Insights Brussels May 2014

INSIGHTS BRUSSELS AFTER THE EP ELECTIONS .

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ISSUE #21 Reshuffling leadership, policies and practices

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Call for change ........................................................................................................... 3 Key policy areas for forthcoming decisions .............................................................. 7 Energy and Environment ................................................................................................................... 7 2030 climate and energy framework ............................................................................................................................. 7 Roadmap on energy independence .............................................................................................................................. 7 EU emissions trading system ........................................................................................................................................ 8 Carbon Capture and Storage ........................................................................................................................................ 8 Political positions on Energy issues at a glance ............................................................................................................ 9

Financial Services ........................................................................................................................... 10 European Long-Term Investment Funds ..................................................................................................................... 10 Institutions for Occupational Retirement Provision (IORP) .......................................................................................... 10 Banking structural reform ............................................................................................................................................ 11 Payment Services ....................................................................................................................................................... 11 Insurance products ...................................................................................................................................................... 12 Benchmarks used in financial instruments or contracts ............................................................................................... 12 Money Market Funds ................................................................................................................................................... 13 Corporate Governance Package ................................................................................................................................. 13 Political positions on financial issues at a glance ........................................................................................................ 14

Food and Beverage ........................................................................................................................... 15 Novel food and animal cloning package ...................................................................................................................... 15 Animal and plant health package ................................................................................................................................ 15 Organic farming and labelling ...................................................................................................................................... 16

Healthcare and Pharmaceutical ...................................................................................................... 17 Medical devices ........................................................................................................................................................... 17

Information and Communication Technology ................................................................................ 18 Connected Continent Package .................................................................................................................................... 18 Data protection package.............................................................................................................................................. 18 Political positions on Digital issues at a glance ........................................................................................................... 19

Transport ..........................................................................................................................................20 The Fourth Railway Package ...................................................................................................................................... 20 Single European Sky II+ .............................................................................................................................................. 20 ETS for intercontinental flights..................................................................................................................................... 21 Truck Measures Regulation......................................................................................................................................... 21 eCall ............................................................................................................................................................................ 22 Political positions on Transport at a glance ................................................................................................................. 23

International Trade.......................................................................................................................... 24 Transatlantic Trade and Investment Partnership (TTIP) .............................................................................................. 24 Free Trade Agreement EU-Japan ............................................................................................................................... 25

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Call for change With the conclusion of the European electoral round last Sunday evening, the way to a substantial reshuffling of policy and leadership in the EU institutions is open.

The results of the European Parliament election carried out across the 28 European Union Member States sent a loud and bold message of change to the Brussels bubble and to several national policy makers across Europe.

The nature and direction of change demanded by European voters varies a lot from one country and party to another. They range from complete abolishment of the EU system, as pleaded by the far-right and nationalistic parties who became the leading political force in UK, France and Denmark; to those calling for even stronger social and political EU integration.

Despite the progress made by the anti-EU parties, the pro-EU bloc remains by far the largest and is in the position to govern and drive the EU agenda as well as the appointment of the new EU institutional leadership. The four pro-European

groups including the Christian democrats (EPP), the Socialists (S&D), the Liberals (ALDE) and the Greens (Green-EFA) can count on an overwhelming majority of 70% of parliamentary seats and have already excluded any cooperation with the eurosceptic front.

However, even though the success of the far– right parties doesn’t give them the numbers to count in Brussels, they will be able to influence the EU agenda through the strength acquired nationally in major countries such as France and UK, radicalizing the position of these countries in the EU decision making process.

There are at least four major EU leadership roles to be renewed. For the presidency of the European Commission, the most important of them, where is determinant the indication and final approuval of the European Parliament but the choice stays with the 28 Heads of State or Government, the race has just started (see the timeline and role of different players in the decision making process on the right column) The appointment is likely to be part of a compromise

Source: European Parliament (provisional data update of 27th May)

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decision on all key EU roles, including the Presidency of the Council and of the High representative for External Affairs, where national interests and personal veto matter at least as much as electoral results.

EU 2014 timeline

On Tuesday evening, heads of state or government will meet in Brussels for a first informal dinner summit to discuss the lessons to be drawn from and implications of the EP election.

