Insight Brussels July 2013

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July 2013

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A MONTHLY ALERT ON KEY EU POLICY DEVELOPMENTS AFFECTING OUR CLIENTS

N°14 – 18th July 2013 SECTORAL POLICIES 1. Agriculture and Fisheries...........................................................................................................................................2 2. Defence ..............................................................................................................................................................................3 3. Energy and Environment ...........................................................................................................................................4 4. Financial Services ..........................................................................................................................................................5 5. Food and Beverage .......................................................................................................................................................6 6. Healthcare and Pharmaceuticals ............................................................................................................................8 7. Information and Communication Technology ..................................................................................................8 8. Media ............................................................................................................................................................................... 10 9. Sports and Gambling ................................................................................................................................................. 10 10. Transport .................................................................................................................................................................... 11

CROSS-SECTORAL POLICIES 11. Competition ............................................................................................................................................................... 13 12. Consumer .................................................................................................................................................................... 14 13. Intellectual Property and Copyright ................................................................................................................ 14 14. Research and Development................................................................................................................................. 15 15. Taxation ....................................................................................................................................................................... 15 16. Trade ............................................................................................................................................................................. 16

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SECTORAL POLICIES 1. Agriculture and Fisheries Political agreement on CAP reform After months of negotiations, the European Commission, the Council of the EU and the European Parliament reached on 26 June political agreement on the reform of the Common Agricultural Policy (CAP). Based on the European Commission’s proposal of October 2011, the agreement relates to four Regulations concerning direct payments, single common market organisation, rural development, as well as financing, managing and monitoring the CAP. The most important elements of the agreement include the following: -

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Convergence: the CAP budget will be distributed in a way so as to ensure that no Member State receives less than 75% of the EU average by 2019. Within a given Member State, aid per hectare will have to amount to at least 60% of the average of the aid disbursed by 2019 in a single administrative area Active farmers and young farmers: the reform tightens the rules to ensure that only active farmers will receive payments. In order to encourage young farmers to set up a business, the basic payment awarded to new entrant young farmers under 40 will be topped up by an additional 25% for the first five years of installation.

Coupled payments: Member States will have the option of providing coupled payments (payments linked to a specific product), which will be limited to 8% of the national envelope if the Member State currently provides coupled support or to up to 13% if the current level of coupled support is higher than 5%.

Sugar quotas: sugar quotas will be abolished by 2017.

Greening: 30% of direct payments will be linked to three environmentally-friendly farming practices, namely maintaining permanent grassland, crop diversification and maintaining an ecological focus area.

The agreement still has to be formally approval by the European Parliament and the Council of the EU. The new rules will take effect as of 1 January 2014.

EMFF: Council of the EU adopts general approach On 15 June, the Council of the EU reached agreement on a full general approach to the proposal for a Regulation on the European Maritime and Fisheries Fund (EMFF), the third and last component of the reform of the Common Fisheries Policy (CFP). This agreement finished the work started in October 2012 when the Council of the EU adopted a partial general approach on the technical aspects of the proposal.

The negotiations particularly focused on Articles 15 to 17 of the proposed Regulation, which deal with budgetary resources under shared and direct management as well as financial distribution for shared management "allocation criteria", as well as Article 101 on sanctions.

Some of these issues had been left open in October, pending an agreement on the next multiannual financial framework for the period 2014-2020 among the EU institutions. This agreement was reached in June and sets a budget of â‚Ź6.574 billion for the EMFF. | Insight Brussels | 2

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Only the funds under shared management, namely €5.526 billion, were to be apportioned, because Member States are free to manage on their own the share of the funds under direct management allocated individually to them. Of the €5.526 billion to be apportioned, €4.385 billion will go to the sustainable development of fisheries and aquaculture, and at least €482 million to CFP implementation and monitoring. Data collection will receive €344 million. A maximum of €45 million will be reserved for storage aid.

Member States also agreed to maintain aid for vessel modernisation, engine upgrading, the purchase of more selective gears, improved working conditions, as well as the reintroduction of fleet reduction aid, support for young fishermen and the historic criterion (taking account of the use of funds during the previous programming period) for the allocation of funds.

On the basis of this full general approach, the Council of the EU can start negotiations with the European Parliament in autumn. The EMF Regulation and the other two Regulations forming the CFP reform package (Regulation on the basic provisions of the CFP and Regulation on the common market organisation) are expected to become operational in January 2014.

2. Defence Arms export: MEPs calls for uniform application of Council Common Position Meeting in Strasbourg on 4 July, the European Parliament adopted by a large majority a Resolution on the implementation of Council Common Position 2008/944/CFSP defining common rules governing control of exports of military technology and equipment.

