single market news - the changing focus of internal market policy-making-2006

8/9/2019 Single Market News - The changing focus of Internal Market policy-making-2006

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CONTENTS

July 2006 42Editeur responsableAnthony DempseyEuropean CommissionDG Internal Market and ServicesUnit A-4

B - 1049 BrusselsTel: (+32 2) 295 73 57Fax: (+32 2) 295 43 51

EditorNigel GriffithsTel: (+32 2) 298 65 11

SubscriptionsAnita HaaseDG Internal Market and ServicesC100 1/130B-1049 BrusselsFax: +32 2 295 43 51E-mail: [email protected]/internal_market/smn.htm

Layout:Unit A4

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

European Communities, [2006]Reproduction is authorised provided the source isacknowledged.

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

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

3 Editorial

4 The changing focus of Internal Market policy-making

7 Internal Market Scoreboard shows the need tospeed up national efforts

7 Expert group formed to provide balanced adviceon accounting standards

8 Corporate governance: stakeholder consultationsshow the way forward

10 Launch of Financial Services Consumer Group

10 Expert group on mortgage funding created

11 SPECIAL FEATUREPostal reform in the EU moves forward

15 Industry reports recommend improvements toEU investment fund framework

16 Public hearing examines key issues in insurance solvency

18 CSS fours years on - user survey gives avote of confidence

19 Public procurement: how to awardlow-value contracts fairly

20 Stakeholders debate future policy on patents

22 Infringements

Photographs for this editionwere supplied by:

Grifco Communications andthe European Commission.


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At the end of June, Alexander Schaub stepped down as DirectorGeneral of DG Internal Market and Service. In conversation withSMN he reflects on the changing international context in which In-ternal Market policy now has to be developed. Whilst pointing to themany success stories in building the Internal Market, we should notlose sight of fact, he stresses, that there is still a long way to go. Ithink that the truth is that the Single Market will always be a work in progress. It will never quite be ready but we continue to makeprogress. (see page 4).

The first two years of the Commissions Action Plan on CompanyLaw and Corporate Governance have seen the first wave of meas-ures implemented or in the process of adoption. To confirm prioritiesfor the next stage, the Commission organised a consultation and fol-lowed this with a public hearing in Brussels. The public hearing whichattracted some 300 stakeholders, broadly confirmed the written re-sponses to the consultation and sought selective action in key areasof concern regarding the most efficient way to modernise companylaw and corporate governance (see page 8).

The EUs postal sector is a major economic vehicle. It is one of the

biggest employers in Europe with 1.7 million people directly em-ployed and 3.8 million people working in related industries. The rev-enue of the sector amounts to 90 billion euro, which corresponds to0.9% of the Unions gross domestic product. Since the launch of aCommission Green Paper in 1991, which highlighted some apparentshortcomings in the sector, the postal sector has been undergoingfar-reaching reform. This has resulted at the end of the day in signifi-cant improvements - notably in terms of quality of postal servicesand efficiency of national postal operators. See Special Feature onpage 11.

A relatively low cost and efficient patent system in the EU is seenas essential by many technology-based industries trying to grow andprosper in a fast-moving global economy. The new industrial policylaunched by the Commission in October 2005 also identified thedevelopment of IPR as major policy initiative. Commission effortsso far at launching the Community Patent (COMPAT) have beendeadlocked over thorny and expensive issues such as translationrequirements. In January the Commission launched a consultationon stakeholders views on the future of the patent system in Eu-rope and in July invited stakeholders to a public hearing in Brussels.Whilst the consultation has demonstrated that there is a widespreadpreference for the Community Patent (COMPAT) as a way forward,stakeholders, it is clear, do not wish to have this system at any price(see page 20).

Thierry Stoll

EDITORIAL

Acting Director GeneralThierry Stoll

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The changing focus of Internal Market policy-making

At the end of June, Alexander Schaub stepped down asDirector General of DG Internal Market and Service. SingleMarket News talked to Dr Schaub about the evolving focusof the work of the Directorate General and the challenges itfaces for the future.

Spotlight

"Compared to where we were some 20years ago, the progress that has beenmade in developing the Single Market hasbeen quite remarkable, says AlexanderSchaub, Director General of DG InternalMarket and Services. "Today, EU citizenscan live, study, work or retire in which-ever country they like in Europe. Andconsumers have a wider choice of high

quality products while companies havelarge and diverse markets at the disposalto develop their business with greatly re-duced technical impediments."

Schaub also highlights the great changesthat have taken place in the structure of Europe's industry: We should not for-get how easy it is to fly around Europe,

often at prices that are only a fraction of what they used to be. Major industry sec-tors have been shaken up to the benefitof consumers. Just look at telecommuni-cations or energy where in the past theonly choice was often between nationalmonopoly or nothing at all. Now thereare many new operators and brandswhich is a real change for the better."

But, he cautions, the many success storieswe can point to should not cause us tolose sight of fact that the EU still has a longway to go. "I think that the truth is thatthe Single Market will always be a work inprogress. It will never quite be ready butwe continue to make progress.

Benefits for citizens and business

Dr Schaub stresses that enormous eco-nomic benefits that have been achievedover the past two decades and theseshould not be overlooked.

Studies have dem-onstrated that the

Internal Market hasdelivered growth of about 6,000 europer household andgenerated 2.5 millionextra jobs in the dec-ade after its estab-lishment in 1993.

There is still muchwork to do, Schaubstresses, but much of it is of a differentnature as major changes have been takingplace in the focus of the work to be done:For many years our job has been build-ing or redesigning the mechanics of theInternal Market which has meant takingthe divergent traditions of EU countriesand bringing them together in a mutu-ally acceptable, harmonised system. Thisinward-looking perspective is changingsince the globalisation of markets andbusiness has transformed the worldwhich we have to operate in.

"The policies we develop at EU level areboth affected by, and have an influence on,policies and legislation elsewhere in theworld. In todays global markets, financial

"Our inward-looking

perspective is chang-

ing. The globalisation

of markets and busi-

ness represents a new

world which we have

to operate in."


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Spotlight

Alexander Schaub has had an illustrious career in the European Commission span-ning more than thirty years. He has worked at the highest level of Commission policydevelopment in the private offices (cabinets) of Commissioners Ralf Dahrendorf,Guido Brunner, Viscount Etienne Davignon and President Gaston Thorn. He was also

Head of Cabinet for Belgian Commissioner Willy De Clercq.

After working as Director in the Directorate General for External Relations andTrade Policy he became Deputy Director General of Internal Market and Industrialaffairs in 1990. In 1995 he became Director General of the highly sensitive Competi-tion DG serving Commissioners Karel van Miert and Mario Monti. In 2002 he movedto DG Internal Market and Services as Director General.

services, in particular, are assuming an in-creasingly important role. And in tacklingthis sector we need to be outward-look-ing and have a 360 degree focus."

He highlights as an example the currentwork in the area of financial derivativeswith the MiFID proposals (Markets inFinancial Instruments Directive). "Theproducts are part of a transatlantic mar-ket system and the proposed Directiveis Europe's attempt to set rules for defacto non-European financial services. Itis a huge project and a major test casefor developing a full set of rules covering25 Member States which take on boardthe interests of external global markets.

The challenge here is whether we can getthese rules accepted and functioning inboth the EU and US context since whatwe are dealing with now are integratedtransatlantic markets."

Dynamic consolidation

The development and on-time adop-tion of the Financial Services Action Plan(FSAP) is an achievement which Schaubis particularly proud of. "Our approachin tackling the highly complex area of

financial services represents a qualita-tive leap in the work of the DirectorateGeneral. The FSAP is a new generation of legislation which has involved a very highdegree of consultation, interchange andcooperation with stakeholders and EUinstitutions to map the way forward. "

Schaub also points to the almost 'breath-taking speed' in the development andadoption of the FSAP compared to ear-lier Single Market legislation. The nextphase, however, up to 2010 will be aphase of consolidation of existing legisla-tion, with few new initiatives, he stresses."The leitmotiv of our new strategy is 'dy-namic consolidation' through which wewill steadily build on the major politicaland legislative advances which have beenmade and build on the market integrationwhich is under way in many sectors."

