Single Market News - Financial reform: key "roadmap" initiatives presented - 2008 IV

8/9/2019 Single Market News - Financial reform: key "roadmap" initiatives presented - 2008 IV

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Emerging digital barriers

to the Single Market

Financial reform:key roadmap initiatives

presented

52

N52

2008

-IV

ISSN1

830-5210


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CONTENTS

2008 - IV

Editeur responsable

Panayotis StamatopoulosEuropean CommissionDG Internal Market and ServicesUnit A-4

B - 1049 BrusselsTel: (+32 2) 296 17 72Fax: (+32 2) 295 43 51

EditorNigel GriffithsFax: +32 2 295 43 51

SubscriptionsBrona MeldrumDG Internal Market and ServicesSPA2 1/008B-1049 Brussels

Fax: +32 2 295 43 51E-mail: [email protected]/internal_market/smn.htm

Layout:Unit A4

Onlinehttp://ec.europa.eu/internal_market/smn.htm

European Communities, [2008]Reproduction is authorised provided the source

is acknowledged.

For further informationhttp://ec.europa.eu/internal_market/index_en.htm

Your Europehttp://ec.europa.eu/youreurope

Photographs for this editionwere supplied by:Grifco Communications andthe European Commission.

3 Editorial

4 Strict rules proposed to regulate credit rating agencies

6 Revision of bank capital requirements rules proposed

to reinforce financial stability

8 Changes to accounting standards adopted to alleviatethe financial turmoil

9 Commission proposes to increase minimum protection forbank deposits

10 Proposal to extend rules on cross-border euro paymentsto direct debits

11 SPECIAL FEATURE

Emerging digital barriers to the Single Market

15 Electronic money: Commission proposes clear legalframework for innovative payment solutions

16 Industrial property conference looks at theCommunity Patent and counterfeiting

18 Accounting rules simplified to benefit SMEs

19 Proposals to simplify EU rules on mergers and divisions

20 Commission assesses the use of electronic procurement

20 Commission holds conferences on Market Abuse Directiveand on markets in financial instruments (MiFID)

21 Infringements
mailto:[email protected]://www.ec.europa.eu/internal_market/smn.htmhttp://ec.europa.eu/internal_market/smn.htmhttp://ec.europa.eu/internal_market/index_en.htmhttp://ec.europa.eu/youreuropehttp://ec.europa.eu/youreuropehttp://ec.europa.eu/internal_market/index_en.htmhttp://ec.europa.eu/internal_market/smn.htmhttp://www.ec.europa.eu/internal_market/smn.htmmailto:[email protected]


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EDITORIAL

Jrgen HolmquistDirector General forInternal Market and Services,European Commission

3

The situation in global financial markets deteriorated in Septemberand October. As a reaction, efforts to stabilise markets and soften aneconomic downturn have increased. The Commission is deeply in-volved in these efforts both at EU and global level. Work has start-ed on a new global regulatory architecture to manage the financialservices industries. Right from the start of the crisis, the Commissionhas played a key role. It was instrumental in preparing the so-calledECOFIN roadmap already in autumn 2007. This roadmap was the firstdocument globally that set out a comprehensive work programme toanalyse and address the shortcomings in regulation revealed by thefinancial crisis. The Commission has also brought forward a numberof important initiatives (see below) to improve financial regulation

and it recently decided to establish a High Level Group reviewing thestructure of cross-border supervision within the European Union. TheCommission has also been actively engaged in promoting the defini-tion of a common EU position, first at the European Council meetingin Brussels on 7 November, and then at the G20 Summit that tookplace in Washington on 15 November. A broad consensus has therebybeen established among Member States on key issues such as the fu-ture role of international financial institutions and the main regula-tory reforms that need to be implemented.

One of the key elements of the EUs roadmap is a revision of the EUsCapital Requirements Directive which regulates the ability of banks to

lend and borrow money. Changes have been proposed by the Com-mission with the overriding aim of strengthening confidence in finan-cial markets, reinforcing the stability of the financial system, reducingrisk exposure and improving the supervision of banks that operate inmore than one EU country. (See p. 6)

The Commission has, after extensive consultation, also proposed a se-ries of far-reaching changes in the way credit rating agencies are regu-lated. The new rules are designed to ensure the high quality of creditratings, which should not be affected by conflicts of interest whichmay arise in the rating business. The Commission proposal goes fur-ther than the rules which apply in other jurisdictions. (See page 4).Measures have also been proposed to raise the minimum level of pro-

tection for bank deposits (see p. 9) and to modify accounting rules tobenefit companies in these times of financial difficulty (see p. 8)

Since 1993 great strides have been made by the EU in removing thetrade barriers between the Member States. Despite this undoubtedsuccess, today we now face the risk of new internal market barriers be-ing created - electronic barriers. Incompatible approaches to onlineprocurement, electronic signatures, eInvoicing and document au-thentication can potentially re-introduce market fragmentation andundermine the potential benefits of the Single Market. (See SpecialFeature p.11)


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The new rules are designed to ensurethe high quality of credit ratings, whichshould not be affected by the conflictsof interest which may arise in the ratingbusiness.

The Commission proposal goes furtherthan the rules which apply in other ju-

risdictions.

The proposal lays down conditions forthe use and issuance of credit ratings.

These are needed to restore marketconfidence and increase investor pro-tection.

It introduces a registration procedure forcredit rating agencies to enable Europe-an supervisors to control the activitiesof the agencies whose ratings are used

by credit institutions, investment firms,insurance, assurance and reinsuranceundertakings, collective investmentschemes and pension funds within theCommunity.

Rigorous rules

Credit rating agencies will have to com-ply with rigorous rules to make surethat:

that credit ratings are not affected

by conicts of interest;

that credit rating agencies remainvigilant on the quality of the ratingmethodology and the credit ratings;

that credit rating agencies act in atransparent manner.

The proposal also includes an effectivesurveillance regime whereby Europeanregulators will supervise credit ratingagencies.

The new rules lay down that:

Credit rating agencies may notprovide advisory services to therated entity or any related thirdparty;

Roadmap - Credit Rating Agencies

As part of a package of measuresto deal with the financial crisis theCommission has put forward a proposalfor a Regulation to control the activitiesof the credit rating agencies.

The behaviour of the credit rating agen-cies, whose analysis is extensively used

by investors, has been highlighted asone of the contributory factors in thecurrent turmoil in global financial mar-kets.

Strict rules proposed by the Commission

As part of the package of measures to deal with the financial crisis, theCommission has, after extensive consultation, proposed a series of far-reaching reforms in the way the credit rating industry is governed. Theywill ensure delivery of high quality credit ratings, eliminating the poten-tial impacts of conflicts of interest.

After the G20 Summit of world leaders in Washington, 15 November CommissionPresident Barroso said: There has been a real convergence of analysis.We havebegun laying the foundations for a new global governance: for a global socialmarket economy, with the European Union acting as its precursor."

Right from the start of the crisis, the Commission has played the key role. It wasinstrumental in preparing the so-called ECOFIN roadmap in autumn 2007. Thisroadmap was the first document globally that set out a comprehensive workprogramme to analyse and address the shortcomings in regulation revealedby the financial crisis. The Commission was also actively engaged in promotingthe definition of a common EU position at the European Council meeting on 7November in advance of the G20 Summit.

to regulate credit rating agencies


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info

They will not be allowed to ratenancial instruments if they do nothave sufcient quality informationto base their ratings on;

They must disclose the models,methodologies and keyassumptions on which they basetheir ratings;

They will be obliged to publish anannual transparency report;

They will have to create an internalfunction to review the quality oftheir methodologies and models;

They should have at least threeindependent directors on theirboards whose remunerationcannot depend on the businessperformance of the rating agency.They will be appointed for a singleterm of ofce which can be nolonger than ve years. They can onlybe dismissed in case of professionalmisconduct. At least one of them

should be an expert in securitizationand structured nance.

