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Documents considered by the Committee on 25 November 2015 - European Scrutiny Contents


7 Digital Single Market Strategy for Europe

Committee's assessment Politically important
Committee's decisionCleared from scrutiny; drawn to the attention of the Business, Innovation and Skills Committee and the Culture, Media and Sport Committee
Document detailsCommission Communication: A Digital Single Market Strategy for Europe
Legal base
DepartmentBusiness, Innovation and Skills
Document numbers(36836), 8672/15 + ADD 1, COM(15) 192

Summary and Committee's conclusions

7.1 In May, the Commission published its strategy for establishing a European digital single market ("Digital Single Market Strategy"), a stated priority of the Juncker Commission. It proposes a mix of legislative and non-legislative initiatives — across three 'pillars' — to be tabled by the end of 2016.

7.2 Our previous Report, listed at the end of this chapter, sets out the detail of the Commission Communication.

7.3 When we considered the Digital Single Market Strategy for the first time on 14 October, we welcomed the intent of the package, aimed at improving the competitiveness of the UK and EU, by removing barriers to trade in digital goods and services, and harnessing investment in and the growth potential of the digital economy. Given the far-reaching nature of legislative proposals expected in this area, we drew it to the attention of the BIS and CMS Committees and sought clarification from the Minister of State for Culture and the Digital Economy, Mr Edward Vaizey, on a number of aspects of the Digital Single Market Strategy, including:

·  What the Government's priorities are in developing the Digital Single Market;

·  How the Government is considering trade-offs on the cross-cutting range of initiatives — both at a UK and EU level; and

·  The Minister's assessment of the impact of the Schrems[30] judgment, which has the effect of restricting data transfers to the USA, on the Digital Single Market Strategy and on the Transatlantic Trade and Investment Partnership ("TTIP") negotiations.

7.4 We are grateful to the Minister for his rapid response. We reproduce the substance of this letter for ease of reference below, but draw attention to the following points.

7.5 In response to the Committee's query on what the Government's priorities are for completing the Digital Single Market, the Minister:

a)  reiterates the two overarching priorities set out by the Prime Minister in January over the next five years a) "creating a Europe for consumers" and b) "an economy for digital entrepreneurs";

b)  states that the Commission's upcoming proposals on copyright and consumer protection are the Government's immediate priorities; and

c)  maintains that the Government will "press the Commission to maintain ambition and pace on the remainder of its Digital Single Market initiatives".

7.6 In view of the raft of public consultations currently underway[31] on the Digital Single Market, including on geo-blocking, telecoms rules, VAT measures and the role of online platforms, we are disappointed that the Minister has not provided a clearer indication of what he is doing to identify and promote UK interests "early on" (ahead of a legislative proposal by the Commission) and what specific results he would like to see emerge within the next couple of years.

7.7 On the question of how the Government is considering trade-offs — both at a UK and EU level, the Minister:

a)  reiterates the Government's commitment to better regulation, to ensure that policies are evidenced based, proportionate and do not disproportionately burden SMEs;

b)  highlights that the Government is pressing the Commission to narrow the scope of its proposals where this would help deliver agreement in the Council; he provides the example of "lobbying for harmonisation of a narrow 'set of key rights' which supports consumer and business confidence and excludes areas that should remain matters for domestic civil law, such as limitation periods"; and

c)  considers that balancing competing interests and objectives, for example between the free flow of data and civil liberties, or between consumers having access to and portability of digital content and businesses being incentivised and remunerated for creative output "should be achieved in tandem, not at the expense of one or the other".

7.8 We thank the Minister for his assessment of how the recent Schrems judgment, impacts the Digital Single Market, noting that many businesses, including SMEs, have been affected. We welcome Government efforts to urge the Commission and US Government to find agreement on data transfer arrangements as soon as possible.

7.9 As to the impact of the Schrems judgment on the TTIP negotiations, we note the Minister's assessment that there is "no direct impact on the context of the [draft Services] text", but would have expected the Minister to provide some detail on the wider political or indirect implications, for example the extent to which it may affect the EU's negotiating position or EU ambitions for driving a high-level international framework for digital trade.

7.10 The Minister commits to maintaining regular communication with the House throughout the development and roll-out of Digital Single Market proposals. As stressed in our previous Report on the Digital Single Market Strategy, we expect the Minister to provide detailed information on each initiative brought forward by the Commission, early on in and throughout the legislative process, including on:

a)  whether the proposed measures comply with the principle of subsidiarity and are necessary and proportionate; and

b)  the extent to which they reflect UK interests.

7.11 In light of the update from the Minister and recognising the pace of developments in the implementation of the Digital Single Market Strategy — as evidenced by the numerous public consultations underway — we now clear this Commission Communication from scrutiny, in order to focus attention on imminent legislative proposals. We draw the Minister's letter and our conclusions to the attention of the Business, Innovation and Skills Committee and the Culture, Media and Sport Committee.

Full details of the documents: Commission Communication: A Digital Single Market Strategy for Europe: (36836), 8672/15 + ADD 1, COM(15) 192.

Background

7.12 The detail of the Digital Single Market Strategy is set out in the Committee's previous Report chapter, listed at the end of this chapter.

