5 The marketing and use of explosives
precursors
| (32003)
14376/10
COM(10) 473
+ ADDs 1-2
| Draft Regulation on the marketing and use of explosives precursors
Commission staff working documents: impact assessment and summary of impact assessment
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| Legal base | Article 114 TFEU; co-decision; QMV
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| Document originated | 20 September 2010
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| Deposited in Parliament | 4 October 2010
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| Department | Home Office
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| Basis of consideration | EM of 15 October 2010
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| Previous Committee Report | None
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| To be discussed in Council | No date set
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| Committee's assessment | Politically important
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| Committee's decision | Not cleared; further information requested
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Background
5.1 Last December, the European Council approved the Stockholm
Programme which establishes the EU's priorities within the area
of freedom, security and justice for the period 2010-14. The Stockholm
Programme reaffirms the four strands of the EU's Counter-Terrorism
Strategy — prevent, protect, pursue and respond—but
calls for a strengthening of the prevent strand by, amongst other
things, implementing the EU's 2008 Action Plan on Explosives.
5.2 The Action Plan provided for the establishment of a Standing
Committee of Experts[22]
to consider possible measures concerning the regulation of precursors
generally available on the market which could be used to make
explosives. The Committee produced a report recommending a number
of policy options, including the adoption of EU-wide regulatory
measures, to enhance the security of chemical precursors. The
policy options were subject to a detailed impact assessment which
considered their financial, economic, social and environmental
impact, as well as their impact on fundamental rights. The draft
Regulation, according to the Commission, reflects a high level
of consensus on the preferred policy option.
The draft Regulation
5.3 The purpose of the draft Regulation is to reduce the risk
that certain chemicals which are generally available to the public
may be used for the manufacture of home-made explosives. The draft
Regulation identifies two categories of chemical substances in
Annexes 1 and 2. The most stringent rules apply to the eight chemical
substances listed in Annex 1. The draft Regulation would:
- prohibit the sale to the general public of Annex 1 chemical
substances (on their own or as part of a compound) if they exceed
a specified concentration (Article 4); and
- establish a licensing regime to enable the legitimate users
of Annex 1 chemical substances to purchase them on production
of a licence. Each Member State would be responsible for its own
licensing regime. A licence issued in one Member State would be
valid in all other Member States (Articles 4 and 5).
5.4 One of the chemicals included in Annex 1 is ammonium nitrate,
a substance which is commonly used in fertilisers. The draft Regulation
provides that farmers may continue to purchase and use ammonium
nitrate, even if the concentration exceeds the specified limit,
without the need for a licence.
5.5 The sale of seven chemicals listed in Annex 2 would not be
subject to any restriction as regards the concentration of each
substance. However, the draft Regulation would require the suppliers
or retailers of substances listed in Annexes 1 and 2 to report
any suspicious transactions to a national contact point established
for this purpose in each Member State (Article 6). The report
should include, where possible, the identity of the purchaser.
The reporting obligation extends to any significant theft of substances
listed in Annexes 1 and 2 and to any other suspicious transactions
concerning substances not listed in the Annexes. The Commission
will develop guidelines indicating how to recognise and notify
suspicious transactions and produce a regularly updated list of
substances not included in the Annexes 1 and 2 which should be
subject to monitoring.
5.6 The processing of personal data, for example, when considering
applications for licences or reporting any suspicious transactions,
must comply with EU data protection laws (Article 7). Member States
are required to ensure that any breach of the rules established
by the draft Regulation is subject to "effective, proportionate
and dissuasive" penalties (Article 8). The draft Regulation
empowers the Commission to adopt delegated acts to update the
Annexes. Each delegated act, upon adoption, must be notified to
the European Parliament (EP) and Council and, except in urgent
cases, only enters into force if neither the EP nor the Council
objects. In urgent cases, the delegated act takes effect immediately
but may be revoked if the EP and Council object within six weeks
of its adoption.
5.7 The legal base for the draft Regulation is Article 114 of
the Treaty on the Functioning of the European Union (TFEU) which
provides for the adoption of EU measures "which have as their
object the establishment and functioning of the internal market".
The Commission says that, while there are a variety of legislative
and non-legislative measures at EU and national level concerning
the safety and use of chemicals, none specifically addresses the
risk that certain chemical substances may be used for the production
of home-made explosives. As a consequence, precursors which may
be restricted or controlled in one Member State may be readily
available in another.
5.8 The Commission justifies EU action on the grounds that differing
regulatory regimes on precursors fragment the internal market
and create a security gap which terrorists may seek to exploit
by, for example, purchasing chemicals in one Member State for
the production and use of home-made explosives in another.
5.9 The Commission's impact assessment (ADD 1) provides a detailed
overview of how chemical precursors have been used to manufacture
home-made explosives for actual or planned terrorist attacks in
the EU since 2004.[23]
It also analyses the likely impact of the draft Regulation on
businesses, consumers and public authorities.