This Common Position lays down eight criteria that must be met for the provision of an arms export licence: respect for the Member States’ international obligations and commitments; respect for human rights and international humanitarian law in the destination country; the internal situation in the destination country; the preservation of regional peace, security and stability; national security; and the risk of diversion or re-export.

In their Resolution, MEPs note that these criteria are applied and interpreted very differently in the Member States, and thus called for a more uniform interpretation and implementation of the Common Position with all its obligations. MEPs also expressed the view that the Common Position should contain a regularly updated, publicly accessible list indicating how far exports to certain countries comply with the criteria and that the powers of the EU Council Working Party on Conventional Arms Exports (COARM) should be increased.

Leaders urged to halt military decline At the Security & Defence Day (SecDef) on 27 June, high level officials called upon European leaders to take action to reverse the decline of the EU’s military capacities and to reverse the widening defence gap with the US when they meet for a special European Council devoted to defence issues in December 2013.

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A number of past and present ministers and senior officials argued that austerity measures forcing European countries to cut defence budgets should give fresh impetus to multinational cooperation in the form of pooling and sharing military capacities. Yet, they also highlighted that this so-called “smart defence” should not be a pretext for further cuts in defence spending.

SecDef is an annual conference organised by the Security and Defence Agenda, the Compagnie Européenne d’Intelligence Stratégique (CEIS), and the Konrad Adenauer Stiftung taking place in Brussels. It gathers key actors from civilian and military backgrounds to exchange ideas and to discuss the future of the security and defence policies in Europe.

3. Energy and Environment Shah Deniz II consortium opts for the Trans-Adriatic Pipeline On June 28, the consortium Shah Deniz II, which includes Socar (Azerbaijan), BP (UK), Statoil (Norway) and Total (France), and holds a license for exploiting the 16 billion cubic metres per year of gas reserves in Azerbaijan, announced that the Trans-Adriatic Pipeline (TAP) has been selected to transport gas from the Caspian Sea to Europe. TAP’s shareholders are Axpo of Switzerland (42.5%), Statoil (42.5%) and E.ON of Germany (15%). TAP will run from the GreekTurkish border to Italy, going through Greece and Albania. The construction of TAP is expected to start in 2015 and the pipeline should come on-stream in 2019. It is designed to carry 10 to 20 billion cubic metres of gas per year.

The choice of TAP throws into question the political investment the European Commission has made in supporting its competitor, the Nabucco project. The latter symbolised the EU’s desire to diversify its supply of gas away from Russia. Nabucco’s defeat also leaves Bulgaria, Hungary and Romania overwhelmingly dependent on Russian supplier. The Nabucco consortium, made up of OMV (Austria), MOL (Hungary), Transgaz (Romania), Bulgargas (Bulgaria), Botas (Turkey) and GDF-Suez (France), immediately announced that, despite this failure, it would seek to develop opportunities based on alternative gas sources.

ETS short term reform saved, Council now needs to approve The proposal to temporary withdraw 900 million CO2 quotas sold within the EU’s emissions trading system (ETS) has been approved by the European Parliament in plenary on 3 July by a tiny majority. MEPs thus momentarily put an end to the uncertainty hanging over the possibility to find a solution to the failings of ETS. The saga of this reform urgently required a legislative initiative to stabilise the carbon price, which has fallen to a historical low level of €3/tonne. The new requirements adopted by the European Parliament give the European Commission the possibility “in exceptional circumstances” to adapt the timetable for the auctioning of quotas, provided that it presents an impact assessment indicating that the industrial sectors concerned will not have to face a significant risk of relocation.

Rapporteur Matthias Groote (S&D, Germany) has now the mandate to start negotiation with the Council of the EU. Under the co-decision procedure applicable in this case, the proposal is adopted if both the European Parliament and Council of the EU adopt the same text in first reading. There is now great pressure on the Council of the EU, which has until now not given any

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sign of its position, because it was waiting for the European Parliament to take a stance first.

However, an increasing number of delegations now tend to express their support to the reform, but Germany and Spain still have not finalised their position.

On 17 July, the European Commission also adopted two separate Decisions on German support schemes in favour of energy-intensive industries. First, it has concluded that a scheme compensating energy-intensive users for CO2 costs in their electricity price as of January 2013 is in line with EU state aid rules, in particular because it maintains incentives for the beneficiaries to further reduce their CO2 emissions. In contrast, the European executive found that a 2009 scheme supporting non-ferrous metal producers (aluminium, copper and zinc) for alleged ETSrelated costs was incompatible with the internal market, notably because it would have entailed serious distortions of competition to the detriment of producers in other Member States.