Better Regulation

"The way we have approached the FSAP,"he explains, "is representative of the verystructured way the Commission now ap-proaches the policy-making process. Be-

fore coming forward with plans, we havea period of comprehensive consultationand undertake impact assessments whichtell everybody what the implications aregoing to be of introducing a Directive orRegulation.

"As a result of this process, the Commis-sion often now decides that regulation assuch may not be necessary or appropri-ate, and that voluntary measures couldachieve the same goals without the addedcosts that regulation usually implies."

The role of the EU institutions and par-ticularly the European Parliament has alsobeen steadily changing. "We recognisethat the European Parliament has devel-

oped more self-confidence in playing itsrole as co-legislator. The European Parlia-ment is a serious and reliable partner of the Commission in achieving the objec-tives of the Internal Market. This has - bythe way been a decisive element in theprocess of strengthening the Parliament'srole also in the often very sensitive areaof comitology decisions."

Schaub, himself the author of a book onthe work of the European Parliament,points to the high levels of political as wellas technical competence now presentin the Parliamentary committees whichpermits them to intervene effectively inthe process and enable the Parliament toseriously exercise its democratic role.


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Spotlight

Changing EU market

Over the past 30 years, the EU's eco-nomic and industrial strengths havechanged and while the EU may have lostdominance in some business sectors, it

is a leading force in financial services andits global position is strengthening, heemphasises. The evidence for this lies ingrowing markets, innovation, transatlan-tic mergers, and, recently, moves towardsstock exchange consolidation.

"Indeed, in this day and age, competitionis global. Investors in search of higher re-turns channel their money towards thesafest, most efficient, most well regulatedmarkets. Issuers looking for easier andcheaper access to finance raise moneywhere they can find liquidity and trans-parency, he explains. In this context anynew rules for financial markets in the EUor in the US have immediate and inevita-ble practical repercussions on players inother parts of the developing global sys-tem. The markets are increasingly inter-dependent and the regulatory approachhas to be aligned to this trend."

Proactive role in regulatory changes

"The developments taking place at theglobal level render it imperative that theCommission takes a fully proactive role

in guiding legislative and regulatory de-velopments at the international level," hestresses. "Indeed we have already takenthe initiative in this respect by establish-ing regular dialogue with our regulatorycolleagues from around the world. Of

course, as our main trading partners, theUS and Japan feature high on the list of interlocutors, but discussions are also ad-vancing with emerging countries such asChina, India and Russia."

The aim of these regulatory dialogues,he explains, is to identify well in advancepotential spill-over effects of legislation ineach others jurisdictions, and to work inan informal and non-confrontational man-ner to find mutually acceptable solutionswhich take into account the differencesin the legal and regulatory structures andbackgrounds.

Dr Schaub points out that since 2004, theEuropean Commission has been engagedin the highly productive and co-operativeFinancial Markets Regulatory Dialoguewith legislators and supervisors in theUS. "The open and informal nature of our dialogue means that concrete issuescan be brought to the table without adanger of being overwhelmed by politicalsensitivities, even in times of crisis. Andthis is delivering tangible results. "

Emerging powers

The Director General recently visitedChina together with CommissionerCharlie McCreevy as part of a bridge-building delegation. "The EU sees China asa valued and important partner, one fromwhich it wants to learn, one with which itis ready to share. As leading global play-ers, China and Europe need to work inconcert to try to secure a friendly andopen business environment and a glo-bal economic framework that promotescompetitiveness, facilitates cross-borderbusiness and gives our people freedomand space to innovate and take risks. "

Averting crises

Creating that understanding is an increas-ingly important part of the work of po-litical leaders and policy-makers. And thebottom line of this approach, he explains,is to utilise the resources available to uson various fronts, and the relationshipswe have built up with colleagues aroundthe globe, to mitigate risk and to preparefor eventual crises.

"We cannot simply put our heads in the

sand and pretend that globalisation is nothaving any impact on financial servicesand financial trade. We have to embracethe challenges and opportunities thatglobalisation brings, while ensuring thatour citizens and businesses enjoy thehighest possible level of protection."

New challenge

"In summary our new challenge is tomake new rules and systems function ef-fectively in the global business context.This is the new test of our work. Thedemands of the new global environmentalso mean that the Commission needs thebest qualified people on its staff," he adds."Our work increasingly requires interdis-ciplinary skills and political sensitivity. Weneed motivated people who don't just fo-cus on the rule-making phase but can seethe initiatives all the way through."

"I have immensely enjoyed being involvedfor some 35 years in developing the EU'srole in so many different and crucial areasand pass the baton onto those who havein many respects a new and different glo-bal context to work in."

Alexander Schaub with his team of Directors at DG Internal Market and Services. From the left:Bertrand Carsin, Anne Houtman, Michael Hager (assistant), Thierry Stoll (Acting Director General),Elemr Tertk , Alexander Schaub, Jean-Yves Muylle (assistant), Jaqueline Minor, David Wright,Pierre Delsaux, Guido Berardis, Henk Post.


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Expert group formed to provide balancedadvice on accounting standards

The Commission has established a Stand-ards Advice Review Group in the areaof accounting to ensure objectivity andproper balance of the European FinancialReporting Advisory Groups (EFRAG)opinions. The Group will be composed of independent experts and high-level rep-resentatives from National Standard Set-ters whose experience and competencein accounting are widely recognised.

The task of the new Group will be to as-sess whether the endorsement opiniongiven by the EFRAG is well balanced andobjective. The group will normally deliverits advice within three weeks. The finaladvice will be published on the Commis-sions website.

The International Accounting Standards(IAS) Regulation adopted in July 2002, re-quires all EU companies listed on a regu-lated market - such as a stock exchange- to prepare their consolidated accountsin accordance with a single set of globalstandards, commonly referred to as In-ternational Financial Reporting Standards(IFRS).

The IFRS are prepared by the Internation-al Accounting Standards Board (IASB), anindependent accounting standard setter.In accordance with the IAS regulation,these standards are adopted for use inthe EU.

Scoreboard

The IAS Regulation foresees the creationof an accounting technical committee toprovide support and expertise to theCommission in the assessment of suita-bility of the IFRS for adoption in the EU.

The European Financial Reporting Advi-sory Group (EFRAG) is a private bodyfounded by the organisations represent-ing preparers, users and accountancyprofessionals to provide opinions to theCommission on whether the proposedstandard complies with EU requirementsand is suitable for adoption.

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

IM Scoreboard shows need to

speed up national efforts

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

Member States need to speed up their efforts to implement InternalMarket rules into national law, according to the Commissions lat-est Internal Market Scoreboard. On average 1.9% of Internal Mar-ket Directives for which the implementation deadline has passed arenot currently implemented into national law, which is an increase of 0.3% on the best-ever result of 1.6% achieved in November 2005.This means that the positive trend of recent years has stalled and theinterim target deficit of 1.5% agreed by Member States has not beenreached.

played over the past two years in timelytransposition.

Only 14 out of 25 Member States remainbelow the 1.5% ceiling, compared to 17 inNovember 2005. Denmark has the low-est deficit, followed by Cyprus, Hungary,Lithuania, Slovenia and the UK.

Denmarks success in bringing its deficit

further down to 0.5% shows it is perfect-

ly feasible to be below theinterim ceiling - providedthe necessary political willexists and good organisa-tion is in place.

Infringements

Progress is also slow inthe correct application of Internal Market rules: not a single old

Member State has been able to deliveron its promise to reduce infringementproceedings by 50% during the period of 2003 2006.

Package meetings between the Commis-sion experts and Member States authori-ties continue to be an efficient means of resolving infringement cases at an earlystage. 25 package meetings took place be-tween July 2004 and July 2005. In almost60% of cases, either a solution has beenfound within 6 months or a decisive step

forward has been taken.