All eyes are likely to be on Italian Prime Minister Matteo Renzi, leader of the centre-left Democratic Party (PD), who succeeded to gain the trust and confidence of more than 40% of Italian voters with a frills free, pro-reform and pro-European campaign. The Italian members newly elected to the European Parliament will be the most important national component of the socialists and democrats’ group and may well be in the position to have a much greater influence that in the past. Meanwhile the determination for ongoing bold reform shown in Italy over the last 3 months may inspire the activity of the next EU Council Presidency that will be held by Italy until the end of 2014 starting from 1st July.

Beyond the choices for leadership, the new European Parliament will be confronted soon with critical decisions in key policy areas for business and citizens, ranging from energy to financial services, from transport to information and communication technology. In the following pages we share a snap-shot of the EP election results, and a review of the most compelling political and regulatory decisions to be finalized in the coming months.

We hope that you will find it useful and inspirational for your work.

Leonardo Sforza

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5 key steps for the renewal of EU institutions

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Composition of the European Parliament: Country breakdown

Source: European Parliament (provisional data update of 27th May)

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Key policy areas for forthcoming decisions Energy and Environment 2030 climate and energy framework One of the most compelling dossiers pending approval by the new European Parliament is the 2030 climate and energy framework. In January, the European Commission presented a draft 2030 framework, setting up new objectives for the EU energy policy beyond the current 2020 targets. The proposal sets binding targets for the reduction in greenhouse gas (GHG) emissions by 40% below the 1990 level as well as for renewable energy sources with an objective of reaching at least 27% of EU energy mix by 2030.

The interinstitutional negotiations on the draft framework started in the first half of 2014.

In its preliminary work, the European Parliament favoured an ambitious climate and energy

framework and adopted therefore in February a resolution supporting three binding targets: 40% for GHG reduction, 30% for renewables and 40% increase in energy efficiency. While their vote was not binding, the resolution will be taken as a basis for the newly elected MEPs to negotiate a final deal with the Council of Ministers.

On the Council’s side, Member States’ representatives are divided. Ahead of the 2015 International Climate Summit in Paris, Western European countries support an ambitious framework, while Eastern European countries defend industry competitiveness. EU Member States however agreed to make their position clear by October at the latest.

Roadmap on energy independence As a result of the Ukrainia crisis, the European Commission is set to present by June a roadmap on energy independence with a view to cut reliance on Russian imports and increase security of supply. Based on preliminary work by the current Greek Presidency of the European Council, the proposal will put forward measures to strengthen energy interconnections between Member States, reduce energy demand , make use of alternative sources of energy, support the exploitation of hydrocarbons in the eastern Mediterranean, diversify natural gas supply

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routes and suppliers, complete the internal energy market and give the EU more power to speak with a single voice on energy issues with the rest of the world. The roadmap may also present measures to review inter-Member States solidarity mechanisms, along with short-term measures (such as emergency plans using for instance reverse flows and storage) and longterm measures (such as the deployment of European grids).

Once unveiled, the roadmap on energy independence will be discussed by the new

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Members of the European Parliament and within the Council of Ministers.

EU emissions trading system The reform of the EU emissions trading system (EU ETS) will be another dossier on the table of the newly elected Parliament. In January, the Commission proposed a long-term reform of the EU ETS with the plan to establish a market stability reserve at the beginning of the next ETS trading period in 2021. The reserve would both address the surplus of emission allowances that has been built up in recent years and improve the system's resilience to major shocks by automatically adjusting the supply of allowances to be auctioned. This would imply the withdrawal of allowances if a surplus builds up (more than 833 million allowances) and their release on the market when there is a deficit (fewer than 400 million allowances).

The creation of such a reserve would operate entirely according to pre-defined rules which would leave no discretion to the Commission or Member States in its implementation. But some Member States and Members of the previous Parliament feared that this reserve would represent a market intervention from the Commission and called instead to set up a carbon ‘central bank' which would have an independent regulatory board taking decisions.

On 25 June the European Commission will host a panel of experts to discuss technical aspects of the proposed EU ETS market stability reserve.