Biofuels: ENVI Committee includes ILUC factor in the proposal On 11 July, the European Parliament’s Committee on the Environment (ENVI) voted by a comfortable majority in favour of the inclusion of the ILUC factor (the production of greenhouse gas from indirect land use change) in the proposal for a revision of biofuel products. MEPs decided to cap at 5.5% the share of first generation biofuel used to reach the target of 10% of renewable energies in total energy consumption for transport by 2020 (the European Commission had suggested a 5% cap). They also set a 2% target for advanced biofuels produced from seaweed and certain types of waste, provided that this share does not deprive others sectors of raw materials, leads to an overexploitation of forests or reduces biodiversity.

The inclusion of the ILUC factor was previously rejected by the European Parliament’s Committee on Energy (ITRE), which set a merely indicative target. On this issue, the ENVI Committee has the lead, while the ITRE Committee has associate status. The rapporteur for the ENVI Committee, Corinne Lepage (ALDE, France), will now seek a compromise with the ITRE Committee’s rapporteur, Alejo Vidal Quadras (EPP, Spain), before the plenary vote in September.

4. Financial Services European Commission proposes a Single Resolution Mechanism for Banking Union The European Commission proposed on 10 July a Single Resolution Mechanism (SRM) for the Banking Union. The aim of the proposal is to ensure that, in case of bank failures, their resolution could be managed efficiently with minimal negative impacts on the financial stability and with limited costs to the taxpayers. The SRM would apply EU-wide rules for bank recovery and resolution, due to be adopted this autumn.

The SRM would work as follows: the European Central Bank (ECB) would have the responsibility of signalling cases where banks need to be resolved. A Board, consisting of representatives of the European Central Bank (ECB), the European Commission and national authorities, would prepare the bank resolution, while the execution of the resolution plan is the duty of national resolution authorities. In case of non-compliance of a national authority, the Single Supervisory Board could directly give instructions to the bank in financial difficulties. A single Bank Resolution Fund would be created in order to guarantee the availability of funding support.

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The mechanism would complement the Single Supervisory Mechanism (SSM), which should confer direct supervisory powers to the ECB in late 2014.

National Ministers reiterated their will of reaching an agreement on the mechanism by the end of 2013, so that it could be adopted in the current parliamentary legislature. It would then be possible to enter into force at the beginning of 2015.

Reform of CRD IV-CRR prudential rules for banks adopted After the Council of the EU formally adopted the reform of capital requirements rules for banks (CRD IV-CRR) on 21 June, the new provisions entered into force on 17 July. This reform package, built on the lessons learnt from the financial crisis, consists of a Regulation and a Directive that transpose into EU law the Basel III international rules for more stringent prudential requirements for banks.

The new rules will apply to more than 8000 banks in the EU from 1 January 2014. They set stricter capital requirements and liquidity obligations for banks, namely: -

an additional systemic risk buffer; conditionality on the qualification of capital as high quality; increased risk oversight by boards; reinforced transparency rules; and the possibility to take temporary measures at European level to deal with systemic risks.

Member States are also allowed to apply stricter requirements if justified by national circumstances.

In addition, the European Parliament succeeded in using the reform to introduce a strong restriction on bankers’ bonuses.

5. Food and Beverage Combatting the shortcomings in Europe’s food supply chain Two documents relating to food security in Europe have recently been published. First, the European Commission released on 10 June a report revealing the high percentage of notifications related to food and feed rejections at EU borders due to the risk they pose to food safety. The report has been circulated on Europe’s Rapid Alert System for Food and Feed (RASFF), the IT tool streamlining the flow of information between national authorities.

Second, the European Food Safety Authority (EFSA) has finalised its opinion on the public health hazards to be covered by meat inspections and made concrete recommendations for improvements, including notably the introduction of a comprehensive meat safety assurance system, the categorisation of farms and slaughterhouses according to the magnitude of risk posed by biological hazards, the strengthening of post-mortem inspections, and the increase in integrated protocols for monitoring chemicals and environmental contaminants.

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In the wake of the horsemeat scandal, the need to tackle the shortcomings in the food supply chain and the issue of food fraud have been raised. Thus, the European Commission stressed in its action plan of March 2013 the need for developing synergies between enforcement authorities and for modernising the controls currently carried out in the EU. The two documents form an integral part of this plan, which is intended to be fully implemented by 2014.

