Documents considered by the Committee on 10 January 2018 Contents

6Location of the European Medicines Agency and European Banking Authority

Committee’s assessment

Politically important

Committee’s decision

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

Document details

(a) Proposal for a Regulation amending Regulation (EU) No 1093/2010 as regards the location of the seat of the European Banking Authority; (b) Proposal for a Regulation amending Regulation (EC) No 726/2004 as regards the location of the seat of the European Medicines Agency

Legal base

(a) Article 114 TFEU, (b) Articles 114 and 168(4)(c) TFEU

Department

Health and Treasury

Document Numbers

(a) (39291), 15264/17, COM(17) 734; (b) (39292), 15263/17, COM(17) 735

Summary and Committee’s conclusions

6.1As a direct result of the EU’s decision to leave the EU, the remaining EU countries (EU-27) agreed on 27 April 2017 that those EU Agencies with a seat in the UK must re-locate. The EU-27 took the decision on 20 November that the European Medicines Agency (EMA) should move from London to Amsterdam and that the European Banking Authority should move from London to Paris. The Commission accordingly proposes the necessary legislative amendments.

6.2The Parliamentary Under Secretary of State for Health (Lord O’Shaughnessy) and Economic Secretary to the Treasury (Stephen Barclay) do not object to the EU’s decision to relocate either the EMA or the EBA.

6.3Lord O’Shaughnessy notes that the Commission’s explanation of its proposal on the EMA includes a “Budgetary Implications” section in which it asserts that relocation will have budgetary implications, not least due to the early termination of the lease in London. The Commission goes on to make reference to the Council’s Brexit negotiation directives of 22 May 2017 stating that the UK should fully cover the relocation costs. The Government observes that the budgetary section does not form part of the legislative change and so should not have been referenced by the Commission. This is particularly so, says the Minister, because relocation costs have not yet been resolved in the exit negotiations. The Joint UK-EU Report on the first phase of the exit negotiations noted that the UK had offered to discuss with Union Agencies located in London how they might facilitate their relocation, in particular as regards reducing the withdrawal costs.

6.4As both proposals remained under scrutiny, the Government abstained from voting at the meeting of EU Ambassadors (COREPER) on 11 December. A joint Commission-UK statement noted that adoption of the proposals would be without prejudice to the UK or EU positions on the costs of relocating the EMA and EBA.

6.5The annual accounts of the EMA for the financial year 2016 disclosed an estimated €448 million (£395 million)70 rent for the remaining rental period between 2017 and 2039 as a contingent liability,71 given that the rental contract does not include any exit clauses. While contingent liabilities in relation to other relocation costs are yet to be determined by the EMA, press reports in early August based on a private EMA briefing to MEPs put the total cost at over £500 million.72 By contrast, the EBA’s rental contract has a break-clause and so the relocation costs are likely to be substantially less.

6.6We note that the Government objects to the Commission’s reference to the budgetary implications of relocating the EMA. As the Commission’s Explanatory Memorandum does not form part of the legislative proposal, it is for the Commission to explain its proposal as it see fits. The objective of the measure is to provide a legislative basis for the relocation. Relocation will inevitably have a budgetary consequence—estimated at over £500 million for the EMA—and so we can understand why the Commission made reference to it.

6.7We note too, however, that the UK has not agreed to cover the relocation costs fully, and we therefore agree that the Commission statement could have more clearly indicated that payment of the costs was subject to ongoing negotiations.

6.8The Government does not take issue with the decision to relocate either of these Agencies. The Department for Exiting the EU reportedly said in mid-April that no decisions had been taken on this matter and that the issue would form part of the exit negotiations.73 Noting that the EU-27 agreed on 27 April 2017 that the Agencies should be relocated, we would welcome clarity on whether the UK did indeed seek to retain the Agencies during the negotiations.