The European Parliament and the Council of Ministers will engage in negotiations in the aftermath of the elections.

Carbon Capture and Storage Newly elected MEPs will also have to discuss during their mandate EU support to Carbon Capture and Storage (CCS) technologies. Under the provisions of the 2009 CCS Directive, the Commission is required to review the legal framework and present a report to the European Parliament and Council by 31 March 2015, together with, if necessary, a legislative proposal to reform the regulatory framework.

Starting the preparatory work, the European Commission launched on 20 May a public

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consultation on the EU legislation related to Carbon Capture and Storage (CCS). The consultation, which closes on 2 July, invites stakeholders to submit their views on the 2009 CCS directive. The main objectives of this review process are to assess the effectiveness, efficiency, ease of application and legal practicality of several of the CCS Directive provisions, as well as to provide an assessment on how the enabling policy of CCS at European level has in practice worked out so far.

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Political positions on Energy issues at a glance

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Financial Services European Long-Term Investment Funds Last June, the European Commission unveiled a draft regulation on European Long-Term Investment Funds (ELTIFs). These funds should invest exclusively in businesses that require longterm commitment, such as infrastructure, transport or sustainable energy projects. The Commission’s strategy aims to tackle criticism that financial markets prefer short-term speculative investments.

Regarding this dossier, newly elected MEPs will decide on whether to ratify the proposal made by their predecessors or restart the legislative proceeding. Indeed, during the last plenary session of April, exiting MEPs decided not to

proceed with the final vote in order to leave a margin of manoeuver to the new Parliament.

Before leaving office, members of the leading Economic and Monetary Affairs (ECON) Committee significantly amended the text: authorization procedures were simplified while the list of eligible investments was enlarged especially by including SMEs of up to €1 billion of market capitalization. Once they established a common position, the newly elected MEPs will have to reach a compromise with the Council.

The Commission expects the first European Long-Term Financing Fund to be set up in 2015.

Institutions for Occupational Retirement Provision (IORP) In March, the European Commission presented a set of measures to channel private sources of financing to long-term investments. The first package of actions includes: a communication on crowdfunding, offering alternative financing options for SMEs, and a revised directive for occupational pension funds (IORP). The goal of this draft reform is, first of all, to encourage European citizens to save for retirement at a time when the continent’s population is ageing.

Moreover, the Commission aims to improve governance of pension funds (by introducing new risk management and internal audit requirements), transparency (providing detailed information to consumers) and cross-border coverage.

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Regarding the IORP reform, Members elected in May will have to start from scratch. Immediately after the elections they will be in charge to build a common position and subsequently to reach an agreement with Member States.

The Commission proposal received mixed response from associations of pension funds. On the one hand, they welcomed the fact that the proposal does not contain new solvency requirements as well as greater flexibility to invest in shares. On the other hand, association representatives expressed concerns that the proposal was not accompanied by an impact assessment and that provisions on funding of cross border schemes were too vague.

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Banking structural reform In January, the European Commission presented a draft regulation for structural reforms in the banking sector. As a key element of this proposal the new rules would only apply to banks considered “too big to fail”. To this purpose, the European Commission already identified around 30 major European banks whose trading activities exceed certain thresholds and that are considered too large and interconnected to be allowed to go bankrupt. The aim of the regulation is to separate risks associated with banks’ trading activities from deposit taking function.

of investments used to account for 15% of market activities and now accounts for 3%. Finally, the regulation would introduce rules to increase transparency of certain financial transactions.

According to the Commission proposal, banks considered “too big to fail” would be obliged to transfer their high-risk market activities into separate legal trading entities starting from 2018.

Moreover, the reform also includes a ban on proprietary trading, a high speculative activity that consists in trading on own account. This kind

In the Council, negotiations are also expected to be difficult: some Member States such as France and Germany have already implemented reforms to separate speculative activities. According to observers, a first informal meeting on this issue highlighted slightly different views in the Council.

Due to late publication of the proposal, outgoing MEPs did not manage to launch the review process. The new Parliament and more specifically the Members of the Committee for Economic and Financial Affairs (ECON) will have to reach a negotiating position on this highly sensitive dossier.

