Documents considered by the Committee on 25 April 2018 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 Ministers:

Emergency oil stocks

Pet travel scheme

EU chemical policy review

EU plastics strategy

State of paediatrics medicines in the EU

Adoption of detailed EU fishing rules

Animal welfare standards and international competitiveness

State of paediatric medicine in the EU competitiveness

Crowdfunding Regulation

Covered Bonds


Emergency oil stocks

A ministerial response to various issues raised by Committee regarding the impact of Brexit on the UK’s emergency oil stocks states that the EU oil stocking Directive adds value to the international framework, but notes that future options for engagement with EU policy in this area are subject to negotiations on the economic partnership agreement between the EU and the UK. The Committee releases the document from scrutiny, while signalling our continued interest in the issues raised.

Cleared; drawn to the attention of the Business, Energy and Industrial Strategy and the Exiting the EU Committees.

Pet travel scheme—tackling puppy smuggling

The Commission’s Report proposes no change to the EU pet travel scheme Regulations, but does call for better enforcement of the derogation limiting the number of pets that may travel during a single trip. The Government is disappointed that the Commission has not chosen to act to address the illegal puppy trade. In response, the Government will continue to press for change and will give consideration to options for the UK’s pet travel policy post-Brexit. Noting that the Environment, Food and Rural Affairs Committee recommended in its report on “Animal welfare in England: domestic pets” in November 2016 that the issue should be included within the Brexit negotiations, we raise the same questions in our report. The Committee also seeks information on the practicalities of a change of approach post-Brexit.

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

EU chemicals policy review

The Commission concludes that the REACH (Registration, Evaluation, Authorisation and Restriction of Chemicals) Regulation is effective but there are opportunities for further improvement, simplification and burden reduction. The Committee expresses surprise that the Government did not reference the Prime Minister’s intention to seek associate membership of the European Chemicals Agency (ECHA) post-Brexit and asks whether: it is safe to assume that the UK would apply relevant EU legislation if it was successful in negotiating associate membership; and, if so, whether that would extend beyond REACH to include the other Regulations covered by the ECHA (i.e. Biocidal Products Regulation, the Classification, Labelling and Packaging Regulation and the Prior Informed Consent Regulation).

Not cleared; further information requested; drawn to the attention of the Environmental Audit Committee.

EU Plastics strategy

In her original EM on this document, the Minister did not acknowledge potential ongoing implications for the UK of EU plastics policy. In reality, the Committee observes, it seems from the Minister’s latest letter that the UK has been engaging closely and intends to continue doing so.

Cleared from scrutiny; drawn to the attention of the Environmental Audit Committee and the Environment, Food and Rural Affairs Committee.

State of Paediatric Medicines in the EU

Following a request by the Committee, the Government has committed to a discrete piece of analysis on paediatric medicines development in the UK in the specific context of the UK’s withdrawal from the EU. The Committee welcomes the Minister’s commitment and emphasises the desirability of including clinical trials within the Government’s analysis. Continued cooperation on clinical trials, including the ability to share and access data through mechanisms such as the European clinical trial database (EudraCT), is crucial to the ability of UK paediatricians to engage in research on rare congenital diseases in particular. The Committee also notes the relevance of the Prime Minister’s recent commitment to seeking associate membership of the European Medicines Agency post-Brexit.

Cleared; drawn to the attention of the Health and Social Care Committee.

Crowdfunding Regulation

The European Commission has proposed a dedicated regulatory regime for crowdfunding for the first time, which would allow platforms to apply for a pan-EU ‘passport’ to operate in any Member State based on a centralised licensing process by the European Securities & Markets Authority (ESMA). For example, a Spanish-based peer-to-peer lending platform that obtains a crowdfunding licence from ESMA would be able to provide its services to UK-based investors without the ability for the Financial Conduct Authority to prevent it from operating if there were concerns about investor protection.

The Committee shares the Government’s concerns that the proposal could undermine the safety net provided by domestic regulatory regimes in individual Member States by allowing platforms to by-pass national supervisory processes. It has therefore retained the proposal under scrutiny. We have also asked the Government, again, for more information about the details of its proposed UK-EU financial services agreement, and whether it might in practice lead to the UK following EU financial services law to maintain preferential market access after it leaves the Single Market.

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

Covered Bonds

In March 2018 the European Commission proposed a new EU-level regulatory framework for covered bonds, a type of debt obligation issued by banks that offers bondholders extra security in case the issuer goes insolvent. Covered bonds are seen as very safe investments, because they are secured against a ring-fenced pool of high-quality, low-risk assets (typically residential mortgages), which holders can access directly as preferred creditors if the issuer of the bond cannot make their contractual payments. The UK market is estimated to amount to €121 billion (£100 billion) of outstanding covered bonds.

To increase their uptake in- and outside of the Single Market under a harmonised regulatory framework, the European Commission has now proposed a Directive for the issuance of all covered bonds. It has also proposed new rules on prudential reliefs for banks that purchase such bonds issued within the EU, allowing them to hold less regulatory capital because these investments are seen as very safe.

The Committee has taken note of the proposal, and summarised the implications for the UK financial services industry after it leaves the Single Market. In particular, UK-issued covered bonds would not trigger the same prudential reliefs because they would be considered ‘third country’ products. The Directive proposed does not contain an ‘equivalence’ regime, but the Committee will keep this under review as the negotiations progress. We have also asked the Government to publish a more detailed proposal for its desired UK-EU financial services agreement after Brexit, which would be based on cross-border market access and regulatory cooperation but without the need for the UK to directly apply EU law.

Not cleared from scrutiny; drawn to the attention of the Treasury Committee.

European Labour Authority

A new proposal for a European Labour Authority (ELA) is due to become operational in 2019. We conclude that the role of the Authority as proposed would largely be of a coordinating and supporting nature, by issuing guidance on employment rights and resolving disputes between Member States on free movement of labour within the Single Market.

Although the ELA would not have any enforcement powers against Member States or businesses, the Committee has retained the proposal under scrutiny in case the European Parliament seeks to expand the powers of the new Authority. The Government has said the ELA and the relevant UK authorities are likely to have to cooperate during the post-Brexit transitional period, and possibly beyond.

Not cleared from scrutiny; 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: Emergency oil stocks [Staff Working Document (C)]; EU chemicals policy review [Commission Communication (NC)]

Exiting the European Union Committee: Emergency oil stocks [Staff Working Document (C)]

Environment, Food and Rural Affairs Committee: EU Pet Travel Scheme [Commission Report (NC)]; EU Plastics strategy [Commission Communication (C)]

Environmental Audit Committee: EU chemicals policy review [Commission Communication (NC)]; EU Plastics strategy [Commission Communication (C)]

Health and Social Care Committee: State of Paediatrics Medicines in the EU [Commission Report (C)]

Home Affairs Committee: EU approval of the Global Compact on Migration [Proposed Decisions (NC)]

International Development Committee: EU approval of the Global Compact on Migration [Proposed Decisions (NC)]

Political and Constitutional Affairs Committee: The EU Civil Protection Mechanism: strengthening EU disaster management [Proposed Decision (NC)]

Treasury Committee: Regulation of covered bonds [Proposed Directive (NC), Proposed Regulation (NC)]; Crowdfunding and P2P lending: new EU regulatory framework [Proposed Regulation (NC), Proposed Directive (C)]

Published: 1 May 2018