IOSCO code

Some of the proposed rules are basedon the standards set in the InternationalOrganisation of Securities Commissions(IOSCO) code. The proposal gives thoserules a legally binding character. Also, inthose cases where the IOSCO standardsare not sufficient to restore market con-fidence and ensure investor protection,

the Commission has proposed stricterrules.

ECOFIN roadmap

The Commission started work to proposelegislation in this area in the summer of2007 when there were first indicationsof malpractice in the ratings business.

EU Finance Ministers (ECOFIN) meet-ing in October 2007 agreed to a set of

conclusions on the crisis (the ECOFINroadmap) which included a proposalto assess the role played by credit ratingagencies and to address any relevantdeficiencies.

The EU Council of 20 June and 16 Octo-ber 2008 reinforced this by calling for alegislative proposal to strengthen therules on credit rating agencies and theirsupervision at EU level, considering it apriority to restore confidence and prop-er functioning of the financial sector.

Comprehensive impact assessment

This proposal is the outcome of a thor-ough and comprehensive impact as-

sessment as well as extensive consulta-tions.

Important input has been given bythe Committee of European SecuritiesRegulators and the European SecuritiesMarkets Expert Group (ESME), Mem-ber States, the ECB, major credit ratingagencies and other stakeholders.

CESRs advice leant in favour of a self-regulatory approach while ESME out-lined a comprehensive package of

proposals and indicated that in the ab-sence of a willingness by the CRAs tostrengthen their internal governanceand procedures, regulation would haveto be considered.

Commissioner for Internal Market andServices, Charlie McCreevy commented:Having considered the matter carefully and taking account of the difficulty ingetting all of the major CRAs to step upto the plate with adequate self regula-

tory proposals I decided it was neces-sary to move forward with the prepara-tion of this legislative proposal.

The proposal is in my view well bal-anced it ensures the analytical in-dependence of credit rating agencieswhile at the same time ensuring thatthey are subject to effective oversight toensure that professional standards areapplied, agreed procedures and policiesare enforced to ensure that the integrityof the rating process is upheld and thatconflicts of interest are adequately man-aged and mitigated.

"The Commission's proposal goes fur-ther than the rules existing in any other jurisdiction in the world. While we aresetting standards for the EU we wantthese to become global standards."

No defence

Under the new rules, CRAs will have tobe authorised and operate in full con-formity with EU rules. They will be su-pervised by EU supervisors.

CRAs will no longer be able to use thedefence that credit ratings are just opin-ions. They will be sanctioned and madeliable for breaches of our rules and otherwrongdoing, including gross profes-sional misconduct. They could face thewithdrawal of their registration underEU law.

Ratings of structured finance instru-ments will need to include a report onthe specific risks involved; alternatively

CRAs may use separate symbols forthese ratings. Separate rating symbolswill also be required for unsolicited rat-ings. Finally, a CRA will not be able to is-sue ratings if it does not have sufficientgood quality information to do so.

http://ec.europa.eu/internal_market/securities/agencies/index_en.htm

"The Commission's proposal

goes further than the rules

existing in any other jurisdic-

tion in the world. While we are

setting standards for the EU we

want these to become global

standards."

Roadmap - Credit Rating Agencies

info

Piotr PlizgaTEL: +32 (0)2.298 87 72

FAX: +32 (0)2.295 56 06

[email protected]
http://ec.europa.eu/internal_market/securities/agencies/index_en.htmmailto:[email protected]:[email protected]://ec.europa.eu/internal_market/securities/agencies/index_en.htm


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Market and Services, Charlie McCreevy.

"The proposals approved by the Collegefor a revision of the Capital Require-

ments Directive are proposals on whichwe have been working for more than ayear now."

A very important element, he explained,relates to the establishment of Collegesof Supervisors to enhance cross-bordercooperation between supervisors andthe mandatory exchange of informa-tion between supervisors to help detectsigns of stress.

"We are also imposing much clearer re-sponsibilities on supervisors in respectof the allocation of capital for banksoperating on a cross border basis. Thisshould ensure that in each Member

our, transparency and prudence are keyto a healthy and stable banking system,"commented Commissioner for Internal

Roadmap - Bank regulation

Revision of bank capital requirement rulesproposed to reinforce financial stability

Member States and industry. It nowpasses to the European Parliament andthe Council of Ministers for considera-tion.

The European Council has expressed astrong sense of urgency emphasising

that the measures should be adoptedby April 2009. While this may be toolate to have any impact on the currentmeltdown of the financial system it willhelp strengthen the regulatory frame-work for the medium term and helpprevent the recurrence of such crises.

Own financial resources

The purpose of the Capital Require-ments Directive - originally adopted in2006 - is to ensure the financial sound-

ness of banks and investment firms.Together they stipulate how much oftheir own financial resources banks andinvestment firms must have in order tocover their risks and protect their de-positors.

This legal framework needs to be regu-larly updated to respond to the needs ofthe financial system as a whole.

These new rules will fundamentally

strengthen the regulatory frameworkfor EU banks and the financial system.I believe that they are a sensible andproportionate response to the financialturmoil we are experiencing. Basic rig-

As a further key element to strengthen confidence in financial marketsthe Commission has proposed a revision of the rules affecting the abilityof banks to lend and borrow money. The Commission has put forward arevision of EU rules on capital requirements for banks that is designed toreinforce the stability of the financial system, reduce risk exposure andimprove the supervision of banks that operate in more than one EU coun-try.

Arevision of the EU rules affectingthe capital requirements for banksand thus their ability to lend money hasbeen drawn up by the Commission.

The proposed amendments are, in themain, a direct follow-up to the 'roadmap'

of measures to counter the financial tur-moil agreed by EUFinance Ministersin October 2007.They are also aresponse to therecent recommen-dations of the G-7Financial StabilityForum.

The changes aredesigned to rein-

force the stabil-ity of the financialsystem, reduce riskexposure and im-prove supervisionof banks that op-erate in more thanone EU country.

The proposal,which amends theexisting Capital

Requirements Di-rectives*, reflectsextensive consul-tation with inter-national partners,

McCreevy: "The proposals

approved by the College

or a revision of the Capital

Requirements Directive

are proposals on whichwe have been working for

more than a year now."

"Rather than working in thesole interest of their own

Member State it is impor-

tant that solutions for cross

border groups are found in

a collegial manner."


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info

info

Arvind Wadhera

TEL: +32 (0)2.298 63 44

FAX: +32 (0)2.295 09 92

[email protected]

Roadmap - Bank regulation

http://ec.europa.eu/internal_market/bank/regcapital/index_en.htm

State where a bank has an operation itwill be appropriately capitalized. Theproposals will strengthen oversight forthe 40+ large cross-border banks, equip-ping the system to handle much moreeffectively the problems that could arisein the event of a cross-border bankingfailure."

Breakthrough in bank supervision

Learning from recent events, it is criticalthat there are procedures and policiesthat ensure the availability of liquidity intimes of stress, he said.

"As we have witnessed, when liquiditydries up the blood just stops flowing andlife just withers away. These measuresrepresent a real and important break-through in respect of the pan-Europeansupervision of banks a breakthroughthat until now has met with stiff political

resistance from many Member States,"he added.

The Commissioner pointed to the bankrescue in Belgium where supervisorsand authorities from different MemberStates came together and addressedproblems with two major financial insti-tutions. "We need learn from and buildupon these precedents," he said.

He stressed that from the Commissionsperspective, it is important for co-oper-

ation to be enshrined in the regulatoryframework for normal and crises times.

"Rather than working in the sole inter-est of their own Member State it is im-portant that solutions for cross bordergroups are found in a collegial manner."

Explaining whatis on offer

On the other key is-sue of securitizationMcCreevy stressed theimportance of rigour,discipline and risk shar-ing. "It is important thatin the much maligned'originate to distribute'

model the originatorand the investor, theseller and the buyer ex-plain and understandwhat exactly is on of-fer."

Own due diligence

He stressed the importance that banksdo their own due diligence/risk assess-ment of the assets they invest in.