Payment Services Last July, the European Commission unveiled the payment services package, which is composed of a regulation on multilateral interchange fees (MIFs) and a revised payments directive (PSD2).

The European Parliament adopted its position on the package in April, during the last plenary session. Based on this preliminary work, the newly elected MEPs will now have to reach a compromise with the Council.

The MIFs regulation aims to introduce caps to fees that can be charged for debit or credit card

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payments. In their assessment, MEPs introduced substantial modifications to the text: it was decided to include commercial cards in the scope of the regulation while the so called principle of “honour all cards” rule was removed. This rule required merchants handling one of the major cards to accept all cards of the same network.

The PSD2 directive introduces provisions prohibiting most card surcharges (additional fees charged when purchasing), decreasing consumers’ liability for fraud, and strengthening security. This part of the package remained similar to the Commission proposal.

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Insurance products In July 2012, the European Commission presented a proposal for the revision of the Directive on insurance mediation (IMD). The aim of the reform is to reinforce protection of insurance policyholders by regulating selling practices for insurance services.

After months of intense negotiations, the European Parliament adopted in February its amendments. The new MEPs will now have to find a compromise with the Council on this controversial reform.

Former MEPs introduced substantial changes to the text. The proposal to ban the “tying� practice (consisting in selling many insurance products in a package) was reduced to a simple limitation.

According to the text adopted by the Parliament, consumers should have the right to decide if they want to purchase the different components separately or as part of a package and they should be fully informed about the risk profile of the services. MEPs also narrowed the length of insurance products that would be covered by the reform. MEPs decided to include new requirements on transparency and conflict of interest in the scope of the regulation. Consumer organizations already criticized the Parliament amendments, stating that the introduced modifications were insufficient to fully protect consumers.

The Council is expected to adopt a position in the coming months in order to start negotiations.

Benchmarks used in financial instruments or contracts Last September, the European Commission presented a draft regulation on indices used as benchmarks in financial instruments and financial contracts. The initiative of the Commission followed a series of revelations that traders at leading banks had sought to benefit from manipulating their submissions to the London Interbank Offered Rate (LIBOR). Subsequently the European Commission heavily fined eight banks for breaking anti-trust rules. Benchmarks such as LIBOR or EURIBOR represent average interest rates that banks would be charged if borrowing from other banks. They also serve as a basis for day-to-day contracts such as households mortgages.

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With regards to this very sensitive dossier, newly elected MEPs will have to reach a common position before starting to negotiate with the Council. This objective was missed by their predecessors due to controversies on two pillars of the regulation. First of all, Members of the Economic and Financial Affairs (ECON) Committee agreed that Commission’s proposal included too many benchmarks but were unable to decide which ones to consider systemically relevant. Moreover, MEPs could not find an agreement on the division of competencies between Member States and the European Securities and Markets Authority (ESMA).

In the Council, negotiations have been quite intense. The British delegation is strongly

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opposing to attribute binding powers to the ESMA in case of dispute with national supervisors. The British government is not likely to accept that the

EU would be responsible for the London-based LIBOR.

Money Market Funds Last September, the European Commission adopted a communication on shadow banking and a draft regulation on money market funds (MMFs). These funds invest in short-term debt as money market instrument issued by governments, banks or corporates. The Commission wanted to regulate MMFs because of their systemic interconnection with the banking sector and, more specifically, because their operation has been at the core of international work on shadow banking. The new rules proposed aim to improve liquidity management and stability of money market funds but also to introduce a legal framework for interactions with banks.

With regards to this dossier, newly elected MEPs will have to start from scratch as their

predecessors have been unable to reach a common position within the Committee for Economic and Monetary Affairs (ECON). Former Members clashed particularly on a rule that would introduce a 3% buffer for certain some forms of MMFs. Such MMFs would be obliged to foresee a capital reserve in order to increase stability in the financial sector. Many MEPS and banking associations already stated that this rule would kill MMFs that invest in risky assets.

The negotiations in the Council are proceeding very slowly as this regulation does not seem to be a priority for the Greek Presidency. According to observers it is unlikely that the Parliament and Member States can reach an agreement before the end of the year.

