Thirty-seventh Report of Session 2017–19...Noting the Commission’s statement “that the UK took...

HC 301-xxxviPublished on 11 September 2018

by authority of the House of Commons

House of Commons

European Scrutiny Committee

Thirty-seventh Report of Session 2017–19 Documents considered by the Committee on 5 September 2018

Report, together with formal minutes

Ordered by the House of Commons to be printed 5 September 2018

Notes

Numbering of documents

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

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

Numbers in the form “5467/05” are Council of Ministers reference numbers. This system is also used by UK Government Departments, by the House of Commons Vote Office and for proceedings in the House.

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

Where only a Committee number is given, this usually indicates that no official text is available and the Government has submitted an “unnumbered Explanatory Memorandum” discussing what is likely to be included in the document or covering an unofficial text.

Abbreviations used in the headnotes and footnotes

AFSJ Area of Freedom Security and Justice

CFSP Common Foreign and Security Policy

CSDP Common Security and Defence Policy

ECA European Court of Auditors

ECB European Central Bank

EEAS European External Action Service

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

EP European Parliament

EU European Union

JHA Justice and Home Affairs

OJ Official Journal of the European Communities

QMV Qualified majority voting

SEM Supplementary Explanatory Memorandum

TEU Treaty on European Union

TFEU Treaty on the Functioning of the European Union

Euros

Where figures in euros have been converted to pounds sterling, this is normally at the market rate for the last working day of the previous month.

Further information

Documents recommended by the Committee for debate, together with the times of forthcoming debates (where known), are listed in the European Union Documents list, which is published in the House of Commons Vote Bundle each Monday, and is also available on the parliamentary website. Documents awaiting consideration by the Committee are listed in “Remaining Business”: www.parliament.uk/escom. The website also contains the Committee’s Reports.

*Explanatory Memoranda (EMs) and letters issued by the Ministers can be downloaded from the Cabinet Office website: http://europeanmemoranda.cabinetoffice.gov.uk/.

http://www.parliament.uk/escom

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

Staff

The staff of the Committee are Dr Philip Aylett (Clerk), Kilian Bourke, Alistair Dillon, Leigh Gibson, Foeke Noppert, Sibel Taner and George Wilson (Clerk Advisers), Arnold Ridout (Counsel for European Legislation), Joanne Dee (Deputy Counsel for European Legislation), Jeanne Delebarre (Second Clerk), Daniel Moeller (Senior Committee Assistant), Sue Beeby, Nat Ireton and Beatrice Woods (Committee Assistants), Ravi Abhayaratne and Paula Saunderson (Office Support Assistants).

Contacts

All correspondence should be addressed to the Clerk of the European Scrutiny Committee, House of Commons, London SW1A 0AA. The telephone number for general enquiries is (020) 7219 3292/5467. The Committee’s email address is [email protected].

mailto:[email protected]

1 Thirty-seventh Report of Session 2017–19

ContentsMeeting Summary 3

Documents not cleared

1 BEIS Intellectual property rights for medicinal products 12

2 BEIS EU structural funds post-2020 15

3 BEIS European Territorial Cooperation (Interreg) 19

4 BEIS Euratom Research & Training Programme 2021–25 23

5 BEIS Joint Undertaking for ITER (Fusion for Energy) 32

6 DCMS Audiovisual Media Services Directive 35

7 DEFRA Reduction in the impact of single-use plastic items 42

8 DEFRA EU Programme for the Environment and Climate Action 46

9 DEFRA Consultation on 2019 fishing opportunities 49

10 DfT Third mobility package: revision of Directive on road infrastructure safety management 52

11 DfT Third mobility package: Proposal for a Regulation on streamlining the trans-European transport network 56

12 DIT Apportionment of the EU’s concessions on Tariff Rate Quotas (WTO) in view of UK withdrawal from the EU 61

13 DOE UK participation in Erasmus post-2020 67

14 HMRC EU support for customs authorities 2021–27 73

15 HMT EU VAT Reform: implications of Brexit 79

Annex: Overview of EU VAT proposals currently or recently under scrutiny 87

16 HO Law enforcement access to electronic evidence 88

17 HO Improving cross-border law enforcement access to financial information 92

18 HO Future EU funding for security: the Internal Security Fund 96

19 HO Future EU funding for border control, asylum and migration 102

20 HO Renewal of the Pericles programme to protect the euro against counterfeiting 110

Documents cleared

21 BEIS Geo-blocking 114

22 BEIS EU Clean Energy legislation 118

23 HMRC Europe on the move: third mobility package 122

24 HMRC Brexit: UK accession to the Common Transit Convention 126

25 HMT Eurozone Investment Stabilisation Function (EISF) 132

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

26 List of documents 137


Formal Minutes 144

Standing Order and membership 145


Meeting SummaryThe Committee looks at the significance of EU proposals and decides whether to clear the document from scrutiny or withhold clearance and ask questions of the Government. The Committee also has the power to recommend documents for debate.

Brexit-related issues

The Committee is now looking at documents in the light of the UK decision to withdraw from the EU. Issues are explored in greater detail in report chapters and, where appropriate, in the summaries below. The Committee notes that in the current week the following issues and questions have arisen in documents or in correspondence with Ministers:

• Access to the EU broadcasting market when the UK ceases to participate directly in the Audiovisual Media Services Directive;

• The implications of future non-participation in the Geo-blocking Regulation for UK businesses and consumers, and the extent to which the Regulation’s effects can be reproduced within the UK;

• Arrangements for limited participation in EU structural funds post-2020

• Whether the UK would consider making a financial contribution to EU regional policy post-2020 along the lines of that made by the European Economic Area countries

• The criteria for assessing UK participation in EU funding programmes post-2020 and the criteria for deciding on the level of UK financial contributions

• Whether new EU rules to reduce single-use plastics would form part of the proposed common rulebook for manufactured goods

• The UK’s contingency planning for 2019 fisheries quotas in the event that there is no Brexit deal.

Summary

Issues related to programmes to be funded under the Multiannual Financial Framework

Euratom Research & Training Programme

The European Atomic Energy Community (Euratom) provides funding for research into the peaceful uses of nuclear material, particularly in the field of fusion energy. The European Commission has recently proposed the legal framework for the Euratom Research & Training Programme from 2021 to 2025, under the EU’s next Multiannual Financial Framework. We have today published a report on the Brexit implications for UK participation in the Programme: this is an explicit Government objective, but will require a new legal agreement with the EU once the UK is a ‘third country’.


Not cleared from scrutiny; further information requested; drawn to the attention of the Business, Energy & Industrial Strategy and Science & Technology Committees.

International Thermonuclear Experimental Reactor (ITER)

The Commission proposes the arrangement for EU financing of ITER over the period 2021–27. The ITER project is one of the areas in which the UK has expressed a desire to cooperate post-Brexit, as recognised by the Commission in its proposal and by the Minister in his Explanatory Memorandum, although participation will be subject to negotiation. Noting the Commission’s statement “that the UK took commitments, as an EU Member State, towards ITER when approving the different project baselines in the Council of the EU”, we ask whether the UK’s agreement to this proposal could be interpreted as a UK financial commitment to ITER over the period 2021–27 and, potentially, beyond. We also request details as to the basis for calculating a UK financial contribution, beyond the “fair share” terms set out in the Minister’s Explanatory Memorandum. Finally, we ask for information on the Government’s contingency plan should it not prove possible to negotiate continued UK involvement in ITER through the EU.

Not cleared; further information requested; drawn to the attention of the Business, Energy and Industrial Strategy Committee and the Science and Technology Committee

EU structural funds and European Territorial Cooperation

The European Commission has proposed the new framework for EU structural funds over the period 2021–27. These funds form the backbone of the EU’s regional policy, which aims to strengthen the economic and social cohesion of the EU. While UK is unlikely to participate in the bulk of the funds, it has expressed interest in the health aspects of the new “European Social Fund Plus” programme and it has committed to looking favourably at continued involvement in European Territorial Cooperation—otherwise known as Interreg (Inter-regional cooperation)—and its PEACE Programme given the relevance to the Irish border. Committee asks for more detail on potential involvement in Interreg. It also notes that the European Economic Area (EEA) countries make a financial contribution to EU regional policy and asks whether this is something that the UK might also consider.

Not cleared; further information requested; drawn to the attention of the Northern Ireland Affairs Committee and the Business, Energy and Industrial Strategy Committee

Future EU funding for border control, asylum and migration:

The European Commission has proposed almost to triple EU funding for asylum, migration and border management under its plans for the EU’s next long-term budget from 2021–27, with €10.4 billion allocated to a renewed Asylum and Migration Fund and €9.3 billion to an Integrated Border Management Fund. These Funds will take effect from January 2021, after the UK has left the EU and the transition/implementation period envisaged in the draft EU/UK Withdrawal Agreement has expired at the end of 2020. The UK is not entitled to participate in those parts of the Integrated Border Management Fund dealing with border control and visa policy as they concern parts of the Schengen rule book which do not apply to the UK. The Commission makes clear that it has formulated its budgetary proposals for a Union of 27 and does not appear to accept that the UK is


entitled to opt into the proposed Asylum and Migration Fund. Whilst recognising that negotiations on the EU’s next long-term budget for 2021–27 are “primarily a matter for the 27 remaining Member States”, the Government nonetheless considers that the UK’s justice and home affairs opt-in applies to the proposed Asylum and Migration Fund and, in reaching an opt-in decision, will consider the impact that opting in would have on the UK’s ability to “steer the design of the fund to support our potential participation as a third country” after December 2020. The European Scrutiny Committee presses the Government for a clearer steer on the prospects for UK participation in negotiations on the proposed Asylum and Migration Fund before the UK leaves the EU, and in the Fund itself post-exit. We also ask the Government to clarify its position on the new criteria for allocating funding amongst Member States and the stronger “rule of law” conditionality proposed by the Commission.

Not cleared from scrutiny; further information requested; drawn to the attention of the Home Affairs Committee.

Future EU funding for security

The Commission has proposed a substantial increase in funding for cross-border police and other security-related cooperation under its plans for the EU’s next long-term budget from 2021–27, with €2.5 billion allocated to a renewed Internal Security Fund and a further €1.1 billion shared between three EU Agencies: Europol, the European Police College and the European Monitoring Centre for Drugs and Drug Addiction. The proposed Regulation establishing the Internal Security Fund will take effect from January 2021, after the UK has left the EU and the transition/implementation period envisaged in the draft EU/UK Withdrawal Agreement has expired. The Commission makes clear that it has formulated its budgetary proposals for a Union of 27 and does not appear to accept that the UK is entitled to opt into the proposed Regulation, even though it cites justice and home affairs legal bases. The European Scrutiny Committee asks the Government to clear up ambiguities concerning the application of the UK’s Title V (justice and home affairs) opt-in Protocol to the proposed Internal Security Fund; comment on the new criteria proposed for allocating funding amongst Member States and the stronger “rule of law” conditionality; and clarify its position on possible UK participation in the Fund as a third country post-exit.


LIFE Programme

The Commission proposes the new framework for EU environment and climate action funding (the “LIFE” Programme) over the period 2021–27. The Government opens the door to future UK participation in this programme, which would require agreement to a UK financial contribution ensuring a fair balance as regards the contributions and benefits. We ask for information on the criteria that will be used to make the assessment as to whether the UK should participate, and the criteria that would be used to assess any financial contribution that the UK might make. We also ask whether the UK would be content with all of the conditions of third country participation, including oversight from the European Court of Auditors and the European Anti-Fraud Office.


Not cleared; further information requested; drawn to the attention of the Environment, Food and Rural Affairs Committee, Environmental Audit Committee and the Business, Energy and Industrial Strategy Committee

Other Issues

EU clean energy legislation

We report the outcome of negotiations on the Renewable Energy Directive, Energy Efficiency Directive and the Energy Governance Regulation. As the negotiations have been concluded and the Government is supportive, we release the documents from scrutiny ahead of a formal vote in Council. We nevertheless request the following additional information:

• Confirmation that the UK will be obliged to transpose the Energy Efficiency Directive into UK law before the end of the post-Brexit implementation period on 31 December 2020 and that elements of the Governance Regulation will also apply before that date;

• comment from the Minister on the delineation between energy policy on the one hand and environmental and climate change legislation on the other given the acknowledgement in the White Paper on the future relationship that some sort of common rulebook for energy policy may be required if the UK wished to remain within the internal energy market, but that this would not extend to wider environmental and climate change rules; and

• clarification of the relationship between the non-binding overall energy efficiency target of 32.5% by 2030 and the binding annual end-use energy savings target of at least 0.8% of final consumption.

Cleared; further information requested; drawn to the attention of the Business, Energy and Industrial Strategy Committee

Single-use plastics

The Commission proposes to reduce the impact of single-use plastic items on the marine environment by preventing and reducing litter from items such as food containers and cups and fishing gear containing plastic. We note that the Commission’s proposal is largely aligned with the direction of travel in the UK, but that differences nevertheless exist. This could be significant, we note, should the rules be considered to relate to manufactured goods and so fall within the proposed common rulebook to support a free trade area in goods. We therefore ask whether the Government would anticipate that some, or all, of this legislation would form part of the common rulebook.

Not cleared; further information requested; drawn to the attention of the Environmental Audit Committee


Fishing Opportunities for 2019

The Commission’s document represents its annual consultation on Total Allowable Catches (TACs) for the following year. The setting of TACs in 2019 will be notable for several reasons, including: 1) the full implementation of the landing obligation (discard ban) to all species subject to quota, as from 1 January 2019; and 2) the UK’s withdrawal from the EU on 29 March 2019. The Commission and Government acknowledge the challenges inherent in setting TACs in line with the landing obligation. Regarding Brexit, the draft Withdrawal Agreement provides that the 2019 TACs will apply to the UK for the whole year. Noting that agreement has not yet been concluded, We ask the Government about its contingency planning.

Not cleared; further information requested; drawn to the attention of the Environment, Food and Rural Affairs Committee

UK accession to the Common Transit Convention

We have cleared from scrutiny an EU proposal to formally invite the UK to join the Common Transit Convention after it leaves the EU. The Convention facilitates trade across a number of European countries, including all EU Member States, by allowing customs checks to be deferred to the final country of destination and take place away from any physical frontier. We have published a report on the UK’s accession given the interest across the House in the Government’s plans for new customs arrangement once the UK leaves the EU Customs Union.

Cleared from scrutiny; further information requested; drawn to the attention of the Home Affairs, International Trade and Treasury Committees

Customs fraud at UK ports

We have today written to the Treasury about the on-going dispute between the UK and the European Commission about alleged customs fraud on Chinese imports entering the UK via the EU. The Commission alleges this has resulted in losses of over €2 billion to the EU budget, because customs duties collected by Member States are used to fund the EU’s expenditure. Although the Government has rejected the findings (which are also repeated by the European Court of Auditors in a recent report), it remains unclear if UK taxpayers may end up having to compensate the EU for the duty losses, and if so what the cost of that would be. The dispute is also complicating negotiations with the EU on a new customs arrangement, given the need for close cooperation to be based on trust. We have asked the Treasury to keep it informed of further developments in the case.

Cleared from scrutiny; further information requested

EU VAT reform

We today published our latest report on the implications of Brexit for the UK’s system of Value Added Tax (VAT), especially as regards the imposition of import VAT on goods moving from the UK to the EU-27 and vice versa when the UK ceases to be bound by the EU VAT Directive. We remain concerned about the vagueness of the Government’s proposals for ‘common procedures and processes’ to obviate the need for fiscal border


controls on trade with the EU after Brexit, and has put a series of questions to the Treasury to ascertain to what extent they could involve UK adherence to EU tax law even as a non-Member State.

Not cleared from scrutiny; further information requested; drawn to the attention of the Business, Energy & Industrial Strategy and Treasury Committees

The Audiovisual Media Services Directive

Trilogue negotiations on the Digital Single Market Strategy reforms to the Audiovisual Media Services Directive (2010/13) have concluded. The Government highlights two points of the outcome which are not in line with the UK negotiating position—the ability for Member States to impose levies on linear and on-demand broadcasts, and the extension of the definition of video-sharing platforms to include social media and live-streaming services—however the levies in the final text are optional, and the UK’s own position on regulating online platforms has become more activist during negotiations. Although the Minister does not provide the Government’s negotiating position, it appears likely that the Government will either support the proposal or abstain. We retained the proposal under scrutiny, pending clarification from the Government of its voting intention.

On EU exit, the Government’s White Paper states that it intends to leave the Digital Single Market and that, in consequence, UK broadcasters will no longer have access to the Country-of-Origin principle which underpins the EU regime. This is consistent, as there is no precedent for a country outside the Single Market having significant preferential access to the EU market. The limitations of the main alternative to the intra-EU regime, the Council of Europe’s European Convention on Trans-Frontier Television (CTT) have gradually become clearer: ‘on-demand’ services are completely excluded, and its utility to linear broadcasters is severely limited by a derogation from the Country-of-Origin principle for advertising content. COBA has concluded that it is of little use to international broadcasters based in the UK. The main alternative is therefore for UK-based international broadcasters to relocate a proportion of their operations to the EU, to retain current access under the AVMSD.

Not cleared from scrutiny; further information requested.

Geo-blocking

The Geo-Blocking Regulation was adopted by the General Affairs Council on 27 February 2018 and entered into the Official Journal of the European Union on 2 March 2018. Although the EU regulation will continue to apply to UK operators exporting to the EU market, it will do so to a more limited extent than at present: UK businesses will be prohibited from practicing the discriminatory activities prohibited by the regulation vis-à-vis EU consumers, but only on an intra-EU basis: i.e they will not be allowed to reroute Polish and Belgian consumers to different interfaces, but will be allowed to reroute all European consumers to an EU-facing interface that differs from the UK interface. This also means that UK consumers will not benefit from the proposal as at present. For example, if a British consumer wishes to access an online clothing shop’s Italian website, the website will be allowed to block access to it and to redirect him/her to the British version. Although it would be possible for the Government to convert the geo-blocking regulation into UK law, it would have a much more limited effect, as the prohibitions


would only apply within the UK (e.g. it could be designed so that businesses would not be permitted to redirect Scottish, English, Welsh and Northern Irish customers to different websites, with different terms of access, without their consent).

Cleared from scrutiny.

Law enforcement access to electronic evidence

the Commission has put forward two proposals to make it easier and quicker for law enforcement authorities to obtain electronic evidence (such as e-mails, text messages and photos) from another Member State for a criminal investigation. The first, a proposed Regulation, would introduce a European Preservation Order to prevent information being altered or erased and a European Production Order requiring the information to be produced within 10 days (or 6 hours in an emergency). The second, a proposed Directive, would require online service providers offering services in the EU to designate a legal representative within the EU responsible for ensuring compliance with European Preservation and Production Orders or other law enforcement requests for evidence needed for criminal proceedings. The Government does not consider that the proposed legislation is necessary and says its priority is to conclude negotiations with the United States on a UK-US Data Access Agreement. It will nonetheless have to decide whether to opt into the proposed Regulation as it is a justice and home affairs measure. The Government confirms that EU measures which the Government opts into before exit day will apply to and bind the UK as if it were a Member State post-exit if they take effect during the envisaged transition/implementation period ending on 31 December 2020, even though negotiations may not have concluded and the UK had a vote on the outcome before leaving the EU in March 2019. The European Scrutiny Committee requests further information on the competence (EU or national) to negotiate data access agreements with third countries and on the possibility that a bilateral UK/US data access agreement might affect the UK’s prospects for securing a comprehensive data-sharing agreement with the EU post-exit.


Improving cross-border law enforcement access to financial information

The European Commission has proposed a Directive to improve cross-border law enforcement access to financial information and support the investigation and prosecution of serious crime. It is intended to complement the EU’s latest (5th) anti-money laundering legislation and would take effect at the same time, in January 2020—post-exit but during the transition/implementation period envisaged in the draft EU/UK Withdrawal Agreement which will expire at the end of 2020. The proposed Directive is subject to the UK’s justice and home affairs opt-in. Whilst it is broadly in line with UK law and practice, the Government has raised two concerns: the possible encroachment on the decision-making autonomy of Financial Intelligence Units (national centres which collect information on suspicious financial activity) and the time limits for intra-EU exchanges of information. Responding to a request for further information on the practical implications of opting in, the Government confirms that the proposed Directive will apply to and bind the UK as if it were a Member State if the Government opts in before exit day and it takes effect during


the envisaged post-exit transition/implementation period, even though the negotiations may not have concluded and the UK had a vote on the outcome before leaving the EU. The European Scrutiny Committee asks to be informed of the Government’s opt-in decision at the earliest opportunity.

Not cleared from scrutiny; further information requested; drawn to the attention of the Home Affairs Committee and the Justice Committee.

Documents drawn to the attention of select committees:

(‘NC’ indicates document is ‘not cleared’ from scrutiny; ‘C’ indicates document is ‘cleared’)

Business, Energy and Industrial Strategy Committee: EU Clean Energy legislation [(a)-(b) Proposed Directives (C), (c) Proposed Regulation (C)]; Joint Undertaking for ITER (Fusion for Energy) [Proposed Council Decision (NC)]; Euratom Research & Training Programme 2021–25 [Proposed Regulation (NC)]; EU Programme for the Environment and Climate Action [Proposed Regulation (NC)]; EU VAT Reform: implications of Brexit [(a) Proposed Regulation (NC); (b) Proposed Directive (NC)]

Education Committee: UK participation in Erasmus post-2020 [Proposed Regulation (NC)]

Environment, Food and Rural Affairs Committee: EU Programme for the Environment and Climate Action [Proposed Regulation (NC)]; Consultation on 2019 fishing opportunities [Commission Communication (NC)]; Apportionment of the EU’s concessions on Tariff Rate Quotas (WTO) in view of UK withdrawal from the EU [(a) Recommended Council Decision (C); (b) Proposed Regulation (NC)]

Environmental Audit Committee: Reduction in the impact of single-use plastic items [Proposed Directive (NC)]; EU Programme for the Environment and Climate Action [Proposed Regulation (NC)]

Exiting the EU Committee: Apportionment of the EU’s concessions on Tariff Rate Quotas (WTO) in view of UK withdrawal from the EU [(a) Recommended Council Decision (C); (b) Proposed Regulation (NC)]; Law enforcement access to electronic evidence [(a) Proposed Regulation (NC); (b) Proposed Directive (NC)]

Home Affairs Committee: EU support for customs authorities 2021–27 [Proposed Regulations (NC)]; Brexit: UK accession to the Common Transit Convention [Proposed Council Decisions (C)]; Future EU funding for border control, asylum and migration [Proposed Regulations (NC)]; Renewal of the Pericles programme to protect the euro against counterfeiting [Proposed Regulations (NC)]; Future EU funding for security: the Internal Security Fund [(a) Commission Report (C); (b) Proposed Regulation (NC)]; Law enforcement access to electronic evidence [(a) Proposed Regulation (NC); (b) Proposed Directive (NC)]; Improving cross-border law enforcement access to financial information [Proposed Directive (NC]

International Trade Committee: Apportionment of the EU›s concessions on Tariff Rate Quotas (WTO) in view of UK withdrawal from the EU [(a) Recommended Council


Decision (C); (b) Proposed Regulation (NC)]; EU support for customs authorities 2021–27 [Proposed Regulations (NC)]; Brexit: UK accession to the Common Transit Convention [Proposed Council Decisions (C)]

Justice Committee: Law enforcement access to electronic evidence [(a) Proposed Regulation (NC); (b) Proposed Directive (NC)]; Improving cross-border law enforcement access to financial information [Proposed Directive (NC]

Northern Ireland Affairs Committee: European Territorial Cooperation (Interreg) [Proposed Regulations (NC)]

Science and Technology Committee: Joint Undertaking for ITER (Fusion for Energy) [Proposed Council Decision (NC)]; Euratom Research & Training Programme 2021–25 [Proposed Regulation (NC)]

Treasury Committee: EU support for customs authorities 2021–27 [Proposed Regulations (NC)]; Brexit: UK accession to the Common Transit Convention [Proposed Council Decisions (C)]; EU VAT Reform: implications of Brexit [(a) Proposed Regulation (NC); (b) Proposed Directive (NC)]


1 Intellectual property rights for medicinal products

Committee’s assessment Politically important

Committee’s decision Not cleared from scrutiny; further information requested

Document details Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EC) No 469/2009 concerning the supplementary protection certificate for medicinal products

Legal base Article 114 TFEU, QMV, Ordinary legislative procedure

Department Business, Energy and Industrial Strategy

Document Number (39792), 9485/18 + ADDs 1–4, COM(18) 317

Summary and Committee’s conclusions

1.1 The UK is one of the largest pharmaceutical manufacturers in the EU, carrying out 17% of EU pharmaceutical research and development (R&D) and 11% of pharmaceutical trade. In order to allow time for investment in new medicines to be recouped, medicines can be protected by patents, which are valid for a maximum of 20 years. Having been granted a patent, though, they must be authorised by regulatory authorities before being placed on the market. As this can take a number of years, the effective patent term is reduced. Supplementary Protection Certificates (SPCs) form part of intellectual property (IP) rights and can provide an additional period of protection on expiry of a patent for a further period of five years. After that, generic manufacturers can enter the market, making cheaper products available to public health systems.

1.2 Where a patent or SPC is in place in the EU on a particular medicine, current EU law prohibits manufacturers of generic products in the EU from making a generic version of the medicine for export to third countries where no SPC or patent protection exists. The Commission argues that this places EU companies at a disadvantage compared to third country manufacturers. It therefore proposes to lift the restriction, subject to certain safeguards to ensure that SPC-protected products are not re-directed onto the EU market.

1.3 The Minister for Universities, Science, Research and Innovation (Mr Sam Gyimah) indicates in his EM that the Government’s assessment is ongoing. Its preliminary conclusions are that:

• the change is unlikely in itself to be an incentive for generic manufacturers to locate manufacturing facilities in the EU rather than in third countries, but it will be a new factor to be taken into account;

http://www.parliament.uk/business/committees/committees-a-z/commons-select/european-scrutiny-committee/guides/

http://europeanmemoranda.cabinetoffice.gov.uk/files/2018/06/9485_18_Supplementary_Protection_Certificate_for_Medicinal_Purposes.pdf


• there is potential for a greater impact on the choice of manufacturing location for generic biological medicines (known as “biosimilars”);1

• the measure will benefit UK companies looking to increase export of products to third countries;

• the impact on market share in third countries may be limited as generic manufacturers can currently supply non-IP protected markets in third countries by manufacturing outside the EU; and

• as generic medicines may be able to enter the EU market more swiftly after expiry of an SPC, costs for the NHS could reduce.

1.4 Concerning the UK’s withdrawal from the EU, the Government would expect the legislation to enter into force before the end of the implementation period and to be retained in EU law thereafter. Post-Brexit, the UK’s ability to reframe SPC legislation will depend on the outcome of negotiations on the future economic partnership with the EU.

1.5 On timing, the Commission hopes that the legislation can be adopted by May 2019. Early exchanges on the proposal were expected before the summer break.

1.6 We note that there are significant uncertainties about the likely impact of this legislation. We therefore look forward to receipt of the Government’s further assessment in due course.

1.7 Regarding the UK’s withdrawal from the EU, we note that the EU and UK have agreed in the draft withdrawal agreement that EU rules will continue to apply to applications for SPCs where the procedures are ongoing at the end of the implementation period.2

1.8 Concerning Brexit, we would welcome clarification as to:

• whether this legislation would fall within the proposed Common Rulebook3 encompassing EU legislation with which the UK will comply in order to secure a free trade area in goods;

• the impact on the UK as a third country; and

• what adjustments will likely be needed to what will, under the European Union (Withdrawal) Act, become retained EU law in relation to Supplementary Protection Certificates.4

1 Biological medicines are medicines that are made or derived from a biological source and as such are complex, with inherent variability in their structure. A biosimilar medicine is a biological medicine which is highly similar to another biological medicine already licensed for use. See, “What is a biosimilar medicine?”, NHS England, 24 September 2015.

2 Joint statement from the negotiators of the European Union and the United Kingdom Government on progress of negotiations under Article 50 TEU on the United Kingdom’s orderly withdrawal from the European Union, 19 June 2018. See Article 56 of the draft Withdrawal Agreement.

3 In its White Paper on the future relationship between the UK and the EU, the Government proposed that the UK follow those EU rules necessary to provide for frictionless trade at the border.

4 The EU Commission issued a “Guidance to Stakeholders“ in relation to the effect on Brexit on Supplementary Protection Certificates on 27 April 2018. It indicates that the main adjustment for Brexit may be to the fixing of the date of the first marketing authorisation which is used to calculate the duration of the SPC.

https://www.england.nhs.uk/wp-content/uploads/2015/09/biosimilar-guide.pdf

https://ec.europa.eu/commission/sites/beta-political/files/joint_statement.pdf

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/725288/The_future_relationship_between_the_United_Kingdom_and_the_European_Union.pdf


Full details of the documents

Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EC) No 469/2009 concerning the supplementary protection certificate for medicinal products: (39792), 9485/18 + ADDs 1–4, COM(18) 317.

Previous Committee Reports

None.

http://europeanmemoranda.cabinetoffice.gov.uk/files/2018/05/ST-9485-2018-INIT-EN.pdf


2 EU structural funds post-2020Committee’s assessment Politically important


Document details (a) Proposal for a Regulation of the European Parliament and of the Council laying down common provisions on the European Regional Development Fund, the European Social Fund Plus, the Cohesion Fund, and the European Maritime and Fisheries Fund and financial rules for those and for the Asylum and Migration Fund, the Internal Security Fund and the Border Management and Visa Instrument; (b) Proposal for a Regulation of the European Parliament and of the Council on the European Regional Development Fund and on the Cohesion Fund; (c) Proposal for a Regulation of the European Parliament and of the Council on the European Social Fund Plus (ESF+).

Legal base (a) Articles 177, 322(1)(a) and 349, TFEU (b) Articles 177, 178 and 349, TFEU (c) Articles 46(d), 149, 153(2)(a), 164, 168(5), 175(3) and 349, TFEU; Ordinary legislative procedure; QMV


Document Numbers (a) (39801), 9511/18 + ADD 1, COM(18) 375; (b) (39807), 9522/18 + ADDs 1–2, COM(18) 372; (c) (39808), 9573/18 + ADDs 1–2, COM(18) 382


2.1 The EU’s European Structural and Investment (ESI) Funds aim to reduce economic, social and regional disparities across the EU, and to address the impacts of migration. In line with proposals for EU financing—the Multiannual Financial Framework (MFF)—from 2021 until 2027 inclusive, the Commission has proposed revised rules governing the ESI Funds for that period.

2.2 While the UK does not expect to participate in future ESI Funds, the Parliamentary Under-Secretary of State (Lord Henley) says in his EM that any final decision will be taken as part of the discussions on the future economic partnership with the EU. This uncertainty derives from the new structure of ESI Funds, incorporating three new Funds related to the future UK-EU internal security relationship: Asylum and Migration Fund; Internal Security Fund; and Instrument for Border Management and Visa. The other four Funds are core parts of the ESI Funds under the current MFF: European Regional Development Fund (ERDF); European Social Fund Plus (ESF +), Cohesion Fund (CF) and the European Maritime and Fisheries Fund (EMFF).

2.3 The total value of all ESI Funds for the 2021–2027 period is proposed to be €358.9bn (£312bn). The proposed budget of Cohesion Policy (ERDF, CF and ESF+) is €330.6bn (£287.4bn). That is approximately 30% of the total EU budget for 2021–2027, whereas it


http://europeanmemoranda.cabinetoffice.gov.uk/files/2018/06/9511_18_9522_18_9573_18_Common_Provisions_of_Funds.pdf


amounts to around a third under the 2014–20 MFF. There will be net cuts to Cohesion Policy of 5–7% compared with the previous programming period, depending on the final agreed budget.

2.4 Document (a) sets down common provisions applicable to all of the Funds and covers matters such as the overall strategic approach, programming, monitoring, evaluation, communication, financing, management, control and financial management. There are rules specific to each of the Funds which, for the ERDF and CF are set out in document (b) and, for ESF +, are set out in document (c). We report these together as they constitute the EU’s Cohesion Policy and share both common objectives and a common regulatory framework. The other Funds are being reported separately. We also report separately the proposal on European territorial cooperation (Interreg), which is a sub-fund under the ERDF.

2.5 The new Common Provisions Regulation (document(a)), which provides common rules for all seven funds, aims to: reduce unnecessary administrative burdens; increase programme flexibility; and align the programmes more closely with each other and EU priorities. It is proposed to reduce the number of preconditions that need to be met before funding can be delivered (“ex-ante conditionality”), but also to evaluate them throughout the entire course of a programme. Funding would be interrupted if the precondition ceases to be met at any point during programme delivery. It is also proposed to link these new enabling conditions with improved economic governance in the Member States concerned.

2.6 The ERDF and Cohesion Fund (document(b)) address disparities in levels of development between regions, and supports research and innovation, Small and Medium Enterprises (SMEs) and the creation of a low carbon economy. Under the new programme, the majority of resources will be focused on the following policy objectives:

• a smarter Europe by promoting innovative and smart economic transformation; and

• a greener, low-carbon Europe by promoting clean and fair energy transition, green and blue investment, the circular economy, climate adaptation and risk prevention and management.

2.7 The ESF+ (document (c)) supports investment in people and improving employment, and is set to become the EU’s tool to implement the European Pillar of Social Rights.5 It supports labour market participation, fosters social inclusion, and promotes skills and lifelong learning. The remit of ESF+ has been expanded compared with the 2014–2020 ESI Fund regulations to include EU programmes on health, deprivation and youth employment.

2.8 In his EM, the Minister re-iterates the Government’s commitment to create a new UK Shared Prosperity Fund as a domestic successor to the EU’s Cohesion Policy. While UK participation in most of the ESI Funds is not expected, the December 2017 Joint Report

5 A set of 20 principles designed to deliver new and more effective rights for citizens, under the following categories: equal opportunities and access to the labour market; fair working conditions; and social protection and inclusion.


agreed between the UK and the EU6 stated that both parties would favourably explore participation in European Territorial Cooperation (Interreg) programmes, a sub-fund within ESI Funds. We report the proposal for this sub-fund separately.

2.9 Subsequent to his EM, the Minister sent a letter providing further detail of the Government’s position.7 In particular, he makes clear that the Department for Health and Social Care intends to explore participation in the health element of ESF+, although no policy decisions have been made at this stage. He also says that the UK will engage constructively in the negotiations on the future of cohesion policy while it remains a Member State. In particular, the UK will support the proposed simplifications and greater focus on innovation and skills, but will question some of the specific programming and management changes.

2.10 The UK supports the reduction in the number of preconditions and the attempt to make them more focused but awaits to see how the proposal to continuously monitor compliance will work in practice. The UK also welcomes the principle of ensuring a strong link between economic governance in Member States and access to funding, although it also emphasises that this could be potentially burdensome if not properly managed.

2.11 Absent from the Government’s position is any comment on possible payments to be made into the EU’s Cohesion Policy in the future, along the lines of financial contributions made by the non-EU members of the European Economic Area (Norway, Iceland and Liechtenstein) towards the reduction of economic and social disparities in the EEA.8 Yet, the Government’s earlier position paper on the future of cohesion policy, concluded that “a dynamic, secure and prosperous European Union is in all of our interests.” This theme of shared prosperity was reflected by the Prime Minister in her remarks in the House9 following the June 2018 European Council, along with a commitment to continued cooperation with the EU to tackle uncontrolled migration.

2.12 The Minister is non-committal on future participation in the European Structural and Investment Funds because of the new structure of the Funds. We would welcome any further update on the Government’s considerations in that regard.

2.13 On the ESF+ programme specifically, we note from the Minister’s letter of 4 July that the Department for Health and Social Care is exploring the potential for involvement in the health aspect of ESF+. We ask for further analysis of this potential involvement, including the advantages and disadvantages and the potential costs involved.

2.14 Drawing benefit from EU cohesion policy is only one element. The policy also involves contributions with the aim of boosting growth to the benefit of all. We were interested to note that the Minister made no mention of any possible UK contribution to EU cohesion post-Brexit, although the Government has acknowledged that EU prosperity is important to the UK. In that context, we ask:

• how the Government intends to support the prosperity of the EU post-Brexit;

6 Paragraph 55, Joint Report on progress during phase 1 of negotiations under Article 50 TEU on the UK’s orderly withdrawal from the EU.

7 Letter from Lord Henley to Sir William Cash, dated 4 July 2018.8 EEA Grants 2014–219 HC Deb 2 July 2018, vol 644, cols 46–64

http://europeanmemoranda.cabinetoffice.gov.uk/files/2018/07/Scan_Les_Saunders_20180705-104628_0462_001.pdf

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/699106/UK_position_paper_on_future_of_cohesion_policy_.pdf

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/665869/Joint_report_on_progress_during_phase_1_of_negotiations_under_Article_50_TEU_on_the_United_Kingdom_s_orderly_withdrawal_from_the_European_Union.pdf

https://eeagrants.org/Results-data/Documents/Legal-documents/Agreements-on-the-EEA-and-Norway-Grants/Agreement-on-the-EEA-Grants-2014-2021

https://hansard.parliament.uk/commons/2018-07-02/debates/EC4648D4-9B09-4D6A-A2E0-C38E425AF318/JuneEuropeanCouncil


• whether the Government would contemplate making a financial contribution to cohesion policy over the period 2021–27 in order to boost EU prosperity, along the lines of the EEA Grants; and

• whether the Government considers that any such contribution would potentially also align with its commitments on migration given the proposal to improve alignment between the cohesion policy Funds and the Funds on migration and borders.

2.15 We welcome the fact that the UK plans to engage constructively in negotiations on these proposals, particularly as there may be some limited participation and contribution on the part of the UK over the next funding period.

2.16 We look forward to a response to our queries and to an update on the progress of negotiations within three weeks. The documents remain under scrutiny.

Full details of the documents: (a) Proposal for a Regulation of the European Parliament and of the Council laying down common provisions on the European Regional Development Fund, the European Social Fund Plus, the Cohesion Fund, and the European Maritime and Fisheries Fund and financial rules for those and for the Asylum and Migration Fund, the Internal Security Fund and the Border Management and Visa Instrument: (39801), 9511/18 + ADD 1, COM(18) 375; (b) Proposal for a Regulation of the European Parliament and of the Council on the European Regional Development Fund and on the Cohesion Fund: (39807), 9522/18 + ADDs 1–2, COM(18) 372; (c) Proposal for a Regulation of the European Parliament and of the Council on the European Social Fund Plus (ESF+): (39808), 9573/18 + ADDs 1–2, COM(18) 382.


None.


http://europeanmemoranda.cabinetoffice.gov.uk/files/2018/05/ST-9522-2018-INIT-EN_(1).pdf



3 European Territorial Cooperation (Interreg)


Committee’s decision Not cleared from scrutiny; further information requested; drawn to the attention of the Northern Ireland Affairs Committee

Document details (a) Proposal for a Regulation of the European Parliament and of the Council on a mechanism to resolve legal and administrative obstacles in a cross-border context; (b) Proposal for a Regulation of the European Parliament and of the Council on specific provisions for the European territorial cooperation goal (Interreg) supported by the European Regional Development Fund and external financing instruments

Legal base (a) Article 175 TFEU, Ordinary legislative procedure, QMV (b) Articles 178, 209(1), 212(2) and 349 TFEU, Ordinary legislative procedure, QMV


Document Numbers (a) (39809), 9555/18, COM(18) 373; (b) (39811), 9536/18 + ADD 1, COM(18) 374


3.1 The European Territorial Cooperation (ETC) goal of the EU structural funds (otherwise known as “Interreg”—inter-regional cooperation) is a long-established strand of the EU structural funds, designed to promote regional cooperation across borders within the EU. It includes the PEACE Programme, specifically designed to support cooperation across the Irish border.

3.2 We are reporting separately on the Commission’s wider proposals for the future of structural funds. The Interreg proposal (document (b)) is distinct, as both the UK and the EU committed in the December 2017 Joint Report10 to examine future PEACE and border-relevant11 Interreg programmes favourably. The proposal includes a new “PEACE PLUS” programme and provides the option for the UK to participate in the 2021–27 ETC programmes.

3.3 The existing arrangements for the PEACE programme have been retained to a large extent. Under the proposal, the existing Special EU Programmes Body (SEUPB) could act as the Managing Authority for the PEACE PLUS programme (as it does for the current PEACE programme). Beneficiaries from the border counties of Ireland and Northern

10 Joint report on progress during phase 1 of negotiations under Article 50 TEU on the UK’s orderly withdrawal from the EU, 8 December 2017, paragraph 55.

