Documents considered by the Committee on 22 November 2017 Contents

Meeting Summary

The Committee looks at the significance of EU proposals and decides whether to clear the document from scrutiny or withhold clearance and ask questions of the Government. The Committee also has the power to recommend documents for debate.

Brexit-related issues

The Committee is now looking at documents in the light of the UK decision to withdraw from the EU. Issues are explored in greater detail in report chapters and, where appropriate, in the summaries below. The Committee notes that in the current week the following issues and questions have arisen in documents or in correspondence with Minsters:

Fisheries

Tobacco products

Consumer protection

Access to environmental justice

Supervision of central counterparties

Anti-money laundering

VAT: e-commerce package

Strengthening Schengen borders

Services package notifications procedure

EU Research Fund for Coal and Steel

Digital Single Market: tackling unjustified geo-blocking

Financial services: UK-EU joint regulation

UK-EU cooperation development policy

Summary

Energy Performance of Buildings

The building sector is the largest single energy consumer in Europe, absorbing 40% of final energy, but most buildings are energy-inefficient. Last year, the Commission proposed a number of changes to its Energy Performance of Buildings Directive. Since the previous Committee last discussed the proposal, Member States have agreed their position, including a watering-down of the proposals on the number of electric vehicle charging points that should be installed in new and renovated buildings. The Committee seeks clarity on the Government’s approach to how new and renovated building stock can contribute to the low carbon transport shift. Noting that the transposition deadline will fall during the post-Brexit implementation period, the Committee seeks clarity on whether the Government intends to implement the legislation.

Not cleared; further information requested.

North Sea Multiannual Fisheries Plan

The EU is moving away from fisheries management based on short-term annual decisions to management based on multiannual planning. Such a Plan was recently proposed for the North Sea, establishing the rules and criteria under which quotas and other measures are adopted. The Fisheries Minister (George Eustice) is supportive, noting that the Plan could provide a helpful framework for post-Brexit fisheries management. There has been no decision as to what elements of the Plan might continue post-Brexit. The Committee asks the Minister for more clarity on the post-Brexit application of EU fisheries rules, including during any implementation period.

Not cleared; further information requested; drawn to the attention of the Environment, Food and Rural Affairs Committee.

Multilateral Investment Court

The Commission seeks to respond to criticism over existing models in free trade agreements for investor-state dispute settlement by proposing the establishment of a multilateral investment court. Council authorisation is sought for the opening of UN-led negotiations with interested countries. The Commission has also published draft negotiating objectives, setting out its preferred options for such a court.

The Committee notes that the Commission’s initiative is of key interest to the UK, given public and political views on the perceived deficiencies of current mechanisms, which are seen as privileging foreign investors over domestic ones, possibly encouraging governments from legislating in the public interest, and certainly lacking in transparency or in consistency in delivering judgments.

The Committee asks for the Government’s views on the substance of the Commission’s proposal, and whether it would consider joining future negotiations on a multilateral investment court.

Not cleared; further information requested.

Tobacco product traceability and security

The EU agreed in 2014 to introduce a “track and trace” system to counter illicit tobacco. Detailed plans for the system have now been tabled by the European Commission and largely agreed with Member States. The Committee requests an assessment of the agreed plans, including the degree of consultation with affected stakeholders. As the rules are due to come into effect from May 2019, the Committee asks if the Government intends to implement them post-Brexit and seeks clarity on the implications—including for the Irish border—of not implementing the rules.

Not cleared; further information requested.

Consumer protection: Proposed Directives on the sale of digital content and on sales of goods online/at a distance

These proposed Directives were published at the same time, linked by the purpose of promoting growth by boosting consumer confidence in online trade. They both seek to harmonise consumer contractual rights and remedies, the first in relation to sale of digital content (37389) and the second in relation to sales of goods online and at a distance i.e. not face-to-face (37390) (the physical goods proposal). It is unlikely that the UK will have to implement either Directive once adopted before Brexit, particularly since negotiations on the physical goods proposal have been deferred pending the outcome of a fitness-for-purpose evaluation (REFIT) of EU consumer law. Despite that, the alignment of new EU consumer rights regimes with the UK’s Consumer Rights Act 2015 could facilitate a new EU-UK future trading relationship. It is important therefore, considering also the possibility of a transitional/implementation period, that the UK continues to influence the proposals’ content and direction.

