Opinion of the European Economic and Social Committee on ‘Challenges and Industrial Change in the EU Aerospace Sector’

(2019/C 62/01)

Rapporteur:	Thomas KROPP
Co-rapporteur:	Enrico GIBELLIERI

Plenary Assembly decision	15.2.2018
Legal basis	Article 304 of the Treaty on the Functioning of the European Union
Body responsible	Consultative Commission on Industrial Change (CCMI)
Adopted in CCMI	25.9.2018
Adopted at plenary	17.10.2018
Plenary session No	538
Outcome of vote (for/against/abstentions)	184/1/3

1.   Conclusions and recommendations

1.1.

The need to develop an EU industrial policy for the aeronautical sector to allow the EU aeronautical industry to compete on a level playing-field in the context of strong competition from established players (the USA in particular) as well as growing competition from emerging players (China in particular). In this context, the need to establish an aeronautics watchtower at EU level and to make aeronautics a key element of EU economic diplomacy and trade policy.

1.2.

The challenges in relation to skills, including ensuring that a highly specialised ageing workforce has the opportunity to share their expertise and skills with younger employees, the need to attract more young employees to the sector with increasingly sought-after skills in both engineering and ICT, and the urgent need for existing workers to be upskilled in the field of digitalisation.

1.3.

The need for civil aviation research to remain a top priority in Horizon Europe with an increased budget compared to Horizon 2020. In this context, to ensure the continuation of the successful technology initiatives to reduce the environmental impact of emissions through the launch of Clean Sky 3 and SESAR 3.

1.4.

The urgent need to deploy SESAR solutions and establish the Single European Sky (SES) after decades of discussions. The need to invest in efficient capacity in the air and on the ground in order to facilitate aviation growth while reducing its environmental impact and increasing safety levels.

1.5.

The need to strengthen the international role of the European Aviation Safety Agency (EASA) and the need for more performance-based EASA rules to enable more efficient deployment of new technology in a safe manner and a level playing field for EU exporters.

1.6.

The need to find solutions for an efficient post-Brexit agreement covering: customs arrangements, regulatory frameworks, cooperation in research and deployment and labour mobility. Technical discussions covering regulations need to begin as a matter of priority, to ensure that mitigation measures are in place.

1.7.

The need to progress on EU Foreign Direct Investment (FDI) screening, with the aim of protecting critical technologies for EU aeronautical manufacturing and MRO industries.

1.8.

The need to ensure continued social dialogue between employers, employees and civil society. Furthermore, the need to launch a sector-specific social dialogue for the aeronautical industry under Commission Decision 98/500/EC.

2.   General comments

The aeronautical industry is one of the EU’s key high-tech sectors in the global market. The industry directly employs 500 000 people in high quality jobs (1) (1 million adding indirect jobs) and consists of an ecosystem of large and small companies covering the entire spectrum of aeronautics.

The EU aeronautical industry is a technological leader in its field and currently has a market share of about one third of the global market. The industry provides a positive contribution to the EU trade balance (EUR 46 billion in EU exports) (2).

Remit of the opinion

Defence and space are not specifically addressed in this opinion. However, it is important to note the role that the civil aeronautical industry contributes to these sectors. This includes the strategic autonomy of Europe through synergies in technologies and common decision centres with defence activities.

The strength and global leadership of the EU aeronautical industry is the result of robust strategies and productive activities. This leadership should not be taken for granted since the industry faces many challenges:

(1)	The fierce competition from established and emerging players who receive substantial backing from their respective governments;

(2)	The shift in economic growth and power towards the East, which is both an opportunity and a threat;

(3)	The near-term operational challenges such as Brexit, EU budgetary constraints and protectionist measures in third countries;

(4)	The need for the EU aeronautical industry to maintain its technological leadership, especially in lowering the environmental impact of emissions;

(5)	The lack of a coherent EU industrial policy;

(6)	The need for a coherent EU strategy on Foreign Direct Investment Screening;

(7)	The need for an increased international presence for the European Aviation Safety Agency (EASA);

(8)	The necessity of boosting the competitiveness of the EU MRO sector;

(9)	The importance of ensuring that a future workforce has the specialist skills needed for the sector, especially in the field of digitalisation.

Specific comments

3.   Global market and challenges

3.1.

The current leading position of EU industry should not be taken for granted. EU GDP as part of global GDP will see a reduction by 30 % from today’s 17 % to 12 % (3).

3.2.

Numerous countries have developed and implemented far-reaching strategies on how to position their countries, how to deploy their people, and how to secure a top position in the global value chain in the context of automatization and a shift of economic power towards the East.

3.3.

Europe will face a totally different competitive situation that is full of opportunities if we succeed in maximising all our efforts and in taking bold decisions. However, it will be full of threats if we simply take our leading position for granted.

4.   Support to non-EU industry by foreign governments

4.1.

US industry (EU industry’s main competitors) continues to benefit from strong public support from the US government including 34 different agencies/departments. The set of regulations, policies and tools put in place over the years by US administrations to support its civil aeronautics industry is extensive and leverages the defence sector very effectively, especially for research, technology and development (including federal budget allocations for research programmes). Other established players (Canada and Brazil) also continue to receive significant backing from their respective governments through an overall industrial strategy.

4.2.

In addition to well-established players in civil aeronautics, several emerging countries (China, Indonesia, India, South Korea, the Philippines and others) are also strengthening their commitment to support the development of national competitive aeronautics industries in the coming years.

4.3.

Among these, China has the most comprehensive strategy that includes a mix of centralised planning and state-owned enterprises. The Chinese government has identified the development of a national civil aeronautics industry as a key priority in several official (top level) documents including the Made in China 2025’ initiative. The current Five-Year Plan of China calls for ‘breakthroughs in civilian aviation engine technology’ and the ‘acceleration of research in large-body aircraft, helicopters, regional jets and general aviation’. It is also important to note that the Chinese airline industry is state-owned and that the Chinese National Development and Reform Commission has the ability to approve all purchases of aircraft by Chinese airlines, which is used to encourage the purchase of domestically produced jetliners such as the COMAC C919 (4). Last but not least the ‘Internet Plus’ plan also establishes a partnership between Chinese tech giants and traditional industries including aeronautics.

5.   EU industrial strategy

5.1.

The lack of an EU industrial policy to support the aeronautical industry, combined with a fragmented approach between EU institutions and national governments, is a key challenge in the context of the changing competitive landscape. There is a need to develop an EU industrial strategy for the EU aeronautical industry to ensure its competitiveness and continued leadership in the global civil aviation market.

5.2.

This requires a strategy and commitment at EU level where all relevant actors at EU, national and inter-governmental levels (including the EU Commission, the EU External Action Service as well as relevant agencies such as EASA and Eurocontrol and Joint Technology Initiatives such as SESAR and Clean Sky) work together towards a common goal to support the competitiveness of the EU industry in the global civil aviation market.

5.3.

A commitment at EU level is required to provide continuous public funding support for this crucial sector, in particular in the field of research and innovation based on a long-term roadmap.

5.4.

An ‘aeronautics’ watchtower should be built at Commission level to monitor non-tariff barriers in key aeronautical regions and assess the relative competiveness of the EU aeronautical industry.

5.5.

Aeronautics should also become a key sector for EU economic diplomacy and EU trade policy, and the EU’s voice should be strengthened at international level, for example within the International Civil Aviation Organization.

6.   R & D to improve efficiency and reduce emissions

6.1.

The two major European Aviation Research Programmes, Clean Sky (greener and more efficient aviation technologies) and SESAR (Air Traffic Management R&I and deployment), act as catalysts for the whole innovation chain in Europe.

6.2.

Thanks to their long-term technology roadmap and financial commitment, they have proven their efficiency and their added value for both public authorities and innovation chain, mostly in (1) designing, developing, manufacturing and operating more competitive, safe and environmentally sustainable aircraft and Air Traffic Management Systems; (2) creating a large and efficient science and technology community of academic research professionals and industries, from large companies to SMEs, through all EU-28 countries and (3) delivering outstanding demonstrators with a real impact on the aircraft programmes and market.

6.3.

Success stories of Clean Sky include, inter alia, the flight tests of the BLADE laminar wing (boasting a 50 % wing friction reduction and up to 5 % less CO2 emissions) and Contra-Rotating Open Rotor (reducing fuel consumption and CO2 emission by about 30 %).

6.4.

Success stories of SESAR are best evidenced by its impactful results: when deployed, the 63 delivered SESAR solutions should offer a 34 % increase in airspace capacity and a 30 % decrease in flight time variance, meaning reduced delays on all EU flights and 95 % of flights staying within their time plan, as well as a decrease of 2,3 % in fuel burn and emissions per flight.

6.5.

In the context of Horizon Europe, civil aviation should remain a top priority, with an increased budget compared to current funding under Horizon 2020. Research and Innovation is the lifeblood of the EU aeronautical industry and the long research cycles of the aeronautical industry require risk-sharing between the public and private sector through grant-based financing based on a long-term commitment to developing research roadmaps. This is essential for the competitiveness of the EU aeronautical industry. The two joint technology initiatives (Clean Sky and SESAR) should therefore be maintained. In the context of the Connecting Europe Facility (CEF) funding should remain a top priority to accelerate and encourage the deployment of the technologies, developed under Clean Sky and SESAR R&I.

6.6.

Civil aviation has shown a track record of reducing its environmental impact. A new generation of aircraft typically reduces emissions by 15-20 %. The global civil aviation industry became the first in the world to agree a comprehensive approach for reducing its emissions. It is based on the ‘four pillar strategy’ of technology, operations, infrastructure and a global market-based measure.

6.7.

Continued EU support for research and innovation is crucial to ensure further progress on reducing the environmental footprint of civil aviation (technological pillar) since over 70 % of all research activities are linked to environmental goals.

6.8.

The Advisory Council for Aviation Research in Europe Flightpath 2050 has set a 2050 goal for technologies and procedures to allow a 75 % reduction in CO2 emissions per passenger kilometre, a 90 % reduction in NOx emissions and a 65 % reduction in the perceived noise emission of flying aircraft (these are relative to the capabilities of typical new aircraft in 2000).

6.9.

Moreover, aircraft movements should become emission-free when taxiing and air vehicles designed and manufactured to be recyclable. Europe should also be established as a centre of excellence on sustainable alternative fuels, including those for aviation, based on a strong European energy policy.

6.10.

Europe should be at the forefront of atmospheric research and takes the lead in the formulation of a prioritised environmental action plan and establishment of global environmental standards. While significant progress has been made under Horizon 2020, the pace of research and innovation should be increased under Horizon Europe, including electrification and hybridisation of aircraft.

7.   Digitalisation

7.1.

Digitalisation (including the digital infrastructure required to accommodate new automated flying platforms), automation, virtual and augmented reality technologies will also be a key priority for aeronautics research. Together with the need to continue improving the aviation safety level and the need to continue working on reducing the environmental footprint of aviation, they will set the research and innovation roadmap for SESAR3 and Clean Sky 3.

7.2.

The deployment of SESAR solutions should be stepped up and it is crucial to establish the SES, in order to ensure efficient deployment within the EU.

8.   European Aviation Safety Agency (EASA)

8.1.

A stronger international role for the EASA is key for the EU aeronautical industry (including maintenance, repair and overhaul (MRO) industry) in order to match the continued strong international role played by the US Federal Aviation Administration in promoting the US aviation industry in third country markets.

8.2.

EASA should be allowed to open more offices in third countries with a key role in promoting European safety regulations, certification standards and policies, and in ensuring that European industry can compete on a level playing-field in key export markets through day-to-day contact with third country Civil Aviation Authorities and avoiding technical barriers to validating European products in those exports markets.

8.3.

EU Bilateral Aviation Safety Agreements with third countries should be expanded to reduce duplicated safety oversight for both type certification/initial airworthiness as well as continued airworthiness/maintenance.

8.4.

Last but not least, EASA’s detailed rules should become more performance-based relying on industry standards in order to enable safe deployment of new technology in a more efficient and faster manner. In this context, the recently agreed revision of the EASA basic regulation (Revision of Regulation (EC) No 216/2008) should be welcomed.

9.   Infrastructure

9.1.

The EU aeronautical industry is also benefiting from the health of the wider EU civil aviation industry (i.e. airlines, helicopter operators, business jet operators and other airspace users) since additional growth for airspace users results in the need for more aircraft and corresponding technology.

9.2.

In this context, it is therefore essential to continue investing in safe and cost-efficient infrastructure on the ground as well as in the air while avoiding excessive aviation taxes.

9.3.

The EU aviation strategy is therefore welcomed since it includes a set of tools to improve the competitiveness of the wider EU civil aviation industry including a revision of the Basic EASA Regulation, a strategy for ensuring EU leadership in the emerging market of civil Remotely Piloted Aircraft Systems and Unmanned Traffic Management Systems, as well as other proposals affecting the competitiveness of the airline industry (revision of Regulation (EC) No 868/2004 and possible revision of the EU Airport Charges Directive).

9.4.

The revision of Regulation (EC) No 1008/2008 (Common Rules for Operation of Air Services in the Community) should also be seen in this context and should ensure that the Single Market remains fit for future developments. In addition, given the recognised need for further consolidation in the EU airline industry, a balance must be found between a more consolidated airline industry and the benefits for EU consumers of a choice of airlines and effective competition.

10.   Maintenance, Repair and Overhaul Services (MROs)

10.1.

MROs are also an important segment of the EU aeronautical industry, contributing both to EU job creation and to exports for MRO services. Boosting the competitiveness of the EU MRO industry (airline MROs, independent MROs and original equipment manufacturer MROs) is therefore also crucial to enable the industry to continue to create jobs and capture new markets.

10.2.

The use of big data and new technologies for MROs will also be an important element to be addressed in Research and Innovation Programmes.

11.   Foreign Direct Investments (FDIs)

11.1.

The EU Commission proposal for FDI screening (COM(2017) 487), will improve the exchange of information and impact assessment and increase transnational transparency but will leave the final decision at national level. The proposal also includes EU Commission screening on grounds of security or public order for cases that may affect projects or programmes of EU interest.

11.2.

This Commission proposal should be welcomed as a first step since it is of the utmost importance not only in relation to foreign direct investment in the EU aeronautical industry and its supply chain but also in relation to critical technologies for EU manufacturing (automation, virtual intelligence, big data and cyber).

12.   Brexit

The European aeronautics sector is fully integrated with many components crossing national borders several times before final assembly. The supply chain consists of many large, medium- and small-sized companies operating just-in-time principles.

The Single Market and Customs Union are critically important since they reduce administrative burden and red tape for industry, thus minimising costs.

The EU-27 and the European Parliament have clearly stated that they will protect the integrity of the Single Market, including the four freedoms, and the jurisdiction of the European Court of Justice and there will be no ‘cherry picking’ for any industry.

The UK Government has made it clear that it will be a third country as of 29 March 2019.

12.1.

A no-deal Brexit scenario must be avoided as it would be especially detrimental for the European aeronautical industry’s competitiveness on a global scale and would put thousands of jobs at risk on both sides of the Channel. There is a need to find solutions for a post-Brexit agreement covering: — Frictionless customs arrangements including export control for dual use goods — Continued membership of EASA and ECHA (REACH) — Civil aeronautics research: continued cooperation in joint technology initiatives — The ability to move highly-skilled employees across borders.

Technical discussions on the regulatory environment covering EASA and ECHA need to begin, as a matter of priority, to ensure that mitigation measures are in place to minimise potential disruptions.

National governments must provide clear guidance to help their businesses prepare for all potential changes caused by Brexit, to minimise disruptions.

13.   Skills

13.1.

The continued success of the EU aeronautical industry is also highly dependent on its ability to attract skilled labour. In the context of an ageing workforce and new technological challenges (digitalisation, automation, cybersecurity, industry 4.0), this requires an overall EU strategy to develop EU education and training programmes with life-long learning and high-quality training provisions at its core.

13.2.

At a national level, Member States are encouraged to promote the uptake of STEM subjects, particularly to girls from an early age, as well as participation in Erasmus+ programmes.

13.3.

Flexible pathways need to be developed between the world of work and the world of education (work-based learning, quality apprenticeships, and sector-specific training initiatives) and SMEs should receive extra support if required.

13.4.

Considering these substantial specific social challenges, the EU aeronautical industry would benefit from sectorial social dialogue at EU level (Decision 98/500/EC) to allow the social partners to discuss specific issues.

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(1)  Source: ASD Facts and Figures.

(2)  Source: ASD Facts and Figures.

(3)  Source: PWC.

(4)  Source: RAND, ‘Chinese Investment in U.S. Aviation’, 2017.

Opinion of the European Economic and Social Committee on ‘European Finance-Climate Pact’

(own-initiative opinion)

(2019/C 62/02)

Rapporteur:

Rudy DE LEEUW

Plenary Assembly decision	15.2.2018
Legal basis	Rule 29(2) of the Rules of Procedure
Section responsible	Agriculture, Rural Development and the Environment
Adopted in section	5.10.2018
Adopted at plenary	17.10.2018
Plenary session No	538
Outcome of vote (for/against/abstentions)	172/4/1

1.   Conclusions and recommendations

1.1.

The EESC is firmly committed to the United Nations 2030 Agenda for Sustainable Development and the Paris Agreement. However, our current trajectory will at best only limit the increase in temperature to 3 oC or more, which is well beyond what is stipulated in the Paris Agreement.

1.2.

At the same time, Europe needs a renewed impetus and a new project, one that is based on cooperation and convergence rather than competition, and which demonstrates the tangible added value it can bring to Europeans, particularly young people. It is now imperative that we adopt a proactive European policy and provide a clear direction for the socioeconomic model that we want for today but above all for future generations.

1.3.

Europe needs to prove that it can provide a favourable environment for creating high-quality, well-paid jobs that respect the environment as well as a real economy which benefits all: European employers, workers and individuals.

1.4.

However, vast amounts of money are fuelling new financial bubbles instead of serving the real economy, and institutions such as the IMF tell us that a new crisis could happen, one even more devastating than in 2008 (1).

1.5.

The next multiannual financial framework (2021-2027) must promote economic development (2) and jobs (3) and enable the EU to achieve its objectives and contribute to the transition to a low-carbon economy by 2050.

1.6.

There will be no life, no jobs and no entrepreneurship on a dead planet. Climate change is therefore an opportunity in terms of creating high-quality jobs and must be able to provide a solution beneficial to employers, workers and civil society. Delaying adaptation, or not acting at all, could substantially increase the total cost of climate change (4).

1.7.

The Commission, the European Court of Auditors and the World Bank refer to similar amounts: the equivalent of EUR 1 115 billion will have to be invested each year in the EU from 2021 in order to move forward and meet the EU’s 2030 targets (5). This EUR 1 115 billion includes a significant share of the current investments which should be redirected towards sustainable development (green earmarking). The cost of non-action would be EUR 190 billion per year (or 2 % of the EU GDP) (6).

1.8.

As has been advocated by many economists and key political figures from civil society (7), we need to encourage and support all projects that can unite Europe’s strengths in the interests of workers, businesses and all Europeans. This is the objective of a finance-climate pact for high-quality jobs.

1.9.

The finance-climate pact aims to redirect the money that could bring about a new financial bubble towards the fight against climate change and the real economy. It must also receive new financing, especially for small and medium-sized enterprises. The pact must provide a new roadmap for European leadership and should be accompanied by an integrated plan (in cooperation with China and India — key players in the fight against climate change).