11 Interreg Programme V(A) involves programmes across the West of Scotland, Northern Ireland and Irish border counties.


https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/665869/Joint_report_on_progress_during_phase_1_of_negotiations_under_Article_50_TEU_on_the_United_Kingdom_s_orderly_withdrawal_from_the_European_Union.pdf


Ireland will be eligible for EU funding. Provisions have also been adopted to allow the UK, Ireland, and the Commission to be parties to a specific financing agreement to fund PEACE PLUS.

3.4 There are five components to the wider ETC (Interreg) programmes: (1) Cross border (covering land borders only); (2) Transnational and maritime; (3) Outermost regions; (4) Interregional cooperation; and (5) Interregional innovation investment. The UK is named as an eligible third country for the land border, transnational and maritime and interregional cooperation components. A separate Chapter covers the terms of participation of third countries. This sets out that the normal Interreg rules will usually apply, with the exception of provisions on programme authorities, management methods, eligibility, large infrastructure projects, procurement and financial management. A financing agreement must be reached between third countries and the European Commission.

3.5 Following past experience that the effectiveness of Interreg projects has been undermined by the lack of a power to address conflicting legal and administrative rules affecting a cross-border region, document (a) proposes a voluntary mechanism to help resolve those obstacles. It would allow for the application in one Member State of the legal provisions12 from another Member State, where conflicting national rules constitute a legal obstacle13 to the delivery of a joint project.

3.6 The potential significance of the proposal to the UK outside the EU is, first, the link to Interreg and possible UK involvement in that programme. Second, the proposal explicitly allows for the mechanism to be applied to external borders of the EU. It could therefore be applied between the UK and Ireland.

3.7 The Parliamentary Under-Secretary of State (Lord Henley) draws attention in his Explanatory Memorandum (EM) on the Interreg programme (document (b)) to the joint UK-EU commitment to examine future PEACE and Interreg programmes favourably, but notes that decisions on future UK participation in ETC programmes will be taken in due course. He adds that the overall Government position is to continue to take part in those specific policies and programmes which are greatly to the UK’s joint advantage. If the UK chose to participate in future EU programmes, it would make contributions to cover its fair share of the costs involved.

3.8 In his EM14 on document (a), the Minister makes only passing reference to the possibility that the mechanism be applied to third countries. He notes simply that the proposal has no implications for the UK, assuming that the UK is no longer a Member State at the time the legislation comes into force.

3.9 We note that the Interreg proposal is of particular significance to Northern Ireland. The UK and EU agreed to look favourably at future UK participation in this programme, particularly with a view to supporting cooperation across the Irish Border. It is therefore with interest that we detect a neutral tone by the Minister rather than one aligned with considering involvement favourably. This may be due to the 12 ‘Legal provision’ means any legal or administrative provision, rule or administrative practice applicable to a joint

project.13 ‘Legal obstacle’ means any legal provision with regard to the planning, development, staffing, financing or

functioning of a joint project that obstructs the inherent potential of a border region when interacting across the border.

14 Explanatory Memorandum from the Department for Business, Energy and Industrial Strategy, dated 13 June 2018.

http://europeanmemoranda.cabinetoffice.gov.uk/files/2018/06/9536_18_Provisions_fo_the_European_Territorial_Cooperation_Goal_Interreg.pdf

http://europeanmemoranda.cabinetoffice.gov.uk/files/2018/06/9555_18_Resolving_Legal_and_Administrative_Obstacles_in_a_cross_border_context.pdf


need to negotiate an acceptable financial agreement rather than any misgivings about the benefits of the Programme. It would be helpful if the Minister would set out the elements that need to be clarified in order that the Government can be assured that participation would be “greatly to the UK’s advantage”.

3.10 We would also welcome further analysis from the Government on the proposed arrangement for third country involvement and what amendments, if any, the UK might propose.

3.11 We were surprised that the Minister’s Explanatory Memorandum on document (a)—the proposed mechanism to resolve legal and administrative obstacles in a cross-border context—made only passing mention of the fact that the new mechanism could be applied to external borders of the EU. We ask therefore whether:

• it could in principle apply to the Irish border;

• there are examples of how joint projects across the Irish border have been hindered by conflicting national rules; and,

• given the joint commitment to look favourably at PEACE and Interreg, whether the new mechanism might be helpful to facilitate the best possible operation of those schemes across the Irish border?

3.12 We look forward to a response, including an update on the progress of negotiations, within three working weeks. The documents remain under scrutiny. We draw them to the attention of the Northern Ireland Affairs Committee.

Full details of the documents:

(a) Proposal for a Regulation of the European Parliament and of the Council on a mechanism to resolve legal and administrative obstacles in a cross-border context: (39809), 9555/18, COM(18) 373;

(b) Proposal for a Regulation of the European Parliament and of the Council on specific provisions for the European territorial cooperation goal (Interreg) supported by the European Regional Development Fund and external financing instruments: (39811), 9536/18 + ADD 1, COM(18) 374.

Background: The PEACE Programme

3.13 The PEACE Programme was initially created in 1995 as a direct result of the EU’s desire to make a positive response to the paramilitary ceasefires of 1994. The current Programme (PEACE IV), covering the period 2014–20 provides opportunity for continued EU assistance to help address the peace and reconciliation needs of the region. In total, 85% of the Programme, representing €229 million (£203 million) is provided through the European Regional Development Fund (ERDF). The remaining €41 million (£36 million), representing 15% is match-funded by the Irish Government and the NI Executive. The eligible area for the PEACE IV Programme for 2014–20 is Northern Ireland and the Border Counties of Ireland (including Cavan, Donegal, Leitrim, Louth, Monaghan and Sligo).




3.14 The content of the PEACE IV Programme has been agreed by the Northern Ireland Executive, the Irish Government and the European Commission. It has four core objectives where it will make real and lasting change in terms of Shared Education initiatives, Support for marginalised Children and Young People, the provision of new Shared Spaces and Services, and projects that will Build Positive Relations with people from different communities and backgrounds.


None.


4 Euratom Research & Training Programme 2021–25


Committee’s decision Not cleared from scrutiny; further information requested; drawn to the attention of the Business, Energy and Industrial Strategy and Science and Technology Committees

Document details Proposal for a Council Regulation establishing the Research and Training Programme of the European Atomic Energy Community for the period 2021–2025

Legal base Article 7 of the Euratom Treaty; unanimity




4.1 The EU’s nuclear energy body, Euratom, funds a research programme into nuclear energy, both fission and fusion. The UK is currently a major beneficiary of the programme, because it is the host of the EU-owned Joint European Torus (JET) fusion energy project in Oxfordshire. Euratom also funds the EU’s contribution to ITER, an international research project to develop a commercially-viable source of fusion energy, via its Fusion for Energy Agency of which the UK is currently a member by virtue of its EU membership.15

4.2 The funding for these—and related projects—comes from the Euratom Research & Training (R&T) Programme. This currently runs until the end of 2018, although an extension until end 2020 is expected to be approved by the EU Member States later this year, aligning the programme with the general EU budgetary cycle (which runs from 2014 to 2020).16 Unlike other EU funding vehicles, the Euratom R&T programme can legally only run for periods of five years at a time.17 Since it deals with the politically sensitive issue of nuclear energy, the programme must be approved unanimously by all Member States.18 The European Scrutiny Committee last drew the Euratom R&T Programme to the attention of the House earlier in 2018.

4.3 In May 2018, the European Commission presented its proposals for the EU’s next Multiannual Financial Framework (MFF), the expenditure limits for the EU budget in different policy areas from the period from 2021 to 2027. This included a proposal to extend the Euratom Research & Training Programme from its (tentative)19 current end date of December 2020 until the end of 2025. It builds largely on the existing Programme,

15 We have assessed the implications of Brexit for the UK’s participation in ITER after the end of the transitional period in a separate chapter of this Report.

16 Depending on the date of adoption of the next Euratom R&T Programme, the UK’s consent or abstention for establishment of the Programme will not be necessary: when the two-year Article 50 period expires on 29 March 2019, the UK will cease to be a Member State and lose all its institutional privileges, including voting rights in the Council.

17 The five-year length is required by Article 7 of the Euratom Treaty.18 The European Parliament has no formal legislative role in relation to the proposal.19 See paragraph 0.2 on the current end date for the programme and the proposal to extend it until 2020.


https://publications.parliament.uk/pa/cm201719/cmselect/cmeuleg/301-xiv/30114.htm

https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=COM%3A2018%3A321%3AFIN

https://eur-lex.europa.eu/legal-content/EN/TXT/?qid=1530188358063&uri=CELEX:52018PC0437


but as we describe in “Background” below, it would be open to the involvement of the UK in return for a “fair” financial contribution, and also seeks to focus more on the non-energy (medical) applications of nuclear research.

4.4 The Commission also notes in its proposal that further funding would be provided for the Joint European Torus project, provided the UK’s Withdrawal Agreement is ratified and the post-Brexit transitional period takes effect.20 During that period, the UK would remain a contributor to the EU budget, and therefore to the Euratom programme, as if it were still a Member State. It is unclear what would happen to the facility if the grant were not extended, or what its future will be after 2020 should the UK become formally ‘associated’ with the Euratom research programme.

4.5 The Minister for Science (Mr Sam Gyimah) submitted an Explanatory Memorandum on the proposal in June 2018, which reiterated the Government’s position that it wants to stay ‘associated’ to the Euratom research programme when the UK has become a ‘third country’ after Brexit. His predecessor had previously told us of the significant inflow of investment the programme generates for the UK (estimated at roughly €70 million per year),21 while participation also gives UK researchers access to facilities and research programmes of which the UK “currently has no equivalent” and which it “would not be able to be duplicate at the national level”.22

4.6 The Euratom Research & Training Programme Regulation is now subject to negotiations among the Member States in the Council, who will decide on its legal framework—including its overall budget and the conditions for ‘third country’ participation—as part of the wider discussions on the Multiannual Financial Framework. While the European Commission is pushing for formal adoption ahead of the European elections in May 2019, in practice the Regulation may not be adopted until later in 2019 or even 2020. Formal negotiations between the Government and the Commission on UK association with the Programme can only begin when the EU-level legal framework is in place.

Our conclusions

4.7 Negotiations on the EU’s next long-term investment programmes as part of the 2021–2027 Multiannual Financial Framework have recently begun in earnest, but the UK is likely to play only a marginal role in those negotiations given its decision to withdraw from the EU. Nevertheless, these discussions are clearly of political interest: the Government has repeatedly said it wants the UK to remain involved in various EU programmes of mutual benefit, including the next Framework Programme for Research (Horizon Europe) and the Euratom Research Programme 2021–2025.

4.8 The terms of UK association with the EU’s nuclear research programme are yet to be agreed, and their legal parameters will be determined to a large extent by the Regulation proposed by the Commission in May 2018. It will be up to the remaining Member States to decide whether to accept, for example, the ‘automatic correction’ to prevent the UK from being a net beneficiary of the Programme. After the Regulation 20 Commission Impact Assessment, document SWD(2018) 307, p. 27.21 The UK Atomic Energy Authority receives around €65 million per year for the Joint European Torus, while UK

fission research receives an additional €4.4 million per year on average. 22 Explanatory Memorandum submitted by the Department for Business, Energy & Industrial Strategy (11 January

2018).

http://europeanmemoranda.cabinetoffice.gov.uk/files/2018/06/EM_9871.18_Euratom_and_Horizon_.pdf

http://europeanmemoranda.cabinetoffice.gov.uk/files/2018/01/EM_15387.17_Research_and_Training_programme_of_Euratom_Horizon_2020_.pdf

https://eur-lex.europa.eu/resource.html?uri=cellar:d17282ba-6a2f-11e8-9483-01aa75ed71a1.0001.03/DOC_3&format=PDF

http://europeanmemoranda.cabinetoffice.gov.uk/files/2018/01/EM_15387.17_Research_and_Training_programme_of_Euratom_Horizon_2020_.pdf


is adopted, the Government and the European Commission will need to negotiate a detailed legal arrangement governing the terms of the UK’s participation. We have estimated the potential gross UK contribution in return for participation in the 2021–2025 Euratom R&T Programme to be approximately £48 million per year, although that figure is necessarily highly speculative at this point.23

4.9 If the UK leaves the EU without a Withdrawal Agreement in March 2019—and therefore without an agreed financial settlement of outstanding obligations—we consider it extremely unlikely that the EU would consider UK ‘association’ to the Euratom research programme, or any other EU programme in which the Government has already expressed a post-Brexit interest. Any such participation would most likely require, at the very least, acceptance of the financial settlement as outlined in the draft Withdrawal Agreement.

4.10 Given the continued uncertainty about the Government’s precise ambitions in the field of nuclear cooperation with the EU, and the financial implications if the UK sought association with the Euratom R&T Programme as a ‘third country’, we retain the proposal under scrutiny. We also draw it to the attention of the Business, Energy and Industrial Strategy and Science and Technology Committees. They may wish to consider the implications of association—or lack thereof—for nuclear research in the UK, especially at the JET facility in Oxfordshire.


Proposal for a Council Regulation establishing the Research and Training Programme of the European Atomic Energy Community for the period 2021–2025: (39879), 9871/18 + ADDs 1–6, COM(18) 437.

Background

4.11 The Treaty establishing Euratom (the European Atomic Energy Community) enables the EU’s Member States to establish a programme to fund research into the civilian uses of nuclear power. The current Euratom Research & Training programme was established in 2014 and, in line with the Treaty, runs for five years until the end of 2018 (with an extension until the end of 2020 expected to be approved by the Member States later this year, see paragraph 0.x below). The Programme complements the EU’s general Framework Programme for Research.

4.12 The Euratom programme for 2014–2018 was given a budget of €1.6 billion (£1.4 billion), which is funded from the general EU budget, with an additional €770 million (£680 million) earmarked for 2019–2020 to bring the total €2.37 billion (£2.1 billion). As

23 The contribution by third countries for participation in EU programmes is typically calculated by taking their share of GDP of the total GDP of the EU and the third country in question combined (i.e. the EU-27 and UK), and multiplying it by the annual EU budget for the programme in question as decided by the Member States and the European Parliament in any given year. The Euratom R&T Programme has a provisional average annual budget of €343 million; the UK’s share of the combined GDP (16 per cent) would yield a putative contribution of €55 million or £48 million.

https://eur-lex.europa.eu/legal-content/EN/ALL/?uri=CELEX:32013R1314



the UK is currently responsible for approximately 12.4 per cent of the budget, its gross contributions over the 2014–2020 period—Brexit notwithstanding24—are expected to amount to roughly €294 million (or €42 million a year).

4.13 The R&T programme finances nuclear research and training with an emphasis on fusion and fission energy, nuclear safety and security, radiation protection and radioactive waste management. This is done using two mechanisms:

• Direct actions, which are research activities undertaken by the European Commission through its Joint Research Centre (JRC) and cover only nuclear fission research. None of these are undertaken in the UK, although UK organisations can participate; and

• lndirect actions, where research is undertaken by participants in Member States or countries associated with Euratom, but funded by the EU. The most significant of these is the Joint European Torus (JET),25 which is hosted by the UK.

4.14 One of the main focus areas of the Euratom research programme has been research into developing a capability to generate electricity from fusion on a commercially viable basis. As the name suggests, fusion power is generated by fusing atoms together through a process of magnetic confinement, producing heat that can be converted into electricity. The Member States earmarked €1.1 billion (46 per cent) of the Euratom programme budget between 2014 and 2020 for research in this area.

4.15 EU-funded nuclear fusion research is undertaken by:

• Eurofusion, a consortium of 30 European research organisations and universities, which runs the Joint European Torus (a fusion research facility) at the Culham Centre in Oxfordshire; and

• The “Fusion for Energy” Agency, the EU’s contribution to ITER, an international research project that will try to generate fusion power as a reliable, commercially-viable energy source. As this aspect of the EU’s nuclear research programme has its own specific legal base and agency, we have considered its future—and the UK’s role in it after Brexit—in a separate report.

4.16 The research undertaken at JET in Oxfordshire contributes to the preparatory work for the launch of ITER in the middle of the next decade.26 However, its facilities are provided as a contribution in kind by the European Commission.27 Moreover, its on-24 This tentative contribution presupposes the UK and EU will ratify the UK’s Withdrawal Agreement under Article

50 TEU, which commits the UK to making contributions to the EU budget in 2019 and 2020 as if it had remained a Member State.

25 A torus is a geometrical three-dimensional shape, perhaps most easily compared to a doughnut or an inner tube. The JET has its name because it has a tokamak design, a magnetic confinement device that forces the plasma needed for fusion power into the shape of a torus.

26 The International Thermonuclear Experimental Reactor (ITER) is an international programme exploring nuclear fusion-based energy. The UK currently participates in this programme via its membership of Euratom. ITER is different from the Eurofusion and JET projects, as it is an intergovernmental organisation with seven members (the EU, the USA, India, China, South Korea, Russia and Japan). The aim of the project is to lay the groundwork for DEMO, a prototype fusion reactor that should demonstrate industrial-scale fusion electricity by the middle of the century.

27 The facilities are owned by the EU because the JET project was established by the then-European Economic Community: Council Decision 71/237/Euratom established a five-year research programme into nuclear fusion. In 1975, Council Decision 75/330/Euratom released EEC funding for the design and preparation of JET, and Council Decision 78/471/Euratom established the JET Undertaking and fixed its location at Culham, Oxfordshire. See the Euratom Work Programme for 2014–15, p. 31.

http://eur-lex.europa.eu/legal-content/EN/TXT/?qid=1516363412678&uri=CELEX:31971D0237

http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:31975D0330&qid=1516363587331&from=EN

http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A31978D0471

http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A31978D0471

http://ec.europa.eu/research/participants/data/ref/h2020/wp/2014_2015/euratom/h2020-wp1415-euratom_en.pdf


going research is largely funded by the Euratom R&T Programme, which provided its latest non-competitive grant to the facility, worth €238 million (£209 million), in 2014. Euratom’s grant agreement with Eurofusion for the exploitation of JET expires in 2018, at the end of the current legal framework (irrespective of whether the programme until the end of the current Multiannual Financial Framework, see paragraph 0.x above).

4.17 A formal decision on whether to extend the existing contract to 2020, which is the outcome sought by the Government, is pending. The Business Secretary (Greg Clark) said in January 2018 that the Government wants to “ensure that the UK maintains its leading role in European nuclear research”, including “a close association with […] the Joint European Torus”. It has also confirmed that, should the Commission agree to extend the JET contract, the UK would “underwrite its fair share of JET’s running costs”.28

4.18 The European Commission can only formally decide on the extension of the grant agreement for the JET project at Culham until the end of 2020 after the draft Regulation extending the Euratom programme until then is formally adopted. As noted, this is likely to take place in September or October 2018. However, informally the Commission has already decided that “the current contract for JET operation will be extended until 2020 when the facility will be handed over to UK”, subject to ratification of the UK’s Withdrawal Agreement (which would create a transitional period in 2019 and 2020, during which Treasury would continue making payments into the EU budget as if the UK were still a Member State).29 There has been no independent confirmation of this from the Department for Business, Energy & Industrial Strategy.30

The Euratom R&T Programme 2021–2025

4.19 As described above, the current Euratom R&T Programme—if the extension is approved—will end in December 2020. Any participation by the UK in the research programme after the transition period (formally known as ‘association’) would require a new agreement between the Government and Euratom.

4.20 The ability of the UK Government to secure association from 2021 onwards is complicated by the fact that the EU is yet to establish the legal framework for the Euratom research programme. On 1 January 2021, the EU’s next Multiannual Financial Framework is scheduled to take effect. This is the long-term EU budget, which will govern the Union’s expenditure across all areas of activity over a seven-year period, until December 2027. The European Commission has tabled a number of proposals for EU funding programmes in those years, and on 7 June 2018 it presented the outline for the next Euratom Research & Training Programme for 2021–2025. It has a provisional budget of €1.7 billion (£1.5 billion) over that period, in real terms approximately the same as the €1.6 billion budget for the current 2014–2018 period.

28 Written Statement HCWS399: Energy Policy (11 January 2018).29 Commission Impact Assessment SWD(2018) 307, footnote 35.30 If the Withdrawal Agreement is not ratified, there will not be a transition period and the UK will fully leave

Euratom—and the research programme—on 29 March 2019. It seems unlikely the JET would receive any EU funding in 2019 and 2020 in that scenario.

https://www.parliament.uk/business/publications/written-questions-answers-statements/written-statement/Commons/2018-01-11/HCWS399/


https://ec.europa.eu/commission/sites/beta-political/files/draft_agreement_coloured.pdf





https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:52018SC0307


4.21 In its legislative proposal, based in part on an independent evaluation of the current Programme,31 the Commission has sought to make some changes to “improve the programme’s efficiency and to bring the regulation into line” with the general Framework Programme for Research (Horizon Europe), which we have assessed in a separate chapter of this Report. In his Explanatory Memorandum, the Minister summarises these changes as follows:

• The possibility for non-EU countries to obtain ‘association’ with the Euratom research programme has been widened, most likely in view of the UK’s exit from the EU. While association—which will require a dedicated legal agreement with the EU—would entitle the UK to bid for funding from the Programme as if it were still a Member State, it also requires a financial contribution which would be subject to “an automatic correction of any significant imbalance between the level of financial contributions and the amount that entities established in the associated country receive through participation in the programme”. In other words, the UK could not be a substantial net beneficiary of the Programme after Brexit;

• The so-called “Marie Sklodowska-Curie Actions”, which fund cross-border researcher mobility under the general Framework Programme for Research, are extended to those conducting nuclear research under the Euratom R&T programme;

• The Commission is seeking to increase synergies between nuclear research and ‘Horizon Europe’, by adopting many of the priorities and processes of the latter proposal, for example with regards to partnerships, emphasis on open science and market-creating innovation; and

• Compared to the current iteration, the Programme would have a greater focus on non-power applications of nuclear research such as healthcare and medical equipment.

4.22 The independent evaluation of the current Euratom R&T Programme also included a recommendation that funding for the JET experiment in the UK should be continued until 2024. However, given the sensitivities around the Brexit negotiations, the Commission has so far refused to accept this recommendation directly, although it has indicated that funding for the facility is secure until the end of 2020 if the UK’s Withdrawal Agreement is ratified and the post-Brexit transitional arrangement takes effect.

4.23 The European Commission has proposed to give the programme a budget of €2.1 billion for the 2021–2027 period, of which €1.7 billion would be spent during the 2021–2025 period covered by its latest proposal.32 This would amount to €300 million per annum; according to the Commission, this is roughly constant in real terms compared to the 2014–2020 programme once the UK’s withdrawal from the EU (and the concomitant reduction in contributions and spending) is taking into account.31 The evaluation exercise of the Euratom R&T Programme led to a series of recommendations made by

independent expert groups, such as reinforcement of the training elements of the programme through specific objectives; improved synergies with other EU research activities; and increasing the participation of new and emerging contributors. There is also a recommendation for the launch of a European Joint Programme in nuclear waste management research.

32 The legal proposal only covers the 2021–2025 period given the Treaty’s restrictions on the length of the research programme.

https://ec.europa.eu/research/evaluations/pdf/archive/other_reports_studies_and_documents/panel_report_on_indirect_actions_of_euratom_interim_evaluation_2014-2018.pdf

https://ec.europa.eu/research/evaluations/pdf/archive/other_reports_studies_and_documents/panel_report_on_indirect_actions_of_euratom_interim_evaluation_2014-2018.pdf


Our assessment

4.24 We last considered the relevance of the Euratom research programme for the UK in February 2018, when we reported the proposed extension of the programme until the end of 2020 to the House.

4.25 We focused in particular on the implications of Brexit for UK cooperation with Euratom on nuclear research, because the Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Richard Harrington) had already made clear at the time that there is no benefit to the UK from not being part of the R&T Programme. He explained:

• the UK Atomic Energy Authority receives around €65 million (£56 million) annually for the JET operating contract, on top of the €4.4 million (£3.8 million) in funding for fission research UK organisations receive on average per year. Given that the UK’s gross contribution is estimated at €44 million a year, the UK is by some margin a net beneficiary of the programme; and

• UK organisations also benefit from access to the “unique JRC nuclear facilities” of which the UK “currently has no equivalent”. As a consequence, UK organisations and researchers have access to all research programmes funded partially or in full by Euratom, providing a resource which the UK “would not be able to be duplicate at the national level”.

4.26 However, irrespective of these benefits, the Government’s decision to withdraw from the EU under Article 50 TEU included its membership of Euratom. As a result, the UK will cease to be a member of Euratom in March 2019 unless the Article 50 negotiating period is extended or the Withdrawal Agreement provides for a different date. As a consequence, the relationship between the UK and the EU’s nuclear research programme will change drastically when the two-year Article 50 period expires on 29 March 2019:

• Under the terms of the draft Withdrawal Agreement there would be a post-Brexit transitional period. For its duration, the UK would remain a participant in—and contributor to—the Euratom research programme. However, the Government would no longer have a vote on individual funding decisions on the Euratom Programme Committee; and

• after the transitional period ends, or on 29 March 2019 in case of a ‘no deal’ Brexit, the UK would no longer automatically participate in the Euratom programme. The UK will instead have to apply for “association” with the Euratom research programme, most likely requiring a continued annual financial contribution and with observer status only in the Euratom Programme Committee.

4.27 When we last considered the R&T Programme, the extent of the Government’s proposals for the future relationship after Brexit amounted to a “future partnership paper” on science and innovation, which stated that the UK “hopes to find a way to continue working with the EU on nuclear R&D”. It did not provide any further detail about the Government’s plans for the substance of such a partnership, or its financial implications.


However, in May 2018, the Prime Minister stated explicitly that the UK would like the option to fully associate to the EU’s science and innovation programmes including but not limited to Euratom R&T.33

Options for UK ‘association’ with the Euratom Research & Training Programme 2021–2025

4.28 If the UK negotiated an association agreement with the Euratom research programme similar to that of Switzerland after the post-Brexit transition, it would have to make a financial contribution each year. The contribution would be calculated by reference to the EU’s annual budget for the programme (over which the UK would no longer have control) and the UK’s GDP compared to that of the European Union and the UK combined. In return, UK-based organisations would be eligible for funding for indirect action (such as the Joint European Torus), and to participate in actions undertaken by the Commission’s Joint Research Centre.

4.29 However, while non-EU countries who participate in the Euratom research programme are allowed to send observers to the Euratom Programme Committee (which has to approve funding decisions and work programmes put forward by the European Commission), only EU Member State representatives have a vote. At present, given the use of qualified majority voting on the Committee, the UK has a significant influence. The Commission proposal for the 2021–2025 Euratom research programme also contains a provision—included in many of its sectoral proposals for the next Multiannual Financial Framework—that a ‘third country’ cannot have any “decisional powers” in relation to how EU programmes are run. The practical implications of such a statutory provision are not yet clear at this stage.

4.30 In terms of the UK’s potential financial contribution to the Euratom Research & Training Programme, the European Commission has proposed to give the programme a budget of €2.1 billion for the 2021–2027 period (of which €1.7 billion would be spent during the 2021–2025 period covered by its latest proposal).34 This would amount to €300 million per annum (roughly constant in real terms compared to the 2014–2020 programme). If the GDP-based methodology were to be applied to the contribution for UK association, given that the UK accounts for 16 per cent of the Union’s GDP at 28 Member States, that would yield a potential annual gross contribution of €48 million (£42 million). That is still significantly less than the UK’s current gross receipts, which the Minister has said amount to €70 million (£62 million) annually.

4.31 However, the Commission proposal contains a requirement for any UK association agreement with the 2021–2025 Euratom R&T Programme to include an “automatic correction” to prevent it from becoming—remaining—a major net beneficiary of the programme after it ceases to be an EU Member State. That implies that either UK receipts would have to come down, its contributions increase, or both. The Government has not provided any detail about its desired substance for an agreement on the UK’s association with the Euratom research programme, or its view on what would constitute a suitable financial contribution.

33 Speech by Prime Minister Theresa May, “Science and modern Industrial Strategy” (21 May 2018).34 The legal proposal only covers the 2021–2025 period given the Treaty’s restrictions on the length of the research

programme.

https://www.gov.uk/government/speeches/pm-speech-on-science-and-modern-industrial-strategy-21-may-2018/

https://www.gov.uk/government/speeches/pm-speech-on-science-and-modern-industrial-strategy-21-may-2018


4.32 The UK’s exit from EU also affects its status under international agreements concluded by Euratom on behalf of its Member States. In the field of nuclear research, this is principally the ITER Agreement. In parallel to the 2021–2025 Euratom R&T Programme, the Commission has also tabled a legislative proposal for the EU’s Fusion for Energy Agency—the Union’s contribution to ITER—for consideration by the Member States. We have assessed the implications of this proposal for the UK, in the context of its withdrawal from the EU, in more detail in a separate chapter of this Report.

4.33 The Committee will continue to press the Government for more detail about its proposals for the post-Brexit partnership with Euratom, including the legal and financial implications of an “association agreement” with its nuclear research programme and the Fusion for Energy Agency.


None, this is a new proposal.


5 Joint Undertaking for ITER (Fusion for Energy)


Committee’s decision Not cleared from scrutiny; further information requested; drawn to the attention of the Business, Energy and Industrial Strategy Committee and the Science and Technology Committee

Document details Proposal for a Council Decision amending Decision 2007/198/Euratom establishing the European Joint Undertaking for ITER and the Development of Fusion Energy and conferring advantages upon it

Legal base Article 7 Euratom Treaty, QMV




5.1 Launched in 2005 and now involving seven global partners (Euratom,35 US, Russia, Japan, China, South Korea and India), ITER (International Thermonuclear Experimental Reactor) is a project to build and operate an experimental facility to demonstrate the scientific viability of fusion as a future sustainable energy source. ITER is being built at the Cadarache research centre in southern France and originally aimed to complete construction with so-called “First Plasma” in 2020.36 That stage is now expected to be reached only by December 2025. Progress to full performance operation is foreseen by 2035.

5.2 Under the ITER agreement,37 the EU has committed to make a contribution to this internationally agreed collaborative effort for at least 35 years starting in 2007. The EU is the single largest contributor to ITER and provides 45% of ITER’s construction costs. Of that contribution, 80% comes directly from the EU budget and 20% from France as the host country.

5.3 Each partner to the agreement is required to provide its contribution to ITER through an agency. For the EU and Euratom, this obligation is delivered by the Fusion for Energy (F4E) Joint Undertaking, the tasks of which are:

• to provide Euratom’s contribution to ITER;

35 The European Atomic Energy Community, comprising all members of the EU as well as Switzerland which participates in some of the research activities, including ITER.

36 First Plasma represents the stage in the construction of the fusion machine that will allow testing the essential components of the machine; under the terms of the ITER Agreement, it is the point where the construction phase is formally completed and the operation phase starts.

37 Agreement on the Establishment of the ITER International Fusion Energy Organization for the Joint Implementation of the ITER Project.


http://www.fusionforenergy.europa.eu/

https://www.iter.org/doc/www/content/com/Lists/WebText_2014/Attachments/245/ITERAgreement.pdf


• to provide the contribution of Euratom to joint fusion research work with Japan; and

• to prepare and coordinate a programme of activities in preparation for the construction of a demonstration fusion reactor and related facilities.

5.4 The current members of F4E are: the EU Member States; Euratom (represented by the European Commission) and Switzerland.38 Each member sits on the Governing Board, which is F4E’s main supervisory body.

5.5 The Commission proposes an amendment to the F4E Decision39 to allow the EU to deliver its ongoing commitments to ITER over the EU’s Multiannual Financial Framework (MFF) 2021–27. The proposal is essentially a technical one as the need for a new baseline for the ITER project has already been agreed following an earlier Commission Communication,40 on which we reported in January and February this year.41 The proposed EU budget contribution over the next MFF is €6.07 billion (£5.32 billion).

5.6 Regarding the relevance of the UK’s withdrawal from the EU, the Legislative Financial Statement annexed to the proposal includes a potential budget line for third party contributions from Switzerland and the UK. The Commission also notes in its accompanying documentation:

“Brexit does not change the overall legal commitment of the EU to ITER, which is governed by the international ITER Agreement to which the EU—and not individual EU Member States—is the contracting party. Brexit will not change the EU’s financial obligations towards ITER which have been undertaken by the EU as a whole, by the conclusion of the ITER Agreement. It should be underlined that the UK took commitments, as an EU Member State, towards ITER when approving the different project baselines in the Council of the EU. It should also be noted that the UK has expressed its interest in continued involvement in ITER activities.”42

5.7 The Minister for Universities, Science, Research and Innovation (Sam Gyimah) recalls in his Explanatory Memorandum43 that the UK has already signalled its support for the proposed amendment given that the objective is to ensure ITER’s progress. The Minister notes the Commission’s observations on the impact of Brexit and confirms that the UK will be seeking close association with the ITER project. This was subsequently re-stated in the recent White Paper on the future relationship between the EU and the UK.44

5.8 The Minister goes on to note that the UK would make an ongoing contribution to cover its fair share of the costs involved in any participation. The exact contribution and terms of the contribution would be subject to the outcome of negotiations.

38 Switzerland participates in ITER through an association to the Euratom Research and Training Programme.39 Council Decision 2007/198/Euratom.40 Commission Communication—EU contribution to a reformed ITER project: 10434/17, COM(17) 319.41 Fourteenth Report HC 341–xiv (2017–19), chapter 9 (21 February 2018); and Eighth Report HC 341–viii (2017–19),

chapter 3 (10 January 2018).42 9868/18 ADD 1, page 13.43 Explanatory Memorandum, dated 25 June 2018.44 Page 29, White Paper on the future relationship between the EU and the UK.

http://europeanmemoranda.cabinetoffice.gov.uk/files/2018/06/EM_9871.18_Euratom_and_Horizon_1.pdf

http://data.consilium.europa.eu/doc/document/ST-10434-2017-INIT/en/pdf


https://publications.parliament.uk/pa/cm201719/cmselect/cmeuleg/301-viii/30106.htm

http://europeanmemoranda.cabinetoffice.gov.uk/files/2018/06/ST-9868-2018-ADD-1-EN.pdf



5.9 In our scrutiny of the earlier Communication on this matter, the Minister summarised the benefits to the UK of ITER in the following terms:

“The UK has already won €500m (£444m) worth of construction contracts for ITER, and is targeting further high-value contracts before construction completes. ITER participation supports UK science excellence, encouraging investment from industry and the creation of high-skill jobs. Non-participation would place those benefits at risk and undermine the UK’s world leading nuclear fusion research capability.”45

5.10 We note that the Commission underlines in the accompanying documentation “that the UK took commitments, as an EU Member State, towards ITER when approving the different project baselines in the Council of the EU”. We would welcome the Minister’s view on this statement and his assessment as to whether the UK’s agreement to this proposal could be interpreted as a UK financial commitment to ITER over the period 2021–27 and, potentially, beyond.

5.11 The recent White Paper confirmed the Commission’s understanding that the UK is, in any case, interested in participating in the ITER project through the EU post-Brexit. As the Minister recognises, this would be subject to some financial contribution. We would welcome further details as to the basis for calculating such a contribution, beyond the “fair share” terms set out in the Minister’s Explanatory Memorandum.

5.12 We noted from our scrutiny of the earlier Communication that the UK derives considerable benefit from ITER and that non-participation would be undesirable. Should it not prove possible to reach agreement on UK participation in ITER through the EU, we ask therefore what the Government’s contingency plan is? An alternative approach would presumably be for the UK to sign up to the ITER agreement as a separate global partner, but would that require an amendment to the ITER agreement? If so, what discussions—if any—has the Government had with the ITER global partners as to UK participation, including the necessary arrangements and the potential financial contribution?

5.13 We retain the document under scrutiny and draw it to the attention of the Business, Energy and Industrial Strategy Committee and the Science and Technology Committee. We request a response by 3 October 2018.


Proposal for a Council Decision amending Decision 2007/198/Euratom establishing the European Joint Undertaking for ITER and the Development of Fusion Energy and conferring advantages upon it: (39881), 9868/18 + ADDs 1–2, COM(18) 445.


None, but the following are relevant: Fourteenth Report HC 341–xiv (2017–19), chapter 9 (21 February 2018); and Eighth Report HC 341–viii (2017–19), chapter 3 (10 January 2018).

45 Letter from Sam Gyimah to Sir William Cash, dated 30 January 2018.



https://publications.parliament.uk/pa/cm201719/cmselect/cmeuleg/301-viii/30106.htm

http://europeanmemoranda.cabinetoffice.gov.uk/files/2018/02/Sam_Gyimah_-_Response_for_European_Scrutiny_Committee_on_EM_10434-17_(1).pdf


6 Audiovisual Media Services DirectiveCommittee’s assessment Politically important


Document details Proposal for a Directive amending Directive 2010/13/EU concerning the provision of audiovisual media services in view of changing market realities

Legal base Articles 53(1) and 62 TFEU; QMV; Ordinary Legislative Procedure

Department Digital, Culture, Media and Sport



6.1 As part of its Digital Single Market Strategy, the European Commission initiated the revision of the Audiovisual Media Services Directive (AVMSD) (EU) 2010/13,46 the principal regulatory framework governing EU-wide coordination of national legislation of audiovisual media, on 25 May 2016.

6.2 On 26 April 2018 the European Parliament, Council and Commission reached a preliminary political agreement on draft Directive (EU) 9479/16. A revision process was concluded in a subsequent interinstitutional trilogue meeting on 6 June 2018,47 at which the final compromise text, which is now available online,48 was agreed.

6.3 On 2 May 2018 the Minister of State for Digital and the Creative Industries (Margot James) wrote to the Committee to provide an update on the outcome of negotiations and an indication of next steps.49 The Minister acknowledges that the final text crossed two of the UK’s red lines in the negotiations, namely:

• the introduction of optional levies for video-on-demand and linear services, which give Member States an option of requiring these services to contribute financially towards national film funds in the country of operation; and

• the extension of the scope of the definition of video-sharing platforms, to include social media and live-streaming services.

6.4 However, the UK’s domestic position in terms of regulating online platforms has evolved considerably during the course of the negotiations, and the Minister notes that, on this issue, “the final text [on video-sharing platforms] aligns with the UK’s Digital Charter proposals”. The Minister also notes that other UK concerns, “especially around

46 European Commission, Audiovisual media services: breakthrough in EU negotiations for modern and fairer rules (26 April 2018).

47 Council of the European Union, Audiovisual media services: agreement on a directive to protect minors, boost competitiveness and promote European content (13 June 2018).

48 European Parliament, Committee on Culture and Education, Provisional agreement resulting from interinstitutional negotiations (13 June 2018).

49 Letter from the Minister (DCMS) to the Chair of the European Scrutiny Committee (2 May 2018).


http://europa.eu/rapid/press-release_IP-18-3567_en.htm

http://www.consilium.europa.eu/en/press/press-releases/2018/06/13/audiovisual-media-services-agreement-on-a-new-directive-to-boost-competitiveness-and-promote-european-content/?utm_source=dsms-auto&utm_medium=email&utm_campaign=Audiovisual+media+services%3a+agreement+on+a+directive+to+protect+minors%2c+boost+competitiveness+and+promote+European+content

http://www.europarl.europa.eu/RegData/commissions/cult/lcag/2018/06-13/CULT_LA(2018)005158_EN.pdf

http://europeanmemoranda.cabinetoffice.gov.uk/files/2018/05/eCase_06523_-_Cash.pdf


the issues of regulatory clarity, have been addressed”. Finally, it should be noted that, although the optional levy is an unwelcome addition to the EU regime, and is not in line with the Country of Origin principle which characterises the broadcasting regime, the core of the existing Country of Origin approach to broadcasting, whereby broadcasters operating in one EU member state are free to broadcast directly to every other EU member state, has been protected. This core negotiating objective has therefore been met.

6.5 The Minister states that the final text is expected to be accepted at the Education, Youth, Culture and Sport (ECYS) Council meeting in November 2018. The two year implementation period provided for in the text thus means that, in the event of a negotiated exit from the EU, the UK will be required to implement the Directive before the end of the implementation period provided for in the draft Withdrawal Agreement,50 assuming that the negotiators reach agreement on a Withdrawal Agreement.