On the digital content proposal, the Government has confirmed the agreement of a General Approach on 8 June. Trilogues were due to commence at the beginning of September. The Committee requests further updates on the negotiations which take into account the previous Committee’s concerns, both in terms of transitional arrangements in relation to consumer protection and future trading arrangements between the UK and the EU.

On for the physical goods proposal, the REFIT concluded in May that there should be regulatory alignment between face-to-face and distance sales. Negotiations have therefore been further delayed whilst the EU institutions decided whether to extend the current proposal to include face-to-face sales or start again with a new all-encompassing proposal, based on the digital content proposal. The Committee notes that an amending proposal has now been published which will be considered in due course when the Government’s Explanatory Memorandum is received. In the meantime, the Committee asks the Government about cooperation on cross-border consumer rights post Brexit, in the light of the Government’s Future Partnership paper.

Not cleared from scrutiny; further information requested.

Access to Environmental Justice: EU and Member State obligations

These two documents address EU and Member State obligations under the Aarhus Convention. Aarhus is a multilateral agreement guaranteeing public rights on access to information, public participation and justice in environmental matters. It has been ratified by both the EU and Member States in their own right, including the UK.

The first document (38700) consists of Commission guidance on CJEU case law concerning Member State obligations on access to environmental justice which flow from the EU’s ratification of the Convention. The aim is to encourage Member States to address problems with their own, very different legislative frameworks for providing accessible justice. In particular, the UK has had to legislate to address problems in the past over its compliance with Convention requirements that legal means of challenge should not be “prohibitively expensive”.

The second document (38876) is a proposed Council Decision for an EU position which was due to be presented at the September meeting of the parties to the Convention. The Committee takes no issue with the scrutiny override that occurred in July as it happened prior to its formation. The document shows that the EU has also been having its own difficulties with compliance with the Convention on access to environmental justice. The Committee asks the Government about potential Brexit implications, in particular whether additional steps will be needed to comply with the Convention after Brexit in the absence of EU enforcement mechanisms. It also asks, more generally, whether there are any plans for discrete environmental enforcement mechanisms after Brexit, especially for EU environmental “retained law”.

Not cleared from scrutiny; further information requested; drawn to the attention of the Environmental Audit Committee and the Environment, Food and Rural Affairs Committee.

Supervision of central counterparties

The EU is currently negotiating an extensive revision of its existing legal framework (called EMIR) governing central counterparties (CCP), which play a key role in the stability and security of Europe’s market for over-the-counter derivatives such as interest rate swaps. The proposals were partially driven by Brexit, as the European Commission—and some Member States—do not believe that London (as the global centre for derivatives clearing) should be completely outside the scope of the EU’s supervisory powers post-Brexit while continuing to clear large volumes of transactions denominated in euro. In particular, the Commission has proposed that under certain conditions, the EU could require a large non-EU CCP to relocate to an EU Member State if it wants to clear derivatives under the same conditions as EU-based clearinghouses. Separately, the European Central Bank has also called for such a power, reviving an attempt which was successfully challenged by the UK before the Court of Justice in 2011.

The impact of such a demand for relocation on financial stability, as well as on the financial services industry in London, is unclear. In addition, the Committee has taken note of concerns expressed over the legal status of existing clearing contracts between UK CCPs and EU-based counterparties if no new agreement is in place by March 2019. The Committee therefore retains the proposals under scrutiny, and requests further information from the Economic Secretary to the Treasury about the implications of Brexit for the clearing industry (as well as on the Government’s proposals for some form of joint UK-EU supervision of that industry after Brexit).

Not cleared from scrutiny; further information requested; drawn to the attention of the Exiting the EU Committee and the Treasury Committee.