1.10.

The EESC believes that this roadmap should cover all aspects of a policy to tackle climate change: a fair transition (measure to mitigate the effects of the change, but also to compensate for damage and loss), as well as real policies for adapting to climate change. The circular economy model should be given priority (8) as much as possible and its regulatory framework improved. Everything will need to be financed on the basis of adequate budgets to redirect current investments (green earmarking) and new sources of accessible funding.

1.11.

This transition would bring the necessary transformation in the labour market and could contribute to the creation of high-quality jobs in the framework of the European Pillar of Social Rights (9).

1.12.

We must support, from a social perspective, the move towards a sustainable society model and establish an action plan to ensure a fair transition so that nobody is left behind.

1.13.

This transition will require major investments in research and development (R&D) and innovation in order to encourage and support innovative projects that comply with European taxonomy.

1.14.

This is about not repeating the mistakes of the past (fuel subsidies and overuse of fossil fuels) and putting an end to any promotion of projects that are detrimental to the climate and/or contrary to the Paris Agreement.

1.15.

To achieve the Paris Agreement goals a significant share of the investments for combating climate change should be realised by the private sector, further to the public fundings.

1.16.

The pact requires the establishment of a clear and predictable European policy framework, over the longer term, with a view to ensuring planning security for investments (10). This framework must be accompanied by border adjustment mechanisms for products which are not subject to the same environmental and social standards.

1.17.

According to the EESC, and as the Commission points out, a unified EU classification system (taxonomy) must be developed with a view to maintaining sustainable projects (and rejecting those that are not) and identifying areas in which investments can have the most impact. The European Parliament supports this approach and also proposes the introduction of a ‘green label’. This label should be granted to investments that comply with EU taxonomy and the highest sustainability standards, with a view to ensuring the positive earmarking of investments (11).

1.18.

The projects to be supported, which will be in line with the United Nations’ Sustainable Development Goals and which require significant resources for innovation and R&D, will need to be enforced through a tool making it possible to visualise the various sources of financing (including the future multiannual financial framework) and based on different initiatives: — redirecting funding towards sustainable investments through ‘green earmarking’ and, in this context, promoting ‘green labelled’ loans from the European Investment Bank (EIB); — using quantitative easing by the European Central Bank (ECB) as a source of financing; — increasing to 40 % the share of European Fund for Strategic Investments dedicated to combating climate change; — the EU must show a level of ambition that will match the challenge of fight against climate change; an average 40 % of its global budget (MFF 2021-2027) must be allocated to this objective; — increasing the corresponding share of the European Cohesion Fund over and above the current 20 %; — using 3 % of pension and insurance funds; — supporting businesses, particularly SMEs, in their R&D investments up to an amount of EUR 100 billion devoted to this purpose; — respecting the financial assistance commitments made to the countries of the South which are contributing to the fight against climate change; — introducing a clause on the ‘Paris Agreement’ that is effectively binding in EU trade agreements.

2.   Introduction

2.1.

Article 3 of the Treaty on European Union states that the EU must promote sustainable, environmentally friendly growth. The need to act on climate issues has now become a top priority, including for the EESC, and is shaping the action of governments as well as economic actors, workers and individuals. Accordingly, a far-reaching economic, social and environmental transition needs to be organised; above all, it needs to be financed (12).

2.2.

The debate that has just started on the EU’s future multiannual financial framework for 2021-2027 must therefore include, across the board, matters linked to the issue of climate change and should centre on the priority goal of the transition to a more sustainable world.

2.3.

This transition would bring the necessary transformation in the labour market and could contribute to the creation of high-quality jobs in the framework of the European Pillar of Social Rights.

2.4.

Europe needs a new project to establish its added value and prove that it can provide a favourable environment for creating high-quality, well-paid jobs as well as a real and sustainable economy which benefits all.

2.5.

Europe can become part of the solution because it can stand out from other international economic actors if it tackles all three social, environmental and economic dimensions of sustainable development.

2.6.

Recent IMF and OECD studies criticised the way the 2008 crisis was managed in adopting economic measures that have forced individuals, businesses and governments to undertake budget cuts.

2.7.

More investment in innovation or R&D is necessary to address new socioeconomic challenges such as energy transition, the circular and collaborative economies, and automation and thus to prevent the decline of the quality of jobs.

2.8.

These financial and social crises have been compounded by a political crisis or in some countries by major political upheaval, and an ecological crisis.

2.9.

Tackling climate change is a necessity but also an opportunity to reform our economies, to promote a sustainable model for growth, to combat inequality more effectively and to strengthen democracy.

3.   The facts

3.1.

The EESC strongly supports the UN’s 2030 Agenda, which lays down a set of sustainable development goals to eradicate poverty, protect the planet, safeguard human rights and guarantee prosperity for all. The adoption of this programme marks a historic shift towards a new model that tackles economic, social and environmental disparities within a universal and integrated framework.

3.2.

By 2100 the Paris Agreement aims to limit global warming ‘to well below 2 oC above pre-industrial levels,’ and, if possible, to pursue efforts ‘to limit the temperature increase to 1,5 oC above pre-industrial levels’. However, according to the United Nations, our current trajectory will at best limit the increase in temperature to 3 oC (or more).

3.3.

Climate change has very high human and financial costs, due in particular to the increase in the number of natural disasters: heat waves and rising water levels have contributed to the deaths of eight million people worldwide since the beginning of the 20th century, at a cost of USD 7 000 billion dollars (13). We are also seeing an increase in the number of climate refugees (250 million by 2050). Accordingly, the weakest are also the first victims of climate change, which increases the inequalities. According to the IMF, ‘rising inequality poses risks to durable economic growth (14)’.

3.4.

In a business-as-usual scenario, the changes in climate expected by 2080 would make households across the EU EUR 190 billion worse off each year at constant prices (purely to meet the cost of insurance to cover climate damage), if no adaptation measures are taken (15).

3.5.

While there has been progress on the issue of financing the fight against global warming and its effects, it has not been enough. Political priority must be given to sustainable finance and a sustainable economy, in particular through a clear, stable and incentive-based policy framework, which should also encourage the implementation of innovative projects with high added value and which respect the environment.

3.6.

Even though Europe has yet to fully recover from the financial crisis of 2008, the IMF is already sounding the alarm and warning of the risk of a more serious and widespread crisis than that which took place in 2008 (16).

3.7.

According to P. Larrouturou and J. Jouzel, of the EUR 2 200 billion created by the European Central Bank since 2015, only 11 % has been pumped into the real economy, with 89 % fuelling speculation and a new financial bubble (17). In addition, the OECD points out that around 800 spending and tax-relief programmes that encourage the production or use of fossil fuels are being applied in the 35 OECD countries and six major emerging G20 economies (18), which profoundly contradicts the guidelines set out in the Paris Agreement.

3.8.

This kind of financing, regardless of whether they are the result of speculation or of funding allocation that conflicts with the EU’s objectives regarding combating climate change, has a high economic, social and environmental price tag for the whole of European society.

3.9.

The European Parliament notes that the multiannual financial framework for 2014-2020 has not been able to meet existing needs. Moreover, it has not responded to a series of crises and new challenges (including agriculture, youth employment, sustainable investment and the environment). This is why this future financial framework now needs to be used to meet the major challenge of tackling climate change and through it creating high-quality jobs.

4.   Opportunities

4.1.

The leading entrepreneurs are aware of the opportunities that climate change offers. Many believe that businesses should be part of the solution and note that, increasingly, companies that have seized the opportunities arising in low-carbon sectors are finding that it is paying off.

4.2.

For entrepreneurs, it is possible to create jobs and innovate while moving towards a prosperous but low-carbon economy (19), and at the same time generating profits. This is all the more important given that ‘zero carbon emissions’ should be achieved by the middle of the century if the objective of keeping global warming below 2 oC is to be met.

4.3.

A finance-climate pact must help change the need to respond to climate change into an opportunity to transform European industry and generate new enterprises. Substantial investments in the real economy and in research and development are therefore needed in order to create sustainable and high-quality jobs.

4.4.

The overall employment rate has increased in the European Union, while unemployment has decreased as a result of the recent economic upswing. Unfortunately, long-term unemployment and the increasingly unstable nature of employment, particularly for women, as well as youth unemployment, are still very worrying. The transition to sustainable development should allow dynamic and innovative enterprises to seize all opportunities available to them and help as far as possible to improve the unemployment situation.

4.5.

The European Union, together with the Member States, must therefore endeavour to develop a coordinated strategy for providing a favourable environment for creating sustainable and high-quality jobs. The Commission must explore the possibility of excluding from the calculation of debt (20) public investments which contribute to the creation of high-quality jobs and to a sustainable economy benefitting to all, enterprises and workers.

4.6.

The EU encourages cooperation between Member States. It supports and evaluates their efforts — mainly through the European Semester, guidelines on employment and the monitoring of national policies (Joint Employment Report, National Reform Programmes and country-specific recommendations). However, it must also align its own policies with the aims and objectives supporting shared prosperity for European entrepreneurs, workers and individuals.

4.7.

ADEME (21) estimates that climate change could lead to a net increase in jobs of five to six million by 2050, while the European Commission predicts that three million jobs could be created in the renewable energy sector by 2020.

4.8.

The BDI employers’ confederation in Germany has indicated that it can achieve an 80 % reduction in CO2 emissions by 2050, provided that it has EUR 50 billion available each year during the period in question.

4.9.

The number of jobs in the green economy is on the rise (4,2 million full-time equivalents in 2014 compared to 2,8 million in 2000). Some sectors are doing particularly well, including the renewable energy sector (1 million new jobs since 2000, or + 182 %) and the waste management sector (from 0,8 million jobs in 2000 to 1,1 million in 2014, or + 36 %).

4.10.

However, it is crucial that SMEs, as well as cooperatives and the smallest organisations present at all local levels, can also take part in sustainable projects and that funds are allocated to them as a priority. Steps must therefore be taken to ensure that access to finance is not an obstacle (22).

4.11.

In addition, it is important to adopt a multi-level approach and to involve all relevant actors, both public and private, so as to promote and integrate the initiatives, plans and actions of networks of regions, cities and municipalities involved in the fight against climate change and the implementation of the Paris Agreement, as stated by the CoR in a recent opinion (23).

4.12.

Lastly, the finance-climate pact, which requires full commitment and determination in both the public and private spheres, will need to take into account the support measures proposed by the Commission, such as taxonomy (classification), the obligation for institutional investors to mainstream ‘sustainability’, information for investors, recalibration of banks’ own funds, ensuring that businesses are more transparent when it comes to disclosing information, and EU labels (suggested by the European Parliament).

5.   The different sources of funding and actions to be undertaken

Redirection (green earmarking) and new sources of funding

5.1.

The European Commission and the European Court of Auditors, which refers to the same figures, agree that EUR 1 115 billion should be allocated each year to the fight against climate change and its effects.

5.2.

Two types of projects should be financed (24) with the EUR 1 115 billion for the period 2021-2030: — on the one hand, projects that generate a return on investment and which fall within the scope of the EIB and public development banks (25), private banks, pension and insurance funds or sovereign wealth funds; — on the other hand, projects that require public subsidies, to be financed by European contributions.

5.3.

Current financing must be reallocated in whole or in part to sustainable investments in order to ‘green’ the financial framework of the EU and channel the financial resources towards combating the effects of climate change. The funds concerned are as follows: — EIB loans: private banks could have investments that comply with the EU taxonomy (classification) financed by the EIB; — monetary creation by the ECB: pumping the money from quantitative easing into the real and sustainable economy: with 50 % of the annual quantitative easing, hundreds of billions of euros could be made available per year; — 40 % (instead of the current share of 20 %) of the European Fund for Strategic Investments (EIB and Commission) should be devoted to dealing with global warming and its effects, including the social and education-related dimensions thereof; — the EU must show a level of ambition that matches the challenge of the fight against climate change: an average 40 % of its budget must be allocated to this climate objective, especially the European Cohesion Fund, which devotes only 20 % of its means to this fight in the budget covering the 2014-2020 period; — in addition to this funding, 3 % of pension and insurance fund investments should be dedicated to the fight against global warming.

5.4.

A particular effort must be made in the area of research and development and professional training; EUR 100 billion a year must be set aside for this sole purpose. The Committee will make proposals in good time to decide which instrument(s) to use in order to supplement the current and future financing required for this purpose.

Measures to be undertaken

5.5.

Many financial instruments could be placed at the disposal of the fight against climate change, but funds will only be available if Europe has a coherent plan with a clear and long-term direction (26). This plan should take into account the following factors:

5.5.1.

A clear, stable and long-term policy framework, will need to be established. Security is crucial for planning and investment; nothing is more detrimental to the necessary level of involvement than the uncertainty created by constant policy changes.

5.5.2.

Since January 2018, the EIB has become the largest issuer of green bonds in the world. If we want to enable the EIB to grant loans on even better terms to developers of projects under the finance-climate pact, two measures could be adopted: — Firstly, the Juncker Plan would need to be extended to include a greater focus on this type of project, allowing the EIB to make use of the guarantee for the European Fund for Strategic Investments. — Secondly, the EIB could receive more funding from the ECB. The EIB already has access to the ECB’s asset purchase programme, but only to a very limited extent. However, given the amounts envisaged, the EIB would quickly run into difficulties with its capital ratio. It is therefore conceivable that the EIB could become the bank for sustainable development, mainly financing the energy transition, ecological mobility and innovation, and moving away from financing traditional projects which, for the time being, still account for the majority of its loans.

5.5.3.

The aim should be to identify the sectors for which these funds would be the most beneficial and have the best cost-benefit ratio for the environment, the public and the economy (energy, housing, agriculture, mobility, transport, recycling, water, etc.). Although there needs to be fair access to the network, it is important to take into account the fact that some sectors are sufficiently profitable and no longer require subsidies (such as the photovoltaic sector).

5.5.4.

The EIB’s work should be stepped up, not only in terms of volume, but also in terms of its capacity to take on more risk. For instance, the EIB would be more useful in the fight against climate change if it were to support emerging industries, however small, rather than allocating billions of euros to the conventional photovoltaic or wind sectors, which are already largely financed by the private sector.

5.5.5.

As the Commission proposes, all financing must fit into a common EU taxonomy (classification). The EESC, as the representative of civil society, should be involved in developing this classification.

5.5.6.

The circular economy model should be given priority as much as possible and its regulatory framework improved. The circular economy must serve to reduce, or ultimately even, to stop the extraction of natural resources, through the recycling of objects (only 3 % of mobile phones are recycled, while other objects are not recycled at all) and precious metals. These metals, such as cobalt or lithium, which are used to manufacture the products of the future, are only available in small quantities relative to future needs, for the electrification of vehicles and storage of electricity in general, with the production of these metals being disproportionate to emerging needs.

5.5.7.

Investments in the energy efficiency of buildings will also need to be encouraged. Buildings are responsible for 30 % of CO2 emissions (especially as there is a rapid return on investment). Furthermore, it will be necessary for power lines and pipelines to be fully interconnected in order to achieve an integrated European energy market, which is linked to Africa and the Middle East.

5.5.8.

In order to ensure a fair social transition, in accordance with the Paris Agreement and as advocated by the Jacques Delors Institute (27), part of the funding will need to be allocated to an adjustment fund for regions and workers affected by the sectors in transition. In this respect, a substantial part of the European Cohesion Fund earmarked for the regions should be allocated to climate objectives and their positive socioeconomic benefits. The Transition Adjustment Fund will also need to provide support measures for retraining workers. Likewise, it will need to anticipate changes instead of being subjected to them; some of its funds should therefore go towards innovation and R&D in priority sectors.

5.5.9.

In each free trade agreement, social and environmental clauses should be completed by a binding commitment to the Paris Agreement. (This would apply to all potential EU trading partners, since 195 of the 197 members of the UN have signed the Agreement).

5.5.10.

To highlight the utmost political importance of this action, the budgetary and financial means set aside in this manner should be enforced through a tool, making it possible to visualise, really and transparently, the funds that are concerned.

5.5.11.

Furthermore, and although this does not come directly under a European finance-climate fund, the EU must respect its international political commitments (2009 UN Climate Conference), which involves mobilising USD 100 billion per year to finance the fight against climate change in Africa and the Mediterranean region by 2020.

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(1)  https://www.theguardian.com/business/2018/oct/03/world-economy-at-risk-of-another-financial-crash-says-imf; IMF: Global Financial Stability Report October 2018

(2)  EESC opinion on the Multiannual Financial Framework, point 3.1.8 (adopted on 19.9.2018, not yet published in the Official Journal).

(3)  EESC, ECO Priorities for 2018 and beyond.

(4)  OECD, The Economic Consequences of Climate Change, 2.9.2016.

(5)  European Commission, Impact assessment accompanying the document ‘Proposal for a Directive of the European Parliament and of the Council amending Directive 2012/27/EU on Energy Efficiency’, SWD(2016) 405 final/2 of 6.12.2016, Table 22 (Scenario EUCO30 — Source: Primes model).

Court of Auditors, https://www.euractiv.fr/section/climat/news/la-cour-des-comptes-fustige-linefficacite-de-la-politique-climat-de-lue/.

(6)  M. Ciscar et al., Climate Impacts in Europe — The JRC PESETA II Project, 2014.

(7)  https://www.pacte-climat.eu/en/the-first-signatories-of-the-call/

(8)  EESC opinion on Investing in a smart, innovative and sustainable industry (OJ C 227, 28.6.2018, p. 70).

(9)  EESC opinion on the European Pillar of Social Rights (OJ C 125, 21.4.2017, p. 10).

(10)  EESC opinion on a Coalition to deliver commitments of the Paris Agreement (OJ C 389, 21.10.2016, p. 20).

(11)  Report of 4 May 2018 [2018/2007(INI)] on sustainable finance, rapporteur: Molly Scott Cato.

(12)  EESC opinion on the Action Plan on Sustainable Finance (see page 73 of this Official Journal).

(13)  Study by James Daniell, Karlsruhe Institute of Technology, April 2016.

(14)  https://blogs.imf.org/2017/02/22/the-imfs-work-on-inequality-bridging-research-and-reality/

(15)  M. Ciscar et al., Climate Impacts in Europe — The JRC PESETA II Project, 2014.

(16)  https://www.theguardian.com/business/2018/oct/03/world-economy-at-risk-of-another-financial-crash-says-imf; IMF: Global Financial Stability Report October 2018

(17)  Avoiding climate and financial chaos (P. Larrouturou and J. Jouzel, ed. Odile Jacob).

(18)  OECD Companion to the Inventory of Support Measures for Fossil Fuels 2015

(19)  Paul Polman, CEO of Unilever, and Jean-Pascal Tricoire, CEO of Schneider Electric and president of the Global Compact in France, at the Business & Climate Summit: http://www.businessclimatesummit.com/summit/2015/press-room

(20)  EESC opinion on Funding the European Pillar of Social Rights (OJ C 262, 25.7.2018, p. 1).

(21)  French Agency for the Environment and Energy Management.

(22)  EESC opinion on the Road from Paris (OJ C 487, 28.12.2016, p. 24).

(23)  CoR opinion on Climate finance: an essential tool for the implementation of the Paris Agreement (OJ C 54, 13.2.2018, p. 9).