6.6 In its report of 13 November 201751 the Committee also asked the Government to provide further information about a number of EU-exit related issues. Asked what proportion of UK audio visual exports and domestic economic activity associated with the audiovisual sector international channels based in the UK represent, the (then) Minister (Matt Hancock) acknowledged in his response52 the reliance of international channels on access to the EU market:

“A survey published by the Commercial Broadcasters Association (COBA)53 shows that over eight out of ten multi-territory commercial broadcasters surveyed stated that London was their European or global headquarters. DCMS economic estimates suggest that the EU is the most significant market for the UK’s AV sector, with the total UK exports of audiovisual services to this market accounting for 40.9% of total UK audiovisual services exports in 2015 (£3 billion).54“55

6.7 The (then) Minister did not, however, meaningfully answer the Committee’s questions as to whether the provisions on advertising in the Council of Europe’s European Convention on Trans-Frontier Television (CTT) effectively granted its signatories an opt-out from the Country-of-Origin principle. That Article 16 of the CTT56 does so has subsequently been confirmed by industry representatives.57 Nor did the Minister provide a meaningful answer to the Committee’s question as to whether UK-based broadcasters targeting the EU market would, under the current EU regime, be able to shift a relatively modest proportion of their operations to the EU market in order to retain current EU access, or whether a more significant restructuring would be necessary.

50 Draft Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community highlighting the progress made (coloured version) in the negotiation round with the UK of 16–19 March 2018 (19 March 2018).

51 First Report HC 301–i (2017–19) chapter 10, (13 November 2017).52 Letter from the Minister (DCMS) to the Chair of the European Scrutiny Committee (1 December 2017).53 COBA, Building a Global TV Hub COBA (28 November 2013).54 DCMS Economic Estimates—DCMS—2017.55 Letter from the Minister (DCMS) to the Chair of the European Scrutiny Committee (1 December 2017).56 Article 16, Council of Europe, European Convention on Transfrontier Television.57 House of Commons Exiting the European Union Committee, Oral evidence: The progress of the UK’s

negotiations on EU withdrawal, Q2331 (24 July 2018).



http://static1.1.sqspcdn.com/static/f/1321365/23977462/1385631686847/Building+A+Global+TV+Hub.pdf?token=JbUvOoNJM3fZkutoANV1ZE0kthc%3D

http://static1.1.sqspcdn.com/static/f/1321365/23977462/1385631686847/Building+A+Global+TV+Hub.pdf?token=JbUvOoNJM3fZkutoANV1ZE0kthc%3D

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/651354/DCMS_Sectors_Economic_Estimates_2017_-_Audio_Visual_ad_hoc_release.xlsx


https://rm.coe.int/168007b0d8

http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/exiting-the-european-union-committee/the-progress-of-the-uks-negotiations-on-eu-withdrawal/oral/87105.html


6.8 On 12 July 2017, the Government White Paper “The Future Relationship Between the United Kingdom and the European Union”58 stated that the UK would not seek to remain a part of the EU’s Digital Single Market and that it recognised that, in consequence, the intra-EU country of origin principle for broadcasters, whereby a company licenced by a national regulator in one Member State can broadcast into any other Member State, “will no longer apply.” The White Paper also stated that the UK’s position as a party to the CTT will not be affected by the UK’s withdrawal from the EU, and that “the UK is seeking the best possible arrangements for this sector”.

6.9 The broadcasting sector has not reacted favourably to the position taken in the White Paper. Adam Minns, the Executive Director of COBA (the Commercial Broadcasters’ Organisation) told the Exiting the EU Committee that the White Paper was a “backwards step”:

In the Mansion House speech the PM suggested the UK would seek mutual recognition for broadcasting. That was removed in the White Paper and nothing else replaced it. […] This uncertainty could not have come at a worse time for us. No one can wait until March 2019 before activating contingency plans.59

6.10 Mr Minns also questioned the Government’s rationale for seeking freedom to diverge from the EU in this area in exchange for increased flexibility, stating that:

“I do not know anyone in the broadcasting sector who is asking for more flexibility and, even if we were, we could get more flexibility without sacrificing mutual recognition or leaving the single market because the UK gold-plates so many rules anyway. It certainly is not going to be mitigation for losing access to 45% of our market, which is what the EU is.”60

6.11 Mr Minns noted that, although it was technically possible for broadcasters in the UK to qualify to participate in the EU regime when the UK was no longer a Member State if (approximately) 10% of a company’s senior editorial workforce was based in an EU Member State, this was not a straightforward solution because these people need support (“they need their IT people; they need legal; they need compliance; they need technology, et cetera. That is when it starts to snowball”).61 He also stated that the Council of Europe’s European Convention on Trans-Frontier Television was of limited use to international channels in the UK because it did not provide Country-of-Origin principle on advertising, and did not cover on-demand services, which represent the future of the industry. Mr Minns said that he did not know a single COBA member that would be willing to use it, apart from channels that do not rely on any advertising revenues and do not have any on-demand services—principally “Russian propaganda news channels coming out the UK”.

6.12 The Government has provided the Committee with a short summary of the overall effects of the amendments made by draft Directive 9479/16 to the Audiovisual Media

58 HM Government, The future relationship between the United Kingdom and the European Union (12 July 2018).59 House of Commons Exiting the European Union Committee, Oral evidence: The progress of the UK’s

negotiations on EU withdrawal, Q2312 (24 July 2018).60 House of Commons Exiting the European Union Committee, Oral evidence: The progress of the UK’s

negotiations on EU withdrawal, Q2323 (24 July 2018).61 House of Commons Exiting the European Union Committee, Oral evidence: The progress of the UK’s

negotiations on EU withdrawal, Q2330 (24 July 2018).

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/725288/The_future_relationship_between_the_United_Kingdom_and_the_European_Union.pdf





Services Directive (EU) 2010/13, which is provided in the Background section of this report. The Minister will write in due course to indicate its voting intention with regards to the final proposal.

6.13 We thank the Ministers for their regular updates regarding the progress of the proposed reforms to the Audiovisual Media Services Directive. We note that the introduction of optional local levies for video-on-demand and linear broadcasts is contrary to the UK negotiating position, as is the extension of the definition of video-sharing platforms to include social media and live-streaming services, although the Government’s domestic policy on regulating digital platforms has evolved so considerably during negotiations that this aspect of the text now appears to align with the UK’s Digital Charter. We also note that the Government has succeeded in protecting the core effects of the Country-of-Origin Principle—which allows broadcasters licensed in one EU Member State to broadcast to all other EU Member States—against initial suggestions from some Member States that it should be replaced with a Country-of-Destination approach. In the event of a negotiated exit, UK-based broadcasters will continue to benefit from this mechanism, which has enabled the growing dominance of the UK broadcasting sector within Europe, during the implementation period provided for in the draft Withdrawal Agreement.

6.14 In the event of a non-negotiated exit, the cross-border market access provided by the current AVMSD would fall away on March 29 2019, when broadcasting licences issued by Ofcom in the UK would cease to be valid in the EU27. International broadcasters based in the UK would no longer be able to rely on the Country-of-Origin principle to broadcast to the European market. Unilaterally retaining current EU regulatory arrangements in UK law will not provide any cross-border market access, as this aspect of the EU regime is inherently reciprocal.

6.15 In this scenario, there are two means by which international channels based in the UK could continue to access the EU market:

• The legal default is that UK firms would retain a degree of market access through the UK’s status as a signatory of the Council of Europe’s European Convention on Trans-Frontier Television (CTT). This would mean that UK works would continue to be classified as European Works, and would retain nominal Country-of-Origin access to the European market for linear (but not on-demand) broadcasters. However, the access provided by the CTT is limited in a number of respects: it completely excludes on-demand broadcasting, which is the highest growth area of the broadcasting sector and represents the future of broadcasting; Article 16 of the CTT grants countries an exception to the Country-of-Origin principle for advertising content, significantly limiting its value for most linear broadcasters, who rely on advertising to monetise their content; several EU Member States (Denmark, Greece, Ireland, Luxembourg, the Netherlands and Sweden) are not signatories to the CTT; and it does not contain a functional enforcement mechanism. On this basis, COBA has indicated that it is of limited use to most UK-based international broadcasters, with the exception of “Russian propaganda channels”.62 We

62 House of Commons Exiting the European Union Committee, Oral evidence: The progress of the UK’s negotiations on EU withdrawal, Q2331 (24 July 2018).



conclude that the CTT is a very deficient substitute for the current intra-EU regime and would represent a serious curtailment of market access for most UK-based international channels.

• Alternatively, UK-based international broadcasters could seek to participate in the EU’s internal regime by securing a licence within the terms of the Audiovisual Media Services Directive (AVMSD), either by establishing a headquarters in the EU (which would have repercussions for the extent of their presence in the UK), or relocating a substantial proportion of their senior editorial staff to an EU Member State (which would normally involve them relocating a proportion of other supporting business functions as well). While there are indications that this is the route that international broadcasters are taking,63 the scale of the impact is difficult to predict, as it will depend both on the extent to which broadcasters are able to accommodate having a proportion of their editorial activity in another country, as well as the impact that these relocations will have on other parts of the broadcasting sector.

• There is also a provision in the AVMSD whereby, if an international broadcaster has no presence at all in the EU, then it could qualify for a licence through the use of uplink satellite services. While this may provide a solution for very small channels with a presence in the UK, it is unlikely to provide a solution for larger companies which typically also have a presence elsewhere in the EU. Moreover, if large companies based in the UK were to seek to use uplink services to retain preferential access to the EU market, in a way that is not currently the case, political pressure would arise from EU Member States to change the provision.

6.16 We note that the Government’s White Paper “The future relationship between the United Kingdom and the European Union” states that the Government no longer seeks to remain a part of the EU Single Market as a whole or of the Digital Single Market in particular, and in consequence accepts that participation in the EU’s Country-of-Origin regime for broadcasting will not be possible. Without taking a view on the merits of this position, we consider it to be consistent, given that broadcasting is excluded from EU preferential trade agreements due to the ‘cultural exception’,64 the only notable exception to this being the EEA Agreement which entails participation in the EU Single Market and acceptance of all of the obligations that this entails.

6.17 We ask the Government to provide us with a summary of its voting intention in relation to the proposed Directive in advance of the forthcoming vote in ECYS Council in November, as well as a more detailed account of the overall effects of the amendments to the AVMSD by the proposed Directive. In the meantime, we retain this document under scrutiny.

63 House of Commons Exiting the European Union Committee, Oral evidence: The progress of the UK’s negotiations on EU withdrawal, Q2379 (24 July 2018). See also: Bloomberg, “Brexit Limbo Leads London Broadcasters to Size Up Amsterdam Digs” (8 August 2017).

64 The only exceptions to this are very limited, relating to (for example) Korean anime. See House of Lords EU Internal Market Committee, Corrected oral evidence: Brexit: Future Trade between the UK and the EU, Q48 (3 November 2016). For an explanation of the cultural exception, see Wikipedia, Cultural exception.


https://www.bloomberg.com/news/articles/2017-08-08/brexit-limbo-leads-london-broadcasters-to-size-up-amsterdam-digs

http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/eu-internal-market-subcommittee/brexit-future-trade-between-the-uk-and-the-eu-in-services/oral/43076.html

http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/eu-internal-market-subcommittee/brexit-future-trade-between-the-uk-and-the-eu-in-services/oral/43076.html

https://en.wikipedia.org/wiki/Cultural_exception



Proposal for a Directive amending Directive 2010/13/EU concerning the provision of audiovisual media services in view of changing market realities: (37812), 9479/16 + ADDs 1–4, COM(16) 287

Background

6.18 The revision of the AVMSD, initiated by the European Commission as part of its Digital Single Market Strategy on 25 May 2016, has aimed to bring the Directive in line with the new media landscapes and shifting market realities. The newly introduced and amended regulatory provisions have been designed to level the playing field for all audiovisual media services: traditional linear services, video-on-demand and, for the first time, also video-sharing platforms.

6.19 The revised AVMSD focuses on reinforcing the protection of minors and combating hate speech and public provocation to commit terrorist offences in all audiovisual content. The new rules also place an emphasis on promoting production and distribution of European works; strengthening the Country of Origin principle; allowing more flexibility in television advertising; permitting levies for video-on-demand and linear services in the country of operation; and guaranteeing the independence of audiovisual regulators.

6.20 Government officials have provided the following informal summary of the effects of the revisions to the existing AVMSD:

• Strengthened Country-of-Origin Principle with more clarity on which Member State’s rules apply in each case, and possibilities for derogations in the event of public security concerns and serious risks to public health.

• Better protection of minors against harmful content, whether on TV or video-on-demand services. The new rules also envisage that video-sharing platforms put appropriate measures in place to protect minors.

• European audiovisual rules extended to video-sharing platforms. The Commission’s initial proposal envisaged limited scope, but the final deal extended to user-generated videos shared on platforms when providing audiovisual content is an essential functionality of the service, including social media that meets that definition.

• Stronger rules against hate speech and public provocation to commit terrorist offences that prohibit incitement to violence or hatred and provocation to commit terrorist offences in audiovisual media services. The rules will also apply to video-sharing platforms to protect people from incitement to violence or hatred and content constituting criminal offences.

• Promoting European works in on-demand catalogues with at least 30% share of European content.

• More flexibility in television advertising. The revised rules give broadcasters more flexibility as to when ads can be shown–the overall limit of 20% of



broadcasting time is maintained between 6:00 to 18:00. Instead of the current 12 minutes per hour, broadcasters can choose more freely when to show ads throughout the day.

• Independence of audiovisual regulators will be reinforced in EU law by ensuring that they are legally distinct and functionally independent from the government and any other public or private body.

• Permits levies for video-on-demand and linear services to be imposed on media service providers established in the country of operation, or in another Member State where the service is targeted towards its territory. This would allow Member States to require these services to contribute financially towards national film funds in the country of operation.

6.21 The Government is currently assessing the proposals in greater detail and will write more formally in due course.


First Report HC 301–i (2017–19) chapter 10, (13 November 2017); Fortieth Report 71–xxxvii (2016–17), chapter 10 (25 April 2017), Thirty-third Report 71–xxxi (2016–17), chapter 5 (1 March 2017), Nineteenth Report 71–xvii (2016–17), chapter 4 (23 November 2016), Seventh Report 71–v (2016–17), chapter 7 (6 July 2016).

https://publications.parliament.uk/pa/cm201617/cmselect/cmeuleg/71-xxxvii/7113.htm

https://www.publications.parliament.uk/pa/cm201617/cmselect/cmeuleg/71-xxxi/7108.htm

https://www.publications.parliament.uk/pa/cm201617/cmselect/cmeuleg/71-xvii/7107.htm

https://www.publications.parliament.uk/pa/cm201617/cmselect/cmeuleg/71-v/7110.htm


7 Reduction in the impact of single-use plastic items


Committee’s decision Not cleared from scrutiny; further information requested; drawn to the attention of the Environmental Audit Committee

Document details Proposal for a Directive of the European Parliament and of the Council on the reduction of the impact of certain plastic products on the environment

Legal base Article 192(1) TFEU; Ordinary legislative procedure; QMV

Department Environment, Food and Rural Affairs



7.1 Marine litter is a growing scourge, which the Commission seeks to tackle in this proposal through the prevention and reduction of litter from single-use plastic items—such as food containers and cups—and fishing gear containing plastic. The proposal derives from the Commission’s earlier Plastics Strategy.65

7.2 The proposal lays down definitions of single-use plastic products,66 fishing gear and the definition of the term ‘producer’ for the purposes of establishing consumption reduction measures, product requirements and extended producer responsibility. The term ‘single-use plastic product’ has not previously been defined.

7.3 In brief, the proposal includes the following actions:

• Member States to take the necessary measures to achieve a significant reduction in the consumption of food containers and cups for beverages that are single-use plastic products;

• restrictions on the placing on the market of certain single-use plastic products for which alternatives exist on the market—cotton bud sticks, cutlery, plates, stirrers, straws and sticks for balloons;

• product design requirements for beverage containers that are single-use plastic products, to ensure that their caps and lids with a significant part made of plastic remain attached to the container during its use stage so that such waste does not leak into the environment;

65 Communication from the Commission, “A European Strategy for Plastics in a Circular Economy”, COM(18) 28.66 The Commission defines a single-use plastic product as “a product that is made wholly or partly from plastic

and that is not conceived, designed or placed on the market to accomplish, within its life span, multiple trips or rotations by being returned to the producer for refill or reused for the same purpose for which it was conceived”.



• marking requirements for balloons, wet wipes and sanitary towels to ensure that they are properly disposed of by consumers;

• extended producer responsibility schemes for fishing gear containing plastic and certain single-use plastic products—including producers’ financial responsibility for awareness-raising campaigns and, in the case of single-use plastics, also the clean-up of litter;

• Member States to achieve a minimum separate collection target for single-use plastic beverage bottles; and

• Member States to take measures to raise awareness about the impact of littering and inappropriate disposal of waste on the environment, in particular, the aquatic environment and about the available re-use and waste management options.

7.4 The Parliamentary Under Secretary of State (David Rutley) says in his Explanatory Memorandum that the actions listed in the proposal are “broadly consistent” with Government policy, although the range of product groups may differ with certain articles. He explains that work is already underway in England on a number of items covered within the proposal. For example:

• restrictions on the placing on the market of single-use plastics with readily available alternatives (i.e. straws, cotton bud and plastic stirrers);

• awareness-raising measures and extended producer responsibility schemes for all items not falling under the market restriction measure, in order to contribute to the cost of prevention, waste management, including clean-up of litter, excluding fishing gear;

• labelling requirements to inform consumers about appropriate waste disposal operations or disposal means to be avoided (i.e. for wet wipes);

• separate collection schemes, such as deposit return schemes, to improve collection rates; and

• product design measures.

7.5 The Minister goes on to note that the Treasury (HMT) issued a call for evidence67 on tackling the waste from single-use plastics through changes to the tax system or the introduction of new charges. This included an opening question with a view to defining single-use plastics. The Minister notes that a final definition may differ from the EU’s proposed definition for single-use plastic products.

7.6 The Minister reports that the Scottish Government is working on options for a deposit return scheme. The Scottish Government also has a range of other measures under consideration, or coming into force, to address some of the proposals, including consulting on banning plastic-stemmed cotton buds and establishing an expert panel to consider how fiscal and other measures can change throwaway behaviours.

67 “Tackling the plastic problem: Using the tax system or charges to address single-use plastic waste”, HM Treasury, March 2018.

http://europeanmemoranda.cabinetoffice.gov.uk/files/2018/06/EM_9465-18_signed_version.pdf


https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/690293/PU2154_Call_for_evidence_plastics_web.pdf


7.7 The Government is still in the process of considering the impact of the proposal on the UK and will work with relevant stakeholders both inside and outside of Government to gather their thoughts and will continue to work with the Commission to support the delivery of the Plastics Strategy and the development of the UK’s own Resources and Waste Strategy later in 2018.

7.8 Internationally, the UK is currently working with Contracting Parties of The Convention for the Protection of the Marine Environment of the North-East Atlantic (OSPAR) to reduce marine litter. As part of this work, options to address the issue of waste items from the fishing industry and aquaculture are being considered. The UK is also continuing to engage with the Global Ghost Gear Initiative to address the issue of lost and abandoned fishing gear. The Scottish Government is similarly supportive of the Initiative and also supports the Fishing for Litter Scheme,68 which has landed 1219 tonnes since 2005, with over 300 Scottish vessels in 18 ports involved.

7.9 Finally, the Minister agrees with the Commission that the broad objective to prevent and reduce plastic marine litter from single use plastic items and fishing gear containing plastic requires collaboration beyond national borders.

7.10 As the proposal must be transposed into national law two years after its entry into force, it is highly unlikely that the deadline will fall within the post-Brexit implementation period due to end on 31 December 2020. Since the Minister’s EM, however, the Government has published a White Paper on the future relationship between the UK and the EU. This proposes a “common rulebook” on manufactured goods, whereby the UK will apply EU rules in order to ensure a free trade area in goods. It is unclear whether this legislation—or elements within it—would fall within the common rulebook.

7.11 We note that the Commission’s proposal is largely aligned with the direction of travel in the UK. Looking at the details, the differences between the EU’s proposal and the UK’s emerging approaches are slight, but they nevertheless exist. This may be significant in view of recent EU exit developments.

7.12 The Government’s White Paper on the future relationship between the EU and the UK advocated a free trade area in goods whereby the UK would continue to apply relevant EU rules. We note that the Commission’s proposal relates to the trade in manufactured goods insofar as it effectively restricts, and places conditions on, the trade of certain plastic products. It would be helpful if the Minister could indicate whether it would anticipate that some, or all, of this legislation would form part of the envisaged common rulebook.

7.13 We note that, at the time of the Minister’s EM, the Government’s analysis was at an early stage. We would welcome an update on the Government’s position and an update on any progress in the negotiations. We look forward to a response to this Report within three working weeks. The document remains under scrutiny and is drawn to the attention of the Environmental Audit Committee.

Full details of the documents: Proposal for a Directive of the European Parliament and of the Council on the reduction of the impact of certain plastic products on the environment: (39794), 9465/18 + ADDs 1–7, COM(18) 340.

68 Fishing for Litter is a collaborative project coordinated by KIMO International.


http://www.kimointernational.org/fishing-for-litter/



None.


8 EU Programme for the Environment and Climate Action


Committee’s decision Not cleared from scrutiny; further information requested; drawn to the attention of the Environment Food and Rural Affairs Committee, Environmental Audit Committee and the Business, Energy and Industrial Strategy Committee

Document details Proposal for a Regulation of the European Parliament and of the Council establishing a Programme for the Environment and Climate Action (LIFE) and repealing Regulation (EU) No 1293/2013

Legal base Article 192 TFEU, Ordinary legislative procedure, QMV




8.1 The Commission proposes a revised LIFE programme for the period 2021–27. LIFE is the EU funding programme for environment and climate action. It aims to contribute to the implementation, updating and development of EU environmental and climate policy and legislation. It covers approximately 0.3% of the current EU budget and targets projects which fall between EU programmes supporting research and innovation and those financing large scale deployment. The current LIFE programme runs from 2014–2020 with a budget of €3.4 billion (£3 billion).

8.2 The new programme has a budget of €5.45 billion (£4.83 billion), split between environment projects (64%) and climate action projects (36%). The targets of the environmental projects should be nature, biodiversity and the circular economy and the targets of the climate action projects should be climate change adaptation and mitigation and the transition to clean energy. The creation of the clean energy sub-programme is an innovation, supporting the development of first-of-a-kind clean energy technologies. This previously fell under Horizon 2020, the research funding programme.

8.3 Another innovation of the revised programme is the intention to increase the scope and volume of strategic integrated projects to implement large territorial scale (regional, multiregional, national or transnational scale) environmental or climatic plans or strategies required by specific EU legislation.

8.4 Since the programme’s launch in 1992, a total of 244 projects have been co-financed in the UK. Of these, 162 have focussed on environmental innovation, 68 on nature conservation and biodiversity, eight on information and communication and four on NGO operating grants. The financed projects represent a total investment of €570 million



(£505 million), of which €262 million (£232 million) has been contributed by the EU. Further information on UK projects supported by LIFE is available in the UK “Country Factsheet“.69

8.5 The Parliamentary Under Secretary of State (David Rutley) says in his Explanatory Memorandum70 that the LIFE programme continues to be open to association with third countries within certain parameters. Third countries, he explains, can officially associate in accordance with the conditions laid down in a specific agreement, which must provide for a financial contribution ensuring “a fair balance” as regards the contributions and benefits. The agreement must not confer to the third country a decisional power on the programme and it must guarantee the rights of the Union to ensure sound financial management. This means that the European Anti-Fraud Office and the European Court of Auditors would have oversight. Examples of projects in which third countries might engage include those tackling transboundary species, such as migratory birds, and projects targeting environmental efficiency within the product lifecycle.

8.6 The Minister adds that any domestic replacement for LIFE after the UK leaves the EU is being considered within the wider context of environmental funding.

8.7 We note that the Minister opens the door to UK participation in this programme in the future. We would welcome the following information:

• the criteria that will be used to make the assessment as to whether the UK should participate; and

• the criteria that would be used to assess any financial contribution that the UK might make.

8.8 We would also welcome an analysis of the proposal identifying specific examples of initiatives which might be helpful to the UK, including assessment of the desirability of engaging in projects under the new clean energy sub-programme.

8.9 We note that third country participation is provided for in the draft Regulation subject to conclusion of a specific agreement to that effect. We note too that the agreement must not confer on the third country a decisional power and it must guarantee the rights of the EU to ensure sound financial management and to protect its financial interests. To that end, the European Court of Auditors and the European Anti-Fraud Office would have oversight. We would welcome clarification as to whether the UK would be content with all of the conditions of third country participation.

8.10 The proposal remains under scrutiny. We draw it to the attention of the Environment, Food and Rural Affairs Committee, Environmental Audit Committee and the Business, Energy and Industrial Strategy Committee.

69 LIFE Programme, United Kingdom Country Factsheet, European Commission. 70 Explanatory Memorandum from the Department for Business, Energy and Industrial Strategy, dated 14 June

2018.

http://ec.europa.eu/environment/life/countries/documents/uk_en_mar17.pdf

http://ec.europa.eu/environment/life/countries/documents/uk_en_mar17.pdf





Proposal for a Regulation of the European Parliament and of the Council establishing a Programme for the Environment and Climate Action (LIFE) and repealing Regulation (EU) No 1293/2013: (39829), 9651/18 + ADDs 1–3, COM(18) 385.


None.



9 Consultation on 2019 fishing opportunities


Committee’s decision Not cleared from scrutiny; further information requested; drawn to the attention of the Environment, Food and Rural Affairs Committee

Document details Commission Communication on the State of Play of the Common Fisheries Policy and Consultation on the Fishing Opportunities for 2019

Legal base —


Document Number (39946), 9635/18 + ADD 1, COM(18) 452


9.1 Each year, the European Commission sets out its assessment of the state of the EU’s fish stocks and its intended approach to setting fishing opportunities—Total Allowable Catches (TACs)—for the following year. This document presents the Commission’s latest assessment and its intentions for the 2019 TACs.

9.2 The December Fisheries Council, at which the TACs will be agreed, will be the UK’s last as an EU Member State. Under the terms of the proposed post-Brexit implementation period, the 2019 TACs will apply to the UK for the whole year, including after exit from the EU on 29 March 2019. As the Commission notes, however, these provisions are subject to formal approval of the Withdrawal Agreement in its entirety by both the EU and the UK and until such time there is no legal certainty about their implementation.

9.3 The European Commission presents a positive assessment of progress towards the core objective of the Common Fisheries Policy—i.e. to align fishing pressure as soon as possible, and by 2020 at the latest, to the objective of restoring and maintaining stocks to levels that can produce maximum sustainable yield (MSY). While significant progress has been made in the North East Atlantic, for example, there remain serious challenges in the Mediterranean and Black Seas.

9.4 As regards the adoption of new management approaches, the Commission draws attention to the adoption of the Baltic Sea and North Sea Multiannual Plans (MAPs) and notes that two others have been proposed. The Commission also highlights the positive role of regionalisation with regard to the phasing-in of the landing obligation (discard ban), with joint recommendations from Member States feeding into discard plans.

9.5 The Commission summarises progress towards implementation of the landing obligation, noting that, as of 1 January 2019, the landing obligation will apply to all catches



of species that are subject to catch limits. While the Commission concludes that, so far, the landing obligation has not created any choke situations,71 it recognises that choking is a challenge.

9.6 Looking towards the 2019 TACs, those in the Baltic Sea and North Sea will be set in line with the respective MAPs, which define ranges of mortality to achieve fishing at MSY (FMSY). The setting of TACs will also need to take into account the full implementation of the landing obligation—while maintaining the objective of reaching FMSY by 2020, the Commission recognises the need for some flexibility. All available tools will need to be used to facilitate the full implementation of the landing obligation, and the Commission will also assess whether setting TACs in line with FMSY in 2019 would seriously jeopardise the social and economic sustainability of the fishing fleets involved.

9.7 In his Explanatory Memorandum (EM), the Minister for Agriculture, Fisheries and Food (George Eustice) welcomes the assessment. The Government agrees that TACs should be set in line with MSY as far as possible but emphasises that there will be a need for some exceptions, notably to minimise discards of bycatches from mixed fisheries as the landing obligation comes fully into effect.

9.8 The Government believes that additional measures, beyond those already available, will be required to avoid choke situations once the landing obligation is fully implemented. For that reason, the Government welcomes the Commission indication that there will be flexibility in the management of bycatch TACs to avoid choke situations emerging in economically important target fisheries. The UK will work with the Commission and other Member States to develop workable solutions to choke problems in fisheries that are economically important to the UK.

9.9 For those stocks where data is limited, the Government opposes automatic precautionary cuts and considers that decisions should be informed by all available evidence, including directional trends in fishing mortality, biomass and fishing effort.

9.10 A feature of the consultation this year is that it looks forward to a calendar year during which the UK will withdraw from the European Union. While the EU and UK have agreed in principle that the 2019 TACs should apply to the UK for the whole year, there is no legal certainty until the Withdrawal Agreement has been agreed. We note that, should the EU and the UK fail to conclude a Withdrawal Agreement, the 2019 TACs would apply to the UK only until exit day. We raise two queries in this regard:

• given that any withdrawal agreement will not be in place by the time of the December Council (even if it has been agreed), we ask whether the Government will propose that the regulation on 2019 TACs contain some form of backstop mechanism in case there is no Withdrawal Agreement in place by 29 March 2019; and,

• noting that agreement has yet to be reached, we ask what contingency plans the Government is making to ensure that a sustainable fisheries policy is in place in the UK from 30 March 2019, including TACs for UK vessels?

71 A choke situation could arise in mixed fisheries where a vessel is fishing a target species, but catches small amounts of another species for which the vessel has no quota but would be required to land it under the landing obligation. A lack of such “bycatch” quota could therefore restrict the harvesting of the target species.

http://europeanmemoranda.cabinetoffice.gov.uk/files/2018/07/18_07_09_EM_9635-18_final_version.pdf


9.11 Regardless of EU withdrawal, the setting of TACs for 2019 will be particularly challenging due to the full implementation of the landing obligation, as the Minister sets out clearly in his EM. We welcome the Minister’s commitment to finding management solutions that avoid potential choke situations.

9.12 We note that it was the Government’s intention to provide the Commission with written comments in response to the consultation by 1 September. We would welcome sight of those comments.

9.13 The document remains under scrutiny. We ask for a response within ten working days and draw this chapter to the attention of the Environment, Food and Rural Affairs Committee.


Commission Communication on the State of Play of the Common Fisheries Policy and Consultation on the Fishing Opportunities for 2019: (39946), 9635/18 + ADD 1, COM(18) 452.


None.



10 Third mobility package: revision of Directive on road infrastructure safety management



Document details Proposal for a Directive of the European Parliament and of the Council amending Directive 2008/96/EC on road infrastructure safety management

Legal base Article 91(1)(c) TFEU; ordinary legislative procedure; QMV

Department Transport

Document Number (39722), 9040/18, COM(18) 274


10.1 The Road Infrastructure Safety Management Directive—Directive 2008/96/EC—was adopted in November 2008. The Directive seeks to ensure that road safety—and its improvement—is considered during the planning, design and operation of road infrastructure. In pursuit of reducing the number of people injured or killed in road accidents, the Directive requires Member States to establish road safety procedures on roads that form part of the trans-European transport network (also known as TEN-T). The four main road safety procedures provided for in the Directive are:

• Road safety impact assessments for infrastructure projects (involving a strategic, comparative, analysis of new roads—or existing roads that are to be substantially altered—on the overall safety performance of the road network);

• Road safety audits for infrastructure projects (requiring an independent, detailed, safety assessment of the design characteristics of road infrastructure projects (at all stages of their development));

• Safety ranking and management of road networks (on sections of the road network that have been in operation for more than three years and on which a large number of fatal accidents—in proportion to the traffic flow of the section in question—have occurred); and

• Road safety inspections (requiring periodic verification of the characteristics and defects that necessitate maintenance work for reasons of road safety).

10.2 In spite of such EU-level action, the Commission is concerned that the total number of road fatalities in Europe is too high and has not fallen as quickly in recent years as it had done previously. The Commission believes that amending the Road Infrastructure Safety Management Directive (the ‘RISM Directive’) will help to reduce the number of serious injuries and deaths on Europe’s roads.


https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32008L0096&from=EN

https://ec.europa.eu/transport/themes/infrastructure_en


10.3 The proposed framework follows the so-called ‘Safe System’ approach which is based on the principle that “human beings can and will continue to make mistakes and that it is a shared responsibility of all involved [in the planning, design and operation of roads] to ensure that road crashes do not lead to serious or fatal injuries”. According to this approach, the safety of all parts of the road system must be improved: roads and roadsides, speeds, vehicles and other road users, so that if one of these elements fail, those involved will be protected by the others.

10.4 The Commission proposes amending the Directive to:

• Improve the follow-up of findings from road infrastructure safety management procedures;

• Facilitate harmonisation and knowledge sharing between Member States (through establishing a system for the exchange of best practice at EU-level and instituting a mandatory reporting exercise);

• Mainstream the protection of vulnerable road users (e.g. young people, cyclists and people with disabilities);

• Improve the deployment of new technologies; and

• Work towards a consistently high level of road safety across Member States using what limited financial resources are available efficiently.

10.5 The main changes proposed in pursuit of these objectives are:

• Mandating transparency and follow-up of infrastructure safety management procedures (by targeted ‘road safety inspections’ or remedial action);

• Introducing a ‘network-wide road assessment’ (a “systematic and proactive risk mapping procedure to assess the ‘in-built’, or inherent, safety of roads across the EU”);

• Extending the scope of the Directive beyond TEN-T to cover motorways and primary roads outside of the core network as well as all roads outside of urban areas built—in whole or in part—using EU funds;

• Setting general performance requirements for road markings and road signs; and

• Making it mandatory to consider vulnerable road users in all road safety procedures.

10.6 The proposal is part of the Commission’s ‘third mobility package’ of legislative initiatives and non-binding actions (which is focussed on ensuring Europe’s future mobility system is “safe, clean and efficient for all EU citizens”). Under the heading ‘safe mobility’, the amended RISM Directive is accompanied by a proposal for the revision of the Vehicle General and Pedestrian Safety Regulation (which will be considered separately). In the context of connected and automated mobility, there is considerable crossover between both proposals, in particular, where vehicle technology relies on road infrastructure (e.g. where road markings are required to support vehicle lane assistance-keeping systems).

https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32009R0661&from=EN



10.7 In his Explanatory Memorandum of 26 June 2018, the Parliamentary Under Secretary of State for the Department of Transport, Jesse Norman, outlines the potential legal and policy implications of the proposed revision of the RISM Directive. With regard to transparency and follow-up of road safety management procedures, the Minister cites his Department’s ‘Road Safety Statement’ and subsequent progress report—it would appear—in support of the assessment that UK policy is broadly similar to that being proposed at EU-level. The Minster explains that a forthcoming, ‘refreshed’, road safety statement will focus on reducing the disproportionately high number of road casualties from vulnerable groups (listed as young people, motorcyclists and older road users). Again, the Minister appears to suggest that UK policy in this area is in line with the changes proposed to the Directive.

10.8 The Minister discusses the Commission’s proposal to set general road performance requirements for road markings and road signs at some length. He raises concerns that the specifics of the proposal—that road markings should be readable by automated vehicles for navigation purposes—could prove costly for local authorities and be damaging to streetscapes. We recognise the Minister’s concern, in particular, when read against the Commission’s Explanatory Memorandum:

… opinions diverge as to whether the physical infrastructure needs to be adapted to suit the needs of vehicles with a high degree of automation or whether vehicles need to be developed so they can adapt to the existing infrastructure. The Commission concluded that a certain degree of harmonisation of the physical infrastructure will be needed to allow a smooth roll-out of higher levels of automation and to ensure that automated vehicles operate safely in mixed traffic.

10.9 We would, however, direct the Minister to proposed new Article 6(c) of the Directive. Subsection two charges the Commission with developing “general performance requirements to facilitate the recognition of road markings and road signs [author’s own emphasis]”. As opposed to ‘minimum performance requirements’, requirements that are of a general nature can be understood as being less onerous and affording Member States greater discretion in determining how, in this case, road markings or road signs—or a combination thereof—would be designed and implemented in order to aid driver assistance systems and/or support vehicles with higher degrees of automation.

10.10 This reading finds support in the annexed Impact Assessment, with the Commission describing ‘policy option 2’ (the chosen regulatory approach for the revision of the Directive) as allowing for “the choice of appropriate technical solutions… [to] remain with Member States, with EU legislation setting general performance requirements to support the smooth roll-out of CCAM [cooperative, connected and automated mobility]…”.

10.11 The Minister suggests that the plan to extend the scope of the Directive to include roads outside of TEN-T is not expected to have a significant impact on the UK’s strategic road networks. This is because following the implementation of the Directive in 2008, the Department for Transport chose to treat a number of non-qualifying roads as part of TEN-T for the purposes of the Directive. We note, however, the Minister’s desire to further scrutinise the Commission’s proposal in order to more fully understand which additional roads will be included under the purview of the Directive (and where, if required, further domestic provision will have to be made).

http://europeanmemoranda.cabinetoffice.gov.uk/files/2018/06/EM_-_EU_Mobility_Package_III_Proposals_(Safe_Mobility)2.pdf



10.12 We thank the Minister for his Explanatory Memorandum and summary of the potential implications of the proposed revision to the RISM Directive. In the absence of significant, unexpected, delays, the proposed amendments to the Directive are likely to come into effect during the post-exit implementation period. We appreciate that the proposal is at an early stage in its development and that more information on its final form will come to light as it is discussed in working groups. With a view to these negotiations, we seek the Government’s views on:

• Whether changes will have to be made to UK infrastructure management procedures in light of the Commission’s proposals, and in particular, the requirement for road safety impact assessments to be undertaken. Furthermore, we request information on which domestic agency will be charged with overseeing the proposed road safety procedures and an assessment of the potential costs associated with instituting these measures (e.g. the training and certification of road safety auditors); and

• Whether the delegation of power to the Commission under new Article 12a is sufficiently clear in its objectives, content, scope and duration.

10.13 As negotiations on the revision of the Directive progress, we request that the Government keep the Committee informed of developments on the proposal to set general road performance requirements for road markings and road signs. We are especially interested to hear whether other Member States share the Government’s concerns that regulation in this area would introduce additional costs associated with compliance and be damaging to road-side aesthetics.

10.14 We retain the proposal under scrutiny and ask the Government to provide the requested information in good time before the December Transport Council.


(39722), COM(18) 274.


11 Third mobility package: Proposal for a Regulation on streamlining the trans-European transport network

Committee’s assessment Legally and politically important


Document details Proposal for a Regulation of the European Parliament and of the Council on streamlining measures for advancing the realisation of the trans-European transport network

Legal base Article 172 TFEU; ordinary legislative procedure; QMV




11.1 The trans-European transport network (known as ‘TEN-T’) is a Union-level policy aimed at the development of a Europe-wide network of roads, railway lines, inland waterways, maritime shipping routes, ports, airports and rail-road terminals. The origins of the policy can be traced to the early 1990s (‘guidelines’ on the connection of national transport routes were first published in 1996). The policy framework around which TEN-T is based has since been developed to cover funding for transport infrastructure projects (including the dedicated ‘Connecting Europe Facility’ for Transport), EU-level governance structures, binding rules, a stronger legal form (by way of a Regulation) and innovations aimed at creating a genuine European transport network.

11.2 Infrastructure projects on TEN-T are managed at EU-level with national transport ministries—or a combination for cross-border projects—responsible for their delivery (e.g. at the stages of planning, national authorisations and construction). Projects on TEN-T can include the development of new infrastructure and upgrades to existing networks.

11.3 The trans-European transport network is comprised of two layers: (1) the ‘Comprehensive Network’ (covering all European regions); and (2) the ‘Core Network’ (covering the most important connections within the Comprehensive Network). The ultimate objective of TEN-T is to close gaps, remove bottlenecks and eliminate technical barriers that exist between the national transport networks of Member States. The completion of TEN-T—including both the Comprehensive Network and the Core Network —is viewed by the Union as a way of strengthening the social, economic and territorial cohesion of the EU and of contributing towards the creation of a single European transport area.

11.4 The UK hosts one of the nine TEN-T Core Network ‘corridors’. The ‘North-Sea Mediterranean’ corridor stretches from Belfast and the Irish ports of Cork and Dublin, as well as from Glasgow and Edinburgh, through Belgium, with a branch from Amsterdam and Rotterdam via Luxembourg to Strasbourg and Basel and via Lyon to the French


https://ec.europa.eu/inea/en/connecting-europe-facility/cef-transport


southern ports of Fos/Marseilles. It covers rail, road, airports, ports and rail-road terminals, as well as the Dutch-Belgian inland waterway system and the Rhône river. High profile infrastructure projects in the UK—such as ground investigations for HS2 and new underground stations along the Crossrail (Elizabeth) tube line—have receiving funding within the framework of TEN-T.