No longer will any bank be able to placereliance on credit rating agencies fortheir risk analysis. No longer will they beable to buy securitized assets withoutensuring that the originator of those as-sets retains a net economic interest inthem, he stressed.

* Directives 2006/48/EC and 2006/49/EC

The main proposed changes

To improve supervision of cross-border banking groups collegesof supervisors will be establishedfor banking groups that operate inmultiple EU countries. The rightsand responsibilities of the respectivenational supervisory authorities willbe made clearer and their cooperationwill become more effective;

To improve risk management forsecuritized products: rules onsecuritized debt the repayment of

which depends on the performanceof a dedicated pool of loans willbe tightened. Firms (known asoriginators) that re-package loansinto tradable securities will be requiredto retain some risk exposure to thesesecurities, while rms that invest inthe securities will be allowed to maketheir decisions only after conductingcomprehensive due diligence. If theyfail to do so, they will be subject toheavy capital penalties;

To improve the management of largeexposures banks will be restricted inlending beyond a certain limit to anyone party. As a result, in the inter-bank market, banks will not be ableto lend or place money with otherbanks beyond a certain amount, whileborrowing banks will effectively berestricted in how much and fromwhom they can borrow;

To improve the quality of banks capitalthere will be clear EU-wide criteria forassessing whether hybrid capital,

i.e. including both equity and debt,is eligible to be counted as part of abanks overall capital the amountof which determines how much thebank can lend;

To improve liquidity risk managementfor banking groups that operate inmultiple EU countries, their liquidityrisk management i.e. how they fundtheir operations on a day-to-day basis will also be discussed and coordinatedwithin colleges of supervisors. Theseprovisions reect the on-going work

at the Basel Committee on BankingSupervision and the Committee ofEuropean Banking Supervisors.
mailto:[email protected]://ec.europa.eu/internal_market/bank/regcapital/index_en.htmhttp://ec.europa.eu/internal_market/bank/regcapital/index_en.htmmailto:[email protected]


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With the full support of EU MemberStates and Parliament, the Com-mission urgently adopted on 15 Octo-ber various amendments to accountingstandards to mitigate against the risk ofchanging market values in corporate re-sults exacerbating the consequences ofthe recent turbulence in financial mar-kets for EU companies.

Changes to the accounting rules havebeen adopted by the Commission topermit EU companies to benefit in thesame way as U.S. competitors in howtheir financial assets are treated in fi-nancial statements.

Roadmap - Accounting standards

The amendments set out to ensure thatEU companies have the flexibility to re-classify assets held-for-trading into theheld-to-maturity category.

This impacts on how values of assetsare set and is particularly importantin falling markets when they could inturn trigger panic selling or have conse-quences for solvency requirements.

The current financial crisis justifies theuse of reclassification by companies.Financial institutions in the EU will thusno longer have to reflect market fluc-tuation in their financial statements for

Changes to accounting standards adoptedto alleviate the financial turmoil

these kinds of assets.

Rapid response

The Commission has adopted theseamendments in response to delibera-tions of the Council of Finance Ministers(ECOFIN) on 7 October who underlinedthe necessity of avoiding any distortionof treatment between US and European

banks due to differences in accountingrules.

These changes will apply as from thethird quarter of 2008.

info http://ec.europa.eu/internal_market/accounting/ias_en.htm
http://ec.europa.eu/internal_market/accounting/ias_en.htmhttp://ec.europa.eu/internal_market/accounting/ias_en.htm


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Roadmap - Bank deposits

info http://ec.europa.eu/internal_market/bank/guarantee/index_en.htm

Commission proposes to

EU Finance Ministers agreed on 7 Oc-tober 2008 that restoring confidenceand proper functioning of the financialsector is a priority. All Member Statescommitted to raise the level of depositguarantees to 50,000 euro, and many ofthem even to 100 000 euro.

The Commission has consequentlybrought forward a revision of EU ruleson deposit guarantee schemes that putsinto action the commitments made bythe EU Finance Ministers.

The new rules are designed to improvedepositor protection and to maintainthe confidence of depositors in the fi-nancial safety net.

Under the new rules, the minimum

level of coverage for deposits will beincreased within one year from 20,000euro to 100,000 euro, and initially to50,000 euro in the intervening period.

Individual Member States can chooseto add to these minimum levels. In ad-dition, the payout period in the event ofbank failure will be reduced from threemonths to three days.

According to estimates, about 65% of

eligible deposits are covered under thecurrent regime. The new levels wouldcover an estimated 80% (with coverage

of 50,000 euro) and 90% (with coverageof 100,000 euro) of deposits.

Co-insurance (i.e. where the depositorbears part of the losses) is abandoned:Member States must ensure that thedeposit is reimbursed up to the cover-

age level. Under the current Directive,Member States have the option to de-cide that deposit guarantee only covers90% of savings.

The proposal now passes to the Europe-an Parliament and the Council of Minis-ters for consideration.

Proposed amendments

The purpose of the Directive on DepositGuarantee Schemes (1994/19/EC) is

to protect a portion of depositors sav-ings and to ensure confidence into thebanking sector, in order to avoid bankruns leading to severe economic conse-quences.

It has remained unchanged since 1994but is now being updated in order to re-spond to the ongoing financial crisis.

Regarding the level of coverage for de-posits, Member States are required to

increase the coverage level to at least

50,000 euro and within a further year toat least 100,000 euro.

The current Deposit Guarantee SchemesDirective covers savings up to at least20,000 euro, although individual Mem-ber States can choose to increase this

level.

Reduction of the payout period

The time allowed for the deposit guar-antee scheme to pay depositors in theevent that a bank fails will be reduced tothree days. Currently the period is threemonths, and can even be extended tonine months.

Charlie McCreevy, Commissioner for In-ternal Market and Services commented:

Increasing the minimum protectionwill strengthen Europeans confidencein the safety of their deposits. The newrules go hand in hand with the commit-ment made by EU Finance Ministers andare another sensible and proportionateresponse to the financial turmoil we areexperiencing.

bank deposits to 100,000 euroincrease minimum protection for

In the wake of the current financial crisis, the Commissionhas proposed a strengthening of depositor protection byraising the minimum level of coverage for bank deposits.
http://ec.europa.eu/internal_market/bank/guarantee/index_en.htmhttp://ec.europa.eu/internal_market/bank/guarantee/index_en.htm


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Cross-border payments

info

Proposal to extend the rules oncross-border euro paymentsto direct debits

In 2001, the Regulation on cross-borderpayments in euro introduced the prin-ciple of equal charges for correspondingdomestic (national) and cross-borderpayment transactions. This has, in effect,brought down prices for cross-borderpayments and introduced more compe-tition in the EU payments market. It hasbeen also the launch pad of the Single

Euro Payments Area (SEPA).

This autumn, following a thorough re-view process, the Commission has putforward a proposal for a modified Regu-lation, which would, inter alia, extendthe principle of equality of charges tocross-border direct debit transactions.

Benefits

The 2001 Regulation equalises chargesfor credit transfers, cash withdrawals

at cash dispensers and payments bymeans of debit and credit cards up tothe value of 50,000 euro within the Eu-ropean Economic Area countries (all 27Member States of the European Union

plus Iceland, Liechtenstein andNorway). The idea is that charg-es for cross-border and nation-al payments in euro, in everybank within the EU, shouldbe the same (there may be, ofcourse, differences between

Member States and paymentservice providers).

The proposed amendmentsto the Regulation bring new

range of benefits for consumers andcompanies. They will soon enjoy chargeequalisation for another popular pay-ment instrument, i.e. direct debit. Fur-thermore, the amendment will increasethe protection of consumer rights, withclearly appointed national authoritiesand out-of-court redress bodies em-powered to deal effectively with con-

sumer complaints and react quickly incases of incorrect law application. Newdefinitions and improved wording willalso add transparency to the existingprovisions of the Regulation.

These modifications constitute an im-portant step towards the full integrationof EU payment markets.

Changing payments landscape

The emergence of the SEPA and the

adoption of the Payment Services Direc-tive (PSD) are changing the paymentslandscape in Europe. In particular, apopular electronic payment instrument direct debit will become available ona cross-border basis as from November2009.