(24)  According to Philippe Maystadt, former president of the EIB.

(25)  KfW in Germany, CDC in France, CDP in Italy, ICO in Spain.

(26)  Jeffrey Sachs, EESC hearing, 18 May 2018.

(27)  http://institutdelors.eu/wp-content/uploads/2018/01/Pactesocialtransitionénergétique-FernandesPellerinCarlin-janvier18.pdf

Opinion of the European Economic and Social Committee on ‘Strategic developments in industrial policy by 2030, with a view to strengthening the competitiveness and diversity of the industrial base in Europe and focusing on long-term performance within global value chains’

(exploratory opinion requested by the Austrian Presidency)

(2019/C 62/03)

Rapporteur:	Carlos TRIAS PINTÓ
Co-rapporteur:	Gerald KREUZER

Referral	Austrian Presidency of the Council, 12.2.2018
Legal basis	Article 304 of the Treaty on the Functioning of the European Union
Body responsible	Consultative Commission on Industrial Change (CCMI)
Adopted in CCMI	25.9.2018
Adopted at plenary	17.10.2018
Plenary session No	538
Outcome of vote (for/against/abstentions)	158/9/4

1.   Conclusions and recommendations

1.1.

Industrial policy should identify and enable opportunities for global sustainable and inclusive future growth. Nobody should be left behind.

1.2.

Europe must maintain its ambition to restore the share of industrial production to previous levels, fine-tuning this objective by means of key performance indicators. Europe’s industrial policy (between DGs, Member States, regions) needs to be improved, being part of complex cross-border value chains in an increasingly globalised market. A holistic approach is needed to reconcile growth, climate, environmental challenges and societal problems in a ‘just transition’ design, effectively connecting national and EU drivers.

1.3.

Europe rEUnaissance means a fully-fledged master plan for European industry, mainstreaming industrial policy across all EU policies, enabling industry to transform in order to make Europe the largest knowledge economy, generating industrial added value through creativity and smart design, social innovation and fostering new sustainable and inclusive industrial models (the Made in Europe brand).

1.4.

If EU climate and Circular Economy policies are to create jobs in Europe, it is crucial that the key parts of the value chain enabling those policies is located in Europe. Therefore, it is important that the EU Strategy recognises the importance of value chains and addresses ambitious measures to develop these further. Rather than focusing on individual sectors, the Strategy should ensure attractive operating conditions in Europe. To ensure Europe’s continued role in the global economy, the measure of success should be the potential of individual European value chain links to be integrated into global value chains, i.e. European suppliers should be able to compete globally and not just in Europe.

1.5.

Improvements in education and training for new jobs and services should also be closely interlinked with R+D+i policies and with the creation of work-based learning, extending Skills Agenda (1) to key industry sectors, such as construction, steel, paper, green technologies and renewable energies, manufacturing and maritime shipping.

1.6.

To ensure Europe’s technological leadership, the EESC also recommends stepping up investments in game changing and disruptive technologies such as artificial intelligence and robotics, the internet of Things, data analytics, 3D printing, new and nano- materials, enhanced virtual reality, bio-economy, sustainable food, digital technologies, neurotechnologies, nano-electronics, ocean and space exploration, etc.

1.7.

The 2021-2027 multiannual financial framework must make the most specific and detailed provision possible for the additional budget resources to be allocated to each individual sector, R+D+i and cohesion policies in particular.

1.8.

The EESC underlines that institutional governance should be enhanced, including in its impact assessment not only the economic, but also environmental and societal impact along the whole value chain.

1.9.

To make the whole industrial value chain more sustainable, the EESC firmly supports the Commission’s road map on financing sustainable growth (2), building a sustainable finance taxonomy that reorients responsible savings to sustainable investments, enhancing the European Strategic Investments (sound combination of the planned InvestEU Fund and private financial sources).

1.10.

The EESC is again strongly supporting the golden rule on public investment, not only in co-financing the strategic investment projects but also in all sustainable investment projects in relation to the positive progress of the unified EU classification system for sustainable activities (or taxonomy), to give new development opportunities to those European countries most punished by the crisis.

1.11.

Financing instruments: Creation of a level-playing field, provision of public funding for industrial scale projects (up to 75 % or more, if justified, of the investment cost), increased preferential loans and access to credit. Access to public grants for actions that focus on ‘de-risking’ intrinsically high-risk breakthrough projects.

1.12.

The most productive sectors (with the highest added value) are also those in which innovation is highest. In addition, those sectors which are subject to more stringent environmental regulation are also characterised by higher patenting levels, arguably as a result of regulatory pressure (3).

1.13.

A major driver of regulatory cost is the implementation of EU policies via Delegated or Implementing Acts. Technocratic compliance procedures without defining the most cost-effective ways to achieve the desired regulatory outcomes are slowing the innovation capacity of industry players, particularly SMEs.

1.14.

Sustainable development and competitiveness must go hand in hand. The EESC demands that products standards to set up in the EU have to be met by both domestic and foreign producers and are enforceable at the border. Therefore, imports of products that do not respect environmental and social rules mean that EU industrial sectors face serious barriers in responding to societal needs and demands with respect to sustainability.

1.15.

The EC should strictly monitor the proper implementation of EU Free Trade Agreements (FTAs), including simple and clear rules. Sustainability chapters in FTAs must promote implementation of ILO labour standards and the UN Principles on Business and Human Rights (4) establishing minimum cross-cutting conditions that cannot be substituted (rights of vulnerable people, good fiscal governance, etc.). Reciprocity in trade relations (e.g. investments, public procurement, subsidies) should be guaranteed.

1.16.

An enlarged social dialogue at different levels is necessary to properly analyse and provide joint responses to global value chains in sustainable companies in which workers have a voice.

1.17.

The EESC calls on the European Commission to establish industrial competitiveness and leadership as a top political priority and to initiate an EU Industrial Strategy Programme. It urges the Commission to publish an annual report on the results of the EU Industrial Strategy touching on all the Commission’s relevant policy fields.

2.   Megatrends — Only one world

2.1.

Today industry is facing a deep transformation regarding the huge scope of the digital transformation and low-carbon economy. Renewable energy will replace fossil fuels, data are becoming the new dominant raw material and the internet (of things) has become the most important way to communicate. Linear production models will give way to more circular production-consumption-recycling systems, while mass production will be replaced by customised production processes. A modern industry means production and innovation in a network of closely cooperating actors from large to small and medium-sized enterprises, extending up to linked services along the value chain. Knowledge has replaced labour or capital as the most important factor. Europe’s long-term industrial strategy has to integrate all these (disruptive) challenges, to enter a phase only paralleled in human history by the shift from the Palaeolithic to the Neolithic: the Infolithic (5).

2.2.

Most academic research warns that 20-50 % of jobs, according to the sector involved, will be replaced around 2030 by technologies and robotics (6). New jobs will however be created, although with greater disparity in terms of geography, sector and skills. The challenge facing European industrial policy is to prevent the EU, its regions and citizens from being excluded.

2.3.

The digital transformation is having an effect on all industry’s main resources: natural and environmental, labour and capital (physical, technological and institutional). To properly manage its social effects, a new valuation of the main resources or capital stocks from which the main income streams will flow, country by country and sector by sector, is needed.

2.4.

Large sections of Europe’s industry are more and more dependent on external exports or are part of complex cross-border value chains, in an increasingly globalised market. At the same time, the EU is confronted with the dissemination of ‘America First’-policies, resulting in a growing risk of trade wars from which there would be no winners, only losers. They are also a threat to the post-war multilateral economic order. Finally, there is the rise of centralised state-led economic models.

2.5.

A fair transition towards a more sustainable industry towards 2050 (7) requires Europe to face the following challenges: — Continued climate change and deteriorating environmental conditions — The depletion of the earth’s natural resources and biodiversity loss — The digitalisation of most industrial sectors will blur the borders between industries and between physical and the virtual world, open sectors to new entrants with a reduction of manual work as a consequence — Social inequalities, including growing polarisation on labour markets and youth unemployment, people left behind in regions with declining industries — Public loss of trust in government, the political establishment, and the EU and its governance structures, as well as other institutions — Demographic changes: ageing, migration, strong growth of the world population and new environmental awareness — Concentration of the population in megacities, with integration of infrastructure networks, artificial intelligence, machine and deep learning — Shift in consumer preferences (changing consumer behaviour, more environmental awareness, regulation of consumer behaviour by public authorities).

A long-term vision should simultaneously contemplate all these trends. Understanding the challenges and how to transform them into opportunities will be a major priority for Europe’s industrial policy. The complex design of the responses requires the involvement of all relevant stakeholders, with a shared responsibility. Its success depends on the efforts and cooperation of the EU institutions, Member States, regions and most importantly on the active role of industry itself.

3.   The transition: an EU committed to maintaining competitiveness through sustainability

3.1.

In order to tackle the multiple and unprecedented challenges industry has to face, Europe has opted to boost its competitiveness by enhancing the quality of its products and services, implementing a strategy of differentiation by regions and industrial sectors with the aim of generating growth and employment through the value added by creativity and smart design, social innovation and new sustainable and inclusive industrial models.

3.2.

Some encouraging indicators are already emerging in Europe, such as its 40 % share of world patents in renewable technologies. New and serious mismatches are however occurring between educational and training functions, business initiatives and the new skills needed by industry.

3.3.

Another major brake on industrial development across Europe can be explained by the fragmented nature of European Union policies, in both geographical and sectoral terms. Moving away from 28 different policies for each industrial sector towards a global focus for EU industrial policy requires synchronisation with measures to complete EMU (fiscal and banking union in particular), the development of a Europe-wide market for venture capital and the adoption of a sustainable financing model, ensuring balanced and harmonised growth throughout the European Union.

3.4.

Understanding whether increased green innovation is enhancing innovation in other sectors, and also its effects on industrial input prices, is an important step towards assessing the effects of environmental policy on countries’ competitiveness as well as to better planning environmental policy.

3.5.

It also requires a strong focus on the potential of SMEs in branches that provide high-level innovative knowledge-based services. Innovation in Europe typically often emerges from small sized structures and the export of high level knowledge based services has a pioneering role for the market positioning of related industries.

3.6.

If Europe is to win back leadership of the knowledge industry or of intangible capital, industrial cooperation and coordination between Member States is key when developing European innovation. The EESC wishes to stress the importance of Common European Interest, innovative public private partnerships and of regional cooperation throughout smart specialisation strategies.

4.   Global and holistic strategy

4.1.

Economies that are more intensely involved in global value chains (GVCs) are better at creating added value. The EU should consequently oppose neo-protectionism with greater determination, as it could aggravate the recent blockage in the growth of involvement in such chains.

4.2.

There is an opportunity to link global value chains with the local economic fabric, fostering the development of local economies, together with disruptive technologies (block chain, 3D printers, robotics, the internet of Things, energy storage, renewable energy, big data, genetic biology, nanotechnology, etc.), with an inclusive focus: they can also pave the way for local production with lower-cost inputs, especially if the prosumer profile is adopted (and well-regulated), promoting the development of productive and inclusive micro-businesses, in complementarity with the major global value chains.

4.3.

The new paradigm of sustainability as a factor for competitiveness, geared to a long-term approach, aims to mobilise, align and secure sufficient public and private resources to achieve the objectives set out in the EU’s policies. Providing sufficient resources is crucial to ensuring fair, balanced and inclusive transformation, in which no-one is left behind or excluded from the playing field and in which public interests such as consumer protection, health, safety and quality remain high priorities.

4.4.

European industry’s sectoral initiatives and alliances to shape the New Skills Agenda and compile a catalogue of well-structured initiatives to strengthen or adjust existing programmes (Erasmus+ the New European Agenda for Culture, etc.) and implement new ones must reach the EU-27 as a whole as soon as possible, ensuring geographical diversity and the close involvement of local authorities.

4.5.

At the same time, the EESC strongly backs the push for multistakeholder dialogue forums, the joint development of innovative strategies and pilot schemes of illustrative value, joint experimentation, exchange of best practice and a willingness to follow up and evaluate projects in detail. It also points out that all actors in the industrial value chain must be brought in, as must consumers. The High-Level Industrial Roundtable, the High Level Group for Energy-Intensive Industries and the High-Level Group on Competitiveness and Growth should be mentioned in this regard.

4.6.

It is essential to improve the EU’s capacity to invest and to close the gap between the formulation of sector policies and the financial investment made, by increasing allocations to the EFSI 2.0 and the investment-related structural funds in order to reach regions and populations that have fallen behind during the years of crisis, and channelling the EU’s recent external surplus and that of the public authorities into investment that modernises our industrial infrastructure and thus contributes to an increase in productivity and economic growth.

5.   Institutional EU industry governance

5.1.

Long-term EU action plans (EU2020, climate plans, etc.) should be mirrored by industrial action plans. Creating synergies between different policy initiatives (circular economy, innovation, transport policy, trade, skills, regional policy) would definitively contribute to maximising their impact.

5.2.

Transparency is a decisive factor in ensuring the success of this process. Industry as a whole must ‘act and communicate’ by providing high-quality information (relevant, verifiable and comparable) to allow precise measurement of financial and non-financial impacts throughout a product’s global value chain.

5.3.

The Sustainable Development Goals (17 SDGs and 169 related targets) and the Paris agreement on climate change serve as a pointer towards the common good, but there is an urgent need to adapt and extend indicators by means of a common methodology combining quantitative and qualitative parameters and monetising externalities. The new set of indicators must include those touching on the global value change dimension, reflecting the EU’s values.

5.4.

The EESC calls for codes of conduct to be introduced for the internationalised segments of the European product or service value chain, as is the case of sustainable food, many of which remain beyond legal governance. It also calls for closer market surveillance and for the introduction of deterrents or penalties for practices harmful to sustainability, such as planned obsolescence.

5.5.

Strengthened Responsible Research and Innovation as part of a bottom-up approach. More accurate prediction of specific sectors, region by region, and matching of investment with the EU’s strategic objectives for 2030 and perspectives for 2050 (8). The EU should also guarantee that the first application of publicly-funded R & D must take place inside the EU. The 3 % -objective for R & D investments — should finally be achieved (currently only 1,9 %, lower than China’s 2,2 %). Disruptive technologies need to be accompanied by roadmaps that address the challenges and conditions related to their uptake (including the economic, regulatory and social impact).

5.6.

The 2021-2027 multiannual financial framework must make the most specific and detailed provision or the additional budget resources to be allocated to each individual sector, R+D+i and cohesion policies in particular. Public support should be increased at all stages of the innovation cycle, including support to start-ups, demonstrators and pilots, collaborative RTD projects, technology diffusion, etc.

5.7.

The EU capital markets union and industrial development should allow public and private savings to be mobilised via secure pathways ranging from socially responsible investment (SRI) to corporate social responsibility (CSR). EMAS certification could also optimise and balance financial yields with vectors for sustainability.

5.8.

A fair policy transition by 2030 means not only innovating for the people and investing in jobs for the workers but also innovating with the people and with the workers, getting them into decent new jobs. In this regard, The EESC underlines that manufacturing must remain technology-neutral.

6.   Gaining ambition in the action plan for European industry

6.1.

Building a learning society is a basic condition for innovative and competitive industry. Europe cannot compete with emerging economies on the basis of wages; it has to be smarter. Skills are also key for employees not only to increase their employability but also for job security, social integration and better opportunities in life, investing in the permanent up- and re-skilling of workers, the promotion of quality education, training and professional development throughout the working life. A more ambitious ‘New skills agenda for Europe’ is needed, reviewing the European Key Competences Framework for assuring that people acquire the knowledge and skills that industry requires to strengthen Europe’s economy resilience as well as promoting sustainable development (target 4 of the UN SDGs).

6.2.

Improved knowledge transfer mechanisms between university + research centres and industrial sectors + their employees.

6.3.

Quite often SMEs are the pioneers in the development of high-level innovative goods and services, but they often lack the means to bring these innovations to a larger market. In line with the 2030 EU industrial policy priorities, an extensive range of possible stimuli and benefits harnessing the strength of the rewards-based pan-European public framework is needed, especially geared to SMEs, but also including the liberal professions as pioneers in provision and export of innovative high-level knowledge-based services: — Strategic public procurement is an important lever of industrial policy. Its potential should be fully exploited by integrating innovative, green and social criteria in public tenders instead of just looking for the lowest price. The EU should support authorities in this respect by giving guidance, setting up a helpdesk, supporting the planning of large infrastructure projects, and enhancing the exchange of best practices — Support for internationalisation — A sandbox for multistakeholder experimentation, support for prior validation of innovation solutions — Clustering (sectoral, horizontal and vertical) and start-up incubators, boosting links between industrial actors in order to share and exchange resources — Specialised, high added value mentoring, regular meetings between start-ups and established businesses in the sector to liaise on plans and initiatives — Tax benefits and public guarantees to support investments — etc.

6.4.

Stimulating knowledge and consolidation of the new sustainable economic models (9) boosting social innovation (new people-centred ways of meeting society’s needs) as a result of applying emerging methods.

6.5.

Special attention has to be given to less developed and industrial transition regions. Local development agencies and the range of tools they have must serve as motors for the creation of ‘microclimates’ or ‘ecosystems’ that bring together and catalyse the growing synergies between manufacturing and services, starting with the needs of individual people and of areas.

6.6.

The role of international trade is crucial to meet the challenges of sustainable industry. Review and improvement of preferential free trade treaties and agreements (from GATT to TTIP), introducing a degree of conditionality tied to sustainability commitments. Establishing red lines: legal and fiscal governance, resolution of off shore differences, minimum social and environmental thresholds. Reciprocity in trade relations (e.g. investments, public procurement, subsidies) should be guaranteed.

6.7.

Creation of a sectoral agenda for balanced management of the transition towards a low-carbon circular economy: setting sector and geographical area targets, introducing roadmaps reflecting real circumstances, the impact of the cost of energy and other inputs.

6.8.

Upgrading industry for the digital age will transform European industry into a highly information- and knowledge-intensive manufacturing system Therefore the EESC wishes to stress the following priorities: — Full promotion of the use of information technologies in tackling societal challenges — Developing an EU-wide ‘high performance’ digital infrastructure — Address the large disparities in digitisation that exist between regions and between large and small companies — Accelerate the development of ICT standards — Address the social dimension of digitisation: impact on quality and quantity of jobs, regulating the sharing economy to prevent unfair competition — Digital intelligence should be increased at all professional levels; digital skills should be promoted at all levels of education (from school to lifelong learning) — Defining new rules for taxing the digital economy — Ensuring cyber security.

6.9.

Secure, sufficient and sustainable energy are key priorities for industry and society. Renewable power needs to be available at a competitive price. This will also require huge investments in smart grids and interconnectivity as well as in breakthrough technologies in energy storage. Smart Carbon Usage will also help reuse the waste carbon and hydrogen, which is currently burnt, to generate power, to produce synthetic fuels and chemicals. The use of these products could significantly accelerate overall. CO2 reduction in the combined steel/chemicals/transport sector. These synthetic fuels or feedstocks should be promoted in the Renewable Energy Directive.

6.10.

The EESC wishes to stress the importance of Action plans for sectors and value chains with a strong growth potential, for the structural upgrading of traditional industries, and for supporting decarbonisation in the energy-intensive industries.

6.11.