In July 2006 the transposition deficit -the percentage of Internal Market Di-rectives that have not been implementedinto national law - stood at 1.9%, whichis 0.3% up from a deficit of 1.6% in No-vember 2005.

The new Member States still performbetter with an average transpositiondeficit of 1.5% compared to 2.2% for the

old Member States. However, their ef-forts seem to be slowing down and theyrisk losing the exemplary role they have


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Stakeholder consultationsshow the way forward

The public hearing in Brussels at-tracted some 300 stakeholdersand interested parties to presenttheir views and engage in debate onthe most efficient way to modernisecompany law and corporate govern-ance. The views expressed at thepublic hearing broadly confirmed thewritten responses to the consulta-tion organised earlier in the year and

sought selective action in key areas of concern.

Key conclusions

The speakers at the hearing who repre-sented a range of stakeholders were ingeneral agreement that any Commissionaction in the field of company law andcorporate governance should focus on: lifting obstacles to the free ow of

capital between Member States andto right of establishment;

Corporate governance

Antonio Borges ,Vice Chair-man of Goldman Sachs Inter-national, said that the ActionPlan should focus on every-thing that leads to powerful

externalities. He also stressedthat , to enhance competition,

increased transparency is amust; higher corporate mobil-ity is a strong catalyst; and the

simplification of legislation,whenever possible, brings

clearer choices for investorsand business leaders.

on granting additional exibility tocompanies.

Some took the view that regulatorycompetition in the field of company lawcan be an effective tool in achieving effi-ciency. However, regulatory fatigue washighlighted as a factor to be taken intoaccount.

Consultation

The consultation itself on future priori-ties for the Action Plan on Company Lawand Corporate Governance which wasconcluded in March elicited more than260 responses from a wide variety of stakeholders from all around the EU andfrom Third Countries.

The idea of undertaking a consultationexercise was itself praised. Many re-spondents called for further systematicconsultations, suggesting a minimum 12week deadline.

The application of the better regulationprinciples, as proposed in the consulta-tion document, received overwhelm-ing support, in particular for systematicregulatory impact assessments, legisla-tion only when needed and light touchregulation.

Future of the Action Plan?

Views were divided on the continued rel-

evance of the Action Plan. Respondentsgenerally supported the work which hasbeen done since 2003 but opinions weresplit on the detail of the measures pro-posed for the medium and long term.

A number of respondents called for astabilisation period. However, any sortof moratorium, it was made clear, shouldnot cover the 'enabling legislation', suchas the Directive on the transfer of regis-tered office or the Statute for a EuropeanPrivate Company.

Views divided on Corporate Governance

There was clear support for addressingthe 'one share, one vote' issue at EU-level, at least as far as undertaking a fact-finding study.

Regarding shareholders' rights, a slendermajority of respondents saw some add-ed value in an EU initiative. Of particularconcern were the issues of establishing amandatory special investigation right, thenomination and dismissal of directors,and shareholder communication rules.Those who opposed these ideas took the view that there is already sufficientprotection of shareholders interest inEU and national legislation.

Institutional investors

Half of the respondents took a positionon the disclosure of institutional inves-tors voting policies. Opinions on theopportunity for action at EU level weresplit, however. Some considered that thematter should be left to contractual ar-rangements. Some believe that an EU

A broad consensus on the principles that should underpin fu-ture action in the field of company law and corporate govern-ance has emerged following an online consultation launched inDecember 2005 and a public hearing organised by the Com-mission in May.


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of legislation, whenever possible, bringsclearer choices for investors and businessleaders.

Commissioner for Internal Market &

Services Charlie McCreevy stressed thatthe overall objective of Commission ac-tion was to "make sure that the regula-tory framework in the area of companylaw and corporate governance will helpboost the competitiveness of the EUseconomy.

He stated his belief in the principle of bet-ter regulation and in regulatory dialogue.I am determined to ensure that full ac-count is taken of dialogue with interestedparties in our actions. This will help en-

sure that a full picture is developed of the potential impact of our actions andthat what we do is clearly focused on theneeds of our constituents.

New study

Regarding shareholder democracy,McCreevy announced that an externalstudy is being commissioned with the aimof identifying all existing deviations fromthe proportionality principle across EUlisted companies. The study will providean analysis of the regulatory frameworksat Member State level. It will evaluatetheir economic significance and potentialimpact on EU investors. "It is my intentionthat the study should be completed at thelatest by the beginning of 2007."

This is a controversialarea. But controversyshould not prevent the EUfrom having a thoroughand informed debate, hesaid.

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

Corporate governance

rule would create excessive burdens forinvestors. Others took the view that EUintervention is needed to create a level-playing field.

A significant number of comments insist-ed on the need to impose transparencyand disclosure obligations on institutionalinvestors. Among the supporters of EUaction, opinions were split on the appro-priate instrument.

Respondents opposed the adoption of an EU wrongful trading rule, consideringthat such issue does not in practice raisesubstantial cross-border problems.

Respondents also opposed the adoptionof EU legislation on directors disqualifi-cation, on the basis of the substantial dif-ferences that exist between the nationalsystems. However, some voices consid-ered such action necessary in order toavoid forum shopping.

Company Law: limited EU intervention

A large majority of respondents calledfor the adoption of a 14th Company LawDirective. A minority, however, raiseddoubts about the practical value of theDirective due to other obstacles, such astaxation and employee participation is-sues.

Board structure

The issue of board structure did not raisestrong feelings, however, and respondentsgenerally did not consider EU action tobe a high priority. Enthusiasm was also

limited about tackling the area of groupsand pyramids. The majority of respond-ents considered that no action was advis-able or necessary.

European Company Statute

As regards the company legal structures,respondents considered it premature tolaunch an assessment of the EuropeanCompany Statute. This statute was con-sidered as partly or very useful by 40%

of the respondents. Almost half of therespondents called for the adoption of a European Private Company Statute. Ahigh number of foundations urged theCommission to carry out a feasibilitystudy on a European Foundation Statute.

Consolidation of company law

A majority of respondents supported thebasic principle of simplifying company law.Most stakeholders, however, considered arecasting exercise as inappropriate. Theyproposed, instead, to launch a codificationor consolidation of existing company lawlegislation.

In his keynote address, Antonio Borgesvice chairman of Goldman Sachs Inter-national and chairman of the EuropeanCorporate Governance Institute (ECGI)said that the Action Plan should focuson everything that leads to powerfulexternalities. He also stressed that toenhance competition, increased transpar-ency is a must; higher corporate mobilityis a strong catalyst; and the simplification

More than 300 stakeholders and interested parties attended the public hear-ing in Brussels to present their views and engage in debate on the most ef-ficient way to modernise company law and corporate governance

info

Nathalie BergerTEL: +32 (0)2.299 65 03FAX: +32 (0)2.299 85 34

[email protected]


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Financial services

The aim of this group, which is co-chaired by DG Internal Market andServices and DG Health and ConsumerProtection of the European Commission,is to stimulate the exchange of informa-tion between national and European con-sumer representatives and the Commis-sion, to provide information to consum-ers in all Member States, to build finan-cial services expertise in the consumermovement and to obtain additional con-sumer-focused input on financial servicespolicy issues.

The Financial Services Consumer Grouphas been established as a sub-group of the already existing European ConsumerConsultative Group (ECCG), the Com-missions main forum for engaging withconsumer organisations and its creationwas included in the Commissions WhitePaper on Financial Services Policy 2005-2010.