Corporate Governance Package This April, the European Commission presented a corporate governance package containing a revised version of the shareholders rights directive and a draft directive on single-member companies.

With regards to the shareholders rights directive, the aim of Commission’s proposal is to improve transparency of listed companies by enhancing shareholders rights. Furthermore, the proposal would oblige companies to disclose information on their remuneration policies. The most controversial rule is the one that would give shareholders the right to approve remuneration

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policies for directors in listed companies on regulated markets.

The second draft directive’s aim is to facilitate operation of SMEs across the EU. The new rules would allow the creation of a single-member private company by any natural person, via online registration and without any minimum capital requirement. A similar proposal failed in 2008 because of the opposition of some Member States.

Newly elected MEPs will start to review the proposals early this autumn.

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Political positions on financial issues at a glance

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Food and Beverage Novel food and animal cloning package Last December, the European Commission presented a new legislative package composed of a draft regulation on novel food and two draft directives on animal cloning. Regarding this package, the new Parliament will have to start from scratch as before leaving office, MEPs just managed to divide responsibilities among the two relevant Committees: the Committee on Agriculture (AGRI) will be in charge of the draft directives on cloning while the Committee for Environmental Affairs (ENVI) will deal with the novel food regulation.

The first directive proposes to forbid using cloning techniques on farm animals; cloning would only be permitted for research or scientific purposes.

The second directive aims to regulate food produced from cloned animal. This part of the package is certainly the most controversial: MEPs and consumer organizations already criticized the Commission’s choice of not including in its proposal rules measures to ensure the traceability and labelling of food driving from descendent of cloned animals. What is more, the

Commission proposal included in general no ban of such products. This precise issue determined already in March 2011 the failure of a very similar proposal.

On this point, the Council already stated that the labelling of food other than beef and veal should be conditional on the results of an impact study.

Furthermore, the Commission argues that the introduction of such rule would oblige the EU to deny products access to the EU market which originate from countries that do not apply a traceability system. According to observers, the Commission fears that this rule could deteriorate trade relations with the US while negotiations on the Transatlantic Trade and Investment Agreement (TTIP) are ongoing.

The third part of the package aims to introduce new rules on foods resulting from new technologies or food not consumed significantly before 1997 in the Union (novel food). The Commission’s proposal would establish a new simplified procedure to evaluate the safety of new products and update the legal definition of novel food.

Animal and plant health package Last May, the European Commission presented a package consisting of 5 proposed regulations on animal and plant health. The new measures proposed by the Commission aim to update and simplify the current regulatory framework and to

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strengthen EU animal and plant health, seeds and safety rules for a safer food chain.

The most sensitive parts of the dossier are the rules for seeds and reproductive materials.

Sectorial associations claimed that the new

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regulation would give excessive powers to the Commission on the controls over seeds and reproductive materials without leaving a sufficient margin of manoeuver to Member States.

Following criticisms from farmers associations and seeds producers, MEPs rejected the Commission proposal. Moreover, MEPs formally called the Commission to withdraw its proposal and submit an updated draft to the new Parliament.

accept to take a step back. The ball is now in Council’s court: on 16-17 June, Member States can either back Parliament’s vote and reject the proposal (and so conclude the legislative process) or amend it. In case the Council chose this second option, the new MEPs will be in charge to carry on a second reading on this highly sensitive dossier.

The Commission expects that this package will enter into force in 2016.

The Commissioner for health, Tonio Borg, strongly defended the proposal and did not

Organic farming and labelling Last March, the European Commission unveiled a legislative package on new rules for bioproduction. The Commission’s proposal contains a new regulation on the farming and labelling of organic products and an action plan that sets goals such as strengthening links between EU research and organic farming or encouraging the use of organic food in schools. The Commission also put for approval a mandate for international negotiations in order to reinforce the external dimension of EU organic production. The aim of this package is to update the legal framework in a sector that has quadrupled in size in the past ten years.