Industrial policy will have to pay special attention to the transport sector which is on the brink of a completely new paradigm as many technological disruptions are taking place at the same time: electrification, digitalisation of production, connected and automated cars, integration of private and collective transport.

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(1)  Ongoing implementation of the Blueprint for Sectoral Cooperation on Skills.

(2)  COM(2018) 97 final.

(3)  ftp://ftp.unibocconi.it/pub/RePEc/bcu/papers/iefewp69.pdf

(4)  European Parliament resolution of 4 October 2018 on ‘the EU’s input to a UN Binding Instrument on transnational corporations and other business enterprises with transnational characteristics with respect to human rights (2018/2763(RSP)’ http://www.europarl.europa.eu/sides/getDoc.do?type=TA&reference=P8-TA-2018-0382&format=XML&language=EN

(5)  ‘Lithic’: from ‘lysis’, to break down (see ‘electro-lysis’), to distribute. Distributed information.

(6)  Acemoglu, D. and P. Restrepo (2017), ‘Robots and jobs: evidence from US labour markets’, NBER Working Paper no. 23285. Arntz, M. T. Gregory and U. Zierahn (2016), ‘The risk of automation for jobs in OECD countries: a comparative analysis’, OECD Social, Employment and Migration Working Papers No 189.

(7)  See SC/047 OJ C 81 of 2.3.2018, p. 44.

(8)  As set out in EESC opinion SC/047 OJ C 81, 2.3.2018, p. 44.

(9)  See EESC exploratory opinion SC/048. OJ C 81, 2.3.2018, p. 57.

Opinion of the European Economic and Social Committee on (a) Proposal for a Directive of the European Parliament and of the Council amending Directive (EU) 2017/1132 as regards the use of digital tools and processes in company law

(COM(2018) 239 final — 2018/0113 (COD))

and on (b) Proposal for a Directive amending Directive (EU) 2017/1132 as regards cross-border conversions, mergers and divisions

(COM(2018) 241 final — 2018/0114 (COD))

(2019/C 62/04)

Rapporteur:	Dimitris DIMITRIADIS
Co-rapporteur:	Norbert KLUGE

Referral	(a) European Parliament, 28.5.2018 (a) Council, 30.5.2018 (b) European Parliament, 28.5.2018 (b) Council, 29.5.2018
Legal basis	(a) Article 50(1) and points (b), (c), (f) and (g) of Article 50(2) of the TFEU (b) Article 50(1) and (2) TFEU
Section responsible	Section for the Single Market, Production and Consumption
Adopted in section	2.10.2018
Adopted at plenary	17.10.2018
Plenary session No	538
Outcome of vote (for/against/abstentions)	190/2/1

1.   Conclusions and recommendations

1.1.

The European Economic and Social Committee (EESC) welcomes the Commission’s proposals, which constitute a comprehensive approach aiming to balance and protect the legitimate interests and needs of all stakeholders, SMEs, minority shareholders, creditors and employees.

1.2.

At the same time, the objective of a Single Market without internal borders for companies must be reconciled with other objectives of European integration such as social protection embedded in Art. 3 (3) TEU, Art. 9 and 151 TFEU, the European Pillar of Social Rights. The EESC is of the opinion that the recent legal proposal on company mobility builds a good opportunity to initiate a further debate about the requirements and efficiency of European company law in the digital age. Thereby, the perspectives of all stakeholders should be viewed, such as employees and the society as a whole. This makes the desired development towards creating sustainable companies as a competitive advantage of the EU.

1.3.

The EESC supports the proposals that enhance the international competitiveness of SMEs, reduce cost, harmonise and simplify processes for registration, filing of company changes and conversions. It believes that guidance by the Commission to the Member States on transposition of the directives is useful.

1.4.

The EESC is against loopholes enabling letter box companies to abuse legislation for fraud, tax evasion, money laundering, reduction of labour standards or social protection and increasing unfair competition. It urges the authorities involved to detect and punish fraudulent practices. The EESC supports the limitation of choice of the Member State of registration to the one with which the company has a genuine link.

1.5.

The EESC supports transparency, security and legal certainty. It emphasises the significance of efficient identity verification, which must be compulsory for the formation of companies and in any event should take place prior to their registration. Member States should fully comply with the EU standards or apply equivalent standards for efficient identity verification and reliable information to include full standards for beneficial ownership.

1.6.

The EESC believes that the submission of scanned copies of passports, ID cards or power of attorney should not be acceptable and will undermine legal certainty. Power of attorney forms should be public documents and should be properly checked before filing information. Legal persons registered in the national registries should use online registration and filing tools, if they are represented by their legal representative, who is a natural person and not a holding company.

1.7.

The EESC welcomes the ‘once-only principle’, so that SMEs will avoid multiple registration and multiple official publications while at the same time national registers ensure the reliability and trustworthiness of documents and information they publish.

1.8.

The EESC stresses the importance of the cost factor for micro SMEs and SMEs, since they have neither the capacity nor the necessary instruments to cope with the digital society. Easy registration and cross-border mobility will assist them to fully benefit from the Digital Single Market and alleviate their administrative burden. The EESC supports the initiative that documents and information issued by business registers should be equivalent to ‘true copies’. However, the actual administrative costs to be paid at the commercial register should be made transparent, reasonable and should not affect accessibility.

1.9.

The EESC believes that there should be free and easy cross-border access to business registers in order to confirm company information, e.g. for disqualification of its directors, to allow the control of company information and to reduce cross-border fraud.

1.10.

The EESC appreciates that the proposal of the Commission expressly recognises the role the notary plays in many Member States in ensuring legal certainty, providing legal advice and preventing fraud and abuse in an increasingly digitalised economic environment. The EESC believes in particular that the prevention of fraud and abuse does not hinder economic activity but, on the contrary, is a pre-condition for a fair and transparent EU Single Market in which micro SMEs have equal opportunities and can compete for customers in a fair and enabling environment by offering the best products and services to the benefit of all market participants.

1.11.

The EESC supports the Commission’s proposal to facilitate cross-border mobility of companies, which sets clear conditions through secondary legislation. However, as the Court of Justice of the European Union has emphasised in its case law, it should be made clear that the purpose of a company to enjoy the benefit of a more favourable legislation does not, in itself, constitute abuse of the freedom of establishment. Company mobility will facilitate employment in the EU as a whole. However, the detrimental effects of a conversion, division or merger on local and regional labour markets should be taken into account as well.

1.12.

The EESC suggests that the Commission pays attention to the divergences between cross- border merger Directive 2005/56/EC and the proposed procedures on cross-border conversions and divisions with a view to possible consequences for their effectiveness and attractiveness.

1.13.

The EESC believes that the new procedure for the transfer of company seat (cross-border conversion) will establish legal certainty through its ex-ante control in the Member State of origin and in the Member State of destination, which, in the latter case, should be limited to review its requirements for the connection of a converted company to its national legal order. It also believes that a general clause against abuse of the right of establishment would be useful.

1.14.

The EESC supports the Commission’s proposal in taking into account the fact that conversions, mergers and divisions can be used fraudulently; however, it remains unclear what an ‘artificial arrangement’ is. Therefore, the EESC suggests that in order to elucidate the expression ‘artificial arrangement’ it is necessary that criteria or indicators are established which point out fraudulent practices or undue tax advantages which hinder legal certainty, fair competition and social protection.

1.15.

The EESC welcomes the exemption of small and micro-companies from an evaluation by an independent expert, since the cost for an independent expert report would overburden them. It believes that this report should be only for large companies wishing to engage in cross-border conversions, divisions or mergers.

1.16.

The EESC welcomes the intention of the Commission to protect existing workers’ participation rights. However, it would like to see the role of European Works Councils enhanced in the event of large company transformations according to Directive 2009/38/EC.

1.17.

The EESC welcomes the introduction of harmonised rules for the protection of minority shareholders and creditors, which did not exist in Directive 2005/56/EC.

1.18.

The EESC stresses the need for all digital tools and processes for the purposes of these proposals to be fully accessible, especially to people with visual disabilities.

2.   The Commission proposals

2.1.

The Commission has put forward a comprehensive set of measures (1), (2) for fair, enabling and modern company law rules in the EU.

2.2.

Currently EU company law (3) includes certain elements of digitalisation, such as the obligation for Member States to make available online information about limited liability companies. However, these requirements are limited and lack precision, leading to a very diverse implementation at national level.

2.3.

The proposal (4) aims to provide more digital solutions for companies in the Single Market and more equal opportunities for companies in the EU while ensuring that Members States have the necessary flexibility to adjust their national systems and to maintain their legal traditions. They should enable and promote the use of digital tools and processes in company law without disruption, allowing Member States to transfer their existing systems of ex-ante control into the digital age.

2.4.

The overall objective of this proposal is to ensure the smooth functioning of the Single Market for the whole duration of a company’s life-cycle when interacting with authorities concerning company and branch registration and filing of information, covering the entire EU territory.

2.5.

The freedom of establishment plays a crucial role in the development of the Single Market as it allows corporate entities to pursue economic activities in other Member States on a stable basis. In practice, the exercise of this freedom by companies remains difficult, in particular for SMEs, as recognised by the 2015 Single Market Strategy (5). However, the legal uncertainty, partial inadequacy and also the lack of rules governing certain cross-border operations of companies means that there is no clear framework to ensure effective protection of these stakeholders.

2.6.

A cross-border conversion offers an efficient solution for companies to move to another Member State without losing their legal personality or having to re-negotiate their business contracts. The Court of Justice of the European Union (ECJ) has considered that the freedom of establishment enshrined in Article 49 TFEU entails the right, for companies established in a Member State, to transfer their seat to another Member State through a cross-border conversion without losing their legal personality (6). In its recent Polbud (7) judgment, the ECJ confirmed the right of companies to carry out cross-border conversions on the basis of the freedom of establishment.

2.7.

In line with the ECJ rulings (8), the main objectives of the harmonised rules for cross-border conversions (9) are two-fold: — enabling companies, particularly micro and small, to convert cross-border in an orderly, efficient and effective manner; — protecting the most affected stakeholders such as employees, creditors and shareholders in a suitable and proportionate manner.

2.8.

The proposal also provides harmonised rules for protection of creditors and shareholders. The company would need to provide the envisaged protection of creditors and shareholders in the draft terms of the cross-border conversion. The rules also complement recent initiatives to strengthen the rules on posted workers and the fight against tax evasion and fraud as well as the Commission’s proposal on a European Labour Authority.

3.   General comments

3.1.

Directive (EU) 2017/1132 of the European Parliament and of the Council (10) codifies existing directives on EU company law. The directive entered into force on 20 July 2017 and before a year had passed, the European Commission submitted new proposals for the modernisation of EU company law.

3.2.

The EESC welcomes these initiatives of the European Commission, as well as the common agreement between the European institutions and the Member States that digitalisation must proceed in order to fulfil the 2015 Digital Single Market Strategy (11) and the 2016 e-Government Action Plan (12).

3.3.

The European Commission’s proposals to amend Directive (EU) 2017/1132 take the necessary steps to put EU companies on a par with the companies of other industrialised states with a strong digital tradition, like the US, Canada, and Australia. Companies need to operate in a certain legal and administrative environment which is adapted to face the new economic and social challenges of a globalised and digital world, while also pursuing other legitimate public interests such as the protection of employees, creditors and minority shareholders and providing authorities with all necessary safeguards to combat fraud or abuse, such as the transfer of fiscal data in the framework of administrative cooperation (13), and to ensure the reliability and trustworthiness of documents and information contained within national registers.

3.4.

However, certain amendments must be made in order to alleviate the administrative burden and cost for the implementation of the proposed initiatives for micro or small and medium-sized enterprises.

3.5.   Proposal for a Directive of the European Parliament and of the Council amending Directive (EU) 2017/1132 as regards the use of digital tools and processes in company law — COM (2018) 239 final

3.5.1.

The EESC welcomes this legislative proposal (14) to ensure the smooth functioning of the EU Single Market for the whole duration of a company’s life-cycle when interacting with authorities concerning company and branch registration and filing of information.

3.5.2.

The EESC considers that digitalisation of company law is a tool for honest, transparent and efficient processes. It is not an end in itself but must serve the interests of businesses, in particular micro SMEs. Therefore, the legislative proposal on the use of digital tools and processes in company law should implement the aforementioned key features of a modern EU company law in the digital age, namely legal certainty and prevention of abuse, reliable information to include full standards for beneficial ownership, preventive controls and transparent corporate structures through reliable business registers. Only under these conditions can the full potential of digitalisation be tapped and micro SMEs benefit from a ‘digital level playing field’ in order to create growth and jobs in the EU.

3.5.3.

The EESC welcomes the recognition and proposed elimination by the European Commission of the existence of obstacles creating unnecessary administrative burden and cost to entrepreneurs who wish to set up a new business or to expand their business by registering their branches. The obstacles to be removed are: (a) Online company or branch registration is allowed, prohibited or imposed by national law causing a diversified picture, which is complex for SMEs (15). (b) Multiple publication of company data and filing of branch accounts in national gazettes in many Member States, where branches exist. (c) Diversified conditions under which third parties (investors, citizens, other companies) access company information in the national registers (which information is supplied free of charge and which under payment).

3.5.4.

The EESC considers that furthering digitalisation is very important since: (a) Online registration processes are generally cheaper, quicker and more efficient than those where the applications are made in person and on paper (16). (b) The initiative is fully coherent with and will build on existing digital elements of EU company law, in particular on the Business Registers Interconnection System (BRIS), which is based on legal obligations set out by Directive 2012/17/EU (17) and the Commission Implementing Regulation (EU) 2015/884 (18). (c) The current proposal will complement the Commission Proposal for a Regulation on the establishment of a Single Digital Gateway, which covers the online general registration of business activity except for the constitution of limited liability companies. This proposal constitutes a ‘lex specialis’ in relation to the Single Digital Gateway (19).

3.5.5.

Concerns about fraud or abuse, especially with letterbox companies, should not hinder support for the proposal for various reasons. These concerns are left to the Member States to address by regulating the conditions under which companies are set up, including mandatory judicial, notarial and/or administrative control of the company statutes (20). The European Union has already adopted a number of measures to counteract corporate tax avoidance with the mandatory disclosure by intermediaries for tax planning schemes, the transfer of fiscal data in the framework of administrative cooperation (21), as well as the mandatory recognition of e-IDAS compliant electronic identification means of Union citizens issued in another Member State.

3.5.6.

The EESC supports, as an ultimate safeguard to avoid fraud, the provision that allows Member States to require the physical presence of relevant persons before a competent authority but only where justified by an overriding reason of public interest. The EESC believes that this digital procedure should not be used by holding companies or in the case of representatives with power of attorney that could disguise the actual interested party and cautions against ‘identity theft’.

3.5.7.

The EESC appreciates that the proposal of the European Commission expressly recognises the role the notary plays in many Member States in ensuring legal certainty, providing legal advice and preventing fraud and abuse in an increasingly digitalised economic environment. The EESC believes in particular that the prevention of fraud and abuse does not hinder economic activity but, on the contrary, is a pre-condition for a fair and transparent EU Single Market in which micro SMEs have equal opportunities and can compete for customers in a fair and enabling environment by offering the best products and services to the benefit of all market participants.

To ensure legal certainty and avoid fraud, Member States should be allowed to provide for preventive controls by competent authorities and/or notaries throughout the entire lifecycle of companies, including where templates are used, provided that the procedure may be carried out fully online. Online submission of documents and the automatic exchange of extracts from the business registers shall not affect the requirements according to the national law in the registration State as to the form and accuracy of the submitted documents.

3.5.8.

The EESC therefore welcomes the European Commission’s proposal to facilitate digitalisation in company law based on the ‘once only’ principle, which will work on the basis of mutual trust between Member States still applying their national requirements for the formation of a company.

3.6.   Proposal for a Directive of the European Parliament and of the Council amending Directive (EU) 2017/1132 as regards cross-border conversions, mergers and divisions — COM(2018) 241 final

3.6.1.

The proposal aims to establish clear rules and adjust company law to cross-border mobility of companies in the EU. The proposal strikes a careful balance between, on the one hand, specific rules and procedures on cross-border company operations that aim to exploit the potential of the Single Market and, on the other hand, the protection against abuse of all stakeholders affected by company affairs, namely employees, creditors and minority shareholders.

3.6.2.

The EESC supports the EU cross-border conversions (22) and the incorporation by the Commission in its proposal of the judgment by the Court of Justice of the EU issued in 2017 on the Polbud case (23). In Polbud, the Court ruled that a national rule which imposes mandatory liquidation as a prerequisite of cross-border transfer of a company is an unjustified and disproportionate restriction and thus incompatible with the freedom of establishment. The general obligation to implement a liquidation procedure imposed by the State amounts to establishing a general presumption of the existence of abuse; such legislation is therefore disproportionate. The transfer of the registered office of such a company, when there is no change in the location of its real head office, falls within the scope of the freedom of establishment protected by EU law. Therefore the ECJ reconfirmed the right of companies to transfer only their registered office, without the real head office, from one Member State to another, even though that company conducts its main, if not entire, business in the first Member State. The purpose of Polbud to enjoy the benefit of a more favourable legislation does not, in itself, constitute abuse of the freedom of establishment.

3.6.3.

The EESC supports in principle the establishment of a procedure for making such conversions possible and the adoption of substantive conditions in order to stop the legal uncertainty of diversified national rules which negatively affects companies, stakeholders and Member States. National laws, where they exist, are often incompatible or difficult to combine with one other. Moreover, more than half of the Member States do not allow cross-border conversions. SMEs are in particular negatively impacted since they often lack resources to perform cross-border procedures through costly and complicated alternative methods.

3.6.4.

The procedure begins with the competent authority of the departure Member State, which issues a pre-conversion certificate in one month; or, in the event of concerns, the authority proceeds with an in-depth examination for one more month. The procedure ends when the destination Member State, which in the light of all relevant facts and information registers the converted company, if the company fulfils its legislation on registration and workers’ protection. Communication between competent authorities will be facilitated through the system of interconnection of business registers (BRIS). Concerns about worker participation are addressed through their right to be informed and consulted in due time by the company. Protection of workers may also be confirmed by the authority of the destination Member State. An important role is played by the European Works Councils.

3.6.5.

The EESC would like to express its reservations about whether a lengthy and costly procedure fulfils the criteria regarding the exercise of the freedom of establishment in another Member State and is compatible with the judgment of the Court of Justice of the EU in Case C-106/16, Polbud. It is important to emphasise that the Court interpreted Article 54 of the Treaty of the Functioning of the EU and applied the general principle of proportionality. Thus the right of a company for cross-border conversion derives from the Treaty itself and the Member States (and the EU institutions) must be careful not to infringe it. Therefore the EESC supports the procedure for the transfer of company seat (cross-border conversion) in the departure Member State but recommends that the procedure in the destination Member State (Article 86p) be limited to an ex-ante control of its requirements for the connection of a converted company to its national legal order (24). There should be, however, a general clause against abuse of the right of establishment of the company. In this way the new procedure will not impose unnecessary burdens beyond its stated aims and at the same time will give the authority to the destination Member State to control abuse even after the conversion.

3.6.6.

