EU news focus

What has Europe done for you? 31 March – 6 April 2014

EU News Focus

In this week’s edition, you will particularly read about how the EU institutions act to develop consumer rights (telecom package, banking and financial products), to make aviation greener and to ensure freedom of establishment is respected by national tax systems. Also, don’t forget to have a look at our special page on EP2014 elections!

European Parliament

Telecom package: ending roaming charges and ensuring net neutrality

By voting the “telecoms package”, MEPs intend to give a serious boost to a “telecommunications single market”. Among the big changes this package would bring, let us note the end of roaming charges in December 2015 and “net neutrality”, i.e., the fact that internet access providers would have to treat equally all services). Net neutrality will prohibit these providers from slowing down or even blocking some services like Skype. The Internet access providers may provide services of higher quality but it may not be to “the detriment of the availability or quality of internet access services” offered by other suppliers of Internet services. Blocking or slowing down services would be allowed only “to enforce a court order, preserve network security or prevent temporary network congestion.” Another aim of the package is to develop the latest technologies, 4G and 5G, throughout the EU. The package will now be discussed by the Council before a joint adoption with the next EP.

Making flights “shorter, greener and cheaper”

The number of flights is set to further increase over the coming years. Therefore, coordination between national authorities in the form of the Single European Sky initiative is essential to gain efficiency by making flights shorter. This would not only benefit the environment, but also generate economic benefits: lower fuel costs for airlines and lower ticket prices for passengers.

In a separate vote, MEPs approved an informal agreement with the Council regarding the exemption of CO2-emissions permits for long-haul flights. Third countries have therefore until 2016 to discuss with the EU and find ways to make aviation greener. Until 2017, only intra-EU flights will be covered by the EU Emission Trading Scheme (ETS). Another evolution regarding the ETS is that Member States will have to report how they spend the money raised through auctioning emission permits: the money is supposed to finance measures to address climate change and to support environment-related research.

If you want to read more about the European Parliament’s activity each week, click here.

European Commission

A communication about adapting Europe’s health systems

To help national health systems to face challenges to their sustainability and meet requirements of quality, the Commission has identified several EU initiatives. Indeed, in times of economic crisis and restrictions on spending, without forgetting the demographic evolutions which will lead to additional healthcare needs, it is necessary to increase the “effectiveness, accessibility and resilience” of health systems. European structural funds will contribute to supporting the reforms recommended in the framework of the European Semester. Tonio Borg, the EU Commissioner for Health, hopes that the reforms will “not only add more years to life, but add more life to our years.”

More concretely, to “strengthen effectiveness”, the Commission invites Member States to assess performance, ensure “safety and quality of care” and avoid over-reliance on hospitals. Regarding accessibility, the Commission suggests a “better planning of the health workforce and a more effective use of medicines.” Finally, health systems should adapt to scientific and demographic changes “by choosing more effective and efficient treatments which respond to patients’ needs” and by improving information flows.

The results of the Commission’s and ECB’s first post-programme surveillance mission to Spain

The programme of assistance to the Spanish financial sector ended in January 2014. So, now, the ECB and the Commission are in charge of post-programme surveillance. The general conclusion of the two European institutions is that “the positive trends of policy progress, ongoing economic adjustment and diminishing financial stress […] have continued, although important challenges to sustained economic and employment growth, public finances and the banking sector still remain.”

Regarding the state of the Spanish economy, growth should return thanks to strong exports and an internal demand that stops falling. Rising confidence, declining unemployment and the continuation of fiscal consolidation also contribute to “easing financial conditions”. The on-going need for deleveraging (i.e., reducing the debt/income ratio) nevertheless remains the main vulnerability in the medium term.

As to the financial sector, “the restructuring of banks having received State aid is well underway” and “solvency ratios have been further increased”, but litigation costs may still rise. The process of re-privatisation will have to continue in 2014 and the reform of the regulatory framework is well on track. However, banks remain fragile as their profits are still under pressure, requiring adequate capital buffers.

You can read the whole statement here.

If you want to know more about the Commission’s action, click here.

Council / European Council

Agreements with the EP confirmed on payment accounts, transparency rules for investment products and Investor-State Dispute Settlement (ISDS)

The Permanent Representatives Committee confirmed agreements with the EP on these three issues.

The directive on payment accounts aims at “guaranteeing access to basic payment services and improving information on fees related to payment accounts.” Consumers will be provided with more transparent information on fees. Moreover, it should become easier for them to switch accounts.

The regulation aimed at improving market transparency for retail investors intends to ensure that they always have adequate information “to take informed decisions”: the extent of disclosure of information should vary according to the degree of risk rather than the legal form of the product, say the institutions. This regulation particularly focuses on insurance-based investment products.

Finally, the regulation on ISDS “establishes rules for managing the financial consequences of investor-state disputes, specifying how cooperation between the Commission and the member states should be structured in specific cases.” The cooperation is important because the EU common commercial policy also covers foreign direct investment.

These three draft texts will have to be officially adopted by the Council before entering into force.

More information about the Council’s work can be found here; for the European Council, click here).

Court of Justice of the European Union

UK tax legislation on consortium group relief & freedom of establishment (case C-80/12, Felixstowe Dock and Railway Company & Others)

In the UK, like in many other countries, a company’s losses may be deducted from the taxable profits of another company being part of the same group. In some cases, it also works in the framework of a consortium. In the present case, a company member of a group wanted to transfer its losses to a company owned by a consortium as the two were connected by a third company (“link company”) member of both the group and the consortium. The UK allows for such losses to be deducted, provided the two companies (the one transferring losses and the one offsetting them against its taxable profits) are resident or have a permanent establishment in the UK. In addition, the UK tax authorities required the link company to meet the same residence criteria. So, there was a difference of treatment between UK companies linked by a resident company and UK companies linked by a company having its seat in another Member State and no permanent establishment in the UK. The Court declared that it created a restriction on freedom of establishment because the requirement made it less attractive to set up a link company outside the UK. The Court rejected the arguments of combating tax avoidance and maintaining a balanced allocation of taxing powers between Member States. The Court also added that “the fact that the group parent company and certain intermediate companies owned by it are established outside the EU does not affect the right of the companies in the group or consortium that are established in the EU to rely in full on freedom of establishment.” Indeed, the nationality of shareholders has no impact on an EU company’s rights.

If you are interested in learning about more European Court’s judgments, click here.

Pierre-Antoine KLETHI

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