11.5 The UK leg of the North-Sea Mediterranean corridor is detailed in the map below:

Source: European Commission

11.6 In terms of its overall structure, TEN-T comprises three parts: (1) the common planning of infrastructure (in terms of geographical coverage and technical characteristics); (2) regulatory measures to facilitate investment; and (3) the Connecting Europe Facility as a specific funding instrument for network projects.

11.7 The proposal under consideration is part of the Commission’s ‘third mobility package’ of legislative initiatives and non-binding actions (which is focussed on ensuring Europe’s future mobility system is “safe, clean and efficient for all EU citizens”). The Commission argues that transport infrastructure and, in particular, investment in its development, can contribute significantly towards futureproofing Europe’s mobility system.

11.8 The proposed Regulation aims to reduce delays encountered in the planning of TEN-T infrastructure projects. Commentators have suggested that, at the current rate of progress, the Union’s aim of completing the Core Network and its corridors by 2030 and the Comprehensive Network by 2050 will not be realised. In light of the findings of a recent report,72 the Commission argues that the facilitation of TEN-T projects and, ultimately, the realisation of the Core and Comprehensive networks, would be aided by simplifying a number of administrative procedures.

72 European Commission, “Action Plan: Making the best use of new financial schemes for European transport infrastructure projects (Progress Report)” (January 2018).

http://ec.europa.eu/transport/infrastructure/tentec/tentec-portal/map/maps.html?corridor=8

https://ec.europa.eu/transport/sites/transport/files/cbs2_report_final.pdf

https://ec.europa.eu/transport/sites/transport/files/cbs2_report_final.pdf


11.9 The Commission has identified rules on permit granting, public procurement (for cross-border projects) and state aid as being especially complicated and time consuming for those delivering projects (whether state bodies, private companies or public/private partnerships). In an attempt to simplify the planning process, the proposed Regulation streamlines and simplifies these rules. On projects of common interest to the realisation of the Core Network, the proposed Regulation would require Member States to:

• Assign priority status to TEN-T projects and ensure sufficient resources are made available for regulatory approvals (or clearances);

• Integrate all permit granting procedures into one comprehensive decision;73

• Establish a competent permit granting authority to issue a single, comprehensive, legally binding decision on permission for infrastructure projects within a three-year timescale (this approach is known as providing a ‘one-stop-shop’ for permits); and

• Coordinate relevant processes with the competent authorities of other Member States on cross-border projects.

11.10 The Commission has also proposed minor modifications to EU-level public procurement rules and has sought to clarify state aid rules. For public procurement, Chapter III of the proposed Regulation introduces a requirement that, if procurement procedures are conducted by a joint entity (established by two or more Member States working together on a cross-border infrastructure project), that entity shall apply the national procurement rules of one Member State (in accordance with EU law).74 This is unless an agreement between Member States provides otherwise; however, any such agreement must still be governed by a single set of national procurement rules.

11.11 On state aid, at point (12) in the recital to the Regulation, where approval is required, Member States are reminded that they can make a request for the Commission to manage projects they consider to be a priority for the Core Network. This guidance is said to be in line with the Commission’s Best Practice Code for the conduct of state aid control procedures and, under the case portfolio approach or mutually agreed planning approach, is argued to lead to more predictable timelines.

11.12 In her Explanatory Memorandum of 26 June 2018, Parliamentary Under Secretary of State at the Department of Transport, Baroness Sugg, raises a number of issues concerning the proposed Regulation.

11.13 With regards to whether or not the proposal is proportionate to the perceived problem (of planning delays for TEN-T projects), the Minister suggests that streamlining and simplifying the granting of permits for infrastructure projects—by integrating individual permit granting procedures into one comprehensive decision made by a single competent authority—could not be achieved without changing existing UK processes.

11.14 The Minister argues that such changes would place considerable administrative and financial burdens on central government and local authorities. From the later sections of the Explanatory Memorandum, this view appears to be based upon the suggested 73 Examples of permits include those relating to planning permission and environmental assessments.74 These rules must be determined in accordance with point (a) of Article 57(5) of Directive 2014/25/EU and Article

39(5) of Directive 2014/24/EU.

http://ec.europa.eu/competition/state_aid/reform/best_practise/en.pdf

http://ec.europa.eu/competition/state_aid/reform/best_practise/en.pdf

http://europeanmemoranda.cabinetoffice.gov.uk/files/2018/06/EM_-_EU_Mobility_Package_III.pdf


complexity of the permit granting regime in the UK (in terms of the number of different authorities that are responsible for granting permits and the different timelines to which they operate). Of particular note is the Minister’s suggestion that the proposed permit changes would apply to the “whole of the UK’s strategic transport network”.

11.15 The Minister’s Explanatory Memorandum does not cover the proposed modifications to public procurement rules or the clarification of state aid rules.

11.16 We thank the Minister for her Explanatory Memorandum. We request further information on the following points in good time for the December Transport Council (at which a progress report on the proposed Regulation is expected to be presented):

• Whether the Government believes the Commission has presented sufficient evidence that “overly complex and time consuming permitting rules in Member States” are a significant contributor to delays in the delivery of TEN-T infrastructure projects and, as a consequence, the completion of the Core and Comprehensive networks. We direct attention, in particular, to the view of the Regulatory Scrutiny Board that the Commission’s original Impact Assessment on the proposal “…[did] not give sufficient evidence on how public procurement and permit procedures affect delays in construction”;

• The Government’s view on the first policy option considered by the Commission —of non-binding guidelines on coordinating the work of permit granting authorities and targeted technical assistance—to improve the speed and efficiency of permit-granting. This option is presented in the Commission’s Impact Assessment as an alternative to the establishment of a mandatory one-stop-shop for permits and the integration of administrative procedures in Member States. More specifically, we seek the Government’s view on whether this ‘soft’ law approach would address its concerns regarding the establishment of a one-stop-shop (i.e. that it would place considerable administrative and financial burdens on central government and local authorities);

• The Government’s opinion on whether, in light of the complexity often involved in Core Network projects, the proposed three-year timescale for making a ‘comprehensive decision’ is sufficient;

• The reasoning behind the suggestion in the Minister’s Explanatory Memorandum that the proposed permitting requirements would “apply to the whole of the UK’s strategic transport network”. It is our understanding that, although, since the entry into force of the Road Infrastructure Safety Management Directive in 2010, the Department for Transport has chosen to treat all routes on the UK’s ‘Strategic Road Network’ (SRN) as though they are part of TEN-T, this is a domestic policy choice and not an EU law requirement. As such, the changes to domestic permit- granting processes proposed in the Regulation would only apply to those routes in the UK that form part of TEN-T, not, as the Minister appears to suggest, the entirety of the SRN; and

• The potential legal, political and/or financial implications of the proposed modifications to EU public procurement and state aid rules.




11.17 We appreciate that the proposal under consideration is at an early stage in its development and will likely be amended during forthcoming Council negotiations. With a view to these discussions, we request that, when more information becomes available, the Government write to the Committee outlining:

• How the proposed one-stop-shop approach would function in practice. We seek clarification on whether the single permit-granting authority would perform a coordinating function—drawing together the decisions of separate authorities—or would be involved in and/or responsible for granting individual permits itself; and

• The specific permits—and responsible authorities—that would be brought together under the auspices of the single comprehensive authority.

11.18 Pending the information requested, we retain the proposal under scrutiny.


(39730), 9075/18 + ADDS 1–3, COM(18) 277.


12 Apportionment of the EU’s concessions on Tariff Rate Quotas (WTO) in view of UK withdrawal from the EU

Committee’s assessment Legally and politically important; drawn to the attention of the International Trade Committee, Environment Food and Rural Affairs Committee, and Exiting the EU Committee

Committee’s decision (a) Cleared from scrutiny; further information requested

(b) Not cleared from scrutiny; further information requested

Document details a) Recommendation for a Council Decision authorising the opening of negotiations with a view to apportioning the Union’s WTO concessions on Tariff Rate Quotas annexed to the General Agreement on Tariffs and Trade 1994 in view of the withdrawal of the United Kingdom from the Union; (b) Proposal for a Regulation of the European Parliament and of the Council on the apportionment of tariff rate quotas included in WTO schedule of the Union following the withdrawal of the United Kingdom from the Union and amending Council Regulation (EC) No 32/2000.

Legal base (a) Article 218(3) and (4) TFEU; (b) Article 207(2) TFEU, ordinary legislative procedure, QMV

Department International Trade

Document Number (a) (39734), 8944/18 + ADD 1, COM(18) 311; (b) (39735), 9258/18 + ADD1, COM(18) 312


12.1 EU tariff-rate quotas (TRQs)75 on imports from third countries (in the World Trade Organisation (WTO)) are currently set for the 28 EU Member States as a whole (as one trading bloc). These will need to be split between the EU27 and the UK following the UK’s withdrawal from the EU, i.e. by:

• 29 March 2019—in the event of a ‘no deal’ scenario (where no transitional arrangements are agreed as part of the Withdrawal Agreement); or

• 31 December 2020—the end of the scheduled implementation/transitional period.

75 TRQs determine the volume by which goods can be imported under each tariff band. and are currently set for the EU as a whole.



12.2 The Council Decision authorises the Commission to open negotiations under Article XXVIII GATT 1994 with WTO members on behalf of the EU, with a view to modifying the EU’s existing TRQs to reflect the withdrawal of the UK from the EU.

12.3 The proposed Regulation enables the EU27 to unilaterally apportion the TRQs in the absence of Article XXVIII agreements with all the relevant WTO members before the EU’s WTO schedule of goods ceases to apply to the UK.

12.4 At its meeting on 20 June 2018, the Committee granted the then Minister of State for Trade Policy (Greg Hands) a conditional scrutiny waiver to support the draft Council Decision, valid until the end of the Bulgarian Presidency, on the following basis:

a) the text put before the Council for a vote was in the form indicated by the then Minister of State for Trade Policy (Greg Hands);76

b) the Committee received clarification on the matters identified in its Report chapter of 20 June 2018 within 10 working days; and

c) the Committee was updated expeditiously on any significant developments during the Council decision-making process.

12.5 In his letter of 3 July 2018, the Minister of State for Trade Policy (George Hollingbery) notes that the UK voted in favour of the Council Decision at the Council meeting on 26 June 2018, provides a copy of the final text agreed, and responds to the list of questions raised by the Committee in its Report chapter of 20 June 2018.

Implications of the inclusion and subsequent deletion of the reference to the UK being ‘authorised to undertake the necessary procedures’ to establish its own independent schedule of concessions on goods at the WTO

12.6 At its meeting of 20 June 2018, the Committee noted that the former Minister supported a draft Council Decision which, in its original iteration, referenced the UK being authorised by the EU to undertake the necessary procedures to set out its own WTO goods schedule of concessions and commitments after exit. This provision was subsequently removed in a revised draft, further to advice from the Council Legal Service, which

noted that while in the past Member States have been authorised to negotiate on matters of exclusive EU competence, this was to negotiate in the Union’s interests. In this instance, and as a logical consequence of the UK’s withdrawal from the Union, the UK would be negotiating in its own interest. As a result, the Council Legal Service advised that this reference should be removed from the Council Decision with an Article 218 legal base.

12.7 The Committee asked the then Minister to clarify the implications of this ‘authorisation’ provision.

76 At paragraph 6 of his letter of 12 June 2019.


12.8 In response to the Committee’s questions on whether the Government considers that it was in the UK’s interest that the reference to authorisation was removed, the Minister:

• states that “… the deletion of the authorisation provision does not materially alter the balance of UK interest” to the extent that “…with or without the original authorisation we [the UK] will be able to undertake the necessary procedures in the WTO and to do so with a sufficient degree of independence as an outgoing Member State”; and

• does not believe that retention of the authorisation provision would have set an unhelpful precedent by making it necessary for the UK to obtain prior authorisation from the EU in establishing its own WTO arrangements post exit/end of the transition period as the “…initial draft Council Decision was tailored to circumstances in which the European Commission was seeking a mandate of its own to enter in Article XXVIII GATT negotiations”.

12.9 We consider that the Minister does not sufficiently address the legal question of whether it was necessary under the Treaties to authorise the UK to act, or whether there was in fact no breach of the Treaty duty of sincere co-operation (Article 4 TEU) for the UK to negotiate on its own behalf for TRQ adjustments (which would only come into force once the UK has left). He simply states “…it is clear that the Commission and other EU Member States recognise that the UK needs to press ahead with its own processes, and want and expect us to do so”. We ask the Minister to provide more detail, noting that the final, adopted Council Decision now include references to both the UK and the Commission complying with or respecting the principle of sincere co-operation.

Concerns of agricultural exporters and progress made in agreeing revised schedules

12.10 Although only 4% of tariff lines within the EU goods schedule are TRQs, these import quotas can be politically charged as they tend to cover sensitive food products. At its meeting on 20 July 2018, the Committee sought further information from the then Minister on the specific concerns of the EU’s biggest WTO member agricultural importers in relation to the EU/UK’s approach to apportioning TRQs, what progress had been made in addressing such concerns, and whether the affected WTO Members were likely to seek concessions and/or seek to renegotiate access rights to the EU/UK. In his response of 3 July 2018, the Minister:

• lists the concerns of key WTO agricultural exporters set out in a letter to the UK and EU Ambassadors to the WTO in a letter dated 26 September 2017, which includes a reference to “being no worse off than at present, in terms of both quantity and quality of access” and believing “that a technical rectification approach would not suffice for the UK’s EU Exit transition”;

• notes that discussions to date have focused on the apportionment methodology and data underpinning it. He considers that the UK and EU methodology is


based on the “best available data averaged over a representative three-year reference period” and is “a fair and transparent way to uphold members’ rights”; and

• stresses that “establishing the UK schedules is a technical exercise, not an opportunity for UK commitments or market access to be improved for other WTO members”. He considers that rectification under the WTO’s 1980 Procedures would “maintain the existing rights, commitments and concessions, of the UK and our trading partners”. However, he acknowledges that opening Article XXVIII negotiations on specific UK’s TRQs post-exit is a “second stage move” that “may be necessary to address reservations” of certain WTO members about TRQs where rectification has not been finalised and is a means “to exhaust the legal process”.

12.11 We note that substantial differences between the UK and certain WTO agricultural exporters over their objectives and preferred negotiating approach appear to remain, and that timescales to reach agreement are tight. This is reflected in press reports, which refer to the head of the WTO (Roberto Azevêdo) stating that the UK is very unlikely to secure consensus on its post-Brexit tariff schedules before it exits the EU in March 2019, as other States seek to improve their market access.

12.12 The Minister does not respond to the Committee’s question on whether the Government has undertaken any impact assessment on the UK domestic agricultural sector of potentially increasing preferential market access of products that are currently subject to TRQs. We can only assume that no such analysis has been conducted. However, in view of the lack of agreement between the EU/UK and large WTO agricultural exporters, we consider it prudent that an impact assessment of granting further agricultural market access concessions (over and above that offered by the UK in its proposed approach) is conducted expeditiously. This should be based on a wide ranging and extensive public consultation of UK stakeholders.

Implications for the UK if apportionment is not agreed before EU exit or end of the transition period

12.13 Further to the Committee’s questions on the implications for the UK if the proposed allocation of TRQs between the EU and UK is not agreed by all WTO Members before UK exit/end of the transition period, the Minister:

• reiterates the Government’s intention that notification of UK-specific schedules will be a “technical exercise” through the rectification procedure which “replicate[s] as far as possible our [the UK’s] existing commitments, such as they exist in the EU’s schedule”;

• states that, in the absence of WTO agreement before exit, the UK would “submit and trade under the UK-only rectified schedule” it asserts at the WTO;


• asserts that trading on uncertified schedules is “not uncommon” and points as an example to the EU, which traded on uncertified goods schedules between 2004 and 2016 as a result of the modifications required following the accession of new EU Member States in 2004;

• does not think that trading on uncertified/unagreed UK-only WTO schedules would impact the scope or timing of future UK bilateral trade agreements, and notes that the EU finalised several trade agreements, including the Comprehensive Economic and Trade Agreement with Canada (CETA), whilst trading on uncertified schedules; and

• confirms that WTO members who believe they have suffered loss of market access could withdraw ‘substantially equivalent’ concessions from the UK. Whilst he does not make a specific assessment of the likelihood of this happening, the Minister notes that parties may prefer “to keep talking” rather than withdraw concessions, as these must be applied on a Most-Favoured Nation basis and would therefore worsen trading terms for all WTO members.

12.14 We ask the Minister to provide further information on how investment and business confidence in the UK may be impacted if the schedules are not agreed before UK exit/end of transition period.

Use of TRQs in the future UK-EU relationship

12.15 In response to the question on whether the UK will seek its own post- exit/transition period TRQs with the EU, the Minister states that the UK wants “the broadest and deepest possible partnership with the European Union” which ensures that “UK companies have the maximum freedom to trade with and operate within European markets “. The Minister does “not therefore expect the UK and the EU to use one another’s TRQs.”

12.16 We clear the Council Decision from scrutiny (further to its adoption on 26 June 2018), but:

• await replies to the questions and outstanding issues identified above (which can be provided by the Minister in his next update to the Committee on the progress on the draft Regulation); and

• ask the Minister to keep the Committee updated on the progress of negotiations and the implications for the UK if WTO agreement on post-Brexit tariff schedules is not reached before UK exit.

12.17 We retain the draft Regulation under scrutiny. We note that the Austrian Presidency is aiming to get an informal negotiating mandate of the draft Regulation agreed in COREPER. We remind the Minister that while the Scrutiny Reserve Resolution does not strictly apply to agreement of an informal negotiating mandate in COREPER, the Committee strongly encourages and expects timely updates ahead of any such agreement (as they act as substitutes for general approaches in Ministerial Council).


12.18 We draw the Minister’s update and our conclusions to the International Trade Committee, the Environment Food and Rural Affairs Committee, and the Exiting the EU Committee.


(a) Recommendation for a Council Decision authorising the opening of negotiations with a view to apportioning the Union’s WTO concessions on Tariff Rate Quotas annexed to the General Agreement on Tariffs and Trade 1994 in view of the withdrawal of the United Kingdom from the Union: (39734), COM(18) 311; (b) Proposal for a Regulation of the European Parliament and of the Council on the apportionment of tariff TO schedule of the Union following the withdrawal of the United Kingdom from the Union and amending Council Regulation (EC) No 32/2000: (39735), 2018/0158, COM(18) 312.

Background

12.19 Details of the Recommendation for a Council Decision and the Proposal for a Regulation are set out in the Government’s Explanatory Memorandum and the Committee’s previous Report chapter of 20 June 2018.


Thirty second Report, HC 301–xxxi, chapter 5 (20 June 2018).

http://europeanmemoranda.cabinetoffice.gov.uk/files/2018/05/18.05_.29_DIT_EM_EU_Draft_Council_Decision_regulation_signed_.pdf


13 UK participation in Erasmus post-2020Committee’s assessment Politically important

Committee’s decision Not cleared from scrutiny; further information requested; drawn to the attention of the Education Committee

Document details Proposal for a Regulation establishing ‘Erasmus’: the Union programme for education, training, youth and sport and repealing Regulation (EU) No 1288/2013

Legal base Articles 165(4) and 166(4) TFEU; ordinary legislative procedure; QMV

Department Education

Document Number (39820), 9574/18 + ADDs 1–3; COM(18) 367


13.1 Erasmus is an EU programme designed to support education, training, youth and sporting activities. In its current form (officially known as ‘Erasmus+’), Erasmus provides opportunities for Europeans to study, train, gain experience and volunteer abroad. As well as students, Erasmus is also open to teachers (both qualified and non-qualified), trainees, young people not enrolled in formal educational or vocational training programmes and youth workers. Its main objectives are to contribute towards the realisation of the ‘Europe 2020’ strategy for growth, jobs, social equity and inclusion, and the achievement of the aims of the ‘Education & Training 2020’ framework (the Union’s supporting policy structure for education and training). Erasmus is also designed to support the EU Youth Strategy (which aims, among other things, to ‘provide more and equal opportunities for young people in education and the job market’).

13.2 Each year, Erasmus funds around 16,000 UK-based students to undertake a study trip or work placement abroad and around 2,200 higher education staff to work or train in another Member State or participating country. Providing for these exchanges accounts for roughly 60% of the total Erasmus budget.77 The UK also benefits from inward student and staff mobility from the 32 countries that participate in Erasmus.78 Around 30,000 European students a year attend higher education institutions in the UK through the scheme. It has been estimated that around two thirds of all UK outbound higher education mobility—which lasts for at least one academic term—is undertaken through Erasmus. During the 2016 Erasmus ‘call’, UK students and UK-based projects received mobility grants totalling €47.5 million.79

13.3 Erasmus is currently structured around three ‘key actions’. These key actions cover ‘mobility of individuals’ (supporting mobility of learners and staff; ‘Erasmus Mundus Joint Masters Degrees’; and Erasmus+ masters loans); ‘cooperation for innovation and the exchange of good practices’ (supporting transnational strategic partnerships; knowledge 77 Education Committee, Ninth Report of Session 2016–17, Exiting the EU: challenges and opportunities for higher

education, HC 683, para 53.78 All 28 Member States of the EU participate in Erasmus along with five non-Member States (Norway, Iceland,

Liechtenstein, Turkey and Macedonia).79 The Erasmus Programme, Briefing Paper Number 8326, House of Commons Library, June 2018.



https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52010DC2020&from=EN

http://ec.europa.eu/education/policy/strategic-framework_en



https://publications.parliament.uk/pa/cm201617/cmselect/cmeduc/683/683.pdf

https://publications.parliament.uk/pa/cm201617/cmselect/cmeduc/683/683.pdf


alliances between higher education institutions and enterprises; sector skills alliances; capacity building projects; and IT platforms such as ‘eTwinning’); and ‘support for policy reform’ (supporting knowledge in the fields of education, training and youth; initiatives for policy innovation; support for European policy tools; cooperation with international organisations; and stakeholder dialogue, policy and programme promotion). In addition, outside of the three key actions, academic and research activities are supported under ‘Jean Monnet’ actions and sporting activities under a dedicated ‘Sport’ heading.

13.4 The current budget for Erasmus—for the period 2014–20—is €14.774 billion (£13.091 billion) under Heading 1 of the EU budget (Smart and Inclusive Growth) and €1.680 billion (£1.489 billion) under Heading 4 (Global Europe). In light of its position as one of the most visible and, arguably, successful Union programmes, total funding for Erasmus equates to 1.5% of planned EU expenditure for the period 2014–20.80 This compares to 0.15% for ‘Creative Europe’ (the Union’s flagship programme for investment in the creative and cultural industries of Member States).81

13.5 Stakeholder evidence provided to the Education Committee inquiry ‘Exiting the EU: challenges and opportunities for higher education’ was close to unanimous in its support for Erasmus. Stakeholder submissions suggested that Erasmus adds to the skills and career prospects of students, improves the international reputation of participating universities and strengthens alumni networks and cooperation between institutional partners. A recent policy briefing by Universities UK—an advocacy organisation representing UK universities —argued Erasmus+ “not only boosts UK soft power at a global level and strengthens graduate skills… [but] also improves student attainment and leads to better outcomes for those who… [go] abroad”.82 Improved outcomes were said to be particularly pronounced for black and minority ethnic students and students from disadvantaged backgrounds.

13.6 In May 2018, as part of ongoing negotiations on the EU’s long-term budget for the period 2021–27 (known as the ‘Multiannual Financial Framework’ (MFF)), the European Commission tabled a proposal for the next iteration of Erasmus. The Commission has proposed to streamline the structure of Erasmus by bringing youth and sport within the framework of existing key actions, developing synergies with wider EU-level programmes (such as the European Structural and Investment Funds), and almost doubling the budget of the programme to €30 billion (£26.582 billion). Similar EU monitoring and audit procedures would continue to apply.

13.7 The proposal is set in the context of the Rome Declaration of 25 March 2017 and the Social Summit in Gothenburg of 17 November 2017. Drawing on the conclusions of both, in its Communication of 14 February 2018, the Commission suggested the need for the Union budget to be utilised to increase mobility and exchanges, in particular, through a substantially strengthened, inclusive and extended Erasmus programme. The proposed refinements to the programme and increase in its budget are justified in the pursuit of ‘sustainable growth, jobs and social cohesion and… [strengthened] European identity’. The next iteration of Erasmus is viewed by the Commission as a key component of Union efforts towards the creation of a ‘European Education Area’.80 As a percentage of commitment appropriations under Headings 1 and 4 of the EU budget for 2014–20 by total

budget appropriations over the same period (€1.087 trillion in 2019 prices).81 The proposal for the next iteration of Creative Europe was considered in the 28th Committee Meeting of the

European Scrutiny Committee of Session 2017–19.82 Universities UK, “Parliamentary briefing: Backbench business debate on Erasmus+” (June 2018) p 1.


https://ec.europa.eu/commission/sites/beta-political/files/communication-new-modern-multiannual-financial-framework_en.pdf

https://publications.parliament.uk/pa/cm201719/cmselect/cmeuleg/301-xxxii/30105.htm

https://publications.parliament.uk/pa/cm201719/cmselect/cmeuleg/301-xxxii/30105.htm

https://www.universitiesuk.ac.uk/policy-and-analysis/reports/Documents/2018/uuk-parliamentary-briefing-erasmus-backbench-debate-june-2018.pdf


13.8 The 2021–27 programme would—like the current programme—be structured around three key actions. The Commission proposes to rename and make minor alterations to the key actions, for example, ‘learning mobility for individuals’ in Erasmus+’ would be renamed ‘learning mobility in education, training, youth and sport’ and new features such as mobility for school pupils would be introduced (Erasmus+ currently provides only for exchange opportunities for school staff). Under the current proposal, ‘sport’ would be brought under the key action structure (meaning that only the Jean Monnet actions would sit outside of the key action framework).

13.9 Other, minor, changes under the proposal include:

• Introducing a simpler name—’Erasmus’;

• Focussing on cooperation and exchanges beyond the EU/Europe, disadvantaged/’hard-to-reach’ students, digital skills, and innovation and forward-looking projects;

• Introducing simpler procedures for small organisations; and

• Discontinuing the ‘Masters Loan Guarantee Facility’.83

13.10 In budgetary terms, the Commission has suggested a financial envelope for the next programme of €30 billion (£26.582 billion). The proposed top line indicative distribution is:

• €24.940 billion (£19.580 billion) for actions in the field of education and training;84

• €3.100 billion (£2.747 billion) for actions in the field of youth (including actions to support learning mobility, and policy development and cooperation);

• €550 million (£487.326 million) for actions in the field of sport (including actions to support learning mobility, and policy development and cooperation); and

• €960 million (£850.608 million) as a contribution to the operational costs of national agencies.

13.11 The governance structure of Erasmus would remain largely unchanged with national agencies responsible for managing the majority of allocated programme funds. The Commission would retain responsibility for direct management functions such as setting the requirements for national agency work programmes, making funds available to national agencies and assessing yearly management declarations.

13.12 As with the current programme, the Commission proposal contains a mechanism which would allow ‘third countries’—i.e. non-EU Member States—to seek ‘association’ to the programme.85 Unlike in its current iteration, association to Erasmus would not

83 The Commission justify the discontinuation of the Masters Loan Guarantee Facility on the basis of stakeholder consultations—cited in the proposal—which suggested it is of limited added value.

84 Split as: €8.640 billion for student and staff mobility exchanges, and partnerships for cooperation amongst organisations and institutions; €5.230 billion for the mobility of vocational education and training learners and staff, and partnerships for cooperation amongst organisations and institutions; €3.790 billion for the mobility of school pupils and staff, and partnerships for cooperation amongst organisations and institutions; €1.190 billion for the mobility of adult education staff, and partnerships for cooperation amongst organisations and institutions; and €450 million for the Jean Monnet actions.

85 Under the current Regulation, third association is provided for under Article 24 (‘Country participation’).


be limited to ‘programme countries’—i.e. EU Member States, association or candidate countries, EEA members, EU Neighbourhood Policy countries and Switzerland—but would be open to any country on the basis of a bilateral agreement. Given that such agreements will be reached between the Union and non-Member States, in place of an agreement on free movement, specific provision will have to be made for the mobility of individuals and organisations.

13.13 Association would be conditional on third countries fulfilling all conditions imposed by the proposed Regulation (as is required of EU Member States). Third country participation would be dependent on a “fair balance” between financial contributions and benefits—of all or parts of the programme—and adherence to the rules applicable to direct and indirect management of the programme, in particular, which entities may apply for funding and who may promote experts to the programme evaluation committee. In line with the current programme, the future programme would not confer ‘decisional power’ on third countries, meaning that, in effect, third countries would have only indirect influence over such decisions. Furthermore, in accordance with Article 16(1)(d) of the proposed Regulation, third country participation would be dependent on accepting the autonomy of the Union to “ensure sound financial management and to protect its financial interests”. This point is developed further under Article 28 of the proposal, which requires third countries:

“[Grant] the necessary rights and access required for the… European Anti-Fraud Office (OLAF)… [and] the European Court of Auditors to comprehensively exert their respective competences. In the case of the European Anti-Fraud Office, such rights shall include the right to carry out investigations, including on-the-spot checks and inspections, provided for in Regulation (EU, Euratom) No 883/2013.”

13.14 The proposal also leaves open the possibility for third countries not associated with the programme to participate in discrete actions on the basis of matching funding.

13.15 In the context of ongoing negotiations on the UK’s future relationship with the EU, stakeholders have made clear their desire for the UK to continue to participate in Erasmus—and to secure access to its successor programme—after withdrawal.86

13.16 The Minister of State for Universities, Science, Research and Innovation, Mr Sam Gyimah, submitted an Explanatory Memorandum on the 2021–27 Erasmus programme on 25 June 2018. Beyond summarising the substance and objectives of the proposal, the Minister says only that “the Government will consider the Erasmus proposals carefully and [will] continue to play a role in EU working groups until they are agreed”. In relation to the UK’s participation in future MFF policies and programmes (such as Erasmus), the Minister quotes the Prime Minister as making clear “the UK would want to make an ongoing contribution to cover our fair share of the costs involved and the exact terms would be subject to negotiation”. The Minister does not indicate whether the Government is considering association to Erasmus for 2021–27 and, whether it is, what the potential policy and financial implications of such a decision might be.

86 See, for example, Universities UK, “How can the government ensure universities are best placed to maximise their contribution to a successful and global UK post-EU exit?” (March 2018) p 3.

http://europeanmemoranda.cabinetoffice.gov.uk/files/2018/06/EM_signed_9574_Erasmus.pdf

https://www.universitiesuk.ac.uk/policy-and-analysis/reports/Documents/2018/brexit-briefing-march-18.pdf

https://www.universitiesuk.ac.uk/policy-and-analysis/reports/Documents/2018/brexit-briefing-march-18.pdf


13.17 We thank the Minister for his summary of the Erasmus proposal. Provided the post-exit implementation period ends on 31 December 2020, the UK will not be automatically part of the future Erasmus programme. We recognise that the proposal is at an early stage in its development and appreciate that more information on its final form will come to light as it is discussed in working groups. With a view to these negotiations, we seek the Government’s views on:

• The proposed doubling of the budget from close to €15 billion to €30 billion, in particular, the reasoning behind this increase and the methodology on which it is based. We note the Commission’s main justification for this increase—of implementing the programme to its fullest extent—but are concerned that information on the number of additional individuals and organisations it is assumed will benefit either has not been calculated or does not appear to be readily available;

• The individual budgetary attributions to key actions and the level of detail provided by the Commission concerning how funds will be further distributed, in particular, whether this is considered sufficient; and

• The Commission’s proposal to develop synergies between Erasmus and other programmes—such as the Asylum and Migration Fund and Internal Security Fund —and what these connections might look like in practice.

13.18 The Commission proposal for the 2021–27 Erasmus programme contains a mechanism which would allow third countries—i.e. non-EU Member States—to seek association to the programme. This option would allow non-EU Member States to participate in all or parts of the programme on the basis of a bilateral agreement. We are disappointed that the Government has not indicated whether it will make use of this option. This is especially frustrating given that this option appears to have been introduced as a way of providing for the UK’s continued participation in Erasmus after exit from the EU.

13.19 We note the Government’s recent Brexit White Paper and its stated intention of establishing ‘cooperative accords’ with the EU in the area of education and culture, specifically the suggestion that “… these accords should support joint activity by the UK and EU, including providing for the participation of UK individuals or entities in EU programmes”. With regard to the current proposal, the White Paper states that “[the] UK’s and EU’s current educational cooperation is centred around Erasmus+… [and the] UK is open to exploring participation in the successor scheme…”.

13.20 We ask the Government to clarify whether it will seek association to the 2021–27 Erasmus programme and, if it will, we request further information on:

• Which parts of the programme it wishes to participate in;

• The potential budgetary implications for the UK of such participation;

• Whether the UK will seek to participate as a third country in the Education, Audiovisual and Culture Executive Agency (the EU agency charged with overseeing the day-to-day management of Erasmus);


https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=uriserv:OJ.L_.2014.150.01.0143.01.ENG

https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=uriserv:OJ.L_.2014.150.01.0143.01.ENG



• Whether it would be content—as a third country participant—with not having decisional power over those aspects of the future programme that will be subject to final signoff from Member States, for example, which entities may apply for funding. If it is not content, will it seek to change this arrangement in the proposal—whilst the UK has voting rights in the Council—so that the UK does have decisional power;

• The likely timeline for association and the possibility that there will be a period where the UK does not participate in Erasmus as it transitions from being a Member State—to being a third country and, if there is such a pause, whether it will institute measures to ensure continued access during this period; and

• In light of its commitment to end free movement, details of the arrangements that it will put in place in order to facilitate the inward mobility of Erasmus participants from EU Member States and third countries associated with the programme.

13.21 Alternatively, if the Government does not intend to pursue association, we request information on whether it is exploring the development of a UK-based replacement (along the lines of the Swiss-European Mobility Programme).

13.22 We retain the proposal under scrutiny and ask the Government to provide answers to the above questions by 5 October 2018.

13.23 We draw the Minister’s update and our conclusions to the attention of the Education Committee.


Proposal for a Regulation establishing ‘Erasmus’: the Union programme for education, training, youth and sport and repealing Regulation (EU) No 1288/2013: (39820), 9574/18 + ADDs 1–3; COM(18) 367.


None.



14 EU support for customs authorities 2021–27


Committee’s decision Not cleared from scrutiny; further information requested; drawn to the attention of the Home Affairs, International Trade and Treasury Committees

Document details (a) Proposal for a Regulation establishing the ‘Customs’ programme for cooperation in the field of customs; (b) Proposal for a Regulation establishing, as part of the Integrated Border Management Fund, the instrument for financial support for customs control equipment

Legal base (a) and (b) Articles 33, 114 and 207 TFEU; ordinary legislative procedure; QMV

Department Revenue and Customs

Document Numbers (a) (39887), 9929/18 + ADDs 1–3, COM(18) 442; (b) (39928), 10325/18 + ADDs 1–3, COM(18) 474


14.1 Since 1991, the EU has operated a long-term support programme for the customs authorities of its Member States. This provides financial support for customs training and IT systems, as each EU country relies on the others to safeguard the Union’s external border with respect to the entry of goods: border authorities apply not only the EU’s Customs Code, but also a wide variety of other EU and national legislation on matters as varied as “dual use goods, firearms, drug precursors, movement of cash, intellectual property rights, public health, product safety and consumer protection, the protection of wildlife and of the environment”.

14.2 As part of the EU’s next long-term budget—the Multiannual Financial Framework (MFF) 2021–2027—the European Commission has proposed to extend the Customs Programme for its duration, accompanied by a separate new funding mechanism—the Customs Control Equipment Instrument87—dedicated specifically to the purchase and maintenance of customs equipment such as scanners by national authorities.88 With a combined provisional budget of €2.25 billion (£2 billion) over that period, the two programmes would contribute primarily to help EU customs authorities meet different challenges:

• The full implementation of the 2016 Union Customs Code, the EU’s core rulebook for the operation of its Customs Union and trade in goods with third

87 The Customs Control Equipment Programme is part of the proposed €9.3 billion Integrated Border Management Fund, of which the lion’s share—€8 billion—has been provisionally earmarked for the Border Management & Visa Instrument, which focuses on the movement of people across the EU’s external borders. We have considered that proposal separately in a different chapter of this Report.

88 There is also a parallel proposal on cooperation between tax authorities (the ‘Fiscalis’) programme. We have considered that proposal in a separate chapter of this Report.


https://ec.europa.eu/commission/future-europe/eu-budget-future_en

https://ec.europa.eu/commission/future-europe/eu-budget-future_en


https://ec.europa.eu/taxation_customs/business/union-customs-code_en




countries. In particular, the Programme will support on-going work to switch to a fully digitalised customs environment for businesses by removing paper-based procedures (due for completion in 2025, after a 2020 deadline proved impractical), including the launch of the Import Control System 2 (ICS2), a new customs risk management tool;

• Helping customs authorities to respond effectively to new tasks and challenges, such as “rapidly changing technologies (digitalisation, connected-ness, Internet of things, blockchain) and business models (e-commerce, supply chain optimisation), reduced public financial means, increasing volumes of world trade and a persistent transnational crime and security threat”;

• Ensuring “adequate and equivalent customs controls” through the purchase, maintenance and upgrade of customs control equipment; and

• Accounting for the cost of the UK’s exit from the EU, which will involve “disentangling the United Kingdom as a Member State from all existing customs electronic systems”. The total costs of this, the Commission says, are not yet known because the substance of a future UK-EU customs cooperation agreement could negate the need for total ‘disentanglement’.

14.3 While the core objective of the Customs Programme has remained unchanged, the Commission has proposed a number of changes in the way the EU supports its Member States’ customs authorities:

• The creation of the aforementioned Customs Control Equipment Instrument at the request of the Member States.89 This is a specific €1.3 billion funding line for the acquisition and maintenance of customs control equipment such as scanners, mobile laboratories and sniffer dogs, in addition to the Custom Programme’s traditional focus on training of customs officials and the development of customs IT systems;90

• A significantly larger budget to support national customs authorities compared to the 2014–2020 Customs Programme: the Commission is seeking €2.25 billion for the 2021–2027 period, including €950 million for IT systems and training,91 and €1.3 billion funding line for customs equipment) compared to €523 million for the current iteration; and

• An explicit legal basis for the use of the Customs Programme to fund the necessary modifications to extend partial access to EU customs systems to third countries or international organisations.

14.4 The 2021–2027 Customs Programme as proposed would also be open to formal ‘association’ by non-EU countries, including the UK after it leaves the EU. This would require a specific legal agreement to that effect, including the modalities of a financial

89 See the March 2017 Council conclusions on customs funding.90 Member States can already receive some EU support for the acquisition of customs infrastructure, but this is

limited as it falls within broader investment instruments such as Hercule III anti-fraud programme, the Structural Reform Support Programme, and the European Structural and Investment Funds, none of which have a specific focus on customs controls).

91 The Commission has estimated that €855 million of the €950 million Customs Programme would be spent on IT systems under the Union Customs Code.

http://ec.europa.eu/transparency/regexpert/index.cfm?do=groupDetail.groupDetailDoc&id=23358&no=1



https://ec.europa.eu/anti-fraud/policy/hercule_en

https://ec.europa.eu/info/funding-tenders/funding-opportunities/funding-programmes/overview-funding-programmes/structural-reform-support-programme-srsp_en

https://ec.europa.eu/info/funding-tenders/funding-opportunities/funding-programmes/overview-funding-programmes/structural-reform-support-programme-srsp_en

http://ec.europa.eu/regional_policy/en/funding/


contribution towards its operational and administrative costs. In return, the Programme could then co-fund the development of shared customs infrastructure and training, including for example the necessary technical adaptations to allow HM Revenue & Customs to access certain EU customs systems as necessary under a new UK-EU customs cooperation agreement. The proposed Customs Control Equipment Instrument is not open to participation by ‘third countries’.