In this context, following extensivereview process and consultation ofstakeholders, the Commission proposedamending the existing Regulation. The

wording of the proposed Regulation, inparticular its definitions, is aligned withthe PSD in order to create a fully consist-

ent legal framework for all electronicpayment instruments in Europe, andavoid any ambiguities which may resultfrom differences between legal texts.

The review process has also identifiedother areas, where modifications ofthe Regulation would be desirable. Forexample, the absence of clearly identi-

fied national competent authorities andout-of-court redress bodies for disputesrelated to the Regulation had led to en-forcement problems in some MemberStates. The new proposal deals withthese issues by appointing the neces-sary authorities, empowering them todeal with the enforcement problemsand by introducing the principle of ac-tive cross-border co-operation in re-solving any potential disputes.

Finally, the review highlighted the ne-

cessity to provide for a progressivephasing-out of some statistical report-ing obligations, which create obstaclesto the integration of the paymentsmarket and endanger the SEPA project.Settlement-based reporting for bal-ance of payments purposes should beultimately abandoned, according tothe proposal. This shall bepreceded by a phase-outperiod, in which the re-porting requirements will

be relaxed.

Under new proposals from the Commission the costs of cross-border and national direct debit transactions in euro will be-come the same.

http://ec.europa.eu/internal_market/payments/crossborder/index_en.htm

info

Krzysztof ZurekTEL: +32 (0)2.299 88 03

FAX: +32 (0)2.295 07 [email protected]
http://ec.europa.eu/internal_market/payments/crossborder/index_en.htmmailto:[email protected]:[email protected]://ec.europa.eu/internal_market/payments/crossborder/index_en.htm


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Emerging digitalbarriers to theSingle Market

S p e c i a l

F e a t u r e

11

S ince 1993 great strides have been made by the EUin removing the trade barriers between the MemberStates. Despite this undoubted success, today we facethe risk of new internal market barriers being created -electronic barriers .

Current efforts by EU Member States to modernise pub-lic administrations and introduce online eGovernmentservices for individuals and businesses, run the risk of

creating multiple and divergent solutions across the Eu-ropean Union.

Incompatible approaches to online procurement, elec-tronic signatures, eInvoicing and document authentica-tion can potentially re-introduce market fragmentationand undermine the benefits of the Single Market.

Single Market Review

The potential risks of 'eBarriers' being created betweenEU countries were clearly highlighted in the Single Mar-ket Review published by the Commission in November

2007 and subsequently endorsed by EU leaders at theSpring European Council.

European legislators are wellaware of the potential bene-fits which electronic solutionscan deliver and in many im-portant areas, Internet-basedrequirements are being in-corporated in new EU legisla-tion.

This is being done, however,under the assumption thatthe computer technologyand standards are in place tomake electronic systems work

seamlessly across national borders.

Indeed important pieces of European legislation relat-ing to public procurement, the provision of cross-bor-der services (the Services Directive) and the Single EuroPayments Area (SEPA) place significant reliance on elec-tronic (Internet-based) communications.

Unfortunately, all the building blocks of the information

society are not yet in place and when it comes to puttingthose policies in practice, there can often be a few sur-prises in store.

Political support

The EU's Lisbon Strategy for Growth and Jobs highlight-ed the development of interoperable eInvoicing as avital component of the strategy for improving competi-tiveness. At the Manchester Ministerial eGovernmentConference in 2005, European ministers agreed thatby 2010, public procurement would be fully available

electronically and should be widely used. Also in thei2010 eGovernment Action Plan launched in 2006, botheProcurement, eID and eSignatures are explicitly high-lighted as the key enabling technologies which under-pin effective eGovernment.

"Incompatible approaches to onlineprocurement, electronic signatures,

eInvoicing and document

authentication can potentially

re-introduce market fragmentation and

undermine the

benefits of the Single Market."


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N o5 2 2 0 0 8 - I V

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But progress in reachingagreement on standardsand technologies for ex-isting solutions has beenworryingly slow. Indeedmany feel that despite theofficial agreement on prin-ciples, they are still mostlybeing dealt with on a na-tional and not Europeanlevel. It is felt that the cross-border interoperability ofeSignatures and eID havenot been priority issues forMember States with po-tentially damaging conse-

quences.

Electronic signatures

In 1999, EU Member States agreed on a Directive defin-ing the Community framework for electronic signatures.This provides a legal basis for the acceptance and use ofelectronic signatures in the Single Market.

Despite now having a formal legal presence, there is to-day a lack of mutual recognition between eSignaturesused in different Member States basically caused by the

lack of trust in national supervision systems. The barriershere lie not only in the technical area but also in legaland political issues.

eProcurement Action Plan

The EU's Procurement Directives adopted in 2004 pro-vide a comprehensive legal and policy framework for theelectronic processing of public tenders - eProcurement.The deadline for transposition into national law was 31 January 2006, and nearly all Member States have com-pleted this.

The objective of the EU legal framework is to allow fullautomation of the procurement-to-payment processchain while preserving all of the existing guarantees andensuring that the electronic communication and receiptof offers is non-discriminatory, transparent and fair.

In addition to the classic procurement procedures thereare also provisions for 'lighter' procedures applicable to,for example, repetitive purchases or dynamic acquisi-tions such as electronic auctions.

The potential gains here are substantial. The public

sector is the largest buyer in the EU and public tendercontracts in 2006 amounted to some 1,800 billion euros equivalent to 16% of the EU's GDP. An estimated 5%savings can be made on the cost of public contractsthrough eProcurement and on top of this the transac-

tion costs can it is believed be reduced by 50%.

In order to help Member States realise these potentialbenefits, a comprehensive Action Plan on eProcurementwas launched at the end of 2004. It seeks to help mod-ernise the general procurement environment, encour-age Member States to automate the various phases ofthe procurement cycle and create the conditions fortrade between the EU and third parties.

Electronic procurement is indeed moving ahead rapidlyin many Member States. There are plenty of examples ofsuccessful implementation of eProcurement and todaytender notices are already regularly handled electroni-cally all over Europe. France, for example, saves time forits service providers and civil servants by using electron-

ic tendering with its marchs-publics platform.

However, across the EU different national solutions foreProcurement are being developed using in some casesnon-interoperable electronic signatures.

The electronic signatures embedded in the documentsare an essential part of the eProcurement process whichhas to provide a secure and interoperable means of elec-tronic authentication of the signatory, and also guaran-tee the integrity of the documents submitted. Tenderdocuments which are signed electronically cannot be

changed without destroying the signature value.

For pan European eProcurement to work, the eSignaturesemployed must be interoperable across all MemberStates. If they are not, the automation process cannotdeliver the expected benefits.

The issues involved in electronic signatures in pub-lic procurement are indeed complex. Bidders have toprovide in one electronic 'package' several electronicdocuments from different sources, all of them properly

authenticated. Sometimes several electronic signaturesmay have to be attached to a single document, for in-stance when a consortium submits a tender.

Whilst Member States develop their solutions the expe-

espite the removal of trade barriers ine Single Market, new digital barrierse emerging through cross-borderompatibility of computer systems.


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1313

rience so far is that public authorities in Member Statesare frequently not considering the cross-border dimen-sion of eProcurement. They assume that bidders will usetheir own national electronic signature.

It is clear that the implementation of eProcurement canbring great benefits. But for this to be fully realised, theinteroperability issue of electronic signatures must beresolved as they are essential key enablers of electronicprocedures.

SEPA and eInvoicing benefits

The Single Euro Payments Area (SEPA) has been launchedthis year and aims at completing monetary integrationin the euro area and at creating a world class payments

system for the EU's Single Market. SEPA standardises andharmonises payment processes and therefore creates anenvironment which could facilitate the implementationof electronic invoicing solutions.

eInvoicing indeed offers huge potential financial ben-efits. Denmark, for example, which has been leading theway in promoting the use of electronic invoices, reportscost savings of the order of 100 million euros a year bymoving from paper to electronic invoices.