In addition, clarification is needed on the concept of ‘artificial arrangements’ of a company in a Member State in order to obtain undue tax advantages. This is a concept elaborated mostly by the Court of Justice of the European Union and is included in Recitals and Article 86(c)(3). It is a key concept that will allow or prohibit the freedom of establishment of a company in another Member State. Clear criteria or indicators must be set so that genuine economic activity based on sound economic decisions should not be obstructed according to the Polbud case of the Court of Justice of the European Union.

3.6.7.

Cross-border mergers (25): Τhe proposal builds on the positive experience with Directive 2005/56/EC (26) on cross-border mergers, which deals only with limited liability companies, and addresses its shortcomings. The proposal therefore introduces harmonised substantive rules on protection of creditors and shareholders, while Directive 2005/56/EC provided only for procedural rules, e.g. for the obligation to inform the shareholders, leaving to the Member States the substantive protection. The proposal newly requests that the draft merger terms specify: — Safeguards for creditors: The proposal introduces the presumption that there is no prejudice if creditors are to be paid by a guarantor or by the resulting company, ascertained by an independent expert assessment of their situation. — The right to exit for shareholders who did not vote or have no voting rights and the right to receive adequate compensation and their right to challenge the proposed share-exchange ratio to national courts.

3.6.8.

The EESC also agrees with other elements of the Commission proposal: (a) Harmonised rules on employee information in a specific and comprehensive way about the implications of cross-border mergers, while Directive 2005/56/EC provided only for participation on the board and their situation to be reflected in the management report. (b) Harmonised rules for a fast track procedure for less complex mergers or waiver of an independent expert report upon agreement of all shareholders or during a merger of a parent company with a subsidiary. (c) Interconnection of business registers for exchange of information — use of digital tools.

3.6.9.

Cross-border divisions (27): These are subject to diverse or incompatible national rules in only 13 Member States, without any EU harmonisation despite their importance for growth. In order to prevent abuse and protect stakeholders an EU legal framework must be introduced for limited liability companies, similar to cross-border conversions. A two stage procedure must be established. In the first stage the division terms are drafted together with two fully explained reports, on the implications of the division to creditors and to employees. In addition, an independent expert report is needed for medium and large enterprises. This is only a first step and the EESC believes that the proposal should also cover cross-border division by acquisition of assets/liabilities of existing company/-ies, and not only the case where new companies are created.

3.6.10.

Currently, national rules differ greatly between Member States and sometimes impose excessive administrative procedures which the Commission needs to mitigate throughout the new proposal in order not to discourage businesses from pursuing new opportunities. Though the EESC is in support of the new rules and procedures, these must however be carefully scrutinised so that they will not incur extra administrative burden and cost, which goes beyond the goals they serve on protection of employees, creditors and shareholders.

3.6.11.

The EESC welcomes the exemption of small and micro-companies in Article 86(g) of the proposal from an examination by the independent expert, since the cost for an independent expert report would overburden micro and small and medium-sized enterprises.

3.6.12.

The EESC wants to emphasise the role of independent experts in revealing fraud only in large companies during the examination and collection of the company documents in a written report, provided that certain requirements are fulfilled, e.g. for an effective internal control structure and standard operating procedures to prevent and mitigate possible conflicts of interest and to ensure the independence of reports regarding stakeholders.

3.6.13.

The EESC strongly supports the proposal of the European Commission which establishes for the first time the procedure for cross-border conversion and complements the already established procedures of cross-border mergers and divisions by enhancing protection of the stakeholders. However, the resulting differences between the procedures of the cross-border merger on the one hand and the cross-border conversion and division on the other may affect the relative attractiveness of the latter. The EESC suggests that the Commission analyses these effects.

3.6.14.

The EESC welcomes the intention of the Commission to protect existing workers’ participation rights. The EESC believes that in the company resulting from a cross border conversion, at least, the same level of all elements of employee participation as laid down in the law of the departure Member State must continue to apply, along the lines of the procedure and the standard rules provided for in Directive 2001/86/EC (28).

3.6.15.

The EESC emphasises the signifant role played by European Works Councils set up in large size companies to be transformed and requests their enhanced involvement, according to Directive 2009/38/EC (29).

3.7.

As a general remark, the EESC stresses the need for all digital tools and processes for the purposes of these proposals to be fully accessible to people with disabilities, and especially to those with visual disabilities.

---

(1)  COM(2018) 239 final,

(2)  COM(2018) 241 final

(3)  Directive (EU) 2017/1132 of the European Parliament and of the Council of 14 June 2017 relating to certain aspects of company law (OJ L 169, 30.6.2017, p. 46).

(4)  COM(2018) 239 final.

(5)  COM(2015) 550 final.

(6)  Cartesio, C-210/06, EU:C:2008:723, paragraphs 109 to 112; VALE, C-378/10, EU:C:2012:440, paragraph 32.

(7)  Polbud — Wykonawstwo, Case C-106/16, ECLI:EU:C:2017:804.

(8)  Please see footnotes 6 and 7.

(9)  COM(2018) 241 final.

(10)  OJ L 169, 30.6.2017, p. 46.

(11)  COM(2015) 192 final.

(12)  COM(2016) 179 final.

(13)  Council Directive 2011/16/EU of 15 February 2011 on administrative cooperation in the field of taxation and repealing Directive 77/799/EEC (OJ L 64, 11.3.2011, p. 1).

(14)  COM(2018) 239 final.

(15)  COM(2018) 241, p. 3.

(16)  COM(2018) 241, p. 5.

(17)  OJ L 156, 16.6.2012, p. 1.

(18)  OJ L 144, 10.6.2015, p. 1.

(19)  COM(2017) 256 final.

(20)  Article 10 of the codified company law Directive (EU) 2017/1132.

(21)  Council Directive 2011/16/EU of 15 February 2011 on administrative cooperation in the field of taxation and repealing Directive 77/799/EEC (OJ L 64, 11.3.2011, p. 1).

(22)  An operation whereby a company formed and registered in accordance with the law of a Member State converts into another company formed and registered in accordance with the law of another Member State retaining its legal personality and without being wound up or going into liquidation.

(23)  Case C-106/16. ECLI:EU:C:2017:804. Polbud was a company established in Poland which decided to transfer is the company’s registered office to Luxembourg, without a change in the location of the real head office of the company. The opening of a liquidation procedure was recorded in the Polish commercial register and a liquidator was appointed. In 2013 the registered office of Polbud was transferred to Luxembourg. Polbud then became ‘Consoil Geotechnik Sàrl’, a company under Luxembourg law. Further, Polbud lodged an application at the Polish registry court for its removal from the Polish commercial register. The registry court refused the application for removal. Polbud brought an action against that decision. The Supreme Court of Poland, before which an appeal has been brought, first asks the Court of Justice whether freedom of establishment is applicable to the transfer of only the registered office of a company incorporated under the law of one Member State to the territory of another Member State, where that company is converted to a company under the law of that other Member State, when there is no change of location of the real head office of that company. See also https://curia.europa.eu/jcms/upload/docs/application/pdf/2017-10/cp170112en.pdf

(24)  Judgments of the Court in case, C-378/10, Vale Epitesi, EU:C:2012:440, para. 31 and Polbud case C-106/16, ECLI:EU:C:2017:804, paras 33, 35, 44.

(25)  An operation whereby two or more companies from two or more Member States transfer their assets and liabilities to an existing (acquiring) or a new company.

(26)  Directive 2005/56/EC of the European Parliament and of the Council of 26 October 2005 on cross-border mergers of limited liability companies. It is now part of the 2017 Codification Directive.

(27)  An operation whereby a company splits and transfers all or some of its assets and liabilities to existing or new company/companies in another Member State.

(28)  Council Directive 2001/86/EC of 8 October 2001 supplementing the Statute for a European company with regard to the involvement of employees (OJ L 294, 10.11.2001 p. 22).

(29)  Directive 2009/38/EC of the European Parliament and of the Council of 6 May 2009 on the establishment of a European Works Council or a procedure in Community-scale undertakings and Community-scale groups of undertakings for the purposes of informing and consulting employees (Recast) (OJ L 122, 16.5.2009, p. 28).

Opinion of the European Economic and Social Committee on a) Proposal for a Regulation of the European Parliament and of the Council establishing Horizon Europe — the Framework Programme for Research and Innovation, laying down its rules for participation and dissemination

(COM(2018) 435 final — 2018/0224 (COD))

and on b) Proposal for a Decision of the European Parliament and of the Council on establishing the specific programme implementing Horizon Europe — the Framework Programme for Research and Innovation

(COM(2018) 436 final — 2018/0225 (COD))

(2019/C 62/05)

Rapporteur:

Gonçalo LOBO XAVIER

Referral	a) European Parliament, 14.6.2018 Council, 25.6.2018 b) European Parliament, 14.6.2018 Council, 27.6.2018
Legal basis	a) Article 173(3), Article 182(1), (4) and (5), Article 188 TFEU; and Article 7(5) of the Euratom Treaty b) Article 173(3) and Article 182(4) TFEU
Section responsible	Single Market, Production and Consumption
Adopted in section	2.10.2018
Adopted at plenary	17.10.2018
Plenary session No	538
Outcome of vote (for/against/abstentions)	187/1/2

1.   Conclusions and recommendations

1.1.

The EESC welcomes the fact that the European Commission has made it clear that Research and Innovation (R&I) must continue to be an essential EU priority also in the context of the next Multiannual Financial Framework 2021-2027. The EESC is most pleased to observe that many of the recommendations made by the Committee for the Horizon 2020 mid-term evaluation have been taken up in areas such as collaborative research and mobility, as well as steps to strengthen innovation, overcome disparities among regions, promote science and innovation activities among citizens, remedy low success rates and reduce the administrative burden (1).

1.2.

The EESC emphasises that science, research and innovation must be key elements of the European community-building process and therefore supports the Horizon Europe approach of bringing citizens closer to these activities and achievements. For this purpose, effectively communicating not only the opportunities of the programme but also the effects of innovation and research activities on citizens’ lives must be part of the strategy to encourage more support from Member States for this effort.

1.3.

The EESC supports the design of R&I missions as part of the strategy of Horizon Europe to achieve more impactful R&I outcomes and to really change the way citizens perceive science and its impacts in their day-to-day lives. The EESC calls for urgency in defining strategic missions that can stimulate research and innovation ecosystems across Europe and that boost collaborative research as the main vehicle to deliver knowledge and create impact. Missions should focus on a specific, quantifiable and achievable target and should be open to all possible participants, capturing excellence from different parts of Europe.

1.4.

The EESC supports the fact that missions will be open to diverse, bottom-up solutions and cover the whole R&I lifecycle. As missions should address medium to long-term goals, the high importance of low Technological Readiness Level (TRL) research should also be reflected in their approach. They should not be focused only in linear innovation models, which often are restricted to incremental innovation, but should explicitly incentivise disruptive innovation models.

1.5.

The EESC as the representative of organised civil society is open to actively contributing to the co-design process and supports the idea of the missions, but one must not forget that bringing decisions too close to final users may limit the missions’ scope and disruptiveness. The mission boards should have high quality and sufficient critical mass from all stakeholders, so as to avoid incremental research or, at the opposite extreme, missions that are far beyond existing technical/technological capacities.

1.6.

The EESC highlights the European Innovation Council (EIC) as an important instrument to support breakthrough innovation and boost entrepreneurship and competitiveness at EU level. In this way, and taking into account the European landscape, the EESC believes that the EIC should particularly focus on very innovative and breakthrough SMEs and start-ups.

1.7.

The EESC agrees that Horizon Europe should bring in social sciences and humanities (SSH) in a systematic way. SSH should be approached in conjunction with the technological approach. Innovation goes far beyond technology, and bringing together the different visions, trade-offs and challenges will better shape the R&I landscape in Europe. The EESC believes that going ‘beyond technology’ would boost SSH across Horizon Europe.

1.8.

The EESC supports the ‘open science’ policy approach as a means to focus on excellent science and high-quality knowledge. Open science is vital for the overall scientific development of the European institutions, but one should consider introducing a certain timeframe for publishing all the scientific results in order to assure that all project outcomes will be made available in suitable repositories and within well-defined timeframes. The EESC welcomes open access to publications and research data, but regular consultation with research stakeholders regarding future requirements in open science is strongly recommended. The established opt-out possibilities should be maintained under Horizon Europe.

1.9.

The EESC agrees that the redesigned pillar structure will improve internal coherence, in particular through the integration of industrial technologies into Pillar 2, enhancing the contribution of industry to tackling global challenges, and matching supply with demand for new solutions. This approach is very appealing, and one suggestion would be to favour consortiums that close the innovation cycle, i.e., include the academic partners that create, the solution providers that develop innovative solutions, and the final users that express their needs so they can operate in a sustainable manner.

1.10.

The EESC also welcomes the aim of further simplifying state aid rules to facilitate the combination of different funds that can be instrumental in overcoming the major disparities between Member States and regions in terms of the number of successful R&I projects. Synergies among the different Union funding programmes and Union policies, namely with structural funds through compatible regulations, are vital for guaranteeing the greatest impact of R&I projects.

1.11.

The EESC highlights the fact that supporting the mobility of researchers via Marie Skłodowska-Curie Actions (MSCA) is also fundamental to further strengthening the European Research Area, while EU and national policies must aim at adequate and attractive working conditions for professionals to avoid the ‘brain drain’ phenomenon that is truly counterproductive for the achievement of cohesion in the EU. In addition, it is vital to strengthen support for early career researchers in the ERC programme.

1.12.

The EESC believes that special focus should be placed on science education and science communication in the pillar of ‘Strengthening the European Research Area’. This would strengthen the science with and for society within this pillar and consequently within Horizon Europe.

2.   General comments

2.1.

The EESC welcomes the Commission’s recent effort to boost European growth through new and measured European policies supported by increased promotion of R & D+I activities that can provide European leadership in many areas (2). The European community of innovators and researchers has achieved many goals in recent years, but it remains the case that this situation is not fully valued by European citizens for several reasons, such as the lack of communication, poor commitment from the community or even citizens indifference to scientific achievements. Therefore, it is crucial to change this attitude within European society, not just in the short-term but also in order to contribute to a long-term innovation and scientific ecosystem embedded in society as a whole.

2.2.

The EESC supports the approach that it is by defining key global challenges that citizens’ views can be changed, as part of a very strong effort to mobilise and engage society for the European project. Boosting Europe’s competitiveness through innovation is fundamental, and must be in leaders’ minds when setting policy priorities. One cannot simply say that R & D+I activities make a major contribution to job creation and growth. It is not enough simply to provide information that two-thirds of economic growth in Europe today arises from RDI activities. Member States must take part in this collective effort.

2.3.

The EESC welcomes the proposal for a new European R&I Programme to support and boost R&I at EU level for 2021-2027, and its main features, namely the focus on open science, global challenges and industrial competitiveness, and open innovation. The EESC strongly believes that the co-creation approach, engaging all the stakeholders in the knowledge and innovation community, is the basis to boost European competitiveness, job creation, social cohesion, in particular combating youth unemployment, and environmental protection in line with the UN 2030 Agenda and the Sustainable Development Goals (SDGs).

2.4.

The Horizon Europe Programme seems to reflect the Commission’s priority to build an innovation and scientific ecosystem that could enable the EU to improve its competitiveness through structural activities that will have an economic and social impact. This is confirmed not only by the proposed increase in the financial package but also by the activities projected under the three pillars of the programme.

2.5.

The EESC supports the main new elements that are highlighted by the Horizon Europe proposal, namely: (i) supporting breakthrough innovation through the European Innovation Council; (ii) creating more impact through mission-orientation and citizen involvement: R&I missions; (iii) strengthening international cooperation; (iv) reinforcing openness through a stronger open science policy; and (v) rationalising the funding landscape through a new approach to European Partnerships.

2.6.

The establishment of EU bottom-up research and innovation missions focused on global challenges and industrial competitiveness might be a good way to get society more engaged in science and innovation activities. This approach might be a successful way to involve society and citizens in the missions that are to be defined, and will create a sense of community that could be essential to achieving significant results and impact. The role of organised civil society in this process, once again, could be crucial.

2.7.

The EESC also appreciates the fact that Horizon Europe is going to support ‘Public Private Partnerships (PPPs)’ as an efficient instrument for boosting collaborative research focused on industry-driven R&I, emphasising fewer partnerships with higher impact. Europe must accept the fact that there is still a long way to go to achieve a lean process in terms of efficient collaboration between academia and industry. There are, of course, many good examples and best practices, but there is also room for improvement. ‘PPPs’ are one of the tools to reduce the existing gap between those two different but complementary worlds: academia and industry/the market.

2.8.

The EESC once again (3) urges the Commission to continuously make efforts to reduce the level of bureaucracy within the Horizon programme. Therefore, the EESC welcomes the Commission’s proposal on having less bureaucracy and a better ‘time to market’/level of response to the proposals, as can be seen, for example, in Horizon 2020, in relation to the specific ‘SME Instrument’. Simplification must be a main aim within Horizon Europe, namely regarding time to grant and subsequently entering the market, constant funding rates, reduced number of instruments, limited use of timesheets, widespread use of lump sums, etc.

2.9.

The EESC believes that, along with reducing bureaucracy, improving simplification, and a more visible campaign to attract SMEs to innovation and R&I activities, the concept underlying the European Innovation Council (EIC) is very welcome, especially with regard to boosting commercialisation, scale-up innovations, and entrepreneurs. In fact, the EESC believes that, under this strategy, the degree of success might increase if we keep in mind that some of the start-ups and ideas have not succeeded in the past, for various reasons that the EIC wishes to address. We must not forget the need to make European culture less risk-averse and, in this connection, the EIC will contribute to this effort and should consider high-risk R&I actions in its overall goals and evaluation criteria.

2.10.

The EESC supports the idea of having more SMEs and start-ups involved in the programme but has some doubts regarding the scale-up proposal. Despite previous efforts throughout the framework programmes, SMEs should be more involved in activities based on R&I and Horizon Europe would be the best chance to get them ‘on board’. The idea of greater involvement via capital might be a good one, but the message must be clear to all companies. The fact that SMEs still have a different perspective when it comes to ‘capital ownership’ requires a full explanation from the programme in order to boost community participation and avoid misinterpretations. SMEs have a long tradition of capital based on family entrepreneurs, and proposals to ‘open’ their capital to the market, funded by this programme, could raise specific questions. Therefore, the EESC urges the Commission to be very clear about this interesting proposal.

2.11.

The EESC also agrees with the principle that there would be no more EU financial investment for entrepreneurs without dialogue with the EU. This ‘motto’, recently announced by Commissioner Moedas in a public session, demonstrates an ambitious idea of more direct interaction with entrepreneurs and candidates, but is also a very risky attitude: it is not yet clear what kind of resources are going to be allocated to the interviews with candidates, and the entire process still needs to be efficient. But the EESC is fully prepared to back this new approach and even offers its help to collaborate on the process by means of the expertise of its members and the backing of the civil society organisations that support their members.

2.12.

Finally, the EESC also welcomes the efforts that seem to be being made to boost the synergy of funds between programmes. Synergies of funds may have a strong role to play in leveraging and boosting R&I capacities in different regions of Europe. Increasing synergies with other Union funding programmes and Union policies, namely with structural funds through compatible regulations, should be a key point. In fact, according to MFF regulations regarding cohesion funds, Member States can transfer up to 5 % of their allocations from one fund to another, enabling them to transfer investment money to other key areas that have been identified. This could be another important step towards better involving Member States in achieving the goal of the innovation programme and taking the scientific agenda to another level. The EESC believes that only by involving the public and private sectors can the programme be considered a success story, with an impact on citizens’ day-to-day lives. Another important aspect would be the harmonisation of the rules and regulations of the different funds, at least for the same types of activity, and particularly for research and innovation.