The Government's view
5.10 In her Explanatory Memorandum of 15 October, the Minister
for Security (Baroness Neville-Jones) says that:
"The Government supports measures that prevent terrorists
acquiring explosives and their precursors, and recognises that
Europe has become an important hub for terrorist activity. Terrorism
is a cross-border issue and these activities do not always take
place in one Member State. The terrorist target may lie outside
of the EU. The proposed Regulation will therefore also have an
influence beyond the EU."[24]
5.11 She explains that the UK's National Counter-Terrorism Security
Office already provides advice to academia and to industry on
the need for vigilance as regards the availability and use of
certain chemicals and the importance of reporting suspicious transactions.
The draft Regulation, which would be directly applicable within
the UK, would go further by restricting the supply of specified
chemicals. The Minister adds that UK legislation would, however,
be needed to introduce appropriate penalties and to establish
a licensing regime and authority.
5.12 The Minister provides a careful analysis of the potential
impact of the draft Regulation on fundamental rights, with particular
reference to the right to respect for private and family life,
the protection of personal data, the right to property and the
freedom to conduct a business. She concludes that any interference
with these rights is "necessary and proportionate, given
in particular the important public interest underlying the Regulation".[25]
5.13 The Minister recognises that the draft Regulation "will
increase the regulatory burden on businesses and UK authorities"
and says that the Government will seek to avoid imposing "excessive
financial commitments".[26]
The Government is conducting its own assessment of the economic
impact of the draft Regulation for the UK but, pending its completion,
the Minister provides useful commentary on the Commission's impact
assessment and "a crude initial estimate" of the likely
costs for the UK.[27]
In summary, the estimated administrative and compliance set-up
costs for UK business are likely to be within the range of £8.3-19
million, and the annual costs within the range of £3.8-13.1
million. In addition, the estimated cost across the private sector
resulting from the reporting of suspicious transactions is likely
to be between £1.1 and £1.6 million a year in the UK.
5.14 Initial administrative costs involved in setting up a licensing
regime, developing guidance and providing training are likely
to be between £0.7 and £3 million for the UK; and ongoing
annual administrative costs for operating the licensing and reporting
scheme within the range of £0.12-0.23 million.
5.15 Some businesses may experience a reduction in sales volumes
for chemicals included in Annex 1 or seek to adjust production
processes to produce goods with a lower concentration of Annex
1 chemical substances. There will also be a cost to consumers,
who will either have to purchase diluted chemicals or obtain a
licence.
5.16 The Minister recognises that "the crude estimates of
costs given are high" and says that the UK's own impact assessment
will provide a better guide as to the real financial impact of
the draft Regulation. She adds that the Government accepts its
"responsibility to reduce the costs and burden to UK businesses
and will seek to negotiate the proposal with this in mind".[28]
Conclusion
5.17 We support the policy objective underlying the draft Regulation
and consider that there is a strong case for EU-wide measures
to limit the supply of certain highly concentrated chemical substances
to members of the general public unless they are able to demonstrate
a legitimate use. We note that the UK already has a system for
the voluntary monitoring and reporting of suspicious transactions.
We think that establishing an obligation for all Member States
to report suspicious transactions of chemicals listed in Annexes
1 and 2, on the basis of common guidelines, would enhance security
across the EU while also ensuring a level playing field within
the internal market.
5.18 As the Minister recognises, the draft Regulation will
entail potentially significant implementation and compliance costs
for some businesses. The extent of those costs is difficult to
quantify, on the basis of the figures provided in the Commission's
impact assessment. We should be grateful if the Minister would
inform us of the outcome of the Government's impact assessment,
once the results are known.
5.19 There are two points on which we would welcome some further
clarification from the Minister. First, Article 4(4) appears to
exempt farmers from the requirement to obtain a licence for the
purchase of high concentrate ammonium nitrate. We note that ammonium
nitrate was one of the substances intended to be used in explosives
in planned terrorist attacks on the Ministry of Sound and Bluewater
Shopping Complex in February and March 2004.[29]
The draft Regulation does not appear to require a status check
to ensure that purchasers of ammonium nitrate genuinely intend
to use it for agricultural purposes. We would be grateful if the
Minister would explain what safeguards are envisaged to reduce
the risk of improper use. Second, we ask the Minister whether
she is satisfied that the scope of the delegated powers conferred
on the Commission is reasonable and justified.
5.20 Pending the Minister's reply, we shall keep the draft
Regulation under scrutiny.
22 The Standing Committee is an ad hoc advisory Committee
comprising experts from EU Member States and representatives of
major EU chemical and fertiliser producers and distributors. Back
23
See section 3.1 and Annex 4 of ADD 1. Back
24
Paragraph 21 of the Minister's Explanatory Memorandum. Back
25
Paragraph 14 of the Minister's Explanatory Memorandum. Back
26
Paragraph 27 of the Minister's Explanatory Memorandum. Back
27
In order to estimate the proportion of EU-wide costs applicable
to the UK, the Minister compares production volumes and sales
values of chemical precursors in the EU with production volumes
and sales values of chemical precursors in the UK. Back
28
Paragraph 45 of the Minister's Explanatory Memorandum. Back
29
See Annex 4 of ADD 1. Back
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