Regarding this dossier new MEPs will have to start from zero as their predecessors did not have

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enough time to take any decision. The package has been generally welcomed by the organic industry, however, some green MEPs and farmers associations expressed concerns about financial burden sharing in case of pesticide contamination. This legal proposal is criticized because organic producers would be obliged to pay for contamination done by farmers using pesticides even if the contamination was accidental. This question is expected to be a major issue for the next AGRI Committee and it remains highly sensitive for both consumers and producers representatives: 45,000 respondents submitted their comments to a public consultation on the issue last year.

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Healthcare and Pharmaceutical Medical devices In September 2012, following the breast implant scandal, the European Commission unveiled two draft regulations: one on medical devices and another on in vitro medical devices (such as those used for HIV blood tests). The aim of the proposed reform was mainly to restore patient’s confidence by introducing new rules to assess safety and performance of medical devices before accessing the European market.

Last April, before leaving office, MEPs reached a common position, but were unable to start the talks with Members States as negotiations have been delayed in the Council. Within the Parliament, political positions have been

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contrasting especially on the system for market authorization: the Commission’s proposal was in favour of a decentralized approach while many MEPs advocated for a centralized system. The final decision can be considered half-way from those positions. Newly elected MEPs will have to reach a compromise with Member States once the Council has reached a common position.

According to insiders, Member States are clashing around the question of reprocessing, traceability and assessment of compliance of medical devices. Ministers nevertheless expect to reach a deal by June.

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Information and Communication Technology Connected Continent Package Just before leaving office, former Members of the European Parliament adopted their position on a single telecoms market (the so-called “connected continent package”). Newly elected Members will now have to go ahead with the opening of negotiations with the Council of Ministers. The Council is expected to adopt its position by October prior to a final agreement.

On the flagship measure of roaming fees, Members of the European Parliament voted in favour of scrapping roaming charges for mobile phones from 15 December 2015. This obligation would apply for voice, text and data services.

MEPs included nevertheless an exemption: if

consumers use roaming services to excess, capped charges could exceptionally be imposed.

On the sensitive issue of net neutrality, the European Parliament supported amendments to the initial proposal from the European Commission to include this principle in the new rules and to shorten the list of exemptions for slowing down internet access and services (limited to the cases of court order enforcement, network security or prevention of temporary network congestion). Under the new provisions, internet service providers would be banned from slowing down or blocking particular services.

Data protection package In February, the European Parliament adopted its position on personal data protection. The new Parliament has now to find an agreement with the Council and negotiations are likely to be very intense especially because the proposal is extremely dense and technical. The text will probably be discussed in June during an informal meeting among EU justice ministers. A definitive agreement is unlikely to be reached before the end of 2014.

In comparison to the original Commission proposal, the Parliament’s amended text

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introduced stricter rules for data gathering and processing. Former MEPs also introduced tougher sanctions in case of violation of the European rules (up to 5% of the global turnover while the Commission proposed 2%). They also included the “right to be forgotten” which means that users would have the right to have their own data removed. The concept of ‘consent to the use of data’ has also been clarified to make it more explicit especially when data are transferred to third countries.

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Political positions on Digital issues at a glance

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Transport The Fourth Railway Package In the area of transport, the first important policy issue on the plate of the newly elected Parliament will be the Fourth Railway Package. The previous European Parliament already adopted a common position on the dossier, but new MEPs will have to start negotiations with the Council of Ministers.

The Fourth Railway Package aims to create, from 2019 onward, a railway landscape in which domestic railway lines are also subject to public tendering. Yet, the nitty-gritty aspects of the legislative outcome might lead to less changes to the European railway landscape than originally envisaged.

First, in their positions, MEPs substantially disagreed with the required institutional “Chinese Wall” between infrastructure manager and train operator. The Parliament amended the original text in order to allow for cooperation agreements between both. This line of reasoning promises a similar, conservative position of the Council of Ministers, downplaying the ramifications of the liberalisation.

Second, social aspects might become an issue.

The Parliament required that train operators tendering for public service contracts would be

obliged to respect the existing labour agreements of the country they operate in. Given the influence of the well-organized railway unions on some of the higher-wage countries’ representatives, the Council might be inclined to follow the Parliament.

