3 Future relations between the EU and
the Overseas Countries and Territories~
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12732/12
+ ADDs 1- 2
COM(12) 362
| Council Decision on the association of the Overseas Countries and Territories with the European Union
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| Legal base | Article 203 TFEU; unanimity; special legislative procedure
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| Department | Foreign and Commonwealth Office
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| Basis of consideration | Minister's letter of 22 August 2013
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| Previous Committee Reports | HC 86-xi (2012-13), chapter 8 (5 September 2012); also see (31117) 15647/09: HC 5-iii (2009-10), chapter 1 (9 December 2009) and (29789) 11238/08: HC16-xxviii (2007-08), chapter 3 (22 July 2008)
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| Discussion in Council | To be determined
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| Committee's assessment | Politically important
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| Committee's decision | Not cleared; for debate in European Committee B
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Background
3.1 When the UK joined the European Union in 1973 special arrangements
were made for the UK's non-European Territories in line with those
already in place for French and Dutch Territories. Such territories
include Polynesia, Netherlands Antilles, the Cayman Islands and
the Falkland Islands. They are styled the Overseas Countries
and Territories, or OCTs.
3.2 The EU's current relationship with the OCTs is
governed by Part Four, Articles 198 — 204, of the Treaty
on the Functioning of the European Union (TFEU). Whereas Part
Four TFEU contains the basic provisions on the association of
the OCTs with the EU, the detailed rules and procedures have been
laid down by the Council, pursuant to Article 187 EC, through
successive Overseas Association Decisions adopted since 1964 —
most recently, Council Decision 2001/822/EC.
3.3 The basic aim of the OAD is to promote the OCTs'
economic and social development and to establish close economic
relations between them and the EU as a whole. This is achieved
through co-operation: grants from the European Development Fund
(EDF); loans from the European Investment Bank; and technical
assistance. There are relevant provisions included in the Decision
on economic co-operation, a trade regime, human and social development,
regional co-operation and cultural development. This is due to
expire on 31 December 2013. The draft Council Decision is a successor,
to link in with the next EDF.[12]
3.4 The previous Committee considered the precursor
2008 Commission Green Paper (with its questions for Member States
and the OCTs)[13] and
the follow-up 2009 Commission Communication, both of which were
debated in European Committee B (see our previous Report for details).
3.5 Subsequent developments involved further close
consultations with the OCTs and, inter alia, the Government
(see our previous Report) and a Joint Position Paper adopted in
February 2011. The latter focussed on future funding arrangements,
enhancing economic competitiveness, promoting regional cooperation,
the environment and climate change; called for the new Decision
to be at least as beneficial as the current Overseas Association
Decision; and was intended to help the Commission formulate its
proposals for the new Decision.
3.6 The Minister (Mr Alistair Burt) noted that the
main themes in the Commission's proposal, as set out in the draft
Council Decision, were consistent with the Government's White
Paper "The Overseas Territories: Security, Success, and Sustainability"
published on 28 June 2012. He noted that the proposal did not
recommend any change in the eligibility criteria for territorial
allocations from the EDF; access procedures would, however, be
simplified.
3.7 The Government was content with the text on preferential
market access as it was consistent with what was promised during
the GSP negotiations; the provision of flexible Rules of Origin
was of particular importance to the Falkland Islands.
3.8 The Government would be giving further consideration
to the Commission's proposal on trade in services: it would be
obliged to offer the best offered in any trade agreement, which
was considerably more generous than the present position.
3.9 The Government was concerned that the proposal
that the Member State responsible for a Territory would be liable
for any loss incurred to the EU Budget as a result of that Territory
making an error in issuing certificates for the trade of goods
would reduce the incentive for the Territories to ensure correct
procedures are followed.
3.10 The Commission had proposed greater cooperation
in the area of financial services and taxation matters; these
were areas of devolved competence to Territory Governments. The
Proposal called for regulatory convergence with recognised international
financial standards and also promoted convergence of OCT legislation
with EU legislation on financial services: the Government would
want to seek clarification on the terminology used by the Commission.
3.11 The Government particularly welcomed the fact
that the Commission had identified a broader range of areas where
co-operation with the Territories was possible: they were home
to many species and environments found nowhere else in the world
and many Territories depended on these assets in some way, such
as for fisheries or tourism; the Proposal also included provisions
for exchanging ideas and co-operation on areas such as disaster
risk reduction, accessibility, youth, education, culture, health
and the fight against organised crime.
3.12 All in all, the Government remained committed
to ensuring a successful negotiation of the successor Overseas
Association Decision and would work with the Commission, Territory
Governments and the other Member States as the negotiations moved
forward to ensure that the final text was in the best interests
of the UK's Overseas Territories.
LEGAL AND PROCEDURAL ISSUES
3.13 The Minister noted the legal basis for the proposed
new OAD is Article 203 TFEU, and commented thus:
"The Proposal is broader in scope than previous
Council Decisions under Article 203. We are looking carefully
at the Proposal to ensure both that it falls properly within the
scope of Article 203 and to examine whether any of its provisions
might engage the UK's opt in under Protocol 21. We will update
the Scrutiny Committees in due course on these issues."
FINANCIAL IMPLICATIONS
3.14 The Minister welcomed recognition in the Proposal
that the Territories would be eligible for other funding streams
and instruments provided for in the EU's Budget; though more wide
ranging than the current Decision, it was consistent with the
UK approach that other funding streams, subject to the programme
criteria and not as a reason to increase the EU's Budget, should
be made available to the OCTs.