3.   The Horizon Europe (2021-2027) proposal

3.1.

The Commission’s proposal for Horizon Europe is based on an announcement of a major achievement: a EUR 100 billion R&I programme that is already a step forward for a science- and innovation-based European knowledge society. In this regard, the fact that Member States agreed to this budget increase demonstrates not only a political commitment but also a clear message to the world: Europe wants to lead the way on innovation, and the funding conditions to do so have thus been created.

3.2.

Besides the financial increase, there are a few new and innovative ideas that the EESC wants to highlight as points taken directly from the proposal that are important for this opinion. Therefore we would like to mention the following items in brief: a) The three-pillar structure of Horizon Europe: as stated by the EC, Horizon Europe is not a revolution but an evolution. Thus it is based on three main pillars: Open Science, which includes the ERC, MSCA and research infrastructure; Global Challenges and Industrial Competitiveness, which comprises five clusters: health; inclusive and secure society; digital and industry; climate, energy and mobility; and food and natural resources; and the Open Innovation Pillar, with the EIC, the European innovation ecosystems and the EIT. The three pillars will be underpinned by activities to strengthen the European Research Area. b) The creation of the European Innovation Council (EIC) to help the EU become a leader in market-creating innovation; Europe has been pursuing this objective for many years, yet despite these efforts, despite excellent ideas, and despite a very strong innovative and scientific community, the level of growth and job creation does not reflect the level of commitment. Thus, the Commission’s proposal will establish a one-stop shop to bring the most promising high-potential and breakthrough technologies from the lab to market deployment, and will help the most innovative start-ups and companies scale up their ideas. The new EIC will help identify and fund fast-moving, high-risk innovations with strong potential to create entirely new markets. It will provide direct support to innovators through two main funding instruments, one for early stages and the other for development and market deployment. It will complement the European Institute of Innovation and Technology (EIT). The EESC believes that the EIC should focus on very innovative and breakthrough SMEs and start-ups. c) Within the EIT, proposals for future EIT Knowledge and Innovation Communities (KICs) will be indicated in the EIT Strategic Innovation Agenda (SIA). The EESC believes that these should not be significantly increased and should be kept to a limited number in line with the principle of simplification of the R&I landscape. In addition, the future KICs should guarantee the representation of different European countries, namely regarding the innovation hubs’ location. The entrepreneurship fostered by the academic pillar (e.g. entrepreneurial education; fostering strong non-disciplinary collaboration between industry and academia; and identifying prospective skills for future innovators) should be reinforced. d) The establishment of EU R&I missions focused on global challenges and industrial competitiveness. This approach might be a successful way to involve society and citizens in the missions that are to be identified and will create a sense of community that could be essential to achieving significant results and impact. Examples could range from the fight against cancer to clean transport, plastic-free oceans, or safe and clean water for all. These missions will be co-designed with citizens, stakeholders, the European Parliament and Member States. The EESC, as the representative of organised civil society, is open to actively contributing to this co-design process. e) Maximising the innovation potential across the EU and strengthening the European Research Area: support will be doubled for Member States that exhibit a low R&I performance potential. Moreover, synergies with European Structural and Investment Funds (e.g. Structural and Cohesion Funds) will make it easy to coordinate and combine funding and help regions embrace innovation and gain leverage at EU level. f) More openness: the principle of ‘open science/open innovation’ will become the modus operandi of Horizon Europe, requiring open access to publications and data. This will promote dissemination and exploitation, assist market uptake and increase the innovation potential of results generated by EU funding. g) A new generation of European partnerships and increased collaboration with other EU programmes: the expectation is that Horizon Europe will streamline the number of partnerships that the EU co-programmes or co-funds with partners such as industry, civil society and funding agencies, in order to increase their effectiveness and impact in achieving Europe’s policy priorities. Horizon Europe will promote effective and operational links with other future EU programmes, like cohesion policy, the European Defence Fund, the Digital Europe Programme and the Connecting Europe Facility, as well as with the international fusion energy project ITER. h) The Joint Research Centre (JRC), the Commission’s science and knowledge service, will continue to contribute by means of scientific advice, technical support and dedicated research.

4.   Science and innovation for all Europeans

4.1.

Citizens must be aware of the European potential and achievements regarding science and innovation activities. These activities truly are a part of everybody’s lives and are a real opportunity to involve society in the European project. The concept and the measures proposed by the Commission are ambitious, and are a ‘never-ending process’, but this is also the best opportunity to get citizens engaged with European values linked to innovation and science for all.

4.2.

Science education and science communication must be considered a fundamental approach to getting everyone involved with the European project. Setting public involvement as a priority within Horizon Europe will represent a clear step forward on delivering the R&I outputs to the market and to our daily lives. The co-creation process based on a multi-stakeholder approach would constitute a clear message for public involvement in the R&I landscape. Social innovation with public involvement and trust in innovation will be crucial to encouraging new governance, production and consumption patterns.

4.3.

Dissemination, communication and exploitation of the success of European science and innovation seems to be somewhat ineffective. Citizens value other regions’ innovations and fail to recognise ‘European achievements’ even when they see them. This must change, for several reasons: besides the idea of getting ‘European value’ from the investments that are made by Europe, it is also important to be proud of EU achievements and goals in connection with the European project for all.

4.4.

Europe is often criticised for its ‘lack of investment’ and ‘lack of a culture of risk and entrepreneurship’. The general idea of the EC proposal is to address these challenges and to create a new narrative regarding these ideas. Science and innovation activities’ contribution to constructing a better and more inclusive Europe is part of the change that is needed to avoid misunderstandings regarding the European project, and certainly represents a good contribution to getting citizens more involved and making them proud of being part of the solution. It is also important to counteract inaccurate ideas about the use of European funds in local communities: if citizens were to recognise that ‘taxpayers’ money’ is being used well, this would be a good step towards countering extreme populist narratives that must be contested.

4.5.

The programme should, in particular, contribute to the strengthening of the European Research Area by ensuring that most of its funding be used for collaborative research involving participants from Member States and/or Associated Countries, in order to offer significant EU added value. Collaboration among European researchers, industries (including SMEs), and other public and private institutions has been instrumental in creating the ERA and is a trademark of the European R&I Framework Programmes, which are very much appreciated by stakeholders and must be preserved in Horizon Europe.

4.6.

Horizon Europe activities shall be primarily delivered through calls for proposals. It should be ensured that most of the Horizon Europe budget is spent via competitive calls that are run directly by the European Commission or its executive agencies in a transparent and efficient way, and that the number and budget of missions and partnerships should be capped at reasonable levels so as to rationalise the R&I landscape, in line with the main aim of simplification.

4.7.

Horizon Europe must streamline the needs and urgent priorities highlighted in the stakeholder consultation launched at the beginning of 2018 as a part of the impact assessment (4) exercise. The aim of the stakeholder consultation was to gather the views of interested citizens and stakeholders on the design of Horizon Europe, namely with regard to fostering R&I across the EU; supporting education, skills and training; and ensuring a clean and healthy environment and the protection of natural resources.

4.8.

In order to actively contribute to the cohesion of the different regions within Europe, the increase in financing for the European Research Council is welcome, particularly if it will be assigned first and foremost to early career researchers, as the group that offers the highest possible potential for the future of Europe. The brain drain from peripheral regions towards other areas must be stemmed and early career researchers’ empowerment must be made a reality.

4.9.

In order to improve the appropriation of research outcomes by the civil society, it is important to underline the fundamental role of social innovation. It is also important to underline the importance of Social Economy Enterprises and overall stakeholders, which alongside industry and SMEs, today constitute an important part of the European economic system.

5.   The role of enterprises

5.1.

The EESC must once again reiterate the fact that SMEs represent the most significant business community in Europe. SMEs are responsible for job growth and creation and therefore must be at the heart of the policy-making process. This proposal seems to reflect this idea, but at the same time the EESC draws the Commission’s attention to the fact that there is no ‘one size fits all’ solution for all Member States regarding how to boost SMEs’ participation in Horizon Europe. Member States have different levels of growth and structural innovation ecosystems, and this must somehow be reflected in the specific measures proposed.

5.2.

The EESC recognises the role of start-ups within innovation and scientific ecosystems, but draws the Commission’s attention to the fact that entrepreneurs must have a business-oriented approach if they want to succeed. It is therefore desirable to give entrepreneurs some advice on the potential and needs of the market. Large companies must also be part of the process. Large companies provide more opportunities for start-ups and SMEs, not only due to the challenges that they create but also due to the business opportunities that normally accompany their activities. It is therefore a very good idea to create a more efficient innovation ecosystem that brings together all their realities.

5.3.

The EESC draws the attention of the community of entrepreneurs, and of the Commission, to the need to develop a new narrative regarding industrial activities. The traditional industrial sectors could really benefit from the activities of start-ups when these are geared towards the challenges that arise out of the digitalisation and robotisation of industrial activities — towards, for instance, the circular economy, or boosting the introduction of very advanced new manufacturing technologies through the participation of SMEs and start-ups and promoting their cooperation with large industries. The level of success could be increased if the start-up community were somehow to be made aware of the industrial challenges ahead.

6.   Financial issues

6.1.

The proposed budget allocation of EUR 100 billion (bn) for 2021-2027 includes EUR 94,1 bn under Horizon Europe, EUR 3,5 under the InvestEU Fund and EUR 2,4 bn for the Euratom Research and Training Programme. The Euratom programme, which funds research and training on nuclear safety, security and radiation protection, will have an increased focus on non-power applications such as healthcare and medical equipment, and will also support the mobility of nuclear researchers under the Marie Skłodowska-Curie Actions.

6.2.

The indicative distribution of the Horizon Europe budget highlights a significant increase (around 20 %) in the ERC budget and in Marie Skłodowska-Curie Actions (around 10 %) in comparison to the Horizon 2020 Framework Programme 2014-2020. The EESC fully supports this increase and that the ERC should devote most of its budget to early career researchers in their most productive and creative phase (Starting Grant (5) and Consolidator Grant (6)).

6.3.

The EIC budget represents the highest increase within Horizon Europe with a total amount of EUR 13,5 bn. Within the Global Challenges and Industrial Competitiveness pillar, the ‘food and natural resources’ cluster shows the largest increase, to a total of EUR 10 bn. The cross-cutting pillar dedicated to ‘Strengthening the European Research Area’ also shows a substantial increase in its budget to a total of EUR 2,1 bn. The EESC believes that these budgetary trends are welcome and will strengthen the European Research Area and build a stronger multi-actor R&I ecosystem across all European regions.

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(1)  OJ C 34, 2.2.2017, p. 66 and Information report on Horizon 2020 (evaluation).

(2)  OJ C 197, 8.6.2018, p. 10.

(3)  OJ C 34, 2.2.2017, p. 66.

(4)  https://ec.europa.eu/info/publications/horizon-europe-impact-assessment-swd-2018-307_en

(5)  For researchers of any nationality with 2-7 years of experience since completion of PhD, a scientific track record showing great promise and an excellent research proposal (https://erc.europa.eu/funding/starting-grants).

(6)  For researchers of any nationality with 7-12 years of experience since completion of PhD, a scientific track record showing great promise and an excellent research proposal (https://erc.europa.eu/funding/consolidator-grants).

Opinion of the European Economic and Social Committee on ‘Proposal for a Regulation of the European Parliament and of the Council establishing the programme for single market, competitiveness of enterprises, including small and medium-sized enterprises, and European statistics and repealing Regulations (EU) No 99/2013, (EU) No 1287/2013, (EU) No 254/2014, (EU) No 258/2014, (EU) No 652/2014 and (EU) 2017/826’

(COM(2018) 441 final — 2018/0231 (COD))

(2019/C 62/06)

Rapporteur:	Oliver RÖPKE
Co-rapporteur:	Violeta JELIĆ

Consultation	European Parliament, 14.6.2018 Council, 26.6.2018
Legal basis	Articles 114(1), 169(3), 43(2) and 173(3) of the Treaty on the Functioning of the European Union
Section responsible	Section for the Single Market, Production and Consumption
Adopted in section	2.10.2018
Adopted at plenary	17.10.2018
Plenary session No	538
Outcome of vote (for/against/abstentions)	187/4/2

1.   Conclusions and recommendations

1.1.

The single market provides an essential basis for creating economic growth and competitiveness. It makes an important contribution to job creation and gives consumers a wide choice of goods and services, and can also serve as the basis for building prosperity in the European Union.

1.2.

The EESC welcomes in principle the integration of five predecessor programmes (and of the European Statistical Programme, though that extends beyond the scope of the single market) and a number of budget headings into a single market programme, as it can be expected to produce synergies and improve cost efficiency.

1.3.

The EESC agrees with the Commission that it is necessary to remove existing obstacles and to press forward with the development, implementation and enforcement of Union law in the internal market. This is particularly true for the areas of goods and services, public procurement, market surveillance, company law, contract and extra-contractual law, anti-money laundering, free movement of capital, financial services and competition, and the development of governance tools. The EESC calls for the creation of a fair and complete internal market which should also take account of compliance with labour, consumer and environmental standards.

1.4.

With regard to the food chain, however, the EESC calls on the Commission to ensure funding under category 3 — ‘natural resources and environment’ — due to the programme’s close relationship with agricultural policy.

1.5.

The EESC welcomes the Commission’s proposal to devote 25 % of available funding to meeting the Paris Agreement climate change objectives, but would like further information about what expenditure is considered climate-related.

1.6.

The EESC notes that the volume of work in consumer protection policy is steadily increasing, due not least to the digital transformation. The EESC therefore urges the Commission to further develop cooperation with consumer networks and organisations and to increase funding for consumer protection accordingly.

1.7.

The EESC notes that, according to the Commission, funding for the priorities in the new Single Market Programme is set to be around EUR 3,9 billion, i.e. approximately the same level as in the current financing period 2014-2020, but is concerned that the negotiations on the EU financial framework could result in cuts and thus in a lower budget than in the past. The EESC nevertheless welcomes the fact that, in the context of COSME, an additional EUR 2 billion is available under the InvestEU programme and that it is possible to combine funding from other programmes.

1.8.

The statistics produced by the European Statistical Programme have a high European added value and constitute one of the bases for the European Union’s policies, including, in particular, on the single market. The EESC therefore agrees with the Commission that the current European Statistical Programme should continue to be given the necessary resources under the new Single Market Programme.

1.9.

The EESC calls for the European social partners to be appropriately involved in all phases of the new Single Market Programme.

2.   General comments on the new Single Market Programme

2.1.

The EESC has already repeatedly stressed that the single market is a cornerstone of the European integration process and contributes significantly to economic growth and job creation. In addition, the single market can also contribute to prosperity (1).

2.2.

In its opinion on the Multiannual Financial framework post-2020 (2), the EESC has already criticised the fact that even fewer resources will be available for achieving the EU’s objectives in the next financial period than in the current one.

2.3.

Under the EU Multiannual Financial Framework, the Committee proposes consolidating a number of programmes and budget headings relating to the competitiveness of enterprises (including SMEs), consumer protection, customers and end users in financial services, policy making in financial services, the food chain, and the development, production and dissemination of European statistics. The EESC welcomes this proposal in principle, because it can achieve synergies and efficiency gains in the funding of the supported projects. The programme also offers a more flexible financial framework, which will make it easier for beneficiaries to implement the projects.

2.4.

An evaluation of the individual programmes that will now be incorporated into the new Single Market Programme also demonstrates the high European added value provided by these various initiatives.

2.5.

It should be noted that there are still barriers and obstacles to the single market. It is therefore important to track developments in this area, take stock of the remaining obstacles and set up a road map for the single market to operate smoothly in the interests of all. The EESC agrees with the Commission that the new programme can help to improve the functioning of the single market through the design, implementation and enforcement of EU legislation. EU action must lead to a simple, clear, stable and predictable regulatory framework for businesses, workers and citizens. The EESC calls for the creation of a fair and complete internal market which should also take account of compliance with labour, consumer and environmental standards.

2.6.

The EESC specifically welcomes the option of funding activities and projects cumulatively across several EU programmes, such as InvestEU, Horizon Europe and the European Social Fund. This could both produce synergies and make it easier to fund projects.

2.7.

The EESC also draws attention to the particular importance of further developing EU tax policy to promote an efficient, competitive and fair single market (3).

3.   Programme objectives

3.1.

Small and medium-sized enterprises play a central role in the European economy. 99 % of businesses in the EU are SMEs, and two thirds of employees work in one. In the EESC’s view, it is therefore essential for SMEs to be supported by the European Union in improving their competitiveness. The EESC would like to stress the importance of support measures for professional and business services in their role as promotor of the competitiveness of European SMEs: they are essential to many other sectors and play a central role in the ‘servitisation’ of the European economy.

3.2.

The EESC would highlight the positive experience of the COSME programme, which has been of great benefit to SMEs thanks to its needs-oriented support in areas such as tourism, the textile industry and other sectors, and has thus made a major contribution to economic growth and the creation of new jobs. Support via COSME should therefore be continued and built on.

3.3.

In recent years, SMEs have been confronted with particular difficulties in accessing finance. A lack of creditworthiness makes it impossible for small and medium-sized enterprises to make appropriate investments in forward-looking areas such as digitalisation, innovation and globalisation. This has a negative impact on economic growth and job creation, and can even threaten the survival of businesses. The EESC therefore welcomes the additional possibility of refinancing using debt and equity instruments under the new InvestEU Fund.

3.4.

In addition, there is also a need for capacity-building support for social partners, public administrations and other beneficiaries, to give these stakeholders the opportunity to participate in EU programmes.

3.5.

Support for young entrepreneurs and for innovative products and services will be one of the key elements of the Single Market Programme. In the EESC’s view, using cluster initiatives to support new business models, advanced technologies, low-carbon and resource-efficient solutions and other areas such as initiatives for international activities, finding staff and upskilling is a positive approach; the Committee supports the work of the European Cluster Collaboration Platform.

3.6.

In many economic sectors, the use of digital solutions is already taken for granted. The continued success and competitiveness of SMEs depends not least on investing in the appropriate digital infrastructure in good time. The EESC therefore supports the idea of supporting SMEs in investing in digital projects. These projects should be designed such that they benefit both the business sector and civil society as a whole.

3.7.

The EESC is in favour of continuing to support the Your Europe, SOLVIT and Your Europe Advice digital portals, the Internal Market Information System and the Single Market Scoreboard, and of promoting the creation and expansion of additional public digital services and cooperation by authorities within and between the Member States in the digital field, including in conjunction with the Digital Europe programme.

3.8.

In that connection, the EESC welcomes the Commission’s progressive approach of devoting 25 % of available funding to meeting the Paris Agreement climate change objectives, but would like further information about what expenditure is considered climate-related.

3.9.

The aim of the Single Market Programme is to support consumer interests and to ensure a high level of consumer protection. The EESC notes that, in general, the challenges of consumer protection policy are continually increasing, in part due to the online trade in goods and services and because of the digital transformation, and in part as a result of inappropriate deregulation measures such as the abolition of statutory quality assurance measures or conditions regulating access to professions. The new programme must therefore ensure that consumers are given the appropriate information and support in their consumer activities. At the same time, it must also be ensured that businesses get adequate support and information on consumer protection provisions.