Currently, 80-90% of all invoices in the EU are still paper-

based. A study undertaken by Cap Gemini shows thatcost reductions of the order of 70-75 percent are possi-ble by moving from paper to electronic invoicing. Over a6 year period this represents an estimated potential costsaving of 238 billion euros for the market as a whole.

Some 30 billion invoices are generated in the EU eachyear. This represents a lot of ink and paper. An estimated15 million trees are used in generation of paper invoices.The eInvoicing approach also promises greater produc-tivity and better customer service.

The potential benefits are enormous but the emergence

of multiple solutions which are not interoperable wouldconsiderably diminish the benefits. The Commission hasset up an expert group in order to identify shortcomingsin the regulatory and technological environment whichcomplicate a wider use of electronic invoicing. Based onits findings, the expert group will propose a EuropeaneInvoicing framework at the end of 2009.

Services Directive electronic proceduresand Points of Single Contact

The EUs Services Directive, which has to be implement-

ed by end December 2009, will significantly reduce bar-riers and stimulate trade across a wide variety of servicesectors such as business services, retail services, mostregulated professions, construction services, real estateor tourism and leisure services, etc..

It is also the first Internal Market Directive that containssuch a general binding obligation for Member States

to put in place 'eGovernment services' and to allow fortheir use across borders. In particular, Article 8 of theDirective requires Member States to give businessesthe possibility to complete all procedures and formali-ties necessary to undertake a service activity throughso-called 'Points of Single Contact'. The 'Points of SingleContact' are meant to become the single institutionalinterlocutors for businesses, so that they do not need tocontact several ministries or bodies to identify and dealwith procedures. The 'Points of Single Contact' have togive service providers the possibility to complete all pro-cedures and formalities at a distance and by electronic

means.

In practical terms, this means that a business has to beable to submit all applications and to receive, where re-quired, the replies of the relevant authorities by electron-ic means. Furthermore, the use of electronic proceduresneeds to be possible not only for businesses establishedin the country of the administration which is grantingan authorisation or requiring compliance with other for-malities - but it must also be possible across borders (forinstance a company in Member State X wanting to es-tablish a branch in Member State Y should be able, fromX, to complete the procedures and formalities with Y via

electronic means through the Point of Single Contactthere).

In using these electronic procedures, the service pro-viders are likely to be required in some cases to identifythemselves and sign forms or documents. The issue ofinteroperable eSignature once again can become a keyfactor in ensuring the cross-border completion of elec-tronic procedures.

eSignatures Action Plan published

The Commissions Single Market Review highlighted therisk of creating new eBarriers to the cross-border provi-sion of public services in the absence of mutual recog-nised and interoperable eSignatures. This issue was tak-en up by the European Council in March 2008 and a clear


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14

info http://ec.europa.eu/internal_market/publicprocurement/index_en.htm

priority to focus on the development of interoperablesolutions for eSignature and electronic authenticationwas set.

In response to this the Commission has drawn up an Ac-tion Plan* which was published on 28 November. It setsout to offer a comprehensive and pragmatic frameworkto achieve interoperability and simplify access to cross-border electronic public services.

Solutions - cross-border pilot projects

The problem areas of electronic signatures and panEuropean online public pro-curement are being tackledat European level by a Large

Scale Pilot (LSP) projectknown as PEPPOL (Pan-Eu-ropean Public eProcurementOn-Line), supported underthe Competitiveness and In-novation Programme (CIP).

The general approach of thePEPPOL project which is be-ing conducted by consorti-um public and private sectororganisations, is not to sweep

away national solutions andthe good work already un-dertaken, but to make theminteroperable.

The pilots aim to develop aprocess - a methodologyfor working with existing ap-proaches and trying to find a common way forwardwhich builds on what is already being done.

A durable and interoperable EU wide solution for eIden-tification should be delivered through another Large-

Scale Project S.T.O.R.K. (Secure indenTity AcrOss BordersLinKed).

This project is tackling the challenges surrounding eIDinteroperability and sets out to find a system for cross-border recognition of eID and authentication that ena-bles citizens and business to use their national electron-ic identities across Europe. Its end-goal is to define andtest common specifications for an overall cross-border

14

architecture which is acceptable to all Member Statesand industrial interests.

S.T.O.R.K. is aiming to achieve the implementation of anEU wide interoperable system for the recognition of eIDand authentication that will enable business, citizensand government employees to use their national elec-tronic identities in any Member State.

The implementation of the Services Directive

The ongoing implementation process of the Services Di-rective offers a good opportunity to make progress in this

area. The Commission andMember States are current-ly working closely together

to find pragmatic solutionsto facilitate the cross borderuse of eSignatures (if andwhen required by MS) andother key elements such aseDocuments.

Showing the way...

The Commission is tryingto lead by example andbring Member States to-

gether and be the focalpoint of efforts to adoptcommon, compatible andinteroperable systems.

The Commission is alsosupporting Member Statesat the technical level by

bringing together national experts to jointly map theway forward and share ideas and resources.

At the end of the day, the implementation is the re-sponsibility of each Member State. The Commission is

trying to encourage and stimulate them to move in theinteroperable direction.

The rewards for success are substantial. ICT are an essen-tial tool for making the Single Market more competitiveand delivering better value for public money to Euro-pean citizens.

Some 30 billion invoices are generated in theEU each year. This represents a lot of ink andpaper. By moving to eInvoicing an estimatedcost saving of 238 billion euros can be achievedover a six year period. The potential benets ofeInvoicing are enormous but the emergence ofmultiple solutions which are not interoperablewill considerably diminish the benets.

* Action Plan on eSignatures and eIdentication to facilitate the provision of cross-border public services in the Single Market
http://ec.europa.eu/internal_market/publicprocurement/index_en.htmhttp://ec.europa.eu/internal_market/publicprocurement/index_en.htm


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15

Cross-border payments

Electronic money: Commission proposes

clear legal framework for innovativepayment solutions

The Commission has put forward a proposal revising the currentrules governing the conditions for issuing electronic money inthe EU. The revised rules will facilitate market entrance for newproviders and contribute to develop an industry whose expectedvolume could reach up to 10 billion euro by 2012.

The Commission's proposal to revisethe rules relating to electronic mon-ey follows extensive consultation whichshowed that the current rules, datingfrom 2000, have hindered the take-upof the electronic money market, ham-pering technological innovation.

The proposal provides for a modern andcoherent legal framework for issuingelectronic money, with the aim of pro-moting the emergence of a true singlemarket for electronic money services inthe European Union.

The main innovations proposed are:

a technologically neutral andsimpler denition of 'electronicmoney', covering all situationswhere the payment serviceprovider (an eMoney institution

or a credit institution) issues aprepaid stored value in exchangeof funds. Electronic money istherefore dened as monetaryvalue stored electronically onreceipt of funds and which is usedfor making payment transactions.This denition covers eMoney heldon payment devices in the holderspossession (pre-paid cards orelectronic purse) or stored remotelyat a server (network or softwaremoney);

a new prudential regime, ensuringgreater consistency betweenprudential requirements ofelectronic money institutionsand payment institutions underthe Payment Services Directive.

The new prudential requirementsinclude an initial capital of 125,000euro enabling market entry forsmaller players and new formulasto determine ongoing capital. Thewaiver regime, according to whichsmall entities can obtain derogationfor some of the authorisationrequirements, is aligned with that

of payment institutions underthe Payments Services Directive,and anti-money launderingrequirements are updated;

a clarication of the applicationof redemption requirements, withspecial reference to their applicationto mobile telecommunications.Consumers would have the right toclaim back their electronic money atany moment, under conditions laiddown by the new rules.

Realising the full potential

The eMoney Directive (2000/46/EC)sought to facilitate access by non-creditinstitutions to the business of eMoneyissuance. However, electronic money isstill far from delivering the full potentialbenefits that were expected at the timeof its adoption and is not yet considereda credible alternative to cash.

