Documents considered by the Committee on 20 October 2010 - European Scrutiny Committee Contents


5 Cross-border road transport of euros

(a)

(31849)

12675/10

COM(10) 376

(b)

(31850)

12680/10

COM(10) 377

+ ADDs 1-6


Draft Regulation extending the scope of Regulation XX 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 4 October 2010
Previous Committee ReportHC 428-ii (2010-11) chapter 14 (15 September 2010)
To be discussed in CouncilNo date set
Committee's assessmentLegally and politically important
Committee's decisionNot cleared; further information requested

Background

5.1 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 that have adopted the euro as their official currency, which together comprise the euro area.[16] 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.

5.2 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.

5.3 Article 133 TFEU only applies 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.

5.4 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.

5.5 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

5.6 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.

5.7 We questioned the choice of legal base for documents (a) and (b) for the following reasons:

  • the principal purpose of document (b) appeared to fit more readily with the EU's internal market objectives, notably the removal of obstacles to the free movement of goods and services, than with the monetary policy objectives contained in Title VIII, Part Three of the TFEU;
  • the use of an internal market legal base would obviate the need for a separate Regulation — document (a) — based on Article 352 TFEU and ensure that there was no future risk that the UK might be bound to implement common rules over which it had had little or no say; and
  • there was, moreover, a possibility that the adoption of the common rules proposed in document (b) would also affect the free movement of goods and services in non-euro area Member States, thus strengthening the case for an internal market legal base.

5.8 We also questioned whether there was a sufficient 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. We invited the Minister to respond to our concerns and kept both documents under scrutiny.

The Minister's letter of 4 October 2010

5.9 The Parliamentary Under-Secretary of State at the Home Office (Lynne Featherstone) tells us that the Government can see arguments in favour of the use of the single market legal base. She continues:

"However, we also believe that it is arguable that Article 133 could be appropriate to achieve the aims it sets out. We do not therefore intend to challenge the choice of legal base in relation to this dossier. By virtue of Protocol 15 to the Treaties, the UK Economic and Monetary Protocol, the UK does not participate in the shaping of measures based on Article 133 TFEU and such measures do not apply to the UK unless and until the UK decides to adopt the euro. Going forward, I understand that Treasury colleagues will nevertheless carefully monitor the use of Article 133 and are mindful of the risks that measures adopted on the basis of this provision could lead to a partitioning of the common market".

5.10 On the question of subsidiarity, the Minister recognises that "the scale of the challenge the Commission is addressing does not appear to be great" but says that the Commission's Impact Assessment considered the possibility of bilateral or multilateral agreements between neighbouring euro Member States to establish rules for cross-border transportation of euros and concluded that such agreements were unlikely to materialise on a large scale. The Government's view, therefore, is that

"if the Commission is to pursue improved cross-border transport of euros, then unilateral action appears to be the most appropriate course. While bilateral agreements might have been appropriate in the past, to seek to facilitate cross-border cash transportation across all the euro-Member States by that means now would seem bureaucratic and resource intensive. Moreover it would become increasingly so if new members join the euro."

Conclusion

5.11 We thank the Minister for her response. However, we continue to question whether Article 133 TFEU is the correct legal base for document (b) for the following reasons. First, the Minister says it is arguable that Article 133 could be appropriate to achieve the aims set out in document (b). We should be grateful if she could explain how and why she considers it to be appropriate, in light of the wording of Article 133 and the broader objectives set out in Title VIII, Part Three of the TFEU. Second, the Minister says that there are arguments in favour of using a single market legal base. If that is the case, we ask the Minister to explain why she thinks the Commission is justified in proposing a further Regulation — document (a) — based on Article 352 TFEU. Article 352 only authorises EU action to attain one of the objectives set out in the Treaties in cases where the Treaties have not provided the necessary powers. The Minister appears to acknowledge that the Treaty does confer the necessary powers to regulate the cash-in-transit market and that they are to be found in the internal market provisions of the TFEU. Use of these provisions would obviate the need for a separate Regulation based on Article 352 TFEU.

5.12 In our previous Report, we asked the Government to confirm whether there was a possibility that the common rules proposed in document (b) would affect the free movement of goods and services in Member States outside the euro area. If it would, this would seem to strengthen the case for using an internal market legal base. The example we have in mind is the land border between the Republic of Ireland and Northern Ireland. We should be grateful for the Government's view.

5.13 We raise a further concern regarding the use of Article 133 TFEU. Article 3(1)(c) TFEU states that the Union has exclusive competence in the area of monetary policy for the Member States whose currency is the euro. As previously noted, Article 133 features among the Articles in Title VIII of Part Three of the TFEU dealing with monetary policy. We ask the Government whether it considers that the Commission, in proposing Article 133 as the legal base for document (b), is seeking to assert exclusive competence for rules governing the transportation of euros and, if so, to explain what consequences this would have if, for example, the UK were to seek to conclude a bilateral agreement on the transportation of currency by road with the Republic of Ireland.

5.14 Pending the Government's response, we shall keep the draft Regulations under scrutiny.





16   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


 
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