3.10.

The financial and economic crisis starting in 2008 has shown that it is particularly essential to provide consumers with comprehensive advice and information on financial services, including debt counselling. In addition, civil society needs to be more heavily involved in policy-making in this field, in particular by promoting organisations that support the policy interests of consumers in the field of financial services.

3.11.

The provision of market and consumer information, and access to legal redress, should be ensured by means of support for consumer protection organisations and the enforcement authorities responsible. The EESC also notes, however, that the New Deal for consumers does not meet legitimate consumer expectations as outlined in the recent EESC opinion on this Commission proposal.

3.12.

Consumer protection at European Union level is strongly supported, in particular via the European Consumer Centres Network and the European Consumers Organisation (BEUC). In recent years, the network has been able to reach millions of consumers and keep them informed, and has also responded to several hundred thousand consumer enquiries. BEUC has been active in representing consumer interests in all relevant EU policy fields. Support for the network and BEUC has produced high European added value. The EESC therefore advocates pursuing this successful cooperation with the European Consumer Centres Network and the European Consumers Organisation over the long term, and continuing to develop it. The Committee also welcomes the plans to cooperate with national consumer protection organisations.

3.13.

In order to improve representation of consumer interests in financial services, funding was provided for two non-profit associations, Finance Watch and Better Finance — first as part of a pilot project and then through a preparatory action. Regulation (EU) 2017/826 on capacity building in this field provides for further co-financing for these associations. The EESC urges the Commission to further boost cooperation with organisations in this policy area.

3.14.

The EESC observes that, in view of the plethora of tasks to be undertaken, the budget for the protection of consumers’ interests is extremely tight at EUR 198,5 million. The EESC urges the European Parliament and the Council to increase the available budget accordingly.

3.15.

Data and statistics provide the basis for decisions in numerous areas, including social, economic, regional, environmental and agricultural policy. The statistics produced by the European Statistical Programme therefore have a high European added value and constitute one of the bases for the European Union’s policies, including, in particular, on the single market. The EESC therefore agrees with the Commission that the current European Statistical Programme should continue to be given the necessary resources under the Single Market Programme, particularly in light of the need to modernise statistical production processes and of the increasing need for statistical data.

3.16.

With regard to standards, the EESC advocates developing them quickly and in a timely manner, in cooperation with SME, employees, consumers and environmental representatives.

3.17.

The food supply chain programme supports measures to ensure a high level of human, animal and plant health protection, and also to improve the sustainability of European food and feed production and raise quality standards. The impact of animal diseases and pests should be minimised using EU-supported preventative programmes. The level of environmental protection and biodiversity should also be supported.

3.18.

Many of the activities in the food supply chain programme fall under agricultural policy and environmental policy. The EESC therefore calls on the Commission to ensure funding for these food chain activities via category 3 on ‘natural resources and environment’.

4.   Budget

4.1.

The Commission proposes a total budget for the Single Market Programme of EUR 4 089 million for the period 2021-2027. This includes: — around EUR 438 million for the internal market objective — EUR 1 billion for the COSME SME programme — EUR 198,5 million for consumers — EUR 220,5 million for standardisation — EUR 552 million for statistics, and — EUR 1,68 billion for the food chain.

4.2.

The EESC notes that, as regards the comparability of these financial envelopes with the current funding period 2014-2020, Brexit and the integration of the individual programmes into the Single Market Programme mean that only limited statements can be made regarding the current budget.

4.3.

The EESC notes that, according to the European Commission, the funding provided for the Single Market Programme is comparable to the current financial period (around EUR 3,9 billion), but is concerned that the negotiations could result in budget cuts and thus in a reduction in available resources compared with 2014-2020.

4.4.

The EESC notes that more than 41 % of the total budget — EUR 1,68 billion — is allocated to the food chain, making it by far the best-funded item in the Single Market Programme, while less than 5 % is to be available for consumer policy projects.

4.5.

It is pleased that, on top of the EUR 1 billion COSME programme, an additional EUR 2 billion will be available through the InvestEU window for supporting SMEs (4).

4.6.

The EESC calls for funding for the consumer policy element of the Single Market Programme to be significantly increased, as the challenges facing consumer protection policy are mounting significantly, not least because of the growing importance of cross-border e-commerce and online services.

4.7.

With regard to the food chain, the EESC calls for funding to be provided under category 3 on ‘natural resources and environment’ for measures that are not covered by market surveillance. This includes, for example, activities to combat animal diseases and plant pests, and animal welfare measures.

4.8.

The EESC welcomes the option of combining project financing from other programmes such as the European Regional Development Fund, the Cohesion Fund, the European Social Fund Plus or the European Agricultural Fund for Rural Development.

4.9.

As well as support for SMEs and start-ups and strengthening the competitiveness and growth of enterprises, eligibility under Article 3 of the Single Market Programme should also be extended to measures that enable the public, consumers, end users, trade unions and representatives of civil society and business to take an active part in political debate, policy-making and decision-making, including support for the activities of national and EU-wide representative organisations.

---

(1)  OJ C 125, 21.4.2017, p. 1.

(2)  ECO/460 — opinion on the Multiannual Financial Framework post 2020 (adopted at the September 2018 plenary session).

(3)  OJ C 125, 21.4.2017, p. 1.

(4)  COM(2018) 439 final.

Opinion of the European Economic and Social Committee on ‘Proposal for a Regulation of the European Parliament and of the Council establishing the “Customs” programme for cooperation in the field of customs’

(COM(2018) 442 final — 2018/0232 (COD))

(2019/C 62/07)

Rapporteur:

Laure BATUT

Consultation	European Parliament, 14.6.2018 Council, 27.6.2018
Legal basis	Articles 114, 33 and 207 of the Treaty on the Functioning of the European Union
Section responsible	Single Market, Production and Consumption
Adopted in section	2.10.2018
Adopted at plenary	17.10.2018
Plenary session No	538
Outcome of vote (for/against/abstentions)	191/3/5

1.   Conclusions and recommendations

The EESC is pleased to note the importance accorded to customs within the internal market, as well as the objective of the Commission proposal, which is to assist the customs union and customs authorities by providing them with a new financial instrument supporting the implementation of customs policy with a view to ensuring uniform application of the rules. The EESC believes that in policy terms European customs, which already apply a common legal code, should function as a single entity.

1.1.   Budget and implementation of the customs programme

1.1.1.

The EESC believes that the amount earmarked for the customs programme of EUR 950 million over seven years, or EUR 5,02 million on average annually per Member State (EU-27), may prove to be insufficient in view of the breadth of the proposal’s objectives and the targets set in relation to staff, networks, technology and equipment. Given that the burden will fall on the Member States for what lies within their remit, the Committee recommends that the Commission make it easier for national customs authorities to benefit fully from the programme, and from the promised synergies between programmes, and it would like the Commission to ensure flexibility between the budget priorities of the Multiannual Financial Framework (MFF).

1.1.2.

The EESC recognises the difficulty of making quantitative forecasts about the cost of Brexit, which could well be very high, and recommends that the proposal under discussion be adjusted as and when needed without compromising the completion of the internal market between the EU-27 and taking into account the critical requirement of having well-trained customs officials and common customs instruments and procedures that can match those of countries like the United States and China.

1.2.   Role of IT in the programme

Given that this represents the main added value expected of the programme and mindful of the need to ensure progress of the IT strategy for customs (1), the EESC welcomes the provision for instruments to finance and facilitate the development and maintenance of EU-wide IT customs systems, especially the inclusion of IT planning tools, above all where these tools help to reduce disparities between the Member States.

1.2.1.

Technological innovation: the EESC recommends that the programme be run in a way that ensures simultaneous roll-out of technological innovations to all the participating Member States.

1.2.2.

Digital cooperation: to maximise digital cooperation, the EESC recommends encouraging the Member States to take steps to reduce disparities in their practices and skills, and to increase their willingness to tackle fraud together.

1.3.   Strengthening skills

The EESC believes that enhancing the skills of administrative staff and customs training are essential to the smooth operation of EU customs cooperation. It recommends making full use of the programme to build on progress already made (2). With the Matthaeus programme from many years ago in mind, this progress could be amplified through an Erasmus for customs (temporary exchanges of customs officials of all categories).

1.3.1.

The Committee recommends that customs authorities be guaranteed the status of ‘authorised authorities’ that can access interoperable systems for conducting checks on people at borders (3).

1.4.   Fundamental rights

The EESC recommends that the programme help to strengthen respect for fundamental rights and data protection within its sphere of application.

1.5.   Indicators

The EESC recommends that participating countries be helped to meet their obligation to report on implementation of the programme using the proposed indicators, considering that budgetary constraints mean national administrations may not always have sufficient time or staff. The EESC suggests that comparisons be carried out between all the Member States at least during the first five years.

1.6.   Governance

The EESC would welcome an open dialogue about implementation of the programme between the Member States, the Commission and the relevant stakeholders. At Union level, it would like to see renewed support from the European Council, which would give the programme long-term visibility, and recommends maximising the chances of its complete success. This includes fiscal harmonisation between the Member States, commitment of all participating countries to training, and a willingness on their part to invest in cooperation, combat fraud, and trade on fair terms.

2.   Introduction

2.1.

Under the Commission’s proposed MFF, the customs programme is intended to support cooperation between customs authorities and to protect the Union’s economic and financial interests. Fifty years on from its inception, the customs union has a harmonised legal framework at EU level. However, progress still needs to be made in ensuring that the Member States’ customs authorities fulfil their duties in a uniform and equivalent way. There is a common customs territory and a common external tariff, prohibiting customs duties and charges having equivalent effect between Member States. However, disparities continue to exist and ‘customs shopping’ that represents unfair competition creeps in when the rules are applied, which falls to national jurisdictions which can impose customs sanctions.

2.2.

Uniform implementation is difficult to achieve in particular because customs authorities have a multifaceted role, poised politically between national, EU and international rules governing trade and free movement. Customs is about goods — promoting their circulation where they are legal, intercepting it where they are illegal, and halting it where they are dangerous. In some Member States, customs authorities produce external trade statistics.

2.3.

The customs system also ensures that numerous non-customs rules are complied with: a. Among other things it protects the population from terrorism, environmental and health risks, firearms and drugs, and oversees currency movements, copyright, public safety and health, product safety, protection of wildlife and the environment, etc., and its role in all types of security matters is expanding; b. Customs authorities also play a critical role in securing the integrity of the supply chain. There will be many synergies between other MFF financial programmes and the customs programme.

2.4.

Customs authorities are already using digital equipment and technology that have cut the time needed for checks and reduced public spending, despite the increase in global trade volumes and in cross-border crime. The customs system is an essential tool of national governments and the Union. It can be deployed across the entire territory of the EU to protect the Union’s financial interests (e.g. customs duties/United States) and those of its citizens (e.g. ‘mad cow disease’). The European Border and Coast Guard (4) will back this up.

3.   Gist of the proposal for a regulation

3.1.

The European Commission has aligned its general draft budget for 2021-2027 (5) with the political priorities of the EU-27. Among those priorities, the new customs programme follows on from the Customs 2020 programme, which it consolidates and broadens, and is intended to support implementation of the Union Customs Code (UCC) (6) and customs policy. To that end it focuses on structured collaboration in relation to methods and budgets, as well as projects to strengthen operational cooperation between the Member States, and beyond them with ‘participating countries’, which include countries in the process of accession.

3.2.

The total number of customs declarations is growing (at around 310 million in 2016 or 10 declarations per second, with 98 % of customs declarations being made electronically). A massive programme has already been launched under the UCC to digitise 17 electronic systems by 2020-2025. This is intended to promote the competitiveness of European companies, and the Commission believes it will provide the biggest added value of the customs programme.

3.3.

Impact studies have identified a need to enhance skills and coordination between EU customs authorities, and for simplified indicators to reduce the red tape they have to deal with. The proposal mentions reinforcement of actions, both at operational level with systematic exchanging of good practice and operational knowledge between Member States, and through a range of IT infrastructure and systems, in order to achieve fully electronic customs systems (7). The projects will take place over several years, obviously in synergy with the Fiscalis programme.

3.4.

The Commission will meet the international obligations of the EU at the WTO. To be in line with the political message contained in the Commission’s communication on Developing the EU Customs Union and Its Governance (8), customs authorities of the Member States should operate as if they were one single entity.

3.5.

Combining savings from Brexit, reforms and austerity policies with new contributions to be requested from the Member States, the Commission is proposing an overall multiannual financial framework for the Union of EUR 1 279 billion for the period 2021-27, which amounts to 1,11 % of the EU-27’s GNI. This would provide EUR 950 million for the customs programme.

3.5.1.

Combining funding will allow synergies based on more flexibility between different priorities in management of the overall budget, e.g. for IT. National customs authorities will be able to draw on the Integrated Border Management Fund to improve their customs control equipment (purchase, maintenance and upgrading of eligible equipment), while the customs programme will support all related actions, such as cooperation actions for the assessment of equipment needs or, where appropriate, training in relation to the equipment purchased.

3.5.2.

The Structural Reform Support Programme could improve the administrative capacity of EU customs. The customs programme will help customs authorities to protect EU financial interests and will also be backed up by the anti-fraud programme which will succeed the current Hercule III Programme (9) and by the anti-fraud information system that supports mutual assistance in the sphere of customs. There will also be synergies with Fiscalis, with the activities of the European Public Prosecutor Office and with the Justice Programme of the Justice, Rights and Values Fund when it comes to training in the application of EU customs law.

4.   General comments

4.1.   Implementation of the customs programme

4.1.1.

On 24 March 2018 the European Parliament was recommending that the total budget of the Union be increased by EUR 219 billion. The Commission emphasises the added value of a European programme compared with national expenditure. However, the total budget is just 1,11 % of EU GNI (10) (compared with 1,13 % for the previous period). The average budget between 1993 and 1999 was 1,25 %. The EESC has been calling for an increase in the EU’s own resources for years (11), and would like to see a political willingness to complete the internal market in respect of customs policy and help provided to national customs authorities to implement this.

4.1.2.

The EESC would like to know how the sum of EUR 950 million for 2021-2027 was arrived at (first paragraph of point 4 in the Explanatory Memorandum). EUR 137,7 million per annum, or EUR 5,02 per annum per country (EU-27), with countries at different levels of development, seems low.

4.2.

The proposal provides for contracts and subsidies to be granted by direct management. The flexibility of the new MFF model would allow synergies to be created between different programmes and between different customs tasks, relations between customs and other authorities, other spheres of EU activity, such as the Digital Europe programme (12), Fiscalis, Justice, etc., and related parts of the budget. The EESC sees this as a sound principle, but would like to know what the eligibility criteria will be for allocating support requested between the permeable components of each programme. It fears the risk of a gulf between the theory and practice of these funding combinations in cases where different actions are scheduled at the same time with support from the same fund, which would then be overextended.

4.3.

The Commission seems to be optimistic about the prospects for Member State and EU revenue, but this is simply conjecture and difficult to substantiate over a period of seven years.

4.4.

The proposal leaves much of the budget responsibility to the Member States, which will have to develop components at national level taking national constraints into account, and still in the face of the austerity policies imposed under the European semester, as well as economic growth that is only slowly picking up, especially in the euro area. However, the structured collaboration system which the proposal provides for will enable Member States to work together, including in developing the components of IT systems.

5.   Specific comments

5.1.   IT

5.1.1.

IT is considered the biggest added value of the programme (13). Customs is probably the first stone of e-governance laid by the Union. The hierarchy of customs control and declaration tools requires ever more connectivity and interoperability. This will require firstly that all the Member States have efficient IT customs infrastructure, with super-fast broadband everywhere. The EESC would like the customs authorities of the 27 to also be recognised as ‘authorised authorities’ that can use the future architecture of interoperable border control systems (14).

5.1.2.

Articles 7(5) and 8 of the proposal state that the Commission may fund measures up to a rate of 100 % for collaborative activities. If an activity involves the development and operation of a European electronic system, the Union will only bear costs relating to common components and coordination, while the Member States will bear costs relating to their responsibilities under the proposal.

5.1.3.   IT innovation

5.1.3.1.

Super-fast broadband networks support all innovative digital services. For IT in customs procedures to have the hoped-for results, all private operators (companies) and public operators (third-country authorities) involved in customs must have access to top quality equipment and services.

5.1.3.2.

If the Multiannual Strategic Plan for electronic customs systems (e-customs MASP) (15) includes the customs programme, any digital innovation will become part of it. The EESC would like any innovation approved by the authorities to be securely shared across the whole interconnected customs network in the Union so that no time is lost after proof of concept by authorities and there is no diversion of trade.

5.1.3.3.

Cybersecurity in relation to data and networks is essential in every sphere: the greater the interconnectivity, the greater the risk. The EESC believes this is important enough to be mentioned in the programme and to be allocated funding, especially as customs activities have a strategic dimension.

5.2.   Indicators

5.2.1.

The Commission focuses on the way in which the programme can contribute to uniform implementation of customs policy and legislation, and proposes novel qualitative indicators for evaluating this.

5.2.2.

The EESC recommends that the training provided for in the programme prepare participating countries for gathering this interesting data, in terms of both collecting and processing it. In a period of budget austerity, customs authorities may well lack the time and/or staff to develop these surveys, whose reliability might then be uncertain. Measurement tools already exist, and software programmes could provide direct information on, for example, the ‘Availability of European electronic systems’.

5.3.   Governance

5.3.1.

To avoid trade diversion and distortion of competition, the Commission plans to coordinate activities so as to ensure uniform conditions for implementing the rules. As on previous occasions it wants to surround itself with committees and groups of experts, emphasising civil society participation.

5.3.2.

Such coordination must be organised in collaboration with national customs authorities and with experts at operational level and over the long term. The EESC would welcome an open dialogue with players such as external experts and representatives of public authorities, including third-country authorities, and representatives of international organisations, business and civil society. The Committee would like to see: (1) before its completion, the European Council promoting the customs programme and signalling its interest in the programme being fully realised; (2) details in the programme about the civil society participants and citizens’ access to review mechanisms to protect their rights.

5.3.3.

The EESC believes that achieving a uniform system would require all the Member States and European institutions to work transparently towards the same goals. After the policy decisions on priorities, the Committee would have liked to see a clear separation between measures relating to control of legal and illegal goods, and border checks on individuals (in compliance with customs policy and migration policy).

5.3.4.

General factors should be mentioned that would underpin the success of the customs programme, including fiscal harmonisation between the Member States, involvement of all participating countries in training and a willingness on their part to invest in cooperation, combat fraud, and trade on fair terms.

5.4.   Building human capacity

5.4.1.

Customs is not starting from scratch: it already has human resources, equipment and skills. This key point is noted in the programme, but not expanded on. Every national customs authority should be eligible for support to develop infrastructure and knowledge.

5.4.2.

The Committee advocates making common EU training widely available, following Europol’s example. This could be subject-based, e.g. on interoperability, AEO (16) audits, fighting fraud, cybersecurity, internal security, etc. The online modules that have already been developed by the European Commission might be complemented by a special Erasmus programme for customs might devoted to continuing learning, through which temporary exchanges of all grades of customs officials could take place, and which would be financed under the customs programme.