In this first meeting, the Commission

Financial ServicesConsumer GrouplaunchedThe newly created Financial Services Consumer Group met forthe first time in June. This Group brings together representativesfrom consumer organisations from EU Member States as well asconsumer organisations active at EU level.

discussed with the Group a number of important current topics:

the Commissions policy priorities in

nancial services up to 2010; the latest policy and legislative

developments in the area of consumer and mortgage credit;

the creation of the Single EuroPayments area;

the Green Paper on assetmanagement;

issues of corporate governance."Financial products and services are of crucial importance for consumers in theirdaily lives. We are delighted that repre-

sentatives of consumer associations fromacross the EU are showing their commit-ment to greater dialogue with the Com-mission on these issues by participating inthe Financial Services Consumer Group,"commented Internal Market and ServicesCommissioner McCreevy. "Consumerinvolvement is essential to the creationof an integrated retail financial servicesmarket that serves all of our citizens in-dustry, SMEs and consumers alike."

Expert Group on mortgage funding createdAn expert group has been set up by theCommission to comprehensively identifythe barriers to cross-border activity inmortgage funding markets and proposesolutions which would facilitate integra-tion.

Stakeholders have consistently high-lighted the importance of integrating theEuropean mortgage funding markets forthe integration of the mortgage marketsas a whole. Further integration of the EUmortgage markets could be considerablyenhanced by the emergence of a pan-Eu-ropean funding market.

This view was supported by the resultsof the consultation on the Green Paperon Mortgage Credit in the EU, which in-dicated that the integration of mortgagefunding markets could contribute to im-proving the efficiency and product com-pleteness of mortgage markets thereby

bringing benefits to lenders and borrow-ers alike.

Because of the complexity and techni-cal nature of the issues to be examined,the Commission decided that mortgagefunding issues merited further in-depthanalysis before assessing whether EU in-tervention could be envisaged.

The Mortgage Funding Expert Group hasbeen carefully selected to ensure a bal-ance between the different stakeholdersinvolved in the funding process. Expertsrepresent all funding techniques (cov-ered bonds, mortgage-backed securities,deposits, etc.) and most EU mortgagemarkets.

The Expert Group will consider barriersto all mortgage funding techniques and

prioritise them in terms of their signifi-cance to the market. The Expert Grouphas also been asked to consider the mostappropriate solution for each barrier.

The Group will meet several times in2006 and will publish a report on its find-ings which will be available on the Com-mission's website.

The Commission will use the results of this Expert Group in considering which,if any, measures, may be announced in itsWhite Paper on the integration of EUmortgage credit markets to be publishedin 2007.

Impact assessments will be undertakenon all potential measures to ensure thatforthcoming work in this area is carefullyfocused.

info http://ec.europa.eu/internal_market/nservices-retail/home-loans/integration_en.htm

info http://ec.europa.eu/internal_market/nances/fscg/index_en.htm


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Postal reformin the EU moves

forward

S p e c i a l

F e a t u r e

the services reserved for national public postal operators,and by strengthening the universal services operated inthe interest of mail users both commercial customersand consumers.

This approach was en-dorsed first by the Coun-cil of Ministers in a Reso-lution in 1994 and, moresignificantly, by the Parlia-ment and the Council of

Ministers in 1997 when thePostal Directive (97/67/EC) was adopted.

The Postal Directive pavedthe way inter alia for gradu-al market opening over anextended period (1997-2009), set quality standardsand greater accountabilityfor service providers, pro-vided postal users with redress systems and establisheda core set of universal services. It also established firmprinciples on prices. In addition, it promoted the role of independent national regulatory authorities to overseethe sector in each Member State.

The amendment of the Postal Directive (2002/39/EC)continued this approach to reform by further reducing themaximum reservable area and by setting the target dateof 2009 for the accomplishment of the Internal Marketfor postal services, subject to review and confirmation bythe Commission.

Drive towards modernisation

Compared to the situation of the postal sector in 1991,the sector has evolved tremendously to the benefit of all

J u l y 2 0 0 6

The EU postal reform is well underway and hasproduced significant improvements - notably interms of quality of postal services and efficiency of national postal operators. Postal services have, assuch, developed noteworthy strengths, particularlyin terms of high levels of service, affordability andreliability. Indeed it is fair to ask how e-commercewould have developed and grown without postalservices; and how would companies be able to reachtheir clients when sending invoices and promotionalmail; and what would consumers have done with-

out nearby post boxes and post offices; and withouthome deliveries 5 to 6 days a week?

Long reform process

While postal services are sometimes taken for granted, itshould not be forgotten that the high quality of universalpostal services is the result of a long reform process thathas been ongoing since 1991. The postal sector is also amajor economic vehicle. It is one of the biggest employersin Europe with 1.7 million people directly employed and3.8 million people employed in related industries. The rev-enue of the sector amounts to 90 billion euro, which cor-

responds to 0.9% of the Unionsgross domestic product.

The reform of the Postal sec-tor started with a CommissionGreen Paper launched in 1991,which highlighted some appar-ent shortcomings in the sector:low quality of services, high costsand indebtedness among the - atone time all public - postal opera-tors. A remedy proposed at thattime, was to open up the sectorto competition by progressivelyreducing the postal monopolies,

11

"The postal sector ... isone of the biggest

employers in Europe with

1.7 million people directlyemployed and 3.8 millionpeople employed in relat-ed industries. The revenueof the sector amounts to

90 billion euro."


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consumers both private and businesses. It has created adrive among public postal operators towards modernisa-tion, which has made the postal sector viable and, as such,has contributed to the overall economic growth of theEU. With a view to sustaining and further building on thispositive evolution, the Commission is currently putting

the finishing touches to a proposal aimed at confirming,if appropriate, the completion of the Internal Market forpostal services in 2009 or proposing any relevant alterna-tive step in the same direction. The proposal, which is duelater this year, will be accompanied by a 3rd ApplicationReport (on the functioning of the Postal Directive) and aProspective Study (on the impact of market opening onuniversal service in each Member State).

Preparatory steps

Due to its wide socialand economical impor-tance, the postal sectorhas many stakeholders.In view of this fact and inorder to balance viewsin the forthcoming pro-posal, the Commissionhas commissioned anumber of sector stud-ies*.

In 2005, WIK-Consult looked at The Evolution of theRegulatory Model for European Postal Services and gave

an in-depth analysis of the current regulatory model. Italso proposed a model of regulation based on sound regu-latory principles, while addressing a number of transitionalissues on the way to full postal market opening. Ecorysstudied The Development of Competition in the Euro-pean Postal Sector, which described the status to dateand likely future strategies of postal operators. The studyalso looked at the likely effects of increased competitionin the postal sector and the possible implications for fu-ture postal regulation.

Two other important studies were published in July 2006.One was carried out by WIK-Consult on Main Develop-ments in the Postal Sector (2004-2006) and the other byPriceWaterhouseCoopers is on The Impact on UniversalService of the Full Market Accomplishment of the Postal

Internal Market in 2009. The conclusions of the studiesappear to be balanced, complementary and encouragingfor the postal sector. They affirm that high quality uni-versal services can be sustained in an open postal mar-ket, where necessary by the adoption of certain flankingmeasures, and they recommend to maintain 2009 as thedate of market opening.

Public consultation

Additionally, the Commission has carried out a PublicConsultation, where all citizens were invited to expresstheir views on most important elements of postal services

as well as on possible issues in the sector. The Public Con-sultation also gave industry stakeholders the opportunityto comment on technical, legal and regulatory issues.Overall, approximately 2,400 replies were received, whichgave a valuable input to the preparation of the forthcom-ing postal proposal.

Last but not least, the Commission launched a postal sta-tistical data collection in 2005 to underpin the future mon-itoring of the market. The response rate was uncommonlyhigh for a first time data collection exercise and gave agood view of the current situation of the EU postal sectorin terms of market opening, volumes, service, employmentetc. It also showed that there are significant differencesthat persist between EU countries. The postal data collec-tion, which will continue on a yearly basis, will mainly serveas an important monitoring mechanism of the postal mar-ket evolution towards opening and beyond.

Achievements to date

The EU postal legislation has been transposed by all EUMember States and the achievements to date are verypositive. Consumers and large mail users have seen im-provements in terms of quality of service. National andcross border letter mail standards (delivery times) have

"Almost without exceptionacross the EU... public

postal operators now pro-vide a substantially greater

range of services for anexpanding customer base."