6.9These proposals are in principle uncontentious, effectively putting into law a decision that has already been taken. It is nevertheless the case that they need to go through the ordinary legislative procedure involving both the Council and the European Parliament. We ask the Minister to state whether the Government has identified any appetite in the European Parliament to amend the Regulations at all, or if they are likely to pass swiftly through both institutions.

6.10Pending responses to the queries raised, we are holding the proposals under scrutiny. Given the link to the EU exit negotiation, we consider that they will be of interest to the House. We also draw them to the attention of the Exiting the EU Committee, the Health Committee and the Treasury Committee.

Full details of the documents

(a) Proposal for a Regulation amending Regulation (EU) No 1093/2010 as regards the location of the seat of the European Banking Authority: (39291), 15264/17, COM(17) 734; (b) Proposal for a Regulation amending Regulation (EC) No 726/2004 as regards the location of the seat of the European Medicines Agency: (39292), 15263/17, COM(17) 735.

Background

6.11The European Banking Authority (EBA) was established under Regulation (EU) No 1993/2010. The European Medicines Agency (EMA) was established under Council Regulation (EEC) No. 2309/93, which was replaced by Regulation (EC) No 726/2004.

6.12Document (a) relocates the seat of the EBA from London to Paris and document (b) relocates the seat of the EMA from London to Amsterdam. The Council decided that the UK-based EU agencies must be relocated from the UK in the context of the UK’s withdrawal from the EU. The remaining 27 Member States selected Paris and Amsterdam by votes in the margins of the General Affairs Council (Article 50) meeting on 20 November 2017. These decisions triggered the need to amend the respective Regulations accordingly.

Explanatory Memorandum of 18 December 2017 on the seat of the EBA

6.13The Economic Secretary to the Treasury (Stephen Barclay) notes the Government’s intention to maintain sound regulatory frameworks and global standards and to build a new relationship with the European Banking Authority. He indicates that the UK abstained on scrutiny grounds when the proposal was put to a vote at COREPER on 11 December. The UK and EU agreed a joint statement recording that consideration and adoption of the proposals (on both the EMA and EBA) was without prejudice to the UK or EU positions on the costs of relocation.

Explanatory Memorandum of 15 December 2017 on the seat of the EMA

6.14The Parliamentary Under Secretary of State for Health (Lord O’Shaugnessy) accepts the need to amend the legislation in order to reflect the relocation, but he expresses concern about references to the budgetary implications in the Commission’s Explanatory Memorandum (CEM). The Commission states, he reports, that the relocation of the EMA will have budgetary implications. This is particularly due to the early termination of its current rental contract in London. The Commission, observes the Minister, expects the UK to meet the costs of the relocation in line with the Council’s negotiation directives. He expresses his concerns in the following terms:

“[The] inclusion of the budgetary implications of the relocation does not form part of the legislative change. The UK therefore objects to the CEM because there is not yet any agreement on relocation costs as they will be subject to EU exit negotiations. The point was made at COREPER on 11 December 2017 when the UK abstained from voting because this matter needs to pass parliamentary scrutiny. The decision to abstain from voting was a cross-Whitehall agreement to manage this issue.

“To address this point, the joint report from the negotiators of the EU and the UK does not include withdrawal costs within the scope of the components of the financial settlement that the UK accepts. Instead it notes that the UK Government has offered to discuss how they can help to facilitate this relocation with a view to reducing the EMA’s withdrawal costs.”

6.15The Minister explains that a vote was taken at COREPER on 11 December and the UK abstained. The vote had taken place prior to passing the UK parliamentary scrutiny procedure and the Commission agreed with the UK that the consideration and adoption of the relevant legislative proposals would be without prejudice to the 8 December Joint Report.

Previous Committee Reports

None.


70 £1 = €0.87985 or €1 = £1.13655 as at 30 November.

71 Subject to the outcome of the withdrawal negotiations.

72 ‘Relocation cost for European Medicines Agency hits €600m after lease bungle’, The Times, 2 August 2017.

73 ‘London battles to keep hold of two main EU agencies’, Financial Times, 16 April 2017.




15 January 2018