s Reports.

*Explanatory Memoranda (EMs) can be downloaded from the Cabinet Office website:

http://europeanmemoranda.cabinetoffice.gov.uk/.

Letters sent by Ministers to the Committee relating to European documents are available for the public to

inspect; anyone wishing to do so should contact the staff of the Committee (“Contacts” below).

Staff

The staff of the Committee are Sarah Davies (Clerk), David Griffiths (Clerk Adviser), Terry Byrne (Clerk Adviser),

Leigh Gibson (Clerk Adviser), Peter Harborne (Clerk Adviser), Paul Hardy (Legal Adviser) (Counsel for European

Legislation), Joanne Dee (Assistant Legal Adviser) (Assistant Counsel for European Legislation), Hannah Finer

(Assistant to the Clerk), Julie Evans (Senior Committee Assistant), Jane Lauder (Committee Assistant), Beatrice

Woods (Committee Assistant), Paula Saunderson and Ravi Abhayaratne (Office Support Assistants).

Contacts

All correspondence should be addressed to the Clerk of the European Scrutiny Committee, House of Commons, 7

Millbank, London SW1P 3JA. The telephone number for general enquiries is (020) 7219 3292/5465. The

Committee’s email address is [email protected]

European Scrutiny Committee, 37th Report, Session 2013–14 1

Contents

Report Page

Meeting Summary 3

Documents for debate

1 BIS (35749) (35491) (35492) EU industrial policy 5

Annex: Key priorities to boost competitiveness 9

2 DECC (35754) Climate and energy policy: 2020 to 2030 16

3 DECC (35757) (35759) High volume hydraulic fracturing (fracking) in the EU 25

Documents not cleared

4 DCMS (32375) (32376) Conditional access services 30

5 DECC (35755) Emissions Trading System: market stability reserve 35

6 DFID (35735) An EU development and cooperation results framework 40

7 DWP (35746) Integrating labour markets 47

8 FCO (35812) (35671) The EU and the Central African Republic 52

9 FCO (34868) (34869) EU-Kosovo co-operation 56

10 HMT (34942) Financial services: bank accounts 59

11 HMT (35589) Taxation 62

12 HO (35614) Female genital mutilation 64

13 HO (35625) Task Force for the Mediterranean 68

Documents cleared

14 CO (35175) (35174) Electronic procurement and invoicing in public administration 71

15 DECC (35750) Energy prices and costs in Europe 75

16 DEFRA (34301) (34317) Sharing of benefits from genetic sources 80

17 DFID (34256) The European Voluntary Humanitarian Aid Corps 84

18 DFT (35674) Rail research and innovation 91

19 FCO (35701) EU Special Representative for the Middle East Peace Process 92

2 European Scrutiny Committee, 37th Report, Session 2013–14

20 FCO (35751) (35752) EU Enlargement: post-accession monitoring: Bulgaria and Romania 99

21 FCO (35800) The EU and the Sahel: appointment of an EU Special Representative 108

22 HMT (35806) (35807) (35808) Multiannual Financial Framework 2014–2020: revenue 113

23 HO (35741) Relocation of the European Police College (CEPOL) 118

24 HO (35760) Combating racism and xenophobia 122

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

25 List of documents 126

Formal minutes 128

Standing Order and membership 129


Meeting Summary

This week the Committee considered the following documents:

Climate and energy policy and fracking: for debate in European Committee

We consider a series of documents this week relating to climate and energy policy. We refer for debate in European Committee a wide-ranging Commission Communication which aims to set out the basis for an EU climate and energy policy between 2020 and 2030. We also recommend that a Commission Communication and Recommendation on high volume hydraulic fracturing (fracking) in the EU is debated with it. We report on and clear a Commission Communication on Energy prices and costs in Europe, and request further information on a Draft Decision on the Emissions Trading System, which we keep under scrutiny.

EU industrial policy: for debate in European Committee

This Commission Communication and Staff Working Documents mark a further stage in the development of the EU’s industrial policy. The Communication sets out the key priorities as being: mainstreaming to ensure EU reindustrialisation; stimulating investment in innovation; a more business friendly framework; easier access to critical production inputs; maximising the potential of the internal market; internationalisation of EU firms; and improving education and training and facilitating mobility. Initiatives in each area are set out. The Government broadly welcomes the Communication. We recommend it for debate in European Committee as an important example of ‘upstream’ scrutiny.

EU Special Representatives

We report on the Council Decision to end the mandate of the EU Special Representative for the Middle East Peace Process. The way that the decision has been made, along with uncertainty about the future of other EUSR roles, causes us concern. There have been press reports that there may be a wholesale integration of EUSR posts into the European External Action Service, which would mean that Member States would no longer be able to approve their mandates. We ask the Minister to respond urgently to a number of detailed questions about these wider issues. We also report separately (and clear) the proposed one-year mandate extension of the EU Special Representative (EUSR) for the Sahel.

The EU and the Central African Republic

This Council Decision and Council Regulation support the implementation of UN Security Council Resolution 2134 (2014), reflecting changes made by the UN Security Council to the existing arms embargo. We clear the Council Decision but do not clear the Council Regulation as we do not yet know which individuals are to be targeted for sanctions, and believe that this should be subject to scrutiny.

Financial Services: bank accounts

This Draft Directive has been under scrutiny for some time and was last considered in July 2013. The aim of the Commission is to improve consumers’ experience of bank accounts


in the EU and to enhance the integration of the EU bank account market, through provisions to improve the comparability of fees on bank accounts, the ease with which consumers switch accounts and access to basic bank accounts. The Minister has now informed the Committee that there is significant pressure from the European Parliament to conclude negotiation of this proposal ahead of the elections in May; and that Council negotiations have picked up pace and were pushed to general agreement just before Christmas. Because the proposal is still under scrutiny, the UK Government abstained. The Minister also reports that the Government had achieved five out of six of its negotiating objectives, and on the sixth priority (relating to comparison websites) the impact was limited. We do not clear the proposal from scrutiny, asking the Government to report back on progress in trilogue.

Conditional access services

These two draft Council Decisions would authorise the EU to sign and accede to a Council of Europe Convention on the legal protection of conditional access services (such as pay-TV or other on-demand services offered by broadcasting or internet service providers in return for payment). The Decisions were cleared from scrutiny in December 2011, but the Commission bought an action in the Court of Justice to challenge their validity. The Government now reports on the Court’s judgement by means of a Supplementary Explanatory Memorandum. In its judgement the Court rules, among other things, that the UK’s Title V opt-in cannot be engaged as no Title V legal base is cited; a long standing area of contention between the Committee and the Government. We ask the Government to comment on the implications of this ruling.


1 EU industrial policy

(a) (35749) 5489/14 + ADD 1 COM(14) 14 (b) (35491) 13964/13 + ADDs 1–3 SWD(13) 346 (c) (35492) 13966/13 + ADDs 1–4 SWD(13) 347

Commission Communication: For a European Industrial Renaissance Commission Staff Working Document: Member States Competitiveness Performance and Implementation of EU Industrial Policy Commission Staff Working Document: European Competitiveness Report 2013 — Towards knowledge driven reindustrialisation

Legal base — Documents originated (a) 22 January 2014

(b) 20 September 2013 (c) 23 September 2013

Deposited in Parliament (a) 27 January 2014 (b) and (c) 11 November 2013

Department Business, Innovation and Skills Basis of consideration EM of 7 February 2014 Previous Committee Report None; but see footnotes Discussion in Council See para 1.10 below Committee’s assessment Politically important Committee’s decision For debate in European Committee C

Background

1.1 In November 2010, we drew the attention of the House to a Commission Communication (An Integrated Industrial Policy for the Globalised Era: Putting Competitiveness and Sustainability at Centre Stage),1 which was followed by a further Communication2 in 2012, providing an update. In this latest Communication (document (a)), the Commission has sought, as its contribution to a debate on industrial policy at the March 2014 European Council, to provide an overview of the actions already undertaken, to identify key priorities for boosting competitiveness, and to secure political support for selected new actions to speed up the attainment of these priorities. It is linked to two recent

1 (32318) 15483/10: see HC 428–ix (2010–11), chapter 14 (24 November 2010).

2 (34341) 15168/12: see HC 86–xx (2012–13), chapter 15 (21 November 2012).


Commission reports — Member States’ Competitiveness Performance and Implementation of EU Industrial Policy (document (b)) and European Competitiveness Report 2013: Towards knowledge driven reindustrialisation (document (c)).

The current documents

1.2 The Commission notes that the EU is emerging from its longest-ever recession, with GDP growing by 0.2% in the third quarter of 2013, and the upturn in business sentiment and confidence indicators suggesting that structural reforms and measures in the financial sector have succeeded. At the same time, it states that a strong European industry is necessary for fostering growth and competitiveness to sustain and strengthen the current incipient economic recovery, and to achieve the goals of the Europe 2020 agenda.

1.3 The Communication also notes that, overall, EU industry has proved its resilience in the face of the economic crisis, and has become a world-leader in sustainability, returning a €365 billion3 surplus for trade in manufactured products (generated mainly by a few high-end medium technology sectors). However, it says that the legacy of the crisis has been severe, with 3.5 million jobs having been lost since 2008, the share of manufacturing in GDP having fallen from 15.34% to 15.1% in 2013, and the EU productivity performance having deteriorated in comparison with its competitors.

1.4 The Commission points out that the main challenges facing EU Industry, and highlighted in the two related Commission reports, indicate a number of weaknesses which have hampered growth, including:

• a continuing weak internal demand, undermining the home market, and keeping intra-EU trade subdued;

• despite an improved business environment in the EU overall, and particularly in some Member States, progress remains uneven, with inflexible administrative and regulatory environments, rigidities in some labour markets, and weak integration in the internal market, which continue to hold back the growth potential of firms, especially small and medium-sized enterprises (SMEs);

• innovation and investment levels remain low, holding back modernisation of the industrial base and hampering future EU competitiveness; and

• EU firms face higher energy prices than most of their leading competitors, and have difficulties accessing affordable materials, qualified labour and capital.

1.5 To deal with this situation, the Commission says it has been pursuing the integrated industrial policy approach outlined in the Industrial Policy Communications of 2010 and 2012, and has issued recommendations to Member States for improving growth in the context of the European Semester. It also acknowledges that several Member States, including the UK, France, Spain and Germany, have defined national and regional industrial strategies and policies, but it emphasises that full implementation at European

3 This figure refers to manufactured products only, and does not include trade flows and raw materials (where the EU

presents a negative trade balance).


and national levels is critical to ensure future competitiveness and to increase growth potential.

1.6 The Commission suggests that the key priorities are as follows:

• mainstreaming to ensure EU reindustrialisation;

• stimulating investment in innovation;

• a more business friendly framework;

• easier access to critical production inputs;

• maximising the potential of the internal market;

• internationalisation of EU firms;

• improving education and training and facilitating mobility.

1.7 The detailed action proposed under each of these headings is set out in the Annex to this chapter.

The Government’s view

1.8 In his Explanatory Memorandum of 7 February 2014, the Minister of State for Business and Energy (Michael Fallon) says that the Government believes that industry has a key role to play in restoring growth and jobs to the EU, and broadly welcomes this Communication. In particular, although he points out that the Commission has limited competence in the area of industrial policy and trade promotion, it nevertheless has a vital role to play in creating open, competitive markets (including energy markets), removing barriers to trade and innovation, creating a robust State Aid framework, removing unnecessary regulatory burdens at the EU level, and facilitating direct access to finance for SMEs.

1.9 More specifically, the Minister welcomes the emphasis on mainstreaming industrial policy across the whole of the Commission, which he says is consistent with the UK’s “whole-of-Government” approach to industrial strategy, and he also welcomes the commitment to take further action to improve the single market, particularly in services, and the renewed commitment to an ambitious and open trade agenda.

1.10 As regards individual aspects of the Communication, the Minister says that the Government:

• supports the Commission’s attempts to improve the business environment by removing or simplifying regulation, and welcomes the recommendation that Member States should undertake domestic reforms to remove regulatory burdens;

• welcomes its commitment to conduct fitness checks and cumulative cost assessments in relation to the main industrial value chains, but believes that more could be done, and that the Commission should come forward with specific recommendations to remove burdens from key industries;


• welcomes the funding provided by the Horizon 2020 programme, which will make available almost €80 billion for research and innovation, in particular through its industrial leadership pillar, and the significant role which the Joint Technology Initiatives of the Innovation Investment Package will play in improving EU competitiveness, not least in areas which are not readily supported by other Horizon 2020 instruments (thereby helping the EU to close the gap which exists between successful research and development projects and getting products and services to market);

• believes that more could also be done to make it easier for SMEs to access the risk finance necessary to invest in and enhance their innovation capability, and to create new products and services through the effective implementation of COSME and Horizon 2020 and targeted EIB funding: it also believes that the Commission should support business efforts to convert successful research and development outputs into leading-edge products and services, and that a proposed study to assess the potential for EU investment in a venture capital fund of funds should be accelerated;

• notes the Commission’s aim of raising industry’s contribution to GDP to 20% by 2020, but does not believe that this should become a firm target for reindustrialisation, as it would be potentially unachievable for most Member States; and

• is committed to ensuring that manufacturing is able to remain competitive during the shift to a low carbon economy and to minimising the risk of carbon leakage, and it notes the measures set out in the Communication4 establishing a framework for climate and energy in the period from 2020 to 2030, its view being that the competitiveness of energy intensive industries should be an integral part of that approach.

1.11 The Minister says that the Communication was to be discussed at the Competitiveness Council on 20 February 2014, and is due to be debated by the European Council on 20–21 March, with follow-up conclusions expected at the Competitiveness Council on 26–27 May.

Conclusion

1.12 This is a wide-ranging Communication, which addresses a subject of some importance, and which clearly needs to be drawn to the attention of the House. The main question, as with many other such documents, is whether the Communication itself should be debated (which would be liable to give rise to a somewhat general and unfocussed discussion), or whether it would make better sense to clear the document, and to concentrate instead on the numerous more specific proposals which will eventually flow from it.

4 (35754) 5644/14: see chapter 2 of this Report.


1.13 On the whole, we have tended in previous such cases to adopt the latter approach, but, given the potential significance of this Communication, we think it would be remiss to let it pass without giving the House the opportunity to consider at this stage the many issues to which it gives rise. We are therefore recommending it for debate in European Committee C.

Annex: Key priorities to boost competitiveness

Mainstreaming to ensure EU reindustrialisation

1. The Communication says that industry’s interactions with the rest of Europe’s economy extend far beyond manufacturing, spanning raw materials and energy upstream and business and consumer services downstream, and with industrial activities being integrated in increasingly rich and complex value chains, linking flagship corporations and SMEs across sectors and countries. It states that business services should be properly taken into account in the design and implementation of industrial policy strategies, and that, in order to be able to reindustrialize Europe through an increase in manufacturing’s share of GDP to 20% by 2020, there is a need for all concerned — including Member States — to put industrial competitiveness at the centre of policy making, and ensure that all aspects of policy areas affecting competitiveness are taken into account.

2. The Commission says that, following the 2012 Industrial Policy Communication, it set up in the beginning of 2013 a High Level Group on Business Services, and proposes to examine the need for further action when the group issues its recommendations in March 2014. It will also closely monitor the recently updated European Standardisation System, in order to assess whether it needs to be further adapted to a rapidly changing environment, and so continue to contribute to Europe’s strategic objectives, particularly in the field of industrial policy, services, innovation and technology development. In addition, the Commission proposes that, from 2014, the Report on Member States’ Competitiveness Performance and Policy should be strengthened to evaluate and clearly link the impact of improvements in the business environment on the progress in Member States’ actual competitiveness performance, and it says that the scope of its annual reports will be extended to monitor efforts at national level to mainstream competitiveness aspects into other policy fields.

Stimulating investment in innovation

3. The Commission says that it has for the first time put an increasing share of its policy at regulatory and financial levers at the disposal of Member States, regions and industry to foster investment in innovation. It will also, through its industrial leadership pillar of the Horizon 2020 programme, provide close to €80 billion for research and innovation, which will help to make existing industries cleaner and smarter via support for key enabling technologies which will redefine global value chains, enhance resource efficiency and reshape the international division of labour. Horizon 2020 will also finance closer-to-market prototypes, and join forces with the private sector through public-private partnerships in key industrial areas, so as to leverage further private investment.


4. The Communication highlights that, with the adoption of the new Multiannual Financial Framework for 2014–20, at least €100 billion of European Structural and Investment Funds (ESIF) are at the disposal of regions to finance support for industry and SMEs in line with their smart specialisation strategies. It says that it is modernising the State Aid Framework for Research and Development and Innovation, and reforming public procurement rules to create a critical mass on the demand side and improve efficiency in the allocation of resources in full respect of competition and internal market rules: and, as a result of the need to speed up investment in breakthrough technologies in fast growing areas, it decided in 2012 to identify the six areas5 in which investment should be encouraged, with the corresponding task forces set up in 2013 having enabled the identification of opportunities for, and obstacles to, innovation requiring further policy action.

5. The Communication says that, based on this work, it will pursue the following priorities in these cross-cutting areas:

Advanced manufacturing

The Commission will implement the Knowledge and Innovation Community on value-added manufacturing and establish a Public Private Partnership on Sustainable Process Industry through Resource and Energy Efficiency, Factories of the Future, Photonics and Robotics, upgrading innovation capacity and competitiveness of Europe’s manufacturing sector. The integration of digital technologies in the manufacturing process will be a priority for future work in light of the growing importance of the industrial market, and the use of “big data” will be increasingly integrated in the manufacturing process.

Key Enabling Technologies (KETs)

The task force is working on the identification of potential KET projects of European interest in a number of areas, and facilitating pan-European access by SMEs to technological infrastructure. It will also further exploit the possibilities of a Memorandum of Understanding signed with the European Investment Bank (EIB).

Bio-based products

The Commission will grant access to sustainable raw materials at world market prices for the production of bio-based products. It says that this will require the application of the cascade principle in the use of biomass, and eliminating any possible distortions in its allocation for alternative uses which might result from aid and other mechanisms favouring its use for other purposes, such as energy.

Clean Vehicle and Vessels

The Commission advocates the adoption and full implementation of the draft Directive on the deployment of an alternative fuels infrastructure, implementing the Green Vehicle Initiative and other Horizon 2020 initiatives promoting clean and energy

5 Advanced manufacturing, key enabling technologies, clean vehicles and transport, bio-based products, construction

and raw materials, and smart grids.


efficient transport, pursuing global standards for electric cars and implementing the priorities identified under the CARS 2020 programme.

Sustainable construction and raw materials

The Commission proposes to set up a €25 billion European Investment Bank lending capacity for energy efficiency in residential housing, and to improve recycling and sustainable waste management in construction.

Smart Grids and Digital Infrastructure

The Commission plans to define further targets for the development of smart grid components; revise and broaden standardisation mandates; and development and guidance on performance indicators. The infrastructure and connectivity software for industrial internet is identified as a priority area as a result of its growing importance, which should help to integrate high performance processes, including cloud computing.

A more business friendly framework — SMEs and Entrepreneurship

6. The Communication highlights the need for European SMEs to overcome the barriers which limit their growth, and says that it continues at the EU level to improve the quality of legislation and the regulatory environment in order to make it more stable and predictable. It highlights the following actions it intends to take to remove the barriers to growth:

• Implementation of the Regulatory Fitness and Performance (REFIT) programme, and following up the top 10 regulatory burdens identified by SMEs so as to simplify EU legislation and reduce regulatory burden on business.

• Competitiveness Proofing has been integrated fully into the Commission’s impact assessments for all major proposals with significant effects on competitiveness.

• The financial perspectives for 2014–2020 make available new and more powerful instruments in support of entrepreneurship and SMEs, with there being for the first time a programme (COSME) specifically targeting SMEs with a budget of €2.3 billion to add to the contributions made by other EU policies. The new cohesion policy also pays particular attention to the competitiveness of SMEs, whilst Horizon 2020 provides funding for early stage, high-risk research and innovation by SMEs, and the new rural development policy further boosts start-ups and the competitiveness of SMEs in rural areas.

• The potential of clusters to create favourable innovation ecosystems for mutually reinforcing groups of SMEs is to be exploited as a means of exploiting growth, and the Commission will facilitate the matchmaking of SMEs wishing to integrate into world-class clusters aiming for excellence and cross-European value chains, with the focus being both on industrial sectors and on facilitating cross-sectoral and cross-border collaboration and innovation.

• An updated Small Business Act, where the Commission will take new action or propose new legislative measures to ensure that start-up companies in all Member


States are able to set up at a maximum cost of €100, and within three days, as well as proposing a target of one month to obtain the necessary licences. The aim is to create more synergies with the reform process under the European Semester, helping SMEs to grow and create jobs.

• The development of conditions to reduce the duration of court litigation of credit recovery for companies, and to give a second chance to honest entrepreneurs and facilitate the transfer of business.

• requesting Member States to introduce the SME Test or an equivalent system in their decision making process, and reduce the administrative burden.

• an initiative on Growth-Friendly Public Administration, providing a comprehensive overview of the best practices in public administration available across the EU, particularly as regards e-government tools and public procurement.

• reinforcing the Entrepreneurship Action Plan to develop entrepreneurial skills and attitudes and to facilitate individuals in developing new ideas.

Easier access to critical production inputs

7. The Communication highlights that EU firms need to have access to essential inputs in a sustainable way and on the best possible terms, but notes that significant problems still exist in capital, energy and raw material markets. These include:

Access to finance

The Communication states that policy actions are contributing to the alleviation of capital needs for specific purposes; that the 2014–2020 cohesion policy will continue to provide access to finance to enterprises through financial instruments; that the amendment of the Common Provisions Regulation will allow the development of risk-sharing instruments with EU guarantees; that the European Structural and Investment Funds (ESIF) or the European Social Fund and financial instruments supporting lending to SMEs, and small midcaps (COSME & Horizon 2020) will be available to Member States on a voluntary basis, and will multiply the financing capacity of public sector funds with equity investments through financial intermediaries, such as venture capital funds, and a well-functioning pan-European venture capital market.

The Commission says that full implementation of the Late Payments Directive should also improve financing for companies, but that an internal market for capital where SMEs can have access to cross-border finance still remains an unfulfilled goal.

Access to Energy

The Communication says that, despite efficiency gains and the progressive opening of the energy markets to competition, EU retail electricity prices for industry grew on average by 3.5% a year and gas prices by 1% between 2008 and 2012, and that, as a result, EU industrial electricity prices are estimated to be twice as high in the USA and Russia and 20% higher than in China (which it describes as a matter of concern


for the competitiveness of energy intensive industries). It also highlights the recent adoption of a climate and energy package from 2020 to 2030.

Access to raw materials

The Communication says that EU industry faces a number of challenges regarding access to both primary and secondary raw materials throughout the whole value chain, with the majority of the most “critical” of these being sourced mainly from outside the EU. The Commission plans to continue to use all instruments, including a current mapping exercise of raw materials diplomacy, to safeguard access to raw materials, and to pay special attention on ongoing and future trade negotiations. It also proposes in 2014 to present a set of actions to promote technologies able to replace critical raw materials, improve environmental and energy performance of products, strengthen the European Innovation Partnership, and improve recycling.

Maximise the potential of the internal market.

8. The Communication says that the internal market provides EU companies with a large home market, facilitates productivity improvements by reducing input costs, allowing efficient business processes and increasing returns on innovation, but that there is still significant potential for growth, and that further simplification of internal market rules can improve economic efficiency, with deepening the internal market bringing about faster technological change. It highlights the importance of speeding up the adoption of Commission proposals to complete infrastructures and simplify and improve the business environment in the internal market, and it calls on the Council, European Parliament and Member States to adopt and/or enforce the initiatives related to the integration and completion of the internal market which are currently subject to delays, such as transport, energy and ICT.

9. The Communication invites Member States to:

Unleash the potential of the transport sector

The Communication notes that the Commission adopted in early 2013 the fourth Railway Package, which makes it easier for rail operators to enter and operate in the EU market, and intends to establish a new joint undertaking (Shift2Rail) to drive innovation in the rail sector. Also, in the maritime sector, it set out in July 2013 plans to ease custom formalities for ships, thus reducing red tape, cutting delays in ports and making the sector more competitive, and it is proposing active steps to enforce the single European Sky obligations in Member States.

Speed up development of clean vehicles

In order to speed up the development of clean vehicles and vessels in Europe, the Commission says that the adoption of its proposal on the deployment of alternative fuels infrastructure will stimulate economic growth in Europe by mandating a minimum coverage of alternative fuel infrastructure, including electric recharging stations with common interface standards.


Creating an internal market for ICT to reduce roaming costs

The Commission says that the EU, Member States, regions and industry all have a co-ordinated role in fostering the digitalisation of business processes, contributing to the development and implementation of an industrial dimension of the digital agenda. and promoting competition in broadband provision. It highlights the proposal for a single market in telecommunications, aimed at promoting investment and taking steps to further decrease regulatory fragmentation in the EU: and it suggests that the convergence of information and communication technologies with energy and logistics networks will create a new landscape of opportunities and challenges for industry and related services (which will provide market opportunities for key enabling technologies, redefine global value chains, and reshape patterns of specialisation).

Liberalise and integrate the internal market for energy to reduce costs

The Communication says that the development of an internal market for energy requires integrated energy networks which would reduce energy costs for European companies.

Complement space infrastructures to offer new business opportunities

The Commission is contemplating rules creating the technological and regulatory conditions for space infrastructure commercial exploitation, and is currently completing space infrastructures, with its flagship projects (Galileo and Copernicus) during the next financial perspectives.

Strengthen the market surveillance and product safety package for SME development The Commission calls on the co-legislators to adopt its proposals on the market surveillance and product safety package, and says that it will ensure that harmonisation is enforced and that the participation of SMEs in the Single Market is facilitated.

Improve the functioning of the internal market for services

The Communication highlights that full implementation of the Services Directive remains important for Europe’s industrial competitiveness, and needs to be improved, emphasizing that a more integrated internal market would boost the competitiveness of business services and industry, and advising these should be taken into account adequately in the design and implementation of industrial strategies. It adds that it will define further action after the High Level Group on business services issues its recommendations in March 2014.

10. The Commission plans to take new actions in the following fields-

Well-designed European standards to accelerate the diffusion of innovations

The European Standardisation System is being reviewed in order to assess its adaptability to the rapidly evolving environment and to contribute to Europe’s strategic internal and external objectives, in particular in the field of industrial policy, innovation and technological development.


Effective standard–setting and the protection of intellectual property.

These are seen as crucial for promoting innovation and the development of new technology areas, and the Commission intends to clarify the rules on the use of IPR in standards and will pursue an initiative on IPR-based standardisation.

A more integrated internal market based on the existing regulatory framework.

The Commission says that, along with its Communication “A vision for the internal market for industrial products”, it will also prepare a Regulation on Enforcement to help to reinforce a level playing field for compliant products in the EU. Also, the Enterprise Europe Network will be reinforced to strengthen support for SMEs in the internal market and further enhance the assistance given for access to finance and for the innovation management capacity of SMEs.

Internationalisation of EU firms

11. The Commission sees the internationalisation and the integration of EU firms in global value chains as a means of increasing their competitiveness and ensuring access to global markets in more favourable competitive conditions. It says that, in order to promote access to markets around the world, it will continue to pursue Free Trade Area negotiations with key bilateral partners, and to act within the WTO agreement to prevent third countries putting up technical barriers to trade. It also plans to pursue the following actions:

• Missions for growth will be reinforced, and the services of the Enterprise Europe Network put to better service to support the internationalisation of SMEs.

• Continued promotion of international standards and regulations, building on the EU’s role as a de facto setter, and take a leading role in reinforcing the international system.

• Regulatory cooperation with other countries will continue to be a priority.

• Ensure EU companies are able to uphold their Intellectual Property Rights in all relevant markets.

• bilateral negotiations with Canada have yielded significant advances in public procurement access, and this will also be pursued in the corresponding negotiations with the United States and Japan.

Improving education and training and facilitating mobility

12. The Commission notes that it has put in place an overall strategy for improving education and training systems, new comprehensive tools to monitor skills needs, and specific initiatives to bring together the relevant actors dealing with apprenticeships, in particular those with crucial ICT skills. It is also developing the following steps to meet the future challenges, which it invites Member States to support:

• A new generation of the Erasmus for young Entrepreneurs programme and a new Erasmus+ programme


• The European Alliance for Apprenticeships and other instruments to make available cross-country traineeships in firms through the active involvement of industry.

2 Climate and energy policy: 2020 to 2030

(35754) 5644/14 + ADDs 1–2 COM(14) 15

Commission Communication: A policy framework for climate and energy in the period from 2020 to 2030

Legal base — Document originated 23 January 2014 Deposited in Parliament 28 January 2014 Department Energy and Climate Change Basis of consideration EM of 19 February 2014 Previous Committee Report None; but see footnotes Discussion in Council See para 2.20 below Committee’s assessment Politically important Committee’s decision For debate in European Committee A, with the

Commission Communication and Recommendation on High Volume Hydraulic Facturing (Fracking) in the EU

Background

2.1 The EU’s climate and energy package has sought to achieve by 2020 a 20% reduction in greenhouse gas emissions, a 20% share for renewable energy, and a 20% increase in energy efficiency. According to the Commission, much has been accomplished, with the Union well on track to meet these targets — an achievement which it describes as all the more significant, given that the European economy has grown by about 45% in real terms since the base year of 1990. However, the Commission comments that much has changed, most notably the effect of the economic and financial crisis on the capacity of Member States to invest; the impact of the high level of fossil fuel prices on the Union’s trade balance and energy costs; the substantial shift in global energy demand towards the emerging economies; the increasing price differential with many of the EU’s trading partners, most notably the United States; the extent to which the Emissions Trading System (ETS) has failed to drive investment in low-carbon technologies; and the new challenges posed by the further development of renewable energy technologies.

2.2 At the same time, the Commission suggests that there has been further confirmation of the likely impact of human influence on climate change, and of the consequent need for


substantial and sustained reductions in greenhouse gas emissions. It says that it is therefore now time to consider the policy framework needed until 2030 in the light of the responses to the Green Paper6 it issued in 2013. In particular, it sees the need to make an ambitious commitment to further reductions in greenhouse gas emissions in line with the cost-effective pathway described in the 2050 roadmaps7 it produced in 2011, and in the process to provide regulatory certainty for investors, and to spur research and innovation into, and the development of, new technologies. It says that this approach should be based on the full implementation of the 20/20/20 targets, together with:

• a simplification of the European policy framework, combined with improving coherence between objectives and instruments;

• within that framework, providing flexibility for Member States to adopt an approach appropriate to their own circumstances, preferred energy mix, and energy security needs;

• strengthening regional cooperation between Member States;

• building upon the momentum behind the development of renewables;

• a clear understanding of the factors which determine energy costs, so as to clarify what can, and cannot, be influenced by national and Union policy;

• improving energy security, whilst delivering a low-carbon and competitive energy system;

• enhancing investor certainty by providing clear signals on the policy framework after 2020; and

• a fair sharing of effort between Member States, which reflects their specific circumstances and capacities.

Key elements

2.3 The Commission says that, although views differed on the level of ambition to be achieved, there was a broad consensus among respondents to its Green Paper that a new target for greenhouse gas emissions is desirable, but that there were mixed views on the need for new targets for renewable energy and energy efficiency. It also says that an analysis confirms the conclusion of the Energy Roadmap 2050, that the costs of a low carbon transition do not differ substantially from those which will be incurred in any event because of the need to renew an aging energy system and rising fossil fuel prices, but that there will be a major shift away from expenditure on fuels towards innovative equipment with a high added value. It also suggests that this process should be assisted by the targeted industrial policy outlined in its Communication8 for an Industrial Renaissance, and it goes on to observe that increased flexibility for Member States should be combined with a

6 (34814) 8096/13: see HC 83–i (2013–14), chapter 5 (8 May 2013) and HC 83–viii (2013–14), chapter 2 (3 July 2013).

7 (32592) 7505/11: see HC 428–xxiii (2010–12), chapter 8 (5 April 2011) and (33563) 18597/11: see HC 428–xlix (2010–12), chapter 14 (1 December 2012).



strong European governance framework, which is coherent with the wider principles of European energy policy, including further integration of the internal market and the delivery of a competitive, secure and sustainable energy system.

