Memorandum by the Department for Business,
Enterprise and Regulatory Reform
EXECUTIVE SUMMARY
The following evidence submission covers the
following policy areas covered by the Department for Business,
Enterprise and Regulatory Reform's (BERR's) remit.
The submission consists of the following policy
areas and where applicable contains responses to questions that
Committee is interested in, as part of the Call for Evidence:
— Internal Markets and Rules on Competition
(combined)
— Services of General Economic Interest
— Common Commercial Policy
For each policy area, the two principal questions,
as requested, are also addressed:
— Are the changes in the Reform Treaty
new, or do they represent the consolidation of previously agreed
Directives into the new consolidated Treaties?
— What is the impact of the changes
on the UK and the EU?
INTERNAL MARKET AND RULES ON COMPETITION
1. The Reform Treaty does not change arrangements
for the internal market in any significant way. The general provisions
covering the free movement of goods and services are unchanged.
However, Article 47 of the Treaty does establish QMV for legislation
to remove barriers to the taking-up of self-employed to work in
other Member States. Other sections of this response deal more
specifically with the treatment on Competition and energy in the
Single Market.
2. With regards to competition rules, the
impact of the Protocol is such that mention of the internal market
elsewhere in the Treaty now implicitly contains a reference to
a system that ensures that competition is undistorted.
3. The Protocol, which has the same legal
status as the Treaties, will not result in a change to UK or EC
competition law. The Protocol maintains the full force of European
competition rules and EU Competition Commissioner Kroes has confirmed
that, "The competition rules which have served European citizens
so well for 50 years remain fully in force". The direct reference
in the Protocol to the objectives as provided for in Article 3
of the Treaty on European Union, as amended by the Reform Treaty
clarifies that the European Union can continue to act under all
the powers it has always had in the area of competition policy.
This includes action under Article 308 of the Treaty on the Functioning
of the European Union.
Internal market & competitiveness question:
Is the principle of "free and undistorted competition"
sufficiently protected by the wording of Protocol no.6?
4. The Protocol maintains the full force
of European competition rules. The direct reference in the Protocol
to the objectives as provided for in Article 3 of the Treaty on
European Union clarifies that the European Union can continue
to act under all the powers it has always had in the area of competition
policy. This includes action under Article 308 of the Treaty on
the Functioning of the European Union and confirmation of the
role of the European Commission as the independent competition
enforcement authority for Europe.
SERVICES OF GENERAL ECONOMIC INTEREST
SGEls Question: What difference does the new legal
footing make to the provision of services of general economic
interest?
5. The amendments made by the Reform Treaty
to Article 16 (which deals with services of general economic interest
(SGEIs)) introduce a legal base for a regulation establishing
general "principles and conditions" governing SGEIs.
The sorts of principles and conditions that the EU might wish
to establish are outlined in article one of the protocol on services
of general interest and include the following: "a high level
of quality, safety and affordability, equal treatment and the
promotion of universal access and of user rights."
6. In practice, given the wide range of
activities that could be defined as SGEIs, the Government believes
it would be impractical to attempt to establish EU-wide service
requirements that could be applied to all of them. Rather, the
Government takes the view that it makes more sense to deal with
public service obligations in sectoral legislation governing specific
areas of activity, as currently happens. The Commission's paper
on SGIs which accompanied the Single Market Review indicates that
it shares this view. It is therefore likely that Article 16 will
provide an additional legal base for sectoral initiatives rather
than being used to pursue EU-wide legislation on SGEIs as a whole.
7. In addition to the Article itself, a
protocol on services of general interest has been annexed to both
EU Treaties. The protocol is intended to assist with interpretation
and does not create any additional legal powers. The first article
of this protocol is intended to clarify the shared values of the
Union in respect of SGEIs. In particular, it underlines the essential
role of national, regional and local authorities in organising
SGEIs and makes it plain that SGEIs should operate in ways that
respect the diverse needs of different users, depending on their
various geographical, social or cultural requirements.
8. The second article of the protocol clarifies
the position on services of general interest of a non-economic
nature. Specifically, it states that the provisions of Treaties
do not in any way affect the competence of Member States to provide,
commission and organise non-economic services of general interest.
In practice, this second article simply clarifies the existing
position vis-a"-vis non economic SGIs ie that they
are not subject to the provisions of the EC Treaty and therefore
do not need to adhere to competition law. However they do remain
subject to basic principles, such as the principle of non-discrimination.
SGEIs Question: What is the significance of references
services of general economic interest being split between the
Treaty and the Protocol?