TIMETABLE
3.15 The Minister noted that discussion in Council
would start from September 2012 in the Africa, Caribbean and Pacific
Working Group (ACPWG). He did not expect any Council Decision
to be put forward for adoption until November 2012 at the earliest,
but it could roll over into the Irish Presidency.
Our assessment
3.16 We thanked the Minister for his helpful and
informative Explanatory Memorandum.
3.17 Looking ahead, we said that we were minded to
recommend the proposed new OAD for debate at some point during
the negotiation process and before the adoption of any general
approach, or partial general approach, prior to the beginning
of the consequential negotiation with the European Parliament.
We asked the Minister to take due account of this in reporting
to us the outcome of the ACPWG negotiations, so that such a debate
could be scheduled in a timely fashion.
3.18 Before then, however, we looked forward to hearing
further from him about the legal and procedural issues that he
had outlined.
3.19 In the meantime, we retained the document under
scrutiny.[14]
The Minister's letter of 22 August 2013
3.20 The Minister for Europe (Mr David Lidington)
writes as follows:
"The Cypriot and Irish Presidencies advanced
negotiations on the proposal and the Lithuanian Presidency's objective
is to secure political agreement at Council in October. The Government
supports the Presidency's objective whilst remaining committed
to obtaining the best possible outcome for the Territories and
the UK.
"Management of Administrative Errors
"The Explanatory Memorandum expressed the Government's
concern about the proposal to hold Member States liable for any
loss incurred by the EU budget as the result of a Territory, with
which it has links, making an error in the issuing of certificates
for the trade of goods. This would remove the incentive for Territory
authorities to ensure that the correct procedures are followed
and impose liabilities which the Government does not consider
the UK to be under. The Government, with support from others,
has made it clear that the UK cannot accept the text as it currently
stands and has suggested alternative wording that recognises the
responsibilities of Territory authorities and their relationship
with the UK.
"Financial Services
"The current text now omits for the most part,
reference to the convergence of Territory legislation with EU
law on financial services, calling instead for the promotion of
regulatory alignment, terminology the Government considers to
be more acceptable.
"Leaders of the Overseas Territories agreed
at the annual Overseas Territories Joint Ministerial Council in
December to continue to meet international standards on tax co-operation,
financial sector regulation and combating financial crime, bribery
and corruption. They further demonstrated this commitment by agreeing
further steps on tax transparency and beneficial ownership in
the lead up to the G8 Summit.
Trade in Services
"The Explanatory Memorandum highlighted the
importance the Government attaches to retaining preferential trade
access to the European Union for the Overseas Territories. It
also noted that the Commission's Proposal went further than the
current Decision in terms of trade in services and would oblige
the UK to offer Overseas Countries and Territories the best terms
we have offered in any trade agreement. The Government has assessed
carefully the impact of this approach and concluded that as it
allows Territory citizens, including British Nationals to provide
a service or establish a service business in the EU, we can support
the text as it stands.
"Delegated and Implementing Acts
"In line with the Government's policy of ensuring
that powers conferred on the Commission are clearly defined, we
have argued for the use of Implementing as opposed to Delegated
Acts in respect of the programming of Union funds. Our concerns
have been understood by the Commission who have instead proposed
that the relevant provisions should be incorporated into the body
of the Decision rather than as currently, in an annex. As such
this has addressed our initial concerns and means that delegated
powers are confined to taking into account technological development
and changes to customs legislation.
"Next Steps
"The proposal will continue to be negotiated
throughout September with, it is hoped, final agreement in October."
Conclusion
3.21 The direction of travel would appear to
be satisfactory. However, there remain areas that have still
to be finalised. We understand that the Minister is hopeful that
this will be soon, and that the Commission are aiming to have
the Decision ready for adoption by mid-October.
3.22 We note that we have heard nothing from the
Minister about the legal and procedural issues that he highlighted
a year ago. We understand that both have been satisfactorily
resolved, insofar as:
— the
scope issue revolved around trade in services and, as the Minister
puts it, the right of "Territory citizens, including British
Nationals to provide a service or establish a service business
in the EU" has been safeguarded (see paragraph 3.20 above);
— the Government concluded that no provisions
require it to "engage the UK's opt in under Protocol 21".
3.23 It is disappointing that the Minister has
failed to explain this properly to the Committee, and in good
time. The House is thus presented with incomplete information
and an unnecessarily short timescale. That being so, we recommend
that the document be debated in European Committee B as soon as
possible after the House returns from the conference recess.
This will enable the Minister to outline the outcome of the negotiations
properly to the many Members interested in the Overseas Countries
and Territories, and for them to question him about the final
shape of this important Council Decision, prior to its formal
adoption.
12 The European Development Fund (EDF) is the main
instrument for delivering EU cooperation under the Cotonou Agreement
with ACP States and the OCTs. The EDF is funded outside the EU
budget by the Member States on the basis of specific contribution
keys. The UK's share is 14.68%. Each EDF is concluded for a multi-annual
period. EDF 11 will total €30.5 million. Back
13
The questions are set out in the Annex to our previous Report. Back
14
See headnote: HC 86-xi (2012-13), chapter 8 (5 September 2012). Back
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