2.4 The framework would include the following specific elements.

Greenhouse gas emissions target

2.5 The Commission proposes a reduction target for domestic EU emissions of 40% in 2030 relative to those in 1990, noting that existing measures arising from Member States’ current obligations will continue to have an effect after 2020, and can be expected to deliver a 32% reduction (which, whilst requiring considerable effort, shows that the proposed target for 2030 is feasible). It adds that this target must be shared between the ETS and the sectors not covered by it, with the ETS delivering by 2030 a reduction of 43% in greenhouse gases compared with 2005 (implying that the annual reduction in the cap on the maximum permitted emissions should increase from 1.74% to 2.2% after 2020), whilst the non-ETS sector would have to make a corresponding reduction of 30%, which will need to be allocated between Member States in an appropriate way. However, unlike the framework to 2020, the Commission does not propose a higher conditional target ahead of any wider international agreement, suggesting that, if a more ambitious EU target is warranted, this could be achieved by access to international credits.

Renewable energy target

2.6 The Commission says that a transition to a more sustainable energy system will not be possible without a significantly higher share for renewable energy, but that its rapid deployment already poses challenges, particularly for electricity systems, which need to adapt to increasingly decentralised and variable production. It also notes that most development of renewables in the EU is driven by national support schemes which can hinder market integration, and that their rapid deployment can affect the competitiveness of other fundamental energy sources and reduce investment incentives for generation capacity. It suggests that renewable energy must in future be exploited in a way which is market driven as far as possible, but it notes that a 40% greenhouse gas reduction target should by itself encourage a greater share of renewable energy in the EU of 27%, and it proposes therefore that this should be the EU’s target. However, whilst the target would be binding on the EU, the Commission believes that this should not be the case for individual Member States, but should instead be achieved through clear commitments determined by the Member States themselves, guided by the EU target and by what each can deliver in relation to its target for 2020, including its specific circumstances, energy mix and production capacity.

2.7 The Commission also says that it is not appropriate to establish new targets after 2020 for renewable energy or the greenhouse gas intensity of fuels used in transport (or any other sub-sector), and that it has already indicated9 that food-based biofuels should no longer receive public support after 2020. It notes that, building on its Transport White

9 (34342) 15189/12: see HC 86–xxi (2012–13), chapter 8 (28 November 2012) and HC 83–xxiii (2013–14), chapter 14 (4

December 2013).


Paper, a mix of policy measures is needed for 2030 and beyond, including a focus on steps such as improving the efficiency of the transport system, the development of electric vehicles and alternative, sustainable fuels, in line with the alternative fuels strategy.10 However, the Commission also says that greater flexibility for Member States must be combined with an increased emphasis on completing the internal energy market, and based on a new governance framework under which each Member State would produce a national plan indicating how its commitment to renewable energy would be delivered. It also points out that this will require a substantial revision after 2020 in the Directive on renewable energy sources, as well as an improved policy on biomass in order to maximise its resource efficient use.

Energy efficiency

2.8 The Commission comments that there is broad political consensus on the importance of improved energy efficiency, noting also that the EU target is not binding, with progress being delivered by specific policy measures at Union and national levels. However, it points out that the Energy Efficiency Directive takes a more holistic approach, and says that an assessment in mid 2014 will look at progress towards meeting the 2020 target (where a shortfall is currently predicted), following which it will consider whether any amendments to the Directive are needed. In the meantime, it says that the analysis underpinning this Communication shows that achieving a 40% reduction in greenhouse gas emissions by 2030 would require an increased level of energy savings of about 25%, with a significant increase required in areas such as housing, transport other than passenger vehicles, and electrical equipment, and with national efforts being complemented by ambitious EU-wide energy efficiency standards.

Emissions Trading System

2.9 The Commission recalls that its 2012 report11 on the functioning of the carbon market noted that, as a result of the downturn in economic activity during the crisis, a surplus of allowances had accumulated, and that it has recently been agreed that the auctioning of 900 million allowances should be postponed until 2019 and 2020. However, it says that, despite this, a structural surplus will remain well into the period after 2020, even if the cap is tightened to meet a 40% target, thereby eroding the effectiveness of the ETS (which it is generally agreed should remain the central instrument to bring about a transition to a low carbon economy). It says that it has therefore put forward, in parallel with this Communication, a proposal12 for the establishment of a market stability reserve, providing an automatic adjustment after 2020 of the supply of auctioned allowances based on a pre-defined set of rules.

10 (34647) 5736/13: see HC 86–xxxiv (2012–13), chapter 3 (6 March 2013), HC 86–xxi (2012–13), chapter 8 (20 November

2012) and HC 83–xxiii (2013–14), chapter 15 (4 December 2013).

11 (34430) 16537/12: see HC 86–xxv (2012–13), chapter 14 (19 December 2012).



Competition in integrated markets

2.10 The Commission says that the completion of the internal energy market remains an immediate priority, and it notes that it recently adopted guidelines13 on public intervention in electricity markets to minimise distortions. It adds that state aid guidelines for energy and environment also need to evolve, with subsidies for mature technologies, including those for renewable energy, being phased out entirely between 2020 and 2030, and it says that it is currently consulting on a revision to those guidelines. The Commission also points out that the internal energy market, together with increased electricity from wind and solar sources, has exerted a downward pressure on wholesale prices, although retail prices have increased as the costs of support schemes are passed onto consumers, with the retail sector also being characterised by high levels of market concentration and price regulation, effectively limiting competition and consumer choice. It therefore stresses that high levels of competition in the internal market will be pivotal in delivering the EU’s energy policy objectives up to 2030, and it says that it will continue to monitor the concentration on the retail and wholesale markets, and to ensure effective antitrust and merger control.

Affordable energy for consumers

2.11 The Commission notes the importance of energy in terms of affecting industrial competitiveness and the purchasing power of households, and it highlights the recent increase in the price gap between the EU and many major economic partners, notably with the availability of shale gas in the US. It says that there is a risk of energy price disparities shifting global trade patterns for certain industries, unless compensated by improvements in energy efficiency, where many manufacturers have sought to achieve sustained improvements in energy intensity and to focus on products with a higher added value. It also points out that an analysis14 of energy prices and costs published alongside this Communication shows that, although this varies from sector to sector, improved energy efficiency means that there has been little impact on the EU’s relative competitiveness directly attributable to higher energy prices and the carbon price under the ETS, and that current policies to prevent carbon leakage15 under the System have also been successful. On the other hand, it says that all future scenarios suggest an upward pressure on EU energy costs, and that it would therefore be prudent to maintain until the end of trading in Phase III of the ETS the existing policy framework for the sectors most at risk of carbon leakage, and to continue to monitor the situation.

Security of energy supply

2.12 The Commission comments that the International Energy Agency projects an increased EU reliance on imported oil from around 80% at present to more than 95% by 2035, with gas import dependency expected to rise from 60% to more than 80%, and it says that, with sustained high commodity prices, this increases the EU’s vulnerability to supply

13 (35531) 15776/13: see HC 83–xxviii (2013–14), chapter 9 (22 January 2014).


15 This arises when, as a result of the cost of climate policies, businesses transfer production to areas with less severe constraints, leading to an increase in their total emissions.


and energy price shocks. It suggests that EU policy to improve security of supply must involve the further exploitation of sustainable indigenous energy sources, including renewables, conventional and unconventional fossil fuels, and nuclear energy; collective action by Member States to diversify their supply countries and routes for imported fossil fuels; and greater efforts to improve energy intensity, and to generate savings from buildings, products and processes.

European governance

2.13 The Commission says that increased Member State flexibility in choosing policies which best suit them must be compatible with further market integration, increased competition, and the attainment of EU level climate and energy objectives through Member States’ national plans which also provide greater coherence of approach, promote further market integration and competition, and provide certainty for investors. It adds that these plans should also set out a clear approach to achieving objectives relating to greenhouse gas emissions in the non-ETS sector, renewable energy, energy savings, energy security, research and innovation, and other important choices such as nuclear energy, shale gas, carbon capture and storage. It also envisages this would involve the development of detailed guidance by the Commission, followed by the preparation of plans, and their subsequent assessment.

2.14 However, the Commission says that systematic monitoring of key indicators is needed to assess progress and to inform any future policy. This includes the energy price differential between the EU and major trading partners, diversification of energy imports and the share of indigenous energy sources; deployment of smart grids and interconnections between Member States; intra-EU coupling of energy markets; competition and market concentration; and technological innovation.

Key complementary policies

2.15 These include:

Transport

The Commission recalls that the Transport White Paper16 established the goal of reducing greenhouse gas emissions from the sector by 60% by 2050 compared with 1990, and by about 20% by 2020 compared with 2008. It also notes that emissions increased by 33% between 1990 and 2007, but have since fallen back — a trend it expects to continue up to 2020, after which it believes that greater efforts will be needed to achieve the targets in the White Paper. It adds that the further reduction of emissions will require a gradual transformation of the public transport system towards better integration between modes, greater exploitation of non-road alternatives, improved management of traffic flows, and extensive innovative in, and deployment of, new propulsion and navigation technologies and alternative fuels, supported by coherent infrastructure design and smarter pricing of infrastructure usage, with Member States also considering how fuel and vehicle taxation could be

16 (32639) 8333/11: see HC 428–xxvi (2010–12), chapter 3 (11 May 2011).


used to support greenhouse gas reductions. It believes that the EU should participate actively within the International Civil Aviation Organisation to create by 2016 a global market-based mechanism in the aviation sector, and that maritime emissions should be integrated into the EU’s greenhouse gas reduction policies, with the EU working with the International Maritime Organisation on a global approach.

Agriculture and land use

The Commission says that agriculture, land use change and forestry both emit and remove greenhouse gases, and that these are currently treated in different parts of the EU’s climate policy, with non-carbon dioxide emissions from agriculture being covered in the Effort Sharing Decision, whilst carbon dioxide emissions related to land-use and forestry are excluded from the EU’s domestic reduction target, but accounted for under international commitments. It considers that land use change and forestry should be included in the reduction target for 2030, with further analysis being undertaken to assess the mitigation potential and most appropriate policy approach.

Carbon capture and storage

The Commission says that emissions must come down significantly to be compatible with the EU’s long term greenhouse gas objective, and that, as theoretical limits of efficiency are being reached in some sectors, carbon capture and storage may be the only option available to reduce direct emissions on the scale needed in the longer term, and may in particular be a key technology for fossil fuel-based power generation. It considers that increased research and commercial demonstration are essential to enable the technology to be deployed within the 2030 timeframe, requiring a supportive EU framework through the continued and strengthened use of auctioning revenues.

Innovation and finance

The Commission says that the Strategic Energy Technology Plan has increased research and development investment across the EU from €3.2 to €5.4 billion a year, and that, under Horizon 2020, a new Union programme for 2014–20, close to €6 billion will be dedicated to energy efficiency and to secure, clean and low carbon technologies. However, it says that the EU will need to step up its research efforts to support the post-2020 climate and energy framework, and that consideration should now be given to how best to do this, and what the priorities should be, for example by using revenues generated by the ETS to accelerate the market uptake of low carbon technologies and greenhouse gas mitigation measures, by leveraging greater private investment via the European Investment Bank, and by drawing on the €23 billion earmarked under the European Structural and Investment Funds for 2014–20 to facilitate a shift to a low carbon economy.

International context

2.16 The Communication notes that global energy demand will increase in the period to 2030, with much of this being met through the use of fossil fuels, but it says that


international efforts to reduce greenhouse gas emissions are mixed, in that, although China, India, Brazil, the USA, the EU and more than 100 countries (together accounting for 80% of global emissions) pledged to reduce emissions in the Copenhagen-Cancun process, planned climate change mitigation efforts are still short of what is necessary to limit the expected rise global temperature. Consequently, Parties to the UN Framework Convention on Climate Change (UNFCCC) launched a process in 2011 to conclude a new international agreement in Paris in December 2015, which would be applicable to all Parties and cover the period after 2020. The Commission notes that the EU and other developed regions will need to show ambition in their climate mitigation plans if they are to encourage less-developed regions to make serious efforts, and it points out that, as the EU is currently a global leader in low carbon technologies, an ambitious global approach to climate and energy policy would allow it to exploit its advantage in those markets.

2.17 The Commission concludes by inviting the Council and the European Parliament to endorse a 40% greenhouse gas emissions reduction target for 2030 and an EU level renewables target of at least 27%, in order to feed into UNFCCC negotiations which will take place throughout 2015. It also asks for endorsement of its proposed new governance system.


2.18 In his Explanatory Memorandum of 19 February 2014, the Minister of State for Energy and Climate Change (Gregory Barker) says that the Government will examine carefully the subsidiarity implications of any more detailed proposals on the 2030 climate and energy framework, including the process for preparing Member State national plans, but, in the meantime, it supports the 40% emissions reduction target proposed by the Commission. However, it considers that the EU should be prepared to offer to commit to a 50% emissions reduction target in the context of an ambitious global climate deal, which it believes is required to remain on the cost-effective pathway necessary to limit the increase in the average global temperature to 2° centigrade.

2.19 As regards specific aspects of the Communication, the Minister says that:

• whilst the Government will examine the proposals for an EU-level renewables target of 27%, it opposes binding targets for Member States, and thus welcomes the explicit statement that the 27% target would not be binding on Member States individually, believing that they must retain maximum flexibility in choosing the energy mix most appropriate to their circumstances if they are to decarbonise in the most cost-effective way possible;

• the ETS is a central component of the UK’s policy for delivering cost effective emissions reductions in the UK and across the EU and for fostering the transition to a low carbon EU economy in a technology neutral manner, and the Government has called for urgent reforms to address the surplus of allowances in the ETS and strengthen the incentive which it provides for investment in low-carbon technology;

• whilst the factor by which the EU-wide ETS emissions cap is reduced annually will need to be increased to meet the 2030 targets, this alone will not be sufficient to


ensure the level of EU decarbonisation necessary to limit global temperature increases, and the Government therefore broadly welcomes the Commission’s proposals for ETS reform: it also open to considering the potential for a market stability reserve, but continues to call for the permanent removal from the system, or cancellation, of an ambitious volume of allowances as the simplest and clearest way to address the surplus;

• the Government welcomes the potential simplification and streamlining of the currently separate processes for reporting action on renewable energy, energy efficiency and greenhouse gas reduction, and believes that the proposed new governance processes could increase investor certainty, enhance policy coherence and transparency, reduce costs and foster progress towards completion of the internal energy market: it also points out that there are links between the proposed new reporting processes and those under the European Semester, and will seek to prevent duplication of efforts.

2.20 The Minister says that there will be an exchange of views on these proposals at the Energy and Environment Councils in March and at the European Council meeting that month, and he notes Commission’s suggestion the Council should endorse its proposals by the end of the year.

Conclusion

2.21 This wide-ranging Communication clearly addresses a subject of considerable political, environmental and economic importance, and, whilst it envisages a somewhat greater degree of freedom than at present for Member States in certain areas, it nevertheless identifies a wide range of issues on which views will need to be taken at both EU and national levels. In view of this, we think its early consideration by the House would be highly desirable, and we are therefore recommending it for debate in European Committee A (alongside a Commission Communication and Recommendation on High Volume Hydraulic Fracturing (Fracking) in the EU, considered at chapter 3 of this Report).


3 High volume hydraulic fracturing (fracking) in the EU

(a) (35757) 5706/14 + ADDs 1–5 COM(14) 23 (b) (35759) 5700/14 C(2014) 267

Commission Communication on the exploration and production of hydrocarbons (such as shale gas) using high volume hydraulic fracturing in the EU Commission recommendation on minimum principles for the exploration and production of hydrocarbons (such as shale gas) using high volume hydraulic fracturing

Legal base — Documents originated 22 January 2014 Deposited in Parliament (a) 29 January 2014

(b) 30 January 2014 Department Energy and Climate Change Basis of consideration EM of 11 February 2014 Previous Committee Report None Discussion in Council See para 3.16 below Committee’s assessment Politically important Committee’s decision For debate in European Committee A, with the

Commission Communication on EU climate and energy policy from 2020 to 2030

Background

3.1 The Commission says that the main driver of EU energy policy is to achieve a supply which is sustainable, affordable, secure and reliable, but that there are a number of challenges, both now and in the near future, particularly as regards natural gas, which accounts for about one-quarter of the EU’s primary energy consumption, and which could contribute to a reduction in greenhouse gas emissions, should it replace more carbon-intensive fuels. However, it observes that production from conventional sources has steadily declined over the last two decades, as a result of which the EU’s import dependency has risen to 67% (and is still increasing), with this also having contributed to increasing prices, now some three or four times higher than those in the United States.

3.2 The Commission points out that technological progress has given access to unconventional fossil fuel previously too costly to extract, and that, as a consequence, gas from that source currently accounts for 60% of domestic production in the United States, with shale gas showing the higher growth rates (and resulting in lower gas prices). It adds that potential reserves of natural gas from indigenous shale formations have led to expectations within the EU that their exploitation (by means of “fracking”) can provide a possible substitute for more carbon-intensive fossil fuels, and reduce dependency on non-EU energy suppliers, thus causing some Member States to actively pursue exploration. At


the same time, however, it notes that the risks involved — some of them of a cross-border nature — have triggered concerns about the health and environmental effects, with the general public also perceiving an insufficient level of precaution, transparency and consultation, leading some Member States to ban fracking, or establish moratoria. It also says that there have been requests for action at EU level, with the European Parliament having adopted two resolutions to that effect in November 2012, and that it has therefore agreed to develop a framework for safe and secure hydrocarbon extraction.

The current documents

3.3 The Commission has accordingly produced these two documents, which follow a public consultation and a series of studies — (a) a Communication setting out the potential new opportunities and challenges stemming from shale gas extraction in Europe, and (b) a non-binding Recommendation setting minimum principles which should apply to it.

Commission Communication

EU shale gas potential

3.4 The Commission says that unconventional hydrocarbon reserves in the EU are thought to be significant, with shale gas formations having the highest potential, and with the technically recoverable resources having been estimated at 16 trillion cubic metres,17 though there is significant uncertainty as to how far this would be economic. It also observes that, whilst there have been a few pilot projects, there has so far been no commercial production of shale gas in the EU, although this could start in 2015–17 in the most advanced Member States: and it believes that, whilst the EU will not becomes self-sufficient, natural gas production from shale could, at least partially, compensate for the decline in its conventional gas production and avoid an increased reliance on gas imports. However, it suggests that the direct price effect is likely to remain modest, compared with that in the United States, due to the relatively low volume and higher production costs expected, and the fact that prices are still largely set through long term oil-indexed contracts, although it also accepts that even a moderate decrease (or avoided increase) in gas prices would benefit Member States, and in particular those heavily reliant on imports, as well as energy intensive industries.

3.5 The Commission adds that shale gas activities can bring direct or indirect economic benefits, for example through investment in infrastructure, employment opportunities, and public income through taxes, fees and royalties. In addition, it says that it has the potential to produce climate benefits if it substitutes more carbon intensive fuels, and does not replace renewable energy, although it also notes that, if this benefit is to be realised, emissions associated with the extraction process, notably methane, need to be properly mitigated.

17 Compared with 3 trillion cubic metres for tight gas, and 2 trillion for coal bed methane.


Environmental risks and public concerns

3.6 The Commission says that it is generally agreed that shale gas extraction has a larger environmental footprint than conventional gas development, as it requires a more intensive technique, mainly takes place onshore, would cover much wider areas, and would require more wells to be drilled, as productivity is generally lower: also, some of its impacts, for example water and air pollution, could have cross-border implications. It goes on to point out that, whereas experience in Europe has been focused on low volume, vertical hydraulic fracturing, operators are now testing further the high volume, essentially horizontal, drilling adopted in North America, and it notes that one of the environmental concerns has been the risk of ground and surface waters becoming contaminated, notably as a consequence of the chemicals used, due to poor well design or casing, uncontrolled induced fractures, or existing faults, as well as poor management of waste water. In addition, it notes that the process will have an impact on water demand, as it requires large volumes (not all of which can be recovered) on local ecosystems, on soil quality, and on land use: and it says that fugitive methane emissions can have an adverse impact on climate and local air quality, as can emissions from transport and on-site equipment.

3.7 The Commission comments that these environmental risks also give rise to health hazards, which have led to varying degrees of public concern, not infrequently resulting in outright opposition to projects. Those concerns have been reinforced by an impression that the public has not been well informed, particularly as regards the geological conditions under which fracking takes place, compounded by doubts over the effectiveness of relevant EU legislation: and, although the Commission says that a range of good technical and regulatory practices have emerged, it is of paramount importance that the risks and public concern about safety of operations should be addressed if the potential benefits are to be reaped.

Protecting the environment, climate and public health

3.8 The Commission says that, although both general EU legislation and specific pieces of environmental legislation apply to shale gas activities, Member States have started to interpret this in different ways, and to develop specific national rules, resulting in differing requirements and a fragmented and increasingly complex operating framework. It also points out that, since EU environmental legislation was developed when fracking was not used in Europe, it does not address a number of issues associated with the practice.

Draft Recommendation

3.9 The Commission notes that the International Energy Agency has confirmed the need for robust and clear rules to reduce and manage the risks from shale gas production, and says that, as existing guidance is not considered sufficient, it has adopted a Recommendation (document (b)), outlining minimum principles enabling shale gas activities, whilst ensuring that climate and environmental safeguards are in place, and that the public is informed.

3.10 More specifically, it seeks to ensure that:


• a strategic environmental impact assessment is carried out prior to the granting of licences for hydrocarbon exploration and/or production likely to involve fracking, in order to address cumulative impacts and possible conflicts with other uses;

• a site-specific risk characterisation and assessment is carried out, related to both the surface and underground, to determine whether an area is suitable for safe and secure exploration or production of hydrocarbons using this method, and to identify risks of underground exposure pathways (such as induced fractures, existing faults or abandoned wells);

• there is baseline reporting of elements such as water, air and seismicity in order to provide a reference for subsequent monitoring or in the case on an incident;

• the public is well informed of the composition of fluid used for fracking on a well-by-well basis, as well as on water composition, baseline data, and monitoring results, so as to ensure that factual information on potential risks and their sources is available (and public acceptance is facilitated);

• wells are properly insulated from surrounding geological formations, so as in particular to avoid contamination of groundwater;

• in order to mitigate the impact of emissions on the climate and local air quality, the release of gases into the atmosphere (venting) is limited to the most exceptional operation safety cases, that controlled burning of gases (flaring) is minimised, and that gas is captured for subsequent use;

• Member States should ensure that permitting authorities have sufficient resources and knowledge to achieve adequate risk management, that procedures are appropriately coordinated, and that consultations are carried out before fracking operations start.

3.11 The Commission also recommends that Member States should ensure that companies apply best available techniques and good industry practice, and says that, as well as reviewing the existing reference document under the Mining Waste Directive to ensure that extracted waste is appropriately handled and treated, it will ask the European Chemicals Agency to make certain changes to the database of registered chemicals under the REACH Regulation (1907/2006/EC) to facilitate the search for information on substances used in connection with fracking. In addition, the Commission says that, in order to increase knowledge on unconventional hydrocarbon extraction technologies, it will establish a European Science and Technology Network to bring together practitioners to collect and analyse results from exploration projects, and it points out that further research in this area is set out in the 2014–15 work programme for Horizon 2020.

3.12 The Recommendation invites Member States to give effect to these principles within six months of publication, and to inform the Commission of any measures they put in place on an annual basis, and for the first time by December 2014. The Commission says that it will closely monitor the implementation of the Recommendation through a publicly available comparison of the situation in Member States in the form of a scoreboard, and will review its effectiveness 18 months after its publication.



3.13 In his Explanatory Memorandum of 11 February 2014, the Minister of State at the Department for Energy and Climate Change (Michael Fallon) says that, like the Commission, the Government is committed to ensuring that all hydrocarbon exploration and production activities are undertaken in a safe and environmentally-responsible manner, and that, although a good regulatory framework is already in place in the UK to ensure this happens, it will look to refine that framework further as the industry develops and moves towards the production phase.

3.14 The Minister adds that the UK practises, or requires, much of what is recommended, most of which falls within the remit of existing Directives. However, he says it has some general concerns about the Recommendation, which he notes extends to the exploration and extraction of conventional as well as unconventional hydrocarbons, covering both onshore and offshore operations; purports to extend some existing EU obligations, notably those relating to the Environmental Liability Directive (2004/35/EC); and contains some provisions which impact on land use planning issues. The Government will therefore be working to ensure that the Commission does not go beyond its competence in putting forward any proposals for legislation.

3.15 He also believes that the 18 month timeframe for assessing the effectiveness of the Recommendation is unlikely to be sufficient to enable an evidence-based assessment, and says that, as the Recommendation is non-binding, the UK will continue to regulate the shale gas sector safely under national legislation and existing EU obligations.

3.16 The Minister concludes by saying that there is likely to be an exchange of views at the March Energy Council and the June Environment Council, but that the Recommendation does not require formal endorsement by the Council.

Conclusion

3.17 These two documents clearly address a subject of considerable topical interest, with the Communication providing a useful analysis of the economic potential of fracking, as well as its associated environmental risks and public concerns. Likewise, although it contains a number of points which the Government intends to pursue, the Commission Recommendation — which is non-binding — appears in general to advocate measures in line with exiting UK practice. Given the likely level of interest among Members, we refer these documents for debate in European Committee A, with the Commission Communication on EU climate and energy policy from 2020 to 2030.


4 Conditional access services

(a) (32375) 18124/10 + ADD 1 COM(10) 753 (b) (32376) 18126/10 COM(10) 755

Draft Council Decision on the signing of the European Convention on the legal protection of services based on, or consisting of, conditional access Draft Council Decision on the conclusion of the European Convention on the legal protection of services based on, or consisting of, conditional access

Legal base (a) Articles 207(4) and 218(5) TFEU; QMV

(b) Articles 207(4) and 218(6)(a)(v) TFEU; QMV; EP consent

Department Culture, Media and Sport Basis of consideration SEM of 13 February 2014 Previous Committee Reports HC 428–xliv (2010–12), chapter 14 (14 December

2011); HC 428–xlii (2010–12), chapter 8 (23 November 2011); HC 428–xxx (2010–12), chapter 7 (22 June 2011); HC 428–xxiv (2010–12), chapter 2 (27 April 2011); HC 428–xvi (2010–11), chapter 5 (9 February 2011)

Discussion in Council No date set Committee’s assessment Legally and politically important Committee’s decision Not cleared; further information requested

Background and previous scrutiny

4.1 Conditional access services are services offered by broadcasting or internet service providers in return for payment, such as pay-TV or other on-demand services. The purpose of the draft Council Decisions is to authorise the EU to sign and accede to a Council of Europe Convention on the legal protection of services based on, or consisting of, conditional access. The Convention largely replicates the provisions of an EU Directive adopted in 1998 which prohibits the manufacture, import, distribution, sale, rental or possession for commercial purposes of devices (such as pirate decoders, smart cards and software) which are designed to facilitate unauthorised access to protected services, but the scope of application of the Convention is potentially much wider because the Council of Europe has a larger membership than the EU. The Convention entered into force in July 2003 but relatively few Council of Europe members have acceded to it. EU accession would, the Commission believes, encourage more European countries to do so, thereby strengthening legal protection for legitimate providers of conditional access services beyond the EU’s borders, reducing piracy, and creating a more secure trading environment.


4.2 The 1998 Directive is an internal market measure which seeks to promote consumer choice and cultural pluralism by establishing a common EU-wide legal framework to ensure the economic viability of broadcasting and information society services based on conditional access. By contrast, the draft Decisions originally proposed by the Commission (in December 2010) to authorise signature and EU accession to the Convention cited as their substantive legal base Article 207(4) of the Treaty on the Functioning of the European Union (TFEU) which concerns the EU’s common commercial policy and is an area of exclusive EU competence.

4.3 The Government, supported by other Member States, considered that the draft Decisions should cite Article 114 TFEU — an internal market legal base — instead of Article 207(4) TFEU, and that Member States should be included as parties to the Convention, in addition to the EU. Whilst the Government accepted that the EU had acquired exclusive external competence over most elements of the Convention, it highlighted two provisions — on confiscation measures (Article 6 of the Convention) and on the provision of mutual legal assistance (Article 8) — in which competence was shared with Member States. It considered that both of these provisions fell within the scope of the UK’s Title V (justice and home affairs) opt-in and that, as the EU had not yet exercised competence in the areas covered by these Articles, Member States remained free to do so. As a precaution, to hedge against the possibility that the EU had acquired some competence in relation to either Article, the Government also notified us that it had decided to opt into the draft Decisions, even though neither cited a Title V legal base, adding:

“Whether the opt-in has practical effect in such circumstances is a question that can ultimately only be answered by the ECJ [Court of Justice of the European Union] but the Government considers that it is in the UK’s best interests to continue to defend the application of the opt-in to provisions falling within Title V, even where there is no citation of a Title V legal base.”18

4.4 The draft Decision on signature of the Convention was formally adopted by the Council, with UK support, in November 2011.19 It cited Article 114 TFEU as its substantive legal base, stipulated that both the EU and Member States should sign the Convention, and made clear that the EU had exclusive competence in relation to all elements of the Convention other than Article 6 (on confiscation) and Article 8 measures relating to confiscation. The adopted Decision made no reference to the application of the UK’s Title V opt-in Protocol (Protocol No. 21) but the Government told us that it had tabled a statement at the Council to record its view that:

“even in the absence of the citation of a legal base in TFEU Title V, the European Union’s competence to enter into the JHA [justice and home affairs] obligations (in Article 8 of the Convention which concern cooperation in investigations and judicial proceedings save insofar as those obligations relate to Article 6 of the Convention and are being entered into by the Member States) derives from TFEU Title V and accordingly the United Kingdom will be bound by virtue of the fact that it has

18 Letter of 26 May 2011 from the Minister for Culture, Communications and Creative Industries (Mr Edward Vaizey) to

the Chair of the European Scrutiny Committee.

19 Council Decision 2011/853/EU, OJ No. L 336, 20.12.2011 p.1.


exercised its opt-in under Protocol No. 21 to the TEU [Treaty on European Union].”20

4.5 Our earlier Reports provide a more detailed overview of the draft Decisions and the Government’s position.21 We cleared both draft Decisions from scrutiny in December 2011.

The Government’s Supplementary Explanatory Memorandum

4.6 The Minister for Culture, Communications and Creative Industries (Mr Edward Vaizey) has submitted a Supplementary Explanatory Memorandum on the draft Decisions, even though they have been cleared from scrutiny, because a ruling given by the Court of Justice last October has annulled the draft Decision on signature, whilst maintaining its effects for up to six months pending the adoption of a new Council Decision. The Minister explains:

“This has resulted in the Commission re-proposing its original proposal (which has Article 207(4) TFEU as its legal base) without going through the normal processes for approving and communicating a new proposal. Although this has come from the Commission, it has done so in such a way that no new document has been registered so there is nothing to deposit and trigger a fresh scrutiny process. This is somewhat irregular, but it is clear that a supplementary explanatory memorandum is required to ensure that Committees are aware of the background to this, the wider implications, and are content that we proceed. We anticipate that the Presidency will want to move this issue along quickly to try to secure formal adoption before the ECJ’s 6 month suspension runs out towards the end of April.”22

The Court’s ruling on the draft Decision on signature23

4.7 The action for annulment was brought by the Commission on the grounds that the Council of Europe Convention falls within the scope of the EU’s common commercial policy, is therefore an area of exclusive EU competence, and should be based on Article 207(4) TFEU. The UK was one of five Member States intervening in support of the Council’s position that Article 114 TFEU is the correct legal base and that the EU has no power, under Article 207 TFEU, to conclude an international agreement involving judicial cooperation and seizure and confiscation measures of a criminal law nature.

4.8 In its judgment, the Court reiterates its settled case law that the choice of legal base must rest on objective factors, including the aim and content of the measure in question, that are amenable to judicial review, adding:

“If examination of that measure reveals that it pursues a twofold purpose or that it has a twofold component and if one of those is identifiable as the main or

20 Letter of 7 December 2011 from the Minister for Culture, Communications and Creative Industries (Mr Edward

Vaizey) to the Chair of the European Scrutiny Committee.

21 See headnote.

22 Para 5 of the Minister’s Supplementary Explanatory Memorandum.

23 Case C-137/12, 22 October 2013.


predominant purpose or component, whereas the other is merely incidental, that measure must be based on a single legal basis, namely that required by the main or predominant purpose or component.”24

4.9 The Court concludes that the primary objective of the draft Decision, in authorising the EU to sign the Council of Europe Convention, is to facilitate international trade between the providers of conditional access services based in the EU and other European countries by extending the legal protection secured within the EU by the 1998 Directive to non-EU members of the Council of Europe. The Court adds that:

“since the approximation of the legislation of Member States in the field concerned has already been largely achieved by Directive 98/84, the primary objective of the Convention is not to improve the functioning of the internal market, but to extend legal protection of the relevant services beyond the territory of the European Union and thereby to promote international trade in those services.”25

4.10 As regards Articles 6 and 8 of the Convention on confiscation measures and judicial cooperation, the Court notes that these provisions are intended generally to ensure effective legal protection for conditional access services throughout the territories of the Contracting Parties and are “purely incidental” to the primary objective of the draft Decision.