Further, MEPs discussed the role of the European Railway Agency (ERA). Where Commission and Parliament want ERA to become a “one-stop-shop” for the authorization of vehicles and to give it a supervising authority over the existing national regulatory agencies, the Council prefers a dual-system in which ERA and its national counterparts would act on an equal footing for domestic connections.

A last contentious matter concerns the principle of reciprocity. Namely, can countries deny access to public tendering to companies originating from countries that have not yet opened their markets?

As only two Member States have fully liberalised their rail transport and some (former) national railway companies have an interest in getting a foot in the door in foreign markets, it remains unsure if the Council will back the Parliament on this stance.

Single European Sky II+ The new parliament will also inherit the Single European Sky 2+ initiative released by the Commission as a follow-up to the Single European Sky legislation. This initiative from 2004 sought to tackle the organizational fragmentation of national traffic control providers

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by creating so called “functional air blocks”, grouping together the air control agencies of neighbouring European countries. The follow-up package, however, released by the Commission in June 2013; contained new, contentious matter.

With the purpose of enhancing the efficiency in

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the aviation back-up services sector, it proposed to uncouple air support services from the air control authority and to make the former subject to public tendering.

formal liberalisation requirement was deemed premature and only negotiable after an impact assessment, carried out by the Commission by 2016.

Not surprisingly, plans for liberalisation in a sector historically organised as a non-competitive public service, evoke resistance from the employees and their labour unions. And thus, at the end of January 2014, the staff of air control authorities in many Member States went on strike. The Parliament amended the text to turn the compulsory liberalisation into a voluntary one. A

A similar, perhaps even more critical position, can be expected from the Council of Ministers.

Member States find themselves not only pressured by the labour unions but they also worry about the financial health of their national air control authorities, on whose balance sheets – for some countries at least – the first Single Sky package has had a detrimental impact.

ETS for intercontinental flights The exemption for intercontinental flights from the European Emissions Trading Scheme (ETS) for aviation will be extended until 2016. This decision was taken during the plenary session of 3 April after the Environment Committee of the European Parliament had first rejected the proposal.

With a trade war lurking behind the bend, the Council had given in to pressure from the US, China and Russia which had threatened to retaliate against the European aircraft manufacturers. At the same time, it was believed

that this decision might give Europe a stronger position in the International Civil Aviation Organisation when negotiating a global emission reduction scheme.

The adopted texts stipulate that the ETS will cover transnational flights from 2017 onwards. Still, it is very likely that the cap on aviation emissions will be on the agenda of the following legislature, since the texts themselves ask the Commission to come up with proposals that “take into account international developments”.

Truck Measures Regulation Another unfinished policy project concerns a regulation changing the allowed weight and dimensions of trucks. Originally, the Commission hoped to blaze a trial for extra-large lorries - the so called mega trucks - on the European roads, but that attempt bit the dust after a first reading in the Parliament. What did pass the scrutiny of MEPs were measures to make trucks more aerodynamic and thus less energy consuming. At

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the same time the text was amended to make these vehicles safer for other road users.

In case the proposal would be approved by the Council, the era of the typical brick-shaped trucks on the European roads would soon come to an end as they would be replaced by more rounded, aerodynamic successors by the year 2022. Yet, it

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is far from sure that the Member States will straightforwardly approve this position.

truck manufacturers demanding a postponement of the new standards until after 2025.

The umbrella organization of national environmental NGOs advocating a more sustainable transport system, Transport and Environment, said it suspected several national delegations to have become prone to lobbying by

Whether T&E’s allegations are correct, can be assessed in June, when the Member States are expected to take an official stance in the Council of Ministers.

eCall With the eCall initiative presented in June 2013, the European Commission aimed at introducing a European-wide road alert system that automatically informs the relevant emergency authorities in case of a traffic accident. For this purpose, by 2015, all cars would have to be equipped with an electronic chipset to transfer location and other relevant data.

Whereas in the Parliament the discussion on the privacy aspects of this technology didn’t prevent

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a majority to support the Commission’s initiative, the proposal got stuck in the Council, as some Member States stumbled upon the costs needed to set up the necessary call infrastructure that is indispensable for the system to work.