The evaluation of the application of this

Directive has shown that some of itsprovisions seem to have hindered thetake-up of the electronic money market,

hampering technologi-cal innovation.

The proposal aims atenabling new, innova-tive and secure elec-tronic money servicesto be designed, provid-

ing market access tonew players and fostering real and ef-fective competition between all marketparticipants.

As all provisions have been amendedand the structure revised, it is proposedthat the existing eMoney Directive berepealed and replaced by a new Direc-tive. The proposal now passes to theEuropean Parliament and the Council ofMinisters for consideration.

Charlie McCreevy Commissioner for theInternal Market and Services comment-ed: "These modern rules will foster com-petition and innovation, while ensuringmarket confidence and a high level ofprotection for consumers. This will bean important contribution to our broadobjective of creating a Single Market forelectronic payments.

info http://ec.europa.eu/internal_market/payments/emoney/index_en.htm
http://ec.europa.eu/internal_market/payments/emoney/index_en.htmhttp://ec.europa.eu/internal_market/payments/emoney/index_en.htm


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16

Industrial Property

The Strasbourg conference tackledthree main topics: a Jurisdiction forEuropean and Community Patents, theCommunity Patent and the fight againstCounterfeiting and IP Piracy.

In its recent Communication entitledenhancing the patent system in Europe

the Commission set out its vision forimproving the patent system in Europeand for revitalising the debate on patentreforms. Since then significant progresshas been achieved in the Council work-ing party. This has led to a revised draftCouncil Regulation on the Community

patent and a re-vised draft Agree-ment on the EUPatent Courtwhich were de-bated at day one

of the confer-ence.

The second dayof the conference

was dedicated to the fight against IPRinfringements which is one of the mainpolicy areas addressed in the Commis-sions Communication 'An IndustrialProperty Rights Strategy for Europe' of16 July 2008.

There was a broad consensus on theneed for action. Participants highlight-ed that the fragmentation of the currentpatent system, its costs, complexity, andresulting legal insecurity harm the com-

petitiveness of European businesses.Such shortcomings hamper access tothe patent system for SMEs.

As one participant stressed, in Europetoday, every second invention is notprotected because of the weaknessesof the patent system. Europe is lagging

behind at a time when countries suchas China are creating a state-of-the-artpatent system by setting up a central-ised and specialised Patent Court. Par-ticipants were unanimous in their callsfor speedy action.

There was also broad consensus on theobjectives of patent reform. Participantsagreed that the creation of a patentlitigation system and of a Communitypatent should not be pursued at anycost. A reform should bring real benefits

to users, otherwise it should be aban-doned. The patent litigation systemshould deliver high-quality judgementsand cost-effective, efficient and speedyprocedures. It should also strike a fairbalance between the interests of pat-ent proprietors and alleged infringers,whilst having an overall beneficial effecton competition and innovation.

Participants agreed, in particular, on aCourt of First Instance involving decen-

tralised local and regional divisions, andon the need for a multinational compo-sition of the panels, although there wassome divergence on details. Moreoverthere was support for the involvement

of technical judges and the concept of apool of judges. The objective is to makeefficient use of resources and to ensure

the participation of experienced judgesin all local divisions.

Furthermore there was a large agree-ment on the scope of jurisdiction for thenew Patent Court. The Court should becompetent for patent infringements andall relevant defences including thoseavailable under competition law.

With respect to remedies and sanctions,participants concurred that in cases ofinfringement, judges should not grant

automatic injunctions, but should havethe discretion to weigh the interestsof both parties and refuse injunctionswhere appropriate.

Participants suggested making use ofthe Venice-II-Resolution and of bestpractice existing in the different Mem-ber States, both under common law andContinental traditions. The intentionshould not be to harmonise nationallaws but to build a new and optimal sys-

tem.

There also seemed to be broad supportfor the creation of a European Mediationand Arbitration Centre. Representatives

Industrial property conference looks at the

Community Patent and counterfeiting

DG Internal Market and Services in collaboration with the French Presi-dency organised a conference on Industrial Property Rights in Strasbourgon 16 and 17 October 2008. This two-day event was opened by Com-missioner Charlie McCreevy and brought together stakeholders, experts,judges, and members of the European Parliament to share views and dis-cuss IP issues which are crucial for European competitiveness.

"...in Europe today, every second

invention is not protected because of

the weaknesses of the patent system."


17/24N o52 2008 - I V

17

Industrial Property

info http://ec.europa.eu/internal_market/indprop/index_en.htm

of SMEs, in particular stressed, that al-though the creation of a European Pat-ent Court would facilitate access to jus-tice for SMEs, out-of-court settlementswould still be an attractive option, bothin terms of costs and speed of proceed-ings. A European Centre with tailor-made facilities could further help SMEsto defend their rights more effectively.

Community patent

As to the Community patent, partici-pants reiterated that the single titleshould be cost-effective, legally secureand reduce complexity. It should alsoallow for more efficient enforcement ofrights inside the European Union andat its external borders. In particular, itshould enable the seizure by customsauthorities of all products infringingpatent rights, wherever counterfeits en-ter the European single market.

Most participants agreed that automat-ed translations would be the right wayforward to address the language issue.Translation requirements have been astumbling block to the creation of theCommunity patent for many years. Itwas stressed that machine translationswould be helpful for patent information,but these should have no legal value.Once again the main issues for partici-pants were cost-effectiveness and legalsecurity. One participant described this

as follows: The creation of a Communi-ty patent should allow companies not tohire more lawyers but more engineers.

Participants also expressed their viewson what should be done if patent re-forms fail once more again. It was sug-gested that alternative approaches withlimited participation such as enhancedco-operation be considered.

Counterfeiting

The issue of counterfeiting was dis-cussed from different aspects such asthe economic impact and implicationsfor competitiveness and innovation, the

consequences for the health and safetyof citizens, and cross-border coopera-tion to strengthen enforcement of IPRs.

Participants stressed that the currentfinancial crisis and economic downturnaggravate the problem of counterfeit-ing and piracy as companies and con-sumers show a growing preference forlow priced goods and services.

A particular focus of the debate was theInternet. It was noted that it facilitatesthe sale of counterfeit goods. The pres-ence and sale of fake goods underminesconsumer trust in Internet selling. There-fore, stakeholders, brand owners andinternet sellers alike have an intrinsic in-terest in stopping counterfeit sales. Forthis reason inter-industry agreementswould appear helpful. This approachshould be explored further and stake-holder dialogues should be launched.

IPR infringements affect all industrialsectors. Various participants stressedthat all Intellectual Property Rights areequal and merit equal protection. Thefight against IP violations should not belimited to trademark infringements. In-fringements of trademarks can be easyand more straightforward to establish.However, the wilful infringement of pat-ents and the copying of patent protect-ed subject matter have likewise seriousconsequences.

European Observatory

There was overwhelming support forthe European Observatory on Coun-terfeiting and Piracy. Despite a grow-ing general awareness of the dangersof counterfeiting and piracy, reliablefacts and data concerning the natureand scale of IP violations have been dif-ficult to generate. The observatory willhelp IPR enforcement through detailed

assessment of existing data on trendsand the overall dimension of IP-relatedcrime.

Participants reached consensus thatpublic awareness raising about the dan-gers of counterfeiting needs to be betterfocused. The BASCAP Intellectual prop-erty Guidelines for Businesses whichwere launched on the same occasionwere therefore particularly welcome.

It was also recalled that most consum-ers are also employees. Therefore, themessage that buying counterfeit prod-

ucts puts employees jobs at risk shouldbecome part of every companys IP cul-ture.

It was also felt that in the fight againstcounterfeiting new technologies shouldbe more efficiently used. Innovativetechnologies can significantly improvethe tracking and tracing of originalgoods and the identification of counter-feit products.

There is thus a need for cooperation in

order to promote common platforms.