9. No particular significance should be
attached to the references to SGEIs being split between the Treaty
itself and the Protocol. Article 16 of the Treaty introduces a
new legal base for the EU to take action in the area of SGEIs.
The protocol is intended to provide clarity on a number of issues
connected with SGEIs, particularly where confusion has arisen
about the scope of Member States to organise SGEIs on their territory
and the extent to which the EC Treaty should operate.
SGEIs Question: Has the right balance been struck
between promoting competition and respecting the differences between
the Member States?
10. Article 16 gives the EU greater powers
to put in place EU-level legislation on SGEIs, however it is balanced
by the protocol, which underlines the primary role of Member States
in organising SGEIs on their territory. The Government believes
the protocol serves a useful purpose in that it makes it plain
that only services of general interest of a non-economic nature
fall outside the scope of competition law.
11. In the paper on SGEIs which accompanied
the Single Market Review, the Commission provided a further explanation
of how it intends to interpret Article 16 of the Treaty and the
accompanying protocol, and it made it plain that when deciding
which services are economic and which are not, it would look only
at the service itself, not at the nature of the entity providing
it. In practice, very few services are considered to be "non-economic",
those that do come into this category include activities such
as the police and judiciary and statutory social security services.
BACKGROUND INFORMATION
12. The term Services of General Interest
(SGIs) is a generic term covering all services that include a
public service element—both those that are "economic"
and those that are not.
13. Services of General Economic Interest
(SGEIs) is not defined in the Treaties. Generally, SGEIs covers
services which are economic in nature, that is to say capable
of being provided in a competitive market place. Examples include
transport services, energy suppliers, postal services and broadcasting.
14. Services of General Interest of a non-economic
nature tend to be activities which are purely a function of the
state, and which it would be impractical to provide using a market
mechanism.
15. On 20 November 2007, the European Commission
published a paper on Services of General Interest to accompany
the Single Market review. In it, the Commission said that it does
not currently intend to propose EU-wide legislation on Services
of General Economic Interest. The paper outlined a number of principles
that will guide the Commission's work on SGIs and provided a further
explanation of how the EU will interpret Article 16, as amended
by the Reform Treaty, and the protocol.
INDUSTRY
16. The 1992 TEC (Maastricht Treaty), added
industry policy to areas of EC competence in Article 130, later
moved to article 157. The Reform Treaty moves Article 157 TEC
to Article 176f of the new Treaty on the Functioning of the European
Union.
17. The original article enabled the Commission
to facilitate co-ordination between Member States for ensuring
the conditions necessary for the competitiveness of the Community's
industry exist. The relevant article explicitly states that it
cannot be used as a basis for introduction by the Community of
any measure which could lead to a distortion of competition.
18. The Reform Treaty clarifies the Commission
role in developing industry policy, adding that its initiatives
to promote co-ordination between Member States include "in
particular initiatives aiming at the establishment of guidelines
and indicators, the organisation of exchange of best practice,
and the preparation of the necessary elements for periodic monitoring
and evaluation. The European Parliament shall be kept fully informed".
This is consistent with the UK view of where Community activity
adds value to industrial policy, and is a helpful clarification
which may guard against those Member States that would prefer
a more interventionist or protective EU industrial policy.
19. The Reform Treaty also restricts the
scope of the EU to act under this article. The original article
gave the Council power to undertake specific measures to support
action taken in the Member States. The Reform Treaty makes explicit
that this article excludes any measures for harmonisation of laws
and regulations of Member States (ie this Article cannot be used
as a basis for harmonisation of Member State laws and Regulations).
ENERGY
Energy Question: What is the significance of energy
appearing in the Treaty for the first time?
20. The appearance of a separate Energy
Article reflects the growing importance of energy as a political
and economic issue in EU and of the connected policy areas of
climate change sustainability and the environment. Although there
were no specific energy articles in previous treaties, a wide
variety of other provisions, in particular related to the single
market and the environment, have enabled the EU to implement a
wide range of measures on energy policy. These include legislation
on electricity and gas market liberalisation; security of supply;
trans-European networks; renewable energy; energy efficiency and
the EU emissions trading scheme.
Energy Question: What is the impact of the EU
sharing competence with Member States on energy?
21. As explained above, the current Treaty
arrangements already provide shared competence on energy issues:
the proposed new Treaty Article does not significantly change
the balance. In particular, the new article preserves the rights
of a Member State to determine the conditions for exploiting its
own energy resources; its choice of energy mix and the general
structure of its energy supply.
Energy Question: What is the effect of the new
"solidarity" clause relating to the supply of energy?
