Intellectual Property
| (32365)
18115/10
COM(10) 790
| Draft Council Decision authorising enhanced cooperation in the area of the creation of unitary patent protection
|
| Legal base | Article 329(1) TFEU; unanimity; consent
|
| Document originated | 14 December 2010
|
| Deposited in Parliament | 21 December 2010
|
| Department | Business, Innovation and Skills
|
| Basis of consideration | EM of 7 January 2011
|
| Previous Committee Report | None; but see (31773) 11805/10: HC 428-ii (2010-11), chapter 2 (15 September 2010); and (31064) 13706/09: HC 5-i (2009-10), chapter 6 (19 November 2009)
|
| To be discussed in Council | 10 March 2011
|
| Committee's assessment | Legally important
|
| Committee's decision | Not cleared, pending evidence session with the Minister
|
Background
1. The European Patent Convention ('the EPC'), signed at Munich
on 5 October 1973, is a Treaty to which 38 States, including all
the Member States of the European Union, are now parties. The
European Union is not a party to the EPC. The EPC provides for
a unitary procedure for granting European patents by the European
Patent Office ('the EPO'). Whilst the procedure for granting patents
is unitary, the European patent in fact amounts to a bundle of
national patents, each governed by the domestic law of the States
which the holder of the patent has designated.
2. In April 2007 the Commission presented a Communication
entitled Enhancing the patent system in Europe. It proposed the
creation of an integrated system for the European patent and a
proposed Community patent. The latter would be granted by the
EPO pursuant to the provisions of the EPC. It would be unitary
and autonomous, producing equal effect throughout the European
Union (unlike the European patent), and could be granted, transferred,
declared invalid or lapse only in respect of the whole of that
territorial area. The provisions of the EPC would apply to the
Community patent to the extent that no specific rules were provided
for in EU law (in the form of a Regulation on the Community patent).
3. Work by the Council also led to the drawing
up of a draft international agreement to be concluded between
EU Member States, the European Union and third countries which
are parties to the EPC to create a court with jurisdiction to
hear actions related to European and Community patents. The agreement
would establish a European and Community Patents Court, composed
of a court of first instance, comprising a central division and
local and regional divisions, and a court of appeal, that court
having jurisdiction to hear appeals brought against decisions
delivered by the court of first instance. The third body would
be a joint registry.
4. In December 2009 political agreement was reached
on a Regulation establishing a unitary EU patent (the name was
changed from Community patent after the entry into force of the
Lisbon Treaty).
5. In June 2010 the Commission adopted a proposal
for a Regulation on the translation arrangements for the EU patent.
Translations represent a significant proportion of the cost of
patenting across Europe, and therefore agreeing a business-friendly
language regime for the EU patent is important. Studies quoted
by the Council say that to obtain a European patent in 13 countries
would cost about €18,000, with approximately €10,000
of that being spent on translations.
6. The Commission's proposal echoed a 2009 proposal
for a three-language arrangement (which had failed to get consensus),
but with additional elements relating to the availability of quality
machine translations and the reimbursement of translation costs
for applicants from EU States that have an official language which
is not English, French or German. Despite compromises being offered,
the required unanimity was not achieved at either the October
or November Competitiveness Councils. In advance of the December
Competitiveness Council, 11 Member States, including the UK, wrote
to the Commission to request it to make a proposal to use enhanced
cooperation for the translation of EU patents. On 14 December
the Commission duly proposed a draft Council Decision authorising
enhanced cooperation — this Decision is the document on
which scrutiny was breached.
7. The Decision on enhanced cooperation was due
to be adopted by the Council on 10 March. However, a pending Opinion
of the Court of Justice (ECJ), requested by the Council, was expected
on 8 March. The ECJ had been asked to consider whether the draft
agreement creating the unified patent court was compatible with
the EU Treaties. The Opinion was published on 8 March. The ECJ
found that the draft agreement establishing the unified patent
court was incompatible with the EU Treaties for two reasons. Firstly,
it would deprive national courts of the power or, as the case
may be, obligation, to refer a question of EU law (including under
the EU Patent Regulation) to the ECJ for a preliminary ruling
under Article 267 TFEU — such preliminary rulings were "indispensable
to the preservation of the very nature of [EU] law". And
secondly, if a decision of the unified patent court were to be
in breach of EU law, it could not be subject to infringement proceedings
by the Commission nor could it give rise to financial liability
on behalf the EU Member States — two essential characteristics
of EU law.