4.11 Turning to the application of the UK’s Title V opt-in Protocol, the Court observes:

“Protocol (No. 21) on the position of the United Kingdom and Ireland in respect of the area of freedom, security and justice and Protocol (No. 22) on the position of Denmark, which are annexed to the TEU and the TFEU, are not capable of having any effect whatsoever on the question of the correct legal basis for the adoption of the contested Decision.

“Indeed, it is the legal basis for a measure — the appropriateness or otherwise of which falls to be assessed [...] on the basis of objective factors such as main or predominant purpose of the measure and its content — which determines the Protocols to be applied, and not vice versa.

“In the present case, it can be seen from the above analysis that the appropriate legal basis is the one relating to the common commercial policy, which is not covered by Protocols Nos. 21 and 22.”26

The Government’s position

4.12 The UK has implemented the 1998 Directive and “would not disagree” with the case advanced by the Commission that extending the protection conferred by the Directive to the broader membership of the Council of Europe might help limit further damage from

24 Para 53 of the Court’s judgment.

25 Para 67 of the Court’s judgment.

26 Paras 73–5 of the Court’s judgment.


piracy. The Minister explains that the UK intervened in the case brought by the Commission in support of the Council:

“in order to resist the expansion of the EU’s external competence at the expense of that of Member States, and to promote the use of mixed agreements where there is shared competence.”27

4.13 He adds:

“Given that the Court annulled the Decision because it was adopted on the wrong legal base, it did not need to examine the issue of the correct test for exclusive external competence, because the correct legal base, TFEU Article 207, expressly confers exclusive external competence. The Court dismissed any possibility that Protocols 21 and 22 were capable of having any effect.

“Since the decision of the ECJ is final, the UK and other Member States have no option but to accept that the correct legal base is Article 207 for the Convention. That being so, and since the overall policy objective of the Convention remains sensible, the Government is seeking approval to agree the Decision on that basis. Although undoubtedly a setback from a broader point of view, the broader issue of competence remains in play, and the Government will remain vigilant and challenge the Commission wherever it appears they are exceeding their remit.”28

4.14 The Minister notes that annulment of the Decision on signature will take effect at the latest on 22 April 2014. A successor Decision, based on Article 207(4) TFEU, will therefore need to be in place before then to ensure that signature of the Council of Europe Convention (which took place on 21 December 2011) is not called into question.

Conclusion

4.15 We recall that, in earlier correspondence on the draft Decisions, the Minister told us:

“In our view, a JHA obligation in a measure should never be regarded as ancillary for the purpose of the predominant purpose test and will always justify the citation of a JHA legal base. In such circumstances we consider that the UK is not bound by a measure which creates JHA obligations unless we have opted in pursuant to the Protocol. We consider this is the case irrespective of whether a JHA legal base has been cited. Furthermore, if we are unsuccessful in arguing that a JHA legal base should be cited in a Council Decision, we would nonetheless assert that the opt-in applies where an international agreement creates obligations in the JHA field, however minor, as they are in these Decisions.”29

4.16 The Minister describes the Court’s ruling on the Decision authorising the EU to sign the Council of Europe Convention on the legal protection of conditional access

27 Para 16 of the Minister’s Supplementary Explanatory Memorandum.

28 Paras 17–18 of the Minister’s Supplementary Explanatory Memorandum.

29 Letter of 7 December 2011 from the Minister for Culture, Communications and Creative Industries (Mr Edward Vaizey) to the Chair of the European Scrutiny Committee.


services as “undoubtedly a setback”. In our view, its significance is far greater, as it appears categorically to discredit the Government’s policy of asserting that the UK’s Title V (justice and home affairs) opt-in can apply to EU measures which do not cite a Title V legal base. We note that, in intervening in the case in support of the Council, the UK did not press for the inclusion of a Title V legal base — the only outcome which would have laid to rest any doubts about the application of the UK’s opt-in Protocol.

4.17 In light of the Court’s ruling, we ask the Minister whether he accepts that it is no longer open to the UK to assert that its Title V opt-in applies to the draft Decisions on signature and conclusion, or to any other EU measures containing obligations in the justice and home affairs field, unless the Government succeeds in securing the inclusion of a Title V legal base?

4.18 We trust that the Court’s judgment in this case, and in another case last September involving an amendment to the social security provisions of the EEA Agreement,30 will have caused the Government to review its policy on the scope of application of the UK’s Title V opt-in Protocol. We ask the Minister to confirm that such a review has been undertaken as a matter of urgency, given its important implications for many of the documents we have under scrutiny, and to provide an assurance that we will be informed of the outcome as soon as possible. Pending the Minister’s response, the draft Decisions remain under scrutiny.

5 Emissions Trading System: market stability reserve

(35755) 5654/14 + ADDs 1–2 COM(14) 20

Draft Decision concerning the establishment and operation of a market stability reserve for the Union greenhouse gas emission trading scheme and amending Directive 2003/87/EC

Legal base Article 192(1) TFEU; co-decision; QMV Document originated 22 January 2014 Deposited in Parliament 28 January 2014 Department Energy and Climate Change Basis of consideration EM of 6 February 2014 Previous Committee Report None; but see footnote Discussion in Council See para 5.14 below Committee’s assessment Politically important Committee’s decision Not cleared; further information awaited

30 Case C-431/11 and (32587) 7591/11, (33298) 16231/11 and (33815) 8556/12, reported in HC 83–xxvi (2013–14), chapter

7 (8 January 2014).


Background

5.1 In order to promote reductions of greenhouse gas emissions in a cost-effective and economically efficient manner, Directive 2003/87/EC established the EU’s Emissions Trading System (ETS). This came into operation on 1 January 2005, and obliges Member States to grant to undertakings in certain areas a permit covering emissions of carbon dioxide. It also required them to establish for each of the first two trading periods (2005–07 and 2008–12) a national plan dealing with the total quantity of allowances and their allocation: undertakings with a permit are then able to emit quantities of carbon dioxide up to the permitted limits, but have to surrender an allowance equal to their annual emissions. The System’s third phase (from 2013–20) incorporates a number of fundamental changes, with the individual Member State allocation caps having been replaced by an EU-wide cap on allowances (which will decrease by 1.74% annually), and with auctioning having become the default system of allocation.

5.2 The Directive requires the Commission to report on the operation of the System, and the first such report in 201231 noted that, at the start of the second trading period, it was expected that the cap would be ambitious, but that the economic crisis had radically reduced the level of emissions, resulting in a surplus of 955 million allowances by the end of 2011 (which in turn had had a major impact on the carbon price, which had fallen to below €10 in the second half of 2011). It added that, due largely to temporary elements directly related to the transition to phase III, a continued rapid build-up amounting to some 500 million allowances was to be expected by the end of 2013, resulting in a surplus at the start of phase III, which could well be over 1.5 billion, or even 2 billion, allowances.

5.3 The Commission therefore proposed that the auctions of a certain quantity of allowances planned for 2013, 2014 and 2015 should be postponed (“backloaded”) until later in phase III, by means of an amendment to the Auctioning Regulation. However, it pointed out that this would not affect the structural surplus, and it therefore went on to consider a number of structural options — including increasing the EU reduction target to 30% in 2020; retiring a number of allowances in phase III; an early revision of the 1.74% annual linear reduction factor; extension of the scope of the system to other sectors; limiting access to international credits; and discretionary price management mechanisms — which it intended to explore with stakeholders without delay by launching a formal consultation process.

The current proposal

5.4 Even though it has recently been agreed that the auctioning of 900 million allowances in the early stage of phase III should be postponed until 2019 and 2020, the Commission says that, without a reform of the ETS, a surplus of two billion allowances is expected to persist until 2030, even if the cap is adjusted downward to deliver the 40% greenhouse gas target which the Commission has proposed in its Communication32 on a 2030 Climate and Energy Package. As this will result in a carbon price insufficient to stimulate the investment needed to meet long-term emission reduction targets, the Commission has suggested the

31 (34430) 16537/12: see HC 86–xxv (2012–13), chapter 14 (19 December 2012).



establishment of a market stability reserve (which emerged as a further structural option during the consultation process referred to above).

5.5 It is envisaged that such a reserve could in the short term help to address the current allowance surplus, and also make the ETS more resilient to any potential future large-scale event which might severely disturb the balance between supply and demand by adjusting auction volumes to address the mismatch between the largely fixed supply but flexible demand from fluctuating emissions, without affecting the total long-term supply. More specifically, as from the start of Phase IV of the ETS in 2021, 12% of the cumulative surplus in the market33 which would otherwise have been auctioned would be withheld annually and placed into the Market Stability Reserve, unless the volume to be withheld was below 100 million allowances.34 The proposal also stipulates that 100 million allowances in the Reserve would be returned to the market if the total number of allowances in circulation is below 400 million, or if the allowance price for more than six consecutive months is more than three times the average price of allowances on the European carbon market during the two preceding years.

5.6 The proposal includes a requirement for the Commission to review the orderly functioning of a market stability reserve by 31 December 2026, paying particular attention to the percentages determining the number of allowances to be held in a reserve, and to submit a proposal, where appropriate, to the European Parliament and the Council. It also includes a provision to smooth out the peak in supply caused by the reintroduction to the market in 2020 of 600 million ‘backloaded’ allowances, as well as any other increases to auction volumes at the end of Phase III such as the auctioning of unused New Entrant Reserve allowances. This provision specifies that, where average auction volumes in 2020 are more than 30% higher than expected volumes in 2021 and 2022, the 2020 volume should be reduced by two-thirds of the difference, with the reduced amount then returned in even instalments across each of the years 2021 and 2022.

5.7 The Commission has published an accompanying Assessment, which sets out in broad terms some possible impacts of such a reserve. This shows that it would remove allowances from the market in 2021, thereby reducing Member States’ auction volumes, with the resultant increase in the carbon price being likely to increase the costs to firms of complying with the ETS, whilst the effect on Member States’ auction revenues would depend on the balance between the magnitude of the change in auction volumes and the corresponding impacts on price. The Impact Assessment also refers to the mid to long-term operation of the reserve, when at some point allowances would be likely to return back to the market (and would thus be likely to lead to a fall in the carbon price and a reduction in the costs to firms of complying with the ETS). However, the Assessment does not estimate the impacts on Member States’ auction revenues of removing allowances from the market from 2021 or returning them later.

33 Defined as the number of allowances issued to EU ETS participants since 1 January 2008 plus surrendered

international credits less total verified emissions for the same period. Allowances in the market stability reserve are also deducted from the total.

34 Thus effectively setting a maximum surplus threshold of 833 million above which allowances will be withheld from the market and added to the reserve each year.



5.8 In his Explanatory Memorandum of 6 February 2014, the Minister of State at the Department for Energy and Climate Change (Gregory Barker) says that the ETS is a central component for delivering cost effective emissions reductions in the UK and across the EU, and he points out that the UK has long called for legislative proposals for its reform so as to address the surplus of allowances in the system and strengthen the incentive it provides for investment in low-carbon technology. He adds that the Government is open to considering the potential for supply side flexibility mechanisms (including a market stability reserve) to improve the functioning of the system, but believes that such a mechanism needs to be supported by robust analysis, based on clear and transparent rules which maintain the integrity of the market, and respect Member States’ fiscal sovereignty. It therefore broadly welcomes this proposal, and is undertaking detailed analysis of the specific parameters put forward to assess its likely impacts.

5.9 The Minister notes that the supply of allowances in the ETS market is currently determined many years in advance and then remains fixed during each Phase, and he suggests that, whilst this has provided emission reduction certainty, it has not provided the certainty required to support decisions to invest in low carbon technologies. In particular, a fixed supply means that significant changes in the level of demand will result in large price movements, the impacts of this currently being seen with prices having dropped around 80% since the beginning of the recession in August 2008, as a result of a large and persistent surplus, arising from significantly reduced output and hence emissions.

5.10 The Minister also comments that this situation has created pressure for ad hoc reforms to address high surplus and low prices, with the proposals for back-loading and the negotiations surrounding their implementation having added to the uncertainty for market participants, and created a risky investment environment. He suggests that the introduction of a market stability reserve might, if properly designed, give a more stable investment signal by providing a clear set of rules for the adjustment of supply in response to unforeseen changes in demand, and he believes that, if this could be achieved, it would remove a significant source of policy uncertainty for investors and improve the resilience of the ETS.

5.11 The Minister also makes a number of specific observations, namely that:

• as stated, allowances would only be withheld and placed in the reserve, or released from the reserve if predefined rules were met, and this will ensure that the action of the mechanism can be predicted by, and is transparent to, market participants;

• the proposal only allows a limited volume of allowances to be withheld or released to the market each year, which will smooth the impact of the mechanism on the market and auction revenues, but the mechanism is not without risks, and some market participants and academics have expressed concern that, if the rules and thresholds were calibrated incorrectly, the mechanism might be ineffective or could cause disorder in the market and increase price volatility;

• the proposed mechanism does not appear to go far enough to address the current surplus of two billion allowances in the ETS, and the UK has therefore continued


to call for the permanent removal from the system, or cancellation, of an ambitious volume.

5.12 The Minister says that the Government is continuing its assessment of the impacts of the proposal, and whether it can deliver on the potential benefits whilst appropriately managing the risks, and that it will prepare an Impact Assessment in due course. In the meantime, he comments that the market stability reserve is likely to have some impact on UK revenues from the auctioning of ETS allowances, but that this will depend on the balance between reductions in overall auction volumes and the resulting increase in price (and vice versa).

5.13 He concludes by saying that initial discussions in Council working parties are expected to take place over the coming weeks, but that, although the timetable for detailed discussions is not yet clear, it is not expected that trilogue discussions will progress significantly before the next Commission and European Parliament are in place in late 2014.

Conclusion

5.14 Given the central role which the EU Emissions Trading System plays in reducing greenhouse gas emissions in a cost-effective and economically efficient way, we think it right to draw to the attention of the House this proposal which seeks to address the current imbalance between the level of emissions and the number of available allowances. At the same time, whilst we have noted the broad welcome which the Government has given to the proposal, it has also flagged up a number of reservations, and has said that it will be carrying out a detailed assessment of the likely impact. We are therefore holding the document under scrutiny, pending receipt of this further information.


6 An EU development and cooperation results framework

(35735) 17709/13 SWD(13) 530

Commission Staff Working Document: Paving the way for an EU Development and Cooperation Results Framework

Legal base — Document originated 10 December 2013 Deposited in Parliament 22 January 2014 Department International Development Basis of consideration EM of 3 February 2014 Previous Committee Report None; but see (35700) —: HC 83–xxxi (2013–14),

chapter 10 (5 February 2014) and (35144) 11672/13 and (35334) 14081/13: HC 83–xxx (2013–14), chapters 16 and 17 (29 January 2014)

Discussion in Council May 2014 “Development” Foreign Affairs Council Committee’s assessment Politically important Committee’s decision Not cleared; further information requested

Background

6.1 The Commission begins thus:

“In an increasingly performance-oriented society, metrics matter. What we measure affects what we do. If we have the wrong metrics, we will strive for the wrong things.” — J.E. Stiglitz, A. Sen, J.P. Fitoussi, “Mis-Measuring our Lives”.

6.2 Recalling the line of travel towards a stronger results focus — the setting of the Millennium Development Goals (MDGs); the adoption of the 2005 Paris Declaration on Aid Effectiveness, the 2008 Accra Agenda for Action and the 2011 Busan High Level Forum; and, most recently, the Report of the UN High Level Panel on Post-201535 — the Commission notes that over the last decade a consensus emerged among donors and partner countries around the following principles:

— ownership of development priorities by developing countries, with the use of country systems as the default approach;

— focus on results through country-led results frameworks; and

— the importance of transparency and mutual accountability.

35 A New Global Partnership: Eradicate poverty and transform economies through sustainable development: Report

of the High Panel of Eminent Persons on the Post-2015 Development Agenda (2013).


6.3 The Commission also recalls that, in the 2011 Communication Agenda for Change36 and the related Council Conclusions,37 the EU and its Member States committed to promote common results–based approaches and strengthen their capacity for monitoring and evaluating development results; and that the Communication A Decent Life for All provides a further long term perspective of the EU development agenda in the post-2015 Sustainable Development Framework.38

The Commission Staff Working Document

6.4 Against this background, the Commission Staff Working Document sets out what the Commission is currently doing to deliver against the commitment in Agenda for Change to strengthen the Commission’s ability to monitor and report operational results achieved by EU funded development and cooperation projects and programmes. The Commission describes the paper as presenting a preliminary approach to the process of drafting an overall EU development and cooperation results framework, and as describing how, once finalized and implemented, this framework will bring together information on results achieved by the EU’s development and cooperation assistance.

6.5 To that end the SWD:

— includes a reflection on results frameworks that have been developed by some bilateral and multilateral donors, describing important conceptual issues that have to be addressed when designing the framework; and

— highlights how the introduction of a results reporting system could lead to improved management practices, accountability, transparency and visibility of EU aid, thus enhancing its impact and demonstrating how funds spent contribute to the objectives set out in the Agenda for Change and achieve measurable results.

6.6 In her Explanatory Memorandum of 3 February 2014, the Parliamentary Under-Secretary of State at the Department for International Development (Lynne Featherstone) says that the results framework will track results aggregated from EU funded development and cooperation projects and programmes, thereby bringing the EU in line with other development actors who already systematically report results. The Minister describes results framework’s two main purpose as:

i. “an accountability tool to communicate results to stakeholders; and

ii. “a management tool to provide performance data to inform management decisions, ensuring resources are allocated efficiently.”

6.7 The Minister notes that the Commission draws on the experience to date of four multilateral agencies39 and DFID, who already have results frameworks in place, noting

36 Available at http://ec.europa.eu/europeaid/infopoint/publications/europeaid/documents/257a_en.pdf.

37 Available at http://www.consilium.europa.eu/uedocs/cms_Data/docs/pressdata/EN/foraff/130243.pdf.

38 Available at http://ec.europa.eu/europeaid/documents/2013-02-22_communication_a_decent_life_for_all_post_2015_en.pdf.

39 Asian Development Bank, African Development Bank, World Bank Group, Inter-American Development Bank.


that the “four level” structure of the framework is the same format as DFID’s Results Framework — the levels being broken down along “the results chain” thus:

— “level 1 describes the global operating context;

— “level 2 contains the results towards which the EU has directly contributed by means of EU financed the projects and programmes;

— “level 3 measures operational effectiveness; and

— “level 4 measures organisational efficiency.”

6.8 Having explored common problems and key issues that have arisen from the results framework of other donors, the proposal identifies the need for:

• “a clear logical link between the various levels in the results chains, in particular between global development progress and the contribution of the EU;

• “a balance between coverage and quality i.e. the importance of keeping the number of indicators manageable to safeguard that the data collected is of adequate quality; and

• “indicators that can be aggregated in a robust way across projects and programmes. The Commission will provide clearly defined methodological notes on acceptable and comparable data sources in order to ensure this.”

6.9 The Minister then turns to issues of attribution versus contribution, which she defines as whether reported results should be specifically attributable to the EU’s efforts or instead considered as contributing to the results obtained by partner countries:

“The paper states that while both approaches are acceptable from a technical perspective, from an aid effectiveness perspective, with a focus on country ownership, the contribution approach is more desirable. The Commission therefore suggests a contribution approach and reporting results as ‘country results supported’. This is in line with the majority of Multilateral Banks but not with DFID, which uses attribution. The document states that the EU will consider attribution where it is possible to identify results directly linked to their support.”

6.10 The Minister further notes that the Commission recognises the importance of setting baselines to allow results to be assessed and reported:

“The paper states that setting targets helps to establish the level of ambition but does not come to a conclusion about whether setting targets is the right approach for the Commission. If targets are set, then the EU will need to improve and strengthen its data collection and measurement techniques in order to achieve reliable estimates that are able to be meaningfully aggregated.”

6.11 With regard to the frequency with which data should be collected for reporting purposes, the Minister says:

“The five institutions studied use differing approaches. The majority (World Bank, Inter-American Development Bank, DFID and African Development Bank) report


results from projects and programmes during the implementation phase. The Asian Development Bank reports results once projects and programmes have been completed. The paper does not reach a conclusion on what the Commission’s approach should be and stresses the need for further analysis.”

6.12 Finally, the Minister notes, cross-cutting issues, periodic reviews of the framework and the criteria for the selection of indicators are considered:

“Crosscutting issues such as gender and climate change will be incorporated. The paper specifically highlights gender and the EU’s aspiration of sex disaggregated results reporting. The paper states that any final results framework may need to be subject to reviews in order to ensure adequate quality and the inclusion of emerging policy priorities. Final indicators have not yet been decided. The document states that the indicators currently used by the five other donors are being examined and those which are compatible with EU selection criteria will be incorporated.”

6.13 In sum, while the approach proposed by the Commission draws from donor best practice and will enhance the quality and scope of the information available to demonstrate EU development results, while at the same time providing relevant information for internal management decisions, the Minister highlights these key issues that remain as yet unresolved:

— “attribution versus contribution”, i.e. whether reported results should be specifically attributable to the EU’s efforts or instead considered as contributing to the results obtained by partner countries;

— whether targets should be set within the results framework to help establish a level of ambition;

— the frequency with which project and programme level data is collected and reported;

— cross-cutting issues, such as gender and climate change e.g. sex disaggregated data; and

— future reviews of the results framework e.g. a review to take into account the Post 2015 framework.

6.14 The Commission sets out a timetable for finalising the results framework and proposes a deadline of September 2014.


6.15 The Minister comments as follows:

“Better, timelier, results data is vital if we are to secure good value for money in our development programmes and demonstrate this to UK taxpayers. This is something the UK has been consistently calling for since DFID’s Multilateral Aid Review (MAR) was first published in 2011. In addition, the UK is pleased to see that the Commission envisages using this tool as both a communications product and also for internal management purposes.”


6.16 The Minister agrees that the proposed four level results framework structure is appropriate, and that a link between levels 1 (high level global development progress) and 2 (outputs more directly linked to EU assistance) of the results framework should be elaborated where possible.

6.17 She then notes four issues about which she is concerned and which she believes have the potential to devalue the framework as a management tool: attribution vs. contribution, the setting of targets, the frequency of reporting and sex disaggregated data:

“The document states that the Commission aims to report according to a contribution approach but will consider attribution where it is possible to identify results directly linked to EU support. UK officials have encouraged the Commission, at a working level, to use an attribution approach as much as possible and to calculate results in shared projects by assigning pro rata shares of results. The UK believes that not attributing results implies the possibility of over- or under-selling the results achieved by the Commission.

“The document does not commit to using targets within the results framework. The UK believes they are an important management tool for judging performance and should be set as part of creating project logframes.

“The UK position is that in order to make the framework effective as a management tool, reporting results annually, from all projects, is essential. If results are not reported annually, on a project by project basis, it is difficult to identify projects which are under-delivering and to take remedial action and therefore the rationale of the results framework as a management tool is weakened substantially.

“The Commission aspires to disaggregate by sex, where relevant and to a relevant level. UK officials have asked the Commission for a clearer commitment to disaggregating data by sex.”

6.18 With regard to her own Department’s contribution, the Minister says:

“The UK has actively lobbied the Experts Working Group on Results in order to reflect the UK position. We gave presentations at the Working Group meetings on our own results framework, explaining some of the issues we have faced. DFID ministers and senior officials in DFID have raised the results framework as a UK priority with their counterparts in the Commission. DFID also has two Seconded National Experts working in the Commission for the unit responsible for the development of the framework.

“In the negotiations of the Implementing Regulations of the 11th EDF, the UK made significant improvements to strengthen the focus on results. These include publishing an annual rather than biennial report on progress, drawing from EuropeAid’s new results framework.

“We will continue to look for opportunities to influence the design of the framework, including the periodic reviews which may take place in the future. We will also continue to press that the Commission delivers against its proposed timetable for finalising the framework and rolling it out.”


6.19 Finally, the Minister says that although implementation of a results framework will incur costs, she believes these will be more than offset in the long run by increased value for money from Commission aid programmes.

6.20 Looking ahead, the Minister says that Council Conclusions on this Staff Working Document will be prepared through CODEV (the EU development working group) for likely adoption at the “Development” Foreign Affairs Council in May 2014.

Conclusion

6.21 Recently, we considered a European Court of Auditors’ Special Report which examined the provision of climate finance for developing countries by the EU. As we noted, tackling the impact of climate change in the developing world is high on the political agenda. Building resilience to it is increasingly central to the EU’s humanitarian work. It will have a higher profile in the next EIB external lending mandate. The likelihood is that expenditure on climate-related development assistance will treble in the 2014–20 financial perspective (from €3.7 billion to €11.6 billion, in 2011 prices). The Court of Auditors points up areas in which the EU and its Member States’ activity could be more efficient. But the report has nothing to say on how effective it has been because — as both the Court of Auditors and the Minister noted — it does not comment on the outputs and outcomes achieved by the programmes examined. This is because, as the Commission Staff Working Document demonstrates, both here and more widely, the Commission/EEAS has only now committed to putting in place a comprehensive results framework. With a trebling of expenditure in this area, such a results framework was, we said, more than ever vital (and all the more so in view of the €58 billion of total external action funding in the 2014–20 financial perspective).40

6.22 The subject was also covered in a recent European Committee debate concerning another Court of Auditors’ report, which examined €1.3 billion of EU support for governance in the Democratic Republic of the Congo. We recommended this debate because the common denominator between this Court of Auditors’ report and many other documents that the Committee has considered over the years is the effectiveness with which the EU — the Commission and the European External Action Service — has spent EU taxpayers’ money in this and other development and cooperation work.

6.23 As the Minister suggests (c.f. paragraph 6.19), there is also a great deal of read-across to the European Development Fund (EDF: the main instrument for delivering EU cooperation under the Cotonou Agreement with ACP States and the OCTs). EDF 11 (2014–20) will total €31.6 billion. The UK’s share is 14.68 %. Over the past six months, we too have considered the updating of the EDF regulations to which she refers, which lay down the detailed procedures for managing this expenditure.41 It was thus illuminating to hear the Minister say during the debate:

40 See headnote: (35700) —: HC 83–xxxi (2013–14), chapter 10 (5 February 2014).

41 See headnote: (35144) 11672/13 and (35334) 14081/13: HC 83–xxx (2013–14), chapters 16 and 17 (29 January 2014).


“Centrally, we have been working closely with the Commission over the past couple of years to improve management by results, which was a major theme of DFID’s multilateral aid review of 2011 and the update, published only two months ago. It committed us to working with the EU to improve: results; monitoring and reporting; working in fragile contexts; and partnership behaviour. The Secretary of State raised the matter at the highest level in the Foreign Affairs Council in Brussels, and DFID has shared best practice on our results framework. As a result, the Commission is in the process of adopting a strong, new central results framework, which will have a clear effect on monitoring, evaluation and reporting.

“In parallel, we are leading reform, through negotiations, of the 11th European development fund for African, Caribbean and Pacific countries, which will run from 2014 to 2020. According to the new regulations, each programme in future will be conflict-sensitive, set out realistic and achievable output and outcome targets, and be transparent about risks and mitigation. We are focused on ensuring that programmes can demonstrate tangible results, which are reported back to the EDF committee and which link to reporting from the Commission’s results framework. The changes will, I hope, drive more active managing by results across EDF programmes and give greater transparency, enabling member states to hold the Commission to account when it is not delivering the performance that we expect.

“All that effort should start translating into improved programming from 2015, when the first EDF 11 programmes are implemented. Member states should receive the first annual report with results data by the beginning of 2016. That is not to say that everything is going well; clearly, real and serious issues are impacting on the value for money we seek from our contribution to the EDF.”42

6.24 This is all well and good. The Minister refers to a commendable degree of UK involvement thus far. However, beyond saying that she and her officials will “continue to look for opportunities to influence the design of the framework, including the periodic reviews which may take place in the future ... [and] ... to press that the Commission delivers against its proposed timetable for finalising the framework and rolling it out”, and referring to prospective Council Conclusions in the Spring, she is not clear as to how, and over what timescale, the aspects of the Commission proposal that she believes would undermine its effectiveness are to be definitively addressed.

6.25 We would accordingly like to hear from the Minister, no later than 24 April, about what progress has been made, what elements she is by then seeking to have included in the Council Conclusions, and how she then expects any remaining deficiencies to be put right.

6.26 In the meantime, we shall retain the Commission Staff Working Document under scrutiny.

42 The record of the debate is available at:

http://www.publications.parliament.uk/pa/cm201314/cmgeneral/euro/140205/140205s01.htm. (Gen Co Deb, European Committee B, 5 February 2014, cols. 3-12).


7 Integrating labour markets

(35746) 5567/14 COM(14) 6 + ADD 1 + ADDs 2–4

Draft Regulation of the European Parliament and of the Council on a European network of Employment Services, workers’ access to mobility services and the further integration of labour markets Annex: Common criteria for the authorisation of organisations to act as EURES Partners Commission Staff Working Documents: Impact Assessments

Legal base Article 46 TFEU; co-decision; QMV Document originated 17 January 2014 Deposited in Parliament 24 January 2014 Department Work and Pensions Basis of consideration EM of 6 February 2014 Previous Committee Report None Discussion in Council No date set Committee’s assessment Politically important Committee’s decision Not cleared; further information requested

Background

7.1 The Europe 2020 Strategy includes a headline target on employment which seeks to raise the rate of employment for women and men aged between 20 and 64 to 75% by 2020, with particular emphasis placed on greater participation of young people in the labour market — youth unemployment across the EU as a whole stands at 23.2% and exceeds 50% in Greece and Spain43 — as well as older workers, the low-skilled and legally resident third country migrants. Although the free movement of workers is enshrined in the EU Treaties as a fundamental freedom, labour mobility within the EU is limited. OECD surveys indicate that annual mobility in the EU is low — 0.29% compared with 2.4% in the United States — and that only around 7.5 million of an EU labour force of some 241 million are economically active in another Member State.

7.2 EURES is a network of public employment services in all of the EU’s Member States, as well as Norway, Iceland, Liechtenstein and Switzerland. It was launched in 1993 and comprises an internet portal and a network of employment advisers. The functions of the EURES network are set out in a 2011 Regulation which requires Member States’ central employment services (Jobcentre Plus in the UK) to cooperate with one another in exchanging information on job vacancies, job applications and CVs.44 A Commission implementing Decision adopted in 2012 sought to strengthen the role of the EURES network in providing more personalised job-matching services and opening it up to a

43 Eurostat unemployment statistics for December 2013:

http://epp.eurostat.ec.europa.eu/statistics_explained/index.php/Unemployment_statistics.

44 Regulation (EU) No. 492/2011, OJ No. L 141, pp.1–12.


broader range of employment service providers. The validity of that Decision is being challenged in the Court of Justice by the European Parliament on the grounds that the Commission has exceeded the implementing powers conferred on it by the 2011 Regulation. Given the uncertainty and delay inherent in legal proceedings, the Commission, in consultation with Member States, has decided to pursue reforms to the EURES network by means of a new Regulation repealing those elements of the 2011 Regulation (and the 2012 Commission implementing Decision) dealing with the EURES network.

7.3 The purpose of the reforms is to make the EURES network a more effective tool for job-seekers and employers interested in intra-EU labour mobility. Whilst awareness of EURES has increased — the number of job-seekers registered on the EURES portal has risen from 175,000 in 2007 to over a million in 2013 — and surveys indicate a growing propensity to seek employment in another Member State, there has been no corresponding increase in labour mobility. The Commission has identified a number of shortcomings in the current functioning of the EURES network. These include:

• the limited composition of the EURES network;

• insufficient labour market transparency as not all job vacancies and CVs are accessible via the EURES portal;

• limited capability for automated matching of CVs and job vacancies;

• uneven access to EURES services across the EU;

• limited capacity of EURES advisors to assist with matching, recruitment and placement services; and

• insufficient exchange of information on labour shortages and surpluses across the EU.

7.4 In June 2012, the European Council agreed a “Compact for Growth and Jobs” which stated that the EURES portal should be developed into “a true European placement and recruitment tool” and invited the Commission to consider extending it to apprenticeships and traineeships.45 At its December 2012 meeting, the European Council called for a new EURES Regulation.