14.5 The draft legislation for both instruments has been submitted to the European Parliament and the Member States in the Council, which must jointly decide on their substance and indicative long-term budget for the duration of the 2021–2027 MFF. The Financial Secretary to the Treasury (Mel Stride) submitted an Explanatory Memorandum on the proposals in June 2018. This states that “there may be a case for cooperating with the EU on shared IT systems”, which the Government “will take into account in negotiating a future customs arrangement with the EU”. The Minister also notes that, if the ‘backstop’ to keep the Irish border free of customs infrastructure ever became operational, the UK’s proposal for its practical implementation92 would require “continued access to EU shared IT systems”. He adds that the application of the proposed Customs Programme during the backstop—meaning the UK’s ability to draw funding from it—“would be subject to negotiation”, presumably because that would require a new UK financial contribution.93

Brexit implications for UK involvement in the Customs Programme

14.6 The protection of the outer perimeter of the EU’s Customs Union relies on national customs authorities. Under EU law, they are required to cooperate closely and share large amounts of information on movements of goods and the businesses that move them. As a Member State, “the UK is currently able to access over 20 EU systems, which provide a variety of functions, including tracking goods and vehicles, and storing details about goods and suppliers”.94

14.7 Although EU systems are supplemented by Member States’ internal IT systems, it is unclear to what extent HM Revenue & Customs is capable of replicating all necessary functions domestically on ‘exit day’ if there is no Withdrawal Agreement. Much attention has focused on HMRC’s new Customs Declaration Service (CDS), which—while important—could not fully replace the functionality of EU systems to which the UK will lose access because of Brexit. In particular, by definition, it cannot replace information-sharing or risk assessments that rely on exchange of data with the customs authorities of the remaining Member States via shared EU systems. Those include, for example, the

92 See the Cabinet Office’s technical note on “temporary customs arrangements“ (7 June 2018). Under the UK’s version of the backstop, the whole of the UK would effectively remain in a customs union with the EU for its duration.

93 Under the terms of the draft Withdrawal Agreement, the UK would remain a full contributor to the EU budget in 2019 and 2020 during the transitional period. The ‘backstop’, if necessary, would take effect after the transition ends and therefore when the UK is no longer paying towards shared EU programmes.

94 https://publications.parliament.uk/pa/cm201719/cmselect/cmhaff/540/54006.htm#_idTextAnchor031

http://europeanmemoranda.cabinetoffice.gov.uk/files/2018/07/Scan_(13).pdf

https://www.gov.uk/government/publications/technical-note-on-temporary-customs-arrangement

https://www.gov.uk/government/publications/technical-note-on-temporary-customs-arrangement


New Computerised Transit System (NCTS) for exchange of customs declarations and bond money for transit of goods to and from certain non-EU countries under the CTC Convention,95 and the EU’s wider Customs Risk Management Framework (CRMF).

14.8 The scale of the initial systematic ‘disentanglement’ that Brexit entails in the field of customs is clear from the draft Withdrawal Agreement: in June 2018, the Government and the European Commission agreed on the gradual phasing out of the UK’s use of, and access to, 20 EU-level ‘networks, information systems and databases’ related to customs,96 including the NCTS and the EU’s Import & Export Control Systems.97 The phasing out is intended to allow the UK and EU to finalise customs procedures and processes related to cross-border trade that took place before the UK leaves the Customs Union. This gradual phasing out of the UK’s access to these systems would take place after the end of the transitional period (during which the UK would stay in the Customs Union and therefore retain access to the relevant EU systems). This period is due to end on 31 December 2020, providing the UK and the EU with more time to prepare for the UK’s gradual removal after the end of the transition, which in many cases involves only partial access—such as ‘read-only’ permissions—for a limited amount of time. The necessary technical modifications could be funded from the current or proposed Customs Support Programmes.

14.9 While the Customs Programme 2021–2027 is likely to part-fund the complete technical ‘disentanglement’ of the UK from EU customs systems after the end of the transition, it could also have a role to play in implementing any subsequent UK-EU customs cooperation agreement. As is clear from the Minister’s Explanatory Memorandum, it is the Government’s intention to negotiate a new customs cooperation agreement with the EU which may involve “shared IT systems” even after the transitional period ends. As a result, the UK may seek future association with the Customs Programme to make any (partial) re-alignment of HMRC’s systems into specific EU customs systems more cost-efficient.

14.10 In terms of the substance of a new UK-EU customs arrangement, the Government’s recent White Paper on the future UK-EU relationship proposed a ‘facilitated customs agreement’ (FCA) under which the UK and EU would act “as if” they formed a joint customs territory. This would include “a common rulebook”, effectively requiring the UK to apply the Union Customs Code indefinitely as a non-Member State. The UK would also—somehow—collect customs duty on goods entering via its ports, but which are destined for the EU.

14.11 The EU’s Chief Brexit Negotiator, Michel Barnier, has already rejected the Government’s customs proposal in its current form because it “it proposes to apply EU

95 CTC is the Common Transit Convention, which facilitates movement of goods between the 28 EU Member States on the one hand and one of the ‘common transit’ countries (namely Iceland, Norway, Liechtenstein, Switzerland, Turkey, Macedonia and Serbia) on the other, or between two ‘common transit’ countries. It allows customs clearance to take place only once during the entire movement, in the country of destination, using exchange of data via the NCTS. The UK is seeking accession as part of its post-Brexit customs arrangements, which requires the agreement of the existing Contracting Parties. The UK cannot formally accede until it has ceased to be an EU Member State, although the formalities for its accession have begun.

96 In addition, the UK will also lose access to 11 other EU systems related to cooperation on VAT, excise and other taxes.

97 More information on the Import and Export Control Systems is available on the HMRC website. For the ICS, for example, entry summary declarations are analysed by the Member State of the port entry, and “[pass] on the information to subsequent ports or airports for the vessel or aircraft’s journey”. After Brexit, HMRC will no longer automatically share such risk analysis with other customs authorities in the EU.

https://www.gov.uk/guidance/using-the-new-computerised-transit-system-to-move-goods-across-the-eu-and-efta-countries

https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:01987A0813(01)-20171205

https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:01987A0813(01)-20171205

https://ec.europa.eu/taxation_customs/general-information-customs/customs-risk-management/measures-customs-risk-management-framework-crmf_en

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/691366/20180319_DRAFT_WITHDRAWAL_AGREEMENT.pdf

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/725288/The_future_relationship_between_the_United_Kingdom_and_the_European_Union.pdf/

https://ec.europa.eu/commission/news/ambitious-partnership-uk-after-brexit-2018-aug-02_en

https://ec.europa.eu/transparency/regdoc/?fuseaction=list&n=10&adv=0&coteId=&year=&number=&version=ALL&dateFrom=2018-07-23&dateTo=&serviceId=21&documentType=&title=united+kingdom&titleLanguage=&titleSearch=EXACT&sortBy=NUMBER&sortOrder=DESC

https://www.gov.uk/guidance/import-control-system

https://www.gov.uk/guidance/export-control-system-ecs-supporting-guidance


customs rules without being part of the EU’s legal order”.98 Nevertheless, it is worth considering the implications of what the Government is proposing as they give an indication of what new arrangement that is mutually acceptable it could be willing to countenance. The Customs Code is meant to fully digitise existing paper-based procedures, and as such it relies heavily on EU-funded customs systems such as the aforementioned New Computerised Transit System and the Import & Export Control Systems for its implementation; by extension, the Government is therefore saying it wants the UK to stay part of the necessary IT systems indefinitely. In such an eventuality, continued UK participation in the EU Customs Programme could facilitate implementation of a new agreement.

Our conclusions

14.12 The UK’s exit from the EU presents the Government with significant challenges in establishing the UK as an independent customs territory for the first time since 1973. Replacements for customs functions currently reliant on EU systems need to be delivered at speed (potentially by March next year). The scale of that challenge has been explored in some depth by our colleagues on other Committees, and the Government’s own recent announcements about the ‘stockpiling’ of food and pharmaceuticals underline the disruption that a ‘no deal’ Brexit could cause at ports on both the UK and EU side, when the former leaves the facilitations of the Customs Union and Single Market. It is therefore right that the Government is seeking to negotiate a new and comprehensive customs arrangement with the EU, and the transitional period—if it takes effect—would provide some breathing space to get those negotiations underway.

14.13 In the absence of formalised cooperation on customs risk management, UK exports to the EU could face a relatively high proportion of checks once the UK leaves the Customs Union and Single Market, adding costs and delays. The Government is seeking to mitigate this by including the EU’s Customs Code, including the shared system that underpin its functioning, into a common UK-EU ‘rulebook’.

14.14 However, the Government’s proposed ‘Facilitated Customs Agreement’—notably the suggestion that the UK would collect customs duty on the EU’s behalf while outside the jurisdiction of the European Commission and Court of Justice99—

have already run into opposition in Brussels. The fact that the EU would not collect customs duty on behalf of the Treasury on goods destined for the UK may also be problematic in the context of the recent amendment to the Taxation (Cross-Border Trade) Bill which requires reciprocity in the new arrangement, although some have suggested a revenue sharing mechanism could still be possible without falling foul of the amendment.

14.15 Overall, the final substance of any UK-EU customs cooperation agreement is likely to differ significantly from the White Paper, but should still reflect the geographic and economic closeness between the UK and the EU and the potential

98 Op-ed by Michel Barnier (2 August 2018).99 We also remain concerned that the on-going dispute between the Government and the European Commission

about the level of undervaluation fraud on imports at UK ports will complicate negotiations on a new customs agreement further, as this is likely to corrode the other Member States’ trust in HM Revenue & Customs to properly apply EU customs legislation when it is no longer subject to the powers of the Commission and the Court of Justice.

https://publications.parliament.uk/pa/cm201719/cmselect/cmeuleg/301-xxiii/30110.htm

https://ec.europa.eu/commission/news/ambitious-partnership-uk-after-brexit-2018-aug-02_en


benefits of closely aligned customs systems. Depending on the substance of a new UK-EU customs agreement, the UK may wish to seek participation as a ‘third country’ in the 2021–2027 Customs Programme recently proposed by the European Commission. The value for money of UK affiliation to the Programme after Brexit will depend to a large extent on the closeness of its customs activities with the EU Customs Union and Customs Code.100 In any scenario where customs cooperation remains as close as suggested by the Government in its White Paper, such participation may well represent good value for money for the UK taxpayer (although the UK’s financial contribution to the Programme would still need to be negotiated).

14.16 However, if the eventual UK-EU customs arrangement keeps HMRC ‘plugged in’ to the EU’s systems, it would be much preferable if such access is agreed before its current access as a member of the Customs Union is lost at the end of the transition. Otherwise, both the UK and EU will invest in the total separation of their customs IT systems (for which they are already preparing, as it is the default scenario), only for them to spend more public funds at a later stage in joining some of them up again. It is likely, of course, that the lion’s share of any investment necessary to prepare the systems for the HMRC’s partial re-integration would fall on the UK taxpayer, even if a contribution from the EU’s Customs Programme could be secured. Given the scale and depth of the overall new UK-EU relationship the Government is seeking, it is highly questionable whether a new customs arrangement can be negotiated, ratified and implemented before the end of the transitional period.101

14.17 Overall therefore, there is still no clarity about the UK’s future relationship with the EU on customs matters and, by extension, the potential value of association with the Customs Programme. In light of this, we retain the proposal (including the proposed funding line for customs equipment from the Border Management Fund) under scrutiny, and ask the Financial Secretary to keep us informed of developments in the legislative process. We also draw these documents to the attention of the Treasury, Home Affairs and International Trade Committees.


(a) Proposal for a Regulation establishing the ‘Customs’ programme for cooperation in the field of customs: (39887), 9929/18 + ADDs 1–3, COM(18) 442; (b) Proposal for a Regulation establishing, as part of the Integrated Border Management Fund, the instrument for financial support for customs control equipment: (39928), 10325/18 + ADDs 1–3, COM(18) 474.


None, these are new proposals for legislation.

100 Disruption of trade in goods would also flow from the UK’s exit from the Single Market, meaning UK agricultural and industrial goods will lose the automatic permission they have at present to freely enter the markets of other EU Member States.

101 It is unclear what specific contingency measures the Government will implement if the UK leaves the Customs Union and Single Market without a new arrangement ready to replace them, to mitigate the impact of the array of customs and regulatory controls goods exported to the EU are likely to face.




15 EU VAT Reform: implications of BrexitCommittee’s assessment Legally and politically important

Committee’s decision Not cleared from scrutiny; further information requested; drawn to the attention of the Business, Energy and Industrial Strategy and Treasury Committees

Document details (a) Proposal for a Council Regulation amending Regulation (EU) No 904/2010 as regards the certified taxable person; (b) Proposal for a Council Directive amending Directive 2006/112/EC as regards the introduction of the detailed technical measures for the operation of the definitive VAT system for the taxation of trade between Member States

Legal base Article 113 TFEU; special legislative procedure; unanimity

Department Treasury

Document Numbers (a) (39083), 12880/17, COM(17) 567; (b) (39795), 9462/18, COM(18) 329


15.1 Value added tax (VAT) is one of the main areas of EU legislation on taxation, because it relates to trade in goods and services and therefore has the potential to impact on the EU’s internal market. Normally, for goods entering a country that operates VAT, customs officials check the tax liability before they are released for free circulation. Similarly, goods are checked on export to ensure they have actually left a country’s tax jurisdiction (since VAT is ultimately payable in the country of import, and therefore any input VAT is refunded to the exporter by the tax authorities of the country of export).102

15.2 Not to operate such border controls would ordinarily risk significant revenue losses, because incoming goods may not be taxed, and fraudsters could falsely—and repeatedly—claim VAT refunds on ‘exported’ goods that never left the country. However, as part of the Single Market, EU law has completely removed the requirement for border-related formalities for trade between EU Member States. Instead, the VAT Directive103 contains a unique system where cross-border supplies between businesses in different Member States are zero-rated for the purposes of VAT, so that the vendor does not have to account for the tax in the Member State of destination.104 Instead, a reverse charge mechanism105 applies: the purchasing businesses must record a second transaction—a so-called intra-Community acquisition—for the same supply, charging the VAT to themselves and paying

102 VAT, though payment is fractioned throughout the supply chain, is ultimately only payable by the final consumer. Therefore, a business that exports a good to another country should not accrue any VAT liability in their home jurisdiction, and as such is entitled to a refund of input VAT paid on their supplies.

103 Directive 2006/112/EC.104 Different rules apply for business-to-consumer sales. For purchases made by the consumer while in a different

Member State, VAT is accounted for by the supplier to their national tax authority. For distance sales within the EU, VAT must be accounted for in either the country of origin or the country of consumption, depending on the circumstances. We discussed this aspect of EU VAT law in more detail in our Report of 24 January 2018 (paragraph 12.28).

105 Reverse charge refers to the fact that it is the business making the purchase, not the supplier, who has to account for the VAT.


https://eur-lex.europa.eu/legal-content/EN/ALL/?uri=celex%3A32006L0112

https://eur-lex.europa.eu/legal-content/EN/ALL/?uri=celex%3A32006L0112

https://publications.parliament.uk/pa/cm201719/cmselect/cmeuleg/301-xi/30116.htm


it to their national tax authority. This is to avoid a situation where an EU business would have to register for VAT, and comply with the locally applicable tax legislation, in every EU country to which they supply goods or services. For goods sold into the EU from outside the Customs Union, VAT liability is still checked at the border.

15.3 To compensate for the lack of physical controls at intra-EU borders, business-to-business supplies between Member States are tracked using a database. This VAT Information Exchange System (VIES) records all cross-border B2B purchases and sales using information submitted by VAT-registered businesses in the European Union. This intra-EU VAT system was introduced on a supposed ‘transitional’ basis in 1992, and by allowing a cross-border supply to be made free of VAT has led to widespread ‘missing trader’ fraud, estimated to cost the EU £44 billion per year.106 In late 2017, the European Commission therefore began the formal process of creating a ‘true’ single EU VAT area, submitting a number of draft Directives to consideration by the Member States in the Council.107

15.4 The centrepiece of the reforms is a Commission proposal for the “definitive” VAT system on cross-border sales within the EU. Following the publication of the legal principles to underpin this new system in October 2017, we considered the VAT reforms in some detail in our Reports of 6 December 2017 and 28 March 2018.108

15.5 The Commission published further detailed implementing rules for the new intra-EU VAT system in May 2018. These were submitted for scrutiny by HM Treasury just before the summer recess. Under the new legal framework as proposed, VAT on intra-EU business-to-business (B2B) sales would continue to be paid to the Member State of the company making the purchase (the so-called ‘destination’ principle). However, the proposed legislation would end the current practice of making the purchaser account for the VAT (the so-called “reverse charge mechanism”), a key feature of the transitional system. Instead, the supplier would have to account for the VAT on a cross-border sale, and the ability to make an intra-EU supply without having to apply value added tax would cease.

15.6 To mitigate the significant impact of this administrative change on businesses and national tax authorities,109 the Commission has simultaneously proposed to expand the use of an EU-wide mechanism ‘One Stop Shop’ mechanism that allows suppliers to pay VAT on sales to any Member State in their own country. While accounted for 106 Intra-EU missing trader VAT fraud takes place when the company buys goods from another Member State,

because purchasing the goods is VAT-free. When selling the goods domestically, the company receives the entire amount of VAT, which it pockets rather than transferring it to the Treasury. Because the company disappears, this type of fraud is called missing trader fraud. Carousel fraud takes this a step further: the same goods are bought and resold by the fraudster several times via middlemen, and each time the amount of collected VAT increases and the company either disappears or becomes insolvent before the tax authority can collect the accumulated VAT.

107 EU legislation on taxation requires the unanimous agreement of all Member States, with the European Parliament only playing a consultative role.

108 In parallel, the Commission published supplementary proposals giving Member States more flexibility to set reduced VAT rates, to increase cross-border cooperation to fight VAT fraud, and to reduce the administrative burden of accounting for VAT for small businesses. We have considered those separately in our Report of 28 March 2018.

109 Under the proposed intra-EU system, the supplier of a good will experience a new cash flow gain because they will hold the VAT paid by the buyer until the date of their One Stop Shop return, whereas the buyers—who can currently offset output VAT against input VAT on the same return, paying only the difference—”are likely to pay VAT before they are able to claim it back”. Similarly, the buyer’s national tax authority would no longer immediately receive the VAT due, but must wait for it to be redistributed by the Member State of the supplier.

https://ec.europa.eu/commission/news/towards-new-and-definitive-vat-system-eu-2017-oct-04_en

https://publications.parliament.uk/pa/cm201719/cmselect/cmeuleg/301-iv/30111.htm

https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:52018PC0329

http://europeanmemoranda.cabinetoffice.gov.uk/files/2018/06/Scan6.pdf

https://publications.parliament.uk/pa/cm201719/cmselect/cmeuleg/301-xxii/30102.htm

https://publications.parliament.uk/pa/cm201719/cmselect/cmeuleg/301-xxii/30102.htm


domestically by the supplier, the VAT would be paid at the rate applicable in the country of consumption and then remitted to the tax authority of the latter. However, adding complexity, the current reverse charge mechanism would be maintained for transactions where the buying business had “Certified Taxable Person” (CTP) status, meaning they were officially considered a reliable taxpayer, unlikely to engage in VAT fraud. Finally, and controversially, the Commission also wants to enable businesses to deduct their input VAT via this system, rather than via the existing VAT refund system on cross-border sales between EU Member States.

15.7 The changes the ‘definitive’ VAT system proposal would make to intra-EU supplies of goods are shown in the table below:Table 1: VAT on B2B intra-EU sales of goods

Which country’s VAT rate applies?

Who accounts for VAT?

Are cross-border supplies zero-rated?

Can the vendor use the OSS accounting mechanism?

Current situation

Member State of destination

Buyer Yes, the sale is split into two transactions for legal purposes. The cross-border supply itself is zero-rated, and the buyer creates a second ‘acquisition’ and charges themselves VAT

No, as they are not liable for VAT

Proposed approach

Vendor, except where the buyer has CTP status

No, the sale consists of a single transaction on which VAT is charged by the supplier to the buyer

Yes, except where the buyer has CTP status

15.8 The Government cautiously welcomed the proposals, but told us in October 2017 that further detailed consideration would be necessary. In particular, the Financial Secretary to the Treasury (Mel Stride) highlighted the problems that could arise from two parallel systems of accounting for VAT depending on whether the buyer is a “reliable taxpayer” or not; the potential impact of changes to cash flow that both tax authorities and businesses may experience as a result of the proposed changes; and the need for further scrutiny to ascertain what new opportunities for VAT fraud the proposals might create. The Minister did not assess the implications for UK businesses, both buyers and suppliers, of leaving the EU’s common system of VAT. The Minister has reiterated those concerns in his latest Explanatory Memorandum of 27 June 2018 on the Commission’s detailed implementing proposals for the new system.

15.9 The Committee has considered the VAT reform proposals on several occasions since they were formally proposed in late 2017, and retained them under scrutiny. While we remain concerned about the complexity of the new system proposed by the Commission, where two systems of accountability for VAT would operate in parallel, our primary concern had been the lack of clarity from the Government about its plans to mitigate the

https://ec.europa.eu/taxation_customs/business/vat/eu-vat-rules-topic/vat-refunds_en

http://europeanmemoranda.cabinetoffice.gov.uk/files/2017/10/DOC241017-241020171545283.pdf

http://europeanmemoranda.cabinetoffice.gov.uk/files/2018/06/Scan6.pdf


VAT-related barriers that Brexit would, by default, impose on UK-EU trade flows unless a new agreement is in place by the time the UK is due to leave the single EU VAT area (at the end of the post-Brexit transitional arrangement, the end date of which is not yet known).

15.10 As noted, when the UK ceases to be bound by EU VAT law, VAT will by default become an import (border) tax on goods moving between the UK and the EU-27. To ensure revenue is protected, both the UK and EU will either need to impose customs controls on goods entering, or agree for the UK to remain part of the VAT Information Exchange System that allows both sides to track which goods are entering and leaving their respective territories. The former option is the default scenario, since the latter requires a detailed (and unprecedented) agreement with the EU, negotiations on which have not begun. On 23 August, as part of its first batch of ‘no deal’ technical notices, the Government announced that—should the UK leave the EU without a transitional arrangement on VAT—HM Revenue & Customs will not assess VAT liability on any imports (EU and non-EU) at the border. Instead, businesses would account for “import VAT on their VAT return, rather than paying [it] on or soon after the time that the goods arrive at the UK border”. The impact of this system of ‘payment on account’ on overall revenue collection, by significantly increasing the risk of missing trader fraud, has not been publicly quantified.

15.11 However, while the Government insists the ‘no deal’ scenario is “unlikely”, it is yet to specify clearly what its actual plans are for a new arrangement with the EU on VAT after the end of the proposed transitional period. In its White Paper on the future UK-EU relationship, it proposed to establish ‘common procedures and processes’ for VAT on UK-EU trade in goods to avoid the need for border controls, but without specifying what those might be. We previously concluded that such an arrangement was likely to require the continued application of significant parts of EU VAT law to the UK, and the Government has refused to categorically state that the latest proposals for reform of the VAT Directive will not apply to the UK (despite the fact they are unlikely to take effect until 2022 at the earliest).

15.12 The Government’s approach to VAT in the negotiations with the EU was complicated further when, on 16 July 2018, it accepted an amendment to the Taxation (Cross-Border Trade) Bill which makes it “unlawful for HMRC to account for any duty of […] VAT […] collected by HMRC to the Government of a country or territory outside the United Kingdom” unless the Treasury certify that “arrangements have been entered into by Her Majesty’s Government and that government under which that government will account to HMRC for those duties and taxes collected in that country on a reciprocal basis”. The implications of the amendment for the ‘common processes and procedures’ approach remain unclear, precisely because the Government has not specified what those might be.

Our conclusions

15.13 VAT is the subject of a web of extremely complicated EU legislation, and these latest Commission proposals for the ‘definitive’ intra-EU VAT system would remove complexity in some areas, while adding it in others. The overall implications for businesses and tax authorities within the EU are not yet clear, and will depend to a large extent to the modifications the Member States are likely to make when considering the proposal in more detail over the coming months (and possibly years).

https://www.gov.uk/government/publications/vat-for-businesses-if-theres-no-brexit-deal/vat-for-businesses-if-theres-no-brexit-deal



https://services.parliament.uk/bills/2017-19/taxationcrossbordertrade.html

https://services.parliament.uk/bills/2017-19/taxationcrossbordertrade.html


15.14 In particular, while these latest proposals may close one loophole—missing trader fraud on zero-rated supplies from one Member State to another it is clear the Treasury is not yet convinced that it will not open up opportunities for fraud elsewhere in the system. It also remains unclear to us what incentive businesses would have to apply for ‘Certified Taxpayer’ status, given that this appears to confer no direct benefits but would require them to continue to account for VAT on intra-EU purchases.

15.15 Irrespective of the landing zone for these proposals after they have been amended by the Member States, the UK’s approach to VAT on trade in goods with the EU is currently effectively in limbo. The EU’s system is the result of a difficult compromise, reached because the Member States had agreed on the overall objective of making a borderless Single Market a reality. The implications of the UK’s decision to leave the EU—and, by extension, the single VAT area—show the sharp contrast between treatment of goods entering the EU from ‘third countries’ and those moving between EU Member States.

15.16 Outside the EU, VAT is an import tax where it involves a supply of goods from one country to another, necessitating border controls to ensure payment of the correct amount of VAT by the importer and the payment of VAT refunds only for goods that are actually exported. Within the EU, those controls have been removed and replaced with an elaborate electronic system—reliant on the submission of monthly statements of intra-EU purchases and supplies by businesses—that aims to allow tax authorities to track goods as they move around the EU, to minimise the risk of VAT evasion. It is part of a wider package of EU VAT law, such as restrictions on rates to avoid competitive rate lowering.

15.17 As a result, the trade and tax implications of the UK leaving the single VAT area are profound. From the Treasury’s perspective, it will require either border controls, continued participation in the EU’s VAT Information Exchange System,110 or an acceptance that revenues from Value Added Tax—which totalled £125 billion in 2017–18111—might be significantly eroded through evasion and fraud. The Government now appears to have accepted the latter in the event of a ‘no deal’ Brexit, preparing for import VAT to be checked on the basis of businesses’ regular VAT returns rather than through border checks. The impact this would have on the Exchequer’s overall receipts from VAT is unclear.

15.18 However, ‘no deal’ preparations notwithstanding, the need for a mutually acceptable solution to the matter of import VAT is especially acute in Northern Ireland. Under EU law, Ireland will be under an obligation to perform fiscal controls on goods entering the Customs Union from the North unless there is an agreement with the UK that renders them unnecessary. The European Commission has therefore proposed a ‘backstop’ to keep the border between the UK and Ireland free of customs and regulatory infrastructure, by extending EU VAT legislation to Northern Ireland, and effectively shifting the fiscal frontier to the Irish Sea. As part of its own ‘backstop’ proposal, the Government has instead proposed to replicate the outcome of the EU’s current system—the abolition of fiscal controls at the border on trade in goods between

110 Implausibly, the UK could also seek to create a parallel VAT information exchange system but it is difficult to see the other Member States agreeing to such a costly and duplicating enterprise.

111 See https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/726467/Jun18_Receipts_NS_Bulletin_Final.pdf.

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/726467/Jun18_Receipts_NS_Bulletin_Final.pdf

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/726467/Jun18_Receipts_NS_Bulletin_Final.pdf


the EU and the UK as a whole—without being fully bound by EU VAT law. Instead, it suggested in its recent White Paper that there should be “common processes and procedures” for VAT (and excise duty).112 However, it has failed to advance any detailed proposals about the substance of those ‘processes and procedures’ might be, and to what extent they would entail continued adherence to elements of EU VAT legislation indefinitely.

15.19 As we have noted before, we are extremely sceptical that the UK could remain part of the VAT Information Exchange System—and negate the need for any fiscal border controls on trade with the EU—without being subject to the same legal restrictions as the remaining Member States, in particularly as regards the minimum VAT rates that EU law currently imposes (the proposed loosening of those restrictions notwithstanding). If the abolition of VAT-related controls on cross-border trade could have been achieved in a less prescriptive way, it is unclear why the Member States—which all have a veto over EU tax law—would have supported the system that currently exists. The risk is therefore that the Government’s approach could require the continued application of EU VAT law indefinitely, including future amendments over which the UK—as a ‘third country’—will lose its veto on 29 March 2019.

15.20 Further problems would arise even if the Government’s approach (of keeping the benefits of the single VAT area for trade without the same legal obligations) was, in principle, acceptable to the EU. It is doubtful that an agreement to that effect could be negotiated and implemented in time before the UK leaves the single VAT area at the end of the post-Brexit transitional period in December 2020:

• The EU’s recent agreement on VAT cooperation with Norway—which has a much narrower scope than the Government’s putative UK-EU VAT agreement—took two years to negotiate. It is based largely on the substance of an existing EU Regulation on cooperation to fight fraud (and, crucially, does not give Norway access to the VAT Information Exchange System, which the UK would need).113 The Government’s approach, as far as can be ascertained from the White Paper, would be unprecedented and therefore likely to take much longer (especially as it relates to taxation, always a sensitive area, in an extremely complex legislative field).

• In addition, the UK is already facing two infringement procedures related to the alleged deficient application of EU law on customs114 and VAT,115 which means the level of trust required from the EU’s side for HMRC to apply a new VAT Agreement may be in short supply. This may become a particularly acute problem in light of the fact that the UK, having decided to withdraw from the EU, is expressly repudiating independent oversight by the European Commission and the European Court of Justice.

112 DExEU White Paper, “The future relationship between the United Kingdom and the European Union“ (12 July 2018), p.18.

113 See the Committee’s Report of 6 December 2017 on the EU-Norway VAT Cooperation Agreement.114 For the infringement case related to customs legislation, see our Report of 24 January 2018.115 For the infringement case related to VAT legislation, see the Commission’s press release of 19 July 2018.





https://publications.parliament.uk/pa/cm201719/cmselect/cmeuleg/301-xi/30115.htm

http://europa.eu/rapid/press-release_MEMO-18-4486_en.htm


Questions for the Minister

15.21 In light of the possibility that EU VAT law may apply in the UK under the terms of a new UK-EU VAT Agreement, we have again decided to retain the reform proposals described in this Report under scrutiny.

15.22 We also find it extremely regrettable that the Minister is still unable to articulate the Government’s position with respect to the need to avoid physical VAT controls on UK-EU flows of goods as part of a long-term trade agreement with the EU, beyond the platitude that the outcome is “subject to negotiations”. We are, obviously, not asking the Minister to divine what the outcome of the negotiations might be. Rather, in the interests of transparency, he should be clear what the Government is asking for in talks with the EU. For the discussions with the European Commission on VAT controls to be meaningful, the Government must have a position to take on what those might entail; more so in light of the unprecedented nature of what it appears to be asking for. Instead, the Minister is giving the impression that the Government’s proposal for “common processes and procedures” between the UK and the EU on VAT was included in the White Paper either without further consideration as to what they might be in practice, or in recognition that stating more explicitly what they might entail would risk a backlash.

15.23 Given the need for Parliament (and the public) to be fully informed of the potential implications of the future arrangement with the EU for the UK’s fiscal autonomy, neither of these options is acceptable. We therefore ask the Minister to write to us by 20 September 2018 to clarify:

• What the common VAT ‘processes and procedures’ it is proposing to the EU to obviate the need for new fiscal controls at the border, as referred to in the Government’s White Paper on the future relationship;

• In particular, whether the UK is proposing to collect VAT on behalf of EU Member States on goods entering the UK but destined for the EU, analogous to its proposal for the ‘facilitated customs arrangement’, and/or to create an adapted form of customs procedure 42116 that allows goods to be moved within the EU under VAT suspension until they reach their Member State of destination;

• Whether the Government is seeking to remain part of the VAT Information Exchange System and the One Stop Shop accounting mechanism, without being bound by the VAT Directive and related VAT legislation more generally (in particular the provisions restricting VAT rate flexibility);

• If so, why it believes that proposal would be acceptable to all remaining Member States that the UK should benefit from a lack of import VAT controls on trade with the EU-27 without the same legal obligations, given they have not chosen to apply this less restrictive approach to accounting for VAT to trade in goods within the Single Market;

116 See for more information on customs procedure 42 European Court of Auditors press release ECA/11/47 (13 December 2011).

http://europa.eu/rapid/press-release_ECA-11-47_en.htm


• If not, which elements of EU VAT law the Government believes may need to be incorporated into a new UK-EU Agreement to obviate the need for new fiscal controls on trade with the EU-27;

• How the amendment on VAT to the Taxation (Cross-Border Trade) Bill it accepted on 16 July impacts on its proposals for the future UK-EU VAT arrangement; and

• What assessment HMRC has made of the implications of the ‘payment on account’ of import VAT in the event of a ‘no deal’ Brexit, in particular with respect to the increased risk of missing trader fraud created by leaving the VAT Information Exchange System without imposing import VAT controls at the border (and how the Government proposes to minimise any resulting revenue losses).

15.24 If the Minister cannot provide further information on the substance of the “common processes and procedures” in particular, we expect his letter to explain in detail why this is the case. It cannot be to retain a negotiating advantage over the EU, given that by definition the UK needs to be clear about its desired outcome on VAT cooperation if it wants to stand a chance of negotiating that outcome successfully. At the very least, it should seek to secure a reference to its proposals in the European Council’s political declaration on the future partnership that would supplement the Withdrawal Agreement, which would form the basis for trade negotiations once the UK has formally become a ‘third country’.

15.25 In anticipation of the Minister’s reply, given the uncertainty about both the final substance of the new VAT Directive and the lack of clarity about the Government’s proposals for a new VAT arrangement with the EU on cross-border trade, we retain the documents under scrutiny. We also draw these latest developments to the attention of the Business, Energy and Industrial Strategy and Treasury Committees.


(a) Proposal for a Council Regulation amending Regulation (EU) No 904/2010 as regards the certified taxable person: (39083), 12880/17, COM(17) 567; (b) Proposal for a Council Directive amending Directive 2006/112/EC as regards the introduction of the detailed technical measures for the operation of the definitive VAT system for the taxation of trade between Member States: (39795), 9462/18, COM(18) 329.


See Fourth Report HC 301–iv (2017–19), chapter 9 (6 December 2017) and Twenty-third Report HC 301–xxii (2017–19), chapter 1 (28 March 2018).





Annex: Overview of EU VAT proposals currently or recently under scrutiny

Proposal Proposed Document reference Scrutiny status

VAT: services and distance sales of consumer goods

December 2016 38341 Cleared on 24 January 2018

VAT: location of customers


VAT: administrative cooperation on consumer goods


VAT on books and newspapers


Reverse charge mechanism for domestic B2B transactions

December 2016 38432 Cleared on 25 April 2017

Definitive VAT system and ‘Quick Fixes’

October 2017 39085 Cleared on 20 June 2018117

Proof of intra-Community supply

October 2017 39084 Cleared on 6 December 2017

VAT: Certified Taxable Persons

October 2017 39083 Remains under scrutiny. Last considered on 20 June 2018.

EU-Norway VAT Cooperation Agreement

October 2017 39174; 39175 Cleared on 6 December 2017

VAT: administrative cooperation to tackle fraud

December 2017 39299 Cleared on 23 May 2018

Minimum standard rate of VAT

December 2017 39391 Cleared on 28 March 2018

VAT: flexibility to set reduced rates

January 2018 39448 Remains under scrutiny. Last considered on 28 March 2018.

SME exemptions from VAT

January 2018 39449 Remains under scrutiny. Last considered on 28 March 2018.

Definitive VAT system: detailed implementing rules

May 2018 39795 Remains under scrutiny. Last considered on 5 September 2018.

117

117 The ‘Quick Fixes’ element of the proposal was split from the ‘definitive VAT system’ and the related Certified Taxable Person proposal, to allow the short-term changes to take effect more rapidly. The ‘Quick Fixes’ are expected to be adopted by EU Finance Ministers in autumn 2018. See for more information our Report of 20 June 2018. The ‘definitive’ system and CTP status proposals remain under scrutiny (documents 39083 and 39795).


16 Law enforcement access to electronic evidence


Committee’s decision Not cleared from scrutiny; further information requested; drawn to the attention of the Home Affairs Committee, the Justice Committee and the Committee on Exiting the European Union

Document details (a) Proposal for a Regulation on European Production and Preservation Orders for electronic evidence in criminal matters

(b) Proposal for a Directive laying down harmonised rules on the appointment of legal representatives for the purpose of gathering evidence in criminal proceedings

Legal base (a) Article 82(1) TFEU, ordinary legislative procedure, QMV

(b) Articles 53 and 62 TFEU, ordinary legislative procedure, QMV

Department Home Office

Document Numbers (a) (39631), 8110/18 + ADDs 1–3, COM(18) 225; (b) (39630), 8115/18 + ADDs 1–2, COM(18) 226


16.1 The European Commission’s “e-evidence” proposals are intended to make it easier and quicker for law enforcement authorities to obtain electronic evidence (such as e-mails, text messages and photos) for a criminal investigation where the data or the service provider are in a different Member State. The proposed Regulation—document (a)—would introduce a European Preservation Order to prevent information being altered or erased and a European Production Order requiring the information to be produced within 10 days (or 6 hours in an emergency). As the proposal is a criminal law measure, it is subject to the UK’s Title V (justice and home affairs) opt-in Protocol, meaning that it will only apply to the UK if the Government decides to opt in. The proposed Directive—document (b)—would require online service providers offering services within the EU to designate a legal representative in the EU responsible for ensuring compliance with European Preservation and Production Orders or other law enforcement requests for evidence needed for criminal proceedings. It is not a criminal law measure as its principal objective, according to the Commission, is to remove obstacles to the provision of services within the EU by establishing “a level playing field for all companies offering the same type of services in the EU, regardless of where they are established or act from”.118

16.2 The Commission anticipates that both proposals will take effect six months after they have been adopted and entered into force. Even if negotiations are not concluded before 29

118 See p.3 of the Commission’s explanatory memorandum accompanying the proposed Directive.





March 2019, the date when the UK is expected to leave the EU, the proposals are likely to be adopted and take effect within the transition/implementation period agreed as part of the UK’s exit negotiations. Under the draft Withdrawal Agreement setting out the terms on which the UK will leave the EU, most EU laws will continue to apply to the UK as if it were a Member State until the transition/implementation period ends on 31 December 2020.119

16.3 We examined the proposals and the Government’s accompanying Explanatory Memorandum in May. In our Report agreed on 16 May, we asked the Government to:

• clarify its position on the need for further legislative action at EU level;

• provide further information on its evaluation of existing tools and mechanisms—whether domestic, EU or international—for obtaining electronic evidence stored in a different jurisdiction and how these compare with the mechanisms and timescales envisaged in the proposed Regulation;

• indicate whether the proposed Directive—document (b)—should also cite a Title V (justice and home affairs) legal base so that the UK would have the option of not taking part;

• explain the practical implications of being bound only by the Directive if the Government were to decide not to opt into the proposed Regulation, and how this might affect requests for electronic evidence made under other EU criminal law instruments in which the UK participates, such as the European Investigation Order;

• provide further information on the progress made in negotiating a bilateral UK-US Data Access Agreement, its main provisions, and how UK participation in the proposed Regulation might affect the operation of the Agreement;

• explain what progress has been made in wider negotiations on the UK’s future security relationship with the EU and how significant opt-in decisions taken in the months remaining until exit day are likely to be in shaping that relationship; and

• clarify the meaning and effect of Article 122(1)(a) of the draft EU/UK Withdrawal Agreement which provides that only those EU justice and home affairs laws which are “binding upon and in the UK” by the date on which the Withdrawal Agreement enters into force—expected to be 29 March 2019—will apply to the UK during a post-exit transition/implementation period.

16.4 In his response dated 18 July, the Minister for Policing and the Fire Service (Mr Nick Hurd) reiterates the Government’s support for improved cross-border access to electronic evidence but, unlike other Member States, does not consider that EU legislation “would be a practical and effective way to address this global issue”. He recognises that existing tools and mechanisms for obtaining electronic evidence have some shortcomings: electronic data cannot be obtained directly from service providers under existing mutual legal assistance arrangements or from service providers outside the EU under the European Investigation Order.

119 See Article 122 of the draft Withdrawal Agreement.

http://europeanmemoranda.cabinetoffice.gov.uk/files/2018/05/EM_signed_-_e-evidence_proposals1.pdf

http://europeanmemoranda.cabinetoffice.gov.uk/files/2018/05/EM_signed_-_e-evidence_proposals1.pdf



http://europeanmemoranda.cabinetoffice.gov.uk/files/2018/07/180718_Letter_from_Nick_Hurd_to_ESC_e-evidence1.pdf



16.5 The Minister accepts that the sole purpose of the proposed Directive is to “remove obstacles within the internal market” and that, as it does not contain JHA content, the UK’s justice and home affairs opt-in does not apply. He says that the Government is “conducting an analysis of the potential implications of being bound only by the Directive” as part of the process for deciding whether to opt into the proposed Regulation—the three-month opt-in deadline will expire on 10 September.