8. The ECJ's Opinion notwithstanding, the Council
adopted the authorising Decision on enhanced cooperation on 10
March.
Previous scrutiny
EXPLANATORY MEMORANDUM OF 7 JANUARY 2011
9. The Explanatory Memorandum submitted by the
Parliamentary Secretary for Business, Innovation and Skills, Baroness
Wilcox, explained that in the Government's request to the Commission
for the use of enhanced cooperation it included a specific reference
to the ECJ Opinion. She continued: "This caveat was included
in order to ensure that if the Court of Justice concluded that
it did not have sufficient jurisdiction and required wider powers
under Article 262 TFEU, then the UK could withdraw from the request
for enhanced cooperation before it was presented to the
Council for a vote" (emphasis added).
10. On enhanced cooperation, the Minister said
"the UK's position […] in general is that any proposals
will be examined on a case-by-case basis to ensure that Treaty
requirements are rigorously applied" (emphasis added).
11. The Minister said the authorising Decision
was be adopted by the Council on 10 March.
COMMITTEE REPORT OF 9 FEBRUARY 2011
12. In the conclusion to our first Report on
the proposal,[1] the Committee
asked for clarification of the basis on which the UK could withdraw
from the enhanced cooperation.
13. Secondly, the Committee questioned why it
was necessary for the authorising Decision to be taken two days
after the Opinion of the ECJ, expected on 8 March. We said "[w]e
would also like sufficient time to scrutinise the Opinion before
clearing the Council's Decision to approve enhanced cooperation
from scrutiny, and would expect an Explanatory Memorandum on the
Opinion when the Minister deposits it. We would, therefore, be
grateful if the Minister would consider whether the Council Decision
could be postponed."
MINISTER'S LETTER OF 16 FEBRUARY
2011
14. In reply, the Minister said the Government
has now been given assurances by the Commission and the EU Presidency
that, although there are no specific provisions in the Treaty
for withdrawal from enhanced cooperation, "a declaration
to be adopted at the same time as the authorising Decision will
make clear that any State may withdraw providing that the implementing
regulations have not been agreed."
15. She continued that "re-opening the text
of the Decision itself is not a viable option given the risk of
further amendment and debate which might hold up progress on this
important file. And reaching agreement on the Decision at the
10 March Competitiveness Council would allow the Commission to
come forward with proposals for the implementing regulations (on
the EU patent and language regime) very shortly afterwards."
16. She concluded by saying that the Government
"will have to take a view on UK participation when it receives
the ECJ Opinion, and that she will update the Committee accordingly.
But the option of remaining within the enhanced cooperation, unless
we have to withdraw, allows us to continue to influence the design
of the system and ensure progress."
COMMITTEE'S LETTER OF 3 MARCH 2011
17. The Committee's view was that the declaration
did not "overcome the problem that the Treaty does not provide
for Member States to withdraw from a decision to enter into enhanced
cooperation. As such, the proposed course of conduct appears to
be unlawful, and would set a negative precedent for the binding
force of future decisions to enter into enhanced cooperation."
18. The Committee said that the fact that adopting
the authorising Decision on 10 March would allow the Commission
to come forward with proposals "very shortly afterwards"
was not a reason to circumvent the procedure provided for in the
Treaty, commenting that this was "type of fudge that undermines
the rule of law and sullies the EU's reputation."
19. The Committee repeated that it failed to
see why the Decision had to be adopted two days after the ECJ's
Opinion was published. "We would like an opportunity to scrutinise
the Opinion before the Council Decision is adopted, rather than
after it has been adopted, in accordance with normal scrutiny
procedure." So the Committee asked the Minister again to
"insist that the Council Decision be postponed. This would
give proper time for your consideration and our scrutiny of the
Opinion without having to concoct a procedure not provided for
in the Treaty. We do not, therefore, give our agreement to the
UK voting in favour of adoption on 10 March and the draft Council
Decision remains under scrutiny."