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1313

become firmly entrenched, are carefully monitored andwidely complied with. National regulatory authorities,where appropriate have levied dissuasive sanctions fornon-compliance with quality targets. Low cost and ac-

cessible complaint pro-cedures to address cus-tomer dissatisfaction arein place and are used byconsumers.

Public postal operatorsnow operate with greaterlevels of efficiency andmany have seized the op-portunity to restructureand streamline their op-

erations without curtailingservices or quality.

They also enjoy greaterfinancial and operationalautonomy than in thepast. These freedoms have

allowed them to invest and diversify into new productranges and services and to capitalise on new technologiesto enhance their delivery and sorting capacity and betterserve specific customer needs.

Almost without exception across the EU and regardless

of the size and potential of their markets, public postaloperators now provide a substantially greater range of services for an expanding customer base.

New services have been created to facilitate the growthin e-commerce. These include track and trace (for parceldelivery), parcel kiosks (for ease of collection) and hy-brid (electronic/physical) mail which is widely used inadvertising.

Increased productivity

The productivity of Univer-sal Postal Providers (USPs),measured as the number of letters per USP employee,seems to have increased overthe period 1990-1999. This ismore marked in those Mem-ber States that have embarkedon a rapid or extensive marketopening. Ownership of USPsis also being transformed.While the majority is still stateowned, the number of stateenterprises continues to de-

crease: only seven of the 25USPs are still state enterprisesor in one case a government department. USP ownershipis also being extended through increased participation byprivate investors. In 2005, minority stakes in the Danishand Belgian USPs were sold.

Progress towards creating greater competition in the let-ter post segment of the postal market has been slowerthan expected. On the other hand, competition in the seg-ment providing delivery of newspapers, periodicals, maga-zines and unaddressed mail is now stronger. The parceland express markets at both the national and EU level are

considered very competitive.Where are we going from here?

The Postal reform has produced very positive results forconsumers, for the postal sector itself and for the EUeconomy as a whole. Completing the Internal Market forpostal services is vital to further improving and sustainingthese results and in allowing all EU countries to benefitequally. The continuing work on postal reform will focuson the remaining obstacles to market entry and on es-tablishing a true level playing field in the internal postalmarket.

More specifically, the focus will be on the following areas:

The largest barrier to accomplishing the InternalMarket for postal services is undoubtedly the factthat substantial reserved areas* remain in MemberStates. The reserved areas should be further reducedor abolished to allow competition to take place in allareas of postal services;

Providing for a sustainable high quality universalpostal service taking into account the absolutepriority of maintaining territorial and social cohesion,the developments in the neighbouringmarkets of communications, advertising

"Consumers and largemail users have seen im-provements in terms of

quality of service. Nationaland cross border lettermail standards (delivery

times) have become firmlyentrenched, are care-

fully monitored and widelycomplied with."

J u l y 2 0 0 6


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and the transport/logistics sector andthe fact that Member States may alreadyadapt some specic service features to

the evolution of local demand by applyingthe elements of exibility that alreadyexist in the Directive 97/67/EC;

The reserved area has so far nanced the universalservice obligation. Other alternative nancingmechanisms, such as a compensation fund, havetherefore not been necessary in practice. Althoughthe real cost of the universal service obligation isdisputed and may vary between States, there maystill be a need for other safeguard mechanisms in theabsence of a reserved area. It is important that suchmechanisms do not distort competition unnecessarilyby causing entry barriers for competitors or byupsetting the level playing eld;

The issue of access: Postal infrastructure canbe accessed at various stages of the value chainranging from collection, consolidation and mailpreparation/franking (usually called upstream access)to the delivery network (usually called downstreamaccess). In addition, there are important means (e .g.post ofce boxes, delivery boxes, address changedatabases) required for the provision of postalservices. It is important that such means are alsosafeguarded in postal markets with several operatorswith a view to avoiding entrance barriers and toprotect consumer interests;

With a view to maintaining a level playing eld for allpostal operators and ensuring the provision of theuniversal service, the National Regulatory Authorityplays an essential role. The conditions necessary toundertake this role may need to be reviewed toincrease their effectiveness.

J u l y 2 0 0 6

info

14

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

* For more information see: http://ec.europa.eu/internal_market/post/studies_en.htm.

The future

One might wonder what the future of postal services willbe in an open postal market. The example of Sweden isworth mentioning in this context as Sweden decided toopen its postal market to competition already in 1993.

Some of the positive effectsfrom postal market opening inSweden were apparently that:

the incumbent operatorhas reformed itsoperations to theadvantage of thecustomers;

products and services haveimproved and are betteradapted to consumerdemand;

average prices decreasedand better reected costs;

quality requirementsof the universal postalservice have been fullled and quality of services haveimproved.

While not all EU countries may be at the same advanced

level as Sweden in the opening up of the postal market,the Swedish example, as well as studies undertaken by theCommission, have shown that all countries can get there

possibly by the help of facilitating measures thus com-pleting the Internal Market for postal services.

Peter CurranTEL: +32 (0)2.296 09 28FAX: +32 (0)2.296 83 92

[email protected]** Reserved Area: This is the segment of postal services which is reserved to those postal operators(which may be either public or private) providing universal services within national boundaries.


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private equity manag-ers play in developingnew enterprises andre-energising existingcompanies. The crossborder dimension of this business could besignificantly enhancedif a number of legaland tax barriers weretackled. Member States

control most of the taxand regulatory leversneeded to provide aprivate-equity friendlyenvironment, and thereport urges them tomake effective use of these powers.

The report highlights a number of cross-cutting EU initiatives that have had un-intended consequences for the privateequity industry and identifies useful EU-

level improvements that could facilitatecross-border investment and capital-rais-ing by private equity funds.

A preliminary exchange of views on thereports with interested parties was organ-ised at an Open Hearing, held in Brusselson July 19. The meeting which broughttogether various stakeholders, includingthe European Parliament, representativesfrom Member State authorities, investors,industry, etc., served as a first opportunityto gather reactions. Reactions in writingare invited until September 20th ([email protected])

Commissioner for Internal Market andServices Charlie McCreevy commentedthat: The three sets of experts havebrought clear and fresh insights to manychallenging issues and theywill be an important input toour thinking as we preparethe November White Paperon improving the single mar-ket for investment funds.

info

Niall BohanTEL: +32 (0)2.296 30 07FAX: +32 (0)2.299 86 [email protected]

Investment funds

info http://ec.europa.eu/internal_market/securities/ucits/index_en.htm#reports

Industry reports

recommend improvementsto EU investment fundframework

The three reports have been drawn upby the expert groups on investmentfund market efficiency and alternative in-vestments and are a follow-up action tothe Green Paper on the enhancement of the EU framework for investment funds.As industry reports, they do not neces-sarily represent the view of the Commis-sion.

Over the last decade, investment fundshave grown from a small base to becomeone of the core pillars of the EUs financialsystem. The UCITS market now compris-es more than 30,000 funds managing over5 trillion euro circa 50% of EU GDP.

The regulation of UCITS therefore rankshighly on the agenda since asset manage-ment is in a state of massive flux - thecommercial horizons are broadening,business models are being reinvented andrisk parameters are changing.

UCITS market

The report on investment fund marketefficiency provides fresh ideas and op-erational suggestions on how efficiencyimprovements can be delivered. Severalof these would require carefully targetedamendments to the UCITS Directive. Thereport calls on the EU to deliver theseimprovements within three years.

The expert group identifies alleged regu-latory failures or gaps which are hamper-ing the efficiency of the European indus-try: lengthy delays in fund authorisation

and notification; absence of a manage-ment company passport; no possibility tomerge funds on a cross-border basis orto pool assets; national rules which pre-clude cross-border delegation of custodyfunctions.