To sum up participants felt that there hasbeen enough debate and that there is anurgent need for action now. The Com-munity and the Member States shouldassume their responsibili-ties and get things done.

info

Margot Froehlinger

TEL: +32 (0)2.295 93 50

Jens Gaster

TEL: +32 (0)2.296 19 73

FAX: +32 (0)2.299 31 04

[email protected]

The Internet increasingly facilitates thesale of counterfeit goods.
http://ec.europa.eu/internal_market/indprop/index_en.htmmailto:[email protected]:[email protected]://ec.europa.eu/internal_market/indprop/index_en.htm


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info

Accounting

McCreevy recommends a

simplification of accountingrules for small firms

empt micro entities from these obliga-tions.

As a consequence the Group calledon the Commission to bring forward aproposal to allow Member States to ex-empt micro entities from the Account-ing Directives.

Long-standing Directives

The Accounting Directives have beenaround for 25-30 years and to date therehas been no real attempt to updatethem. These Directives were designedas general rules with all businesses inmind large or small. Furthermore, theyalready allow Member States to exemptcertain types of companies from the re-quirements.

With the move to IFRS for listed compa-nies, the Accounting Directives have be-

come less relevant. Many companies arenow outside their scope altogether.

It is estimated that micro entities would

save on average as much as 1,200 europer year by exempting them from theonerous requirements of the Account-ing Directives.

Commissioner McCreevy has taken theview that there is considerable merit insupporting the Stoiber Groups proposalthat Member States should be allowedthe option to exempt micro entitiesfrom the accounting requirements.

In 2007 a proposal was put forward toallow Member States to exempt verysmall companies or so called 'micro en-tities' from the EUs Accounting Direc-tives.

A consultation which was subsequentlyundertaken by the Commission showed

that 59% of the respondents were infavour of the proposal. Those in favourwere mainly companies and public au-thorities. Those against included partsof the accountancy profession, andsome Member States.

In July 2008, the High Level Group ofI n d e p e n d e n tStakeholders onAdmin i strat i veBurdens, headedby Edmund Stoi-

ber, examinedthe issue and hadbefore it a reportprepared by out-side consultantswhich found thatthere could be animmediate savingof 5.7 billion euro,if micro entities

were exempted from the accountingframework and no longer had to pre-

pare annual accounts.

The Group delivered a 'compromise'proposal of allowing Member States todecide for themselves whether to ex-

Charlie McCreevy, Commissioner for the Internal Market and Servic-es has given his backing to proposals drawn up by the Stoiber HighLevel Group of Independent Stakeholders to give Member Statesan option to exempt small firms - micro entities and SMEs - from thetime-consuming rigours of the EU's Accounting Directives.

"It is estimated that micro

entities would save on average

as much as 1,200 euro per year

by exempting them from the

onerous requirements of the

Accounting Directives."

"..there could be an immediate savingof 5.7 billion euro, if micro entitieswere exempted from the accountingframework and no longer had to prepareannual accounts."

With the move to IFRSr listed companies, theccounting Directives haveecome less relevant.

http://ec.europa.eu/internal_market/company/simplication/index_en.htm
http://ec.europa.eu/internal_market/company/simplihttp://ec.europa.eu/internal_market/company/simpli


19/24N o52 2008 - I V

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Company law

info

Proposals to further simplify

EU rules on mergers and divisions

The Commission has put forward aproposal for a Directive that will fur-ther reduce the administrative burdenson European public limited-liabilitycompanies in the area of mergers anddivisions.

Under the proposal, companies would

benefit from simplified requirementson reporting and on the publication ofdraft terms.

The proposal complements the twopackages of 'fast track' measures thatwere put forward by the Commission inMarch 2007 and April 2008.

These measures will contribute to the

objective of reducing administrativeburdens on EU companies by 25% bythe end of 2012. The total savings po-

tential of the measures proposed so farin the area of company law, with thecurrent proposal, is brought to 1 billioneuro/year.

Company law, accounting and auditinghave been identified as priority areasfor reducing administrative burdens on

companies.

Simplified business environment

The Commission setout its action planin these areas in itsCommunication ona Simplified busi-ness environmentfor companies in theareas of companylaw, accounting and

auditing of 10 July2007.

The reaction to theC o m m u n i c a t i o nshowed clear overall

support for the initiative.

In the area of company law, the prefer-ence was clearly for proposing targetedchanges to the existing directives in-stead of repealing certain ones alto-

gether.

The current proposal aims notably at:

reducing the reportingrequirements of companies inthe case of mergers and divisions,in particular where shareholdersdecide that certain reports arenot needed and in the contextof so-called 'simplied' mergers

and divisions between parentcompanies and their subsidiaries;

avoiding double reporting wherereporting requirements also resultfrom other EU rules;

introducing the possibility forcompanies to use the Internet andelectronic mail in order to publishthe draft terms of merger or divisionand to provide shareholders withthe documentation required.

With this proposal, we continue to de-liver on the promises we made last year,"commented Internal Market and Serv-ices Commissioner Charlie McCreevy.

"The Directives that we want to modifydate back about 30 years. If we wantto keep administrative burdens for EUcompanies to a minimum we must makesure that these rules are brought in linewith todays technological possibilitiesand business processes.

http://ec.europa.eu/internal_market/company/simplication/index_en.htm

http://ec.europa.eu/youreurope

Further cost savings for public limited liability companies in theEU will be possible through the proposed introduction of simpli-fied reporting requirements in the event of company mergers ordivisions.
http://ec.europa.eu/youreuropehttp://ec.europa.eu/youreuropehttp://ec.europa.eu/youreuropehttp://ec.europa.eu/youreuropehttp://ec.europa.eu/internal_market/company/simplihttp://ec.europa.eu/youreuropehttp://ec.europa.eu/youreuropehttp://ec.europa.eu/internal_market/company/simpli


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eProcurement

info

Commission holds conferences on theMarket Abuse Directive and on MiFID

Commission assesses the use of electronicprocurement in Europe

The Commission is launching an on-line survey to find out more about

the actual experience of businesses andpublic purchasers with electronic pub-lic procurement (eProcurement). Thiswill provide essential information foran evaluation which is taking place onthe effective up-take of eProcurementacross the EU and will guide future EUaction in this field

In particular the evaluation will assesshow well the objectives of the 'Action

Plan for the implementation of the le-gal framework for electronic public pro-curement', adopted by the Commissionin December 2004, have been achieved.

Public procurement is a key sector ofthe EU economy accounting for about16% of GDP. Modernising and openingup procurement markets across borders

including through the expansion ofeProcurement is crucial to Europescompetitiveness and for creating newopportunities for EU businesses.

eProcurement is also a key strategicelement in the Commissions plans toreduce administrative burden. It is esti-mated that electronic procurement andinvoicing could reduce total procure-ment costs by around 5% and more thanhalve transaction costs, saving govern-ments and therefore taxpayers bil-

lions of euros annually.

The benefits of eProcurement do notstop at saving money. Traditional pro-curement systems can be difficult forpotential bidders to access, while manymay simply be unaware of existing ten-dering opportunities. Making it easier toobtain information and knowledge will

benefit all businesses, but particularlySMEs, which often lack the manpowerto monitor the market.

Several Member States have alreadyrealised the high potential benefits ofeProcurement. However it is clear thatthere are still barriers to be overcome ifeProcurement is to fulfil its potential andhence the Commission invites all inter-ested parties to respond to this survey.

Different questionnaires have been

designed to ask specific questions ofbusinesses, public purchasers and theinstitutions responsible for public pro-curement policy.

Parties interested in participatingin this survey - the deadline for re-sponses is 18 December 2008 - vis-it the website or send an email to:

[email protected]://ec.europa.eu/internal_market/publicprocurement/e-procurement_en.htm#consultation

The Commission held two conferenc-es on 12 and 13 November 2008 inBrussels. The first one was on the Mar-ket Abuse Directive (MAD); the secondone was on the Markets in Financial In-struments Directive (MiFID). Both con-ferences brought together senior pol-

icy makers, regulators, a wide range ofstakeholders representing business andcivil society and academia.

Concerning market abuse, the debatefocused on whether the MAD had apositive impact on market integrity fouryears after its enforcement deadline.