MINISTER'S LETTER OF 9 MARCH 2011
20. The Minister wrote to give the Committee
advance warning (of one day) of the possibility that the Government
may need to override parliamentary scrutiny. It saw "enhanced
cooperation as the only viable way forward and it would be extremely
regrettable if it were unable to support the authorising Decision
at the Competitiveness Council on 10 March."
21. She continued that "the option of postponing
the Council Decision was not available although the Government
did discuss this possibility with the Commission, other Member
States and the Presidency. Reopening the text of the decision
itself was also not a viable option given the risk of further
amendment and debate which may have held up progress."
22. She said the "Council Legal Service
has advised, in writing, that any Member State participating in
enhanced cooperation would be entitled to withdraw as long as
no substantive act to the enhanced cooperation has been adopted."
The Government considered "that the combination of the view
of the Council Legal Service and the declaration to be made in
writing by the Commission does give it sufficient assurance to
withdraw after the authorising decision so long as the two implementing
regulations (on the EU patent and the language arrangements) have
not been agreed. At the Government's request, the Presidency has
agreed that the final decisions on the two implementing regulations,
one of which requires unanimity in the Council, will be taken
together." This was planned for the 30 May Competitiveness
Council.
23. The Government "will take a final view
on UK participation when it has fully considered the implications
of the Court's Opinion and the Minister would ensure that the
Opinion is deposited and an Explanatory Memorandum submitted in
sufficient time for the Committee to scrutinise before any final
decisions on implementing regulations are taken. The Committee
will of course have the opportunity to scrutinise the draft regulations
in the usual way once they are issued by the Commission."
COMMITTEE'S LETTER OF 17 MARCH 2011
24. The Government did vote in favour of the
authorising Decision on 10 March. On 17 March the Committee wrote
to the Minister to say it took such breaches of scrutiny very
seriously and invited her to give evidence to it "to explain
why you chose to ignore the scrutiny reserve and, more generally,
to explain the Government's approach to the adoption of this Decision."
EXPLANATORY MEMORANDUM OF 30 MARCH
2011 AND COMMITTEE'S REPORT OF 6 APRIL 2011
25. The Minister deposited the Opinion of the
ECJ together an Explanatory Memorandum. Unfortunately, the latter
shed no light on the Government's thinking on the Opinion, but
explained that Member States would discuss it in the relevant
Council working group on 14-15 April. In its Report in response,[2]
the Committee asked for a full update following the working group
meeting and before the Minister gave evidence.
MINISTER'S LETTER OF 13 APRIL 2011
26. The Minister wrote again:
"to explain the reasons why the Government considered
it was necessary to override the Parliamentary scrutiny reservation
on this occasion. I also wish to provide some further information
you requested in relation to the Explanatory Memorandum on the
ECJ Opinion.
"When I attended the Competitiveness Council,
I took the opportunity to repeat our desire to agree the unitary
patent as a package with an effective patent court. In particular
the role of the ECJ in any patent court arrangement was a particular
concern. Any extension of ECJ powers in resolving patent disputes
would be opposed by industry, and may require primary legislation
(under the EU Bill) in the UK. This is why UK sought and secured
assurances of our ability to withdraw from enhanced cooperation
should the opinion of the ECJ be unfavourable.
"Unfortunately, the ECJ opinion on the compatibility
of the draft International Agreement on the patent court did not
issue until two days before the Council authorising Decision.
While the ECJ Opinion concluded that the current draft agreement
was incompatible with EU law it did not say that extending the
powers of the ECJ under Article 262 TFEU was the only solution.
In fact the Opinion stated that extending ECJ powers was not the
only conceivable way of creating a unified patent court. Therefore
the Government took the view that the ECJ Opinion did not prevent
the UK from agreeing the Council Decision on 10 March.
"The Hungarian Presidency had originally planned
to agree implementing legislation at the Competitiveness Council
on 30 May. This would have required the Commission to have proposed
implementing legislation on the unitary patent and the language
regime by the end of March. That did not happen and I understand
that the Commission is expected to make substantive proposals
on implementing legislation later this month. As a result the
Council working group discussion planned for April has been postponed.
The delay in issuing the Commission's proposals also means that
it is highly unlikely that Member States will be in a position
to take a decision on the implementing regulations at the Competitiveness
Council on 30 May because they will have been given insufficient
time to consider the proposals. The agenda items for Competitiveness
Councils are set by the Presidency and the Commission.