16.6 The Minister explains that the UK-US Data Access Agreement “would allow companies storing data in one country to comply with lawful orders for electronic communications from the other country without any conflict of law, in tightly defined circumstances”. The US Congress has passed domestic legislation—the Clarifying Lawful Overseas Use of Data (CLOUD) Act—to enable US Communication Service Providers to comply with UK law enforcement requests for data issued under the Agreement but there remains “much to do at both the technical level and in terms of securing congressional and parliamentary ratification of the Agreement before the Agreement can enter into force”. He confirms that “the Government’s priority is to sign and ratify the Agreement” and adds that the way in which UK participation in the proposed Regulation might affect the operation of the Agreement will be an important factor in reaching an opt-in decision.

16.7 Turning to the UK’s future relationship with the EU, the Minister sets out the Government’s aspiration for “an ambitious and comprehensive security relationship which preserves mutually important operational capabilities while ensuring the UK and EU continue to work together to combat fast evolving security threats”. He continues:

JHA opt-in decisions taken since the UK triggered Article 50 and before 29 March 2019 will clearly identify EU tools and legislation that the UK considers to be useful both as a Member State, during the Implementation Period, and in any future relationship. Given that most recent JHA opt-in or Schengen opt-out decisions have related to legislation amending existing tools the UK participates in, those decisions are not in themselves significant in shaping the future security partnership.

16.8 The Minister says that the Government has clarified with the European Commission the meaning of the provisions of the draft EU/UK Withdrawal Agreement concerning the application of EU justice and home affairs measures during a post-exit transition/implementation period:

The UK will be bound by any measure where the UK has opted into or not opted out of that measure before the date the Withdrawal Agreement enters into force, whether or not the measure has been formally adopted.

Our Conclusions

16.9 We thank the Minister for addressing each of our questions.

16.10 We highlight the Government and the Commission’s shared understanding of Article 122 of the draft EU/UK Withdrawal Agreement which raises the stakes on any decisions to opt into Title V (justice and home affairs) measures or not opt out of Schengen-building measures taken before the UK leaves the EU on 29 March 2019. This is because EU measures which the Government opts into (or does not opt out of)


will apply to and bind the UK as if it were a Member State if they take effect during the envisaged transition/implementation period ending on 31 December 2020, even though negotiations may not have concluded and the UK had a vote on the outcome before leaving the EU. Whilst the Minister indicates that most recent Title V opt-in and Schengen opt-out decisions simply amend existing tools in which the UK participates and so “are not in themselves significant in shaping the future security partnership”, that is not the case for the proposed Regulation which is a new EU justice and home affairs measure.

16.11 We infer from the Minister’s letter that the Government is unlikely to opt into the proposed Regulation for two reasons. First, he confirms that the Government sees no need for EU legislation in this area and, second, he suggests that UK participation in the proposed Regulation may affect the operation of a bilateral UK-US Data Access Agreement which the Government is keen to conclude. We understand that the Commission and the Council Legal Service both consider that the EU has exclusive competence to negotiate a data access agreement with the United States and have urged Member States to refrain from bilateral negotiations.120 We ask the Minister whether he accepts that this is an area of exclusive EU competence, or would become one with the adoption of the proposed Regulation, and whether a decision to opt into the proposed Regulation would impede or prevent the UK from negotiating and concluding its own bilateral UK-US Data Access Agreement. We also ask him what assessment he has made of the risk that a bilateral UK-US Data Access Agreement might affect the prospects for securing a comprehensive data protection agreement with the EU post-exit.

16.12 We reiterate our request for further information on the practical implications of being bound only by the Directive, should the UK decide not to participate in the proposed Regulation, and how this might affect requests for electronic evidence made under other EU criminal law instruments in which the UK participates, such as the European Investigation Order. Would, for example, these requests also have to be addressed in the first instance to the service provider’s designated legal representative in the EU?

16.13 Pending further information, the proposed Regulation and Directive remain under scrutiny. We ask the Minister to provide regular updates on the progress of negotiations. We draw this chapter to the attention of the Home Affairs Committee, the Justice Committee and the Committee on Exiting the European Union.


(a) Proposal for a Regulation on European Production and Preservation Orders for electronic evidence in criminal matters: (39631), 8110/18 + ADDs 1–3, COM(18) 225.

(b) Proposal for a Directive laying down harmonised rules on the appointment of legal representatives for the purpose of gathering evidence in criminal proceedings: (39630), 8115/18 + ADDs 1–2, COM(18) 226.


Twenty-eighth Report HC 301–xxvii (2017–19), chapter 3 (16 May 2018). 120 See the Presidency note of 28 May 2018 (Council document 9418/18).





17 Improving cross-border law enforcement access to financial information


Committee’s decision Not cleared from scrutiny; further information requested; drawn to the attention of the Home Affairs Committee and the Justice Committee

Document details Proposal for a Directive laying down rules facilitating the use of financial and other information for the prevention, detection, investigation or prosecution of certain criminal offences and repealing Council Decision 2000/642/JHA

Legal base Article 87(2) TFEU, ordinary legislative procedure, QMV




17.1 Criminal activity frequently has a cross-border dimension, making it difficult to gather the evidence needed to advance a criminal investigation or prosecution. The European Commission considers that existing mechanisms within the EU for accessing and exchanging financial information relating to criminal activity are too slow, given the pace at which funds can be moved across borders. It has therefore proposed a Directive which is intended to improve access to financial information for law enforcement purposes. The proposal would require Member States to:

• give designated national law enforcement authorities and Asset Recovery Offices direct access to bank account information held in their Member State’s central bank account registries (or electronic data retrieval systems) where necessary to prevent, detect, investigate or prosecute a serious criminal offence;

• strengthen the exchange of financial information and analysis between their own designated national law enforcement authorities and Financial Intelligence Units (national centres which collect information on suspicious or unusual financial activity) as well as between Financial Intelligence Units in different Member States;121

• introduce a three-day time limit for the exchange of information between Financial Intelligence Units in different Member States (24 hours in “exceptional and urgent cases”); and

• give Europol indirect access to bank account and other financial information or analysis via each Member State’s National Europol Unit.

121 Whilst it would be for each Member State to designate the relevant national law enforcement authorities, they must include the National Europol Unit.




17.2 The proposed Directive is subject to EU data protection rules and includes additional safeguards which are set out in our earlier Report agreed on 27 June. The Commission envisages that it would take effect at the same time as the recently agreed Fifth Anti-Money Laundering Directive (“5th AMLD”) which requires Member States to establish central bank registries or electronic data retrieval systems so that account holders can be readily identified. This means that both Directives would have to be implemented by 10 January 2020, before the expiry (on 31 December 2020) of the post-exit transition/implementation period envisaged in the draft EU/UK Withdrawal Agreement during which the UK will continue to apply EU laws.

17.3 As the proposed Directive is a criminal law measure, it is subject to the UK’s Title V (justice and home affairs) opt-in and will only apply to the UK if the Government decides to opt in. In his Explanatory Memorandum of 12 June, the Minister for Security and Economic Crime (Mr Ben Wallace) indicated that the proposal was “broadly in line with existing UK legislation and practice on the sharing of financial information” but expressed concern that it might compromise the operational autonomy of national Financial Intelligence Units (FIUs) and questioned whether a request from a FIU in another EU Member State should be handled with greater urgency than a request from a FIU in a non-EU country. In his letter of 24 July 2018, the Minister says that “all other Member States have similar concerns to the UK” and that he is “hopeful that the changes we wish to see made to the text will be made”. He confirms that the three-month deadline for notifying the Council of the UK’s opt-in decision will expire on 17 August.

17.4 In our earlier Report, we requested further information on the practical implications of the Government’s opt-in decision during the period (to 31 December 2020) when EU law will continue to apply to the UK. We asked:

• whether the proposed Directive would be of greater operational benefit to the UK than an earlier Council Decision (adopted in 2000) on cooperation between Member States’ national Financial Intelligence Units in which the UK already participates and which the proposed Directive would repeal;122

• if the Government were to decide not to opt into the proposed Directive, whether the 2000 Council Decision would continue to apply to the UK until the end of the transition/implementation period (31 December 2020); and/or

• whether the UK’s non-participation in the proposed Directive would make the earlier Council Decision “inoperable” for other Member States, meaning that the UK could be ejected from it before the end of 2020.123

17.5 The Minister tells us that most of the provisions of the earlier (2000) Council Decision were replaced by the EU’s Fourth Money Laundering Directive (which applies to the UK) and that it “consequently has no further value”. The repeal of the Council Decision will not, therefore, impede the UK’s existing cooperation with FIUs in other EU Member States.

122 Council Decision 2000/642/JHA concerning arrangements for cooperation between financial intelligence units of the Member States in respect of exchanging information. The UK re-joined this Decision and 34 other EU measures in December 2014, after deciding to opt out en masse of EU police and criminal justice measures adopted under the pre-Lisbon Treaty arrangements.

123 Under Article 4a of Protocol 21 to the EU Treaties, the Council may decide that the UK can no longer participate in an existing EU measure if the UK’s non-participation in an amending measure would make it inoperable for other Member States. An amending measure includes a measure which repeals and replaces an earlier EU measure.


http://europeanmemoranda.cabinetoffice.gov.uk/files/2018/06/EM_8411_18_ADDS_1-2.pdf

http://europeanmemoranda.cabinetoffice.gov.uk/files/2018/07/2018-07-24_-_Rt_Hon_Ben_Wallace_MP_to_Chair_of_ESC_-_council_decision_2000-642-JHA.pdf

https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32000D0642&from=GA


The proposed Directive covers new areas—notably, access by competent law enforcement authorities to bank account register details—that were not included in the earlier Council Decision or the Fourth Money Laundering Directive.

17.6 We noted that, under Article 122(1)(a) of the draft EU/UK Withdrawal Agreement, the proposed Directive will only apply if it is “binding upon and in the UK” by exit day. We asked the Minister whether this meant that the proposed Directive would only apply if the Government decided to opt in and the proposal was formally adopted by the Council and the European Parliament by 29 March 2019. The Minister responds:

“The Government has clarified the text of the Withdrawal Agreement in relation to the application of the JHA opt-in and Schengen opt-out with the European Commission. The UK will be bound by any measure where the UK has opted into or not opted out of before the date the Withdrawal Agreement enters into force, whether or not the measure has been formally adopted. We consider it possible, but unlikely, that the Directive will be adopted before 29 March 2019.”

17.7 Finally, we asked the Minister to:

• explain the basis on which the UK’s Financial Intelligence Unit would be able to exchange financial information with its counterparts in the EU post-exit (and post-transition); and

• indicate whether the proposed Directive would be amongst the measures to be included in a new internal security treaty with the EU, as envisaged in the Government’s Framework for the UK-EU Security Partnership.

17.8 The Minister says that the UK FIU exchanges information with a wide range of countries outside the EU and envisages that these arrangements will continue post-exit “as they are based on the provisions of the Crime and Courts Act 2013”. He reiterates the Government’s aspiration for “an ambitious and comprehensive security relationship which preserves mutually important operational capabilities whilst allowing the UK and EU to continue to work together to combat fast evolving security threats”. The UK currently participates in around 40 EU police and criminal justice measures and wishes to sustain cooperation in areas of mutual operational benefit for the EU and the UK: practical operational cooperation, multilateral cooperation through EU agencies, and data-driven law enforcement.

Our Conclusions

17.9 The Minister considers it “possible, but unlikely” that the proposed Directive will be adopted before the UK leaves the EU on 29 March 2019. This means, if the Government decides to opt in, that the UK will be bound by and required to implement the Directive (if it is adopted during the post-exit transition/implementation period envisaged in the draft EU/UK Withdrawal Agreement) without having a say in negotiations on the proposal after the UK’s exit or a vote on the final text agreed with the European Parliament. The only justification we can see for deciding to opt in in these circumstances would be to strengthen the case for the UK to sustain close cooperation in tackling cross-border financial crime as part of a new post-exit internal security

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/705687/2018-05-0_security_partnership_slides__SI__FINAL.pdf


treaty with the UK. Given the imminence of the opt-in deadline, it is disappointing that the Minister is clearly unwilling to indicate whether the Government intends the proposed Directive to be amongst the measures included in a future treaty with the EU.

17.10 We ask the Minister to inform us of the Government’s opt-in decision, and provide a full explanation of the reasons for it, at the earliest opportunity. We also request regular updates on negotiations. Meanwhile, the proposed Directive remains under scrutiny. We draw this chapter to the attention of the Home Affairs Committee and the Justice Committee.


Proposal for a Directive laying down rules facilitating the use of financial and other information for the prevention, detection, investigation or prosecution of certain criminal offences and repealing Council Decision 2000/642/JHA: (39666), 8411/18 + ADDs 1–2, COM(18) 213.


Thirty-third Report HC 301–xxxii (2017–19), chapter 6 (27 June 2018).



18 Future EU funding for security: the Internal Security Fund


Committee’s decision (a) Cleared from scrutiny

(b) Not cleared from scrutiny; further information requested; drawn to the attention of the Home Affairs Committee

Document details (a) Commission report: ex-post evaluation of the Prevention and Fight Against Crime Programme (ISEC) and the Prevention, Preparedness and Consequence Management of Terrorism and other Security-related Risks Programme (CIPS) 2007–13

(b) Proposal for a Regulation establishing the Internal Security Fund

Legal base (a) —

(b) Articles 82(1), 84 and 87(2) TFEU, ordinary legislative procedure, QMV


Document Numbers (a) (39921), 10197/18 + ADDs 1–2, COM(18) 455; (b) (39912), 10154/18 + ADD 1, COM(18) 472


18.1 Recent terrorist and cyber-attacks in Europe have underlined the cross-border dimension of the security threats facing Member States and the need for enhanced cooperation and information exchange between police and judicial authorities. Whilst Member States are responsible for ensuring the safety and security of their citizens, the EU can provide important financial and technical support to strengthen national capabilities and close the information gaps which criminals exploit. The European Commission’s proposals for the EU’s next long-term budget for the period 2021–27 include a substantial increase in funding for security—a total of €4.8 billion compared with €3.5 billion for 2014–20. Just over half of this sum—€2.5 billion (£2.1 billion)—would be channelled through a renewed EU Internal Security Fund. Around €1.2 billion would be used to support the decommissioning of soviet-era nuclear facilities in three Member States and €1.1 billion would boost funding for three EU Agencies—Europol, the European Police College (CEPOL) and the European Monitoring Centre for Drugs and Drug Addiction (EMCDDA).124

18.2 The aim of the proposed Regulation establishing the Internal Security Fund—document (b)—is to support Member States’ efforts in responding to the ever-changing security threats they face from terrorism and cross-border criminal activity by:

124 See the European Commission’s EU Budget for the Future: Building a Europe Resilient to future Security Challenges. fact sheet,



https://ec.europa.eu/commission/sites/beta-political/files/budget-may2018-internal-security-fund_en.pdf


• increasing the exchange of information amongst law enforcement authorities and optimising the use of EU information systems;

• intensifying cross-border joint operations; and

• strengthening capabilities to combat serious and organised cross-border crime.125

18.3 The proposal takes into account the findings of an evaluation of previous EU funding instruments for police cooperation covering the period 2007–13 which are set out in a Commission report—document (a)—and the outcome of stakeholder consultations. These highlighted a need to simplify funding mechanisms and build additional flexibility into the Internal Security Fund to respond to emergencies and new security challenges. The Commission proposes maintaining “a critical mass of upfront funding for structural and large multiannual investments” to help Member States develop their security systems whilst also ensuring that investment is focussed on “key EU priorities”: terrorism and radicalisation, serious and organised crime, cybercrime, and support for victims of crime.126

18.4 The Commission envisages that 60% (or around €1.25 billion) of the Fund would be allocated to Member States at the outset (with a further “top-up” of €250 million mid-way through the funding period), with the remaining 40% (around €1 billion) reserved for thematic projects to meet urgent or unforeseen security challenges or address “priorities with a high added value” for the EU. Under this funding model, each Member State would receive a fixed sum of €5 million at the start of the new funding period. Subsequent allocations would be based on a distribution key weighted to reflect the size of each Member State’s population (40%) and territory (15%) and in inverse proportion to their GDP (45%).127 The Commission anticipates that the management of the Internal Security Fund will be made easier by bringing it within the scope of the proposed Common Provisions Regulation which contains a comprehensive set of rules (or “single rule book”) on the programming, evaluation and financial management of EU funds.

18.5 The Commission underlines the need to exploit synergies and ensure coherence with other proposed EU funding instruments which are likely to be relevant in addressing cross-cutting security threats. They include the Asylum and Migration Fund and Integrated Border Management Fund (enhancing protection of the EU’s external borders), the European Social Fund+ (drugs policy, radicalisation), the European Regional Development Fund (security of infrastructure and public spaces), Horizon Europe (security research), Digital Europe (security of IT systems) and the Justice and Rights and Values programmes (judicial training, interoperable information systems, support for victims of crime).

18.6 The proposed Regulation specifies that actions funded “shall be implemented in full respect for fundamental rights and human dignity” as set out in the EU Charter of Fundamental Rights, EU data protection law and the European Convention for the Protection of Human Rights and Fundamental Freedoms. Funding will also be subject to compliance with a separate Regulation on the protection of the Union’s budget in case of generalised deficiencies as regards the rule of law in the Member States which the Commission has proposed as part of its budget proposals for 2021–27. This proposal would introduce further conditionality by enabling EU funding to be suspended or cut back

125 Annexes II and III of the proposed Regulation contain a detailed list of measures and actions that the Fund would support.

126 See p.2 of the Commission’s explanatory memorandum accompanying the proposed Regulation. 127 See the European Commission’s fact sheet—Questions and Answers: Reinforced security funding for 2021–27.


https://ec.europa.eu/commission/sites/beta-political/files/budget-may2018-common-provisions_en.pdf

https://ec.europa.eu/commission/sites/beta-political/files/budget-may2018-common-provisions_en.pdf

https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52018PC0324&from=EN


http://data.consilium.europa.eu/doc/document/ST-10154-2018-ADD-1/en/pdf


where the Commission considers that a threat to the rule of law in an EU country would pose a risk to “sound financial management or the protection of the financial interests of the Union”.128

18.7 The Commission says it is presenting the proposed Regulation “for a Union of 27 Member States” as it would take effect in January 2021, after the UK’s exit from the EU in March 2019 and after the expiry at the end of December 2020 of the transition/implementation period envisaged in the draft EU/UK Withdrawal Agreement.129 Although the proposal cites Title V (justice and home affairs) legal bases, it does not include the customary recital to indicate whether or not the UK is opting in. The UK does not participate in the equivalent funding instrument for 2014–20 (the instrument for financial support for police cooperation).

18.8 There is no provision to enable third (non-EU) countries to be “associate” participants in the Internal Security Fund, but the Fund may be used to support action “in relation to and in third countries” which supports the priorities set out in the proposed Regulation.130 The Commission envisages that this could include cooperation with third countries in the following areas: countering terrorism and radicalisation, serious and organised crime and corruption, trafficking in human beings and migrant smuggling as well participation in joint investigation teams.131

18.9 In his Explanatory Memorandum of 5 July 2018, the Minister for Policing and the Fire Service (Nick Hurd) welcomes the Commission’s evaluation of the EU’s earlier police cooperation funding instruments for the period 2007–13—document (a)—and its efforts to reflect “lessons learned” in its latest proposal for a renewed Internal Security Fund, but observes that “the overarching findings may be overly positive, and more thorough introspection would have been helpful”.

18.10 Turning to the proposed Regulation establishing the Internal Security Fund— document (b)—the Minister recognises that negotiations on the EU’s next long-term budget “are primarily a matter for the 27 remaining Member States, as the UK will no longer be a Member State of the European Union when the next MFF [Multiannual Financial Framework] begins in 2021”. He adds, however, that the UK will participate in negotiations “on the basis that the UK is currently a full member of the European Union” and “will engage where there are UK interests”. He agrees that security should be considered a priority for EU funding but adds that any increase should be achieved through “reprioritisation” within the EU budget without increasing the overall budget level.

18.11 The Minister says that the proposed Regulation is subject to the UK’s Title V (justice and home affairs) opt-in and “will only apply to the UK if we opt into it”. He adds that, in reaching an opt-in decision, the Government will take into account:

• any possible benefits for the UK, given that EU funding will only be available after the transition/implementation period envisaged in the draft EU/UK Withdrawal Agreement expires at the end of December 2020;

128 See our Thirty-fourth Report HC 301–xxxiii (2017–19), chapter 7 (4 July 2018). 129 See Article 121 of the draft EU/UK Withdrawal Agreement and p.3 of the Commission’s explanatory

memorandum accompanying the proposed Regulation.130 See Articles 4(2) and 5 of the proposed Regulation. 131 See p.4 of the Commission’s explanatory memorandum accompanying the proposed Regulation.




http://europeanmemoranda.cabinetoffice.gov.uk/files/2018/07/EM_10154_18_ADD_1_10197_18_ADD_1-2.pdf


• the fact that the UK does not participate in the police cooperation instrument which forms part of the current Internal Security Fund for 2014–20; and

• the impact that opting in would have on the Government’s ability to “steer the design of the fund to support our potential participation as a third country” after December 2020.

18.12 The Minister underlines the UK’s “strong interest in the collective security of EU Member States, as part of the EU-wide counter-terrorism effort” and the Government’s support for a range of EU security-related measures, including recent proposals to make EU migration and security databases interoperable. He continues:

“The UK has been instrumental in developing the security, law enforcement and criminal justice co-operation tools which the EU has at its disposal. We want this to continue in a way that works for both the UK and for Europe and are committed to ongoing cooperation with the EU on security and law enforcement. Our relationship with the EU will change as a result of our departure and the details of our participation in practical cooperation measures that currently facilitate cooperation will be subject to negotiations.”

18.13 The Minister recalls the Prime Minister’s commitment to “continue working with the EU” post-exit and to “take part in those specific policies and programmes which are to the UK and the EU’s joint advantage, such as those that promote our mutual security”. The UK would expect to make “an ongoing contribution to cover our fair share of the costs involved”. He notes that the Commission is keen to secure an overall agreement on the EU budget for 2021–27 by May 2019, ahead of the next European Parliament elections, but adds that the timing is “uncertain”.

Our Conclusions

UK participation in the proposed Regulation

18.14 The proposed Regulation establishing the Internal Security Fund—document (b)—does not include a recital indicating that UK participation is subject to the UK’s Title V (justice and home affairs) opt-in Protocol. This is an important omission as such a recital clarifies the legal basis on which the UK is (or is not) entitled to participate in EU justice and home affairs measures. For reasons of political expediency, we understand why the Commission considers that it would be inappropriate for the UK to participate in the proposed Regulation, given that it will only apply from January 2021, after the UK has left the EU and the post-exit transition/implementation period envisaged in the draft EU/UK Withdrawal Agreement has expired. We nonetheless consider, as a matter of law, that the UK’s Title V opt-in Protocol does apply since the UK retains all the rights and obligations of EU membership until it leaves the EU. The better course of action would therefore seem to be for the Commission to include a recital to this effect and for the Government to decide not to opt in. We ask the Minister:

• whether he intends to press for the inclusion of a UK-specific recital;


• whether he expects to encounter any opposition from the Commission or other Member States and (if so) what action she intends to take to maintain the full effect of the UK’s Title V opt-in Protocol for as long as the UK remains a member of the EU; and

• to confirm the deadline for notifying the Government’s opt-in decision.

18.15 Under the draft EU/UK Withdrawal Agreement, only EU justice and home affairs measures which are “binding upon and in the United Kingdom” on exit day will continue to apply to the UK during a post-exit transition/implementation period ending on 31 December 2020. In separate correspondence, the Government has clarified that:

“The UK will be bound by any measure where the UK has opted into or not opted out of before the date the Withdrawal Agreement enters into force, whether or not the measure has been formally adopted.”132

This raises the stakes on any opt-in decisions (or decisions not to opt out of Schengen measures) taken before the UK leaves the EU on 29 March 2019.

18.16 We recognise that the risk is negligible as regards the proposed Regulation establishing the Internal Security Fund, as it will only take effect from January 2021. Nonetheless, if any extension of the post-exit transition/implementation period beyond December 2020 were to be agreed as part of the UK’s withdrawal or future partnership negotiations, a decision to opt in would mean that the Regulation would apply to and bind the UK, raising difficult questions about ongoing contributions to the EU’s next long-term budget for 2021–27.

Allocation of funding and conditionality

18.17 The Commission proposes a new formula for allocating EU funds amongst Member States so that EU expenditure reflects “EU-level priorities and policy commitments and supports the implementation of the EU home affairs acquis”.133 It also proposes stronger conditionality to ensure that beneficiaries of EU funding are held to their obligation to respect the rule of law. We would welcome the Minister’s view on the significance of these changes, as well as some indication of how other Member States have reacted, and how great an impact the changes are likely to have on the future distribution of funding.

Participation in the Internal Security Fund as a third country post-exit

18.18 The Minister sets out the Government’s aspiration to “continue working with the EU” post-exit and to “take part in those specific policies and programmes which are to the UK and the EU’s joint advantage, such as those that promote our mutual security”. We ask him to explain:

132 See the letter of 18 July 2018 from the Minister for Policing and the Fire Service (Nick Hurd) and the letter of 24 July 2018 from the Minister for Security and Economic Crime (Ben Wallace) to the Chair of the European Scrutiny Committee.

133 See p.8 of the Commission’s explanatory memorandum accompanying the proposed Regulation.

http://europeanmemoranda.cabinetoffice.gov.uk/files/2018/07/180718_Letter_from_Nick_Hurd_to_ESC_e-evidence.pdf




• what scope there is under the proposed Regulation for the UK, or legal entities established in the UK, to participate in or be associated with the next Internal Security Fund;

• whether the Government intends to seek some form of participation or association with the Fund and the anticipated benefits, given that much of the EU rule book underpinning police and judicial cooperation will cease to apply to the UK once it leaves the EU; and

• the basis for calculating a “fair share” if the Government does seek some form of UK participation in the Fund.

18.19 We are content to clear the Commission evaluation report—document (a)—from scrutiny. Pending further information, the proposed Regulation—document (b)—remains under scrutiny. As well as responding to our questions, we ask the Minister to provide progress reports on the negotiations. We draw this chapter to the attention of the Home Affairs Committee.


(a) Commission report: ex-post evaluation report for the period 2007–13 of actions financed by the “Prevention and Fight Against Crime” programme (ISEC) and the “Prevention, Preparedness and Consequence Management of Terrorism and other Security-related Risks” programme (CIPS): (39921), 10197/18 + ADDs 1–2;

(b) Proposal for a Regulation establishing the Internal Security Fund: (39912), 10154/18 + ADD 1, COM(18) 472.


None.





19 Future EU funding for border control, asylum and migration


Committee’s decision Not cleared from scrutiny; further information requested; drawn to the attention of the Home Affairs Committee

Document details (a) Proposal for a Regulation establishing the Asylum and Migration Fund

(b) Proposal for a Regulation establishing, as part of the Integrated Border Management Fund, the instrument for financial support for border management and visa

Legal base (a) Articles 78(2) and 79(2) and (4) TFEU, ordinary legislative procedure, QMV

(b) Articles 77(2) and 79(2)(d) TFEU, ordinary legislative procedure, QMV


Document Numbers (a) (39913), 10153/18 + ADDs 1–3, COM(18) 471; (b) (39915), 10151/18 + ADD 1, COM(18) 473


19.1 Migration, external border control and security within the EU remain at the top of the EU’s political agenda as it prepares its next long-term budget for the period 2021–27. According to the EU Commissioner for Migration, Home Affairs and Citizenship (Dimitris Avramopoulos):

“Bigger challenges need bigger resources—this is why we propose to almost triple the budget in this area. The reinforced funding will be pivotal in ensuring that we can implement these political priorities: further secure our external borders, continue to grant protection to those who need it, better support legal migration and integration efforts, counter irregular migration, and effectively and swiftly return those who have no right to stay.”134

19.2 The Commission envisages that funding for asylum, migration and border management would increase from €13 billion under the current budget (2014–20) to €34.9 billion under the new budget for 2021–27.135 Around €12 billion would be allocated to EU agencies—mainly to the European Border and Coast Guard Agency, with the aim of

134 See the European Commission’s press release, EU budget: Commission proposes major funding increase for stronger borders and migration, issued on 12 June 2018.

135 See our Thirty-fourth Report HC 301–xxxiii (2017–19), chapter 6 (4 July 2018) and the Commission’s fact sheet, EU Budget for the Future.



https://ec.europa.eu/commission/sites/beta-political/files/budget-proposals-modern-eu-budget-may2018_en.pdf


establishing “a standing corps of around 10,000 border guards”,136 but also to eu-LISA (the Agency overseeing the EU’s migration and security information systems), and to the EU Agency for Asylum. Most of the rest would be channelled through two EU funds:

• €10.4 billion (£9.1 billion) for a renewed Asylum and Migration Fund; and

• €9.3 billion (£8.17 billion) for a new Integrated Border Management Fund to support Member States in securing the EU’s external borders.

19.3 The aim of the proposed Regulation establishing the Asylum and Migration Fund—document (a)—is to contribute to the efficient management of migration flows by supporting efforts to:

• strengthen the EU’s common asylum system;

• manage the legal migration and integration of third country nationals; and

• counter irregular migration through more effective return and readmission policies.137

19.4 The Commission considers that new mechanisms are needed to allocate EU funding in a more flexible way: “maintaining a critical mass of upfront funding and large, multiannual investments in line with Member States’ needs” whilst also supporting investment in key EU priorities.138 It envisages that the Fund would be used in two ways: 60% (or around €6.25 billion) would be dedicated to Member States’ national Asylum and Migration Fund programmes and provide long-term financial support;139 the remaining 40% (around €4.17 billion) would be reserved for thematic projects with “a high added value to the Union”. Under this model, each Member State would receive a fixed sum of €5 million (£4.4 million) at the outset of the funding period. Any further allocations to Member States would be based on a distribution key and directed to those in greatest need and experiencing the most migratory pressure, with the funding weighted by policy area—30% for asylum, 30% for legal migration and integration, and 40% for irregular migration and returns.140 Member States would also receive targeted funding from the “thematic facility” to meet urgent needs and respond to crises or to support important policy priorities. So, for example, Member States would receive €10,000 for each individual resettled under an EU resettlement scheme as well as additional funding for exceeding their “fair share” of asylum seekers under the Commission’s proposed revision of the Dublin rules determining the Member State responsible for examining an application for international protection.141

136 See p.2 of the Commission’s explanatory memorandum accompanying document (b). 137 Annexes II and III of the proposed Regulation contain a detailed list of measures and actions that the Fund

would support. 138 See p.3 of the Commission’s explanatory memorandum accompanying the proposed Regulation. 139 Part of this sum—€1.1 billion—would be allocated mid-way through the funding period to take account of any

new migratory pressures.140 The funding formula is set out in Annex 1 of the proposed Regulation. The initial allocation of funding would

be based on Eurostat data covering a three-year reference period (from 2018–20) establishing which Member States have the greatest needs in each area of funding: asylum, legal migration and integration, and irregular migration and returns.

141 The figures for Dublin-related funding are uncertain as negotiations on a successor to the current Dublin III Regulation remain deadlocked.






19.5 The Commission envisages that a more targeted distribution of EU funding will not only ensure that it reaches the Member States most affected by migratory flows, but also give tangible expression to the obligation in Article 80 of the Treaty on the Functioning of the European Union (TFEU) that the implementation of EU policies on asylum and migration “shall be governed by the principle of solidarity and fair sharing of responsibility, including its financial implications, between the Member States”.

19.6 The Commission’s proposal to create a dedicated Integrated Border Management Fund underlines the importance it attaches to strengthening the EU’s external borders and ensuring a high level of security within the EU whilst maintaining a Schengen area without internal border controls in which goods and people can move freely. The Fund would be split between two different funding instruments: one focused mainly on the movement of people across the EU’s external borders (the Border Management and Visa Instrument), the other on enhanced customs checks on the movement of goods (the Customs Control Equipment Instrument). The bulk of funding—€8 billion (around £7 billion)—would be allocated to the Border Management and Visa Instrument, with the remaining €1.3 billion under the Customs Control Equipment Instrument used to fund the acquisition of “state-of-the-art” customs equipment (for example, scanners, automated number plate detection systems, teams of sniffer dogs and mobile laboratories for sample analysis).142

19.7 The aim of the proposed Regulation establishing a financial support instrument for the EU’s external borders and common visa policy (the Border Management and Visa Instrument)—document (b)—is to ensure “strong and effective” management of the EU’s external borders through:

• support for the European Border and Coast Guard Agency and national border control authorities in managing migratory flows (including search and rescue operations and the deployment of teams to migration “hotspots”) and in preventing illegal immigration and cross-border crime; and

• support for the EU’s common visa policy as a tool to facilitate legitimate travel and prevent migration and security risks.143

19.8 Just over half of the funds under the Border Management and Visa Instrument (€4.8 billion) would provide long-term support for Member States’ border management measures and implementation of the common visa policy, with the remaining sum (€3.2 billion) allocated to a “thematic facility” to respond to urgent needs, provide emergency assistance or support projects with “a high added value to the Union”.144 As for the Asylum and Migration Fund, each Member State would receive a fixed sum of €5 million (£4.4 million) at the outset of the funding period. Any further allocations to Member States would be based on a distribution key which takes into account the workload, pressure and threat level at their external land borders (30%), external sea borders (35%), airports (20%) and

142 See chapter X of this Report and the European Commission’s press release of 12 June 2018, EU budget: Commission proposes major funding increase for stronger borders and migration.

143 Annexes II and III of the proposed Regulation contain a detailed list of measures and actions that the Fund would support.

144 Part of the €4.8 billion (€802 million) would be allocated mid-way through the funding period to take account of any new migratory pressures. Lithuania would receive an additional €157 million for the Special Transit Scheme to help manage the transit of people between the Kaliningrad Oblast and other parts of the Russian Federation.






consular offices (15%).145 The funding is intended to complement the work undertaken by EU agencies active in the field of border management, notably the European Border and Coast Guard Agency, eu-LISA and the EU Agency for Asylum, as well as agencies with a broader maritime surveillance role such as the European Maritime Safety Agency and European Fisheries Control Agency.

19.9 The Commission underlines the need to exploit synergies and ensure coherence with other EU funding instruments whilst also simplifying the procedures for funds which are managed jointly by the Commission and Member States under a “shared management” model. The Asylum and Migration Fund and the Integrated Border Management Fund would both be covered by the proposed Common Provisions Regulation which contains a comprehensive set of rules (or “single rule book”) on the programming and evaluation of EU funds and their financial management.146 So, too, would the EU’s cohesion funds (the European Regional Development Fund and the European Social Fund) which are intended to complement the Asylum and Migration Fund by providing support for the longer-term integration of third country nationals within their host communities.

19.10 The proposed Common Provisions Regulation includes an “enabling condition” which would make the effective application and implementation of the EU Charter of Fundamental Rights a prerequisite for EU funding.147 Responding to growing concerns about declining respect for the rule of law and the independence of the judiciary in several EU Member States, the Commission has also proposed a separate Regulation on the protection of the Union’s budget in case of generalised deficiencies as regards the rule of law in the Member States as part of its budget proposals for 2021–27. Its proposal would introduce further conditionality by enabling EU funding to be suspended or cut back where the Commission considers that a threat to the rule of law in an EU country would pose a risk to “sound financial management or the protection of the financial interests of the Union”. Such a risk may arise from measures endangering the independence of the judiciary or limiting the availability and effectiveness of legal remedies (including a lack of effective judicial oversight of government entities that manage EU budgetary allocations).148

19.11 Both the proposed Regulations would take effect in January 2021, after the UK’s exit from the EU in March 2019 and after the expiry at the end of December 2020 of the transition/implementation period envisaged in the draft EU/UK Withdrawal Agreement.149 The Commission says it is presenting its budget proposals “for a Union of 27 Member States”, following the UK’s notification of its decision to leave the EU.150 Although both the proposed Regulations cite Title V (justice and home affairs) legal bases, neither includes the customary recital to indicate whether the UK is participating in and bound by them. They will replace two EU funding instruments which will expire at the end of 2020. Document (a)—the proposed Regulation establishing the Asylum and Migration Fund—is the intended successor to the Asylum, Migration and Integration Fund in

145 The funding formula is set out in Annex 1 of the proposed Regulation. The initial allocation of funding would be based on data provided by Member States and Eurostat covering a three-year reference period (from 2018–20) establishing which Member States have the greatest needs in each area of funding: external land borders, external sea borders, airports and consular offices.

146 See chapter 20 of this Report. 147 See Annex III of the proposed Common Provisions Regulation which sets out four horizontal enabling conditions

which each Member State must fulfil to receive EU funding. 148 See our Thirty-fourth Report HC 301–xxxiii (2017–19), chapter 7 (4 July 2018). 149 See Article 121 of the draft EU/UK Withdrawal Agreement.150 See p.4 of the Commission’s explanatory memorandum accompanying both proposed Regulations.

https://eur-lex.europa.eu/resource.html?uri=cellar:26b02a36-6376-11e8-ab9c-01aa75ed71a1.0003.02/DOC_1&format=PDF








which the UK currently takes part. Document (b)—the proposed Border Management and Visa Instrument—will replace part of the current EU Internal Security Fund dealing with external borders and visa policy. The UK does not participate in this part of the EU Internal Security Fund as it concerns elements of the Schengen rule book which do not apply to the UK.

19.12 Third (non-EU) countries would be able to participate in the Asylum and Migration Fund, subject to an agreement ensuring “a fair balance” between the contributions they make and the benefits they receive, but they would have no decision-making powers.151 By contrast, the Border Management and Visa Instrument only envisages the participation of third countries associated with the Schengen rule book—Iceland, Norway, Switzerland and Liechtenstein.152

19.13 In her Explanatory Memorandum of 5 July 2018 on the proposed Asylum and Migration Fund, the Immigration Minister (Caroline Nokes) recognises that negotiations on the EU’s next long-term budget for 2021–27 are “primarily a matter for the 27 remaining Member States, as the UK will no longer be a Member State of the European Union when the next MFF [Multiannual Financial Framework] begins in 2021”. The Government nonetheless intends to participate in negotiations “on the basis that the UK is currently a full member of the European Union” and will “engage where there are UK interests”. She says that the proposed Regulation is subject to the UK’s Title V (justice and home affairs) opt-in and “will only apply to the UK if we opt into it”. In reaching an opt-in decision, the Government will consider:

• any possible benefits for the UK, given that EU funding will only be available after the transition/implementation period envisaged in the draft EU/UK Withdrawal Agreement expires at the end of December 2020; and

• the impact that opting in would have on the Government’s ability to “steer the design of the fund to support our potential participation as a third country” after December 2020.

19.14 The Minister reiterates the Government’s “strong interest in the effective management of the EU’s external border, not just in combating illegal migration and cross-border crime, but also as part of the EU-wide counter-terrorism effort”, adding:

“A stronger, more secure external Schengen border is of direct benefit to the UK if the journeys of migrants seeking to enter the UK clandestinely are disrupted and stopped.”

19.15 The Minister recalls the Prime Minister’s commitment to “continue working with the EU” post-exit and to “take part in those specific policies and programmes which are to the UK and the EU’s joint advantage, such as those that promote our mutual security”. The UK would expect to make “an ongoing contribution to cover our fair share of the costs involved”. She indicates that the Government will consider carefully “how we maximise potential benefits from any third party engagement” in the new post-2020 Asylum and Migration Fund. She notes that the UK has received an allocation of €370 million from

151 See Article 5 of document (a). 152 See Article 7(4) of document (b).

http://europeanmemoranda.cabinetoffice.gov.uk/files/2018/07/EM_10153_18_ADD_1-3.pdf

http://europeanmemoranda.cabinetoffice.gov.uk/files/2018/07/EM_10153_18_ADD_1-3.pdf


the current EU Asylum, Migration and Integration Fund for the period 2014–20 and that the Government “will be considering in due course the potential impact” that the loss of EU funding in this area would have on the UK.

19.16 In her separate Explanatory Memorandum of 5 July 2018 on the proposed Border Management and Visa Instrument, the Minister first indicates that the proposal is subject to the UK’s Title V (justice and home affairs) opt-in and “will only apply to the UK If we opt into it”, but later says that the UK is unable to participate as it builds on parts of the Schengen rule book which do not apply to the UK. She expresses the Government’s support for “efforts by the EU to increase the security of the EU border and to ensure that Member States can access adequate funding in order to achieve that aim”.