European Parliament approves new rules for food for vulnerable persons On 11 June, the European Parliament gave its approval to new strengthened rules for food for babies and young children, food for specific medical purpose, and total diet replacement for weight control. The adopted Regulation will replace various pieces of legislation in order to streamline the rules on the labelling and composition of these food products.

The new legislation will soon be published in the EU Official Journal, but will only apply from 2016. This transitional period should allow businesses to adapt their commercial practices and the European Commission to adopt more detailed rules. In the meantime, the existing legislation will continue to apply and no products will have to be removed from the market.

New database on food additives As of 1 June, a new list of approved additives is applied in the EU. The European Food Safety Authority (EFSA) considers the more than 370 additives to be safe, technologically justified and not misleading consumers. A rigorous re-evaluation programme has been set up with a view to ensuring the permanent safety of the additives.

Consultation on Bisphenol The European Food Safety Authority (EFSA) consults on an updated and extended assessment of exposure to Bisphenol A. Stakeholders can give their views from mid-July to mid-September.

At the beginning of 2014, EFSA will launch a second public consultation on the human health aspects of its risk assessment. After having thus gathered enough inputs, EFSA should be in a position to finalise its scientific opinion in the course of 2014.

Consultation on food wastage With a view to reducing the annual wastage of 89 million tonnes of food, the European Commission launched on 15 July a consultation on the European food production and consumption system. Stakeholders can submit their opinion until 1 October.

The European Commission plans to present ideas later this year with a strong focus on food waste in a Communication on Sustainable Food. The Communication will look at food waste and at reducing resource inefficiencies across the food chain.

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6. Healthcare and Pharmaceuticals New rules for managing cross-border health threats On 3 July, the European Parliament approved at first reading the draft Decision on serious crossborder threats to health caused by communicable diseases of chemical, biological and environmental origin. The new rules, which repeal Decision 2119/98/EC, introduce a procedure for the coordination of voluntary joint procurement of vaccines, create a rapid alert system and reinforce the mandate of the Health Security Committee in risk coordination and crisis response.

Building on lessons learned with recent crises such as the H1N1 pandemic, the volcanic ash cloud, the avian influenza A (H7N9), the Coronavirus or the outbreak of E. coli, the EU has decided to improve citizens’ protection by strengthening preparedness planning and coordination between Member States.

The Decision will enter into force the day following its publication in the EU Official Journal.

Healthcare expenditures can be part of a “social investment” approach Meeting in Brussels on 21 June, the Employment, Social Policy, Health and Consumer Affairs Council (EPSCO) adopted its Conclusions on the European Commission's Communication "Towards social investment for growth and cohesion" presented in February 2013.

The Communication forms part of the so-called Social Investment Package (SIP), a new policy framework that gives guidance to Member States on more efficient social policies, including healthcare.

In its Conclusions, the EPCSO Council underlines the deteriorating social impact of the financial crisis, and emphasises the role of well-designed and effective social policies to address the effects of this crisis through their stabilisation and social protection functions. It highlights that these functions could be reinforced by using a social investment approach that addresses people’s needs in preventive strategies. The reinforcing effects of social investment could be achieved through reforms at national level that strengthen human capital, health, education and skills.

It remains to be seen how Member States will integrate this new approach into their spending and efficiency review processes affecting social budget.

7. Information and Communication Technology New rules for telecoms operators and Internet Service Providers when personal data is lost or stolen On 24 June, a European Commission Regulation aimed at complementing the revised ePrivacy Directive (2009/136/EC) with practical rules was adopted. With these new rules, the European Commission seeks to provide clarity about how to meet the obligation of informing national authorities and subscribers on breaches of personal data. The main novelties are the imposition of a 24 hours delay to inform the authorities about the breach, the obligation for companies to

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describe the information affected and the measures that will be applied, and the details of the elements companies should pay attention to when assessing whether to notify subscribers.

All relevant stakeholders were involved in a public consultation in 2011, which showed the need for greater harmonisation in this field in order to ensure the timely information of consumers.

The European Commission Regulation has direct effect and requires no further transposition at national level. It will enter into force two months after publication in the EU Official Journal.

Stricter penalties for cybercrimes across the EU On 4 July, the European Parliament adopted by a large majority a Directive on attacks against information systems, which toughens sentences for cyber-attacks. Under the new rules, Member States will be required to set their maximum terms of imprisonment at two years minimum for illegally accessing or interfering with information systems. In addition, penalties for attacks against critical infrastructure, such as power plants, and for illegally intercepting communications will also be increased to a maximum of five years. The Directive also aims at facilitating prevention, and at boosting police and judicial cooperation.