Hedge funds

The report on hedge funds identifies a

number of alternative approaches - whichdo not call for new EU legislation - tomake hedge funds available to differentcategories of investors under appropri-ate conditions. It stresses the need toremove barriers to investment in hedgefunds by institutional investors and tocross-border provision of essential sup-port services to hedge fund managers.

The group describes how the regula-tory patchwork in Europe is hamperingthe development of a scalable onshorebusiness. European hedge fund managersare not always able to choose service orliquidity providers from across Europe.The group argues that, if the EU wishesto be home to a successful hedge fundbusiness, it must tackle these frictions. Butany remedial action should stop short of introducing hedge-fund specific EU-levelinitiatives.

Private equity

The report by the private equity indus-try group describes the unique role that

The Commission has published industry reports focusing on retail in-vestment funds (UCITS), hedge funds and private equity that analysethe main challenges facing different segments of the EU investmentfund industry. They constitute an important input to the forthcom-ing White Paper on strengthening the single market framework forinvestment funds, scheduled for publication in November 2006.


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In Solvency II, the Commission is devel-oping a modern, risk-based system, whichtakes into account current internationaldevelopments.

Broader scope

Whereas the Solvency I Directives aimedat revising and updating the current EUsolvency regime, the Solvency II projecthas a much broader scope. The fourgoals of the Commissions approach are: Better regulation - codication of

currently 14 insurance Directivesinto one Directive;

A Directive that is as principle-basedas possible, but still aims at a highlevel of harmonisation through itsimplementing measures; taking intoaccount the combination of new andold texts;

A proposal developed intransparency with stakeholders andbased on a solid impact assessment;

The solvency margin is the amountof regulatory capital which an in-surance undertaking is obliged tohold against unforeseen events. At EU-level, harmonised solvency margin re-quirements have been in place since the1970s and have been amended by the

Solvency I Directives in 2002.

For the insurance industry, solvency re-quirements are a cost factor. The industrywould therefore like these requirementsto be fair but also, if possible, low.

Consumers and supervisors, on theother hand, tend to prefer high solvencyrequirements. But the public also has aninterest in promoting a healthy insurancesector, particularly since it has a key roleto play in dealing with challenges such asincreasing longevity, rising health costs,natural catastrophes and terrorism, toname but a few.

Solvency II

Public hearing debateskey issues concerningSolvency IIThe Solvency II project is a fundamental and wide-ranging review of the cur-rent supervisory regime for insurance companies within Europe. The reviewintroduces a risk-based supervisory system which not only updates the currentsolvency requirements but is also an overhaul of the supervisory provisions of the EU Insurance Directives. The main aim is to ensure that there is adequatepolicy-holder protection in all EU Member States whilst ensuring that the cost

to the industry is equitable. Another fundamental objective is to foster supervi-sory convergence at European level. At a public hearing in Brussels, stakeholdersmet to debate the key issues at stake.

A proposal compatible withinternational developments.

One key objective is that the require-ments better reflect the true risks of aninsurance undertaking. There is wide-spread recognition that this is not thecase in the current system. Another im-portant feature of the new system will bethe increased focus on the supervisoryreview process. The aim is to increase thelevel of harmonisation in general, includ-

ing that of supervisory methods, toolsand powers.

With this in mind, the Commission or-ganised a public hearing in Brussels tobring stakeholders together to debatesome of the key issues.

Close cooperation with industry

The first keynote speech of the hear-ing was given by Henrik Bjerre-Nielsen,the Chair of CEIOPS (the Committee of

European Insurance and OccupationalPensions Supervisors) which providestechnical advice to the Commission onspecific issues as well as quantitative im-pact studies. Mr Bjerre-Nielsen stressedhow CEIOPS is working closely with theindustry and other interested parties ondeveloping its contribution to the crea-tion of the new system, particularly, inview of the radical change needed in cul-ture and management practices to imple-ment the system.

We are aware of market differences.Some undertakings are up to speed.Others have a long way to go. CEIOPS isdeeply involved, together with the Com-mission, on fostering these reforms tobusiness. They will go to the heart of Sol-vency IIs success, he explained.

He highlighted the world-wide dimen-sion of Solvency II and the great inter-est and, possibly, concerns outside theEU. Together with the Commission weare working on the most pressing, fromthe US, starting a longer-perspective dia-logue with China, and have exchangedapproaches with the Swiss. We recognise


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that the global position is high in eco-

nomic and commercial importance, aswell as politically, he said.

During the day, a series of Panels focusedon particular aspects of the discussion.The first panel of speakers updated theaudience on the work of CEIOPS. The sec-

info http://ec.europa.eu/internal_market/insurance/solvency2/hearing_en.htm

ond panel, involving different stakeholdersincluding a consumer representative, dis-cussed the potential impact of Solvency IIon their sectors.

Panel 3 discussed how Solvency II mayimpact insurance products and marketswhilst the fourth panel focused on howSolvency II stands in the light of interna-tional developments.

Commissioner Charlie McCreevy indicat-ed that the Commission wants to achievea high level of genuine harmonisation inSolvency II. Supervisors also have to con-verge in the way they supervise compa-nies and in the methodologies they use,

as the possibilities for further integrationof the insurance industry largely dependon this, he said.

As the deepening of the integrationof the insurance market and enhancingpolicy-holder protectionare the primary objec-tives, the Commission will

make its own assessmentwhen looking at CEIOPSadvice, he concluded.

Public procurement

Commission issues guidance on how to awardlow-value contracts fairly

The Commission has published guidanceon how public authorities should awardcontracts of low monetary value fairly.These contracts account for the vastmajority of public contracts in the EU

over 90% in some Member States. Al-though they are not covered by the EUDirectives on public procurement, it iswell established that their award shouldnevertheless comply with the internalmarket principles of transparency andnon-discrimination.

The Commissions guidance, which is inthe form of an Interpretative Commu-nication, contains suggestions on howpublic authorities should comply withthese principles, together with examplesof innovative ways to award contracts ina modern, transparent and cost-efficientmanner.

Low-value contracts present significantopportunities for European businesses,

in particular for small and medium sizedenterprises and start-up companies.Competition for these contracts wouldallow public authorities to choose from abroader range of potential suppliers andto gain from better-value offers.

The detailed rules of the public procure-ment Directives do not apply to thesecontracts, as they have a value of less than211,000 euro in the case of services orsupplies contracts, or 5,278,000 euro inthe case of works contracts. Neverthe-less, the European Court of Justice (ECJ)has developed minimum standards of transparency and non-discrimination forthe award of these contracts. However,in many instances public authorities con-tinue to award these contracts directly tolocal providers without any competition.

The Commissions Interpretative Com-munication provides guidance to con-

tracting authorities to help them com-ply with the standards developed by theECJ.

The Communication explains how toensure that low-value contracts are ad-vertised adequately and transparently.It also provides guidance on how publicauthorities can ensure a fair and impartialprocedure for awarding a contract. Theprinciples of such a procedure include atransparent and objective approach, ap-propriate time-limits, mutual recognitionof written evidence between differentMember States, equal access for eco-nomic operators from all Member States,and non-discriminatory description of the subject-matter of the contract.

Finally the Communication explains howbidders can request a review of the im-partiality of decisions taken in the courseof an award procedure.

info http://ec.europa.eu/internal_market/publicprocurement/key-docs_en.htm

Henrik Bjerre-Nielsen: "CEIOPS is workingclosely with the industry and other inter-

ested parties on developing its contributionto the creation of the new system"

info

Valrie KupfermanTEL: +32 (0)2.299 26 03FAX: +32 (0)2.299 30 [email protected]

Solvency II


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CSS four years on -user survey givesa vote of confidence

The new Citizens Signpost Service(CSS) has been in operation for fouryears and has seen a steady increase inthe volume of cases it handles.

Via CSS, citizens have access to a net-work of legal experts who provide per-sonalised advice on problems they may

encounter when exercising single marketrights in another EU country.