The draft Regulation

7.5 The purpose of the draft Regulation is to establish a common framework for cooperation between Member States and the Commission on:

• the sharing of information on job vacancies, applications and CVs, as well as job placements;

• the functioning of the EURES network and related mobility support services for employers and workers; and

45 See http://www.consilium.europa.eu/uedocs/cms_Data/docs/pressdata/en/ec/131388.pdf.


• better information exchange on labour shortages and surpluses.

7.6 The draft Regulation establishes a new legal base for the EURES network, sets out its objectives and how it should function. It includes provisions on:

• the expansion of the EURES network to encompass other providers of employment services — so-called “EURES Partners” — provided they comply with a set of minimum criteria and service delivery requirements (Articles 8 and 9);

• the EURES portal — the draft Regulation seeks to: increase the number of job vacancies and CVs made available to the EURES portal; include information on apprenticeships and traineeships; ensure that the EURES portal is linked to and clearly visible on all job search portals managed by public employment services at national, regional or local level; and enable the EURES portal to provide an automated job matching service by mapping national classifications of skills, competences, qualifications and occupations to a common European classification (Articles 14–16);

• access to support services for workers and employers — these include the provision of basic information on the EURES portal and network and personalised assistance with job searches, job matching, placement and recruitment, as well as general information on social security (Articles 18–23); and

• the exchange of information on labour shortages and surpluses across different sectors and Member States, and on living and working conditions, administrative procedures relating to employment, and rules applicable to workers (Articles 26 and 27).

7.7 The draft Regulation is based on Article 46 of the Treaty on the Functioning of the European Union (TFEU) which provides for the adoption of EU measures required to bring about the free movement of workers including, under Article 46(a), by ensuring close cooperation between national employment services and, under Article 46(d), by setting up appropriate machinery for exchanging information on job vacancies and job-seekers and for achieving a balance between supply and demand in the labour market.

7.8 The Commission considers that the action it has proposed complies with the principles of subsidiarity and proportionality for the following reasons:

• it is consistent with Treaty objectives on securing a high level of employment and with the specific measures envisaged in Article 46(a) and (d) TFEU;

• it addresses acknowledged shortcomings in the operation of the existing EURES network and changes in the vacancy and recruitment market;

• exchanging information on job vacancies, job applications and CVs across borders necessarily pre-supposes a common framework for cooperation and cannot be sufficiently achieved by Member States alone;

• Member States are only required to make available to the EURES portal job vacancies and CVs already advertised nationally;


• automated matching of job vacancies and job applications or CVs will be achieved by means of simple interoperability tools rather than the imposition of a single European classification system; and

• Member States have the flexibility to determine how to deliver employment and mobility support services.

7.9 The Commission notes that any costs associated with its implementation of the draft Regulation, such as the operation and development of the EURES portal and the provision of training for EURES staff, will be covered by the funding available for 2014–20 from the Programme for Employment and Social Innovation. Activities undertaken by Member States to facilitate intra-EU labour mobility will be eligible for support from the European Social Fund.


7.10 The Minister for Employment (Esther McVey) agrees with the Commission’s analysis of the justification for EU action and says that the draft Regulation has minimal policy implications for the UK. Unlike some Member States, the UK already makes available to the EURES portal all job vacancies published at national level and has mainstreamed EURES into the service provided by Jobcentre Plus. Their employment advisers provide the information stipulated in the draft Regulation as part of their standard procedures. She adds:

“The effect of the proposals is likely to increase the number of jobs advertised on EURES by other Member States and balance out the proportion of UK jobs which are currently advertised as compared to those in other Member States.”46

7.11 The Minister continues:

“The current preponderance of UK vacancies (over 60%) on the EURES portal suggests that previous EURES decisions [...] have proved to be an inadequate vehicle to foster the achievement of a labour market balance across the European Union. Notwithstanding potential within these draft proposals to address this issue we intend to pursue this [...] during negotiations.

“The UK will also work with other Member States during the negotiations to ensure that the obligations included in the proposal are appropriate and that a positive outcome is achieved for the UK.”47

7.12 The Minister says that she will oppose the use of delegated acts to amend the minimum common criteria and service delivery requirements for EURES Partners set out in the Annex to the draft Regulation, adding:

“The minimum criteria for participation in EURES and the mechanism for amending them are in our view essential parts of the proposal. On that basis, it would be more effective and proportionate for the amendment mechanism to be

46 Para 20 of the Minister’s Explanatory Memorandum.

47 Paras 21–22 of the Minister’s Explanatory Memorandum.


included in the basic legislative act. DWP [Department for Work and Pensions] is concerned that if the Commission had the power to make delegated acts there would be a risk of the EURES delivery specification being broadened. This could place further administrative requirements on DWP which might incur extra costs. It is however useful to note that the relevant safeguards appear to be in place in the current proposal.”48

7.13 The Minister accepts that it is appropriate for the Commission to adopt, by means of implementing acts, a template for sharing information on the systems established by each Member State for authorising the participation of EURES Partners in the EURES network, adding:

“It could enable the Commission to assess Member States’ progress in developing necessary service delivery systems [...] a more systematic audit might increase compliance in areas such as vacancy sharing across the European Union.”49

7.14 The Minister expects compliance costs for the UK to be minimal, as it already has a well-developed EURES network. She notes that the Commission would like the draft Regulation to be agreed during the current Greek Presidency.

Conclusion

7.15 It seems that the UK advertises far more job vacancies on the EURES portal than many other Member States but has fewer EURES advisers in relation to its population than any other country participating in the EURES network.50 Data for 2012 indicate that EURES advisers in the UK were only able to help 19 outgoing job-seekers find a job in another Member State. This contrasts with figures for France, Sweden, Germany and Italy which suggest that their EURES advisers were able to help a much larger number of outgoing job-seekers find employment in another Member State.51 We ask the Minister whether the Government has made an assessment of the impact that the changes proposed in the draft Regulation might have on the number of incoming and outgoing job-seekers in the UK and, in particular, whether a greater emphasis on employment support and advice in the UK might increase the number of UK job-seekers able to secure employment in another Member State.

7.16 We agree with the Minister that the power to amend the Annex to the draft Regulation establishing minimum criteria for participation in the EURES network and service delivery requirements should not be delegated to the Commission and look forward to hearing how this matter is resolved in the course of negotiations. We note the political impetus to secure an agreement during the current Presidency and, with this in mind, ask the Minister to ensure that she provides the information we have requested promptly, as well as further updates on the progress of negotiations. Meanwhile, the draft Regulation remains under scrutiny.



50 See p.18 of ADD 3 — the Commission cites a ratio of 1:3,765,000.

51 See pp.28–29 of ADD 3 — France and Sweden placed some 2,000 job-seekers abroad; Germany and Italy placed around 3,700.


8 The EU and the Central African Republic

(a) (35812) — — (b) (35671) 6282/14 + ADD 1 JOIN(14) 5

Council Decision amending Council Decision 2013/798/CFSP concerning restrictive measures against the Central African Republic Council Regulation concerning restrictive measures in view of the situation in the Central African Republic

Legal base (a) Article 29 TEU; unanimity;

(b) Article 215 TFEU; QMV Department Foreign and Commonwealth Office Basis of consideration EM of 19 February 2014 Previous Committee Report None; but see (35672) —: HC 83–xxvi (2013–14),

chapter 18 (8 January 2014) Discussion in Council To be determined Committee’s assessment (a) Politically important

(b) Legally and politically important Committee’s decision (a) Cleared

(b) Not cleared; further information requested

Background

8.1 On 5 December 2013, the UN’s Department of Public Information issued the following statement:

“The Security Council today authorized both the deployment of the African-led International Support Mission in the Central African Republic, known as MISCA, and the French troops already stationed in the strife-torn nation to support, by all necessary measures, the Mission in discharging its mandate.

“Unanimously adopting resolution 2127 (2013), under the United Nations Charter’s Chapter VII, the Council mandated MISCA to help protect civilians, stabilize the country and restore State authority over the territory, as well as create conditions conducive to the provision of humanitarian assistance. To finance such efforts, the Council requested the Secretary-General to establish a trust fund for MISCA, through which Member States and international, regional and subregional organizations could provide financial support.

“In a unique section of the 12-page text, the Council requested the Secretary-General to undertake contingency preparations for the possible transformation of the Mission into a United Nations peacekeeping operation, stressing that a future decision by the Council would be required to establish such a presence. He was also


requested to make recommendations on a possible transformation within three months.

“By other terms, the Council noted the African Union Peace and Security Commission communiqué of 13 November, which welcomed the proposed strengthening of French forces to better support MISCA. The Council called on the Transitional Authorities to fully cooperate with those troops by ensuring their safety, security and freedom of movement with unhindered and immediate access throughout the country. As well, the Council would review the mandate for the French forces within six months.

“Against that backdrop, the Council further decided that, for an initial period of one year, all States should immediately take measures to prevent the direct or indirect supply, sale or transfer to the Central African Republic of arms and related materiel, including weapons and ammunition, military vehicles, paramilitary equipment and spare parts related to military activities. It authorized all States to seize, register and dispose of such prohibited items.

“By related provisions, the Council also expressed its strong intent to swiftly consider imposing targeted measures, including travel bans and asset freezes, against individuals who acted to undermine peace and stability, including by threatening or violating transitional agreements. It would establish a committee to monitor the implementation of such measures, which would then report back on its work within 60 days.

“On the human rights front, the Council strongly condemned widespread human rights violations by Séléka elements, anti-Balaka elements and the Lord’s Resistance Army, urging the Transitional Authorities to ensure that all such perpetrators were held accountable. It requested the Secretary-General to establish an international commission of inquiry, for an initial period of one year, to investigate reports of human rights abuses in the Central African Republic by all parties since 1 January 2013.”52

Council Decision 2013/798/CFSP

8.2 On 23 December 2013, the EU Council adopted Decision 2013/798/CFSP concerning restrictive measures against the Central African Republic (CAR) providing for an arms embargo, in accordance with UNSCR 2127 (2013) of 5 December 2013. The Committee cleared this Council Decision and reported the background and the Government’s views to the House on 8 January 2014.53

8.3 On 28 January 2014, the Department of Public Information of the UN Security Council issued the following notice:

“The Security Council extended the mandate of the United Nations Integrated Peacebuilding Office in the Central African Republic (BINUCA) for one year today,

52 See http://www.un.org/News/Press/docs/2013/sc11200.doc.htm.

53 (35672) —: HC 83–xxvi (2013–14), chapter 18 (8 January 2014).


deciding also to expand sanctions imposed on individuals to include a travel ban and an assets freeze, and authorizing the deployment of a European Union intervention force in the country

“Unanimously adopting resolution 2134 (2014), the Council also reinforced and updated BINUCA’s mandate to assist in the transitional political process, and to help with conflict prevention, humanitarian assistance, extension of State authority, stabilization of the security situation, and the promotion and protection of human rights.

“Also by the text adopted today, the Council authorized the European Union to deploy an operation in the Central African Republic, as referenced in a letter dated 21 January from the bloc’s High Representative (document S/2014/45). It also authorized that operation to take all necessary measures, within the limits of its capacities and areas of deployment from its initial deployment and for a period of six months from the declaration of its full operational capacity.54

“Further the text, the Council decided that, for an initial period of one year, all Member States would take the necessary measures to prevent the entry into or transit through their territories of individuals designated by the relevant Sanctions Committee, provided that nothing would oblige a State to refuse its own nationals entry into its territory. The Council also decided that all Member States would freeze without delay all funds, other financial assets and economic resources within their territories that were either owned or controlled, directly or indirectly, by individuals or entities designated by the Sanctions Committee, by others acting on their behalf or by entities owned or controlled by them.”55

8.4 In his Explanatory Memorandum of 19 February 2014, the Minister for Europe (Mr David Lidington) says that on 13 February 2014, RELEX (the external relations working party) agreed:

— a draft Council Decision to amend Decision 2013/798/CFSP, to reflect the changes that UNSCR 2134 (2014) introduced; and

— a draft Regulation, underpinning the embargo, travel ban and asset freeze measures set out in the Council Decision.


8.5 The Minister says that:

— the availability of arms has undoubtedly played a negative role in the situation in the CAR, with violence occurring across much of the country; the arms embargo, introduced under UNSCR 2127 (2013), therefore played a logical step in reducing access to weapons. However, policing of the lengthy and porous CAR borders is minimal, and thus tightening the embargo under the new Council Decision, and the

54 For the Committee’s consideration of the Council Decision establishing this mission, see (35747) —: HC 83–xxxi

(2013–14), chapter 14 (5 February 2014).

55 See https://www.un.org/News/Press/docs/2014/sc11264.doc.htm for the full text of the notice, and of UNSCR.


supporting Regulation in question, seeks to further mitigate the risk of arms entering the country;

— a successful political process, leading to an inclusive, constitutional, and effective government, is vital to the medium and long term future of the CAR; the introduction of asset freeze and travel ban measures will therefore be used to target individuals who engage in, or provide support for, acts that undermine the peace, stability or security of the CAR;

— France is “looking to target specific individuals with Seleka (the mainly Muslim rebel coalition that took power by force in March 2013) or anti-balaka (mainly Christian armed groups who have been linked to atrocities against Muslim communities) links, although no specific listings have yet been proposed”;

— France is “aware that for the UK to agree any names for listing, there is a need for strong underlying evidence that can be defended in a UK court of law. The UK has the right to veto any nominations at the UN sanctions committee stage, and will do so if evidence is lacking”;

— he expects France to “propose listings and share supporting evidence with us in the coming weeks”;

— in the meantime, “it is worth noting that the threat of restrictive measures that UNSCR 2134 (2014), and ultimately this regulation, impose already sends a powerful and timely political signal; which we hope will work somewhat to deter further violence and instability in the country”.

8.6 The Minister concludes by saying that Council Decision and Regulation are due to be adopted by COREPER56 in the week commencing 3 March 2014; at which point, the Council Decision and Regulation will be implemented into EU law and will be legally binding in all Member States.

Conclusion

8.7 No questions arise on the draft Council Decision, which we therefore clear from scrutiny.

8.8 We are, however, concerned that we are being asked to clear a Council Regulation that is incomplete, in that precisely who is to be subject to it is yet to be decided — which, as the Minister notes, is crucial. The Council Regulation cannot be properly adopted until the UN Sanctions Committee has agreed to whom it should apply. We

56 COREPER, from French Comité des représentants permanents, is the Committee of Permanent Representatives

in the European Union, made up of the head or deputy head of mission from the EU member states in Brussels. Its job is to prepare the agenda for the ministerial Council meetings; it may also take some procedural decisions. It oversees and coordinates the work of some 250 committees and working parties made up of civil servants from the member states who work on issues at the technical level to be discussed later by COREPER and the Council. It is chaired by the Presidency of the Council of the European Union. There are in fact two committees: COREPER I consists of deputy heads of mission and deals largely with social and economic issues; COREPER II consists of heads of mission (Ambassador Extraordinary and Plenipotentiary) and deals largely with political, financial and foreign policy issues.


shall therefore continue to retain it under scrutiny until the Minister can provide a draft that contains those names.

8.9 On a point of detail, pace COREPER, it is our understanding that no draft legislation is finalised until it has been adopted by the Council (c.f. the Minister’s remarks at 8.1 above); we should be grateful if the Minister would confirm that this is his understanding also.

9 EU-Kosovo co-operation

(a) (34868) 8775/13 COM(13) 218 (b) (34869) 8776/13 COM(13) 219

Draft Council Decision on the signing of a Framework Agreement between the European Union and Kosovo on the general principles for the participation of Kosovo in Union programmes Draft Council Decision on the conclusion of a Framework Agreement between the European Union and Kosovo on the general principles for the participation of Kosovo in Union programmes

Legal base (a) Articles 212 and 218(5)TFEU; QMV

(b) Articles 212 and 218 (6)(a)TFEU; QMV Department Foreign and Commonwealth Office Basis of consideration Minister’s letters of 2 December 2013 and 19 February

2014 Previous Committee Reports HC 83–xxi (2013–14), chapter 10 (20 November

2013); HC 83–xvii (2013–14), chapter 4 (16 October 2013); HC 83–iv (2013–14), chapter 13 (5 June 2013)

Discussion in Council Not known Committee’s assessment Legally important Committee’s decision Not cleared; further information requested


9.1 These Council Decisions will enable Kosovo to participate in 22 EU programmes (annexed to the Agreement), by authorising the signing (document (a)) and conclusion (document (b)) of the Framework Agreement.

9.2 Our Fourth Report57 of the session sets out the content and background to the documents and the Government’s view. In particular, it explains how the Government

57 HC 83–iv (2013–14) chapter 13 (5 June 2013).


contests the proposed sole legal base for the Decisions, Article 212 TFEU, and instead thinks that there should be multiple substantive legal bases reflecting the legal bases of the 22 programmes. In that Report we addressed the question of how one of those proposed new legal bases would be Article 352 TFEU and therefore involve approval by Act of Parliament under section 8 of the European Union Act 2011 (EU Act) unless a section 8(6) exemption applies. In its response to the Report, the Government assured the Committee that it is able to rely on one such section 8(6) exemption for the reasons outlined in our Seventeenth Report.58

9.3 Our Seventeenth Report also addresses an additional issue which the Government brought to our attention in a letter of 8 October, namely that because two of the programmes listed in the Framework Agreement have Title V legal bases, the Government believes that it should have asserted its opt-in rights under the JHA Protocol (even in the absence of a Title V legal base) but that by the time it had realised, the three month opt-in period (and the eight week period for enhanced parliamentary scrutiny) had expired. We were not satisfied with the explanation of the Minister for Europe (Mr David Lidington) for the oversight and asked the Government:

• why the relevance of the Title V legal bases had not been realised earlier in the process and;

• whether it accepted that any subsequent citation of the programme legal bases, including the Title V bases, would trigger the JHA opt-in process.

9.4 The Minister’s response in his letter of 30 October 2013 was summarised in our Twenty-first Report.59 As that response was particularly unsatisfactory on the second question, we sought further clarification from the Government of its view on the application of the opt-in Protocol when a Title V legal base is added in the course of negotiations. We also said that we would be writing to the Council Secretariat and the Commission to seek their views. A response has now been received from the Council Legal Services which confirms that their view remains the same as that expressed by the Secretary-General of the Council, referred to in paragraphs 9.5 and 9.7 of this Report.

The Minister’s letter of 2 December 2013

9.5 The Minister addresses the question of when the opt-in is triggered when a proposal is first published. He cites the view of the Secretary-General of the Council on that point from a letter which was sent from the Secretary-General to the then Head of UK Rep, Sir John Cunliffe, on 27 September 2012. The Government’s view is that the opt-in process is triggered by the publication of the final language version of a proposal that contains JHA obligations.

9.6 The Minister also acknowledges that we do not share the Government’s view that the UK’s opt-in rights can be asserted in the absence of a Title V legal base. He also notes the loss of the opportunity for enhanced parliamentary scrutiny prior to the adoption of the

58 HC 83–xvii (2013–14) chapter 4 (16 October 2013).

59 HC 83–xxi (2013–14), chapter 10 (20 November 2013).


proposal and says that should the opportunity for post-adoption opt-in arise, he would offer Parliament the full eight-week period for enhanced scrutiny.

Our letter of 11 December 2013

9.7 In his letter of 2 December, the Minister did not consider the pertinent section of the letter from the Secretary-General of the Council that expresses the view that later citation of a Title V legal base during negotiations triggers the opt-in process at the point of consultation or reconsultation of the European Parliament on the revised proposal.

9.8 To address this omission, we wrote to the Minister, asking him in this letter to reconsider his response in light of the view of the Secretary-General.

The Minister’s letter of 19 February 2014

9.9 The Minister now responds and reiterates his previous view, set out in his letter of 2 December, that the opt-in Protocol is triggered at first publication of a proposal and that “any opt-in decision must be taken within three months of a proposal being presented to the Council”.

9.10 However, he does address the question we raised in our letter of 11 December by confirming that the Government does not agree with the Secretary-General’s view of the effect of the citation of a Title V legal base after the publication and during the negotiation of a proposal.

Conclusion

9.11 We question in chapter 4 of this Report60 whether the Government’s policy on the application of the opt-in protocol is tenable in the light of recent, adverse ECJ rulings on Conditional Access Services and the EEA Agreement.

9.12 We consider that the Government’s policy on when the opt-in process is triggered is creating legal and procedural uncertainty and reducing the scope for effective enhanced parliamentary scrutiny. Given that the Government’s policy is at odds with the view of both the Council Secretariat and the ECJ on the application of the opt-in Protocol, we would urge the Government to reconsider that policy. We note however that in giving evidence before us in January the Secretary of State for Justice was unable to shed further light on how such differences between the Government and the Council might be resolved in the context of the negotiation of the PIF Directive.

9.13 In retaining these documents under scrutiny, we register, yet again, our disagreement with the Government policy on the application of the opt-in Protocol. We also wait to see the Government’s response to the questions on its opt-in policy which we pose in chapter 4 of this report. We ask the Minister to continue to keep us informed of all further developments, including the possibility of a post-adoption opt-in.

60 (32375) 18124/10 and (32376) 18126/10: Draft Council Decisions on the signing and conclusion of the European

Convention on the legal protection of services based on or consisting of conditional access.


10 Financial services: bank accounts

(34942) 9788/13 + ADDs 1–2 COM(13) 266

Draft Directive on the comparability of fees related to payment accounts, payment account switching and access to payment accounts with basic features

Legal base Article 114 TFEU; co-decision; QMV Department HM Treasury Basis of consideration Minister’s letter of 14 February 2014 Previous Committee Reports HC 83–v (2013–14), chapter 9 (12 June 2013) and HC

83–xii (2013–14), chapter 8 (17 July 2013) Discussion in Council Not known Committee’s assessment Legally and politically important Committee’s decision Not cleared; further information requested

Background

10.1 In May 2013 the Commission presented, in the context of the Single Market Act (not, despite its title, legislation, but a policy manifesto), this draft Directive with provisions to improve:

• comparability of fees on bank accounts;

• the ease with which consumers switch accounts; and

• access to basic bank accounts.

10.2 The aim was to improve consumers’ experience of bank accounts in the EU and enhance the integration of the EU bank account market.

10.3 The draft Directive had three key elements. First, it would provide that:

• Member States should provide a list of the most common bank account services subject to a fee at national level;

• the European Banking Authority would have a role in helping to develop guidelines to assist in this process;

• the Commission would then be able to set out a list of EU standard terminology (and definitions) common to the majority of Member States — this information would be given to consumers prior to taking out a bank account;

• Member States should establish a voluntary accreditation scheme for websites comparing fees charged by providers, in order to simplify the comparison of services and fees offered by banks;


• account providers would issue the customer with a statement of all fees incurred on their payment account, on at least an annual basis; and

• account providers would have to inform consumers if they were buying a “packaged account” and if it was possible to buy the account separately to the additional product or service — if so, providers would then be required to disclose what the costs and fees for each would be.

10.4 Secondly, the proposed Directive included provisions to improve payment account switching across the EU:

• setting out minimum standards aimed to facilitate payment account switching within Member States and across the EU; and

• providing that customers would not incur a financial loss due to mistakes made during the switching process.

10.5 Thirdly, the draft Directive:

• would introduce a right of access to a basic account for all EU consumers, regardless of their place of residence;

• specifies the characteristics of a basic account, such as the freedom for money to be added to the account and for direct debits; and

• would require Member States to raise public awareness of basic accounts.

10.6 We considered this proposal twice last year and heard of a number of Government concerns, including one of subsidiarity. The latter point was dealt with in our last Report on the proposal, when we also looked forward to being updated on developments in the negotiations. Meanwhile the document remained under scrutiny.61

The Minister’s letter

10.7 The Economic Secretary to the Treasury (Sajid Javid) tell us that:

• there is significant pressure from the European Parliament to conclude negotiation of this proposal ahead of the elections in the spring;

• the European Parliament voted on the proposal at the beginning of December 2013, which put additional pressure on the Lithuanian Presidency to also have a general approach agreed before the end of the year; and

• Council negotiations therefore picked up pace and were pushed to agreement on general approach just before Christmas 2013.

10.8 Commenting that the Government wanted to seek to ensure the proposed Directive avoids putting unnecessary burdens on industry and achieves the right outcome for UK consumers, the Minister reminds us that its priorities were to:

61 See headnote.


• clarify and amend the definition of a payment account to include current accounts only — the Commission text could cover an unknown range of different products, such as credit cards, saving accounts and e-money;

• restrict proposals to domestic switching — cross border switching would impose significant burdens on industry because of the technical and practical concerns involved and there is no substantial evidence of consumer demand;

• ensure existing Member State arrangements are recognised in the Directive for switching — the UK’s Current Account Switching Service already goes further than the Commission’s proposal by introducing a fully automated process for the consumer and the Government wants to ensure that Member States which have already taken action face no additional unnecessary burdens;

• ensure existing Member State arrangements are recognised in the Directive for basic bank accounts — the major UK banks already voluntarily offer basic bank accounts and the Government wants to ensure that Member States which have already taken action face no additional unnecessary burdens;

• ensure that basic bank provisions allow anti-fraud and anti-money laundering requirements to be met — mandating basic bank accounts with an EU right to access could place a significant additional burden on UK industry; and

• block the inclusion of comparison websites in the Directive — the proposal represents a significant intervention in a market that is currently unregulated and it is noteworthy that websites were not included in the Single Market Act II.

10.9 Expanding on the rapid progress to a Council general approach, the Minister says that:

• the Lithuanian Presidency forced the matter to a general approach decision at a COREPER meeting on 20 December 2013, by which time the Government had achieved five out of its six priorities;

• on the sixth priority, relating to comparison websites, the Government ensured that the general approach would have a limited impact;

• the Government also made a written statement at COREPER, which set out its continued and significant concerns about the inclusion of comparison websites and the need to ensure that the Directive recognises existing agreements in Member States for both basic bank accounts and current account switching;

• given the proposal remains under scrutiny, the Government abstained from voting at COREPER;

• the Presidency concluded, however, that a general approach was agreed and proceeded to trilogue discussions; and

• these discussions, for final agreement on the proposed Directive, have started and the Government expects them to accelerate rapidly over the coming weeks.


10.10 The Minister concludes by asking whether, given there is likely to be pressure for an agreement in the coming months, we are content to grant scrutiny clearance.

Conclusion

10.11 We note the Minister’s report of Government satisfaction on five of its negotiating priorities and its apparent partial amelioration of the sixth problem. However, we are not clear from the Minister’s account whether, if the proposal were not still under scrutiny, the Government would have been satisfied enough with the Presidency text to support the Council’s general approach. Nor is it clear to us how secure the Government expects the improvements it has gained in Council negotiations to be during the trilogues.

10.12 So, rather than clearing the proposal from scrutiny now, we will await a further report from the Minister on how the trilogues are developing before considering the matter again. Meanwhile the document remains under scrutiny.

11 Taxation

(35589) 16918/13 + ADDs 1–3 COM(13) 814

Draft Council Directive amending Directive 2011/96/EU on the common system of taxation applicable in the case of parent companies and subsidiaries of different Member States

Legal base Article 115 TFEU; consultation; unanimity Department HM Treasury Basis of consideration Minister’s letter of 12 February 2014 Previous Committee Report HC 83–xxvii (2013–14), chapter 6 (15 January 2014) Discussion in Council Not known Committee’s assessment Politically important Committee’s decision Not cleared; further information requested

Background

11.1 The purpose of Directive 2011/96/EU, the Parent Subsidiary Directive (PSD), is to ensure that companies from the same group are not taxed twice. It achieves this by exempting dividends paid by a subsidiary in one Member State to a parent in another Member State and prohibiting withholding tax on these dividends.

11.2 This draft Directive would make two amendments to the PSD. Both are intended to prevent tax avoidance and reflect specific action points detailed in the Commission’s 2012


Communication, Action Plan to strengthen the fight against tax fraud and tax evasion.62 The first amendment would insert what the Commission refers to as a general anti-abuse rule (GAAR), although in the UK it would be considered a targeted anti-abuse rule (TAAR) as it is confined to a specific piece of legislation rather than applying generally to aggressive tax planning. The second amendment would remedy a specific tax loophole concerning the use of hybrid loan arrangements in cross-border situations resulting in double non-taxation.

11.3 When we considered this proposal last month we heard that the Government’s overarching concern would be to ensure any agreed Directive is in line with developments in the OECD Base Erosion and Profit Shifting (BEPS) project. So we asked to hear, before considering this proposal again, about progress in Council working group negotiations in securing this objective. Meanwhile the document remained under scrutiny.63

The Minister’s letter

11.4 The Exchequer Secretary to the Treasury (Mr David Gauke) first explains that:

• the BEPS Action Plan is wide-ranging in scope and sets out a detailed work programme covering 15 specific items spread over a two year period;

• the Government expects, however, that the first outputs will be achieved by September and these will include action 2 (hybrids), action 6 (treaty abuse), action 8 (transfer pricing aspects of intangibles) and action 13 (transfer pricing documentation and the reporting template), along with a report identifying the issues raised by the digital economy and a review of member country’s tax regimes regarding harmful tax practices; and

• most of the rest of the work is due for completion by September 2015, with the exception of some of the work on transfer pricing and harmful tax practices and action 15 to develop a multilateral instrument to make the necessary changes to bilateral treaties.

11.5 The Minister then tells us, with regard to this draft amending Directive, that it is action 2 of the BEPS Action Plan that is most relevant. This calls for the development of:

“model treaty provisions and recommendations regarding the design of domestic rules to neutralise the effect (e.g. double non-taxation, double deduction, long-term deferral) of hybrid instruments and entities.”

11.6 He continues that:

• the amendment that is being proposed with respect to Article 4 of the current Directive is intended to close a specific tax loophole with respect to hybrid loan arrangements and would therefore fall within the scope of the OECD work;

62 (34548) 17637/12 + ADDs 1–16: see HC 86–xxvii (2012–13), chapter 3 (16 January 2013), HC 86–xxxi (2012–13),

chapter 5 (6 February 2013) and HC 83–v (2013–14), chapter 8 (12 June 2013).

63 See headnote.


• the Government has therefore reiterated, in the Council working group, that EU work to address hybrid mismatches should acknowledge the parallel discussions in the OECD;

• there has been acceptance of this point, with a number of Member States intervening to support the UK; and

• the Greek Presidency committed to ensuring that any relevant developments in the OECD would be notified within the Council working group.

Conclusion

11.7 We are grateful to the Minister for his prompt response on the issue of compatibility with developments in the OECD Base Erosion and Profit Shifting project. We look forward to hearing in due course about progress in firmly securing this and other UK interests in the Council working group discussions. Meanwhile the document remains under scrutiny.

12 Female genital mutilation

(35614) 17228/13 COM(13) 833

Commission Communication: Towards the elimination of female genital mutilation

Legal base — Department Home Office Basis of consideration Minister’s letter of 20 February 2014 Previous Committee Report HC 83–xxxi (2013–14), chapter 6 (5 February 2014) Discussion in Council No date set Committee’s assessment Politically important Committee’s decision Not cleared; further information requested


12.1 The purpose of this Commission Communication is to describe what action the EU has already taken to combat female genital mutilation (FGM) and to propose a series of further (non-legislative) actions to:

• ensure a better understanding of the prevalence of FGM within the EU;

• promote sustainable change to prevent FGM;

• support more effective prosecution of FGM;


• provide protection for girls or women at risk of FGM; and

• contribute to the worldwide elimination of FGM.

12.2 The Communication draws on the findings of a report published in 2013 by the European Institute for Gender Equality (EIGE) which highlighted the absence of reliable and comparable data on the prevalence of FGM within the EU, as well as inadequate monitoring and evaluation of the effectiveness of legislative and policy measures to tackle FGM, and called for better specialist support services and professional training, multi-agency cooperation, sustainable funding, and enforcement of existing laws to avoid impunity.64

12.3 Our Thirty-fourth Report, agreed on 5 February 2014, summarises the problems identified in tackling FGM within the EU and the actions proposed by the Commission. They include:

• the development of a common methodology and indicators to measure the prevalence of FGM;

• better use of EU funding to support professional training;

• an analysis of existing criminal laws relating to FGM (prosecutions for FGM are rare, and there have been none in the UK, despite the introduction of specific legislation in 1985);

• the exchange of best practice;

• the inclusion of references to FGM in country of origin information produced by the European Asylum Support Office; and

• incorporating FGM in political and human rights dialogues with third countries and supporting initiatives within the UN and regionally to eliminate FGM.