Anti-Money Laundering Directive

The European Commission has proposed a fifth Anti-Money Laundering Directive, which seeks to establish a level of public access to each EU country’s Register of Trusts, and strengthen customer due diligence rules for banks and other obliged entities when handling financial transactions. The file is currently in the trilogue process. While the European Parliament is pushing for a fully publicly-accessible Register of Trusts, the Council—also representing the UK Government—wants a more proportionate approach under which access to information on specific trusts would be considered on a case-by-case basis. In addition, the UK’s exit from the EU will make UK-based banks, companies and trusts “third country” entities for the purposes of the existing Anti-Money Laundering Directive. In the negotiations on the amendments to that law, the European Parliament is also arguing for the introduction of a legal requirement that any country wishing to conclude a trade agreement on financial services with the EU has to apply anti-money laundering rules that are equivalent to those prevailing in the EU.

It is unclear if the new Directive may apply in the UK irrespective of Brexit under the terms of the Government’s “implementation period” for the first two years after March 2019. The Committee therefore asks the Economic Secretary to the Treasury for further information on the potential post-Brexit implications of the existing and proposed new anti-money laundering rules. The Committee has also written to the Minister separately about the way in which the Government will respond to a recommendation by the European Commission that the information held on the UK’s existing registers of beneficial ownership for both companies and trusts should be independently verified.

Not cleared from scrutiny; further information requested; drawn to the attention of the Home Affairs Committee, the Justice Committee and the Treasury Committee.

The free movement of EU citizens

This Commission Communication on the implementation of EU free movement rules dates back to November 2013. The European Scrutiny Committee recommended it for debate on the floor of the House in January 2014. Despite repeated pressing by the Committee the Government failed to schedule a debate ahead of the June 2016 referendum on the UK’s membership of the European Union, and the previous Committee rescinded the debate recommendation in March 2017. This Report formally clears the Communication from scrutiny. In doing so, the Committee makes clear that it expects the Government to deliver on its commitment to engage meaningfully with the scrutiny process while the UK remains a member of the European Union and to provide “a range of opportunities” to debate and scrutinise its approach to the exit negotiations in a way which is not simply expedient for the Government, but genuinely responsive to the issues Parliament considers to be politically and legally important.

Cleared from scrutiny; drawn to the attention of the Home Affairs Committee and the Committee on Exiting the European Union.

The resumption of transfers of asylum seekers to Greece under the Dublin rules

In this non-binding Recommendation, the Commission sets out the steps which it considers Greece needs to take to enable Member States to send back asylum seekers who first entered the EU through Greece (so-called “Dublin transfers”). Dublin transfers to Greece were suspended in 2011 following judgments by the Strasbourg Human Rights Court and the Luxembourg European Court of Justice that there were systemic deficiencies in Greece’s asylum system. The Immigration Minister (Brandon Lewis) confirms that the UK is not returning asylum seekers to Greece and has also temporarily suspended Dublin transfers to Hungary for legal and practical reasons.

Cleared from scrutiny; drawn to the attention of the Home Affairs Committee and the Joint Committee on Human Rights.

The EU’s response to the refugee crisis—the creation of “hotspots”

The EU has invested heavily in “hotspots”—frontline registration and reception centres established in Greece and Italy—as a tangible expression of solidarity with countries bearing the brunt of the migration and refugee crisis in the Mediterranean. This Court of Auditors report examines the EU’s role in developing and implementing hotspots from their inception in 2015 to the end of summer 2016. It acknowledges the “difficult and volatile” operating environment but concludes that hotspots have made an important contribution in managing migratory flows by increasing reception capacity, improving registration procedures and strengthening coordination amongst the different actors. The Court makes a number of recommendations (all of which the Commission accepts) to expand capacity, improve the treatment of unaccompanied children, ensure the more effective deployment of national experts and clarify responsibilities, structures and operating procedures within the hotspots. The Committee asks the Immigration Minister (Brandon Lewis) to comment on the Court’s analysis and recommendations; explain why there appears to have been a delay in agreeing Council Conclusions on the report; and provide further information on Member States’ reactions to a Commission Action Plan presented in July in response to increased migratory pressures in the Central Mediterranean (including an Italian initiative for a Code of Conduct for NGOs involved in search and rescue operations in the Mediterranean).