Speakers covered various topics includ-ing the scope of the MAD, inside infor-mation, market manipulation and the

enforcement of the Directive. Many at-tendees expressed concerns regardingthe necessity to scrutinize carefully theregime of sanctions, short selling andthe possibility for issuers to delay disclo-

sure of inside information. It was alsounderlined that the financial turmoilhas increased the possibilities of abuse.

MiFID - one year on

Concerning MiFID, the debate focused

on the impact of MiFID one year afterits enforcement deadline. Speakers cov-ered various topics including economicand institutional impacts, impacts onfirms and on investors and related in-ternational aspects. There was generalagreement on the positive effects ofMiFID and on the need to separate theresults of MiFID from the context of theglobal financial crisis.

Concerning trading venues and invest-

ment firms, it was recognised that com-petition makes markets function bet-

ter, although several issues were raisedconcerning transparency requirements.Concerning supervisors, a call was is-sued for the proper application of MiFIDwith CESR holding a crucial role in en-suring better coordination and conver-gence between national supervisors.

Regarding investors, MiFID is believedto have increased retail investor protec-tion though more investor educationand an eventual extension of MiFID toother products may be required. Theneed to address clearing and settlementwas also expressed. All in all, MiFID wasgenerally perceived to be a very positivedevelopment to the securities marketsalthough some critical points will haveto be closely monitored in the forth-coming review of the Directive taking

into account the effects of the financialcrisis.

http://ec.europa.eu/internal_market/securities/isd/conference_en.htmhttp://ec.europa.eu/internal_market/securities/isd/mid_en.htm
mailto:[email protected]://ec.europa.eu/internal_market/securities/isd/conference_en.htmhttp://ec.europa.eu/internal_market/securities/isd/mihttp://ec.europa.eu/internal_market/securities/isd/mihttp://ec.europa.eu/internal_market/securities/isd/conference_en.htmmailto:[email protected]


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Infringements

Did you ever have

a problem with an

administration in

another EU country

and wondered

whether Europereally exists?

Discover what

SOLVIT can do for

you and

enjoy your rights

in Europe!

Reimbursement of the cost of cross-border medical

treatment: France, Luxembourg, Portugal and SpainThe Commission has decided to bring actions before theEuropean Court of Justice against Portugal and France andto send reasoned opinions to Spain and Luxembourg withregard to cases where the cost of medical treatment re-ceived in another Member State has not been reimbursed.The Court of Justice has on several occasions expressedits opinion on the reimbursement of medical expenses

incurred in another MemberState and recognised patientsrights not granted in thesecountries.

Freedom of establishment for pharmacies:Germany and Portugal

The Commission has sent reasoned opinions to Ger-many concerning a prohibition for non-pharmacists onowning pharmacies and a prohibition on owning morethan four pharmacies, and to Portugal concerning a pro-

hibition for medicines wholesaling companies on own-ing pharmacies and a prohibition on owning more thanfour pharmacies.

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Special rights held by the State/public entitiesin EDP: Portugal

The Commission has decided to refer Portugal to the Eu-ropean Court of Justice as it considers that the specialrights held by the State in Energia de Portugal (EDP) dis-

courage investment from other Member States, in viola-tion of EC Treaty rules.

Freedom to provide services: Austria, Belgium,Germany, Italy and the United Kingdom

The Commission has taken action to put an end to re-strictions on freedom to provide services in five MemberStates. The Commission will refer Italy to the European

Court of Justice over its regulations on compulsory maxi-mum fees for lawyers services. The Commission will sendreasoned opinions to the United Kingdom concerning

its regulations on trademarks and to Austria concerningits regulations on insolvency. The Commission will alsosend supplementary reasoned opinions to Belgium con-

cerning the rights of European temporary employmentagencies and to Germany concerning employee trainingin the Federal State of North Rhine-Westphalia.

Infringements

Obstructing online sales of optical productsand glasses: FranceThe Commission has formally requested France to amendits national legislation on the sale of optical productsand glasses. By banning distance sales of optical prod-ucts and glasses by qualified dispensing opticians andrequiring all qualified operators to register their diplomawith the French departmental authorities, the current

legislation restricts freedom of establishment (Article 43of the EC Treaty) and free movement of services (Article49 of the EC Treaty), in particular free movement of in-formation society services (as provided for in Directive2000/31/EC on electronic commerce). The Commissionsrequest takes the form of a reasoned opinion.

Hospital pharmacists: Spain

The Commission has decided, under Ar-ticle 228 of the EC Treaty, to send a letterof formal notice to the Spanish authori-ties requesting information on the meas-

ures they have taken to comply with the European Courtof Justices judgement of 8 May 2008 (C-39/07) regard-ing recognition of professional qualifications of hospitalpharmacists.

Investment restrictions on open pension funds: Poland

The Commission has formally requested Poland to re-move restrictions on investment by Polish Open PensionFunds (OPFs) in other Member States. The infringementprocedure was initiated by a letter of formal notice in

October 2007. Having analysed the reply from the Polish

authorities, the Commission still considers that the in-vestment limits in foreign assets imposed on OPFs act asrestrictions to the free movement of capital in violationof EC Treaty rules. The Commissions request takes the

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Infringements

Compliance with Court judgement onhelicopter purchase contracts: Italy

The Commission has decided, under Article 228 of theEC Treaty, to send a letter of formal notice asking Italy forfull information on its compliance with a 2008 judgment

of the European Court of Justice con-cerning the award of supply contractsfor the purchase of helicopters.

Road maintenance services and flightmeasure services: Germany

The Commission has decided to send reasoned opin-ions to Germany concerning the conclusion of publicservice contracts for the maintenance of district roadsby administrative districts (Landkreise) in eight German

States (Lnder), and concerning the award of a publicservice contract in 2002 for the provision of flight meas-ure services.

INFRINGEMENT PROCEDURES

If the Commission obtains or receives convincing evidence from a complainant that an infringement of EU

law is taking place, it first sends the Member States concerned a letter of formal notice.

If the Member State does not reply with information allowing the case to be closed, the Commission sends

a reasoned opinion, the second step of the infringement proceedings under Article 226 of the EC Treaty. If

there is no satisfactory response within two months, the Commission may then decide to refer the case to the

European Court of Justice in Luxembourg.

More information on infringement proceedings relating to the Single Market is available at:http://ec.europa.eu/internal_market/infringements/index_en.htm

The latest information on infringement proceedings concerning all Member States is available at:http://ec.europa.eu/community_law/eulaw/index_en.htm

Motorway concessions: Italy (closure)

Following reforms in the Italian motorway sector, the

Commission has decided to close an infringement pro-cedure against Italy concerning restrictions on the freemovement of capital and on the freedom of establish-ment. The Italian law in question is Decree-Law No 262of 3 October 2006 Urgent regulation on taxation andfinancial matters and in particular, certain provisions of

Article 12 concerning the New discipline concerning

the revision of fares on toll motorways and reinforce-ment of ruling power of ANAS, the Italian motorwayregulator. The closure of this case is without prejudiceto the ongoing procedures on the same topic relatingto State Aid and transport policies as well as those in thefield of public procurement.
http://ec.europa.eu/internal_market/infringements/index_en.htmhttp://ec.europa.eu/community_law/eulaw/index_en.htmhttp://ec.europa.eu/community_law/eulaw/index_en.htmhttp://ec.europa.eu/internal_market/infringements/index_en.htm


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Single Market News is published in separate English, French and German editions.

To subscribe, visit this web address.An electronic version (PDF) is also available.

http://ec.europa.eu/internal_market/smn.htm

Brona Meldrum

European Commission

DG Internal Market and Services

Unit A4SPA2 1/008

B-1049 Brussels

Fax: +32 2 295 43 51

E-mail: Markt- [email protected]

KM-AB-08-052-EN-C
http://ec.europa.eu/internal_market/smn.htmmailto:[email protected]:[email protected]://ec.europa.eu/internal_market/smn.htm

Single Market News - Financial reform: key "roadmap" initiatives presented - 2008 IV

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