Documents considered by the Committee on 8th December 2010 - European Scrutiny Committee Contents


9 Cross-border road transport of euros

(a)

(31849)

12675/10

COM(10) 376

(b)

(31850)

12680/10

COM(10) 377

+ ADDs 1-6


Draft Council Regulation (EU) concerning the extension of the scope of Regulation (EU) of the European Parliament and of the Council on the professional cross border transportation of euro cash by road between euro-area Member States

Draft Regulation on the professional cross-border transportation of euro cash by road between euro-area Member States

Commission staff working documents: impact assessment and summary of impact assessment

Legal base(a)  Article 352 TFEU; EP consent; unanimity

(b)  Article 133 TFEU; co-decision; QMV

Document originated14 July 2010
Deposited in Parliament2 August 2010
DepartmentHome Office
Basis of considerationMinister's letter of 17 November 2010
Previous Committee ReportHC 428-ii (2010-11), chapter 14 (15 September 2010); HC 428-iv (2010-11), chapter 5 (20 October 2010)
To be discussed in CouncilNo date set
Committee's assessmentLegally and politically important
Committee's decisionNot cleared; further information and progress reports requested

Background

9.1 The euro was launched on 1 January 1999 and euro banknotes and coins were introduced for cash payments on 1 January 2002. There are currently 16 EU Member States which have adopted the euro as their official currency and together comprise the euro area.[46] The UK and Denmark both have an opt-out which exempts them from participation in the euro. The remaining nine Member States have not yet met the conditions for adopting the euro.

9.2 Document (b) seeks to facilitate the free circulation of euro banknotes and coins within the euro area by means of a Regulation establishing common rules on the cross-border transportation of euro cash by road. It is based on Article 133 of the Treaty on the Functioning of the European Union (TFEU) which provides for the adoption of measures "necessary for the use of the euro as the single currency". Article 133 is in Title VIII of Part Three of the Treaty concerning economic and monetary policy, under the chapter on monetary policy. The purpose of this chapter is to establish the objectives, tasks and governance of the European System of Central Banks (ECSB — comprising the European Central bank and national central banks); regulate the issuing of euro banknotes and coins; and provide the necessary powers to adopt measures for the use of the euro as the single currency in euro Member States.

9.3 Article 133 TFEU applies only to those Member States whose currency is the euro. This means that the UK and the ten other non-euro Member States would not form part of the qualified majority required to adopt the draft Regulation, would not take part in the vote, and would not be bound by the Regulation.

9.4 Document (a) makes provision for the common rules set out in document (b) to be extended automatically to any Member State currently outside the euro area once the Council has decided that it has satisfied the conditions for participating in the single currency. It is based on Article 352 TFEU which empowers the EU to act if "necessary, within the framework of the policies defined by the Treaties, to attain one of the objectives set out in the Treaties, and the Treaties have not provided the necessary powers". EU measures must be unanimously agreed by all Member States. Moreover, because Article 352 TFEU is a residual legal base, only enabling the Union to act in the absence of any other Treaty Article conferring the necessary powers, the Lisbon Treaty expressly requires the Commission to alert national parliaments to its proposed use.

9.5 The common rules proposed in document (b) would require Member States within the euro area to establish a special licensing regime for professional "cash-in-transit" ("CIT") companies wishing to transport euro cash by road across internal borders to another euro Member State. EU action is justified, according to the Commission, because Article 133 TFEU imposes a duty to ensure the free and efficient circulation of euro cash and because it is the only practicable way of reconciling divergent national rules which have resulted in a heavily segmented CIT market.

Previous scrutiny

9.6 In her Explanatory Memorandum of 12 August, the Minister of State for Security and Counter-Terrorism at the Home Office (Baroness Neville-Jones) said that the Commission's proposals would not apply to the UK unless the UK were to decide to join the euro and so there would be no immediate legal, policy or financial implications. She highlighted a number of provisions which would present difficulties if they were to apply to the UK, notably those concerning the carriage of firearms and the potential additional costs for CIT companies. The Minister did not question the Commission's choice of legal base for the proposals or their compliance with the principle of subsidiarity.

9.7 When we first considered these proposals, on 15 September, we questioned both the choice of legal base for documents (a) and (b) and the need for EU regulation in light of the evidence adduced in the Commission's explanatory memorandum that the CIT market was predominantly local in character and any impediment to the free circulation of euros was mainly limited to certain border areas.

9.8 In her response of 4 October 2010, the Parliamentary Under-Secretary of State at the Home Office (Lynne Featherstone) told us that the Government could see arguments in favour of a single market legal base but thought that there was an arguable case for the use of Article 133 TFEU and that the Government did not therefore intend to challenge the Commission's choice of legal base. She acknowledged that "the scale of the challenge the Commission is addressing does not appear to be great" but thought that unilateral action was likely to be a more efficient means of improving the improved cross-border transportation of euros within the eurozone than a series of bilateral agreements.

9.9 We continued to question the use of Article 133 TFEU as the legal base for document (b) and asked the Minister to provide a more detailed explanation of her reasons for considering that Article to be more appropriate than an internal market legal base. We sought the Government's views on the implications for the free movement of goods and services across the land border between the Republic of Ireland and Northern Ireland, in light of the limited scope of application of the common rules in document (b). We also noted that Article 3(1)(c) TFEU states that the Union has exclusive competence in the area of monetary policy and asked the Minister whether she thought that the Commission, in proposing Article 133 TFEU as the legal base for document (b), was seeking to assert exclusive EU competence for rules governing the transportation of euros.