Not cleared from scrutiny; further information requested; drawn to the attention of the Home Affairs Committee.

Protecting migrant children

This non-binding Commission Communication sets out a series of actions to support and protect migrant children which address the root causes of their flight from home, the dangers they face on their journey to Europe, and their protection needs once in Europe. The Immigration Minister (Brandon Lewis) provides an overview of measures taken by the UK to meet the needs of refugee and migrant children, but has little to say on the specific actions proposed by the Commission. The Committee requests further information and asks whether this is an area in which the Government intends to remain in lockstep with the EU until Brexit day or to pursue a different path. It also asks how many unaccompanied children have been transferred to the UK from Italy and Greece under section 67 of the Immigration Act 2016 (the so-called “Dubs amendment”) and under the family reunification provisions of the Dublin Regulation since the peak of the migration and refugee crisis in Europe in 2015.

Not cleared from scrutiny; further information requested; drawn to the attention of the Home Affairs Committee and the Joint Committee on Human Rights.

Implementing the EU-Turkey agreement on migration

The Immigration Minister (Brandon Lewis) responds to criticisms made by Amnesty International that the return of irregular migrants from Greece to Turkey is based on “the untrue, but wilfully ignored, premise, that Turkey is a safe country for refugees and asylum seekers”. He reiterates the Government’s position that Turkey offers “sufficient protection, in both its law and its practice, to justify the return of migrants from Greece under the EU-Turkey agreement”.

Cleared from scrutiny; drawn to the attention of the Home Affairs Committee.

Strengthening Schengen borders

The Commission has proposed changes to the Schengen Borders Code to provide greater flexibility in reintroducing temporary controls at internal Schengen borders in response to serious security threats. The UK does not participate in the Schengen Borders Code and so has no vote on the proposed changes but maintains a keen interest in the operation of the Schengen area. The Committee asks the Immigration Minister (Brandon Lewis) to explain whether he expects the impact of internal border controls on UK citizens travelling to or trading within the Schengen area to differ before and after the UK’s exit from the EU.

Cleared from scrutiny; further information requested; drawn to the attention of the Home Affairs Committee.

Digital Single Market: Tackling unjustified geo-blocking

The Commission proposes to introduce geo-blocking rules to prevent discrimination between consumers who shop online on the basis of their nationality, place of residence and/or establishment. Trilogue negotiations concluded on 21 November, with copyright-protected content being excluded from the scope of the Regulation. On Brexit, the Minister clarified that geo-blocking rules would still apply to UK businesses post-withdrawal when they direct activity towards the EU market. The Government says it will consider whether a UK-EU agreement is needed to retain the benefits of the policy for UK consumers. The Committee seeks further clarification on these points and a summary of the compromise text.

Not cleared from scrutiny; waiver granted; further information requested.

Services package: notifications procedure

EU Member States are supposed to ensure that all new measures which apply to business service providers are non-discriminatory, proportionate and justified by public interest objectives, but the defective notifications procedures contained in the Services Directive mean that Member States are in practice able to circumvent scrutiny of new measures. The Commission therefore proposes to rectify the defective notification procedures. The General Approach which was agreed at Competitiveness Council in May watered down the Directive’s provisions, contrary to UK wishes. Nonetheless, the Government considers that the proposed changes will benefit UK businesses post-exit.

Not cleared from scrutiny; further information requested.

Digital Single Market: Cross-border parcel delivery

The Commission has proposed a Regulation that seeks to lower the prices paid by individuals and small businesses for cross-border parcel delivery. The Council reached a General Approach at the Telecoms Council on 9 June. Although the Presidency’s compromise text addressed the UK’s main concern—the revised text gives National Regulatory Authorities (NRAs) more discretion over which postal items to assess—the Government abstained because it did not seek clearance in sufficient time for the Committee to grant a scrutiny waiver before the General Election.

Not cleared from scrutiny; further information awaited.