19.17 The Minister notes that the Commission is keen to secure an overall agreement on the EU budget for 2021–27 by May 2019, ahead of the next European Parliament elections, but adds that the timing is “uncertain”.

Our Conclusions

UK participation in the proposed Regulations

19.18 Neither of the proposed Regulations contains a recital on the application of the UK’s Title V (justice and home affairs) opt-in or Schengen opt-out Protocol. This is an important omission as recitals relating to these Protocols establish the legal basis on which the UK is (or is not) entitled to participate in EU justice and home affairs measures. For reasons of political expediency, we understand why the Commission considers that it would be inappropriate for the UK to participate in the proposed Regulation establishing the Asylum and Migration Fund—document (a)—given that it will only apply from January 2021, after the UK has left the EU and the post-exit transition/implementation period envisaged in the draft EU/UK Withdrawal Agreement has expired. We nonetheless consider, as a matter of law, that the UK’s Title V opt-in Protocol does apply since the UK retains all the rights and obligations of EU membership until it leaves the EU. The better course of action would therefore seem to be for the Commission to include a recital to this effect and for the Government to decide not to opt in. We ask the Minister:

• whether she intends to press for the inclusion of a UK-specific recital;

• whether she expects to encounter any opposition from the Commission or other Member States and (if so) what action she intends to take to maintain the full effect of the UK’s Title V opt-in Protocol for as long as the UK remains a member of the EU; and

• to confirm the deadline for notifying the Government’s opt-in decision.

19.19 Under the draft EU/UK Withdrawal Agreement, only EU justice and home affairs which are “binding upon and in the United Kingdom” on exit day will continue to apply to the UK during a post-exit transition/implementation period ending on 31 December 2020. In separate correspondence, the Government has clarified that:

http://europeanmemoranda.cabinetoffice.gov.uk/files/2018/07/EM_10151_18_ADD_1.pdf

http://europeanmemoranda.cabinetoffice.gov.uk/files/2018/07/EM_10151_18_ADD_1.pdf


“The UK will be bound by any measure where the UK has opted into or not opted out of that measure before the date the Withdrawal Agreement enters into force, whether or not the measure has been formally adopted.”153

19.20 This raises the stakes on any opt-in decisions (or decisions not to opt out of Schengen measures) taken before the UK leaves the EU on 29 March 2019.

19.21 We recognise that the risk is negligible as regards the proposed Regulation establishing the Asylum and Migration Fund, as it will only take effect from January 2021. Nonetheless, if any extension of the post-exit transition/implementation period beyond December 2020 were to be agreed as part of the UK’s withdrawal or future partnership negotiations, a decision to opt in would mean that the Regulation would apply to and bind the UK, raising difficult questions about ongoing contributions to the EU’s next long-term budget for 2021–27.

19.22 The Minister’s Explanatory Memorandum on the proposed Border Management and Visa Instrument—document (b)—asserts both that the UK is entitled to opt into the proposed Regulation as it is a Title V (justice and home affairs) measure and that the UK is unable to participate as it builds on elements of the Schengen rule book which do not apply to the UK. We ask the Minister to confirm that the UK is not entitled to participate and that she will press for the inclusion of a recital to this effect in the proposed Regulation.

Allocation of funding and conditionality

19.23 The Commission proposes a new formula for allocating EU funds amongst Member States so that they are targeted towards those under greatest pressure and in greatest need. It also proposes stronger conditionality to ensure that beneficiaries of EU funding are held to their obligation to respect the rule of law. These are significant changes. We ask the Minister whether she welcomes them, how other Member States have reacted, and how great an impact the changes are likely to have on the future distribution of funding.

Association with the Funds post-exit

19.24 The Minister indicates that the UK will consider participating in the Asylum and Migration Fund as “a third-party country” post-exit and “making an ongoing contribution to cover our fair share of the costs”. She also says that the Government will be considering “in due course” the impact that a loss of EU funding in this area would have on the UK. We would welcome further information on:

• the tangible benefits for the UK of being “associated” with the Fund, given that much of the EU rule book underpinning cooperation on asylum, migration and returns will cease to apply to the UK once it leaves the EU;

• the basis for calculating a “fair share” if the Government does seek to associate the UK with the Fund; and

153 See the letter of 18 July 2018 from the Minister for Policing and the Fire Service (Nick Hurd) and the letter of 24 July 2018 from the Minister for Security and Economic Crime (Ben Wallace) to the Chair of the European Scrutiny Committee.

http://europeanmemoranda.cabinetoffice.gov.uk/files/2018/07/180718_Letter_from_Nick_Hurd_to_ESC_e-evidence.pdf




• the areas in which the loss of EU funding will be most keenly felt (for example, resettlement, support for refugees) and how the Government intends to minimise the impact for beneficiaries.

19.25 We ask the Minister to confirm our understanding that participation in or association with the Integrated Border Management Fund would be restricted to third countries associated with the Schengen rule book and so would not be an option for the UK.

19.26 Pending further information, the proposed Regulations remain under scrutiny. As well as responding to our questions, we ask the Minister to provide progress reports on the negotiations. We draw this chapter to the attention of the Home Affairs Committee.


(a) Proposal for a Regulation establishing the Asylum and Migration Fund: (39913), 10153/18 + ADDs 1–3, COM(18) 471.

(b) Proposal for a Regulation establishing, as part of the Integrated Border Management Fund, the instrument for financial support for border management and visa: (39915), 10151/18 + ADD 1, COM(18) 473.


None.


http://data.consilium.europa.eu/doc/document/ST-10151-2018-INIT/EN/pdf


20 Renewal of the Pericles programme to protect the euro against counterfeiting


Committee’s decision Not cleared from scrutiny; further information requested; drawn to the attention of the Home Affairs Committee

Document details (a) Proposal for a Regulation establishing an exchange, assistance and training programme for the protection of the euro against counterfeiting for the period 2021–27 (the “Pericles IV programme”)

(b) Proposal for a Regulation extending the Pericles IV programme to Member States not participating in the euro

Legal base (a) Article 133 TFEU, ordinary legislative procedure, QMV

(b) Article 352 TFEU, special legislative procedure, unanimity


Document Numbers (a) (39819), 9589/18 + ADDs 1–2, COM(18) 369; (b) (39837), 9625/18, COM(18) 371


20.1 The “Pericles” programme was established in 2001 as a dedicated source of EU funding to support Member States’ efforts to protect the euro against counterfeiting and fraud. The current programme—Pericles 2020—will expire at the end of 2020. The European Commission has proposed two Regulations to extend the programme and ensure continuity of funding as part of its package of proposals for the EU’s next long-term budget for the period 2021–27. The first proposed Regulation—document (a)— would establish the Pericles IV programme with a budget of €7.7 million (£6.7 million), compared with €7.3 million for 2014–20. It is based on Article 133 of the Treaty on the Functioning of the European Union (TFEU) which provides for the adoption of EU measures “necessary for the use of the euro as the single currency” and only applies to Member States participating in the single currency. The UK will not, therefore, take part in the adoption of the proposal. Recognising that counterfeiting outside the euro area can be just as detrimental to confidence in the single currency as counterfeiting within the euro area, the second proposed Regulation—document (b)—would extend participation in the Pericles IV programme to all non-euro Member States, but using a different legal base in the EU Treaties—Article 352 TFEU—which requires the unanimous support of all Member States and the approval (consent) of the European Parliament.

20.2 The Pericles IV programme would cover much of the same ground as the current Pericles 2020 programme, with a particular focus on the exchange of information and specialised staff, multidisciplinary training on tackling counterfeiting of the euro, the





provision of technical, scientific and operational support, and the purchase of equipment for use by anti-counterfeiting authorities in third countries. Actions funded by the Pericles IV programme would be open to participants from third countries if they have relevant expertise.

20.3 The proposed Regulations establishing the Pericles IV programme and extending participation to non-euro Member States would take effect in January 2021, after the UK’s exit from the EU on 29 March 2019 and after the expiry on 31 December 2020 of the transition/implementation period envisaged in the draft EU/UK Withdrawal Agreement.154

20.4 In his Explanatory Memorandum of 11 July 2018, the Minister for Security and Economic Crime (Ben Wallace) does not take issue with the legal bases proposed by the Commission and accepts that the UK’s Title V (justice and home affairs) opt-in Protocol does not apply to document (b). The UK will therefore be bound by the proposed Regulation, if adopted. He explains that an Act of Parliament was required before the UK could vote for, and agree to be bound by, the Regulation (adopted in 2014) extending participation in the Pericles 2020 programme to non-euro Member States. This is because the Regulation was based on Article 352 TFEU and section 8 of the European Union Act 2011 provides that the Government may not vote for an EU measure based on Article 352 TFEU unless it has obtained the prior approval of Parliament. This form of enhanced parliamentary scrutiny will not apply to document (b) as:

“Section 8 of the European Union Act 2011 was repealed as of 4 July 2018 by the European Union (Withdrawal) Act 2018 (Commencement and Transitional Provisions) Regulations 2018. An Act of Parliament will not therefore be required for the Government to vote in favour of the adoption of this Regulation” (document (b)).

20.5 The Minister accepts that negotiations on proposals brought forward as part of the EU’s next long-term budget for 2021–27 are “primarily a matter for the 27 remaining Member States” as the UK will not be a member of the European Union when the new funding programmes take effect in January 2021. He reiterates the Government’s wish to “continue working with the EU in ways that promote the long-term economic development of our continent”, including through participation in “specific policies and programmes which are greatly to the UK and the EU’s joint advantage”. He adds that the UK would “obviously want to make an ongoing contribution to cover our fair share of the costs involved and the exact terms would be subject to negotiation”. Whilst describing counterfeiting of the euro as “a minor issue” in the UK, the Minister recalls UK support for Pericles since its inception in 2001 and notes that “the Bank of England and the National Crime Agency derive benefit from training and information exchange under the programme”.

154 See Article 121 of the draft EU/UK Withdrawal Agreement.


http://europeanmemoranda.cabinetoffice.gov.uk/files/2018/08/EM_9589_18_ADD_1-2_9625_18.pdf


Our Conclusions

Repeal of section 8 of the European Union Act 2011

20.6 The repeal of section 8 of the European Act 2011 with effect from 4 July 2018 is, in our view, premature.155 We consider that the requirement for the Government to seek explicit parliamentary approval before it can support EU measures based on Article 352 TFEU is an important safeguard and should have been retained for as long as the UK has a vote within the EU Council. The use of Article 352 TFEU as a legal base for EU action is intended to be the exception, rather than the rule, in circumstances where no other provisions of the EU Treaties provide the necessary powers. The 2011 Act recognised that EU measures based on Article 352 TFEU merit enhanced parliamentary scrutiny because of the risk (albeit insignificant in this case) that they may push at the boundaries of EU competence. The UK’s exit from the EU in March 2019 does not diminish this risk, given that most EU laws will continue to apply to the UK as if it were a Member State until the end of 2020 under the terms of the draft EU/UK Withdrawal Agreement. Moreover, whilst we appreciate that the Pericles IV programme will only apply from the beginning of 2021, any extension of the transition/implementation period beyond 2020 would have significant budgetary implications for the UK if it were to be bound, even for a limited period, by programmes funded by the EU’s next long-term budget for 2021–27. We ask the Minister to explain why the Government has chosen to repeal section 8 of the 2011 Act before the UK has left the EU.

UK participation in the negotiation and adoption of document (b)

20.7 Only EU Member States whose currency is the euro are entitled to take part in the adoption of the proposed Regulation establishing the Pericles IV programme—document (a)—so the UK will not have a vote. By contrast, the proposed Regulation extending participation in Pericles IV to non-euro Member States—document (b)—must be agreed by unanimity, meaning that the UK will have a vote if it is brought to Council for adoption before 29 March 2019. We ask the Minister how active a role the Government intends to play in the negotiations, what (if any) changes it will seek, and how the UK will vote.

UK participation in Pericles IV post-exit

20.8 The Minister sets out the Government’s aspiration to “continue working with the EU” post-exit and to “take part in those specific policies and programmes which are greatly to the UK and the EU’s joint advantage”. We ask him to explain:

Ȥ what scope there is under the proposed Regulation for UK bodies to participate in the Pericles IV programme post-exit;

Ȥ whether the Government intends to seek some form of participation; and

Ȥ the anticipated benefits for the UK as well as the basis for calculating a “fair share” if the Government does seek to participate.

155 We note that the European Union (Withdrawal) Act 2018 (Commencement and Transitional Provisions) Regulations 2018 do not only repeal section 8 of the European Union Act 2011 (the EU Act) as of 4 July. The Regulations also repeal sections 1 to 13, 14(1) and 15(1) of, and Schedule 1 to, the EU Act. So the premature limitation of enhanced parliamentary scrutiny extends also to any other new EU measures which would have been caught by those other provisions of the EU Act before “exit day”.

http://www.legislation.gov.uk/uksi/2018/808/regulation/2/made


20.9 Pending further information, the proposed Regulations remain under scrutiny. As well as responding to our questions, we ask the Minister to provide progress reports on the negotiations. We draw this chapter to the attention of the Home Affairs Committee.


(a) Proposal for a Regulation establishing an exchange, assistance and training programme for the protection of the euro against counterfeiting for the period 2021–27 (the “Pericles IV programme”): (39819), 9589/18 + ADDs 1–2, COM(18) 369.

(b) Proposal for a Regulation extending to the non-participating Member States the application of Regulation (EU) No …/2018 establishing an exchange, assistance and training programme for the protection of the euro against counterfeiting for the period 2021–27 (the “Pericles IV” programme): (39837), 9625/18, COM(18) 371.


None.




21 Geo-blockingCommittee’s assessment Legally and politically important

Committee’s decision Cleared from scrutiny

Document details Proposal for a Regulation on addressing geo-blocking and other forms of discrimination based on customers’ nationality, place of residence or place of establishment within the internal market

Legal base Article 114 TFEU; ordinary legislative procedure; QMV




21.1 The Geo-Blocking Regulation (2018/302) was adopted by the General Affairs Council on 27 February 2018 and entered into the Official Journal of the European Union on 2 March 2018.156 The Committee had previously granted the Government a scrutiny waiver to support the proposal at Council.157

21.2 Although the legislative procedure for this proposal has now concluded, the Committee has retained this proposal under scrutiny pending answers to a number of questions about the implications of EU exit with respect to geo-blocking. In its last report,158 the Committee specifically sought further information from the Government about:

• the extent to which the third country provision in the regulation would constrain UK traders directing activities to consumers in the EEA after the regulation ceased to apply to the UK as an EU Member State;

• whether, if the Government chose to convert the draft regulation into UK law following Brexit, this would provide UK consumers seeking to purchase goods or services from EU businesses with the same protections as provided for in the regulation; and

• whether the Government intended either to negotiate the inclusion of geo-blocking arrangements in the future economic partnership, or to convert the regulation into domestic law.

21.3 In a letter to the Committee, the Parliamentary Under Secretary of State at the Department of Business, Energy and Industrial Strategy (Lord Henley)159 has responded to the Committee’s questions in detail. The European Commission has also produced

156 OJ L 60I , 2.3.2018 Regulation (EU) 2018/302 of the European Parliament and of the Council of 28 February 2018 on addressing unjustified geo-blocking and other forms of discrimination based on customers’ nationality, place of residence or place of establishment within the internal market.

157 A scrutiny waiver was granted in the Committee’s report of 22 November 2017 and renewed in its report of 10 January 2018.

158 Ninth Report HC 301–ix (2017–19) chapter 2 (10 January 2018).159 Letter from the Minister (BEIS) to the Chair of the European Scrutiny Committee (14 February 2018).


https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=uriserv%3AOJ.LI.2018.060.01.0001.01.ENG

http://europeanmemoranda.cabinetoffice.gov.uk/files/2018/02/Letter_from_Lord_Henley_to_Sir_Bill_Cash_14_February_2018.pdf


a notice to stakeholders which covers the impacts on UK consumers more explicitly than the Government has been willing to, in its responses to the Committee.160 The key points of both the Minister’s response and the Commission’s notice are highlighted in our conclusions below.

21.4 We have taken note of the Minister’s response to our questions.

Geo-blocking implications of EU exit for UK businesses selling to the EU

21.5 In terms of the implications of EU exit for UK businesses targeting consumers in the EU, we note the Minister’s assessment that, in the absence of any UK-EU agreement on geo-blocking, when the UK ceases to participate in the regulation as an EU Member State, although “the Geo-blocking Regulation’s core provisions would continue to apply to UK-based businesses trading with EU consumers in the EU in the same manner as they will continue to apply to EU Member States”, this would only be on an intra-EU basis, meaning that “UK businesses trading with EU consumers in the EU will not be obliged to offer the same terms of access as they do to UK customers [but] will be required to provide all EU customers with the same terms of access, so that UK firms are not practising geo-blocking within the EU”. To illustrate the practical effects of this, the Minister states that “UK businesses will not be prohibited from rerouting EU customers to a single EU-facing website/interface”.

21.6 In effect, the extent to which UK businesses will be constrained to comply with the regulation will be limited to the intra-EU aspect of their operations: i.e., they will no longer be permitted to use geo-blocking to discriminate between consumers from different EU member states where this is prohibited by the regulation, but will be permitted to use geo-blocking to differentiate between UK and EU consumers in ways prohibited by the regulation.

Geo-blocking implications of EU exit for UK businesses and consumers making purchases from the EU

21.7 However, this also means that EU businesses will no longer be bound by the regulation’s provisions with respect to UK consumers, which will effectively negate the benefits of the Directive for this group. These effects are clarified in the European Commission’s notice to stakeholders on geo-blocking161 which states that natural persons residing in the UK (unless they are EU nationals) will not benefit from any of the three principal measures in the regulation which protect consumers:

• UK citizens or businesses who wish to access websites in the EU will not benefit from the ban of discriminatory blocking or limiting customers’ access to traders’ online interfaces and redirecting them to another online interface (Article 3). For example, if a British consumer wishes to access an online clothing shop’s Italian website, the website will be allowed to block access to it and to redirect him/her to a British site.

160 European Commission, Notice to Stakeholders: Withdrawal of the United Kingdom and EU Legislation in the field of Geo-Blocking (21 March 2018).

161 European Commission, Notice to Stakeholders: Withdrawal of the United Kingdom and EU Legislation in the field of Geo-Blocking (21 March 2018).

http://ec.europa.eu/newsroom/dae/document.cfm?doc_id=50505

http://ec.europa.eu/newsroom/dae/document.cfm?doc_id=50505


• UK citizens and businesses will not benefit from the right to “shop like a local” in the EU including benefitting from the same prices and conditions relating to the delivery of goods and services as local consumers (Article 4), for the goods and services covered by the regulation. For example, a UK business wishing to buy hosting services for his/her website from a Swedish company will no longer be entitled to the same terms of access (including pricing) as a Swedish customer. Similarly, car rental companies in EU Member States will not be obliged to offer UK customers who wish to make an on-site booking the same rates as domestic customers.

• UK citizens and businesses using payment means from the United Kingdom will not be protected against traders applying different conditions to those offered to EU customers.

Converting the regulation into UK law

21.8 We also sought clarification as to whether, given that the EU regulation has extra-territorial effect (applying to businesses established in third countries), the UK could impose equivalent requirements on the EU, thus retaining its benefits. We note the Minister’s response that “The UK could in principle take steps to impose requirements equivalent to those of the Geo-Blocking Regulation on traders based in third countries (including those from EU countries) operating within the UK”. However, based on the Minister’s previous clarification (above) that the EU regulation merely constrains businesses in third countries targeting EU consumers from practicing the prohibited activities on an intra-EU basis, we conclude that the effect of the UK imposing equivalent geo-blocking restrictions through UK law would be limited to prohibiting businesses in other countries from using geo-blocking to internally segment the UK market. Our initial assessment is that such an approach would be significantly less effective than participating in an EU-wide regulation as the effects would be confined to the UK market, which is at once more integrated and less diverse (in terms of products, prices and contractual arrangements) than the larger, less integrated EU market. In summary, converting the geo-blocking regulation into UK law will not make it possible for UK businesses and consumers to retain its principal benefits.

21.9 As to whether the Government intends to seek the inclusion of provisions on geo-blocking in the future partnership, we infer from the 12 July 2018 White Paper “The future relationship between the United Kingdom and the European Union”, in which the Government reiterates its intention “not to be a part of the EU’s Digital Single Market”, and from the short section on Digital trade and e-commerce, that the Government does not seek new arrangements UK-EU on geo-blocking. As such, we anticipate that the return of practices prohibited by the geo-blocking regulation will be one of the forms that reduced reciprocal UK-EU market access takes in the digital sector.

21.10 As this legislative procedure has concluded, and we have now concluded our scrutiny of the implications of EU exit for geo-blocking, we now clear this document from scrutiny.



Proposal for a Regulation on addressing geo-blocking and other forms of discrimination based on customers’ nationality, place of residence or place of establishment within the internal market: (37818), 9611/16 + ADDs 1–2, COM(16) 289.


Ninth Report HC 301–ix (2017—19) chapter 2 (10 January 2018); Second Report HC 301–ii (2017–19), chapter 6 (22 November 2017); Twenty-eighth Report HC 71–xxvi (2016–17), chapter 1 (25 January 2017); Nineteenth Report HC 71–xvii (2016–17), chapter 2 https://publications.parliament.uk/pa/cm201617/cmselect/cmeuleg/71–xvii/7105.htm(23 November 2016); Seventh Report HC 71–v (2016–17), chapter 3 (6 July 2016).

https://publications.parliament.uk/pa/cm201617/cmselect/cmeuleg/71-xxvi/7104.htm

https://publications.parliament.uk/pa/cm201617/cmselect/cmeuleg/71-xvii/7105.htm

https://publications.parliament.uk/pa/cm201617/cmselect/cmeuleg/71-xvii/7105.htm

https://publications.parliament.uk/pa/cm201617/cmselect/cmeuleg/71-v/7106.htm


22 EU Clean Energy legislationCommittee’s assessment Politically important

Committee’s decision Cleared from scrutiny; further information requested; drawn to the attention of the Business, Energy and Industrial Strategy Committee

Document details (a) Proposal for a Directive amending Directive 2012/27/EU; (b) Proposal for a Directive on the promotion of the use of energy from renewable sources (recast); (c) Proposal for a Regulation on the Governance of the Energy Union, amending Directive 94/22/EC, Directive 98/70/EC, Directive 2009/31/EC, Regulation (EC) No 663/2009, Regulation (EC) No 715/2009, Directive 2009/73/EC, Council Directive 2009/119/EC, Directive 2010/31/EU, Directive 2012/27/EU, Directive 2013/30/EU and Council Directive (EU) 2015/652 and repealing Regulation (EU) No 525/2013

Legal base (a) Article 194(2) TFEU, ordinary legislative procedure, QMV; (b) Article 194(2) TFEU, ordinary legislative procedure, QMV; (c) Articles 192(1) and 194(2) TFEU, ordinary legislative procedure, QMV


Document Numbers (a) (38340), 15091/16 + ADDs 1–13, COM(16) 761; (b) (38345), 15120/16 + ADDs 1–9, COM(16) 767; (c) (38352), 15090/16 + ADDs 1–5, COM(16) 759


22.1 The Commission proposed its “Clean Energy for all Europeans” package162 of legislation at the end of November 2016, aiming to “keep the European Union competitive as the clean energy transition is changing the global energy markets”. We have considered the constituent elements of the package on several occasions and we now report the outcome of negotiations on the proposals relating to energy efficiency, renewable energy and governance.

22.2 When we last considered these proposals—at our meeting of 6 June—we requested an update on the progress of negotiations. The Minister for Energy and Clean Growth (Claire Perry) wrote163 to us on 12 June setting out the trajectory of discussions and then again164 on 12 July explaining the outcome of negotiations, as described below. The compromise texts are expected to be put to Council for final adoption as early as September.

22.3 On document (a)—the revised Energy Efficiency Directive (EED)—an EU-level target to reduce energy consumption by 2030 by an ‘indicative’ 32.5% was agreed. While

162 “Commission proposes new rules for consumer centred clean energy transition”, European Commission, 30 November 2016.

163 Letter from The Rt Hon Claire Perry MP to Sir William Cash MP, dated 12 June 2018. 164 Letter from The Rt Hon Claire Perry MP to Sir William Cash MP, dated 12 July 2018.


https://ec.europa.eu/energy/en/news/commission-proposes-new-rules-consumer-centred-clean-energy-transition

http://europeanmemoranda.cabinetoffice.gov.uk/files/2018/07/Letter_to_Sir_William_Cash_MP_EU_Energy_Council_Statement.pdf

http://europeanmemoranda.cabinetoffice.gov.uk/files/2018/07/Letter_to_the_House_of_Commons_Committee_12072018_PDF1.pdf


the UK attempted to limit the level of the EU target as far as possible, the UK applied flexibility here, given that there are no binding consequences on the UK. Under the final text, Member States are required to set an indicative national target which contributes to the overall target, but there is no mechanism to ensure that national targets add up to the required EU level. On the further national energy savings targets, the final deal was for a binding requirement for Member States to achieve annual end-use energy savings of at least 0.8% of final consumption (including transport) over the period to 2030.

22.4 In the final stages of the negotiation over the EED, the Minister reports that the UK was able to resolve its concerns relating to the calculation of existing 2020 targets. The previous (more favourable) methodology is now set out within the new legislative text.

22.5 On the Renewable Energy Directive (RED) and Governance Regulation, the UK’s strategy was to prioritise limiting the overall costs to the UK, including ensuring that any targets were not nationally binding, and minimising the cost of specific requirements on heating and cooling and on transport. The institutions agreed a headline EU renewables target for 2030 of 32% with a review in the mid-2020s. The Minister views this as an acceptable compromise, given that the UK secured language in the Governance Regulation allowing Member States to set their own contributions to this target. This means that there will be no legal mechanism to oblige the UK to make any specific contribution, giving the UK the flexibility to meet its climate targets in the most cost-effective way.

22.6 Regarding heating and cooling under the RED, the provisional agreement sets a defined level of endeavour of a 1.1 percentage point per annum increase in renewable heat’s share of total heat but allows Member States to aim for a lower endeavour on grounds of cost-effectiveness. On transport, an overall renewable energy target of 14% in 2030 was agreed with a review clause in 2023, alongside a range of further detailed provisions.

22.7 The Minister makes no reference to the UK’s withdrawal from the EU, but this is an area that we have explored in our earlier scrutiny of these proposals. The EED must be transposed within 18 months of entry into force (22 months for some of the provisions), and so the UK will be obliged to transpose it into UK law before the end of the post-Brexit implementation period (31 December 2020). The Governance Regulation will apply to the UK upon its entry into force, although some provisions need only be applied from 1 January 2021. The RED must be transposed by 30 June 2021.

22.8 The degree to which the UK will apply EU energy legislation, or align with it, after the implementation period, is yet to be resolved. In the White Paper on the future relationship between the UK and the EU, the Government noted that it would explore with the EU the options for the future energy relationship. This would include the options of leaving, or remaining in, the internal energy market. The Government acknowledged that remaining in the internal energy market would “need a common rulebook with the EU on the technical rules for electricity trading” as well as a consistent approach to carbon pricing, which could include remaining in the EU’s Emission Trading System. The Government was unequivocal, however, that participation in the internal energy market should not require a common rulebook on wider environmental and climate change rules.

22.9 It is also noteworthy that the White Paper indicated that the proposed common rulebook on manufactured goods would include rules which set environmental requirements for products, such as their energy consumption.



22.10 We note the ambitious but flexible outcome of these negotiations. As we understand the timetables, the UK will be obliged to transpose the Energy Efficiency Directive into UK law before the end of the post-Brexit implementation period on 31 December 2020. Elements of the Governance Regulation would also apply before that date. It would be helpful to have the Minister’s confirmation that our understanding is correct.

22.11 The arrangements that will apply after the implementation period remain subject to substantial uncertainty following the recent White Paper, which set out the rather obvious position that the UK could either remain in the internal energy market or leave it. A development in that Paper was a recognition that a condition of remaining in the internal energy market would likely require some sort of common rulebook, although this would not extend to “wider environmental and climate change rules”. We consider that the delineation between these policies is rarely as neat as suggested, and this is encapsulated by the name of this package of legislation—”clean energy”. In the light of the material in the White Paper, the Minister’s comment on this issue would be helpful.

22.12 We note with interest that, regardless of the arrangements for any alignment of energy policy, the proposed common rulebook on manufactured goods would extend to energy consumption requirements for products.

22.13 There is one point of detail on which we would welcome further information, particularly as the UK will likely be obliged to implement the Energy Efficiency Directive. The Minister is content with the proposed indicative target as it is not binding on the UK. There is nevertheless a binding requirement for Member States to achieve annual end-use energy savings of at least 0.8% of final consumption. It would be helpful if the Minister could explain:

• the relationship between the indicative overall target and the binding energy savings target; and

• the impact on the UK of the binding energy savings target.

22.14 We release these documents from scrutiny ahead of formal agreement in Council and look forward to a response to the above queries by 3 October. We draw this chapter to the attention of the Business, Energy and Industrial Strategy Committee.


(a) Proposal for a Directive amending Directive 2012/27/EU: (38340), 15091/16 + ADDs 1–13, COM(16) 761;

(b) Proposal for a Directive on the promotion of the use of energy from renewable sources (recast): (38345), 15120/16 + ADDs 1–9, COM(16) 767; and

(c) Proposal for a Regulation on the Governance of the Energy Union, amending Directive 94/22/EC, Directive 98/70/EC, Directive 2009/31/EC, Regulation (EC) No 663/2009, Regulation (EC) No 715/2009, Directive 2009/73/EC, Council Directive 2009/119/EC,




Directive 2010/31/EU, Directive 2012/27/EU, Directive 2013/30/EU and Council Directive (EU) 2015/652 and repealing Regulation (EU) No 525/2013: (38352), 15090/16 + ADDs 1–5, COM(16) 759.


Thirtieth Report HC 301–xxix (2017–19), chapter 3, chapter 4 and chapter 6 (6 June 2018); Fifth Report HC 301–v (2017–19), chapter 2, chapter 3 and chapter 5 (13 December 2017); Fortieth Report HC 71–xxxvii (2016–17), chapter 4, chapter 5 and chapter 7 (25 April 2017); Twenty-ninth Report HC 71–xxvii (2016–17), chapter 2, chapter 3 and chapter 5 (25 January 2017).


https://publications.parliament.uk/pa/cm201719/cmselect/cmeuleg/301-xxix/30106.htm









https://www.publications.parliament.uk/pa/cm201617/cmselect/cmeuleg/71-xxvii/7105.htm

https://publications.parliament.uk/pa/cm201617/cmselect/cmeuleg/71-xxvii/7106.htm

https://www.publications.parliament.uk/pa/cm201617/cmselect/cmeuleg/71-xxvii/7108.htm


23 Europe on the move: third mobility package



Document details Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions—Europe on the move: sustainable mobility for Europe: safe, connected, and clean

Legal base -


Document Number (39737), 9141/18, COM(18) 293


23.1 The Communication under consideration outlines the legislative proposals and non-binding actions comprising the Commission’s third and final ‘Europe on the move’ mobility package (commonly referred to as the ‘third mobility package’). The third mobility package is focussed on ensuring Europe’s future mobility system is “safe, clean and efficient for all EU citizens”. Common to these areas is the Commission’s promotion of new technologies in the pursuit of the Union becoming a “world-leader in connected and automated mobility”. The third mobility package follows on the heels of the second mobility package (published in May 2018) and the first mobility package (published in November 2017).

23.2 The third mobility package comprises the Communication under consideration, a Communication on ‘connected and automated mobility’, eight legislative proposals and a number of non-legislative accompanying documents (and is split between actions in the areas of: ‘safe mobility’; ‘clean mobility’; ‘connected and automated mobility’; ‘digital information exchange in transport’; the Trans-European Transport core network (TEN-T); and ‘maritime fitness’ or safety).

23.3 In the area of safe mobility, legislation is proposed on vehicle and pedestrian safety, and road safety infrastructure management. On clean mobility, legislation is proposed on CO2 performance standards for new heavy-duty vehicles, tyre labelling (with respect to fuel efficiency), and the introduction of a common methodology for alternative fuels unit price comparison. On digital information exchange in transport, legislation is proposed on the creation of a ‘European Maritime Single Window’ (streamlining reporting requirements for ships arriving in and/or departing EU ports) and an electronic freight transport information system. Legislation has also been proposed on streamlining permit procedures for projects on the core TEN-T network. These proposals—and accompanying documents—will be considered separately.






23.4 In a letter from Baroness Sugg, Parliamentary Under Secretary of State for Transport, to Sir William Cash, Chairman of the House of Commons European Scrutiny Committee, dated 25 July 2018, the Government provides an update on its expectations for the transport agenda during the Austrian Presidency of the EU Council of Ministers. With regard to the third mobility package, the Minster highlights safe mobility—and the accompanying legislative proposals—as the area in which most progress is expected during the Austrian Presidency. From the Minster’s letter and recent reports, it appears as though little progress will be made on the Commission’s clean mobility proposals, in particular, that for a Regulation on CO2 performance standards for new heavy-duty vehicles. Indeed, vehicle manufactures have voiced significant disquiet at the proposed emission reduction targets and type-approval standards (which they considered to be overly burdensome).165

23.5 The Communication includes two annexes. The first outlines a ‘Strategic Action Plan on Road Safety’ and the second a ‘Strategic Action Plan on Batteries’. With a view to the EU’s long-term goal of realising zero fatalities in road transport by 2050 (so-called ‘Vision Zero’)—and in pursuit of the interim target of reducing the number of road deaths and serious injuries by 50% between 2020 and 2030—the action plan on road safety outlines a common framework of actions to be elaborated in cooperation with Member States by mid-2019 (the end of the current Commission). These include:

• Enhanced road safety governance (including principles for an EU road safety policy framework, the establishment of a ‘European Road Safety Ambassador’ and related key performance indicators);

• Stronger financial support for road safety (by supporting road safety initiatives from related EU funds);

• Safe roads and roadsides (through the proposed Directive on Road Safety Infrastructure Management);

• Safe vehicles and safe road use (through the proposed revisions to the vehicle General Safety Regulation and the Pedestrian Safety Regulation);

• Fast and effective emergency response (through assessing the effectiveness of legislation on the ‘eCall’ system—which automatically alerts emergency services to a vehicles location in the event of a serious accident—and exploring the feasibility of its extension to wider classes of vehicles);

• Future-proofing road safety (through the comprehensive strategy on connected and automated vehicles); and

• The EU’s global role: exporting road safety (by looking beyond the EU to immediate neighbours, such countries of the Western Balkans and the Eastern Partnership, who are expected to sign road safety declarations with the EU in 2018).

165 See, for background, Grayling, “The EU’s Third Mobility Package: What’s at Stake?”(May 2018) p 2 (available at: https://www.grayling.com/be_pa/en/insight/grayling_policy_update_the_eus_third_mobility_package)

http://esid.parliament.uk/Documents/3a589853-7ee2-430b-a589-d38bf798274f.pdf

https://www.grayling.com/be_pa/en/insight/grayling_policy_update_the_eus_third_mobility_package


23.6 The annexed strategic action plan on batteries sets out a number of key actions—to be supported by industrial stakeholders and the Member States—in pursuit of “making Europe a global leader in sustainable battery production and use”. These key actions are developed in furtherance of:

• Securing access to raw materials for batteries;

• Supporting European battery cell manufacturing at scale and creating a fully competitive value chain in Europe;

• Strengthening industrial leadership through stepped-up EU research and innovation;

• Developing and strengthening a highly skilled workforce in all parts of the battery value chain;

• Supporting the sustainability of the EU’s battery cell manufacturing industry with the lowest environmental footprint possible; and

• Ensuring consistency with the broader enabling and regulatory framework (i.e. that of the Union’s trade policy, first and second mobility packages and the Clean Energy strategy).

23.7 In his Explanatory Memorandum of 26 June 2018, the Parliamentary Under-Secretary of State for the Department of Transport, Jesse Norman, welcomes the publication of the third mobility package, and in particular its focus on road safety. The Minister does not comment, specifically, on the Communication under scrutiny, focussing, instead, on the potential legal and policy implications of the two legislative proposals covered in the same Explanatory Memorandum (on vehicle and pedestrian safety, and road safety infrastructure management, respectively).

23.8 We thank the Minister for his summary of the third mobility package. As the Communication is not legally binding (and participation in the annexed action plans is voluntary), we are content to clear it from scrutiny. The legislative proposals and accompanying documents outlined in the Communication—which form the substance of the third mobility package—will be examined separately.


Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions—Europe on the move: sustainable mobility for Europe: safe, connected, and clean: (39737), 9141/18 COM(18) 293.

Background

23.9 The ‘Europe on the Move’ mobility packages are a set of Commission initiatives seeking to establish a more integrated and sustainable EU transport system. They are linked closely with other EU-level initiatives under the Energy Union, Digital Single Market, Circular and Low Carbon Economy and the Jobs, Growth and Investment Agenda.

http://europeanmemoranda.cabinetoffice.gov.uk/files/2018/06/EM_-_EU_Mobility_Package_III_Proposals_(Safe_Mobility).pdf


23.10 The first mobility package was presented in May 2017 and included a wide range of initiatives aimed at making road traffic safer; encouraging smart road charging of electric vehicles; reducing CO2 emissions and air pollution; cutting regulatory red-tape for businesses; fighting illicit employment; and ensuring adequate working conditions and rest times for road haulage workers.

23.11 The second, so-called ‘clean’, mobility package was presented in November 2017. It included new CO2 emission standards for domestic vehicles; the proposed Clean Vehicles Directive; an action plan on the trans-European deployment of alternative fuels infrastructure; revisions to the Combined Transport Directive; the proposed Directive on Passenger Coach Services; and the proposed Regulation on common rules for access to the international market for coach and bus services.


The Committee considered the first mobility package in November 2017 (First Report HC 301–i (2017–19), chapter 39 (13 November 2017)) and the second mobility package in May 2018 (Twenty-first Report HC 301–xx (2017–19), chapter 12 (21 March 2018).

https://publications.parliament.uk/pa/cm201719/cmselect/cmeuleg/301-i/301-i.pdf

https://publications.parliament.uk/pa/cm201719/cmselect/cmeuleg/301-xx/301-xx.pdf


24 Brexit: UK accession to the Common Transit Convention


Committee’s decision Cleared from scrutiny; further information requested; drawn to the attention of the Home Affairs, International Trade and Treasury Committees

Document details (a) Proposal for a Council Decision as regards an invitation to the United Kingdom to accede to the Conventions on the simplification of formalities in trade in goods and on a common transit procedure; (b) Proposal for a Council Decision on amendments to the Convention on a common transit procedure in light of the accession of the United Kingdom.

Legal base Articles 207 and 218(9) TFEU; QMV

Department Revenue and Customs

Document Numbers (a) (40017), 11568/18 + ADD 1, COM(18) 576; (b) (40033), 11693/18, COM(18) 601

Background and Committee’s conclusions

24.1 To simplify the transport of goods across Europe, 35 countries are party to the Common Transit Convention (CTC) of 1987 and the related Convention on ‘the simplification of formalities in trade’.

24.2 Membership of the Conventions allows for the movement of goods under duty suspension (the ‘common transit procedure’), enabling the relevant customs duty to be paid in the country of destination without full customs checks en route when crossing through other signatory countries (see “Background” below). To guard against the risk of duty loss, use of the common transit procedure requires the posting of a financial guarantee by the trader using it. Transit declarations are processed and shared electronically via the New Computerised Transit System (NCTS). The EU, which has exclusive competence over customs matters, is party to the Convention on behalf of its 28 Member States (which are therefore not independent signatories to the agreement). The other Contracting Parties are Norway, Iceland, Switzerland, Liechtenstein, Turkey, Serbia and Macedonia.