The Minister's letter of 17 November 2010

9.10 The Parliamentary Under-Secretary of State at the Home Office (Lynne Featherstone) re-iterates the Government's view that Article 133 TFEU is the correct legal base:

    "Given that the terms of document (b) make it clear that the rules in question apply only in relation to transfers of euros between 'participating Member States' (i.e. those Member States participating in the single currency) by a cash-in-transit company established in such a Member State it seems clear that the predominant purpose of the measure in question is to ensure the free movement of cash so as to ensure the effective function of the single currency. On this basis we consider that Article 133 is the appropriate legal base here. While the argument might be different if the measure was designed to apply to transport of euros and other cash amongst all Member States that is not what the proposed Regulation is about."

9.11 She adds that, in light of the Government's assessment that Article 133 TFEU is the correct legal base for document (b), it follows that the use of Article 352 TFEU as the legal base for document (a) is also appropriate. She explains:

"The EU institutions have taken the view that Article 133 cannot apply to Member States which have not adopted the euro and it is therefore the practice to resort to Article 352 and its predecessors so as to extend euro area instruments to non-euro area Member States as far as relevant. Again, the argument concerning the use of the Article 133 and 352 legal bases might be different if the aim of the package of proposed measures was to provide a regime governing transport of any currency amongst all Member States, but that is not what the Commission has proposed."

9.12 The Minister says that, as the proposed common rules in document (b) would apply only to the transport of euros between euro area Member States by CIT companies established in such States, they would not apply to the transport of euros between, for example, the Republic of Ireland and Northern Ireland.

9.13 Finally, on the Union's exclusive competence in monetary matters, the Minister explains:

    "While, for the reasons set out above, our view is that the predominant purpose of document (b) is laying down measures necessary for the use of the euro as a single currency, the measure is not exclusively about monetary policy. Where though the other purposes pursued by a measure are merely incidental, the ECJ's clear jurisprudence is that the act in question must be based on a single legal basis, namely that required by the main or predominant purpose or component.

    "The decision that the predominant purpose pursued by a measure is one falling within an area of exclusive EU competence does not, however, mean that anything else which has been included within such a measure automatically becomes an area of exclusive EU competence. In any event, as in the present case, transportation of euros or any other currency between euro-area and non euro-area States is not covered by the proposed Regulation, Member States' ability to conclude agreements in such areas would in our view be unaffected by the conclusion of document (b)."

Conclusion

9.14 We are grateful for the Minister's response. However, we continue to harbour doubts about the use of Article 133 TFEU as the legal base for document (b) for three reasons.

9.15 First, we think that there is a risk of fragmentation within the internal market. As we have noted previously, the Commission recognises that the CIT market is predominantly local in character and that any impediment to the free circulation of euros is mainly limited to border areas.[47] The Minister explains that the common rules in document (b) are only intended to apply to Member States participating in the euro area and so would not apply to the cross-border transportation of euros in border areas straddling euro and non-euro States, for example the Republic of Ireland and Northern Ireland. Our question was not, however, whether the rules would apply but whether they could or should have a broader application within an internal market in which euro currency is in free circulation. We understand that dual pricing is a reality in border areas which straddle euro and non-euro States and so it follows that there is a potential market for CIT companies to transport euros which, on the basis of the current proposals, they will be unable to exploit.

9.16 Second, the use of Article 133 TFEU to adopt common rules applicable only within euro States necessitates the use of Article 352 TFEU to extend those rules to non-euro States as and when they become eligible to join the euro area. We think that Article 352 should be used sparingly and we are not convinced that its use is justified in this case because, in our view, an internal market legal base could have been cited for the adoption of the common rules contained in document (b).

9.17 Third, we note the Minister's explanation that the adoption of a measure based on Article 133 TFEU does not mean that it "automatically becomes an area of exclusive EU competence". We think, nevertheless, that the use of Article 133 TFEU, in light of Article 3(1)(c) TFEU, at the very least creates some small risk of establishing a new area of exclusive EU competence and, given our doubts about the proposed choice of legal base, question whether that risk is one worth taking.

9.18 We recognise that the Government remains firmly of the view that Article 133 TFEU is the correct legal base for document (b). We would, therefore, welcome the Government's views on the Opinion issued by the European Central Bank which, while endorsing the Commission's choice of legal base, proposes amendments which would make provision for CIT companies to cross the territory of a non-euro Member State in order to transport euro cash between two euro States. The Bank says the amendments are needed because the Commission cannot have intended to exclude euro area Member States (such as Ireland) from the scope of application of the common rules in document (b) simply because they have a land border with a non-euro Member State. We ask the Minister to tell us whether the Government would support the amendments proposed by the European Central Bank. We also ask the Minister to inform us of any significant developments in the course of negotiations by means of progress reports. Meanwhile, the proposals remain under scrutiny.


46   Participating Member States are Belgium, Germany, Ireland, Spain, France, Italy, Luxembourg, the Netherlands, Austria, Portugal and Finland (since 1999), Greece (2001), Slovenia (2007), Cyprus and Malta (2008) and Slovakia (2009). Back

47   See the Conclusion of our Second Report of 15 September 2010, HC 428-ii (2010-11), chapter 14. Back


 
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