Denmark has chosen to opt out from the rules, because the country wants to keep its own system in place. Despite having opted out from EU police and criminal laws, Ireland and the UK have decided to apply the Directive.

The draft Directive has already been informally agreed with the Member States and the latter are expected to formally adopt the new rules very shortly. Afterwards, they will have two years to translate them into national law.

EU funding for future Internet projects On 28 June, the European Commission published a €100 million call for proposals for the Future Internet public-private partnership (FI-PPP). Around 1,000 start-ups and innovative companies will receive grants to develop applications and other digital services in fields such as energy, health, media, smart manufacturing and transport.

Funding for this third and final stage of the FI-PPP will be channelled through 20 consortia, which include crowd funding platforms, venture capitalists, co-working spaces, regional funding organisations and technology companies. The winners will be selected according to how they propose maximising the impact of their financing in the internet ecosystem.

The €500 million FI-PPP was launched in 2011 to help businesses and governments capitalise on the mobile Internet and data revolution, to stimulate innovation, and to create jobs in the European digital industry. The funding also forms part of the StartUp Europe project launched by the European Commission to connect European entrepreneurship ecosystems.

European Commission provides €77 million to high-tech manufacturing sector SMEs The European Commission announced on 13 June that it will contribute €77 million from its 7 th Research and Development Framework Programme (FP7) to an innovation initiative for the manufacturing sector.

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This so-called “I4MS” initiative is designed to help high-tech small and medium sized enterprises (SMEs) exploit the potential of ICT, helping their businesses to grow. It targets suppliers and users of ICT solutions, and covers innovation in four areas: advanced robot solutions; high performance cloud-based simulation services; intelligent sensor-based equipment; and innovative laser applications.

I4MS, which is part of the European Commission’s wider efforts to strengthen the EU’s manufacturing sector, officially starts this month and will conduct more than 150 innovation experiments over the next three years. The initial set of SMEs comes from 12 Member States and five Associated Countries, with participation being expected to increase with the Calls for Experiments to be launched in 2014 and 2015.

8. Media Consultation on converging audiovisual world In view of the rapid convergence of technologies and content in the audiovisual sector, the European Commission opened a consultation on media freedom, the independence of audiovisual regulatory bodies, the changing media landscape and borderless Internet.

Stakeholders, including business representatives, viewers and internet users, are invited to share their views on the changing media landscape and borderless Internet. The questions concern in particular market conditions, interoperability and infrastructure, and implications for EU rules. On the basis of the results of the consultation, which is open until 31 August, the European Commission might explore regulatory and policy responses, including self-regulation.

9. Sports and Gambling National online gambling authorities to increase cooperation From 4 to 5 July, the online gambling regulators from France, Germany, Italy, Portugal, the UK and Spain met in Lisbon to discuss ways to step up cross-national cooperation. For this purpose, they exchanged market data, as well as information on their national regulations and sports ethics, and discussed the fight against illegal gambling, fraud prevention, the protection of gamblers and the sharing of international liquidities.

The regulatory authorities also welcomed the suggestion made by the European Parliament’s Internal Market and Consumer Protection Committee (IMCO) in its draft report on online gambling in the internal market, which was adopted on 30 May, to oblige national regulators to issue licences only to the operators that respect the law applying in all Member States. The final adoption of this report by the European Parliament in plenary has been postponed from 1 July to 10 September.

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10. Transport Railway: Progress in negotiations on the 4th Railway Package On July 11, the five rapporteurs on the proposals for a 4th Railway Package presented their views to the European Parliament’s Committee on Transport (TRAN). The biggest changes to the liberalisation of the railway sector are introduced by the report of Mathieu Grosh (EPP, Belgium), who proposed to delay by ten years the opening to competition of railway lines covered by public service contracts. 90% of trains in the EU currently travel in the framework of such contracts, which are still awarded directly to operators without any call for tenders. While the European Commission had proposed to impose a tendering procedure by December 2019, Grosch suggests putting the target back to 2029 with the argument that a new legislation would undermine on-going contracts. Nonetheless, several MEPs and the European Commission remain sceptical about this approach. The deadline for tabling amendments is 16 September.

They will be put to the vote in TRAN Committee on 26 November, before the plenary session scheduled for January 2014.