12.4 The Minister for Crime Prevention (Norman Baker) broadly endorsed the objectives and actions proposed in the Communication but suggested that, with the possible exception of sharing good practice, they could be sufficiently achieved by Member States alone and were therefore inconsistent with the principle of subsidiarity.

12.5 Whilst expressing understanding for the Minister’s caution concerning the “added value” of EU action, we noted the links between the activities proposed in the Communication and the measures being taken domestically to combat FGM, in some cases supported by EU funding. Many of the activities appeared to be a continuation of existing EU efforts, rather than an expansion into new areas of activity, and were intended to complement, not replace, action at domestic level. We asked the Minister whether he considered that the EU’s existing efforts should be curtailed, and to identify more clearly which of the actions proposed in the Communication would, in his view, be inconsistent with the principle of subsidiarity. We also asked for an assurance that the

64 See http://eige.europa.eu/sites/default/files/EIGE-Report-FGM-in-the-EU-and-Croatia_0.pdf.


Government would consult external stakeholders and provide a summary of their views and suggested that the Communication should be included on the agenda of a future Justice and Home Affairs Council, given the Government’s reservations about the role envisaged for the EU, and the strength of its own commitment to combating FGM.


12.6 The Minister (Norman Baker) re-iterates the Government’s commitment to tackling FGM, adding that Ministers have recently signed a cross-Government declaration to end FGM which seeks to:

• ensure the law is as robust as possible to help secure domestic prosecutions;

• fund community engagement activities aimed at changing attitudes to FGM;

• build a stronger evidence base through NHS data to encourage local action;

• improve social work training to ensure FGM is seen and dealt with as child abuse;

• improve the criminal justice system response to secure prosecutions; and

• join up the UK’s international and domestic programmes to help eradicate FGM at home and overseas.

12.7 Turning to the justification for EU action in terms of subsidiarity, the Minister continues:

“The Government recognises that tackling FGM will require a multi-pronged approach and there is some action in the Communication which, due to the scale and effects achieved, will add more value when taken at European level. This includes action to encourage EU level effective practice sharing, providing EU level funding and monitoring the transposition of relevant EU legislation.”

12.8 He considers that Member State, rather than EU action, is more appropriate in the following areas:

• producing written guidance for professionals;

• devising and delivering training for professionals — including professionals in health, education and law enforcement;

• developing systems for proper co-operation and information sharing between different public agencies and public services;

• enforcing domestic criminal legislation — by the police/CPS in the UK; and

• providing support services for victims who are based in the UK.

12.9 The Minister continues:


“I do not feel that implementing [these actions] collectively, at EU level, will produce a better result in the UK given the significant amount of work we are already undertaking domestically. For example, the UK have published multi- agency practice guidelines for practitioners on FGM, designed specifically for police, children’s services, teachers and health practitioners and we are in the process of developing an E-learning package for safeguarding professionals. Similarly the Crown Prosecution have published an FGM action plan which seeks to achieve a prosecution for FGM.

“As stated in my Explanatory Memorandum, we are fully committed to sharing effective practice, where skills and knowledge can be transferred across Member States, and we will continue to seek opportunities to do this. In the spring of 2015, we will be hosting an event to share effective practice and learning to support colleagues across the EU in improving their own response to tackling FGM.”

12.10 The Minister says that the Government does not intend to undertake a separate consultation of stakeholders, adding:

“The proposals contained within the Communication are consistent with Government policy. We have on-going engagement with key stakeholders working on FGM and through this we are able to assess their views on policy proposals.”

12.11 He anticipates that the Greek Presidency will seek to adopt a set of Council Conclusions on Violence against Women and Girls which is likely to include a reference to FGM. He continues:

“This is welcome. On present plans this is most likely to take place at the Council meeting in June, although as yet we do not have a draft of their proposal. As this is the case I do not propose to press for the Communication to be put on as a separate agenda item at a Justice and Home Affairs Council meeting.”

Conclusion

12.12 We thank the Minister for his letter which confirms that the content of the Commission Communication is consistent with Government policy and so would appear to add little value to action already being undertaken domestically in the UK. We note, however, that the report on FGM published by the European Institute for Gender Equality in 2013 reveals a disparate picture across the EU as a whole. We therefore agree with the Minister that, in tackling FGM within the EU, the Commission should focus its efforts on facilitating the exchange of information on the most effective policy approaches and legal frameworks to prevent FGM, protect those at risk, and prosecute the perpetrators.

12.13 We stated in our earlier Report65 that the Communication warranted political consideration at Council level, given the Government’s reservations about the role envisaged for the EU in combating FGM. We note that FGM is likely to be considered by the Council as part of a broader set of Conclusions on violence against women and

65 See headnote.


girls to be agreed towards the end of the Greek Presidency. We ask the Minister to tell us what type of EU action on FGM he expects to be included in the draft Conclusions and, once a draft becomes available, to indicate whether he considers the action proposed to be appropriate and proportionate. Meanwhile, the Communication remains under scrutiny, and we again draw it to the attention of the Home Affairs Committee to inform its current inquiry into female genital mutilation.

13 Task Force for the Mediterranean

(35625) 17398/13 COM(13) 869

Commission Communication on the work of the Task Force Mediterranean

Legal base — Department Home Office Basis of consideration Minister’s letter of 20 February 2014 Previous Committee Report HC 83–xxxi (2013–14), chapter 7 (5 February 2014) Discussion in Council October and December 2013 Justice and Home Affairs

and European Council meetings Committee’s assessment Politically important Committee’s decision Not cleared; further information requested


13.1 Tens of thousands of migrants have fled by sea to Italy and Malta in 2013, most seeking to escape conflicts in Syria and the Horn of Africa, according to the UNHCR.66 Sea crossings are often hazardous and a number of migrants have lost their lives. Last October, in the aftermath of the sinking of a boat off the coast of the Italian island of Lampedusa, with the loss of more than three hundred lives, the Justice and Home Affairs (JHA) Council established a Task Force for the Mediterranean to identify “priority actions for a more efficient short term use of European policies and tools” to prevent further loss of life at sea, based on the principles of prevention, protection, solidarity and fair sharing of responsibility.

13.2 The Task Force comprises the Commission, Member States, the European External Action Service and relevant EU Agencies (notably, Frontex, the European Asylum Support Office, Europol, the Fundamental Rights Agency and the European Maritime Safety Agency). The Commission Communication sets out the actions proposed by the Task Force (summarised in our Thirty-fourth Report, agreed on 5 February 2014) which are grouped into five categories:

66 See http://www.unhcr.org/5257d5599.html.


• cooperation with third countries;

• regional protection, resettlement and legal avenues for migration to Europe;

• people smuggling, human trafficking and organised crime;

• border surveillance and the control of maritime borders; and

• assistance to Member States experiencing high levels of migration.

13.3 The Government told us that the Communication presented “for the most part, a sensible and coherent set of actions” and commanded a “broad consensus” when discussed at the December JHA Council. The UK had, however, voiced some concerns with regard to:

• the emphasis placed on legal migration channels as a means of counter-balancing perceptions of an EU response focussed principally on security and prevention;

• proposals to increase the numbers of resettled refugees in response to “protracted refugee situations”, notably in countries neighbouring Syria, and to explore possibilities for “protected entry” to the EU, such as humanitarian visas or permits; and

• the danger of creating a “pull factor” if enhanced EU search and research capacities were to create a false sense of security for potential migrants.

13.4 We considered the Communication to be a helpful document to the extent that it brought together within a single framework the tools, resources and policies being pursued at EU and national level to address the causes of migration, combat people smuggling and human trafficking, and enhance maritime border surveillance and controls, whilst at the same time ensuring an appropriate humanitarian response to those in need of international protection.

13.5 We sought further information on two elements of the Task Force proposals. First, given the Government’s reservations about increasing resettlement activity, we asked whether the Home Secretary’s recent announcement on the provision of “emergency sanctuary” in the UK for particularly vulnerable displaced Syrians would qualify as resettlement and whether the Government intended to seek funding from the EU’s Asylum and Migration Fund to support its humanitarian efforts. Second, the Government indicated that the UK might be able to contribute expertise in developing information and awareness-raising campaigns targeting potential migrants. We asked for further details of the contribution the Government had in mind to make, and its assessment of the impact that such campaigns have had in deterring migration.


13.6 Turning first to the provision of emergency sanctuary in the UK for particularly vulnerable displaced Syrians, the Minister for Immigration and Security (James Brokenshire) tells us:


“The new Vulnerable Persons Relocation (VPR) Scheme for Syrian refugees will offer humanitarian assistance in the UK to a small number of the most vulnerable refugees who cannot be supported effectively in refugee camps or urban communities in the countries neighbouring Syria.

“The VPR scheme will run in addition to the two resettlement programmes the Home Office currently operates in partnership with the UNHCR: the Gateway programme, which settles 750 refugees from a small number of targeted locations every year, and the Mandate Resettlement Scheme, which is designed to resettle individual refugees who have been recognised as refugees by UNHCR and have a close family member in the UK who is willing to accommodate them. Syrian refugees accepted by the Home Office under the VPR scheme will not be resettled in the same way as those under our existing resettlement programmes because they will receive temporary sanctuary in the UK. However, vulnerable Syrians admitted to the UK through this scheme will still receive comparable rights and benefits to those who receive international protection in the UK.

“We are currently exploring how best to deliver the VPR Scheme. We have not ruled out the Asylum and Migration Fund as a source for additional funding to meet this objective. We expect the Regulation establishing this Fund to be adopted shortly.”

13.7 The Minister underlines the UK’s “established record” on communications work and adds:

“Given this experience, I believe we are well placed to support work in the Southern Mediterranean and possibly also in transit and origin countries further afield. We may also be able to explore new approaches in this context based on recent communications work undertaken outside of the field of migration.

“We are currently engaging with the Commission, the EU’s External Action Service and the Greek Presidency on their plans for taking forward the Task Force proposals, including the proposal on information campaigns, ahead of a discussion at the next JHA Council. On that basis, I propose that I write to you again in due course to advise you of progress.”

Conclusion

13.8 In our earlier Report on the Communication, we noted that the Home Secretary and other Ministers at the December 2013 Justice and Home Affairs Council had expressed concern regarding some of the actions proposed by the Task Force, leading the Presidency to conclude that:

“while the Council welcomed the Communication, not all of the actions proposed ‘could be supported in equal measure by Member States’.”67

13.9 By contrast, the December 2013 European Council Conclusions call for:

67 See our Thirty-fourth Report of 5 February 2014.


“the mobilisation of all efforts in order to implement actions proposed in the Communication with a clear timeframe to be indicated by the Commission.”68

13.10 We ask the Minister why the Conclusions agreed by the European Council do not reflect the reservations expressed by Justice and Home Affairs Ministers and how the Government intends to ensure that the Task Force proposals are implemented in a way that takes account of the concerns set out in his predecessor’s Explanatory Memorandum and summarised in paragraph 13.3 above.

13.11 We look forward to receiving further information on the contribution the UK proposes to make to the work of the Task Force. As previously indicated, we would particularly welcome further details on communications work already undertaken by the UK and the Government’s assessment of its impact in raising awareness of the risks associated with illegal immigration and in deterring illegal immigration. Meanwhile, the Communication remains under scrutiny.

14 Electronic procurement and invoicing in public administration

(a) (35175) 12131/13 COM(13) 453 (b) (35174) 12104/13 + ADDs 1–3 COM(13) 449

Commission Communication: End-to-end e-procurement to modernise public administration Draft Directive on electronic invoicing in public procurement

Legal base (a) —

(b) Article 114 TFEU; co-decision: QMV Department Cabinet Office Basis of consideration Minister’s letter of 12 February 2014 Previous Committee Reports HC 83–xvi (2013–14), chapter 2 (9 October 2013) and

HC 83–xxii (2013–14), chapter 3 (27 November 2013)Discussion in Council See para 14.8 below Committee’s assessment Politically important Committee’s decision Cleared

68 See http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/140245.pdf.


Background

14.1 Towards the end of 2011, the Commission put forward proposals69 to modernise the EU Public Procurement Directives (2004/17/EC and 2004/18/EC), including provisions which would make electronic communication mandatory for the publication of notices announcing public procurement tenders, the publication of related documents, and the submission of tenders. Following a Communication70 in April 2012 which sought to provide a wider view of the benefits of e-procurement, it then put forward in June 2013 these two further documents.

14.2 Document (a) is a Communication, which set out the current state of implementation in the public sector on “end-to-end e-procurement” (covering not only the three steps referred to above, but payment as well), and sought to identify the benefits. It concluded that, although the proposals to make e-notification, e-access and e-submission mandatory would be important, further steps were now needed. These included a legislative proposal (document (b)), which would require the European Committee for Standardisation (CEN) to draw up a new European standard, setting out minimum requirements for the content (“semantic data model”) of the core electronic invoice. The Directive would apply to invoices issued under contracts awarded in accordance with the measures which will replace the Public Procurement Directives, and authorities across the EU would have to accept e-invoices meeting those requirements. In addition, there would be a number of supporting non-legislative measures, including further work by the CEN to develop a new European e-invoicing standard, and the Commission also highlighted the need for national action plans to identify the most successful strategies.

14.3 As we noted in our Report of 9 October 2013, the Government agreed that e-procurement can have significant benefits, which are likely to be greatest with full end-to-end electronic processes, and believes that, as a result of the initiatives which have been taken, the UK is already relatively well-placed in this area. It also suggests that public sector e-invoicing should be encouraged, and that the UK’s approach to interoperability — which expects authorities to accept e-invoices, whilst encouraging, but not obliging, suppliers to submit them — is similar to that proposed. However, it cautioned that, as there is a raft of existing data standards across the EU, it was not axiomatic that the best approach would be to add another one, and that, as UK public bodies will increasingly adopt e-invoicing before the current draft proposal has been adopted, and this should not lead to incompatibilities with the e-invoicing already in place.

14.4 In addition, the Government said that:

• full interoperability covers data content, format and transmission, and requiring authorities to accept an electronic invoice which complies only with the content standard could create potential issues if it was not compatible with format and transmission standards and protocols used by authorities;

69 (33585) 18964/11: see HC 428–lii (2010–12), chapter 2 (29 February 2012), HC 86–xxi (2012–13), chapter 5 (28

November 2012) and HC 83–xii (2013–14), chapter 12 (17 July 2013) and (33586) 18966/11: see HC 428–lii (2010–12), chapter 3 (29 February 2012), HC 86–xxi (2012–13), chapter 4 (28 November 2012) and HC 83–xii (2013–14), chapter 12 (17 July 2013).

70 (33867) 9299/12: see HC 86–vi (2012–13), chapter 6 (27 June 2012).


• although the draft directive requires that personal data protection should be guaranteed, this depends largely on the persons and systems involved, and any data protection requirements should be proportionate to the actual risks; and

• the proposal does not provide for specific remedies for economic operators for breaches by authorities and utilities, and consideration will need to be given to the extent to which provisions will be enforced when it is transposed in the UK.

14.5 We commented that it seemed sensible to extend a mandatory approach to e-invoicing by public authorities, and we noted that the Government agreed that this could provide significant benefits. However, as it had also highlighted a number of issues which it wished to explore further, we decided to hold the documents under scrutiny, pending further information.

14.6 We received a letter of 18 November 2013 from the Minister for Civil Society (Nick Hurd), which addressed certain shortcomings in the Government’s handling of the Parliamentary scrutiny of the documents, but went on to say that a number of Member States had raised similar issues of substance to those identified by the UK. As a result, it had been possible to achieve a number of improvements, notably that:

• the Directive was expected to clarify that the data elements covered by the standard invoice should be consistent with those contained in the VAT directive, and that, whilst it would cover the core elements of an invoice, the parties would not be precluded from including other elements as well;

• although the original draft directive recognised that full interoperability involves data formats (“syntax”) and transmission as well as the underpinning data standards, it had concentrated only on the last of these, but the Commission had now suggested that CEN should also be invited to identify for approval a limited number of existing syntaxes of proven usefulness: authorities and utilities would then only be obliged to accept e-invoices which both met the semantic data standard and one of the syntaxes, thus reducing the potential number of syntaxes they might have to accept, and helping to ensure that the standard is consistent with existing good practice;

• the Commission had now recognised that a data standard cannot in itself “guarantee” protection of personal data, and it was expected that this would be amended so as to “have regard to the need for personal data protection” or similar wording; and

• the draft directive did not propose specific remedies if authorities and utilities fail to accept relevant e-invoices, and none has been suggested during negotiations, but the Government believed that suppliers should have effective avenues if e-invoice recipients failed to to accept them, and the Cabinet Office would consider further whether specific additional enforcement or remedies would be appropriate, or whether pre-existing legal rights and remedies will be sufficient.

14.7 The Minister concluded by asking if we would now be prepared to clear the document, or grant a scrutiny waiver, in order to allow the Government to accept a general approach in the Council on 2 December 2013. We commented in our Report of 27


November 2013 that the Government supported the main thrust of the proposal, and had been concerned principally about certain detailed points to which we had drawn attention in our previous Report. However, we noted that it believed that the text contained a number of improvements which addressed those concerns, and, whilst we remained reluctant to release the documents from scrutiny, we said that we would be prepared to grant a waiver under paragraph 3(b) of the Scrutiny Reserve Resolution, in order to allow the UK to agree a general approach at the Council, if it was minded to do so. We did, however, ask to be kept informed of further developments.

Minister’s letter of 12 February 2014

14.8 We have now received from the Minister a letter of 12 February 2014, indicating that these improvements had been substantially maintained during the trilogue discussions, although several new provisions had been introduced, including the need for the new standards to be practical, user-friendly and suitable for small and medium-sized enterprises, and for use in private sector commercial transactions. In addition, some of the core elements to be covered by the standard are specifically set out in the Directive, the standard must be tested in practice for suitability before it is adopted, and the adoption of the new Directive will be subject to a formal objection procedure (set out in the European Standardisation Regulation), allowing any Member State or the European Parliament to object. Finally, the UK was successful in achieving an exemption where necessary for security reasons.

14.9 The Minister also says that the timescales have been revised, with a 36 month deadline from the entry into force of the Directive for the development, testing and publication of the standard, and Member States will have to transpose the requirement to accept e-invoices within 54 months of the Directive coming into force (although bodies other than central government will be allowed a further 12 months before they are required to accept e-invoices). He concludes by saying that the main concerns and shortcomings which had been identified have been addressed, and by asking if we would now be willing to grant scrutiny clearance.

Conclusion

14.10 We are grateful to the Minister for this update, and confirm that we are now clearing the document.


15 Energy prices and costs in Europe

(35750) 5599/14 + ADDs 1–6 COM(14) 21

Commission Communication: Energy prices and costs in Europe

Legal base — Document originated 29 January 2014 Deposited in Parliament 27 January 2014 Department Energy and Climate Change Basis of consideration EM of 6 February 20104 Previous Committee Report None; but see footnotes Discussion in Council See para 15.9 below Committee’s assessment Politically important Committee’s decision Cleared

Background

15.1 We are reporting separately on a Commission Communication,71 setting out a policy framework for climate and energy in the period from 2020 to 2030, which (among many other things) draws attention to the impact which the significant levels of investment needed to achieve the objectives proposed will have on energy prices for industrial and domestic consumers at a time when there are political concerns about recent rises in Europe prices.

The current document

15.2 Those concerns led the May 2013 European Council to call on the Commission to provide an in-depth analysis of the issue, and its response is set out in this Communication, which has been published alongside the one on climate and energy in order to inform the subsequent debate. It is accompanied by, and summarises the contents of, two Staff Working Documents, one (SWD(14) 20) providing an analysis of trends in gas and electricity72 prices and costs across Europe between 2008 and 2012, and the other (SWD(14) 19) an in-depth look at the factors which have influenced energy economics in Europe in recent years.

15.3 The Commission begins by noting that rising energy prices in Europe are not new, but that the difference now is that the sector is in the midst of a major shift away from imported fossil fuels, and needs high levels of investment; that the energy price gap between the EU and its major economic partners has widened; that moves to decarbonise


72 Oil and coal prices are not covered in any detail as they are determined globally.


electricity generation have led to a strong growth in wind and solar power, which has impacted on grids and production costs; and that, as a result of the move within Europe’s gas and electricity sectors from public monopolies to competitive private companies, users bear the cost of new investments in the short term, rather than taxpayers, although these developments are expected in the long run to result in a sustainable energy sector.

15.4 The Commission also highlights the distinction between energy prices and costs. It notes that the first of these is often seen as the more critical, and comprises three elements — the wholesale and retail energy components (covering fuel purchase and processing, and the costs of constructing and operating power stations); network costs (covering transmission and distribution infrastructure, as well as public service obligations and technology support); and taxes and levies (either as part of general taxation, such as VAT, or sector-specific levies, for example to support climate policies). However, the Commission also points out that energy costs determine the amounts actually paid by consumers, and that price rises can, in part at least, be offset by reduced consumption arising from efficiency gains.

15.5 The Commission identifies the following main findings from the two Staff Working Documents:

• whilst there are significant variations across Member States, average retail prices for both gas and electricity across the EU rose between 2008 and 2012, with electricity prices rising on average by 4% a year for domestic consumers and 3.5% for industrial consumers, and with corresponding increases of 3% and 1% for gas;

• on average across the EU, the two main drivers of these price rises are network costs and taxes and levies, with the network cost component of the retail price for electricity having increased by 18.5% and 30% for domestic and industrial consumers respectively, whilst the taxes and levies components have increased by 36% and 127% respectively, although this is before exemptions to some industry sectors are taken into account: for most Member States, the share of taxes and levies is less than 10% of the electricity price, but the average across the EU as a whole is 30%;

• although lower import dependency and better security of supply could help cushion the impact, fossil fuel prices remain the key drivers of gas and electricity prices in the EU, in part because of the continuing practice of oil-indexed contracts, whilst there is empirical evidence that unbundling and market opening have helped to reduce prices;

• although there are again significant variations between Member States, on average across the EU the cost of renewable energy added to retail prices has risen, but still only constitutes 6% of the household electricity price and 8% of the industrial electricity price;

• the EU Emissions Trading System (ETS) has not provided a strong price signal for consumption and investment behaviour, in part because economic conditions in Europe have dampened overall demand, although the increased role of renewables in the electricity mix may also have contributed to the low carbon price;


• in contrast to the energy element of retail prices, there has been a convergence and a fall in wholesale electricity prices, with the prices of some major European wholesale electricity benchmarks having decreased by 35% to 45%, implying that price competition in some retail markets may be weak;

• against a backdrop of declining gas consumption, due in part to improvements in the energy efficiency of household heating, the average share of energy costs as a proportion of total household consumption increased from 5.5% to 6%;

• despite falling industrial consumption, increases in electricity prices caused cost increases of about 4% for industry overall, whereas, in the case of gas, costs declined by 6.8% (and consumption by 5.3%);

• the gas price differential with major international competitors is increasing, particularly in the case of the US, with average EU retail industrial gas prices being around three to four times more expensive: this widening difference has mainly been driven by factors such as the shale gas boom in the US, the impact of oil-indexation on gas price dynamics in the EU, and sharply increased gas demand in Japan in the aftermath of the Fukushima incident;

• EU electricity prices have also increased relative to major international competitors, with medium sized industrial consumers in the EU having paid more than twice the price for electricity compared with companies based in the US and Russia, and about 20% more than those based in China;

• whilst EU energy prices have increased, the EU manufacturing sector as a whole has relatively low real unit energy costs, partly because restructuring to lower energy intensity and higher value added production has helped to offset the price rises;

• the widening gap in energy prices and costs between EU and other regions is forecast to contribute to a reduction in the EU’s share in global export markets for energy intensive goods;

• the US energy position relative to the rest of the world has been changed by shale gas, with gas prices having fallen significantly: and, although there is so far no evidence that this has led to a shift in industries between the EU and the US, the impacts may not yet have fully fed through, and concerns therefore remain.

15.6 The analysis concludes that high energy prices for EU industry, particularly relative to the US, are an important concern, and that EU energy and carbon policies need to be cost-efficient. In particular, it identifies that action to reduce energy costs is required in the following areas:

• completion of the internal energy market in 2014 and further development of energy infrastructure, in order to increase competition and generate efficiencies which will exert downward pressure on electricity and gas prices;

• action to improve price competition in the retail markets on which the Commission intends to launch a Communication before the summer of 2014;


• action to strengthen the EU’s international influence by maintaining current policies of diversifying energy supplies and supply routes, negotiating with major energy partners with one European voice, and increasing indigenous renewable energy production and energy efficiency to reduce import dependency;

• ensuring a cost effective approach to the EU 2030 Climate and Energy Framework, and ensuring that climate and energy policies financed by taxes and levies are applied cost effectively and follow best practice;

• undertaking further work to investigate varying Member State network practices and drawing out best practice, with a view to minimising the impact of network costs on energy prices;

• helping vulnerable energy consumers to improve their energy efficiency, respond to price signals and adopt other novel energy technologies to lower their energy costs;

• continuing efforts to ensure a level playing field for industrial energy prices, tackling international partners under the auspices of the World Trade Organisation (as well as bilaterally) on their energy subsidies and export restrictions on energy goods;

• helping European industry to improve its international competitiveness, including where necessary fiscal transfers, and exemptions or reductions in taxes or levies provided these are compatible with state aid rules and internal energy market rules.


15.7 In his Explanatory Memorandum of 6 February 2014, the Minister of State at the Department for Energy and Climate Change (Michael Fallon) says that, although the documents do not contain any specific proposals, and thus have no immediate policy implications, the Government welcomes them as providing important analyses which should inform political discussions on climate and energy policy at the EU level over the course of 2014, on which it will continue to engage with the Commission as thinking develops.

15.8 He also makes the following detailed points:

• the Government is committed to tackling rising energy prices through delivering more efficient and competitive energy markets, and helping to improve the energy efficiency of consumers;

• it continues to be a strong supporter of the EU internal energy market, and agrees that it is important to complete this in 2014, in order to place downward pressure on gas and electricity prices, by improving competition, increasing the efficiency of power and gas flows and use of generation capacity, and providing stable price signals to drive cost-efficient investment in energy infrastructure;

• it notes the Commission’s intention to bring forward an action plan on retail markets by summer 2014, commenting that Great Britain is in the process of implementing national actions following the completion of a regulatory review of


the retail energy market, which focused on the key factors deterring consumer engagement and switching;

• it agrees with the Commission that new technology can help encourage consumers to respond to price signals, better control their energy use and save money on their energy bills, and says that the intention is to replace 53 million meters with smart electricity and gas meters in all domestic properties, and smart or advanced meters in smaller non-domestic sites in Great Britain by the end of 2020 (which is expected to result in savings of £26 a year by 2020, rising to around £43 a year by 2030, for the average dual fuel domestic consumer, and of about £200 for non-domestic customers by 2020);

• it notes the conclusions relating to engagement with international partners, diversification of energy supplies and supply routes, and the reference to negotiating with major energy partners with one European voice, and it supports the principle of greater coherence in the EU’s external energy relations, valuing the role of the Commission in co-ordinating Member State positions on energy issues, so long as the existing balance of EU-Member State competence is respected;

• it highlights the importance, in the context of increasing energy dependence in the EU, of making the best use of indigenous energy resources, not least by avoiding unnecessary regulation;

• it agrees on the need for a cost-effective EU 2030 Climate and Energy Framework, its response to the Commission Green Paper73 having set out the UK’s view on the need for the EU to adopt a unilateral EU-wide greenhouse gas emissions reduction target of 40% for 2030 (and one of up to 50% in the context of a global agreement on climate change), to deliver structural reform of the ETS; to avoid mandatory renewable energy or energy efficiency targets, and to continue to improve energy efficiency;

• it agrees that climate and energy policies financed by taxes and levies need to be cost-effective, and welcomed the recent non-binding Commission guidance74 on public intervention in the electricity market;.

• it notes the conclusion relating to network practices and will continue to engage with the Commission as its thinking develops in this area, stressing the need for the Commission to adopt a clear set of objectives, so that any subsequent measures have tangible benefits;

• it is committed to ensuring that manufacturing is able to remain competitive during the shift to a low carbon economy and to minimise the risk of carbon leakage, and it believes that the competitiveness of energy intensive industries should be an integral part of the 2030 climate and energy package, where it supports a single greenhouse gas target and opposes specific and potentially costly sub-targets for renewables or energy efficiency.

73 (34814) 8096/13: see HC 83–i (2013–14) chapter 5 (8 May 2013) and HC 83–viii (2013–14), chapter 2 (3 July 2013).

74 (35531) 15776/13: see HC 83–xxviii (2013–14), chapter 9 (22 January 2014).


15.9 The Minister concludes by noting that these documents do not contain either legislative or non-legislative proposals, but that the Energy Council is due to have a policy debate in March on energy prices, which is expected to draw on the information and conclusions set out in these documents. He adds that the Commission has indicated its intention to produce an action plan on retail energy markets by summer 2014, and that the Energy Council in June is expected to agree conclusions on energy prices.

Conclusion

15.10 This document provides an essentially factual analysis of trends in energy costs and prices within Europe, and of some of the factors which have influenced these, and, as such, it does not appear to give rise to any issues requiring further consideration. Having said that, the question of energy prices is currently a matter of some general political controversy, as well as having a read-across to the recent Commission Communication on climate and energy policy to 2030, and, for that reason, we think it right in clearing the document, to draw it to the attention of the House.

16 Sharing of benefits from genetic sources

(a) (34301) 14641/12 + ADDs 1–3 COM(12) 576 (b) (34317) 14728/12 + ADD 1 COM(12) 577

Draft Regulation on Access to Genetic Resources and the Fair and Equitable Sharing of Benefits Arising from their Utilisation in the Union Draft Council Decision on the conclusion of the Nagoya Protocol on Access to Genetic Resources and the Fair and Equitable Sharing of Benefits Arising from their Utilisation to the Convention on Biological Diversity

Legal base (a) Article 192(1) TFEU; co-decision; QMV

(b) Articles 192(1) and 218(6) TFEU; QMV; consent Department Environment, Food and Rural Affairs Basis of consideration Minister’s letter of 12 February 2014 Previous Committee Reports HC 86–xviii (2012–13), chapter 4 (31 October 2012),

HC 83–xix (2013–14), chapter 1 (30 October 2013) and HC-xxiii (2013–14), chapter 6 (4 December 2013)

Discussion in Council See para 16.13 below Committee’s assessment Legally and politically important Committee’s decision Cleared


Background

16.1 Genetic resources have a wide range of users and resultant benefits, and the Convention on Biological Diversity (CBD) provides the main international framework for their equitable sharing. However, it does not specify how this should be achieved in practice, and the Nagoya Protocol to the Convention therefore seeks to establish more predictable conditions for access and ensuring that only legally acquired sources are used. It requires all parties to take measures regarding user compliance, but they are free to decide whether to regulate access: however, if they do so, they must implement the detailed provisions set out in the Protocol.

16.2 As we first noted in our Report of 31 October 2012, the Protocol is a mixed agreement with shared competence, and has been signed by the EU and 24 Member States. These two documents comprise (a), a draft Regulation implementing those provisions falling within EU competence, and (b), a draft Council Decision, enabling the EU to ratify the Protocol, once the Regulation has been adopted. More specifically, the draft Regulation sets out minimum due diligence measures, which all users in the EU would have to exercise to establish that genetic resources are accessed legally, and the benefits fairly and equitably shared; require all users to transfer relevant information to subsequent users; and oblige users to declare at the point of commercialisation that they have complied with their due diligence obligation. The proposal would also require the Commission to establish an EU Register of Trusted Collections comprising only fully documented samples of genetic resources, and Member States would have to verify whether a collection meets the necessary requirements, whilst users acquiring a genetic resource from it would be considered to have exercised due diligence.

16.3 We also noted that the Government welcomed the draft Council Decision (except insofar as it would require the EU and Member States to ratify simultaneously), but had drawn attention to a number of preliminary concerns over the draft Regulation, including the possibility that certain of the measures might not be in accordance with the principle of subsidiarity. We were told that a full analysis would be undertaken ahead of the deadline in the Subsidiarity Protocol for raising any objection with the Commission, and that, although the Government had yet to complete a detailed Impact Assessment, it would undertake this for any final Regulation. In the meantime, an initial analysis of the financial considerations suggested that there would be minimal costs for Government and for users.

16.4 We commented that there appeared to be more to the proposed Regulation than met the eye, and, in noting that the Government would be undertaking a full analysis of the subsidiarity implications, we stressed the importance of our receiving this in good time to allow the preparation of a draft Reasoned Opinion, if that was seen to be required. Pending this, and the Government’s detailed Impact Assessment, we said that we were holding both documents under scrutiny.

