Documents considered by the Committee on 3 November 2010, including the following recommendations for debate: Financial Management - European Scrutiny Committee Contents

5 The marketing and use of explosives precursors



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

Legal baseArticle 114 TFEU; co-decision; QMV
Document originated20 September 2010
Deposited in Parliament4 October 2010
DepartmentHome Office
Basis of considerationEM of 15 October 2010
Previous Committee ReportNone
To be discussed in CouncilNo date set
Committee's assessmentPolitically important
Committee's decisionNot cleared; further information requested


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]


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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Prepared 12 November 2010