Insights Brussels May 2014

INSIGHTS BRUSSELS Special EU Elections

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INSIGHTS BRUSSELS . AFTER THE EP ELECTIONS .

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 doesnt 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.

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 on-

going 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.

EU 2014 timeline

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 Councils 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

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 long-

term 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

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 long-

term commitment, such as infrastructure,

transport or sustainable energy projects. The

Commissions 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 continents 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.

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.

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

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.

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.

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.

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

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.

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 Commissions 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 Commissions 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

policies for directors in listed companies on

regulated markets.

The second draft directives 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 Commissions 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

Commissions 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

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.

The Commissioner for health, Tonio Borg,

strongly defended the proposal and did not

accept to take a step back. The ball is now in

Councils court: on 16-17 June, Member States

can either back Parliaments 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.

Organic farming and labelling

Last March, the European Commission unveiled

a legislative package on new rules for bio-

production. The Commissions 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

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 patients

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

contrasting especially on the system for market

authorization: the Commissions 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 Parliaments amended text

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

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.

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

formal liberalisation requirement was deemed

premature and only negotiable after an impact

assessment, carried out by the Commission by

2016.

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

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.

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

truck manufacturers demanding a postponement

of the new standards until after 2025.

Whether T&Es 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 didnt prevent

a majority to support the Commissions 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

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 Europes car export

champion Germany, that doesnt want to see a

further growth of Japans 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 [email protected] Romain Seignovert [email protected] Jacopo Grassi [email protected] Ruben Brugnera [email protected] Square de Mees 23 B 1000 Bruxelles Our website: www.mslgroup.com Follow us on twitter for breaking news updates: @MSL_Brussels

Insights Brussels May 2014

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Transcript of Insights Brussels May 2014