In the Council of the EU, Member States’ delegations managed to adopt on 11 June a general approach on the interoperability chapter. While the European Commission’s proposal granted greater powers to the European Railway Agency (ERA), delegations supported a compromise that advocates a dual approach to certification rather than a generalised centralisation of procedures through the ERA. Under the new provisions, only vehicles used in international transport will have to be certified by ERA in cooperation with national safety agencies. As for the equipment for the exclusive use of domestic purposes, Member States decided to let operators choose whether they go to the ERA or their respective national agencies. These provisions express Member States’ reluctance to rely on ERA, which is regarded as not having enough experiences and resources to carry out these certification tasks.

Aviation: Single sky reform presented in a tense climate On June 11, the European Commission presented its proposal to review the four Regulations that make up the Single European Sky (SES), as well as the rules relevant to the European Aviation Safety Agency. The proposal comes in response to the need for limiting the fragmentation of the European sky and the fact that European airports are close to saturation point.

The most controversial provision of the package is of the separation of ancillary services (weather, aeronautical information, technical maintenance and repair of radar equipment) from air traffic services per se (traffic control and flight information). According to the European Commission, these services are currently the main cost factor in air traffic management and are almost always provided by large monopolistic entities. Tendering procedures could bring down the cost of traffic management by 20%. Trade unions, however, fear that jobs will be lost and have organised protest movements in many Member States.

On surveillance authorities and Eurocontrol, the package proposes to separate air traffic control operators from their regulator to guarantee the latter’s independence. France has already expressed doubts on this issue, as the two functions are currently exercised by the DirectorateGeneral for Civil Aviation. In addition, Eurocontrol would be strengthened to provide new services to the smaller control bodies, thus bringing large scale savings in the sector.

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While France and Germany have informed the European Commission of their reticence towards the new package, debate in the Council of the EU and the European Parliament has started in July.

Consultation on new state aid rules for airports and airlines The European Commission published on 3 July a draft of revised state aid rules on the public funding of airports and start-up aid to airlines. Under the proposed rules, state aid for investment in airport infrastructure would be allowed if necessary to improve transport and the accessibility of a region. Operating aid to airports would be allowed for a transitional period of 10 years under certain conditions. Finally, start-up aid to airlines to launch a new route would be permitted if it remained limited in time.

A public consultation launched the same day invites stakeholders to provide feedback on the proposal. The consultation will last until 25 September. In light of stakeholders’ contributions, the European Commission will adopt the revised rules at the beginning of 2014.

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CROSS-SECTORAL POLICIES 11. Competition EU to facilitate damage claims by victims of antitrust violations The European Commission adopted on 11 June a proposal for a Directive on how citizens and companies can claim damages for infringements of EU antitrust rules. The proposal aims to make it easier for whoever has been harmed by competition law infringements to obtain damages by removing a number of practical difficulties, such as diverging national rules.

The proposal sets out measures to facilitate damages actions available in Member States: -

National courts will be able to order companies to disclose evidence when victims claim compensation.

Decisions of national competition authorities finding an infringement will automatically constitute proof before national courts that the infringement occurred.

Rules on limitation periods (the period of time within which victims can bring an action for damages) and liability in cases where price increases will be clarified.

Rules to facilitate consensual settlements will be put in place to allow faster and less costly dispute resolution.

In parallel, the European Commission has adopted a Recommendation encouraging Member States to set up collective redress mechanisms in order to improve access to justice for victims of violations of EU law and a Communication on quantifying antitrust harm to provide guidance to Courts.

The proposal will now be discussed in the European Parliament and the Council of the EU. Once it had been adopted. Member States will have two years to transpose the provisions into national law.

European Commission consults on possible improvements to EU merger control On 20 June, the European Commission opened a public consultation, which will run until 12 September, on possible future improvements to the EU Merger Regulation in two areas: minority shareholdings; and case referrals between the European Commission and the national authorities. Stakeholders are invited to give their view on whether any improvements of the current framework are necessary.

Concerning minority shareholders, the European Commission raises the question of whether the Merger Regulation, which currently only applies to transactions leading to an acquisition of control over the target company, should be amended to include non-controlling minority shareholdings, which can in some cases harm competition and consumers.

Concerning case referrals, the European Commission seeks input on how to streamline the system, which currently allows Member States to refer cases to the European Commission on vice versa, in order to avoid delays and to improve its effectiveness.

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12. Consumer European Commission proposes a modernised set of rules on package holidays On 9 July, the European Commission proposed a revision of a 1990 Directive on package travels (Directive 90/314/EEC) that would bolster consumers’ rights. The proposal responds to a transformation of traveller practices. Indeed, the digital age has enabled holiday makers to customise their travel arrangements to their specific requirements. These customised arrangements were not covered before, but would now be protected by the Directive.