16.5 We next reported to the House on 30 October 2013, when we drew attention to the unsatisfactory way in which the Government had handled the subsidiarity issue. We also recorded that there had been no developments on the draft Directive, and that, although some Member States preferred a ban on the use of illegally acquired genetic resources, rather than the due diligence approach proposed by the Commission (and favoured by the UK), discussions in the Council on the draft Regulation appeared to be moving in a


sensible direction. However, the UK remained concerned by the views under consideration by the European Parliament, which favoured a prohibition-based approach, had proposed additional information requirements on users, and would apply the Regulation retroactively to genetic resources accessed before it entered into force. The UK was also seeking to remove a Commission suggestion that matters relating to traditional knowledge should be addressed by the Regulation, and concerns remained that the proposed scheme for ‘Trusted’ or Registered Collections would give the Commission unnecessarily broad powers to remove individual collections without reference to Member States.

16.6 However, we went on to note that, although the European Parliament’s plenary session on 16 September 2013 had adopted most of the amendments which cut across the Government’s position, the UK’s concerns were shared by the Commission and the majority of Member States, and had been reflected in the Presidency’s mandate for the trilogue negotiations, which were expected to begin on 16 October and to be finalised before the end of the year. In view of this, the Government expressed the hope that we would be able to clear the draft Regulation.

16.7 We commented that, although we were pleased to note that the discussions within the Council had been satisfactory from the UK’s point of view, there still appeared to be a number of uncertainties surrounding the position of the European Parliament, and that we had yet to receive the promised impact assessment. In view of this, we said that we would like to have this further information before we could consider clearing either of these documents.

16.8 We subsequently received a further letter of 29 November 2013 from the Parliamentary Under-Secretary at the Department for Environment, Food and Rural Affairs (Lord de Mauley), enclosing a very comprehensive ‘checklist’ impact assessment, looking at the costs to users which will accrue from the different obligations of the Nagoya Protocol and the Regulation. It concluded that a final Regulation, which reflected the Commission’s original proposal whilst taking account of the views of Member States, would deliver significant benefits for UK users of genetic resources, not least compared with the approach favoured by the European Parliament, and would in particular help them adapt to the changes to the research landscape which will result from the coming into force of the Nagoya Protocol.

16.9 As regards the position of the European Parliament, the Minister highlighted its continuing wish to prohibit the use of illegally acquired genetic resources (which the UK believed is unacceptable as it would impact adversely on the research industry in Europe), and that the Parliament still wanted to see the retroactive application of the Regulation to previously-accessed genetic resources (which would significantly increase its costs and complexity). He said that the UK had been very firmly supported in its opposition to these and some other elements of the Parliament’s proposals, both by Member States within the Council, by the Commission, and by UK and EU stakeholders. He added that Member States had been working hard to find additional flexibility in order to reach a compromise agreement with the Parliament, but that the Lithuanian Presidency’s mandate was clear that it could only agree a final Regulation on behalf of the Member States if that did not impose unreasonable costs on users and regulators alike.


16.10 In view of this, he asked if we would now consider clearing the document from scrutiny so that discussions could move freely, adding that the trilogue negotiations were on-going, and that the European Parliament had faced increasing pressure from Member States and other stakeholders to take account of the concerns expressed. He remained hopeful that a final agreement could be reached, but added that this would largely depend on the flexibility of the European Parliament, given the known strong positions of Member States on these key issues.

16.11 We said that, whilst we were grateful to the Minister for this update, and noted the mandate which the Council had given the Presidency for the trilogue discussions, we hesitated to clear the document, whilst those discussions had still to be completed. Having said that, we did not want to prevent the Government from supporting a satisfactory deal if one was on offer, and we said that we would therefore grant a waiver under paragraph 3(b) of the Scrutiny Reserve Resolution, subject to the proviso that we would like to be kept informed of subsequent developments.

Minister’s letter of 12 February 2014

16.12 We have now received from the Minister a further letter of 12 February 2014, in which he says that the relevant European Parliament Committee has recently approved a text reflecting the agreement reached in trilogue, which conforms with the UK’s negotiating aims. In particular, although Member States had to agree to the inclusion of a definition of illegal use and a bolstered requirement for meeting due diligence standards, any retrospective application of the proposed Regulation has been removed, as has the prohibition on the use of illegally-accessed genetic resources, and the UK’s subsidiarity concerns have been met by the removal of the power for the Commission to de-register registered collections without first receiving a request from the relevant Member States. As a consequence, the Minister says that he is confident that the additional burden on UK businesses and researchers will now be minimal,

16.13 The Minister says that the text is expected to be voted upon shortly by the European Parliament plenary, following which it will be adopted by the Council, and then signed, with publication in the Official Journal expected in June 2014.

Conclusion

16.14 We are grateful to the Minister for this update, and we are now content to clear both these documents.


17 The European Voluntary Humanitarian Aid Corps

(34256) 14150/12 + ADDs 1–2 COM(12) 514

Draft Council Regulation establishing the European Voluntary Humanitarian Aid Corps

Legal base Article 214 (5) TFEU; Co-decision; QMV Department Department for International Development Basis of consideration Minister’s letter of 24 February 2014 Previous Committee Reports HC 83–xxvi (2013–14), chapter 5 (8 January 2014),

HC 83–xxiii (2013–14), chapter 8 (4 December 2013), HC 83–xviii (2013–14), chapter 9 (23 October 2013), HC 83–iv (2013–14), chapter 6 (5 June 2013); HC 86–xxxi (2012–13), chapter 2 (6 February 2013), HC 86–xxii (2012–13), chapter 10 (5 December 2012) and HC 86–xviii (2012–13), chapter 6 (31 October 2012); also see (32292) 17065/10: HC 428–xii (2010–11), chapter 12 (12 January 2011)

Discussion in Council 14 March 2014 Committee’s assessment Politically important Committee’s decision Cleared

Background

17.1 The Committee’s extensive consideration of this proposal thus far is set out in the previous Reports cited above. A summary is set out below.

17.2 Article 214(5) TFEU sets out a commitment to create a European Voluntary Humanitarian Aid Corps (EVHAC), “to establish a framework for joint contributions from young Europeans to the humanitarian aid operations of the Union”. The May 2011 ECOFIN Council welcomed the proposal, “but underlined that such a corps should be cost-effective, should build upon existing national and international voluntary schemes without duplicating them, and be focused on addressing concrete needs and gaps in the humanitarian field”. A European Parliament Declaration was enthusiastic but lacked any of these qualifications.

17.3 The Commission would develop standards for recruitment, preparation, deployment and management of volunteers, and manage a Register of EU Aid Volunteers Organisations to select, prepare and deploy them, who would have to be certified for compliance with these standards. A certification mechanism would also be established for organisations eligible to receive volunteers. The proposed 2014–20 budget is €239.1 million.


17.4 In the first update in December 2012, the Parliamentary Under-Secretary of State, Department for International Development, (Lynne Featherstone) set out her approach clearly:

• determine whether the volunteering programme would be the most cost-effective way of addressing the problems that had been identified;

• limit the number and scope of the initiative’s activities to those where needs were clear and pilot programmes had been evaluated and given a positive assessment;

• ensure “as a minimum” that any EU Aid Volunteers initiative not only responded to identified need but was complementary to existing initiatives in this field within the international system;

• offered value for money; and also

• had objectives grounded in humanitarian principles, including a focus on robust outcome measures such as lives saved;

• provided for sufficient Duty of Care for those deployed; and

• was time-limited and independently evaluated before any continuation.

17.5 In her Explanatory Memorandum of 21 November 2013, the Minister explained in detail the differences in the revised draft regulation from the original proposal,75 which she described as hard won in negotiations in COHAFA.76 The Minister then commented thus:

“A like-minded group of Member States worked effectively together to improve the draft regulation and to build a strong Council position before the regulation entered the trialogue process. The Government judges that previous UK concerns have now been met in the revised draft regulation.

“The Government, along with all other Member States, endorsed the establishment of European Voluntary Humanitarian Aid Corps when it signed the Treaty on the Functioning of the European Union (Article 214(5)). The role of the Council and the European Parliament now, as co-legislators, is therefore to ‘determine the rules and procedures for the operation of the Corps’.77 The Government considers that it has made important improvements to these rules and procedures. It has also negotiated important parts of the regulation (e.g. training, certification, standards) be adopted through implementing acts to ensure that Member States can continue to scrutinise these parts of the regulation. This is important since feedback from pilot schemes is on-going, and will need to be incorporated appropriately into the functioning of the initiative.”

17.6 Looking ahead, the Minister stated:

75 See our Report of 23 October 2013 for details.

76 The Working Party on Humanitarian Aid and Food Aid (COHAFA) is the main forum within the EU for policy debate between Member States and the Commission on humanitarian issues and food assistance.

77 Article 214(5) Treaty on the Functioning of the European Union, 2010.


“As mentioned in my previous letter, the draft regulation is currently going through the process of political trialogue with the European Parliament. The UK and other Member States have provided a strong negotiating position to the Presidency of the Council and the compromises suggested so far in this process do not appear to threaten the improvements to the draft regulation that were agreed in COHAFA. UK officials will continue to follow the trialogue process to ensure that the gains made are not reversed.”

Our assessment

17.7 Since the revised Council Regulation accompanying her EM was a limité document, and thus not depositable in the House, the Minister’s detailed exposition was very helpful, and suggested that the revised text was indeed a great improvement on the original. However, we understood that there was to be a further political trialogue meeting on 3 December.

17.8 We therefore asked the Minister for an update about the outcome, with a clearer timeline as to when the Council would have to take a position on the final text. We noted our particular interest in any changes that shifted the management process away from implementing to delegated Acts.

17.9 In the meantime, we continued to retain the draft Regulation under scrutiny.

17.10 We also again drew this further update to the attention of the International Development Committee.78

The Minister’s letter of 13 December 2013

17.11 The Minister said that: following the 3 December political trilogue meeting, an agreement had been reached; the UK had indicated its approval at COREPER;79 and her letter set out how the final text differed from the text discussed in her recent Explanatory Memorandum, and how this fitted with broader UK policy objectives.

17.12 The Minister continued as follows (her emphasis):

“The Presidency had a strong negotiating position and almost all of the Council’s amendments to the Commission’s original proposal have been agreed to. There are a few minor amendments to the final text. I do not judge any of these to be problematic, and many of them further improve the quality of the regulation. For example, a paragraph on strengthening the gender perspective of EU humanitarian aid has now been included.

78 See headnote: HC 83–xxiii (2013–14), chapter 8 (4 December 2013).

79 COREPER, from French Comité des représentants permanents, is the Committee of Permanent Representatives in the European Union, made up of the head or deputy head of mission from the EU member states in Brussels. Its job is to prepare the agenda for the ministerial Council meetings; it may also take some procedural decisions. It oversees and coordinates the work of some 250 committees and working parties made up of civil servants from the member states who work on issues at the technical level to be discussed later by COREPER and the Council. It is chaired by the Presidency of the Council of the European Union. There are in fact two committees: COREPER I consists of deputy heads of mission and deals largely with social and economic issues; COREPER II consists of heads of mission (Ambassador Extraordinary and Plenipotentiary) and deals largely with political, financial and foreign policy issues.


“The more substantive changes are around three areas in the regulation where agreement was yet to be reached: standards regarding candidate EU Aid Volunteers; the adoption of indicators to monitor progress towards operational objectives; and the balance between annual work planning and commitments to longer-term programme objectives.”

17.13 The Minister outlined the agreement reached on these three areas thus:

“Standards — The Council position was that the Commission should adopt implementing acts to establish standards for the identification, selection and preparation of candidate volunteers and the management and deployment of EU Aid Volunteers. The European Parliament was pushing for these to be adopted by delegated acts. The agreement reached on 3 December separates these ‘standards’ into ‘standards’ and ‘procedures’, the former to be adopted by delegated acts and the latter to be adopted by implementing acts. I judge that where delegated acts have been proposed, they will not have a significant impact on programming since they concern the broader aspects of standard-setting, such as provisions to ensure equal opportunities and non-discrimination in the selection process for volunteers. The areas of primary concern to the UK, such as the procedures for training, the management of the volunteers in third countries and duty of care and safety and security measures, are classed as ‘procedures’ and, therefore, adopted through implementing acts where Member States will be able to heavily influence the process.

“Indicators — The Council position was previously that a monitoring framework with indicators for the initiative should be adopted through implementing acts. The European Parliament had resisted this. The agreement reached now includes strengthened indicators to monitor progress towards operational objectives in the basic act, which the Commission will be empowered to amend through delegated acts, subject to veto by the Council or European Parliament. Again, I judge that this will not have a significant impact on programming. Since delegated acts would only come into play in order to amend the indicators, the European Parliament’s right to veto amendments would not affect the continued implementation of the initiative.

“Thematic priorities and working planning — The European Parliament sought an amendment which would give it power to veto multiannual work programmes for the initiative through delegated acts. The Presidency made it clear that this would be unacceptable to the Council. The agreement reached outlines ranges for percentage allocations of the overall financial envelope across thematic priority areas in an annex. If these need to be amended following the mid-term evaluation of the initiative, the Commission would be empowered to adopt delegated acts in order to do so. Should exceptional circumstances require the Commission to make adjustments outside of the mid-term evaluation, an urgency procedure has also been included. From a policy perspective, the ranges outlined are not problematic, and the ranges included allow sufficient flexibility for needs-based annual work planning to be meaningful. I judge that the possibility of amendment by delegated acts following the mid-term review will not have a significant impact on programming since the European Parliament’s right to veto amendments would not affect the continued implementation of the initiative.”


17.14 With regard to the proposed timetable, the Minister says:

“Following the European Parliament Development Committee’s vote on compromise agreement, there will be a period where lawyers and linguists check the final text. This process is expected to take around eight weeks. Following this, there will be a plenary vote in the European Parliament and then the Council will be expected to take a final position. Under the current timescales proposed this would, therefore, fall towards the end of February or into March.”

Our assessment

17.15 The Minister included with her letter a copy of the full consolidated text of the final compromise package, with amendments to the original Commission proposal indicated therein. This was helpful so far as it went; but, as it remained a limité document, we could again do little more than report the contents of the Minister’s letter to the House. Before the Council took a final position, we therefore asked the Minister to deposit the final version, with no privacy limitation, along with a final Explanatory Memorandum. As well as summarising how it met her original objections and overall UK objectives, we asked her to confirm that it contained no provisions that increased the Commission’s power of independent action via the enhanced use of delegated acts other than the ones she had outlined in her letter.

17.16 We also again drew this further update to the attention of the International Development Committee.


17.17 The Minister says that the European Parliament is scheduled to consider the regulation in the plenary between 24 and 27 February; it is then currently scheduled for consideration by COREPER on 12 March, and for adoption by the Council on 14 March. Despite this, she says, “a final, clean English version of the text will not be made available until 5 March.”

17.18 The Minister then continues as follows:

“Although I cannot deposit a non-limité version of the regulation with the Committee, I can provide the assurances that the Committee is seeking since there have been no substantive changes to the text since my previous EM, and only minor linguistic ones.

“I can, therefore, confirm to the Committee that there are no further provisions for delegated acts included in the regulation than those outlined in my previous letter.”

17.19 The Minister then summarises the extent to which UK objectives have been met as follows:

— “Cost-effectiveness and value for money — The UK and other Member States successfully negotiated for a reduction in the allocated budget from €239 million (£196 million) to €147.9 million (£121 million), a reduction of 38%. The UK and other Member States in the Council also successfully negotiated for the annual work


programme for the initiative to be adopted through implementing acts, which will ensure Member State consultation and the ability to feed in lessons learned on an annual basis to increase its effectiveness. The effectiveness of the initiative will also be measured against a more robust set of indicators which will allow greater scrutiny of the value for money offered by particular activities under the initiative;

— “Scope of initiative limited to where there are identified needs — Throughout negotiations in the Council Working Party on Humanitarian Aid and Food Aid (COHAFA) the UK and other member states emphasized that the initiative must be needs-based and that this be reflected across the text; this has been achieved. By securing the adoption of the annual work programme through implementing acts, the UK and other Member States will be able to retain oversight and influence over how needs are assessed and addressed by the initiative. The UK also sought to remove other objectives, such as social inclusion and visibility from the objectives of the regulation and succeeded in doing so. The UK also successfully negotiated with others to ensure that the arrangements for the training programme for the volunteers and the procedure for assessing the volunteers’ readiness for deployment will be adopted through implementing acts so that Member States can continue to influence this;

— “Complementarity to existing initiatives within the international system — The language on complementarity within the regulation text has been strengthened to help ensure that the EU Aid Volunteers Initiative avoids duplication and overlap. An amendment negotiated in COHAFA now ensures that certification for hosting and sending organisations will be based on existing certification mechanisms and procedures and adopted through implementing acts. The procedures for the identification, selection and preparation of the volunteers will also be adopted through implementing acts, so there will be an opportunity for Member States and relevant experts to ensure that this, too, is complimentary;

— “Objectives grounded in humanitarian principles — Although present in the original proposal, further focus on principled humanitarian action is now included in the regulation. The objective of the initiative, as outlined in the revised article 4 of the regulation, now reads “The objective of the EU Aid Volunteers initiative shall be to contribute to strengthening the Union’s capacity to provide needs-based humanitarian aid aimed at preserving life, preventing and alleviating human suffering and maintaining human dignity and to strengthen the capacity and resilience of vulnerable or disaster-affected communities in third countries, particularly by means of disaster preparedness, disaster risk reduction and by enhancing the link between relief, rehabilitation and development”;

— “Duty of care for volunteers — The UK secured additional language in the text which strengthens provisions for the safety, security and proper management of deployed volunteers. Further detail on duty of care and safety and security of volunteers will be adopted through implementing acts ensuring experts and Member States can continue to influence this;

— “Monitoring and evaluation — The UK and other Member States pushed for additional and more robust indicators to be included in the regulation against which the effectiveness of the initiative could be judged. The UK and others also pushed for the


inclusion of a requirement that the Commission report to the Council annually on progress of implementation, results and, as far as possible, outcomes of the initiative. An interim evaluation report will be completed by 31 December 2018 and a full ex-post evaluation by 31 December 2021.”

17.20 In summary, the Minister says, “I judge that the UK’s initial policy objectives for the negotiation of this regulation have been met sufficiently for the UK to adopt the regulation.”

Conclusion

17.21 We accept, and are grateful, that the Minister and her officials have done their best to reconcile the timelines set out above with our wish to have the final clean text of the draft regulation deposited before it is adopted.

17.22 We accept the Minister’s assurance that there are no further provisions for delegated acts included in the regulation other than those outlined in her previous letter.

17.23 As the Minister notes, Member States endorsed the establishment of a European Voluntary Humanitarian Aid Corps when they signed the Lisbon Treaty. At an earlier point, justifiably, the Minister described this project as “originally framed as a flag for Europe and a feel-good activity for young Europeans”. The Minister is thus to be congratulated, along with other like-minded Member States, for having ensured that it will now be established on a proper footing. We can but hope that, as it is taken forward, those who do so volunteer will be able to add value in the way intended to the EU’s highly-regarded humanitarian work, and to do so under appropriate conditions of safety, security, and general management. We look forward to receiving the first monitoring and evaluation report in due course.

17.24 In the meantime, we now clear the draft Regulation.


18 Rail research and innovation

(35674) 17967/13 + ADDs 1–3 COM(13) 922

Draft Council Regulation establishing the Shift2Rail Joint Undertaking

Legal base Articles 187 and 188 TFEU; consultation; QMV Department Transport Basis of consideration Minister’s letter of 11 February 2014 Previous Committee Report HC 83–xxviii (2013–14), chapter 4 (22 January 2014) Discussion in Council Probably 14 March 2014 Committee’s assessment Politically important Committee’s decision Cleared

Background

18.1 The EU has longstanding policies aimed at, in the context of a “Single European Transport Area”, amongst other matters creating trans-European transport networks, a single market for transport undertakings and a shift to rail, particularly for freight, from other transport modes.

18.2 The EU may establish joint undertakings, that is, partnerships with other bodies, necessary for the efficient execution of EU research, technological development and demonstration programmes.

18.3 The Commission proposes, with this draft Regulation, establishment of a joint undertaking between the EU, represented by the Commission, and the rail industry, to be known as the Shift2Rail Joint Undertaking, in order to support rail research and innovation. The object would be to achieve a reduction in overall costs to the rail user and/or taxpayer as well as increasing capacity and reliability of rail services.

18.4 When we considered this matter last month we noted the Government’s enthusiasm for the proposed Joint Undertaking. However, we did not know whether the Government had any concerns about the text of the draft Regulation or the proposed statutes for the Joint Undertaking which it would be addressing during negotiation of the proposal. So we asked to have, before considering the document further, information on any such points. Meanwhile the document remained under scrutiny.80


18.5 The Minister of State, Department for Transport (Baroness Kramer), tells us now that that the Government does not have any significant concerns about the proposed text, but that officials will be seeking clarification on two relatively minor specific points:

80 See headnote.


• the definition of 50% increase in reliability in Article 2 paragraph 2c; and

• the wording, in Article 2 paragraph 2d, around interoperability, to remove any ambiguity around innovations relating mainly to the UK railway.

18.6 The Minister continues that:

• initial soundings at working group level have indicated that other Member States are likely to accept these requests for clarification; and

• working group discussions indicate that Member States are supportive of the proposal and she therefore expects that the Greek Presidency will be able to achieve a general approach on this proposal at the 14 March Transport Council.

Conclusion

18.7 We are grateful to the Minister for this information and, having no further questions, now clear the document.

19 EU Special Representative for the Middle East Peace Process

(35701) — —

Council Decision extending the mandate of the European Union Special Representative for the Middle East Peace Process

Legal base Articles 28, 31(2) and 33 TEU; QMV Department Foreign and Commonwealth Office Basis of consideration Minister’s letter of 30 January 2014 Previous Committee Reports HC 83–xxvii (2013–14), chapter 10 (15 January 2014);

also see (35061) —: HC 83–vii (2013–14), chapter 15 (26 June 2013); also see (32601) — and (32982) —: HC 428–xlvii (2010–12), chapter 23 (18 January 2012), HC 428–xxxv (2010–12), chapter 4 (7 September 2011), HC 428–xxxiii (2010–12), chapter 5 (13 July 2011) and HC 428–xxvi (2010–12), chapter 4 (11 May 2011)

Discussion in Council January 2014 Committee’s assessment Politically important Committee’s decision Cleared; further information requested (reported to

the House on 15 January 2014); further information provided and requested


Background

19.1 EU Special Representatives (EUSRs) were established under Article 18 of the 1997 Amsterdam Treaty. They are appointed by the Council through the legal act of a Council Decision (formerly a Joint Action) where the Council agrees that an additional EU presence on the ground is needed to deliver the political objectives of the Union. Their purpose is to represent the EU in troubled regions and countries and to play an active part in promoting the interests and the policies of the EU.

19.2 The substance of the mandate depends on the political context of the deployment. Some provide, inter alia, a political backing to an CSDP operation; others focus on carrying out or contributing to developing an EU policy. Some EUSRs are resident in their country or region of activity; others work on a travelling basis from Brussels.

19.3 All EUSRs carry out their duties under the authority and operational direction of the High Representative of the Union for Foreign Affairs and Security Policy (HR; Baroness Catherine Ashton). Each is financed out of the CFSP budget. In addition, Member States also contribute regularly through, for example, seconding some of the EUSR’s staff members.

19.4 After the coming into force of the Treaty of Lisbon and the establishment of the European External Action Service, the HR now has the sole right of initiative for the establishment of EUSRs and also proposes the person to occupy the post. Most were previously senior national diplomats or active politicians. The Council continues formally to appoint EUSRs, who report back through the Political and Security Committee (PSC),81 including meeting the PSC on a regular basis.

The EUSR to Middle East Peace Process (MEPP)

19.5 The incumbent, Dr Andreas Reinicke, was appointed in February 2012: a German diplomat with more than 25 years experience, who had devoted most of his career to the Middle East with deep and extensive knowledge about the MEPP.

19.6 The Council Decision that the Committee considered last June extended Dr Reinicke’s mandate from 30 June 2013 until 30 June 2014, with a provision to review developments on the ground between then and 31 December 2013. At that time the Minister for Europe (Mr David Lidington) noted that efforts to re-launch the peace process, led by the United States, were ongoing. Ending the mandate at this time would, the Minister said, send a contradictory message.

19.7 Suggesting that it would be wrong to end the mandate at that point clearly indicated that the question of when to do so would be uppermost over the following six months. We presumed that the Minister would inform the Committee of the outcome of the review, and his views on its findings and recommendations.82

81 The committee of ambassador-level officials from national delegations who, by virtue of article 38 TEU, under the

authority of the High Representative for Foreign Affairs and Security Policy (HR) and the Council, monitor the international situation in areas covered by the CFSP and exercise political control and strategic direction of crisis management operations, as set out in article 43 TEU. The chair is nominated by the HR.

82 For full information, see (35061) —: HC 83–vii (2013–14), chapter 15 (26 June 2013).


19.8 The Council Decision that we considered in January repealed the previous Council Decision 2013/350/CFSP, and confirmed that future representation would be reviewed before the end of the current time-frame for the peace talks, in May 2014. This was, the Minister for Europe explained, the result of the decision taken by the PSC on 27 November 2013, at the HR’s request, to repeal the EUSR/MEPP mandate from 1 January 2014 — his roles and responsibilities then being transferred to Helga Schmidt, EEAS Deputy Secretary General, acting as the HR’s envoy and reporting directly to Member States through the PSC. The Minister supported the proposal, judging that this would continue the UK objective of an active and efficient EU contribution to the ongoing negotiations, which aimed to achieve a final settlement of the Israeli-Palestinian conflict: the EU was playing an active role, including through the December FAC conclusions,83 which “put forward an unprecedented package of support in the form of ‘Special Privileged Partnerships’ offered to both parties in the event of a final status agreement”.

Our assessment

19.9 The Minister drew attention to the scrutiny reserve that had been placed on this Council Decision in Brussels. But, we noted, the Minister was presenting the Committee with a fait accompli: the substantive decision had already been taken and implemented, and had come before the Committee only because a Council Decision was necessary formally to end this mandate. Moreover, contrary to our clearly-expressed understanding, we had heard nothing from the Minister since June 2013. We therefore asked him to explain why he had not previously provided us with information about the way matters were developing, and why had it taken him from 27 November 2013 until 6 January 2014 to tell us about this proposal and say why he now supported it.

19.10 We asked the Minister to comment on reports in a reputable newspaper84 that this proposal was made “in the face of fierce opposition from the member states” — this because (the article suggested) the proposal was regarded as prejudging the outcome of a general review currently underway of EUSR roles. We noted that we had been in regular correspondence with him on this matter: the Minister has assured us that this review is focussed on the guidelines governing the EUSRs’ terms and conditions of service; he would advise us of the outcome, but would not deposit it for scrutiny prior to adoption. In this instance, we asked the Minister to confirm that there were no proposals under discussion for the wholesale integration of EUSR posts into the EEAS — one consequence being that Member States would no longer be able to approve the mandate of what were effectively the Council’s special envoys to a variety of trouble spots affecting EU and national interests, or the job holder.

19.11 We also noted that, at the time of writing, the prospects for any sort of final settlement by May 2014 were not encouraging. In any event, we asked the Minister to write to the Committee, before any decision was taken and no later than before the Easter recess, to outline what options regarding the nature of the EU’s engagement on the peace process, in the run up to May 2014, were then under active consideration; and to provide his assessment of the state of play in the peace talks, and the implications at that time for EU’s

83 Which are reproduced at the annex to our previous Report: see HC 83–xxvii (2013–14), chapter 10 (15 January 2014).

84 European Voice of 19 December 2013 — 8 January 2014, p.8.


longer-term involvement, particularly in the area of security cooperation (e.g. for the existing and any further prospective CSDP missions).85

The Minister’s letter of 30 January 2014

19.12 The Minister says that he will respond to the broader question on the EU’s engagement on the peace process in more detail in a separate letter as requested before the Easter recess.

19.13 The Minister then continues thus:

“At present, the EU’s engagement on the MEPP has been focussed on building a positive atmosphere around the ongoing negotiations. At December’s Foreign Affairs Council, Conclusions were agreed which set out an offer of an “unprecedented package” of support for both parties in the case of a final status agreement: an offer which was warmly welcomed by both parties. At present the EEAS, in close consultation with Member States, is drawing up ideas for what this package of incentives might consist of. At the FAC on 20 January the Foreign Secretary encouraged the EEAS to focus on a small number of major incentives that meet the needs of both parties, accompanied by a far reaching communications strategy.”

19.14 With regard to the Committee’s “process” questions, the Minister says;

“I understand your concerns about staying informed as discussions progressed on the EUSR mandate. Your conclusions of 26 June 2013 stated that you wished to be updated when the six month review of the mandate took place, before 31 December 2013. If this had been published, I would of course have informed you at that stage of the outcome and my views on its findings and recommendations as requested.

“However, the EEAS, taking forward the EUSR Guidelines Review at the same time, assessed that the roles and responsibilities of the EUSR to the MEPP could in this case be effectively taken forward by DSG Helga Schmidt, a senior EEAS official reporting directly to the Political and Security Committee (PSC).

“UK Ministers were consulted in late November on the future of EU representation on the MEPP, and took the view that we would agree to repeal the mandate, providing there was a consensus, and the matter would be kept under review. We therefore agreed with the option put forward by the EEAS on 27 November when the mandate was considered at the PSC. The Council agreed that the mandate could be rescinded as long as we returned to this matter in due course. Given the consensus on the issue, the formal review of the mandate which would have taken place in the following month was no longer necessary.

“As the Committee is aware from separate correspondence, work is beginning in Brussels on the review of the 2007 Guidelines on the appointment, mandate and financing of EUSRs. The first discussion of the new EEAS draft EUSR Guidelines

85 See HC 83–xxvii (2013–14), chapter 10 (15 January 2014) for full details.


(which came out earlier than anticipated) took place on 10 January in the PSC, during which the UK underlined the importance of increasing the efficiency, effectiveness and accountability of the current EUSR system. Through the revision of the EUSR guidelines we are working for a greater role for the Council. However, in the case of the EUSR MEPP as the Council was in agreement with the EEAS, a decision was taken to terminate the mandate without the need for undertaking a formal review.”

19.15 As to why it took from 27 November until 6 January for the proposal to come before scrutiny, the Minister says:

“Once the proposal was agreed in principle at PSC on 27 November, the EEAS drafted the Council Decision which was then discussed and ultimately agreed at a Relex meeting on 9 December 2013. The final version of the proposal became available at this point, after which we undertook to provide a detailed submission to the Committee. The usual ten day deadline from the deposit of the Council Decision should have been 23 December. Due to Parliamentary recess from 19 December until 6 January we were unable to prepare a comprehensive Explanatory Memorandum before recess. It was therefore submitted in time for the return from recess at the beginning of the New Year.”

19.16 The Minister does not respond to the questions raised in paragraph 19.10, viz., that this proposal was made “in the face of fierce opposition from the member states”, and if there were proposals under discussion as part of the review of EUSR role and responsibilities for the wholesale integration of EUSR posts into the EEAS.

Conclusion

19.17 The Minister’s response on the “process” issues is unconvincing. The Committee is continually assured of his commitment to the effective scrutiny of CSDP/CFSP and his support for the Committee’s aim of enhancing the role of Parliament in monitoring CSDP/CFSP activity. Yet were he and his officials so minded, we see no reason why the Committee could not have been informed about the developments at the end of November and then provided with the formal outcome in time for it to be scrutinised prior to adoption. The Committee is frequently asked to deal with matters at very short notice, and gladly does so. Its last meeting before the Christmas recess was on 18 December 2013: the final version of the proposal having become available on 9 December 2013, the Minister could have provided an EM in time for that meeting.

19.18 His failure to respond to the “policy” questions is equally disappointing. The Minister will be as aware as we are of the debate around the EUSR’s role, and place within CSDP, ever since the changes wrought by the Lisbon Treaty.86 This manifested itself in mid–2013, in the way in which a number of annual EUSR mandate extensions were handled: the HR essentially keeping the PSC and thus Member States in the dark until the last minute before bringing forward a number of proposals that were widely interpreted as prompted by her vision of the EUSR role being taken over by the EEAS

86 For a short review, see the EU Special Representative: A dying breed?, by Erwan Fouéré, published on 13 December

2013 by the Centre for European Policy Studies (www.ceps.eu/ceps/dld/8748/pdf ).