The Minister's letter of 30 October 2015

7.13 In response to the Committee's question on what the Government's priorities are for achieving a Digital Single Market, the Minister first sets out the Prime Minister's overarching ambitions:

"The Prime Minister's 'UK vision for the digital economy' paper of last January sets out an overall vision for the Digital Single Market and two overarching priority areas, which the Government is focused on delivering over the next five years. Our vision for the Digital Single Market is one which is digital by default, where it is even easier to operate online across Europe than it is do things offline in a single state. The two priority areas are:

"1. A Europe for consumers

"Consumers should be able to shop anywhere, anytime, and buy from the widest range of providers. They should be given the confidence that their rights will be protected and their data will be used in a responsible and transparent way.

"2. An economy for digital entrepreneurs

"We should design an environment that helps new entrants in an inclusive playing field where they can sell to a potential 500 million consumers, not an obstacle course that defeats many would-be online exporters at the first hurdle."

7.14 The Minister goes on to set out the Government's immediate priorities for the Digital Single Market:

"The priorities for the next few months are upcoming proposals on copyright and consumer protection. We expect that these will be published by the European Commission in December of this year. However, the other initiatives are also important because of the huge potential of digital to fuel innovation and growth, and to underpin competitiveness."

7.15 The Minister does not provide any detail on how other initiatives may be prioritised:

"We will continue to press the Commission to maintain ambition and pace on the remainder of its Digital Single Market initiatives."

7.16 In response to the Committee's question on how trade-offs on the likely policy initiatives and actions are being considered at a UK and EU level, the Minister states:

"We recognise that the Digital Single Market is a wide ranging policy space that affects many different stakeholders. In terms of policy formulation, we remain committed to better regulation principles, here and in the European Union. Policy should be evidenced based, proportionate and not unnecessarily or disproportionately burden SMEs.

"During the development and roll-out of Digital Single Market proposals, we will be pressing the Commission to narrow its scope, where this would help deliver agreement, and therefore early wins for consumers and businesses. For example, on consumer rights we have been lobbying for harmonisation of a narrow 'set of key rights' which supports consumer and business confidence and excludes areas that should remain matters for domestic civil law, such as limitation periods. The UK is the first country in Europe to have bespoke consumer protection on digital content — enshrined in the Consumer Rights Act 2015 — and we believe this would be a good starting point for the Commission to consider too.

"Going forward we want to see EU data protection legislation that protects the civil liberties of individuals, that strikes a balance between the free flow of data while providing data subjects with confidence that their data will not be misappropriated. These should be achieved in tandem, not at the expense of one or the other.

"It is also vital that we ensure the balance between consumer and business is correct. Upcoming proposals on copyright should widen legal access and enable portability of digital content answering consumer demands. However the framework must also ensure that we maintain Europe's rich creative output, and continue to remunerate and incentivise the creative industry effectively."

7.17 The Minister's assessment of how the recent Schrems judgement, which has the effect of restricting data transfers to the USA, impacts the Digital Single Market and TTIP negotiations is set out as follows:

"The Court of Justice ruling that invalidates the Commission's adequacy decision on Safe Harbour is disappointing. Companies need to be able to transfer data to third countries, with appropriate safeguards — that is why the UK intervened in this case.

"My colleague the Minister of Data Baroness Neville-Rolfe held a roundtable with business on the 19th October 2015 to better understand the impact of this judgement on their operations. Many businesses are being directly or indirectly affected, especially SMEs, and it is clear that there are costs involved in changing contractual agreements for the transfer of data. The Information Commissioners Office was also present, and reiterated its earlier public statement (6th October) that it will provide updated guidance to business on complying with EU data protection law when transferring data to the US over the coming weeks. The free flow of data, with appropriate safeguards, will be key to delivering on the ambitions of the Digital Single Market. The Government will therefore continue to press the Commission and the US Government to step up their current discussions to ensure adequate data transfer arrangements are not disrupted.

"In relation to trade negotiations and the EU-US Free Trade Agreement (TTIP) specifically, the judgement has no direct impact on the content of the text. The EU's draft Services text for TTIP includes provisions intended to liberalise the flow of data and facilitate increased e-commerce between the USA and the European Union. However, the text also includes a provision in its 'general exceptions' making clear that even though TTIP sets out principles for the free flow of data, both parties are still able to adopt and enforce measures necessary for the 'protection of the privacy of individuals in relation to the processing of personal data and the protection of confidentiality of individual records and accounts'. In the case of the EU, this would cover its Data Protection legislation and the Safe Harbour scheme as a means to demonstrate compliance with it."

7.18 The Minister concludes that he "will maintain regular communication with the House of Commons European Scrutiny Committee and the House of Lords Select Committee on the European Union throughout the development and roll-out of Digital Single Market proposals over the next five years".

Previous Committee Reports

Fifth Report HC 342-v (2015-16), chapter 32 (14 October 2015).


30   US-EU Data Sharing: Case C-362/14: Maximillian Schrems v Data Protection Commissioner. Back

31   See http://ec.europa.eu/digital-agenda/en/consultations for an up-to-date list of open consultations. Back


 
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Prepared 4 December 2015