Furthermore, the reform aims at bringing additional protection for consumers. The main amendments are stricter controls for price surcharges, a reinforced right to cancel a reservation, information about tour operators’ liabilities, guarantees of compensation in case of material or immaterial shortcomings and a single point of contact in the event of problems.

13. Intellectual Property and Copyright Collective management of copyright The European Parliament’s Committee on Legal Affairs (JURI) adopted on 9 July a report by Marielle Gallo (EPP, France) on the proposal for a Directive on collective management of copyright. The proposal, which was published by the European Commission in July 2012, focuses on two areas. First, it strives to enhance transparency in the sector. To this end, it requires rights collecting societies for all sectors to present an annual report to their members and to pay royalties to artists within three months from the end of the financial year in which the revenue was collected. Artists, on the other hand, will have monitoring rights through a general meeting and will be allowed to freely chose the collecting society that manages their rights.

Second, the proposal promotes pan-European licensing. The idea is to see European musical platforms such as Spotify emerge by enabling them to negotiate operating licences not with all 28 Member States, but with four or five regional hubs of collecting societies.

Negotiations with the Council of the EU will begin in September, with the aim of having the Directive adopted by the end of this legislature in spring 2014.

Counterfeit goods: Stronger customs enforcement On 29 June, a Regulation on the customs enforcement of intellectual property rights entered into force. This Regulation expands the list of IPR infringements that can be dealt with by EU customs authorities and provides for a new simplified procedure for small consignments.

The Regulation does not apply to non-commercial merchandise transported by travellers and emphasises that trade in legitimate medicines in transit through the EU’s territory should not be restricted on the basis of alleged IPR infringements. Instead, EU custom authorities should only detain medicines when there is a substantial likelihood that these goods are diverted onto the internal market.

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14. Research and Development Partnership to fight poverty-related diseases The Commissioner for Research, Innovation and Science, Máire Geoghegan-Quinn, and the cochairman of the Bill & Melinda Gates Foundation, Bill Gates, have signed an agreement that creates a strategic partnership for research to tackle HIV-AIDS, tuberculosis, malaria and other poverty-related diseases. The objective is not only to accelerate the development of drugs, vaccines and diagnostics, but also to improve the access for those in need.

In addition, the partners plan to launch a joint innovation prize at the 2014 Innovation Convention to reward innovations that address global health challenges. Finally, the European Commission and the foundation will finance clinical development of new tools to treat those poverty-related diseases.

Public-private partnerships investing €22 billion in research and innovation On 10 July, the European Commission, Member States and large European companies unveiled their intention to co-invest more than €22 billion over the next seven years in innovative sectors that stimulate growth and employment. This investment will primarily be distributed among five public-private partnerships in medicines, aeronautics, bio-based industries, as well as fuel cells and hydrogen. A series of projects developed by the European Commission and the Member States in high-tech SME’s will also be included in the investment initiative.

The package forms part of the EU’s Horizon 2020 innovation and research programme, which contributes €8 billion to the total investment.

15. Taxation European Parliament approves Financial Transaction Tax The European Parliament on 3 July approved massively in a show-of hands vote the financial transaction tax (FTT) being developed by Austria, Belgium, Estonia, France, Germany, Greece, Italy, Portugal, Slovenia, Slovakia and Spain. At the same time, it proposed amendments, with a view to harmonising tax rates, to extend the scope to spot currency transactions and to add more exemptions. However, the European Parliament only plays a consultative role.

The 11 Member States have been discussing plans to introduce a financial transaction under the EU’s enhanced cooperation procedure, which was authorised by the Council of the EU in January, and the European Commission adopted a corresponding proposal in February. The countries are intensively working on this proposal, because they have to agree unanimously on the design of the FTT. The intention is to introduce this tax in 2014.

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A MONTHLY ALERT ON KEY EU POLICY DEVELOPMENTS AFFECTING OUR CLIENTS

European Commission proposes to extend mandatory automatic exchange of tax information On 12 June, the European Commission proposed to amend the Directive on administrative cooperation on tax matters (2011/16/EU) to apply automatic exchange of information as the general rule in the EU. The objective is to expand the scope of automatic exchange of information beyond that provided for in the Directive on administrative cooperation. The five categories of income and capital covered by the Directive and where bank secrecy will be abolished from 2015 are earned income, directors’ fees, life insurance products not covered by other Directives, as well as pensions and ownership of, and income from, immovable property. The proposal extends the list to dividends, capital gains, other financial income and account balances.

