Seventh Report Contents

Instruments of interest

Draft Social Entrepreneurship Funds (Amendment) (EU Exit) Regulations 2018

Draft Venture Capital Funds (Amendment) (EU Exit) Regulations 2018

1.European social entrepreneurship funds (EuSEF) relate to alternative investment schemes that focus on social enterprises which are set up with the explicit aim to have a positive social impact and address social objectives. European venture capital funds relate (EuVECA) to alternative investment schemes that focus on start-ups and early stage companies. 1 Both types of funds are subject to EU legislation2 laying down a common framework of rules regarding the use of the relevant designations. These two sets of Regulations, laid by HM Treasury (HMT), amend the EU legislation so that it operates effectively in a UK-only context.

2.In the Explanatory Memorandum to both sets of Regulations, HMT refers to the Alternative Investment Funds Managers (Amendment) (EU Exit) Regulations 2018 (“the AIFM (Amendment) Regulations”), which are to provide a temporary permissions regime allowing both EuSEF and EuVECA funds (as Alternative Investment Funds), which have been passported into the UK before exit day, to continue to access the UK market. Since the AIFM (Amendment) Regulations were not laid before Parliament alongside these two sets of Regulations, we sought additional information from HMT about the interaction between the instruments, and the timing of their laying and consideration. We are publishing that information as Appendix 1.

Air Navigation (Amendment) (No. 2) Order 2018 (SI 2018/1160)

3.The Air Navigation Order 2016 (“the ANO 2016”) is the principal statutory instrument by which the Civil Aviation Authority regulates safety for the aviation industry. The ANO 2016 prohibits the carrying of a sporting weapon or munition of war on board an aircraft. This Order creates an additional exception, where a police officer can take a munition of war on board an aircraft, provided the officer is acting in the course of the officer’s duty and the munition is removed from the aircraft before the aircraft takes off. The European Aviation Safety Agency Air Operations Regulation3 sets out the technical requirements for aircraft operations, and the offences and penalties for breach of these requirements are set out in the ANO 2016. This Order introduces further criminal offences for breach of specified obligations4 which should have been given full effect in UK law before now. The Committee asked the Department for Transport (DfT) why there was a delay with these measures and DfT explained:

“ … it was originally intended that the offences should have been included in the Air Navigation Order 2016 but unfortunately this did not happen. The oversight was not identified until late in 2017 by which time it was too late to add them the ANO amendment order that was being made that year.”

Although DfT has assured the Committee that they “are not aware of any instances which would have been considered for prosecution had the powers been available in any event”, the Committee would encourage DfT to ensure that mechanisms are in place to mitigate the risk of further omissions in the law in the future.

Export of Objects of Cultural Interest (Control) (Amendment etc.) (EU Exit) Regulations 2018 (SI 2018/1186)

4.EU Regulations currently provide for a system of EU licences which enable Member States to prevent objects of cultural interest from leaving the EU customs territory through another Member State. This licensing process requires the UK competent authority to provide reciprocal co-operation and mutual assistance between Member States. 5 In the event that the UK leaves the EU without a deal, any items located in the UK will be outside the EU customs territory. However, the UK would, if the Regulations remained in place, still be required to cooperate and assist the remaining 27 Member States, but they would not be obliged to reciprocate these duties. The Department for Digital, Culture, Media and Sport explains that this would create a “one-sided obligation on the UK”; therefore, these Regulations revoke the EU licensing regime. The export of cultural goods will continue to be controlled by UK licences,6 which allows the UK to retain objects of cultural interest of outstanding national importance that would otherwise be exported. EU licences issued before exit day will be valid for export at UK borders after exit day for the duration of their validity.7

Privacy and Electronic Communications (Amendment) Regulations 2018 (SI 2018/1189)

5.The Information Commissioner may impose penalties of up to £500,000 for breaches of the law in circumstances where persons transmit, or instigate the transmission of, unsolicited communications for the purposes of direct marketing by means of fax ,or make unsolicited calls for those purposes.8 Since 2015, the Information Commissioner has issued more than £4.8 million in penalties. However only 46 of the 93 fines issued to companies in breach of the law from April 2015 were paid in full, leaving a shortfall of £2.5 million of unpaid fines. The Department for Digital, Culture, Media and Sport explains that this shortfall arises because companies are usually wound up by their directors in order to avoid fines. A new company is normally then set up to continue to breach the law, with the cycle continuing if these activities attract a fine.9 These Regulations will enable the Information Commissioner to impose a penalty on a director of a company where such a breach occurs as a result of action, or inaction, by that officer.

2 Namely, Regulation (EU) No 346/2013 on European social entrepreneurship funds; and Regulation (EU) No 345/2013 on European venture capital funds.

3 Commission Regulation (EU) No 965/2012 (“the EASA Air Operations Regulation”).

4 Namely, a specified obligation relating to the Organisation Requirements for Air Operations and a specified obligation relating to the approval of helicopter offshore operations.

5 When considering whether to issue an EU licence, the UK’s competent authority (the Arts Council of England) must check whether any exportation of the cultural object from a Member State on or after 1 January 1993 was lawful and definitive.

6 As provided for in the Export of Objects of Cultural Interest (Control) Order 2003 made under the Export Control Act 2002.

7 The period of validity for EU export licences cannot exceed 12 months.

8 Under the Privacy and Electronic Communications (EC Directive) Regulations 2003 (SI 2003/2426) (“the 2003 Regulations”), the Information Commissioner may impose a monetary penalty, under the Data Protection Act 1998 as applied to the 2003 Regulations and saved in relation to the 2003 Regulations by the Data Protection Act 2018, for a serious breach of regulations 19 to 24 of the 2003 Regulations. Regulations 19 to 24 of the 2003 Regulations set out the circumstances in which persons may transmit, or instigate the transmission of, unsolicited communications for the purposes of direct marketing by means of fax or make unsolicited calls for those purposes.

9 A process known as “phoenixing”.

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