Newly elected MEPs will now have to reach a final agreement with the Council which is expected to take a consenting decision in May. Delays are however postponing the implementation by two years.

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Political positions on Transport at a glance

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International Trade Transatlantic Trade and Investment Partnership (TTIP) If the current Transatlantic Trade and Investment Partnership (TTIP) negotiations between the European Commission and the US Trade Representative ever lead to an agreement, the text will be presented to the next European Parliament for ratification.

The widespread criticism from civil society has already had its influence on the Parliament. The left-wing groups, namely GUE-NGL and the Greens, already dismissed any new trade agreement. S&D still sits on the fence and explicitly refers to the rejected ACTA treaty as a sketch of what to expect when the outcome of the negotiations compromises European social and environmental standards. Not only in the Parliament scepticism surrounds the TTIP debate, also – mostly in Europe – civil society has started to mobilise against it and dispraises the fact that important political decisions are being taken behind closed doors. This controversy has even lead fierce supporters of international trade to become sceptical about TTIP. Societal pressures – and criticisms – from constituencies are making talks harder between the Commission and the US Trade Representative.

With the quantitative tariff barriers in the EU-US trade being already very low, TTIP primarily focusses on the reduction of non-tariff barriers.

Especially on the eastern side of the Atlantic this attempt is regarded with a very watchful eye, as

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European social, environmental and safety standards are in most sectors stricter than their American counterparts. Under unremitting public scrutiny are, for instance, the sanitary and phytosanitary measures, a torn in the side of the US negotiators, who seek to overcome the (de facto) ban on most genetically modified food imports and hormone treated beef. Also under negotiation is the fuel quantity directive, of which the provisions rule out oil imports originating from Canadian oil sands.

At the same time, the removal of the American moratorium on shale gas exportation which is on the wish list of European Commission, is fiercely contested by European environmental organizations that see the availability of a cheap fossil energy supply as an important threat to the transition towards a renewable European energy market.

Even more controversial has been the inclusion of a so called Investor-State Dispute Settlement Mechanism (ISDS). Such a provision would allow foreign investors to litigate against Member States in case legislation has been adopted that violates a treaty provision. Confronted with an allergic reaction from civil society against what it calls a form of “corporate sovereignty” that undermines national democratic decision making abilities, Trade commissioner Karel De Gucht, saw himself forced to temporarily exclude ISDS from the talks.

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Free Trade Agreement EU-Japan Somewhat in the shadow of the TTIP, a free trade agreement between the European Union and Japan is also in the making. In contrast to the talks with the United States, one year since the start, substantial progress has been made and in a not so distant future - a final agreement is expected to be presented to the new Parliament which will ratify or not the agreement. Though talks are held under a similar degree of secrecy, they have drawn less attention from civil society.

A plausible explanation is the less ambitious agenda regarding non-tariff barriers; one that does not touch upon the more high-profile, politically sensitive debates.

For Japan, the removal of European tariff barriers is key, especially for imported cars. This is greeted with aversion by Europe’s car export champion Germany, that doesn’t want to see a

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further growth of Japan’s share in the European car market. Europe, on the other hand, wants Japanese non-tariff barriers to be hauled down.

For example, a major stumbling block for European train manufacturers is the operational safety clause for public procurement in free trade agreements. This exemption – according to the European railway manufacturers – is systematically being used to make the rolling stock market an intra-Japanese business. Tokyo, on the other hand, claims the provision is necessary to ensure that trains resist earthquakes. A similar complaint concerns the requirements for small cars to be eligible for the Japanese tax reduction for small cars that are believed to be tailored to the Japanese car industry, as they are not met by most European small cars.

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For further information please contact: Leonardo Sforza Leonardo.Sforza@mslgroup.com Romain Seignovert Romain.Seignovert@mslgroup.com Jacopo Grassi Jacopo.Grassi@mslgroup.com Ruben Brugnera Ruben.Brugnera@mslgroup.com Square de Meeûs 23 – B 1000 Bruxelles Our website: www.mslgroup.com Follow us on twitter for breaking news updates: @MSL_Brussels

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