—thus removing the elements of control that Member States, who are supposedly in charge of CSDP/CFSP, currently have.

19.19 Now, in addition to the ending of this mandate:

— on 31 January, it was announced that the EUSR for the South Caucasus and the Crisis in Georgia, Philippe Lefort, would end his mandate on 31 January 2014. The announcement included the following:

‘I would like to thank Ambassador Lefort for his hard work, energy, and dedication as co- Chair of the Geneva International Discussions and as EU Special Representative for the South Caucasus and the crisis in Georgia,’ said High Representative of the Union for Foreign Affairs and Security Policy/Vice-President of the Commission Catherine Ashton. ‘Philippe has worked with patience and objectivity to help the parties to the conflicts resolve their differences, and has earned their trust. I look to them to place similar trust in his successor.’

“The EU remains firmly committed to conflict resolution in the South Caucasus, including through its co-chairmanship of the Geneva International Discussion and its active support for the OSCE-led Minsk Group peace process.

“The EU will appoint a successor to Philippe Lefort in the coming weeks to ensure continuity in this vital role.”

— commenting on this development, European Voice said that “[d]iplomatic sources and others active in the Caucasus speak of a poor relationship between Ashton and Lefort”; of Lefort, “who had previously served as ambassador to Georgia, [having] even bigger problems in communication with the Georgians”; of Member States feeling “that it was important to signal support for Georgia’s decision to strike political and trade agreements with the EU in November, as well as for conflict resolution in the region”; and of “Georgia’s ambition to move closer to the EU [being] seen as leaving it vulnerable to additional pressure from Russia”.87

— on 6 February 2014, European Voice carried news of the resignation of Patricia Flor as the EUSR to central Asia as of 28 February, four months before her mandate ends, to return to the German foreign ministry; noting that “the responsibilities associated with the post, which was created in 2005, will be assumed by officials in the European External Action Service”. The article further notes that, since assuming her mandate in June 2012, while limited geographically to five post-Soviet states — Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan — its significance has grown “with the looming withdrawal of troops from Afghanistan, which is a neighbour of Tajikistan, Turkmenistan and Uzbekistan”.88

19.20 The situation is thus all the more confusing. The Minister still does not explain why what he was opposed to in June made sense in November. As the Centre for European Policy Studies paper cited in footnote 6 states:

87 See http://www.europeanvoice.com/article/imported/special-envoy-to-the-caucasus-steps-down/79472.aspx.

88 See http://www.europeanvoice.com/article/imported/eusr-to-central-asia-resigns/79569.aspx.


“to withdraw the EUSR before the end of his agreed mandate at the very moment the peace process has regained some momentum raises questions about the EU’s real commitment to the peace process, even though the EU is the largest contributor of financial assistance to that region. Although Ashton has announced that the EU’s seat at the Quartet meetings (comprising the US, the Russian Federation, the EU and the UN) will be filled by a highly respected and competent figure (her Deputy Secretary General for Political Affairs), the visibility and accessibility of the EU as a foreign policy interlocutor on the ground will suffer, with the Deputy Secretary General having many other tasks to attend to.”

19.21 More generally, the wider debate around who performs this “special envoy” function in a post-Lisbon world is plainly ongoing. We have the strong impression that either Member States are again being kept in the dark by the HR and EEAS until the news is broken; or the Minister is aware of developments that could carry major implications for EU external action and those charged with promoting and implementing it, whereas the House has to rely upon press reports and academic studies.

19.22 We therefore ask the Minister:

— to clarify who is to assume the EUSR roles that have suddenly become vacant; and

— if it is proposed that it should be someone in the EEAS, to explain how, along with his or her present responsibilities, he or she will provide the same degree of visibility and accessibility on the ground as a “free-standing” EUSR, and how Member States are to retain an appropriate degree of oversight and control of his or her activities.

19.23 We also again ask the Minister to respond to our earlier request (c.f. paragraph 19.10 above) and to explain to us what, more generally, is going on, not just with the guidelines governing the EUSRs’ terms and conditions of service but with regard to the basic issue of their role and to whom they will continue to be responsible.

19.24 We would also like to know precisely when he expects to be able to provide us with details of the outcome of the review, and what the timing implications then are for this year’s “mandate renewal” round.

19.25 In the meantime, we are also drawing this chapter of our Report to the attention of the Foreign Affairs Committee.


20 EU Enlargement: post-accession monitoring: Bulgaria and Romania

(a) (35751) 5633/14 + ADD1 COM(14) 36 (b) (35752) 5634/14 + ADD1 COM(14) 37

Commission Report on progress in Bulgaria under the Co-operation and Verification Regime Commission Report on progress in Romania under the Co-operation and Verification Regime

Legal base — Documents originated (Both) 22 January 2014 Deposited in Parliament (a) 27 January 2014

(b) 27 January 2014 Department Foreign and Commonwealth Office Basis of consideration EM of 6 February 2014 Previous Committee Report None; but see (34649) 5938/13: HC 86–xxxii (2012–

13), chapter 13 (13 February 2013);(34104)12827/12: and (34125) 12828/12: HC 86–xi (2012–13), chapter 27 (5 September 2012); also see (33674) 6371/12 and (33675) 6372/12: HC 428–li (2010–12), chapter 13 (22 February 2012); (33049) 13253/11 and (33050) 13254/11: HC 428–xxxv (2010–12), chapter 12 (7 September 2011); (32547) 6986/11 and (32548) 6987/11: HC 428–xx (2010–11), chapter 7 (16 March 2011); (31824) 12558/10 and (31825) 12562/10: HC 428–i (2010–11), chapter 65 (8 September 2010); (31436) 7947/10 and (31437) 7948/10: HC 5–xviii (2009–10), chapter 7 (7 April 2010); (30828) 12386/09 and (30829) 12388/09: HC 19–xxvi (2008–09), chapter 22 (10 September 2009); (30437) 6405/09 and (30438) 6407/09: HC 19–xvii (2008–09), chapter 8 (13 May 2009), HC 19–xiv (2008–09), chapter 6 (22 April 2009) and HC 19–xii (2008–09), chapter 3 (25 March 2009); also see (29876) 12177/08 and (29877) 12182/08: HC 16–xxix (2007–08), chapter 2 (10 September 2008); (29431) 6150/08 and (29432) 6161/08: HC 16–xiii (2007–08), chapter 15 (27 February 2008); (28754) 11491/07


and (28768) 11489/07: HC 41–xxxii (2006–07), chapter 11 (25 July 2007) and (27865) 13347/06: HC 34–xxxviii (2005–06) chapter 3 (18 October 2006)

Discussion in Council 18 March 2014 General Affairs Council Committee’s assessment Politically important Committee’s decision Cleared

Background

20.1 The accession negotiations with Romania and Bulgaria were concluded in December 2004 and a Treaty of Accession was signed on 25 April 2005. The UK ratified the Treaty on 5 April 2006.

20.2 The Commission’s October 2005 and May 2006 monitoring reports identified a number of areas where further improvements were needed in order to meet all membership requirements, and all of which went to the heart of a properly functioning governance system based on the effective implementation of laws by an accountable, independent and effective judiciary and bureaucracy. The Accession Treaty allowed for a delay until 2008, but only if the Commission recommended that either country was “manifestly unprepared” for membership. The Commission’s final verdict was that both countries would be in a position to take on the responsibilities of membership by 2007. There were, however, still significant shortcomings, particularly on JHA issues.89

20.3 So, various post-accession measures were put in place, the most crucial being the Mechanism on Cooperation and Verification (CVM) — a process whereby, having set benchmarks on JHA issues, the Commission works closely with both governments on steps to meet them, and reports to the European Parliament and the Council, with the (time-limited and now-defunct) sanction of non-recognition of judicial decisions under mutual recognition arrangements if progress was insufficient.90 Notwithstanding that accession on 1 January 2007 was essentially a fait accompli, in view of the range of outstanding issues and their implications for actual and aspiring candidates, the Commission’s final verdict was debated in the European Standing Committee on 15 January 2007.91

20.4 Bulgaria’s benchmarks are:

— Benchmark 1 — Independence/ accountability of judicial system;

— Benchmark 2 — Transparency/efficiency of judicial process;

— Benchmark 3 — Reform of the judiciary;

— Benchmark 4 — High level corruption;

89 For details, see previous Reports enumerated in the headnote to this chapter.

90 Commission Decisions 2006/928/EC and 2006/929/EC of 13 December 2006 establishing a mechanism for cooperation and verification of progress in Bulgaria and Romania to address specific benchmarks in the areas of judicial reform and the fight against corruption and organised crime (OJ No. L 354, 14.12.06, pp.56 and 58); see http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2006:354:0056:0057:EN:PDF and http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2006:354:0058:0060:EN:PDF).

91 Gen Co Deb, European Standing Committee B, 15 January 2007, cols. 3-28.


— Benchmark 5 — Corruption at borders and in local government;

— Benchmark 6 — Organised crime.

20.5 Romania’s benchmarks are:

— Benchmark 1 — Reform of judicial process;

— Benchmark 2 — Establishment of an integrity agency;

— Benchmark 3 — Investigation of high level corruption;

— Benchmark 4 — Corruption, in particular within local government.

20.6 The previous Committee’s consideration of earlier reports is enumerated in the headnote. As all the Committee’s and its predecessor’s Reports illustrate, thus far it has been very much a case (in both countries) of incremental steps forward, other steps backward, some marking of time, and an overall impression of a continuing lack of sustained commitment by the political class as a whole.

The Commission’s five-year overview

20.7 In the summer of 2012, the Commission produced a five-year overview — a broad assessment of progress in each country since the CVM was established and proposals in the light of that assessment. Once again it made for dispiriting reading. As the Committee noted when clearing them, its concern for five years now has been not to conduct a post-mortem on Bulgaria and Romania’s accession but, rather, to ensure that the lessons that emerged from it were incorporated into the handling of subsequent accessions, and specifically Croatia’s.

20.8 The recognition that Bulgaria and Romania were allowed to accede despite sub-standard preparation, combined with subsequent poor performance on a range of “good governance” issues, prompted the introduction of a new chapter 23 into the accession process, with both opening and closing benchmarks requiring unanimity for the chapter to be opened; and, once opened, to be closed. That came to an end in summer 2011, when Croatia’s accession treaty was signed, and two years of pre-accession monitoring got underway: if there were still concerns at the end of this process, “appropriate measures” could be introduced.

20.9 In Romania’s case, the Commission report was produced at a time of (as the Minister for Europe, Mr David Lidington, had put it in his Explanatory Memorandum of 27 July 2012 on this five-year overview) of “high political volatility”. While no doubt true that (as the Minister said) it was possible that, without the CVM, none of the necessary measures would have been taken by either country, we found it extraordinary that it should be so, five years after their accession — five years that had been no more than (as he put it) “a phase predominantly concerned with legislation” and where both countries still needed to move “to one more focussed on implementation and delivery”. Though the situation was more concerning in Romania at that juncture, the harsh reality in both countries was where it always had been: the absence of a broad political consensus for implementing the necessary reforms to ensure that they are sustainable and irreversible. Thus, in Romania,


67% of those surveyed thought that corruption had got worse over the past three years; whilst in Bulgaria, widespread corruption was still a cause for concern, with the only areas where it had been in any sense effectively tackled being arguably the result not of the CVM but of the EU having at one point suspended normal funding because the situation then was so bad, and the lack of tackling corruption elsewhere being closely linked to organised crime.

20.10 Nevertheless, the CVM, for all its weaknesses, could not be abandoned. Looking further down the accession track, “front-loading” these issues in future was the right policy. But before then would come Croatia, whose accession treaty had already been signed and who was due to accede in July 2013. As we had said, we were unable to see how “appropriate measures” at the end of an unsatisfactory pre-accession monitoring process could be reassuring, since these could not differ fundamentally from the palpably ineffective CVM. That is why we agreed with the Minister that these CVM reports underlined the importance of ensuring that all future candidate countries — including Croatia — were fully ready for EU membership by the date of their accession.92

20.11 In the meantime, we cleared the documents.93

The January 2013 Commission report on Romania

20.12 The Commission recalled that, as its previous report had been issued at a time when important questions were raised with regard to the rule of law and the independence of the judiciary in Romania, it had included specific recommendations to restore respect for these fundamental principles and the decision to report six months later, with a focus on the Commission’s recommendations in this area.

20.13 The Minister described the report as a fair and objective assessment of the progress in Romania since last July. He would argue for “positive but balanced” language in the Council Conclusions that were to be adopted in the second half of February 2013.

20.14 After meeting the Romanian prime minister on 4 February 2013, the President of the Commission issued a statement in which he said, inter alia:

“I appreciate the efforts that Prime Minister Ponta has made over the last six months to deliver on the commitments he made last July. The conditions now exist, with a more stable political situation, a new Government and Parliament, to make a real push on the reform process. We need to see further progress on the independence of the judiciary and the appointment to key posts. We will also look to politicians to set an example by stepping aside where integrity rulings or corruption charges exist.”94

92 Commission Communication: 14854/12, “Main Findings of the Comprehensive Monitoring Report on Croatia’s state

of preparedness for EU membership”, was the Commission’s most recent assessment. For the Committee’s consideration of it and Croatia’s accession process as a whole, see (34320) 14854/12: HC 86–xxi (2012–13), chapter 12 (28 November 2012) and the earlier Reports referred to therein.

93 See headnote: (34104)12827/12: HC 86–xi (2012–13), chapter 27 (5 September 2012).

94 See http://europa.eu/rapid/press-release_SPEECH-13–98_en.htm.


Our assessment

20.15 All the areas of continuing concern were those that the Commission had highlighted in every previous such report. As the Minister said, what was now needed was “broad-based support for the reform agenda from all sides of the political and judicial spectrum” — which was, of course, precisely what had been lacking for the past six years, and before accession. Clearly, he and the Commission were hoping that, this time, a new prime minister and a new parliament would finally take a different approach. We concluded that we would have to wait until the next report to see whether or not such hopes were well-founded or, again, misplaced.95

The January 2014 Commission reports on Bulgaria and Romania

20.16 The Commission’s detailed reports are (as on previous such occasions) helpfully summarised by the Minister for Europe (Mr David Lidington) in his Explanatory Memorandum of 6 February 2014, as follows.

Bulgaria

“The Commission reports that since July 2012, progress towards CVM benchmarks in Bulgaria has been limited. Improvements to judicial appointment procedures and an audit by the Prosecutors Office are the only positives described.

“The report acknowledges that the reporting period covers three different Bulgarian governments (the previous government which stood down in February 2013, the three month long caretaker government from March to May 2013, followed by the current coalition established in May 2013) but that all share responsibility for a lack of progress against the CVM benchmanks. Particular concerns are frequent revelations about political influence on the judiciary, lack of prosecutions for corruption and the escape from justice by leaders of organised crime. The Commission calls on the Bulgarian authorities to provide leadership on reform based on core principles of rule of law and independence of the judiciary.

“To help progress and address the issues identified, the Commission makes a series of recommendations to the Bulgarian authorities. Key recommendations are as follows:

“Independence, accountability and integrity of the judiciary

“The report raises concerns about the appointments process for the Judiciary and Magistracy. The report calls for a focus on professionalism and integrity, particularly for senior appointments. Appraisal processes should be introduced together with uniform standards as the basis for promotion. Monitoring and evaluation of court decisions should also be carried out to identify and rectify inconsistencies. Allocation of cases throughout the judiciary should be random and transparent, with case allocation checked by independent experts, to counter public concern about the independence of the judiciary.

95 See headnote: (34649) 5938/13: HC 86–xxxii (2012–13), chapter 13 (13 February 2013).


“Reform and Efficiency of the Judicial System

“The Commission calls for an updated strategy on judicial reform to give direction and momentum to reform efforts. Transparency should be incorporated into this strategy via the introduction of an annual progress report from the Supreme Judicial Council outlining reform measures and setting goals for the next year.

“Key within this reform is the completion of a new Penal Code, which has been under preparation since 2010. In its 2012 CVM report, the Commission recommended setting a target for the completion and implementation of the new Penal Code, this request is again made in this report.

“E-justice has been recognised by Bulgarian Ministers of Justice as an important element in the modernisation of the Bulgarian justice system, assisting with efficiency, transparency and consistency of the judicial process. Although some progress has being made, the application of e-justice facilities consistently throughout the country has yet to be established. The Commission calls for concrete progress towards full implementation.

“Tackling Corruption

“The report highlights Bulgaria’s poor track record in tackling corruption:

“Bulgaria is considered to have one of the highest corruption risks among EU Member States. Tackling high-level corruption is one of the core benchmarks of the CVM, and reports have consistently pointed to shortcomings in terms of the prevention, investigation, and dissuasion through bringing emblematic cases to justice”. The report calls for increased measures not only to prevent corruption, but also to pursue those suspected of corruption via the courts.

“Specific recommendations include: placing a single institution in charge of combating corruption, producing a revised anti-corruption strategy in consultation with civil society, and ensuring that the risk of corruption within public procurement is reduced by increasing the scope of checks and ensuring the effective and consistent application of rules and sanctions.

“Organised Crime

“On combating organised crime, the Commission, as in several other areas, calls for a strategy to be developed and implemented to enable successful prosecution of those involved in organised crime, including punitive measures for addressing those who abscond from court. Following the merger of the Chief Directorate Combating Organised Crime with the State Agency for National Security (SANS) in June 2013, the Commission asks for a policy guiding SANS interaction with equivalent bodies in other EUMS. The report also highlights the failed appointment of an individual* to the Head of SANS and the non-transparent, politically-influenced way by which the individual was selected. This, along with the Commission for Prevention and Ascertainment of Conflicts of Interest (CPACI)’s weak performance and apparent political influence are of cause for concern to the European Commission.”


Romania

“The Commission’s report states that Romania has made progress in many areas since the last report. Many areas for improvement focus on refining and building on the progress made so far.

“What concerns the Commission is the level of commitment to judicial independence by political figures. In terms of the sustainability of reforms made, the report reflects that anti-corruption institutions have maintained their good work, despite political pressure to do otherwise. However, the Romanian Parliament has shown, via its attempts to amend legislation in its members’ favour, that progress still has the potential to be reversed.

“To build on the positive steps and ensure their longevity, the Commission suggests a series of recommendations. Key recommendations are as follows:

“Judicial Independence

“The report praises the role of the Superior Council of Magistracy for its defence of judicial independence and calls for the Romanian authorities to provide the right conditions for this to continue. The Commission also recommends that the Code of Conduct for parliamentarians includes clear provisions to ensure that parliamentarians respect the independence of the judiciary and its decisions.

“Judicial reform and integrity

“The Commission recommends measures which build on the progress made so far in the consistency in judicial practice and on the integrity framework of the judiciary by: i) addressing court workload issues; ii) furthering transparency via consistent and up to date online publication of court decisions; iii) ensuring that laws on conflict of interest and unjustified wealth are applied universally and iv) expanding checks applied to EU fund project procurement to all public procurement.

“Fight against Corruption

“The Commission acknowledges the strong track record Romania is establishing on tackling and prosecuting high-level corruption and calls for this level of rigour towards corruption at any level. Also recommended is to improve the consistency and severity of penalties given for corruption cases and to make public procurement procedures less susceptible to corruption.”


20.17 The Minister endorses these reports:

“They are comprehensive and provide a balanced understanding of progress achieved over the reporting period. The reports also highlight where further efforts are necessary in both countries to meet the required benchmarks. The Government remains supportive of keeping the CVM in place as it provides a useful way of monitoring developments.”


20.18 The Minister professes himself disappointed by the lack of progress made by Bulgaria:

“particularly after a number of positive steps were made in 2012 regarding the legislative framework. This report notes that key institutions such as the Supreme Judicial Council and the Conflict of Interests Commission are not producing results. The Commission is correct in that successive governments have yet to produce strategies to tackle systemic issues in CVM areas and significant challenges remain. The turbulent political situation can go some way to explain the lack of progress against the 2012 recommendations but following this 2014 report, the Bulgarian government will need to act swiftly to address EC concerns.”

20.19 With regard to Romania, the Minister says that the progress achieved:

“demonstrates that the rule of law institutions are exerting their independence, and the continued development of a track record in the prosecution of high-level corruption cases is particularly noteworthy. However, these advances need to be fully supported at all levels to ensure that reforms are sustainable and irreversible. There remains a lack of broad-based political commitment to meeting the objectives of the CVM, which undermines the progress being made at the institutional level. Judicial independence and the separation of powers are essential elements of an impartial and effective judicial system, and are not yet sufficiently embedded in Romania.”

20.20 The Minister endorses the Commission’s proposal to provide its next reports in a year’s time:

“This gives time for implementation of reforms and a better assessment of their sustainability. During this time we will continue to work with the Romanian and Bulgarian authorities to help them meet the benchmarks. We will also encourage the Commission to maintain its close monitoring of the reform process in both countries and to keep Member States informed.”

20.21 The Minister continues to consider that the CVM process :

“a valuable tool in helping Bulgaria and Romania to meet core standards in term of judicial reform and the fight against corruption and organised crime. We are working with like-minded Member States to ensure that the Conclusions to be agreed at the March meeting of the General Affairs Council endorse the Commission’s objective work and underline the need for the CVM to remain in place until the benchmarks are met.”

20.22 The Minister note that further assistance will be provided using existing EU funding under the programmes already available to Romania and Bulgaria, and that Romania also has access to a €100 million World Bank loan to upgrade its judicial infrastructure (“building new court rooms, etc”).

20.23 With regard to bilateral support, the Minister says:


“We will continue to support both countries on judicial reform, anti-corruption and combating organised crime (for Bulgaria) through the British Embassies in Bucharest and Sofia and expertise sharing.

“Recently financed projects included: in Bulgaria, lobbying on Asset Forfeiture including SOCA and HO experts delivering presentations and sharing UK experience, and provision of UK expertise on Counter terrorism texts in the Bulgarian Penal Code currently drafted. In Romania in 2013 we co-funded a web platform to roll out the National Anti-Corruption Strategy to all Ministries and Local Authorities and we funded a project to boost the capacity of the Ministry of Health’s Integrity Unit. This year we will co-sponsor, with the Romanian Government, a regional anti-corruption conference to boost capacity and regional cooperation in South East Europe and the Western Balkans.”

Conclusion

20.24 The situation in Bulgaria is deeply concerning. Improvements to judicial appointment procedures and an audit by the Prosecutors Office are the only positives. 18 months after the last report there are still frequent revelations about political influence on the judiciary, a lack of prosecutions for corruption and leaders of organised crime continuing to evade justice. Yet again the Bulgarian authorities are enjoined to provide leadership on reform based on core principles of rule of law and independence of the judiciary.

20.25 Romania is judged to have made progress in many areas since the last report a year ago. Yet the Minister again notes a continuing lack of broad-based political commitment, which undermines the progress being made at the institutional level: and the Commission remains concerned about both the level of commitment to judicial independence by political figures and the Romanian parliament’s apparent endeavours to mitigate the good work of the anti-corruption institutions via its attempts to amend legislation in its members’ favour, thereby endangering the sustainability of the reforms made.

20.26 Why does all this matter? As the Commission says elsewhere:

“Corruption seriously harms the economy and society as a whole. Many countries around the world suffer from deep-rooted corruption that hampers economic development, undermines democracy, and damages social justice and the rule of law. The Member States of the EU are not immune to this reality. Corruption varies in nature and extent from one country to another, but it affects all Member States. It impinges on good governance, sound management of public money, and competitive markets. In extreme cases, it undermines the trust of citizens in democratic institutions and processes.”

20.27 These words are taken from its first report on corruption in all EU Member States, which was published on 3 February 2014. It notes that three quarters of respondents (76%) think that corruption is widespread in their own country, a quarter (26%) consider that they are personally affected by corruption in their daily lives and around one in twelve (8%) say they have experienced or witnessed a case of


corruption in the past 12 months. Individual country analyses are said to have revealed a wide variety of corruption-related problems, as well as of corruption control mechanisms, some of which have proved effective and others have failed to produce results. Public procurement was found to be particularly prone to corruption in the Member States, owing to deficient control mechanisms and risk management.96

20.28 Thus the situation in Bulgaria and Romania is far from unique. The EU as a whole would appear to have work to do.

20.29 In the meantime, we are again drawing this report to the attention of the House because of its importance to the integrity of the future enlargement process.

21 The EU and the Sahel: appointment of an EU Special Representative

(35800) — —

Draft Council Decision extending the mandate of the European Union Special Representative for the Sahel

Legal base Article 31(2) and 33 TEU; QMV Department Foreign and Commonwealth Office Basis of consideration EM of 20 February 2014 Previous Committee Report None; but see (34702) —: HC 86–xxxiv (2012–13),

chapter 11 (6 March 2013) and HC 86–xxxiii (2012–13), chapter 13 (27 February 2013); also see (34063) —: HC 86–viii (2012–13), chapter 18 (11 July 2012)

Discussion in Council 17 March 2014 Committee’s assessment Politically important Committee’s decision Cleared

Background

21.1 The European External Action Service (EEAS) “Strategy for Security and Development in the Sahel” has four key themes:

• “Firstly, that security and development in the Sahel cannot be separated, and that helping these countries achieve security is integral to enabling their economies to grow and poverty to be reduced.

96 COM(14) 38: Commission Report: EU Anti-Corruption Report; available at:

http://ec.europa.eu/dgs/home-affairs/e-library/documents/policies/organized-crime-and-human-trafficking/corruption/docs/acr_2014_en.pdf.


• “Secondly, that achieving security and development in the Sahel is only possible through closer regional cooperation. This is currently weaker than it needs to be, and the EU has a potential role to play in supporting it.

• “Thirdly, all the states of the region will benefit from considerable capacity-building, both in areas of core government activity, including the provision of security and development cooperation.

• “Fourthly, that the EU therefore has an important role to play both in encouraging economic development for the people of the Sahel and helping them achieve a more secure environment in which it can take place, and in which the interests of EU citizens are also protected.”97

Council Decision 2013/133/CFSP

21.2 This Council Decision of 18 March 2013 appointed Michel Reveyrand-de Menthon as the new European Union Special Representative (EUSR) for the Sahel. The Sahel region is defined as in the EU Strategy for Security and Development in the Sahel, i.e. Mali, Mauritania and Niger.98

21.3 The new EUSR’s mandate was based on the EU’s policy objectives in relation to the Sahel, i.e. to contribute actively to regional and international efforts to achieve lasting peace, security and development in the region. The EUSR should aim to enhance the quality, intensity and impact of the EU’s multi- faceted engagement in the Sahel region, including the EU Strategy for Security and Development in the Sahel. Initial priority would be given to Mali and to the regional dimensions of the conflict there; the EU’s policy objectives being, through the coordinated and effective use of all its instruments, to promote a return for Mali and its people to a path of peace, reconciliation, security and development.

21.4 More specifically, the EUSR was tasked to:

“(a) actively contribute to the implementation, coordination and further development of the Union’s comprehensive approach to the regional crisis, on the basis of its Strategy for Security and Development in the Sahel to enhance the overall coherence and effectiveness of EU activities in Mali and the Sahel.

“(b) engage with all relevant stakeholders of the region, governments, regional authorities, regional and international organisations, civil society and diasporas, with a view to furthering the EU’s objectives and contribute to a better understanding of the role of the Union in the region.

“(c) represent the Union in relevant regional and international fora, including the Support and Follow Up Group on the situation in Mali, and ensure visibility for EU

97 The Strategy is available at http://www.eeas.europa.eu/africa/docs/sahel_strategy_en.pdf.

98 EUSRs promote the EU’s policies and interests in troubled regions and countries and play an active role in efforts to consolidate peace, stability and the rule of law. They support the work of the High Representative of the Union for Foreign Affairs and Security Policy (HR), in the regions concerned, and provide the EU with an active political presence in key countries and regions, acting as a “voice” and “face” for the EU and its policies. See http://eeas.europa.eu/policies/eu-special-representatives/index_en.htmfor full details.


support to crisis management and conflict prevention, including EUTM Mali and EUCAP SAHEL.

“(d) maintain close cooperation with the UN, in particular the UN Secretary General’s Special Envoy for the Sahel and the UN Secretary General’s Special Representative for West Africa, the AU, in particular the AU High Representative for Mali and Sahel, ECOWAS and other leading national, regional and international stakeholders including other Special Envoys for the Sahel.

“(e) closely follow the regional and trans-boundary dimensions of the crisis, including terrorism, organized crime, arms smuggling, human trafficking, drug trafficking, refugee and migration flows and related financial flows; in close cooperation with the EU Counter Terrorism Coordinator, contribute to the further implementation of the EU Counter terrorism Strategy.

“(f) maintain regular high level political contacts with the countries in the region affected by terrorism and international crime in order to ensure a coherent and comprehensive approach and to ensure the EU’s key role in the international efforts to fight terrorism and international crime. This includes the EU’s active support to regional capacity-building in the security sector, and ensuring that the root causes of terrorism and international crime in the Sahel are adequately addressed.

“(g) closely follow the political and security consequences of humanitarian crises in the region.

“(h) with regard to Mali, contribute to regional and international efforts to facilitate the resolution of the crisis, in particular the implementation of the roadmap for the political transition, a free and transparent electoral process and a credible national inclusive dialogue.

“(i) promote institution building, security sector reform and long-term peace building and reconciliation in Mali.

“(j) cooperate with the EUSR for Human Rights in promoting respect for human rights and international humanitarian law and maintain regular contacts with relevant authorities in Mali and in the region, the Office of the prosecutor of the International criminal court, the office of the High Commissioner for Human Rights and the human rights defenders and observers in the region. Contribute to the implementation of the Unions’ human rights policy including the Union Guidelines on human rights and international humanitarian law, in particular the Union Guidelines on Children and Armed conflict as well as Union Guidelines on violence against women and girls and combating all forms of discrimination against them, the Updated Union Guidelines on promoting compliance with international humanitarian law, the Revised Guidelines on the Protection of Civilians in CSDP Missions and Operations and the Union policy regarding UNSCR 1325 (2000) on Women, Peace and Security including by monitoring and reporting on developments in this regard.

“(k) follow up and report on compliance with relevant UNSCRs, in particular 2056 (2012) 2071 (2012) and 2085 (2012).”


21.5 As with the already established EUCAP SAHEL Niger mission,99 we shared the Minister’s concern not so much about the case for this additional EUSR (which was well-made) but about ensuring Value for Money (VFM). Looking ahead, we said that we expected the salary and other VFM aspects of the EUSR role to be given full consideration in the review of EUSRs, which we looked forward to scrutinising in due course.100

21.6 In subsequent correspondence, the Minister said that officials were working on a strategy to address this issue, and that he would update the Committee separately on EUSR future mandates and how both the monitoring and evaluation of EUSRs could be improved.

Our assessment

21.7 Given that the EUSR Sahel was to have few staff, a small budget and no executive responsibilities, we found it difficult to see the justification for an annual remuneration of a quarter of a million Euros, or for it to be the same as that of counterparts with palpably bigger responsibilities.

21.8 We trusted that the Minister’s officials’ engagement in addressing the salary and other VFM aspects of the EUSR role would include ways in which the EUSRs’ individual performances could be better measured, given that (as in this instance) their tasks were defined in such terms that a high “box marking” was almost guaranteed, and looked forward to hearing more from the Minister about his approach.101

The draft Council Decision

21.9 The draft Council Decision proposes the renewal of the incumbent’s mandate for one year, until 28 February 2015.


21.10 In his Explanatory Memorandum of 20 February 2014, the Minister for Europe (Mr David Lidington) says that he supports renewal of the mandate.

21.11 The Minister continues as follows:

“M. Reveyrand has performed satisfactorily in the EUSR Sahel role.

“In June 2013 he was a co-signatory of the Ouagadougou Accords signed between the Government of Mali and groups representing the Tuareg separatists. This agreement formed the basis of the ceasefire between Bamako and the MNLA, and

99 EUCAP SAHEL Niger is designed to build the capacity of Nigerien security forces to fight terrorism and organised

crime. The budget for the first year of the mission is €8,700,000; it is due to last for 24 months and, at full operational capability, consist of up to 78 people. The aim of the mission is:

“to enable the Nigerien authorities to implement the security dimension of their Strategy for Security and Development, as well as improving regional coordination in tackling common security threats. In particular, EUCAP Sahel Niger will aim to contribute to the development of an integrated, sustainable, and human rights-based approach to the fight against terrorism and organised crime.”

