Enhanced cooperation for the EU Patent: the Committee's evidence session with Baroness Wilcox - European Scrutiny Committee Contents


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 baseArticle 329(1) TFEU; unanimity; consent
Document originated14 December 2010
Deposited in Parliament21 December 2010
DepartmentBusiness, Innovation and Skills
Basis of considerationEM of 7 January 2011
Previous Committee ReportNone; 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 Council10 March 2011
Committee's assessmentLegally important
Committee's decisionNot 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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Prepared 8 June 2011