"The Government has been considering the implications
of the ECJ opinion. I understand the Commission intends to suggest
amendments to the draft agreement later this month, which they
believe will resolve the incompatibility raised by the ECJ. While
we do not yet know the details of the amendments we support efforts
to amend the current international agreement. Should it prove
difficult to amend the current draft international agreement to
make it compatible with EU law alternative options may be considered."
Assessment of the Minister's
evidence of 11 May 2011
27. On 11 May the Minister gave evidence about
the scrutiny breach, a transcript of which is appended to this
Report. We had hoped to ask her questions about the legal implications
of the right to withdraw from a Council Decision to enter into
enhanced cooperation and more generally, and on the future prospects
for the unitary EU patent, but it was decided to draw the evidence
session to a close earlier than anticipated to give the Minister
more time to reflect on the answers she had given.
28. In summary, the Minister's evidence on the
scrutiny breach showed a lack of understanding of how the House
of Commons scrutinises EU documents, which greatly concerned us.
The following is an example of an exchange with the Minister:
"Q12 Stephen Phillips: Perhaps we can
deal with it in this way: without consulting your notes, are you
able to tell this Committee what the scrutiny reserve is?
Baroness Wilcox: Okay.
"No Minister of the Crown should give agreement in the Council
or in the European Council to any proposal for European Community
legislation or for a common strategy, joint action or common position
under Title V or a common position, framework decision, decision
or convention under Title VI of the Treaty on European Union."
"Q13 Stephen Phillips: That is what it
says. Are you reading that for the first time?
Baroness Wilcox: I am
reading it; I am reading it to you.
"Q14 Stephen Phillips: Are you reading
it for the first time yourself?
Baroness Wilcox: Do you
mean have I understood that that was the situation before I read
it out?
"Q15 Stephen Phillips: Let's come on
to that in a moment. Are you reading that for the first time yourself?
Baroness Wilcox: I have
read this out before.
"Q16 Stephen Phillips: Are you reading
that for the first time to yourself?
Baroness Wilcox: No, I
have read this to myself before.
"Q17 Stephen Phillips: Right, so what
is the scrutiny reserve?
Baroness Wilcox: The scrutiny
reserve — that which I have just read to you, no?
"Q18 Stephen Phillips: What does it mean?
What is its effect?
Baroness Wilcox: I think
I could only but repeat it to you. It has been written carefully.
"Q19 Stephen Phillips: Well, would you
agree with me that what it means is that the Government cannot
go off to a European Council and agree a document that this Committee
maintains under the Scrutiny Reserve and which has not yet been
debated either in a European Standing Committee or on the Floor
of the House of Commons? That is what it means, isn't it?
Baroness Wilcox: Well,
yes. If we have good reasons to have to go back and look again,
and if we have good reasons to override it, then we would do so.
We would come here and we would try and explain to you why we
had. In fact, I think in the exchange of letters that we have
had, we have always tried to be very clear about what it is we
are doing, and always try to keep in mind what we are doing for
Great Britain."
29. We also found her evidence to be contradictory.
In answer to question 5 she asserted that the Committee was responsible
for the scrutiny breach:
"Baroness Wilcox: [...] We knew that
10 March was a critical date for us, and we had to take a decision
as we had not yet finally heard whether you were going to withdraw
your objection or not. Therefore, we then went ahead as we had
not yet received the final answer to the letter that we had written
to you."
30. The opposite, however, was the case. In our
letter of 3 March we said "[w]e do not, therefore, give our
agreement to the UK voting in favour of adoption on 10 March and
the draft Council Decision remains under scrutiny" ¯
we question how this could have been expressed more clearly.
31. The Minister then appeared to rely on the
legal advice she had received that it was possible to withdraw
from the Council Decision as somehow trumping the Committee's
own legal concerns and entitling her to override the scrutiny
reserve:
"Baroness Wilcox: [...] I cannot say
often enough that we would not have come to this decision lightly.
I know you say that every Minister would say that, but in this
instance our difficulty was that our legal advice was not the
same as your legal advice";[3]
and
"Q36 Chair: So, come
what may, you were determined to go ahead, irrespective of whether
the whole question of debate in the House of Commons was irrelevant?