100 For the full background, see HC 86–xxxiii (2012–13), chapter 13 (27 February 2013).

101 For the full background, see (34702) —: HC 86–xxxiv (2012–13), chapter 11 (6 March 2013).


permitted the presidential and legislative elections in Mali to take place. It remains the basis on which further progress in the peace process is likely to be made.

“Reveyrand has travelled widely in the Sahel-Sahara region over the last year, and has been energetic in building dialogue with regional and international contacts on the issues facing the Sahel. His mandate ensures that his activity is closely linked to the EU’s Strategy for Security and Development in the Sahel, which we support.

“Reveyrand’s collaborative approach is appreciated among EU Member States, and there is agreement that the EUSR can play an important role in helping Sahelian states to address the wide-ranging challenges affecting the region. Similarly, the EUSR’s co-ordinating function can help to mobilise the range of EU instruments available to assist in the region, and to co-ordinate the EU’s work with that of other international actors such as the UN, World Bank, African Union and ECOWAS. Consequently there is broad consensus that Reveyrand’s mandate be extended for a further 12 months.”

“2014–15 Mandate and Budget

“In committee discussions in Brussels we have successfully introduced a number of amendments to the mandate, to reflect the (broadly positive) political developments in the Sahel since February 2013. These include the signing of the Ouagadougou Accords in June, the deployment of the UN Mission (MINUSMA) to Mali in July, and the successful presidential and legislative elections in Mali. We also added language on the need for the EUSR to push for further progress on the Malian peace process, and to keep a weather eye on Niger and Burkina Faso, which will hold important elections in 2015–16.

“Following the light-touch ‘refresh’ of the EU’s Sahel Strategy (which will in future also cover Chad and Burkina Faso), the EUSR has proposed to expand his team to include a further (fifth) POLAD (Policy Advisor) who would be based in Brussels. The proposal was accompanied by a bid to increase the EUSR team’s budget by EUR 80,000 (or 6%), from EUR 1,350,000 to EUR 1,430,000, to cater for this new appointment. We pushed back on this, and insisted that any increase in staffing should be funded from the EUSR’s existing resources. The EUSR has therefore worked to reduce costs in other areas of the budget, and the most recent draft budget now proposes an additional POLAD with no financial increase. We are content with this outcome.

“The extension of Reveyrand’s mandate until February 2015 would bring it into line with the majority of other EUSR mandates, which will be renewed for only 8 months from June 2014 to February 2015.”

Conclusion

21.12 The Minister notes that the 12-month extension of M. Reveyrand’s mandate until February 2015 would bring it into line with the majority of other EUSR mandates, “which will be renewed for only 8 months from June 2014 to February 2015”. This somewhat throwaway remark touches on one of the general issues — the question of


when the review of current guidelines on EUSRs and the apparent tussle between the HR and Member States over their future — that are raised in a separate chapter of this Report on the (former) EUSR to the Middle East Peace Process and the recent resignations of the EUSRs to the South Caucasus and Georgia and to Central Asia.102

21.13 So far as this mandate extension is concerned, however, no questions arise. Given the interest in CSDP generally, I suggest that (as usual with such mandate renewals) it is reported to the House.

22 Multiannual Financial Framework 2014–2020: revenue

(a) (35806) 5466/14 — (b) (35807) 5467/14 — (c) (35808) 5468/14 —

Amended Draft Council Decision on the system of own resources of the European Union Amended Draft Council Regulation laying down implementing measures for the system of own resources of the European Union Amended Draft Council Regulation on the methods and procedure for making available the traditional, VAT and GNI-based own resources and on the measures to meet cash requirements (Recast)

Legal base (a) Article 311, third paragraph TFEU and Article

106a EURATOM; consultation; unanimity (b) Article 311(4), fourth paragraph TFEU and Article 106a EURATOM; consent; QMV (c) Article 322(2) TFEU and Article 106a EURATOM; consultation; QMV

Deposited in Parliament 17 February 2014 Department HM Treasury Basis of consideration EM of 17 February 2014 Previous Committee Report None Discussion in Council Possibly May 2014 Committee’s assessment Politically important Committee’s decision Cleared

102 See (35701) — at chapter 19 of this Report.


Background

22.1 The February 2013 European Council reached a political agreement on the revenue side for EU budgeting in the 2014–2020 Multiannual Financial Framework (MFF). The agreed financing system (the ‘Own Resources’ system) for the 2014–2020 MFF sees very little change to the system in place for the 2007–2013 MFF — there will be no new Own Resource, no EU-wide taxes and no change to the UK abatement.

The documents

22.2 These Presidency texts to implement the European Council political agreement replace the Commission’s texts of November 2011.103

22.3 The amended draft Council Decision, document (a), is the final draft text for the so-called Own Resources Decision (ORD) for the period 2014–2020. The ORD is the most important document in this legislative package, as it sets out the general rules for the financing of EU budget expenditure by Member States, including the budgetary corrections.

22.4 The first amended draft Council Regulation, document (b), is the final draft text laying down implementing measures for the Own Resources system. It sets out the requirements on Member States for the operation of the system and for the control and supervision measures.

22.5 The second amended draft Council Regulation, document (c), is the final draft text on the methods and procedure for making available the traditional, VAT and GNI-based own resources and on the measures to meet cash requirements. It sets out the procedures for Member State financing of the annual EU budget through the Own Resources system, including the arrangements for the holding of an account into which contributions are made, specifying the dates on which payments fall due and the penalties for late payment.

22.6 Member States have provisionally indicated that they are content with these texts, which are now being transmitted to the European Parliament to fulfil its Treaty role, before returning to the Council for formal adoption.


22.7 The Economic Secretary to the Treasury (Nicky Morgan) comments that:

• the Government believes that this draft Own Resources legislative package is acceptable;

• the draft ORD, document (a), is faithful to the European Council deals on the 2014–2020 MFF that the Prime Minister negotiated and accurately reflects what has been agreed by the European Council;

103 (33361) 16844/11 (33362) 16845/11 (33363) 16846/11 (33364) 16847/11 (33365) 16848/11: see HC 428–xlv (2010–12),

chapter 7 (20 December 2011), HC 428–lii (2010–12), chapter 11 (29 February 2012), HC 86–ii (2012–13), chapter 17 (16 May 2012), HC 86–xi (2012–13), chapter 2 (5 September 2012) and HC Debs, 31 October 2012, cols. 295-346.


• there is little change to the financing side of the EU budget over the 2014–2020 MFF, particularly to the language on the UK abatement; and

• the draft ORD text retains the existing categories of Own Resources and does not introduce any new Own Resources or EU-wide taxes to finance the EU budget.

22.8 The Minister then explains some of the detail of the draft ORD, saying that:

• the Member States’ “retention rate” for Traditional Own Resources (TOR), which covers Member States’ collection costs for customs duties, is reduced from 25% to 20%

• this means a larger share of the budget will be financed from TOR with a corresponding reduction in GNI-based contributions;

• this change will, however, have no impact on the ultimate cost of the EU budget to the UK;

• for the period 2014–2020, the draft ORD re-introduces the reduced rate of call for VAT-based contributions for Germany, the Netherlands and Sweden, which will be fixed at 0.15% for these Member States compared to 0.3% for all other Member States;

• Austria, which benefitted from a reduced call rate for its VAT-based contributions over 2007–2013, will revert to a standard call rate (0.3%) over the 2014–2020 MFF;

• for the period 2014–2020 the draft ORD also re-introduces reductions in the GNI-based contributions of the Netherlands and Sweden and introduces a reduction in these contributions for Denmark;

• these reductions constitute lump sum corrections for these Member States and are fixed at €695 million (£570.9 million), €185 million (£152 million) and €130 million (£106.8 million) per year respectively;

• reductions in GNI-based contributions of €30 million (£24.6 million) in 2014, €20 million (£16.4 million) in 2015 and €10 million (£8.2 million) in 2016 are provided also to Austria;

• all amounts are expressed in 2011 prices;

• the draft ORD lays down the Own Resources ceilings for payment appropriations (1.23% of total Member States GNI) and commitment appropriations (1.29%) and sets out the method for calculating subsequent changes to these ceilings following the introduction of European System of Accounts 2010 (ESA 2010) by all Member States;

• the draft ORD retains the current mechanism for the UK abatement and the way it is financed by the other Member States; and

• several time-limited transitional provisions in the abatement text have, as expected, been deleted, as they expired at the end of 2013 (for example, the cap on the total cost and phase-in schedule of the UK’s rebate reduction in 2005).


22.9 The Minister notes that:

• the ORD requires unanimity in Council, followed by approval by Member States in accordance with their constitutional requirements (in the case of the UK, approval of previous ORDs has taken the form of successive amendments to Section 1(2)(e) of the European Communities Act 1972 — most recently by the European Communities (Finance) Act 2008);

• the European Parliament is consulted, though its consent is not required; and

• the ORD will enter into force on the first day of the month following receipt by the Commission of the final notification of Member State approval, but will apply retrospectively to 1 January 2014.

22.10 The Minister continues by briefly describing the two draft Council Regulations accompanying the draft ORD, noting first that there is a slight change from the current system where almost all of the detail on implementation and making payments to the Commission are set out in a single Implementing Regulation.

22.11 The Minister says that:

• the draft implementing Regulation, document (b), contains elements of the current Implementing Regulation, as well as elements of Council Regulation (EC, Euratom) No. 1026/1999, which determines the powers and obligations of agents authorised by the Commission to carry out controls and inspections of the EU’s Own Resources; and

• it sets out the requirements on Member States for the operation of the Own Resources system and for the control and supervision measures.

22.12 As for draft “making available” Regulation, document (c), the Minister says that:

• it contains the remaining elements of the current Implementing Regulation and sets out the procedures for Member States financing of the annual EU budget through the Own Resources system;

• these include the arrangements for the holding of an account into which contributions are made, specifying the dates on which payments fall due and the penalties for late payment; and

• since this legislative proposal contains in a single new act the bulk of the original legislative act (the Implementing Regulation) and all the amendments made to it, it is presented as a ‘recast’ of existing Regulations.

22.13 Turning to the financial implications of the legislative package the Minister says that:

• the actual financial cost to the UK of the 2014–2020 MFF is contingent on a number of factors, including the size of each year’s EU budget, distribution of spending across programmes and Member States, implementation, miscellaneous revenues of the EU (for example, fines and penalties imposed by the Commission


on private companies and Member States) and, most importantly, economic factors such as relative growth performance and exchange rates;

• these factors determine the level of EU spend, relative economic sizes of Member States (which in turn determine how the financial burdens are divided) and the value of the UK’s abatement;

• in relation to the 2011 amended Commission proposal for Own Resources legislation,104 the UK’s contribution to the 2014–2020 MFF was provisionally estimated to be around 14.5% pre-abatement and 11.4% post-abatement;

• the proportion of TOR that Member States keep to cover their collection costs is reduced from 25% per cent of the amount collected to 20% — while this will affect the UK’s in-year contributions, it will not affect the ultimate cost of the 2014–2020 MFF to the UK, when the abatement is taken into consideration;

• this is because, through the abatement mechanism, the UK does not derive any financial benefits or incur additional costs due to any changes to the financing system of the EU since 1984;

• this “not a penny more, not a penny less” principle ensures that the ultimate cost of the EU budget to the UK today is the same as it would have been under the system that existed in 1984;

• various changes to the EU financing system since then are reflected in adjustments to the calculation of the UK abatement;

• for example, changes in the TOR collections costs since 1984 are negated by “TOR windfall gains” adjustments and the effect of the introduction of the Fourth Resource (GNI-based contributions) on the cost to the UK are corrected through the “UK advantage” adjustment;

• this approach and the underlying principle mean that the UK will not be affected by the change in TOR collection costs when the UK abatement is taken into account;

• the UK contributes to the annual GNI reductions (lump sum corrections) for other Member States;

• this means that the UK will contribute to the two new lump sum corrections (for Denmark and Austria) which average at approximately €138.6 million (£113.8 million) per year for the two Member States over the 2014–2020 period; and

• on the basis of the 2011 estimates for the UK’s financing shares, these would cost the UK approximately €20.1 million (£16.5 million) per year.

104 Ibid.


Conclusion

22.14 Given that this legislative package will implement the European Council’s agreement on the current Multiannual Financial Framework, as it relates to revenue for EU budgets for the period 2014–2020, we clear the documents. However, we note that the agreed Own Resources Decision will require an Act to amend Section 1(2)(e) of the European Communities Act 1972 and suggest that Members will want to take that opportunity to examine the Government’s assertions in relation to the effects of the Own Resources system for the UK during the period 2014–2020.

23 Relocation of the European Police College (CEPOL)

(35741) 5522/14 COM(14) 7

Commission Communication: Commission Opinion on the initiative for a Regulation amending Decision 2005/681/JHA establishing the European Police College (CEPOL) presented by Belgium, Bulgaria, the Czech Republic, Germany, Estonia, Greece, Spain, France, Croatia, Italy, Cyprus, Latvia, Lithuania, Luxembourg, Hungary, Malta, the Netherlands, Austria, Poland, Portugal, Romania, Slovenia, Slovakia, Finland and Sweden

Legal base — Document originated 16 January 2014 Deposited in Parliament 23 January 2014 Department Home Office Basis of consideration EM of 12 February 2014 Previous Committee Report None; but (35619) 17043/13: HC 83–xxvi (2013–14),

chapter 3 (8 January 2014) is relevant Discussion in Council No date set Committee’s assessment Politically important Committee’s decision Cleared; but relevant to document 17043/13 referred

to European Committee B for a debate on the opt-in (decision reported 8 January 2014)

Background

23.1 The European Police College (CEPOL) is currently based at Bramshill, in Hampshire. Its location is set out in a 2005 Council Decision establishing CEPOL as an EU Agency. In December 2012, the Government announced that the Bramshill site, which also houses the UK’s College of Policing for England and Wales, would be sold and that CEPOL would be required to relocate. Shortly afterwards, in March 2013, the Commission published a draft Regulation which would repeal the 2005 Decision and a 2009 Decision establishing


Europol — the Hague-based European Police Office — as an EU Agency and merge their functions within a single EU Agency for Law Enforcement Cooperation and Training.105

23.2 We understand that most Member States and the European Parliament oppose the proposed merger. As, in any event, negotiations on the draft Europol Regulation are expected to continue into 2015, it seems likely that a new location for CEPOL will need to be agreed if the Government’s objective of selling the Bramshill site is to be achieved in the course of 2014. In June 2013, the Government told us that a number of Member States had expressed an interest in hosting CEPOL but that it did not yet have a settled view on which alternative location would be appropriate.106 However, the Justice and Home Affairs Council in October 2013 reached a political agreement on “provisional arrangements” to host CEPOL in Budapest, Hungary, from the date on which the Bramshill site closes, pending the outcome of negotiations on the draft Europol Regulation.107

23.3 In November 2013, 25 Member States (the exceptions are Denmark, Ireland and the UK who have special arrangements for EU justice and home affairs measures) presented an initiative to establish a new base for CEPOL in Budapest on a date yet to be determined in 2014. The Member State initiative takes the form of a draft Regulation amending the relevant provisions of the 2005 Council Decision and is described in our Twenty-ninth Report of 8 January 2014. The draft Regulation is subject to the UK’s Title V (justice and home affairs) opt-in. The UK has until 8 March 2014 to notify the Council Presidency of its opt-in decision.

23.4 The Government told us that the draft Regulation offered “an obvious benefit” insofar as it would facilitate the relocation of CEPOL, freeing the Bramshill site for sale later this year. However, the Government was unable to indicate how much, if any, of the relocation costs would fall to the UK, and expressed concern that the Title V legal base proposed in the draft Regulation would give the European Parliament a power to co-determine the location of an EU Agency, a matter usually reserved to the Council.

23.5 We asked the Government to clarify its position on a number of issues, notably:

• whether it agreed with the choice of Budapest, and why it would be a good base for CEPOL;

• whether the draft Regulation should cite a different legal base which removed the European Parliament’s power of co-decision and, if so, which one;

• whether a draft Regulation was the appropriate legal instrument to amend the 2005 Council Decision;

• the costs which the UK may be required to bear for the relocation of CEPOL; and

• the implications of the Government’s opt-in decision for its 2014 block opt-out of pre-Lisbon EU police and criminal justice measures.

105 See (34843) 8229/13 and (34842) 8230/13: HC 83–iii (2013–14), chapters 1 and 14 (21 May 2013).

106 Letter of 20 June 2013 from the Minister for Security (James Brokenshire) to the Chair of the European Scrutiny Committee.

107 See Council Conclusions at http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/jha/138925.pdf.


23.6 We also recommended that the Government’s opt-in decision should be debated in European Committee B.

The Commission Communication

23.7 The Commission has produced an “own initiative” opinion on the draft Regulation. It rejects the proposal on the following grounds:

• it is “in direct opposition” to the draft Europol Regulation put forward by the Commission which proposes merging Europol and CEPOL;

• it makes no reference to provisional arrangements for the relocation of CEPOL, as envisaged in the political agreement reached by the Justice and Home Affairs Council last October;

• it separates the decision on the location of CEPOL from the broader objective of functional and operational reform which underpins the Commission’s merger proposals; and

• the Impact Assessment accompanying the draft Regulation only considers the costs and benefits of relocation to Budapest, without taking into account and comparing other options, including the costs savings that would result from the merger of CEPOL and Europol.

23.8 The Commission concludes:

“Should this initiative be pursued, the Commission would be obliged to make a Declaration, at the time of its adoption, on the provisional nature of this Regulation, its adverse budgetary effects and the necessity of not prejudging the outcome of discussions on the Commission’s own proposal. In that regard, the Commission encourages the European Parliament and the Council to build on the constructive progress that is being made on its proposal to reform Europol’s legal framework while reflecting on an alternative solution to co-locate CEPOL and Europol that would match the goals of rationalisation and operational improvement for both agencies.”108


23.9 The Minister for Policing, Criminal Justice and Victims (Damian Green) notes the Commission’s negative opinion on the draft Regulation and adds:

“We have previously stated our concern that a merger will mean that CEPOL’s training role will be subsumed into Europol’s operational role, and we think the cost savings or “synergies” suggested by the Commission will be difficult to achieve. The Commission’s own research, Study on the amendment of the Council Decision 2005/681/JHA setting up CEPOL activity — Final Report, April 2012, carried out by the independent research body GHK, said that in the case of a merger operational

108 See pp.3–4 of the Communication.


activities would take the lead and learning activities would be downscaled in the longer term. The report also said that cost savings would be minimal.”109

23.10 Notwithstanding the Commission’s opposition to the draft Regulation, the Minister notes that the Presidency is keen to secure a political agreement before the May elections to the European Parliament.

Conclusion

23.11 The Commission’s negative opinion is to be expected, given that the Member State initiative to relocate CEPOL to Budapest on what would appear to be a permanent basis would undermine its own proposal to merge and co-locate CEPOL with Europol in The Hague. As the Commission has no power to obstruct the adoption of the draft Regulation on the relocation of CEPOL to Budapest, should the Council and European Parliament agree that it is an appropriate location, we are content to clear the Communication from scrutiny, but consider the Commission opinion to be relevant to the opt-in debate we have already recommended. We note, in that regard, that the Minister has yet to state his view on the suitability of the proposed new site or to address the questions we raised in our Twenty-ninth Report of 8 January 2014. We urge him to do so forthwith, so that the House is able to come to an informed view at the conclusion of the opt-in debate.



24 Combating racism and xenophobia

(35760) 5784/14 COM(14) 27 + ADD 1

Commission report on the implementation of Council Framework Decision 2008/913/JHA on combating certain forms of racism and xenophobia by means of criminal law Commission Staff Working Document: National transposition measures and data on the application of the Framework Decision submitted by Member States

Legal base — Document originated 27 January 2014 Deposited in Parliament 30 January 2014 Department Home Office Basis of consideration EM of 13 February 2014 Previous Committee Report None Discussion in Council No date set Committee’s assessment Politically important Committee’s decision Cleared

Background

24.1 In 2008, the Council agreed a criminal law measure — Framework Decision 2008/913/JHA — introducing a limited harmonisation of Member States’ laws on racism and xenophobia. It requires Member States to create criminal offences and penalties for certain types of intentional conduct directed against a group of persons (or individuals belonging to such a group) defined by reference to their race, colour, religion, descent or national or ethnic origin which:

• publicly incites violence or hatred, including through the dissemination or distribution of tracts, pictures or other material; or

• publicly condones, denies or grossly trivialises genocide, war crimes and crimes against humanity, or crimes within the jurisdiction of the Nuremburg Tribunal,110 when such conduct is carried out in a manner likely to incite violence or hatred; or

• instigates, aids or abets the commission of such offences.

24.2 Member States may decide only to penalise conduct carried out in a manner likely to disturb public order or which is threatening, abusive or insulting. The Framework Decision requires Member States to introduce a maximum penalty of not less than one to three years’ imprisonment and to ensure that racist or xenophobic motivation is either considered an aggravating circumstance when prosecuting other crimes, or may be taken

110 This refers to crimes, against peace, war crimes and crimes against humanity as defined in Article 6 the Charter of

the International Military Tribunal established to prosecute major war criminals of the Axis powers following World War Two.


into account when determining sentence. The Framework Decision also includes rules on jurisdiction and the liability of legal persons, as well as safeguards intended to protect fundamental rights, notably freedom of expression and association. Member States had until the end of November 2010 to implement the Framework Decision.

24.3 In July 2013, the Government confirmed its intention to opt out of all EU police and criminal justice measures adopted before the Lisbon Treaty took effect on 1 December 2009. The 2008 Framework Decision on racism and xenophobia is not included in the list of 35 measures that the Government has said it intends to seek to rejoin.111 As a consequence, it will cease to apply to the UK with effect from 1 December 2014 and the UK will be released from its obligation to implement the criminal law provisions it contains.

The Commission report

24.4 The purpose of the Commission report is to assess whether Member States have correctly transposed the requirements of the Framework Decision into their national laws and are complying with its provisions. The report recalls that, despite the disparate legal frameworks and traditions governing racist and xenophobic hate or speech crimes across Member States, the Framework Decision establishes sufficient “common ground” to ensure that the same conduct constitutes an offence throughout the EU and attracts “effective, proportionate and dissuasive” penalties.

24.5 The report reveals a mixed picture, largely because many Member States have relied on existing national criminal laws and interpretative case law to comply with the requirements of the Framework Decision, rather than introducing specific new legislation. The UK, for example, has notified 22 national transposition measures, most pre-dating the Framework Decision, which implement its provisions in England and Wales, Scotland, Northern Ireland and Gibraltar. In many cases, the language used in the Framework Decision is only partially reflected in national implementing legislation, creating a degree of uncertainty as to the scope of the criminal offences established and their full compliance with the Framework Decision.

24.6 The report notes that a large majority of Member States have introduced appropriate criminal penalties and ensure that their criminal justice systems take due account of racism and xenophobia as a motivating factor in the commission of other offences. The Commission questions, however, whether all Member States have complied with the rules establishing jurisdiction (although some grounds of jurisdiction, including extra-territorial jurisdiction for crimes committed by a national of a Member State outside its territory, are optional).

24.7 The report draws attention to examples of good practice, such as the creation of specialised units to investigate and prosecute hate speech and hate crime, and better protection for victims. It underlines the need for close cross-border cooperation to tackle the dissemination of hate speech via the internet, and for the collection of reliable and comparable data on the incidence (and response to) hate and speech crimes.

111 See Command Paper 8671, published July 2013.


24.8 The report concludes that a number of Member States have not yet correctly transposed the Framework Decision, highlighting, in particular, shortcomings in relation to the definition of offences condoning, denying or grossly trivialising genocide, crimes against humanity and war crimes (including crimes within the jurisdiction of the Nuremberg Tribunal), the liability of legal persons, and jurisdiction. The Commission says that it will seek to address any deficiencies through a process of bilateral dialogues with the relevant Member States. It notes that it will be able to bring infringement proceedings in the event of non-compliance from 1 December 2014.

The Government’s position

24.9 The Minister for Crime Prevention (Norman Baker) welcomes the Commission’s report, adding:

“It is encouraging to learn that criminal legislation to deal with serious forms of racism and xenophobia has been implemented in other Member States.”112

24.10 However, he takes issue with the Commission’s assessment of the UK and Gibraltar’s record of compliance with elements of the Framework Decision:

“While the UK and Gibraltar have no specific criminal offences of publicly condoning, denying or grossly trivialising crimes of genocide, crimes against humanity, war crimes, and crimes against peace when carried out in a manner likely to incite to violence or hatred (as referred to in Article 1(1)(c) and (d) of the Framework Decision) in our view, any conduct that seeks to incite violence or hatred may well, depending on the circumstances, amount to an offence under existing incitement to hatred legislation in the UK. Case law113 setting out how this has been applied in the UK courts was submitted to the Commission and this point is highlighted in the report.”114

24.11 The Minister notes that that Commission report does not make clear that some of the grounds of jurisdiction set out in the Framework Decision are optional and so are not binding on the UK. He considers that a combination of existing domestic legislation and common law provisions in the UK, as well as existing and new legislation in Gibraltar, ensures compliance with the requirements of the Framework Decision without the need to create specific new offences.

24.12 The Minister confirms that the Government does not intend to seek to opt back into the Framework Decision once it ceases to apply to the UK from 1 December 2014, but adds:

“Notwithstanding the Government’s decision to opt out of the Framework Decision, we take the issue of hate crime very seriously, and will continue to work with other Member States to tackle this at a practical level.”115


113 http://www.cps.gov.uk/news/latest_news/101_09/.




24.13 He says that:

“The UK [and Gibraltar] will continue to meet the requirements of this instrument regardless of our participation in this Framework Decision.”116

Conclusion

24.14 In light of the Government’s decision to exercise its block opt-out of pre-Lisbon EU police and criminal justice measures, including this Framework Decision, the Commission report has minimal legal or policy implications for the UK and we are content to clear it from scrutiny. We nevertheless draw it to the attention of the House because we consider that the Government’s commitment to continue to comply with the requirements of the Framework Decision once it has been released from its obligation to do so, from 1 December 2014, will be of considerable political interest.



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

Cabinet Office

(35748) 5175/14 + ADD 1 COM(13) 942

Draft Council Decision on a position to be taken within the EU-Chile Association Committee regarding the amendment of Annex XII to the Agreement establishing an association between the European Community and its Member States, of the one part, and the Republic of Chile, of the other part, setting out the list of Chilean entities which procure in accordance with the provisions of Title IV of Part IV (Government Procurement).

Department for Business, Innovation and Skills

(35766) 5722/14 + ADD 1 COM(13) 848

Draft Council Decision on the conclusion of a Cooperation Agreement on a Civil Global Navigation Satellite System (GNSS) between the European Community and its Member States and the Kingdom of Morocco.

Department for Environment, Food and Rural Affairs

(34948) 9875/13 COM(13) 286

Commission Report on the reviews undertaken under Article 30(9) and Article 73 of Directive 2010/75/EU on industrial emissions addressing emissions from intensive livestock rearing and combustion plants.

(35798) 6173/14 + ADD 1 COM(14) 49

Draft Council Decision on the position to be adopted in the Indian Ocean Tuna Commission (IOTC).

Department for International Development

(35706) — —

European Union Direct Financial Support to the Palestinian Authority.

(35711) — —

EU Development Assistance to Central Asia.


Department for Transport

(35792) 6140/14 + ADD 1 COM(14) 47

Draft Council Decision on the conclusion of a Protocol amending the Agreement on Air Transport between Canada and the European Community and its Member States, to take account of the accession to the European Union of the Republic of Croatia.

(35793) 6151/14 + ADD 1 COM(14) 48

Draft Council Decision on the signing of a Protocol amending the Agreement on Air Transport between Canada and the European Community and its Member States, to take account of the accession to the European Union of the Republic of Croatia.

(35804) 6793/14 COM(14) 95

Draft Council Decision on the position to be adopted within the relevant committees of the United Nations Economic Commission for Europe as regards the proposals for amendments to Regulations Nos. 3, 6, 7, 10, 13, 18, 19, 27, 46, 48, 67, 74, 107, 110, 113, 117, 123, 129 and the draft Global Technical Regulation on the Worldwide harmonised Light-duty vehicle Test Procedures (WLTP) and the draft Global Technical Regulation on Tyres.

Foreign and Commonwealth Office

(35717) 5136/14 COM(13) 936

Commission Report under Article 213 of Regulation (EU, Euratom) No. 966/2012 on the Accounting Officer and Internal Auditor of the European External Action Service (EEAS).

HM Treasury

(35779) 5883/14 COM(14) 45

Draft Decision on the mobilisation of the European Globalisation Adjustment Fund in accordance with Point 28 of the Interinstitutional Agreement of 17 May 2006 between the European Parliament, the Council and the Commission on budgetary discipline and sound financial management (application EGF/2013/008 ES/Comunidad Valenciana textiles from Spain).


Formal minutes

Wednesday 26 February 2014

Members present:

Mr William Cash, in the Chair

Michael Connarty Mr James Clappison Chris Kelly

Jacob Rees-MoggHenry Smith Mr Michael Thornton

The Committee deliberated. Draft Report, proposed by the Chair, brought up and read. Ordered, That the draft Report be read a second time, paragraph by paragraph. Paragraphs 1.1 to 9.3 read and agreed to. Paragraph 9.4 read, amended and agreed to. Paragraphs 9.5 to 13.7 read and agreed to. Paragraphs 13.8 to 13.11 read, amended and agreed to. Paragraphs 14.1 to 25 read and agreed to. Resolved, That the Report be the Thirty-seventh Report of the Committee to the House. Ordered, That the Chair make the Report to the House.

****

[Adjourned till Wednesday 5 March at 2.00 p.m.


Standing Order and membership The European Scrutiny Committee is appointed under Standing Order No.143 to examine European Union documents and—

a) to report its opinion on the legal and political importance of each such document and, where it considers

appropriate, to report also on the reasons for its opinion and on any matters of principle, policy or law which

may be affected;

b) to make recommendations for the further consideration of any such document pursuant to Standing Order

No. 119 (European Committees); and

c) to consider any issue arising upon any such document or group of documents, or related matters.

The expression “European Union document” covers —

i) any proposal under the Community Treaties for legislation by the Council or the Council acting jointly with

the European Parliament;

ii) any document which is published for submission to the European Council, the Council or the European

Central Bank;

iii) any proposal for a common strategy, a joint action or a common position under Title V of the Treaty on

European Union which is prepared for submission to the Council or to the European Council;

iv) any proposal for a common position, framework decision, decision or a convention under Title VI of the

Treaty on European Union which is prepared for submission to the Council;

v) any document (not falling within (ii), (iii) or (iv) above) which is published by one Union institution for or

with a view to submission to another Union institution and which does not relate exclusively to consideration

of any proposal for legislation;

vi) any other document relating to European Union matters deposited in the House by a Minister of the Crown.

The Committee’s powers are set out in Standing Order No. 143.

The scrutiny reserve resolution, passed by the House, provides that Ministers should not give agreement to EU

proposals which have not been cleared by the European Scrutiny Committee, or on which, when they have been

recommended by the Committee for debate, the House has not yet agreed a resolution. The scrutiny reserve

resolution is printed with the House’s Standing Orders, which are available at www.parliament.uk.

Current membership

Mr William Cash MP (Conservative, Stone) (Chair)

Andrew Bingham MP (Conservative, High Peak)

Mr James Clappison MP (Conservative, Hertsmere)

Michael Connarty MP (Labour, Linlithgow and East Falkirk)

Geraint Davies MP (Labour/Cooperative, Swansea West)

Julie Elliott MP (Labour, Sunderland Central)

Stephen Gilbert MP (Liberal Democrat, St Austell and Newquay)

Nia Griffith MP (Labour, Llanelli)

Chris Heaton-Harris MP (Conservative, Daventry)

Kelvin Hopkins MP (Labour, Luton North)

Chris Kelly MP (Conservative, Dudley South)

Stephen Phillips MP (Conservative, Sleaford and North Hykeham)

Jacob Rees-Mogg MP (Conservative, North East Somerset)

Mrs Linda Riordan MP (Labour/Cooperative, Halifax)

Henry Smith MP (Conservative, Crawley)

Mr Michael Thornton MP (Liberal Democrat, Eastleigh)

The following members were also members of the committee during the parliament: Mr Joe Benton MP (Labour, Bootle) Jim Dobbin MP (Labour/Co-op, Heywood and Middleton) Tim Farron MP (Liberal Democrat, Westmorland and Lonsdale)


Penny Mordaunt MP (Conservative, Portsmouth North) Sandra Osborne MP (Labour, Ayr, Carrick and Cumnock) Ian Swales MP (Liberal Democrat, Redcar)