To assess the performance and apprecia-tion of the CSS service, the Commissionrequested an independent evaluation of CSS. The ndings have been very posi-tive and CSS is, according to independentexperts, lling a distinct gap in providinginformation and advice to EU citizens.

More than 77% of respondents to theuser satisfaction survey indicated thatthey believe CSS is very important toEU citizens. Close to 70% of users of the service stated they were satisedor very satised with CSS. Users areparticularly happy with the fact that they

The experts conclude that CSS deliversa high quality service according to strictdeadlines and standards. It is also fully inline with the Commissions stated com-munication strategy and offers a rareopportunity to raise citizens awarenessof the benefits of the EU and the InternalMarket and is an important mechanismfor dialogue with citizens.

How it works

The objective of CSS is to provide EUcitizens with tailor-made answers toquestions they ask about the exercise of their rights in the Internal Market. It setsout to provide practical information inresponse to enquiries regarding the ex-ercise of such rights and on the next stepto be taken by them in overcoming any

Citizens Signpost Service

CSS A success story: A recent independent evalu-ation of the Commissions Citizens Signpost Service(CSS) concludes that it is unique and fills a distinct gapin information and advice services offered by the EUsinstitutions to answer citizens needs.

receive a personalised response and thatadvice is clear and jargon-free. They werealso satised with the relevance and ac-curacy of CSS.

Unique service

A unique feature of CSS is that it is theonly Commission service providing ad-vice and signposting on specific Internal

Market legislation bylegal experts. It oper-ates in 20 languagesand covers all 25Member States. Noother national publicor voluntary service,the report pointsout, provides similarfree, independentservice.

The CSS family - experts, Management Team from ECAS and colleagues atDG Internal Market & Services - at the occasion of the Annual Training Seminar.

Testimonial

CSS helps with consumer protectionThanks to CSS, an English citizen residing in another EUcountry, succeeded in recovering 429 euro from a nationalTelecom operator. The latter had overcharged the Englishcitizen's telephone calls without informing him that theyhad changed the supplier.


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Citizens Signpost Service

info http://ec.europa.eu/citizensrights/

problems they face.

By providing next-step sign-posting theCSS explains where people should go -whether at local, regional, national or EUlevel - to help them resolve their prob-lem. Most of the enquiries come frompeople who have already tried to obtainthe guidance they need elsewhere.

The CSS operates in close relationshipwith the EUROPE DIRECT Contact Cen-tre. EU citizens can access CSS by using

infoMaria da Graca BarbedoTEL: +32 (0)2.296 50 08FAX: +32 (0)2.295 43 [email protected]

Testimonial

CSS helps with immigration

Through the CSS, I always get a very quick and adequate help.

I hope you will continue. Its a ray of light in the darkness of theimmigration world of todayThis citizen has already contacted the service in the past andcame to CSS again with a question on her rights when migratingto another EU country. The CSS response was highly useful toher and she expressed her gratitude regarding CSS and whatit represents to people when relocating in Europe who do notknow where to turn to get accurate advice on their rights.

Did you ever havea problem with anadministration in

another EU country and wondered

whether Europe

really exists?

Discover what SOLVIT can do for

you and

enjoy your rightsin Europe!

OPEN CONSULTATIONSTake part in shaping European policy by re-sponding to one of our consultations relatingto the development of the Internal Market.

We want to know what you think.

Ongoing Your Voice consultations Closing

Regulated professions in the field of activities involving trade in anddistribution of toxic products 1.10.2006

http://europa.eu.int/yourvoice/consultations

the EUROPE DIRECT free phone number.Another way to contact CSS is to use theCSS web form on the website.

Whether the question is one about resi-dence rights, social security cover, gettinga qualication recognised, air passengerrights, opening a bank account or buyinggoods or services in another EU country,a citizen can submit a question via CSSand receive within eight working days aprofessional response including, if neces-sary, guidance or signposting to where

further help is available at the local, na-tional or European level. SOLVIT, theproblem solving tool of DG Internal Mar-ket and Services, is one of the services towhich citizens can be signposted.

The CSS service is provided by the legalexperts of ECAS (European Citizens Ac-tion Service) which is under contract tothe Commission.


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In January the Commission launched aconsultation on stakeholders views onthe patent system in Europe and whatchanges if any are needed to enable itto improve innovation and competitive-ness, growth and employment in the EUsknowledge-based economy.

The consultation was timely consider-

ing the difficulty the EU faces in makingprogress in the patents area and in viewof the new industrial policy launched bythe Commission in October 2005, whereIPR is identified as one of the major pol-icy initiatives.

The Commission felt a consultation of all interested parties would be crucial inensuring that future patent policy prop-erly reflects stakeholders needs. Theconsultation was important against thebackdrop of the deadlocked discussionon the Community Patent (see box) but

was much broader in content. The Com-missions consultation focused on fourareas:

basic principles of the patent system; the Community Patent; the European patent system, in

particular EPLA - the EuropeanPatent Litigation Agreement;

approximation and mutualrecognition of nationalpatents.

Lively response

There was very lively response tothe consultation with more than2,500 replies emanating from allsectors of industry, patent lawyersand other stakeholders.

Participation was particularly high fromsectors such as ICT, pharmaceuticals,chemicals, automotive, consumer elec-tronics, biotechnology and mechanicalindustries. Furthermore there was a bigresponse from Europes SMEs - 664 SMEsin total from 14 Member States and thetwo acceding countries.

The Commission drew up preliminaryconclusions from the consultation sub-missions and invited stakeholders todiscuss the key issues raised at a publichearing in Brussels July 12.

More than 350 participants attended thehearing where some 60 speakers from

Industrial property

Stakeholders debatefuture policy on patents

There is widespread support for a Community Patent but not atany cost. A recent consultation on the way forward to providingsimpler patent protection in Europe has elicited a very lively de-bate. A packed public hearing in Brussels in July brought togeth-er stakeholders from across the board to discuss the preliminaryconclusions from the consultation.

industry, legal specialists, trade associa-tions and other interested parties took the stand to give their perspective.

COMPAT yes - but not at any cost

Although the consultation showed thatthere is widespread preference for theCommunity Patent (COMPAT) as a way

forward, stakeholders, it is clear, do notwish to have this system at any price,and in particular not on the basis of theCommon Political Approach reached byEU Ministers in 2003.

Many stakeholders reject the deal cur-rently on the table on account of anunsatisfactory language regime and inad-equate jurisdictional arrangements.

What most parties appear to be lookingfor is an improvement over the currentsituation in terms of a truly unitary highquality patent. If this cannot be achievedquickly and without major political com-promises affecting the usefulness of the


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and competitiveness do not depend onthe number of patents granted every yearbut on their quality and on the level of legal certainty which they provide. Coop-eration with the EPO is considered cru-cial in this respect.

Harmonisation and mutual recognition

There is very little support for approxi-mation of national laws. Mutual recogni-tion of national patents is rejected almostunanimously by stakeholders.

On the basis of the considerable numberof written contributions received and theinput from the public hearing, the Com-mission will consider thebest way forward to en-sure that the patent sys-

tem in Europe properlystimulates innovation andgrowth.

info

Grazyna Piesiewicz TEL: +32 (0)2.298 01 24FAX: +32 (0)2.299 31 [email protected]

final solutions, then some stakeholdersgo as far as urging the Commission towithdraw its proposal and concentrateits resources on other issues. Otherstakeholders point to the EPLA as a pos-sible solution to the current difficulties.

Some stakeholders (many SME-relatedorganisations) put forward the idea of setting up a regulatory framework formediation as a means of alternative dis-pute resolution in patent cases, with theexclusion of issues concerning the valid-ity of a granted patent.

Regarding the translation issue thereare two extremes: those who unequivo-

cally support a single language patent andthose who want full translation into allofficial EU languages immediately upongrant.

EPLA

Both industry and patent attorneys seemto favour the Communitys involvementin the European Patent Litigation Agree-ment (EPLA). This preference flows fromthe general opinion that the existing pat-ent system based on the EPO and the

EPC works well and outstanding prob-lems relate to the lack of unitary jurisdic-tion. Some also believe that it could actas a precursor for the Community Patentand its jurisdictional system.