EU Research Fund for Coal and Steel (RFCS)

The Commission proposes to allow the EU Research Fund for Coal and Steel (RFCS) to recycle de-committed resources to bridge a funding gap. There are several steel operations in the UK, and the Minister emphasises that research of this type is the principal means by which UK steel companies can maintain a competitive advantage. The Committee grants the Government a scrutiny waiver for an anticipated decision in Council in December, and seeks further clarification about whether the Government intends to continue to support steel-related research following the UK’s withdrawal from the EU.

Not cleared from scrutiny; waiver granted; further information requested.

Documents drawn to the attention of select committees:

(‘NC’ indicates document is ‘not cleared’ from scrutiny; ‘C’ indicates document is ‘cleared’)

Business, Energy and Industrial Strategy Committee: Posting of Workers Directive [Proposed Directive (NC)]; Compliance package: Single digital gateway [Proposed Regulation (NC—Waiver granted)]; European Accessibility Act [Proposed Directive (NC—Waiver granted)]; VAT: e-commerce package [(a) Proposed Directive (NC), (b) Proposed Implementing Regulation (NC), (c) Proposed Regulation (NC)]; Research Fund for Coal and Steel (RFCS) [Proposed Council Decision (NC)]

Digital, Culture, Media and Sport: European Accessibility Act [Proposed Directive (NC—Waiver granted)]

Environmental Audit Committee: Access to EU environmental justice and the Aarhus Convention [Proposed Council Decision (NC)]; Access to environmental justice at Member State level [Commission Notice (NC)]

Environment, Food and Rural Affairs Committee: Multiannual Plan for Demersal Fishing Stocks in the North Sea [(a) Proposed Regulation (NC), (b) Executive Summary (NC), (c) Impact Assessment (NC)]; Access to EU environmental justice and the Aarhus Convention [Proposed Council Decision (NC)]; Access to environmental justice at Member State level [Commission Notice (NC)]

Exiting the European Union Committee: Supervision of central counterparties [(a) Proposed Regulation (NC), (b) Commission Communication (C), (C) Proposed Regulation (NC), (d) Recommendation (NC)]; The free movement of EU citizens [Commission Communication (C)]

Home Affairs Committee: 5th Anti-Money Laundering Directive [Proposed Directive (NC)]; The resumption of transfers of asylum seekers to Greece under the Dublin rules [Commission Recommendation (C)]; The free movement of EU citizens [Commission Communication (C)]; The EU’s response to the refugee crisis—the creation of “hotspots” [Court of Auditors Special Report (NC)]; Protecting migrant children [Commission Communication (NC)]; Implementing the EU-Turkey agreement on migration [(a) Commission Communication (C), (b) Commission Report (C)]; Strengthening Schengen borders [(a) Commission Communication (C), (b) Commission Recommendation (C), (c) Proposed Regulation (C)]

International Trade Committee: Strengthening trade defence instruments to deal with China Market Economy Status [Proposed Regulation (C)]

Joint Committee on Human Rights: The resumption of transfers of asylum seekers to Greece under the Dublin rules [Commission Recommendation (C)]; Protecting migrant children [Commission Communication (NC)]

Justice Committee: 5th Anti-Money Laundering Directive [Proposed Directive (NC)]

Transport Committee: European Accessibility Act [Proposed Directive (NC—Waiver granted)]

Treasury Committee: European Accessibility Act [Proposed Directive (NC—Waiver granted)]; VAT: e-commerce package [(a) Proposed Directive (NC), (b) Proposed Implementing Regulation (NC), (c) Proposed Regulation (NC)]; EU Venture Capital Funds and Social Entrepreneurship Funds [Proposed Regulation (C)]; Supervision of central counterparties [(a) Proposed Regulation (NC), (b) Commission Communication (C), (C) Proposed Regulation (NC), (d) Recommendation (NC)]; 5th Anti-Money Laundering Directive [Proposed Directive (NC)]

Women and Equalities Committee: European Accessibility Act [Proposed Directive (NC—Waiver granted)]





28 November 2017