The proposal forms part of the measures taken by the European Commission to increase transparency and to fight tax evasion in Europe.

Finance Ministers adopt package combatting VAT fraud The ECOFIN Council adopted on 21 June two Directives aimed at combatting VAT fraud. The first Directive will expand the list of goods and services to which a reverse charge mechanism can be applied, while the second Directive seeks to create a quick reaction mechanism to tackle cases of sudden and massive VAT fraud that can occur in other undetermined sectors.

The Directives lay down a sunset clause, which stipulates that the reverse charge mechanism and the quick reaction mechanism will end on 31 December 2018, unless a prolongation is unanimously agreed by the Council of the EU.

16. Trade TTIP: EU and US conclude first round of negotiations On 12 July, EU and US negotiators concluded the first round of negotiations on the Transatlantic Trade and Investment Partnership (TTI). This round, which started on 8 July in Washington, was meant to be a warm-up session before substantive talks will be held at a later stage. 15 different working groups were set up during the week to discuss approaches and ambitions on a wide array of topics, including government procurement, investment, energy and raw materials, regulatory issues, intellectual property, as well as dispute settlement and competition.

The first round of talks followed the official launch of the negotiations announced on 17 June.

Beforehand, the Member States had agreed to give the European Commission the green light to start negotiations and defined their negotiating mandate.

The start of TTIP talks had been threatened by revelations that the US secret service had wiretapped EU buildings in Brussels and Washington, but on 4 July the EU decided that the first round of negotiations should not be delayed. At the same time, the European Commission made clear that it expects that the oversight of intelligence activities, intelligence collection, as well as the question of privacy and data protection will be discussed in the relevant working groups.

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The aim of the TTIP is to liberalise trade and investment between the two blocs, with the reduction of non-tariff barriers being a key element of transatlantic liberalisation. According to a report published by the European Commission in March 2013 and entitled “Reducing Transatlantic Barriers to Trade and Investment”, the TTIP could increase EU exports to the US by 28%, equivalent to an additional €187 billion worth of goods and services exports. This would translate to an extra €545 in disposable income each year for a family of four in the EU. The second round of negotiations will take place in Brussels during the week of 7 October and a third round should be scheduled before the end of 2013. The aim is to conclude the deal by the end of 2014.

EU takes Russia to WTO over car levy After having for eleven months threatened to take action against Moscow, the EU on 9 July officially requested consultation over a recycling fee imposed by Russia on imports of vehicles at the World Trade Organisation (WTO).

According to the EU, the fee that was introduced in September 2012 is discriminatory, because it does not only concern almost exclusively imports and not domestic production, but also because Belarus and Kazakhstan, which form a customs union together with Russia, are exempted from paying the fee. The EU also argues that this fee is progressive, as it illegally differentiates between new and old cars, ranging from €420 for the former to up to €17,200 for the latter.

Russia has until 19 July to respond to the EU’s request for consultation and both sides have 60 days to reach a satisfactory solution through consultation before the EU can request the WTO to set up a panel to rule on the legality of the Russian fee. The EU hopes to find a solution and has good reasons to believe that a positive outcome is possible, because the Kremlin has in May presented an amended bill to Russia’s parliament, which would level the playing field by imposing the tax on all exporting countries, as well as domestic production.

Solar panels: EU and China close to reaching settlement A settlement between the European Commission and the Chinese authorities concerning duties imposed by the EU on imports of solar panels originating from China is increasingly likely to be reached soon.

On 4 June, the European Commission had decided to impose temporary customs duties on imports of solar panels originating from China. Starting at 11.8% until 6 August, the rate will subsequently go up to around 47%. The European Commission’s strategy to apply low duties for a two-month period, which was meant to pressure China to come to the negotiating table, seems to work: on 5 July, China put forward a proposal for a deal that could potentially end the dispute.

Under this proposal, China would limit its exports of photovoltaic modules to the EU to ten gigawatts per year and impose a minimum price of around €0.5 per watt, which is the actual cost of production. The European Commission’s decision on whether or not to accept the Chinese proposal is expected next week.

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For further information please contact: Leonardo Sforza (leonardo.sforza@mslgroup.com) Romain Seignovert (romain.seignovert@mslgroup.com) Andrea Oechsler (andrea.oechsler@mslgroup.com) Bertrand Van Maele (bertrand.vanmaele@mslgroup.com MSLGROUP Brussels, Avenue des Gaulois, 18 – B 1040 Bruxelles Our website: www.mslgroup.com Follow us on twitter for the breaking news updates: @MSL_Brussels

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