Support for EPLA is not viewed as being

necessarily incompatible with support forthe Community Patent.

Basic principles for patent system

Based on the feedback from the consulta-tion, the basic principles which need toguide the patent system in Europe are:

the patent system must provide anincentive for innovation providedthat patentability criteria arerigorously respected;

it must ensure the diffusionof scientic knowledge andtechnologies by an efcient,transparent and complete publicationof patent documentation;

it must facilitate the transfer of technology;

it must be available to all players onthe market;

it must offer legal certainty to thepatentee and the users.

It is clear that stakeholders are first andforemost concerned about maintainingand improving patent quality in Europe in

order to avoid the shortcomings of somepatent offices such as the USPTO.

Industry is unanimous that innovation

The Community Patent

to come to an agreement on the detailsof the Community Patent despite regularefforts.

The main sticking point has been thequestion of the translation of patentclaims. Ministers have so far been unableto agree on time delays for translations(into the remaining languages) and the ef-fects of possible errors in translations.

The original Commission proposal fore-saw that the patent be valid as grantedby the European Patent Office in one of the three EPO languages: English, French,German, while translations need to bepublished in the other two EPO languag-es for information purposes.

Translation costs make patenting an in-vention in Europe significantly more ex-pensive than in the US or Japan. This dif-ficulty is increased by the need to work indifferent national legal systems in case of dispute. The current system is thereforeconsidered to be a significant barrier toresearch, development and innovation.

On 3 March 2003, the CompetitivenessCouncil reached agreement on a Com-mon Political Approach for the key ele-ments of the proposed Community Pat-ent. This included a centralised Commu-nity Court which would rule on disputes,language regimes, costs, the role of na-tional patent offices and the distributionof fees. However, the Council has failed

Industrial property

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

In 2000, the Commission proposed thecreation of a Community Patent to giveinventors the option of obtaining a singlepatent which is legally valid throughoutthe EU.

At the moment, patents can be awardedeither on a national basis or through theEuropean Patent Office (EPO) in Munich,which grants so-called European Patentswith a single application and granting pro-cedure. However, once granted the Eu-ropean patent becomes a national patentfor the designated Member State. EachMember State may still require that (inorder for it to be legally valid in their ter-ritory) the European Patent is translatedinto its official language.


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Restrictions on sports betting services

Infringements

The Commission has decidedto send official requests forinformation on national leg-islation restricting the supplyof sport betting services toseven Member States (Den-mark, Finland, Germany, Hun-gary, Italy, the Netherlands andSweden).

The Commission wishes toverify whether the measures

in question are compatible with Article 49 of the EC Trea-ty which guarantees the free movement of services. Thisdecision relates only to the compatibility of the nationalmeasures in question with existing EU law, and only to thefield of sports betting. It does not touch upon the exist-ence of monopolies as such, or on national lotteries. Nordoes it have any implications for the liberalisation of themarket for gambling services generally, or for the entitle-ment of Member States to seek to protect the generalinterest, so long as it this is done in a manner consistentwith EU law, i.e. that any measures are necessary, propor-tionate and non-discriminatory.

Banking Germany

Restriction on use of the 'Sparkasse' nameGermany has been formally asked by the Commissionto modify its legislation (Article 40 of the Kreditwesen-gesetz) which provides that the name Sparkasse (sav-ings bank) may be used only by publicly-owned banks. Theeffect of this law is that a savings bank automatically losesthe right to use the name Sparkasse after privatisation.The Commission considers that this is in violation of ECTreaty rules on the freedom of establishment (Article 43)

and free movement of capital (Article 56), because it pre-

vents private investors from benefiting from the goodwillvalue of the name. In this case the goodwill value cor-responds to, inter alia, the extent to which the name isconsidered favourably by the general public. The Commis-sions request applies only to this aspect of the privatisa-tion which, in the Commissions view, should be in accord-ance with EC Treaty freedoms, and in no way attempts toprescribe whether or not existing savings banks should in

fact be privatised.

Banking France

Offering interest on current accountsThe Commission has decided to ask France formally toamend its legislation (Code Montaire) that prohibitsbanks from offering interest on current accounts to theircustomers. The upshot of the legislation is that banks fromanother Member State which have a branch or subsidiaryin France cannot offer banking services under the same

conditions as in their home Member State. The Commis-sion considers that the legislation is in breach of the ECTreaty rules on the freedom of establishment (Article 43)and does not correctly implement the Banking Directivesprovisions on single licences.

Motor insurance Ireland

Compensation for drivers of uninsured carsThe Commission has decided to refer Ireland to the Eu-ropean Court of Justice over its rules excluding regard-less of the circumstances payment of any compensationfrom the Irish Insurance Bureau to drivers of vehicles incases where all vehicles involved in a collision are unin-sured. This means that if a driver of an uninsured vehicleis involved in an accident with another uninsured vehiclebut is blameless, that driver will not receive any compen-sation.

The Commission considersthat this is contrary to EU law,which requires that nationalcompensation bodies covervictims of accidents causedby unidentified or uninsuredvehicles.


22/22

Golden shares' Spain, Italy

Restrictions on investment in energy firmsthe automatic suspension of vot-ing rights for shareholdings in ex-cess of 2% in Italian electricity andgas companies, where such hold-ings are acquired by public com-panies not quoted on the stock exchange and holding a dominantposition in their own domesticmarkets, breaches the EC Treatyrules on the free movement of capital (Article 56).

The Commission has decided to refer Spain to the Eu-ropean Court of Justice with respect to certain provi-sions of Spanish legislation that limit the voting rights of investments by state companies in the energy sector. TheCommission considers that these provisions constituteunjustified restrictions on the free movement of capital inviolation of EC Treaty rules (Articles 56).

The Commission has also decided to ask Italy formally tomodify its legislation in order to comply with the Euro-pean Court of Justice ruling of 2 June 2005 on the law oninvestment in energy companies. The Court found that

Special rights held in privatised companiesThe Commission has sent Portugal a formal requestto abandon the special rights held by the State/publicentities in Portugal Telecom and established in the pri-vatisation decree-laws and Articles of Association of the Company. The infringement procedure was initiatedby a letter of formal notice in December 2005. Havinganalysed the reply from the Portuguese authorities, theCommission still considers that the special powers act as

a disincentive to investment from other Member Statesin violation of EC Treaty rules.The Commission has also decided to refer Italy to the Eu-ropean Court of Justice because it considers that certainprovisions of Italian law concerning investment in priva-tised companies constitute unjustified restrictions on thefree movement of capital and the right of establishment inviolation of EC Treaty rules (Articles 56 and 43).

Privatisation framework law: HungaryThe Commission has decided to ask Hungary formally tomodify its privatisation framework law (Act XXXIX of 1995 on the Sale of State-Owned Entrepreneurial Assets),which it considers to be incompatible with EU law. TheCommission considers that the law contains unjustified

restrictions on the free movement of capital and right of establishment by conferring special rights for the statein 31 privatised companies in the form of voting priority(golden) shares.

More information on infringement proceedings relating to the Single Market laws is available at:

http://ec.europa.eu/internal_market/infringements/index_en.htm

Infringements

INFRINGEMENT PROCEDURES

If the Commission obtains or receives convincing evidence from a complainant that an infringement of EU lawis taking place, it first sends the Member States concerneda letter of formal notice.If the Member State does not reply with information allowing the case to be closed, the Commission sends areasoned opinion, the second step of the infringement proceedings under Article 226 of the EC Treaty. If thereis no satisfactory response within two months, the Commission may then decide torefer the case to the Euro-pean Court of Justicein Luxembourg.

The latest information on infringement proceedings concerning all Member States is available at:

http://ec.europa.eu/community_law/eulaw/index_en.htm

single market news - the changing focus of internal market policy-making-2006

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