Baroness Wilcox: Oh no,
Chairman, no. We had to ascertain first and foremost that we would
be able to withdraw. The important thing was that we were able
to withdraw."
"We had understood the concern of the Committee
was that we could not withdraw."[4]
32. This line of reasoning confused two distinct
issues, as was made clear to her:
"Q24 Mr Clappison: With respect, it is
nothing to do with legal advice. It is a question of scrutiny
in the first instance. The legal advice was a point that the Committee,
as a scrutiny Committee, drew to your attention. However, this
is not a question of legal advice; this is a breach of scrutiny
reserve. I understand that you are doing it for a good motivation
and so on, but I have to say that from our point of view that
is simply not good enough."
33. The Minister then appeared to alight upon
"special reasons" as an exception to the scrutiny reserve
having to be lifted before a Minister could give agreement in
the Council[5] (paragraph
4 of the Scrutiny Reserve Resolution). On further questioning,
however, she accepted that "special reasons" had never
been cited in correspondence with the Committee prior to the evidence
session, but said that she did not realise that it was necessary
to do so.[6] When questioned
about whether she had complied with the requirement in the Scrutiny
Reserve Resolution to give the Committee notice "at the first
opportunity after reaching the decision", she wrote to us
on 13 April.[7] When
pressed, she accepted that the letter of 13 April was not a prompt
response:
"Q44 Mr Clappison: Could you get the
dates right first, and then, when you have the dates right, could
you answer this simple question? Do you think that the way you
have responded to this Committee meets the requirements of Standing
Orders, which you have just heard?
"Baroness Wilcox: Possibly, yes. So we
informed on 9 March, and the letter here on 3 March. This letter
here. So is the answer yes or no? Looking at it like this, it
does not look very good."
Minister's letter of 16 May 2011
34. In a letter to the Committee following her
appearance, the Minister makes the following comments:
"May I first say that I take very seriously
the Committee's role in scrutinising forthcoming EU legislation
on behalf of Parliament. This role is critical in ensuring that
Parliament is able to satisfy itself that a proposal is in the
UK's interest in advance of its adoption, and I recognise that
only in very exceptional cases would it be justified to agree
to a proposal before scrutiny has been cleared. I am sorry that
I was not able fully to answer the Committee's questions on this
issue when we met.
Parliamentary Scrutiny process
"I sought to follow due process in relation
to this proposal, and following a number of exchanges I wrote
to you as Chairman of the Committee on 9 March in advance of the
Competitiveness Council of 10 March explaining that we saw a need
to support the enhanced cooperation decision. I recognise that
I did not make sufficiently clear to the Committee in this letter
that we were relying on the terms of the scrutiny reserve resolution
and in particular the fact that we were giving agreement to the
Council decision for "special reasons". Moreover, the
letter I was planning to send after the Competitiveness Council
of 10 March was delayed because I understood from your Committee's
Clerk that you were writing to me. I wanted to respond to your
letter with as much information as possible in relation to the
ECJ Opinion 1/09 on the proposed EU Patent Court, which the Committee
had asked to be deposited. I hold the work your committee does
in extremely high regard and I delayed my letter in order to supply
you with the fullest possible response, rather than because of
any disregard for the Parliamentary scrutiny process.
The special reasons for supporting the enhanced
cooperation decision
"In order to clarify the position for your Committee
let me set out what the "special reasons" were for the
Government taking the exceptional step of overriding scrutiny
on this occasion.
"The UK has been at the forefront of calls for
the creation of a European patent system that supports business
and economic growth. This is why we were among the first group
of states to consider using enhanced cooperation, once unanimity
could not be achieved on the language arrangements, and why I
wrote to Commissioner Barnier on 8 December on behalf of the UK
Government to request a proposal on enhanced cooperation from
the Commission.
"As I explained to the Committee on 11 May,
the agenda for the Competitiveness Council of 10 March was set
by the Hungarian Presidency. We explored the possibility of deferral
but there was no appetite for postponing this decision.
"Moreover as one of the prime movers we were
in a critical position. For the UK to have abstained would have
seriously damaged the UK's credibility in negotiations with our
European partners, as well as causing a loss of momentum after
the progress which had been made under the Swedish, Spanish and
Belgian Presidencies, which would have been difficult to recover.