22. The proposed treaty has frequent references
to solidarity between Member States in relation to a range of
policy areas. In particular, it has been added both to an existing
article (100) related to "severe difficulties" in the
supply of certain products (now clarified to refer primarily to
energy) and in the chapeau of the new energy article itself. Support
for including such a clause was strong among countries of Central
and Eastern Europe who have concerns over security of energy supply.
It is not yet clear what difference, if any, the solidarity clause
will make, in practice, given, in particular, that Article 2 of
the Treaty establishing the European Community already includes
the task of promoting solidarity between Member States.
COMMON COMMERCIAL POLICY
INTRODUCTION
23. The European Community's trade relations
are governed by the provisions of the Common Commercial Policy
(CCP) set down in the Treaty. In particular, the current scope
of the CCP includes: changes in tariff rates, the conclusion of
trade agreements with non-EU countries (including trade in services
and the commercial aspects of intellectual property), uniformity
in trade liberalisation measures, and trade defence instruments
such as anti-dumping measures and subsidies.
SUMMARY
24. Under the Lisbon Treaty the CCP forms
part of the EU's external action. Within Part V, Title II covers
"the Common Commercial Policy" and Articles 131
and 133 of the existing Treaty become Articles 188b and 188c respectively.
In summary, the key changes in the Lisbon Treaty for the CCP:
— Extend the scope of the CCP to include
foreign direct investment;
— Grants the European Parliament a
co-legislative role in respect of measures defining the framework
for implementing the CCP and imposes an obligation on the Commission
to keep the European Parliament informed of the progress of trade
negotiations; and
— Removes the requirement for shared
competence in respect of certain forms of agreement relating to
trade in services but retains the requirement for unanimity.
DETAIL
Extension of EU competence in trade policy matters
25. Articles 188b and 188c of the EU Reform
Treaty extend EU competence. The most significant change is that
the definition of the common commercial policy is expanded so
as to include "foreign direct investment". This term
is not defined but is understood to be capable of covering all
matters which would normally be covered in Bilateral Investment
Agreements. This will have implications for Member States ability
to conclude new bilateral investment agreements with third countries.
Furthermore, as the EU develops its relations with third countries
in this area, it is likely that Member States existing bilateral
investment agreements will be replaced with EU level agreements.
Ultimately, any definitive conclusions on the scope of the extension
of exclusive EU competence on foreign direct investment issues
will need to be taken by the courts.
26. A significant change from the existing
position under the CCP is also made in Article 188c(4). The existing
requirement for certain agreements on trade in services to be
concluded by both the Member States and the Community has been
removed allowing the EU alone to enter into such agreements but
subject, in certain circumstances, to unanimity in the Council.
These agreements cover matters relating to cultural and audiovisual
services, education services and social and human health services.
This will provide additional scope for the Commission to negotiate
trade agreements which cover these areas.
27. Nevertheless, as a matter of general
principle, the exercise of competences by the Community in the
external sphere cannot go beyond the delimitation of competences
in the internal sphere (this is acknowledged in Article 188c(6).
Therefore, insofar as some services fall within areas that are
expressly recognised by the Treaty of Lisbon as falling within
shared competence[1]
or indeed principally fall within Member State competence[2]
there should be continued Member State competence to conclude
international agreements.
Voting Procedures
28. Article 188c(4) reaffirms that the general
rule for Council decisions for the negotiation of agreements remains
qualified majority voting (QMV). However, the Lisbon Treaty also
provides a clear indication of where the Council will be required
to take a decision on the basis of unanimity for the negotiation
and conclusion of agreements, covered by the CCP. The areas which
will require a unanimous decision by the Council are: agreements
in the fields of trade in services, commercial aspects of intellectual
property, and foreign direct investment where the agreements include
provisions for which unanimity is required for the adoption of
internal rules, and for certain agreements in the field of social,
educational and health services. Unanimity is also required for
agreements on trade in cultural and audiovisual services which
risk prejudicing the EU's cultural and linguistic diversity.
Role of the European Parliament
29. Article 188c(2) provides for an enhanced
role for the European Parliament in the formulation, supervision
and control of the CCP. The European Parliament is afforded a
stronger role in the negotiation and conclusion of international
agreements, but does not acquire any new role in relation to decisions
to open negotiations. Article 188c(3) stipulates that the Council
remains responsible for the decision to open negotiations on the
basis of a proposal submitted by the Commission. However, during
negotiations, the Commission is now tasked with ensuring that
the European Parliament is kept fully informed of progress.
17 December 2007
1 Eg consumer protection, environment certain aspects
of health-see Article 4 of the Treaty as amended. Back
2
Tourism, culture (see Article 6 of the Treaty as amended). Back
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