Implications of Brexit

24.3 When the UK ceases to be a Member State of the EU, it will also automatically cease being party to the Common Transit Convention. The UK is therefore seeking to accede as a non-EU country to the Convention, as first announced in the Government’s August 2017 paper on customs cooperation with the EU.166 It formally wrote to the Council of the

166 Department for Exiting the EU, “Future customs arrangements: a future partnership paper“ (August 2017).



https://www.gov.uk/government/publications/future-customs-arrangements-a-future-partnership-paper

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/637748/Future_customs_arrangements_-_a_future_partnership_paper.pdf


EU on 24 May 2018 to request the formalities for its accession be initiated: the Convention only allows ‘third countries’ to become a party to it when formally invited to do so by the Member States of the EU acting in the Council.167

24.4 In response to the UK’s request, the European Commission in summer 2018 formally tabled two draft Council Decisions, recommending that the EU’s Member States should:

• Formally invite the UK to accede to the Conventions as of the date that EU law ceases to apply to it (i.e. either on 29 March 2019 or at the end of any subsequent transitional period under the Withdrawal Agreement); and

• Propose a technical amendment to the CTC to move the UK from the list of Member States of the EU and to the part designated for the common transit countries on the guarantee forms used to prove a specific shipment is in transit.

24.5 The first of these documents states that the EU will only formally invite the UK to accede “once the technical conditions for accession to the Conventions have been fulfilled by the United Kingdom or once convincing assurance has been provided that these technical conditions will be fulfilled on time before the effective date of the application of the Convention to the United Kingdom as a Contracting Party”. The Chief Secretary to the Treasury (Elizabeth Truss) submitted an Explanatory Memorandum on the proposals on 29 August 2018, which set out he UK’s reasons for seeking independent membership to the CTC—it would offer “cash-flow benefits to UK and Contracting Parties traders and allow for simpler checks at the border, which reduce the frictions on trade”—but failed to clarify what the necessary ‘technical conditions’ for UK accession are.

24.6 The UK is pushing for formal adoption by the Council of the necessary Decisions by the middle of September 2018, because it is the Government’s view that the legal process for UK accession—which requires the EU’s agreement—needs to start no later than 22 October to be concluded in time for a potential ‘no deal’ Brexit on 29 March 2019. (If the Withdrawal Agreement is ratified, the UK would stay part of the Common Transit Convention as if it were a Member State until the end of the subsequent transitional period.) On the UK side, secondary legislation under the Taxation (Cross-border Trade) Bill will be required to implement the UK’s obligation under the Conventions. The Conventions will also need to go through the UK’s domestic ratification process as set out in the Constitutional Reform and Governance Act 2010. As the Government’s Explanatory Memorandum on the CTC proposals was only deposited in Parliament on 29 August, the scrutiny timetable for the two proposals is extremely short.

24.7 In terms of the substantive impact of the proposals, UK accession to the Conventions would retain the current framework for customs controls for trade in goods with the non-EU CTC countries, and reduce the impact of the need for UK goods exported to the EU to undergo customs checks. However, CTC membership by itself will not be sufficient to achieve the Government’s ambition for “frictionless access to each other’s markets for goods”168 because the Conventions:

167 See article 15a of the Common Transit Convention.168 Department for Exiting the EU, “The future relationship between the United Kingdom and the European

Union“ (12 July 2018).



http://europeanmemoranda.cabinetoffice.gov.uk/files/2018/08/EM_UK_CTC_accession.pdf




• Will not remove the imposition of custom controls on goods moving between the UK and the EU-27, which are currently absent. Instead, it will allow such goods to undergo customs controls away from the border and in the EU Member State of destination;

• Would not remove the need for goods exported to Ireland from Northern Ireland or vice versa to undergo customs controls, even if the infrastructure could be set away from the physical frontier (although it would facilitate, from a customs perspective, the transit of goods to or from Ireland via the UK); and

• Do not in any way address the imposition of new ‘third country’ regulatory barriers on UK exports to the EU, such as the need for meat products to be routed into the EU via Border Inspection Posts (BIPs) and subject to a risk assessment and possible physical inspection.169

24.8 The relatively limited impact of CTC accession in the event of a ‘no deal’ Brexit is also clear from the Government’s own recent technical notice on “Trading with the EU if there’s no Brexit deal“. For exports to the EU, this notes that even with the UK as a signatory to the Conventions, “businesses importing goods from the EU will be required to follow customs procedures in the same way that they currently do when importing goods from a country outside the EU”. This, the Government says, will require them to “consider how they will submit import declarations,170 including whether to engage a customs broker, freight forwarder or logistics provider”.

Our conclusions

24.9 It has been the Government’s intention since at least August 2017 that the UK should accede to the Common Transit Convention independently when it ceases to be an EU Member State. Given the benefit UK membership of the Conventions will bring to businesses, especially in the event of a ‘no deal’ Brexit, we are content to clear these EU proposals from scrutiny. Formal adoption by the Council of these legal acts is a necessary legal step for UK accession to take place, and should therefore be facilitated as much as possible.

24.10 However, we are disappointed that the Government did not inform us before the 2018 summer recess of the substance of the (then forthcoming) CTC proposals, and instead submitted an Explanatory Memorandum two weeks before the scheduled adoption of the Council Decision that will formally invite the UK to accede to the Conventions.

24.11 The Government itself requested the start of the procedure for UK accession in May 2018, at which point it would have been clear that a formal decision by the Council, on a proposal by the European Commission, would be necessary. In turn, it would have been obvious at that point that the resulting Commission proposal would be subject to the normal scrutiny process in Parliament. As such, it should have been possible to alert Parliament proactively to the likely substance of the proposal, and its significance in the

169 See Regulation 882/2004 on ‘official controls’. This will be replaced by Regulation (EU) 2017/625 from December 2019, when BIPs will be renamed ‘Border Control Posts’ (BCPs).

170 The Government has previously indicated it would also seek a “continued waiver from the requirement to submit entry and exit summary declarations for goods being moved between the UK and the EU, removing a time-sensitive administrative requirement”. However, clearly in a ‘no deal’ scenario such a simplification would not occur.

https://www.gov.uk/government/publications/trading-with-the-eu-if-theres-no-brexit-deal/trading-with-the-eu-if-theres-no-brexit-deal

https://www.gov.uk/government/publications/trading-with-the-eu-if-theres-no-brexit-deal/trading-with-the-eu-if-theres-no-brexit-deal

https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:02004R0882-20180701

https://eur-lex.europa.eu/legal-content/en/ALL/?uri=CELEX:32017R0625


wider process of the UK’s exit from the EU. Even if an Explanatory Memorandum could not be submitted until a later stage, this information could have been communicated to the Committee by letter at the same time as the request to the EU was made.

24.12 Such an approach would have meant that our formal scrutiny of the documents would not have had to take place at such short notice. We hope the Minister can provide reassurance that any other preparations for the UK’s exit that require formal decisions by the EU in relation to other international agreements (and will therefore fall within the purview of the European Scrutiny Committee) will be notified to us further in advance to avoid the appearance that the scrutiny process is being pre-empted.

24.13 Although we have cleared the proposals from scrutiny, we also ask the Minister to write to us by 19 September 2018 to explain what the ‘technical conditions’ are that must be met for the UK’s accession to be approved, and in particular if any additional physical or IT infrastructure—for example relating to the New Computerised Transit System—will need to be in place for HMRC to meet its obligations under the Conventions as a ‘third country’. We would also like the Minister to clarify whether the UK’s accession would also extend to the Sovereign Base Areas on Cyprus, which are currently part of the EU Customs Union but face their own unique set of challenges in relation to their customs status after Brexit.171

24.14 As described in paragraph 0.7, accession to the Common Transit Convention by itself will not contribute materially towards the Government’s ambition of “frictionless access” to the EU’s Single Market for goods after Brexit, insofar as it does not obviate the need for customs and regulatory controls on UK goods entering the EU and vice versa. In light of our observations, we draw the proposals to the attention of the Home Affairs, International Trade and Treasury Committees, given their interest in the UK’s post-Brexit approach to customs and trade facilitation.


(a) Proposal for a Council Decision as regards an invitation to the United Kingdom to accede to the Conventions on the simplification of formalities in trade in goods and on a common transit procedure: (40017), 11568/18 + ADD 1, COM(18) 576; (b) Proposal for a Council Decision on amendments to the Convention on a common transit procedure in light of the accession of the United Kingdom: (40033), 11693/18, COM(18) 601.

Background

24.15 In the field of customs, ‘transit’ refers to a facility that allows businesses to move goods across borders or territories without paying import taxes—like customs duty and Value Added Tax—due when the goods enter or leave the intermediate territories between the countries of export and import, thus requiring only one final customs set of customs countries when the goods reach their final destination.172

24.16 Given that the EU is Europe’s largest single customs territory, it would be particularly onerous if goods moving from a non-EU country had to cleared from customs

171 For more information on the potential implications of Brexit for the Sovereign Base Areas, see our Report of 18 July 2018.

172 https://ec.europa.eu/taxation_customs/sites/taxation/files/transit_manual_en.pdf/

https://publications.parliament.uk/pa/cm201719/cmselect/cmeuleg/301-xxxv/30111.htm





https://ec.europa.eu/taxation_customs/sites/taxation/files/transit_manual_en.pdf/


at the point of entry since this would concentrate customs controls—and therefore traffic bottlenecks—at a limited number of physical sites in certain Member States. Therefore, transit procedures allow goods to be moved through the EU without needing to be cleared by customs officials at their formal point of entry into the Union. There are, broadly speaking, two types of suspensory procedures involving goods transiting through the EU’s customs territory before customs formalities have been completed:

• the ‘Union Transit’ procedure, where goods from outside the EU are under transit from one Member State to another, governed by the Union Customs Code; and

• the ‘Common Transit’ procedure, based on the 1987 Common Transit Convention and the related Convention concerning the simplification of formalities in trade in goods,173 which effectively extends this procedure to the movement of goods between the 28 EU Member States, as well as the four EFTA countries (Iceland, Norway, Liechtenstein and Switzerland), as well as Turkey, Macedonia and Serbia.

24.17 The Common Transit Conventions allow movements of goods between signatory countries and the EU to benefit from only being subject to one set of customs controls. Each signatory to the Convention has designated customs offices where movements under the Union or Common Transit must begin and end (which can be set away from physical frontiers). These offices are called ‘offices of departure’ and ‘offices of destination’ respectively. While intermediate customs offices—‘offices of transit’—do not conduct formal controls, goods in transit must be presented to them so their customs status can be verified.

24.18 The practical benefit of the CTC is that it allows goods to move between signatory countries with only one set of customs checks once they reach their destination, at a facility which can be set away from the physical border of the country of destination. However, to avoid the risk of evasion of customs duty or Value Added Tax, use of the Common Transit procedure requires the business to provide a guarantee to cover the amount of possible debt. The guarantee can be a cash deposit or an undertaking furnished by a financial institution acting as guarantor. In addition, the general rule is that goods entered for the transit procedure must be moved to the customs office of destination along an “economically justified route” and within a pre-set time limit; the customs office of departure can also require a specific route be followed. Transit declarations are processed and shared electronically via the New Computerised Transit System (NCTS).

24.19 In addition to only simplifying (but not eliminating) customs controls on goods moving across Europe once they are in free circulation in any one of the CTC countries, the Common Transit Convention also does not remove the need for non-customs related checks on trade in goods. For example, it does not waive the requirement for products of animal origin to enter the EU via a Border Inspection Post (BIP) and undergo proportional food safety checks before entering the Single Market. Those checks cannot be deferred until the good reaches the Member State of destination.

173 The ‘Convention on the simplification of formalities in trade in goods’ created the Single Administrative Document (SAD) used for entry, exit and transit declarations in all the signatory countries. According to HMRC, use of the paper-based SAD “is largely restricted to instances when computer systems aren’t working and customs resort to manual processing, or as an advice to shipping agents”.

http://eur-lex.europa.eu/legal-content/EN/ALL/?uri=CELEX:01987A0813(01)-20171205

http://eur-lex.europa.eu/legal-content/EN/ALL/?uri=CELEX:01987A0813(01)-20171205

http://ec.europa.eu/world/agreements/prepareCreateTreatiesWorkspace/treatiesGeneralData.do?step=0&redirect=true&treatyId=522

http://ec.europa.eu/world/agreements/prepareCreateTreatiesWorkspace/treatiesGeneralData.do?step=0&redirect=true&treatyId=522




None.


25 Eurozone Investment Stabilisation Function (EISF)



Document details Proposal for a Regulation on the establishment of a European Investment Stabilisation Function

Legal base Article 175(3) TFEU; ordinary legislative procedure; QMV

Department Treasury



25.1 The institutional establishment of the euro centralised monetary policy within the European Central Bank and the Eurosystem,174 but left responsibility for economic and fiscal policies in the hands of the Eurozone’s national governments. When the financial crisis erupted in 2008, this decentralised structure allowed financial and sovereign debt crisis in one Eurozone country to spread to others, while the EU lacked the necessary structures to mount a unified response.

25.2 To stabilise the Eurozone economy, and to put in place the structures necessary to prevent a recurrence of the crisis, the EU has engaged in a far-reaching process of economic, legal and institutional reform.175 In 2015, the ‘Five Presidents Report’—issued by the European Commission, European Central Bank, European Parliament, European Council and the Eurogroup—identified a need for the Eurozone to move closer to a “Fiscal Union”. As part of this, the report called for a common macroeconomic stabilisation function,

25.3 In spring 2017, the European Commission presented a “reflection paper“ on the Economic & Monetary Union (EMU). In his September 2017 “State of the Union“ speech, European Commission President Jean-Claude Juncker announced that the Commission would be bringing forward further proposals to make the structural changes identified as necessary by the Five Presidents Report, including a creation of a dedicated euro area budget line within the EU budget, which would fund structural reform assistance and perform a stabilisation function in the event of an economic shock.

174 The Eurosystem is the collective name for the European Central Bank and the Central Banks of each Eurozone country.

175 These reforms to preserve economic stability have included the creation of the European Semester; the inclusion of the Excessive Deficit Procedure and Macroeconomic Imbalances Procedure under the Stability and Growth Pact; the Fiscal Stability Treaty (after the UK vetoed EU Treaty change in December 2011) and the European Stability Mechanism. The Eurozone has also created a Banking Union, where supervision and resolution of troubled large banks is handled by the European Central Bank, rather than by national regulators.


https://ec.europa.eu/commission/sites/beta-political/files/reflection-paper-emu_en.pdf

https://ec.europa.eu/commission/sites/beta-political/files/state-union-2017-brochure_en.pdf


The Commission proposals for reform of the EMU

25.4 On 6 December 2017, the Commission presented a first package of initiatives for reform of the EMU. It included proposals for the creation of a European Monetary Fund (including a backstop for the Eurozone’s Single Resolution Fund for failing banks), a financial support mechanism to help countries meet the eligibility criteria for joining the euro, and a Directive to integrate the Fiscal Compact into EU law. It also proposed that the Eurozone should appoint a Minister for the Economy. We discussed these proposals in some detail in our Report of 21 February 2018 on the deepening of the EU’s Economic & Monetary Union.

25.5 In parallel to its legislative proposals, the Commission also published a policy paper setting out plans for new budgetary instruments to support Eurozone countries in financial distress or in need of support to achieve structural reforms.176 Among these would be a new Structural Reform Support Programme under the 2021–2027 Multiannual Financial Framework, focused primarily on helping Member States achieve the necessary reforms to meet ensuring sound public finances and avoiding balance of payment difficulties. The Commission also continued work on an automatic fiscal stabiliser for the Eurozone, as called for in the Five Presidents’ Report. This facility would respond to macro-economic shocks affecting the single currency area that could not be addressed by national fiscal buffers.177

Proposal for the European Investment Stabilisation Function

25.6 In May 2018, the European Commission tabled its proposals for the post-2020 Structural Reform Support Programme and the automatic stabiliser for the Eurozone (the ‘European Investment Stabilisation Function’ or EISF). We have already cleared the former from scrutiny because it is a funding instrument that will only become operational after the UK has left the EU. However, the EISF would be a significant alteration to the institutional structure of the Eurozone, the functioning of which is of especial importance to the UK economy. As such we have considered it in more detail in the remainder of this Report.

25.7 The Commission’s proposal for the Eurozone stabilisation function takes the shape of an investment protection fund, which could provide loans under favourable conditions to Eurozone countries and Denmark,178 if they experienced an economic shock. It would aim to protect public investment when a national government may not have sufficient fiscal space to cut back on public spending (as traditional monetary levers are not available

176 These new budgetary initiatives would complement existing tools such as the Structural Reform Support Programme, the European Structural & Investment Funds, and the European Financial Stability Mechanism.

177 In its policy paper of December 2017, the Commission suggested the automatic stabiliser could take one of a number of forms, such as an investment protection fund; a reinsurance mechanism for national unemployment benefit schemes; a ‘rainy day’ insurance fund that would pay out grants to contributing Member States under pre-defined adverse economic circumstances.

178 Denmark has pegged its currency to the euro via the European Exchange Rate Mechanism (ERM II). Non-Eurozone Member States will also have an interest in the proposal because—with the exception of the UK and Denmark—they are required to adopt the single currency area, and any EISF loans would be guaranteed by the EU budget to which they are contributors.


https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A52017DC0822

https://eur-lex.europa.eu/legal-content/EN/ALL/?uri=COM%3A2018%3A391%3AFIN



to individual Eurozone countries). The new Function would be complementary to the EU’s existing ‘toolbox’ of instruments to address financial distress in Member States, including the European Stability Mechanism.179

25.8 The key elements of the Commission proposal are as follows:

• the EISF would be able to loan up to €30 billion (£27 billion) in total across the entire Eurozone. The loans would be raised by the Commission on capital markets, using the EU budget as guarantee. Any loans granted from the EISF would therefore appear as contingent liabilities on the EU’s accounts;

• Support provided by the EISF would be conditional on a Member State experiencing a “large asymmetric shock”, defined in terms of a rise in the national unemployment rate compared to the previous 25 years and year-on-year; and

• If granted, an EISF loan could only be used for public investment in support of policy objectives as defined in the draft new Common Provisions Regulation for 2021–2027—such as higher employment, the fight against climate change, or transport connectivity—or the provision of education and training.

25.9 Although EISF support would take the form of a loan, the Commission argues that the new mechanism would still present a favourable option for a Member State to choose in the event of an economic shock, because:

• the loan would be cheaper than could be achieved by a Member State experiencing economic difficulties on the open market (as it would be guaranteed by the EU budget);

• use of the EISF would have a “strong signalling effect to market participants”, acting as a way of protecting investor confidence and “avoiding the loss of market access and [the need for] a full-blown financial adjustment programme”; and

• a Member State making use of the EISF would not normally have to pay interest on the loan because those costs would be covered by the Function itself by way of a grant.

25.10 For the purposes of effectively subsidising the interest due, the proposed EISF Regulation would establish a Stabilisation Support Fund. It would be funded via contributions from Eurozone countries,180 investment returns on those contributions, and repayments of interest rate subsidies by Member States if they have failed to meet the conditions attached to their loan (namely that it did not invest the entirety of the loan in eligible investments, or maintained at least the same level of public investment compared to the average in the five years before the loan was granted).

179 The European Stability Mechanism (ESM) provides financial assistance to Eurozone countries experiencing or threatened by severe financing problems, primarily through macro-financial loans, but also via bank recapitalisation and purchasing sovereign bonds. It was established outside the framework of the EU Treaties due to the pressures of the 2012 Eurozone crisis, but the Commission has recently proposed re-integrating the ESM into EU law as the European Monetary Fund.

180 The methodology for calculating Member State contributions would be laid down in a separate intergovernmental agreement. According to the Commission, contributions should be equivalent to a share of their monetary income from the assets they hold in exchange of the banknotes they supply (“seigniorage”).

https://www.esm.europa.eu/



https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=COM:2017:0827:FIN


Possible future developments of the Eurozone stabilisation function

25.11 The option for the stabilisation mechanism chosen by the Commission avoids the creation of a permanent transfer union within the Eurozone—traditionally opposed by various countries such as Germany and the Netherlands—because the loans from the EISF would have to be repaid. As such, the Commission says, the investment protection option “may thus be politically more feasible, at least in the near future”.

25.12 The Commission has also reiterated that the stabilisation mechanism as proposed now could be expanded over time, for example by introducing an insurance-based ‘rainy day’ fund. Eurozone countries would pay a ‘premium’ in return for pay-outs in the case of pre-defined adverse economic consequences. Politically, that would be a hard sell because some countries were more likely to benefit from the fund and would therefore most likely have to pay higher contributions. Negotiations on the technical detail would be extremely politically sensitive. The Commission wants to assess the feasibility of this option as part of its first full review of the EISF, which would take place four years after the stabilisation function became operational.

25.13 In the long term, the European Commission wants to fold the stabilisation function into a proper Eurozone budget. That would go beyond just providing stabilisers in the case of an economic shock, but create a ‘tax and spend’ authority at the supranational level for the single currency area. The Commission admits that “further reflections and discussions would be needed to assess its content and raise its political acceptability”. However, in June 2018 France and Germany also called in the ‘Meseberg Declaration’ for a dedicated ‘Eurozone budget’ to “promote competitiveness, convergence and stabilisation in the euro area”, and said they would jointly work on a proposal for a European Unemployment Stabilisation Fund. Those developments will colour the negotiations among the Eurozone’s Member States on the Commission’s EISF proposal.

The Government’s position

25.14 In January 2018, the Chief Secretary to the Treasury (Elizabeth Truss) provided a first Explanatory Memorandum on the EMU reform proposals, including the EISF. This was almost entirely non-committal, noting the lack of concrete proposals at that stage, and that the Stabilisation Function would be part of the “next MFF, post 2020, when the UK is envisaged to play no part, so are not relevant to the UK”. Following the publication of the detailed proposal in June, the Chief Secretary submitted a second Explanatory Memorandum on 13 July 2018. It provides no substantive assessment of the Commission proposal, but states that, “regardless of our relationship with the EU” after Brexit, “a resilient Euro area remain[s] in the UK’s interest”. The Memorandum adds that “any costs associated with the functioning of the euro area should be borne by [its] Member States”.

Our conclusions

25.15 The creation of the stabilisation function is primarily a matter for the countries of the Eurozone, and is likely to be subject to intense negotiations given the range of views among members of the single currency area on the benefits and costs—including the possibility of ‘moral hazard’—inherent in the creation of a mechanism that essentially mutualises some of the risks inherent in monetary union at the EU-level.


https://www.bundesregierung.de/Content/EN/Pressemitteilungen/BPA/2018/2018-06-19-meseberg-declaration.html

http://europeanmemoranda.cabinetoffice.gov.uk/files/2018/01/DOC290118-290120181431591.pdf

http://europeanmemoranda.cabinetoffice.gov.uk/files/2018/07/EISM_EM_13072018.pdf

http://europeanmemoranda.cabinetoffice.gov.uk/files/2018/07/EISM_EM_13072018.pdf


25.16 However, we do consider the Commission proposal to be politically important given that the strength of the Eurozone is of key importance to the UK’s own economic health, and given the close trading links the UK has and will maintain with the single currency area after Brexit. The EISF proposal should also be seen in the context of the recent Franco-German ‘Meseberg Declaration‘ on a budget for the Eurozone. In the future, should such a Eurozone budget become a reality, it could take on the function of the stabilisation mechanism in addition to other centralised spending responsibilities. For example, Paris and Berlin are developing a joint proposal for a European Unemployment Stabilisation Fund, to be presented to EU leaders at the December 2018 European Council.

25.17 There does not appear to be any direct exposure by the UK to contingent liabilities that could be created by the EISF, as the UK is due to cease being a contributor to the EU budget as if it were a Member State at the end of the transitional period in December 2020. It is extremely unlikely that any contingent liabilities incurred by the EU budget would crystallise before that time.181

25.18 The Committee will continue to monitor the attempts at reform of the Economic and Monetary Union for the time being, and report any relevant developments to the House as appropriate. We are content to now clear the proposal for the Investment Stabilisation Function from scrutiny.


Proposal for a Regulation on the establishment of a European Investment Stabilisation Function: (39838), 9615/18 + ADDs 1–4, COM(18) 387.


None.

181 This situation could change if there were to be an extension of the post-Brexit transitional period beyond December 2020.

https://ie.ambafrance.org/Franco-German-declaration-on-Europe-19-June-2018



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

Department for Business, Energy and Industrial Strategy

(39572)

7283/18

+ ADD 1

COM(18) 84

Report from the Commission to the Council on the five yearly review of the multiannual financial guidelines for managing the assets of the ECSC in liquidation and, on completion of the liquidation, the Assets of the Research Fund for Coal and Steel.

(39626)

—

—

ECA Special Report 08/2018—EU support for productive investments in businesses—greater focus on durability needed.

(39663)

8367/18

+ADDs 1–3

COM(18) 219

Communication from the Commission to the European Parliament, The Council, the European Economic and Social Committee and the Committee of the Regions a European retail sector fit for the 21st century.

(39693)

8560/18

+ADDs 1–3

COM(18) 239

Proposal for a Directive of the European Parliament and of the Council amending Directive (EU) 2017/1132 as regards the use of digital tools and processes in company law.

(39694)

8561/18

+ADDs 1–2

COM(18) 241

Proposal for a Directive of the European Parliament and of the Council amending Directive (EU) 2017/1132 as regards cross-border conversions, mergers and divisions.

(39727)

8891/18

+ ADD 1

COM(18) 256

Report from the Commission to the European Parliament and the Council on the implementation of the Space Surveillance and Tracking (SST) support framework (2014–2017).

(39890)

—

—

Court of Auditors Special Report No 16/2018: Ex-post review of EU legislation: a well-established system, but incomplete.


(39895)

10050/18

COM(18) 398

Proposal for a Council Regulation amending Council Regulation (EU) 2015/1588 of 13 July 2015 on the application of Articles 107 and 108 of the Treaty on the Functioning of the European Union to certain categories of horizontal State aid.

(39941)

10642/18

+ ADD 1

COM(18) 498

Proposal for a Regulation of the European Parliament and of the Council Amending Regulation (EU) No 1303/2013 as regards the resources for economic, social and territorial cohesion and correcting that Regulation as regards the resources for the investment for growth and jobs goal.

Department for Digital, Culture, Media and Sport

(39883)

9993/18

+ ADDs 1–4

COM(18) 440

Proposal for a Regulation of the European Parliament and of the Council establishing the European Solidarity Corps programme and repealing [European Solidarity Corps Regulation] and Regulation (EU) No 375/2014.

(39799)

9364/18

+ ADDs 1–5

SWD(18) 198

COMMISSION STAFF WORKING DOCUMENT Digital Economy and Society Index (DESI) 2018.

(39889)

—

—

Court of Auditors: Special report n°12/2018: Broadband in the EU Member States: despite progress, not all the Europe 2020 targets will be met.

(39777) 9235/18

+ ADD 1 COM(18) 267

Communication from the Commission to the European Parliament, the European Council, the Council, the European Economic and Social Committee and the Committee of the Regions A New European Agenda for Culture.

Department for Environment, Food and Rural Affairs

(39955)

10655?18

+ADD 1

COM(18) 503

Proposal for a Council Decision on the conclusion of the Protocol on the implementation of the Fisheries Partnership Agreement between the Republic of Côte d’Ivoire and the European Community (2018–2024).

(39956)

10654/18

COM(18) 505

Proposal for a Council Regulation on the allocation of fishing opportunities under the Protocol on the implementation of the Fisheries Partnership Agreement between the Republic of Côte d’Ivoire and the European Community (2018–2024).


(39957)

10653/18

+ADD 1

COM(18) 502

Proposal for a Council Decision on the signing, on behalf of the Union, and provisional application of the Protocol implementing the Fisheries Partnership Agreement between the Republic of Côte d’Ivoire and the European Community (2018–2024).

(39960)

10815/18

+ADD 1

COM(18) 515

Proposal for a Council Decision on the conclusion of the Voluntary Partnership Agreement between the European Union and the Socialist Republic of Viet Nam on forest law enforcement, governance and trade.

(39961)

10814/18

+ADD 1

COM(18) 514

Proposal for a Council Decision on the signing, on behalf of the Union, of the Voluntary Partnership Agreement between the European Union and the Socialist Republic of Viet Nam on forest law enforcement, governance and trade.

(39963)

10879/18

+ ADD 1

COM(18) 518

Proposal for a Council Decision on the conclusion, on behalf of the European Union, of the Agreement in the form of an Exchange of Letters between the Union and the People’s Republic of China in connection with the WTO dispute settlement proceedings DS492 Measures affecting Tariff Concessions on Certain Poultry Meat Products.

(39964)

10878/18

+ ADD 1

COM(18) 517

Proposal for a Council Decision on the signature, on behalf of the European Union, of the Agreement in the form of an Exchange of Letters between the Union and the People’s Republic of China in connection with the WTO dispute settlement proceedings DS492 Measures affecting Tariff Concessions on Certain Poultry Meat Products.

(39975)

10855/18

COM(18) 500

Proposal for a Council Regulation amending Regulation (EU) 2017/1970 fixing for 2018 the fishing opportunities for certain fish stocks and groups of fish stocks applicable in the Baltic Sea.

(39991)

11087/18

+ADD 1

COM(18) 541

Recommendation for a Council Decision to authorise the Commission to open negotiations on behalf of the European Union for the conclusion of a Sustainable Fisheries Partnership Agreement and protocol with the Republic of The Gambia.

Department for Exiting the European Union

(39988)

—

—

COMMISSION OPINION on the draft amendments to Protocol No 3 on the Statute of the Court of Justice of the European Union, presented by the Court of Justice on 26 March 2018


Department for International Trade

(39994)

11354/18

COM(18) 542

Proposal for a COUNCIL DECISION on the position to be taken on behalf of the European Union in the Meeting of the Participants to the Arrangement on Officially Supported Export Credits.

Foreign and Commonwealth Office

(39910)

10184/18

COM(18) 465

Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL establishing the Instrument for Pre-accession Assistance (IPA III).

(39971)

10970/18

COM(18) 530

Proposal for a Council Decision authorising Austria, Luxembourg and Romania to accept, in the interest of the European Union, the accession of Belarus and Uzbekistan to the 1980 Hague Convention on the Civil Aspects of International Child Abduction.

(39972)

10969/18

COM(18) 528

Proposal for a Council Decision authorising Austria and Romania to accept, in the interest of the European Union, the accession of Honduras to the 1980 Hague Convention on the Civil Aspects of International Child Abduction.

(39973)

10968/18

COM(18) 527

Proposal for a Council Decision authorising Austria to accept, in the interest of the European Union, the accession of Ecuador and Ukraine to the 1980 Hague Convention on the Civil Aspects of International Child Abduction.

(39974)

10967/18

COM(18) 526

Proposal for a Council Decision authorising Austria, Cyprus, Croatia, Luxembourg, Portugal, Romania and the United Kingdom to accept, in the interest of the European Union, the accession of the Dominican Republic to the 1980 Hague Convention on the Civil Aspects of International Child Abduction.

(39976)

—

—

Proposal of the High Representative of the Union for Foreign Affairs and Security Policy to the Council for a Council Decision amending Council Decision (CFSP) 2016/610 on a European Union military training mission in the Central African Republic.

(39987)

11161/18

—

CFSP Report—Our priorities in 2018.

(39989)

11271/18

COM(18) 17

COUNCIL DECISION (CFSP) 2018/964 of 5 July 2018 amending Decision 2014/512/CFSP concerning restrictive measures in view of Russia’s actions destabilising the situation in Ukraine.


(39992)

—

—

Proposal of the High Representative of the Union for Foreign Affairs and Security Policy to the Council for a Council Implementing Decision (CFSP) 2015/1333 concerning restrictive measures in view of the situation in Libya.

(39993)

—

—

Proposal of the High Representative of the Union for Foreign Affairs and Security Policy to the Council for a Council Implementing Regulation implementing Regulation (EU) 2016/44 concerning restrictive measures in view of the situation in Libya.

(40002)

—

—

Council Decision (CFSP) 2018/1000 of 16 July 2018 Amending Decision (CFSP) 2016/1693 Concerning Restrictive Measures Against ISIL (Da’esh) and Al-Qaeda and Persons, Groups, Undertakings and Entities Associated with them.

(40003)

—

—

Council Implementing Regulation (EU) 2018/999 Of 16 July 2018 Implementing Regulation (EU) 2016/1686 Imposing Additional Restrictive Measures Directed Against Isil (Da’esh) and Al-Qaeda and Natural and Legal Persons, Entities or Bodies Associated with them.

(40025)

—

—

Council Decision (CFSP) 2018/1085 of 30 July 2018 amending Decision 2014/145/CFSP concerning restrictive measures in respect of actions undermining or threatening the territorial integrity, sovereignty and independence of Ukraine.

(40026)

—

—

Council Implementing Regulation (EU) 2018/1072 of 30 July 2018 amending Regulation (EU) No.269/2014 concerning restrictive measures directed against actions undermining or threatening the territorial integrity, sovereignty and independence of Ukraine.

HM Revenue and Customs

(39959)

10679/18

COM(18) 444

Proposal for a COUNCIL DECISION on the position to be taken on behalf of the European Union in the United Nations Economic Commission for Europe Working Party on customs questions affecting transport and in the Inland Transport Committee in connection with the envisaged adoption of a new Convention on the facilitation of border crossing procedures for passengers, luggage and load-luggage carried in international traffic by rail.

HM Treasury

(39953)

10791/18

COM(18) 483

Report from the Commission to the European Parliament and the Council on restrictions on payments in cash.


Home Office

(39776)

9307/18

COM(18) 307

Proposal for a Regulation of the European Parliament and of the Council Amending Regulation (EC) No 862/2007 of the European Parliament and of the Council on Community statistics on migration and international protection.

(39920)

10199/18

+ ADDs 1–4

COM(18) 456

Report from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions Ex Post Evaluation Reports for the period 2011 To 2013 of actions co-financed by the tour funds under the Framework Programme ‘Solidarity and Management of Migration Flows’.

(39922)

10119/18

+ADDs 1–5

COM(18) 464

Report from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions on interim evaluation of the Asylum, Migration and Integration Fund and the Internal Security Fund.

Ministry of Justice

(39858)

9542/18

+ ADD1

COM(18) 396

Report from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions 2017 Annual Report on the Application of the EU Charter of Fundamental Rights.

(39926)

—

COM (18) 364

Communication from the Commission to the European Parliament, the Council, the European Central Bank, the European Economic and Social Committee and the Committee of the Regions The 2018 EU Justice Scoreboard.

(39954)

10768/18

+ ADDs 1–2

COM(18) 507

Report from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions on the interim evaluation of the implementation of the Justice Programme 2014–2020.

Office for National Statistics

(39970)

10905/18

+ ADDs 1–2

COM(18) 506

Report from the Commission to the European Parliament and the Council on the application of Regulation (EU) No 549/2013 of the European Parliament and of the Council of 21 May 2013 on the European System of national and regional accounts in the European Union and on the application of the granted derogations.


(39978)

11009/18

COM(18) 516

Report from the Commission to the European Parliament and the Council on the ‘Commitments on Confidence in Statistics’ by Member States as required by Regulation (EC) No 223/2009 of the European Parliament and of the Council of 11 March 2009.

Department for Transport

(39632)

8106/18

COM(18) 188

Report from the Commission to the European Parliament and the Council on implementation and compliance with the sulphur standards for marine fuels set out in Directive (EU) 2016/802 relating to a reduction in the sulphur content of certain liquid fuels.

(39502)

6218/18

COM(18) 56

Report from the Commission to the European Parliament and the Council Quality of petrol and diesel fuel used for road transport in the European Union (Reporting year 2016).

(39508)

6319/18

COM(18) 73

Report from the Commission to the European Parliament and the Council on the exercise of the delegation conferred on the Commission pursuant to Regulation (EU) No 510/2011 setting emission performance standards for new light commercial vehicles as part of the Union’s integrated approach to reduce CO2 emissions from light-duty vehicles.

(39738)

9144/18

COM(18) 275

Proposal for a DECISION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Council Directive 96/53/EC as regards the time limit for the implementation of the special rules regarding maximum length in case of cabs delivering improved aerodynamic performance, energy efficiency and safety performance.

(39933)

—

—

COMMISSION IMPLEMENTING REGULATION (EU) …/…. on a common methodology for alternative fuels unit price comparison in accordance with Directive 2014/94/EU of the European Parliament and of the Council [9179/18 Commission Staff Working Document: Report on Raw Materials for Battery Applications and strategic Action Plan on Batteries].

(39937)

—

—

Special Report no: 19 A European hig h-speed rail network: not a reality but an ineffective patchwork.


Formal MinutesWednesday 5 September 2018

Members present:

Sir William Cash, in the Chair

Geraint DaviesRichard DraxMr Marcus FyshKate HoeyKelvin HopkinsDarren Jones

Mr David JonesStephen KinnockAndrew LewerMichael TomlinsonDavid WarburtonDr Philippa Whitford

Scrutiny Report

Draft Report, proposed by the Chair, brought up and read.

Ordered, That the draft Report be read a second time, paragraph by paragraph.

Paragraphs 1.1 to 26 read and agreed to.

Summary agreed to.

Resolved, That the Report be the Thirty-seventh Report of the Committee to the House.

Ordered, That the Chair make the Report to the House.

[Adjourned till Wednesday 12 September at 1.45pm.


Standing Order and membershipThe European Scrutiny Committee is appointed under Standing Order No. 143 to examine European Union documents and—

a) to report its opinion on the legal and political importance of each such document and, where it considers appropriate, to report also on the reasons for its opinion and on any matters of principle, policy or law which may be affected;

b) to make recommendations for the further consideration of any such document pursuant to Standing Order No. 119 (European Committees); and

c) to consider any issue arising upon any such document or group of documents, or related matters.

The expression “European Union document” covers—

i) any proposal under the Community Treaties for legislation by the Council or the Council acting jointly with the European Parliament;

ii) any document which is published for submission to the European Council, the Council or the European Central Bank;

iii) any proposal for a common strategy, a joint action or a common position under Title V of the Treaty on European Union which is prepared for submission to the Council or to the European Council;

iv) any proposal for a common position, framework decision, decision or a convention under Title VI of the Treaty on European Union which is prepared for submission to the Council;

v) any document (not falling within (ii), (iii) or (iv) above) which is published by one Union institution for or with a view to submission to another Union institution and which does not relate exclusively to consideration of any proposal for legislation;

vi) any other document relating to European Union matters deposited in the House by a Minister of the Crown.

The Committee’s powers are set out in Standing Order No. 143.

The scrutiny reserve resolution, passed by the House, provides that Ministers should not give agreement to EU proposals which have not been cleared by the European Scrutiny Committee, or on which, when they have been recommended by the Committee for debate, the House has not yet agreed a resolution. The scrutiny reserve resolution is printed with the House’s Standing Orders, which are available at www.parliament.uk.

Current membership

Sir William Cash MP (Conservative, Stone) (Chair)

Geraint Davies MP (Labour/Cooperative, Swansea West)

Martyn Day MP (Scottish National Party, Linlithgow and East Falkirk)

Steve Double MP (Conservative, St Austell and Newquay)

Richard Drax MP (Conservative, South Dorset)

Mr Marcus Fysh MP (Conservative, Yeovil)

Kate Green MP (Labour, Stretford and Urmston)

Kate Hoey MP (Labour, Vauxhall)

Kelvin Hopkins MP (Independent, Luton North)

Darren Jones MP (Labour, Bristol North West)

Mr David Jones MP (Conservative, Clwyd West)

Stephen Kinnock MP (Labour, Aberavon)

Andrew Lewer MP (Conservative, Northampton South)

Michael Tomlinson MP (Conservative, Mid Dorset and North Poole)

David Warburton MP (Conservative, Somerton and Frome)

Dr Philippa Whitford MP (Scottish National Party, Central Ayrshire)

http://www.parliament.uk

http://www.parliament.uk/biographies/commons/sir-william-cash/288

http://www.parliament.uk/biographies/commons/geraint-davies/155

https://www.parliament.uk/biographies/commons/martyn-day/4488

http://www.parliament.uk/biographies/commons/steve-double/4452

http://www.parliament.uk/biographies/commons/richard-drax/4132

http://www.parliament.uk/biographies/commons/mr-marcus-fysh/4446

http://www.parliament.uk/biographies/commons/kate-green/4120

http://www.parliament.uk/biographies/commons/kate-hoey/210

http://www.parliament.uk/biographies/commons/kelvin-hopkins/2

http://www.parliament.uk/biographies/commons/darren-jones/4621

http://www.parliament.uk/biographies/commons/mr-david-jones/1502

http://www.parliament.uk/biographies/commons/stephen-kinnock/4359

http://www.parliament.uk/biographies/commons/andrew-lewer/4659

http://www.parliament.uk/biographies/commons/michael-tomlinson/4497

http://www.parliament.uk/biographies/commons/david-warburton/4526

http://www.parliament.uk/biographies/commons/dr-philippa-whitford/4385

Thirty-seventh Report of Session 2017–19...Noting the Commission’s statement “that the UK took...

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