Abstention would have meant we were not party to the decision,
and would not have been able to influence negotiations going ahead
on the design of the unitary patent system. We would then have
had no further role in ensuring the creation of a business-friendly
system which contributed to growth in Europe, when the Prime Minister
had specifically committed to breaking the deadlock on this in
his speech at the Davos World Economic Forum.
"When I attended the Competitiveness Council,
I took the opportunity to repeat our desire to agree the unitary
patent as a package with an effective patent court. In particular
the role of the ECJ in any patent court arrangement was a particular
concern. Any extension of ECJ powers in resolving patent disputes
would be opposed by industry, and may require primary legislation
(under the EU Bill) in the UK. This is why UK sought and secured
assurances of our ability to withdraw from enhanced cooperation
should the opinion of the ECJ be unfavourable. We did this as
soon as we were reliably informed that the ECJ Opinion 1/09 would
not be issued until 8 March, two days before the Competitiveness
Council of 10 March. Such a situation had not been envisaged when
I deposited the Explanatory Memorandum of 7 January 2011 as at
that time we were still expecting the ECJ Opinion to be imminent.
"While the ECJ Opinion concluded that the current
draft agreement was incompatible with EU law it did not say that
extending the powers of the ECJ under Article 262 TFEU was the
only solution. Therefore the Government took the view that the
ECJ Opinion did not prevent the UK from agreeing the Council Decision
on 10 March. I am sorry that because of the need for analysis
of the Opinion under very tight timing we were not able to let
the Committee know this before their meeting on 9 March.
Next steps
"We have urged upon the Hungarian Presidency
the importance of ensuring that sufficient time is allowed for
Parliamentary scrutiny of the implementing regulations on the
unitary patent and the language regime, subject of Explanatory
Memoranda 9224/11 and 9226/11, and following these representations
we have just heard that these are no longer being considered for
agreement on a general approach at the Competitiveness Council
of 30/31 May. It is however still possible that the Hungarian
Presidency will seek to adopt Council positions in June before
handing over to the Polish Presidency, so this remains an active
issue."
Conclusion
35. In her evidence the Minister raised three
different reasons for why scrutiny was overridden, moving from
one to the next as each was challenged. It is particularly concerning
that she began by asserting that a delay on our part caused the
scrutiny breach, and the reliance of "special reasons"
appeared more off-the-cuff than pre-conceived. In addition, her
answers were made the less convincing by a lack of understanding
of the fundamentals of the scrutiny process.
36. The overall impression we were left with
was well summarised by the Chairman:
"Q20 Chair: I would simply like to add to
that the fact that, as you said at the beginning, we have been
at this for 40 years. In this context, some might interpret that
as suggesting that, for you and the Government, this was a holy
grail, sufficient to say, "Well, it doesn't really matter
what the European Scrutiny Committee thinks about this. We will
just go ahead anyway. If they ask us to come along, we can explain
it afterwards." That is possibly a reasonable interpretation
of what happened"; and
"Q26 Chair: That is the question that is
really troubling us, because it appears to me — I was not
quite prepared for this when we started out on this session —
that you really do believe that the Government has the right to
override the Committee simply because it is a matter of what you
perceive to be the national interest. Actually, there is a place
called Parliament with elected Members of Parliament who gather
together for the purposes of making decisions like that and calling
the Government to account."
37. That said, the Minister's letter of 16
May is helpful in explaining in greater detail why the letter
of 13 April was delayed; what the special reasons were for overriding
scrutiny; and why she felt it would not be possible to abstain
from voting in the Council (about which we are less convinced).
We do not propose to take the scrutiny override further in correspondence
with the Minister, but Members of the Committee may want to take
up some of the answers she gave in evidence when she comes back
to give evidence, as is suggested below.
38. We invite the Minister to come back, with
her Department's legal adviser, to give evidence on whether there
is a right to withdraw from Council Decisions in enhanced cooperation
and more generally, and on her views of the prospects for a future
unitary patent in the EU.
39. In the meantime the document remains under
scrutiny.
1 See headnote. Back
2
(32604) -:HC 428-xxiii (2010-11), chapter 2 (5 April 2011). Back
3
Q 24 Back
4
Q 31 Back
5
Q 26 Back
6
Q 32 Back
7
Q 40 Back
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