5.4.3.

The EESC firmly believes that for cooperation between national authorities with different cultures to succeed and for good practices to be identified and shared, customs officials must have learned to understand each other and to practise their profession in a similar way (17), in terms of how they use digital tools as well as in other areas (e.g. administrative skills). The EESC believes it would be good policy for both the Member States and the Union to maintain customs operations on the ground, notwithstanding the ever-increasing technical requirements. It does not want to see the combination of austerity and the stated objectives of the programme result in reductions in administrative staff, and would like everyone to have access to ways of improving their skills in order to cooperate with their counterparts in other EU countries.

5.5.   Protection of fundamental rights

5.5.1.

The Committee points out that as well as being an instrument for implementing customs policy, the customs programme encourages the upholding of fundamental rights by providing standard training to customs officials and representatives of participating third countries. It is important to take full advantage of this opportunity.

5.5.2.

The General Data Protection Regulation (GDPR (18)) applies across the Union. Economic operators, businesses and officials must comply with the GDPR, and must be able to invoke it. Protection of data — whether of individuals, industry or businesses — can be vitally important and it must be guaranteed by national and EU systems, in the case of routine procedures and disputes, as well as in e-commerce and in statistics relating to the programme assessment indicators.

5.5.2.1.

Management of the Union’s external borders, in cooperation with Frontex, may involve cases where human rights are threatened. The customs authorities concerned must respect the human rights of both the presumed perpetrators and their customs officials.

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(1)  Report from the Commission to the European Parliament and the Council of 11 April 2018 — COM(2018) 78 final.

(2)  SWD(2017) 34 final.

(3)  COM(2017) 793 — 2017/0351 (COD) and COM(2017) 794 final — 2017/0352 (COD).

(4)  Regulation (EU) 2016/1624.

(5)  COM(2018) 322 final.

(6)  Under the UCC (Union Customs Code, Regulation (EU) No 952/2013, which came into effect on 1 May 2016), an operator can submit declarations to a single customs office in the Union (centralised system), even if the goods pass through different places. Its stated objective is for all customs formalities to be paperless by 31 December 2020.

(7)  See Decision No 70/2008/EC of the European Parliament and of the Council of 15 January 2008 on a paperless environment for customs and trade.

(8)  OJ C 434, 15.12.2017, p. 43.

(9)  Hercule III (Regulation (EU) No 250/2014) has a budget of EUR 104,9 million and is intended to protect the EU’s financial interests by supporting activities to combat irregularities, fraud and corruption affecting the EU budget. The programme is run by the European Anti-Fraud Office (OLAF).

(10)  GNI: gross national income.

(11)  OJ C 74, 23.3.2005, p. 32, point 4.5.15.

(12)  COM(2018) 434 final.

(13)  SWD(2018) 322 final, Impact Assessment.

(14)  COM(2017) 793 final.

(15)  e-customs MASP-C Multi-Annual Strategic Plan, Taxud.a.3(2017)6498377.

(16)  AEO: authorised economic operator.

(17)  See Matthaeus programme.

(18)  GDPR: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=uriserv:OJ.L_.2016.119.01.0001.01.ENG&toc=OJ:C:2016:119:TOC

Opinion of the European Economic and Social Committee on ‘Proposal for a Regulation of the European Parliament and of the Council establishing the space programme of the Union and the European Union Agency for the Space Programme and repealing Regulations (EU) No 912/2010, (EU) No 1285/2013, (EU) No 377/2014 and Decision 541/2014/EU’

(COM(2018) 447 — 2018/0236 (COD))

(2019/C 62/08)

Rapporteur:

Raymond HENCKS

Consultation	European Commission, 12.7.2018 Council, 13/07/2018
Legal basis	Article 304 TFEU
Section responsible	Section for the Single Market, Production and Consumption
Adopted in section	2.10.2018
Adopted at plenary	17.10.2018
Plenary session No	538
Outcome of vote (for/against/abstentions)	189/3/2

1.   Conclusions and recommendations

1.1.

The European Union can boast a number of major success stories in the space sector. Through its space programmes it contributes to addressing certain major global challenges, including those relating to climate change, security and improving citizens’ daily living conditions, while retaining its sovereignty and its strategic independence vis-à-vis other space powers.

1.2.

The EESC supports the EU in its complementary efforts to remain a major independent space power. It agrees with it acquiring financial resources commensurate with its ambitions, in particular a ‘prime reference amount’ of EUR 16 billion, which the EESC views as a minimum financial envelope. The EESC reiterates its call for new financing opportunities to be found, together with the European Investment Bank, to support space-related research, design and manufacturing projects by private companies, SMEs and start-ups.

1.3.

As regards the specific objectives of the European space programme, the EESC welcomes the fact that, alongside the programme’s continuously evolving flagships (Galileo and Copernicus), the EU is giving ‘space surveillance and tracking’ more autonomy and powers so as to protect space infrastructure from the risk of the huge amount of space debris that is orbiting around the Earth. It also welcomes the new initiative relating to the Govsatcom system, which responds to the need for secure European satellite communications.

1.4.

The EESC notes, however, that the EU remains very low-key in terms of its communication with citizens on the benefits of EU space activities for society and the economy. It proposes an appropriate campaign, so that citizens realise the added value of European space activities, which have become indispensable to their daily lives, boosting jobs, growth and investment, and which are an asset for their safety.

1.5.

Moreover, we are very far from making the most of the benefits that space offers for the European economy. The potential of the Earth Observation Programme, and of harnessing the vast amount of data it produces, is largely under-utilised. The EESC calls for an information and awareness-raising initiative to be launched for potential beneficiaries, especially in the maritime and agricultural sectors.

1.6.

Internationally, the European space sector is subject to fierce competition, given that space activities are becoming increasingly commercial with greater private sector participation on the market outside the EU. Consequently, it will be absolutely necessary to boost the importance of the single market and apply a principle of ‘European preference’ in the space sector.

1.7.

Europe needs competitive launchers suited to commercial and institutional markets if it wants to maintain its independent access to space in the face of a growing number of launchers and strong competition. The EESC encourages the Commission to explore ways to support European research and launch infrastructure.

1.8.

The EESC considers that the futuristic project of extracting and retrieving natural resources outside the earth’s orbit (space mining), an area in which one Member State has positioned itself as a pioneer, calls for the EU to follow developments more closely, in order to maintain clear European added value.

2.   Introduction

2.1.

Since the 1990s, the EU has been developing a space policy oriented towards independence from other space powers, in particular through the development of programmes and applications in key industrial sectors such as communications, security, emergency services, navigation systems, information, event broadcasting, climate change, weather forecasting, etc.

2.2.

With the support of the European Space Agency (ESA), the EU now has a major network of satellites and its own access to space, via French Guiana, using European launchers. ESA Member States (1), in turn, have their own space agencies and programmes, research centres, ground facilities and substantial industrial capabilities. In general, they are the source of space initiatives which are then taken up in the framework of the EU or ESA.

2.3.

EU action involves, in particular, designing, fully financing and operating the following space programmes, for which it bears overall responsibility for implementing, including in the area of security: — Galileo is the first highly accurate global satellite navigation and positioning system, specially designed for civilian purposes, provided free of charge to users, — Copernicus provides Earth observation data covering six areas: monitoring of land, the marine environment, the atmosphere and climate change as well as emergency management and security, — EGNOS is a pan-European system of three satellites which improves the quality of the open signals emitted by existing global satellite navigation systems and provides more accurate geolocation data, — SST (space surveillance and tracking) is a space monitoring system used to track the 780 000 items of space debris in orbit around the Earth, — Govsatcom is a governmental (civil and military) satellite communications system, recognised as one of the elements of the Global Strategy for the Union’s Foreign and Security Policy.

2.4.

The Commission has currently delegated the development and deployment of space infrastructure to ESA, which is responsible for deploying the Galileo infrastructure, while the EU agency in Prague (the European GNSS Agency — GSA) is responsible for promoting the market penetration of Galileo. ESA also manages some Copernicus operations.

2.5.

The European space industry employs more than 231 000 people, including 41 333 in the area of space construction, and generates an added value estimated by the European Commission to be between EUR 53 billion and EUR 62 billion in 2017.

3.   Commission proposal

3.1.

The proposed space programme is a response to the industrial strategy presented by Mr Juncker in his 2017 State of the Union address, and to the Commission Communication of 26 October 2016 on a new ‘Space Strategy for Europe’.

3.2.

The following acts: — Regulation (EU) No 1285/2013 on the implementation and exploitation of European satellite navigation systems, Galileo and EGNOS, — Regulation (EU) No 377/2014 establishing the Copernicus Programme, — Decision No 541/2014/EU establishing a Framework for Space Surveillance and Tracking Support, — Regulation (EU) No 912/2010 of the European Parliament and of the Council setting up the European GNSS Agency, are repealed and replaced by the Regulation under consideration, which lays down rules common to all components of the programme, dealing in particular with budgetary contributions and mechanisms, financial provisions, public procurement, governance and security. The Regulation also lays down certain rules specific to each of those components.

3.3.

The European GNSS Agency, which is responsible for implementing a new generation of satellite navigation systems (GNSS), becomes the European Union Agency for the Space Programme, which is responsible for contributing to the programme, in particular with regard to security, communication and promotional activities, as well as activities linked to marketing the services offered by Galileo and EGNOS.

3.4.

The new space programme aims to: — provide high-quality, up-to-date and, where appropriate, secure space-related data, information and services, — maximise socioeconomic benefits, — enhance the security of the EU and its Member States, — promote the EU’s role as a major player on the international stage.

3.5.

The proposed Regulation sets the total budgetary allocation for all EU space activities, including research, at EUR 16 billion for the period 2021-2027 (compared to EUR 12,6 billion for the period 2014-2020). This financial envelope constitutes the prime reference amount in line with the Interinstitutional Agreement of 2 December 2013 on budgetary discipline, and can be broken down as follows: — Galileo and EGNOS EUR 9,7 billion, — Copernicus EUR 5,8 billion, — SST/Govsatcom EUR 0,5 billion.

3.6.

The new Regulation also addresses the different forms of cooperation and partnership between stakeholders, as well as relations with international organisations and third countries.

3.7.

The Commission will report annually to the European Parliament and the Council on the implementation of the space programme, based on performance indicators still to be established.

3.8.

The programme will also be evaluated at least every four years. The conclusions of the evaluations, together with the Commission’s comments, will be forwarded to the European Parliament and the Council as well as to the EESC and the Committee of the Regions.

4.   General comments

4.1.

It must first of all be recognised that the EU can congratulate itself on having developed its own space policy in good time and on becoming independent from the other space powers, including one previously considered a reliable partner but that has since become unpredictable.

4.2.

The EESC supports the EU in its complementary efforts to remain a major independent space power and to be able to consolidate its technical strengths. Space is a sector requiring considerable financial resources. There can be no ambitious space policy without a corresponding budget.

4.3.

The fact that the draft Regulation plans to allocate financial resources to the EU in line with its ambitions — i.e. a financial envelope of EUR 16 billion as a minimum ‘prime reference amount’ — can therefore only be welcomed. It follows that the Parliament and the Council, as well as the Commission when it draws up the draft budget, undertake not to depart from that amount by more than 10 % for the entire duration of the programme (except in exceptional circumstances). Nonetheless, the EESC reiterates its call for new financing opportunities to be found, together with the European Investment Bank (EIB), to support space-related research, design and manufacturing projects by private companies, SMEs and start-ups, such as in the area of nanosatellites, miniature propulsion systems, extending satellite lifespans, new applications for Earth observation, etc.

4.4.

Moreover, space research and innovation — which must be strengthened if the EU wishes to remain at the cutting edge of progress — can be financed by Horizon Europe, under the ‘Leadership in enabling and industrial technologies’ work programme, with a budget of EUR 13,5 billion.

4.5.

In this regard, we must welcome the fact that, after Brexit, the UK intends to request to continue participating in the European space programme. However, the EESC regrets the fact that only 20 of the current 28 EU Member States are ESA members.

4.6.

With regard to the specific objectives of the space programme, the EESC approves of the fact that the new applications and new services take account of developments in the area of autonomous cars, drones, robots and the internet of Things (Galileo), and focus — in the interests of humankind — on the monitoring of climate change (e.g. anthropogenic CO2 and greenhouse gas emissions monitoring), land use in support of agriculture, the observation of polar areas, forest and water management, and the detection of small objects (e.g. ships) to monitor illegal traffic (Copernicus).

4.7.

The EESC also supports the proposal to allocate more autonomy and capacity to SST in order to protect space infrastructure and the Earth from space risks, as well as the creation of new activities to observe space debris and extreme space weather phenomena resulting from solar activity as well as asteroids and comets (near-Earth objects). The issue of space debris directly concerns over sixty countries that currently own and operate satellites. This space surveillance is crucial given the risk of damage to essential infrastructure that affects the daily lives of citizens, with the associated service interruptions, inconvenience and economic losses.

4.8.

The new initiative on the Govsatcom system responds to the need for secure EU satellite communication (border surveillance, maritime community, policing, civil protection, humanitarian aid, EU external action, etc.) and will make it possible to improve the safety and independence of future European secure telecommunications systems and services, which the EESC supports.

4.9.

The EU can thus boast a number of major success stories in the space sector. The EESC notes, however, that the EU remains very low-key in terms of its communication with citizens on the benefits of space for society and the economy. Many are not aware that when, for example, they use their mobile phone, smartphone or navigation systems, watch satellite TV, travel by land, sea and air, or withdraw money, they are using space services. It will therefore be necessary to ensure, via an appropriate campaign, that citizens realise that European space activities are essential for their daily lives, create employment, growth and investment, and help improve their security.

4.10.

Similarly, we are very far from making the most of the benefits that space offers for the European economy. The potential of the Earth Observation Programme, and of harnessing the vast amount of data it produces, is largely under-utilised. The EESC calls for an information and awareness-raising initiative to be launched for potential beneficiaries, especially in the maritime and agricultural sectors.

4.11.

As the Commission notes, there have been difficulties related to the space sector’s capacity to hire appropriate staff. The EESC is of the view that space science should be included in the school system, and that awareness should be raised among Member States’ universities in order for them to offer a master’s degree in space engineering.

4.12.

Internationally, the European space sector will have to meet the challenge of fierce competition, given that space activities are becoming increasingly commercial as a result of greater private sector involvement. The major European operators carry out most of their activities outside Europe. Consequently, it will be absolutely necessary to boost the importance of the single market and apply a principle of ‘European preference’ in the space sector.

4.13.

As the Commission states, space is part of a global value chain, which is facing major changes pushing the traditional boundaries of the space sector. This ‘New Space’ is revolutionising the space sector, not only from a technological perspective but also from an economic model point of view. It is therefore essential for the EU to actively support the whole space sector, in particular research and development, start-ups and business incubators active in this sector. The EESC regrets that the Commission confines itself in this Regulation to stating that the space programme shall support cooperation between undertakings in the form of space hubs bringing together, at national and regional levels, actors from the space and digital sectors, without any further information about the functioning and financing of such hubs.

This ‘New Space’ project could consist of developing the economic sector of space assets (space mining), with the aim of extracting and retrieving natural resources from outside the earth’s orbit. Asteroids, for example, may contain nickel, platinum, cobalt and iron. NASA estimates that the asteroid belt between Mars and Jupiter (more than a million asteroids) is worth USD 700 trillion. These resources may be brought back to Earth, or used in space as energy for satellites or to build bases from which space exploration missions further afield can depart.

4.14.

Luxembourg is the second country in the world, after the United States, to establish a legal framework (which some contest) allowing for the exploration and commercial use of space resources. The EIB has also been involved in the project in an advisory capacity, together with ESA, which intends to provide advice and guidance through its financial advisory service for innovation.

4.15.

The EESC believes that the EU should step up its technological, financial and legal participation in space mining research, and ensure that the project continues to have clear European value, as other American, Arab and Asian organisations and companies have become involved in the project.

4.16.

Europe needs launchers suited to commercial and institutional markets if it wishes to be able to maintain its independent access to space. Reusable rockets show particularly promising progress, which will reduce costs and the turnaround time between launches. Competition on the commercial market remains intense and sometimes unfair. The EESC encourages the Commission to explore ways to support research and European launch infrastructure, while respecting the vital principle of preserving the EU’s independent access to space.

4.17.

Even if, according to the TFEU, the Member States have the power to define services of general interest, this does not detract from the competences of the EU to define such services at its own level, where this appears necessary in order to implement the EU’s objectives. The EESC calls for the EU institutions to recognise the existence and need for EU services of general interest in areas where EU action is more effective in meeting its objectives, as is clearly the case for the space sector.

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(1)  ESA has 22 Member States. The national bodies responsible for space in the following countries have a seat on ESA’s governing Council: Austria, Belgium, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Luxembourg, the Netherlands, Norway, Poland, Portugal, Romania, Spain, Sweden, Switzerland and the United Kingdom. Canada takes part in some projects under a cooperation agreement. Slovenia is an Associate Member. Bulgaria, Croatia, Cyprus, Malta, Latvia, Lithuania and Slovakia have cooperation agreements with ESA.

Opinion of the European Economic and Social Committee on a) Proposal for a Regulation of the European Parliament and of the Council amending Council Regulation (EC) No 1206/2001 of 28 May 2001 on cooperation between the courts of the Member States in the taking of evidence in civil or commercial matters

(COM(2018) 378 final — 2018/203 (COD))

and on b) Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EC) No 1393/2007 of the European Parliament and of the Council on the service in the Member States of judicial and extrajudicial documents in civil or commercial matters (service of documents)

(COM(2018) 379 final — 2018/204 (COD))

(2019/C 62/09)

Rapporteur:

Bernardo HERNÁNDEZ BATALLER

Referral	a) European Parliament, 10.9.2018 b) European Parliament, 10.9.2018
Legal basis	Article 304 of the Treaty on the Functioning of the European Union
Section responsible	Single Market, Production and Consumption
Adopted in section	2.10.2018
Adopted at plenary	17.10.2018
Plenary session No	538
Outcome of vote (for/against/abstentions)	184/0/9

1.   Conclusions and recommendations

1.1.

The EESC takes due note of the Commission’s proposals to amend the Taking of Evidence Regulation and the Service of Documents Regulation.

1.2.

The EESC calls on the Commission to take into account the observations in this document concerning their proposals, specifically those set out in points 5.2, 5.3, 5.4, 5.5, 5.9, 5.10, 6.3, 6.4. and 6.6, since without a genuine judicial area, the freedoms of the single market cannot be fully taken advantage of.

2.   Background

2.1.

With the objective of creating an area of freedom, security and justice in the European Union (EU), Article 81 of the Treaty on the Functioning of the European Union (TFEU) lays the groundwork for developing ‘judicial cooperation in civil matters’ having cross-border implications, by enabling the EU to adopt measures for the approximation of the laws and regulations of the Member States.

2.2.

When necessary for the proper functioning of the internal market, a legal provision exists to adopt measures aimed at ensuring mutual recognition and enforcement — between Member States — of judgments and of decisions in extrajudicial cases and cooperation in the taking of evidence.

2.3.

To regulate judicial assistance between Member States, the EU replaced the systems set out in the Hague Conventions by adopting the following legal instruments:

2.3.1.

Council Regulation (EC) No 1206/2001 (1) on cooperation between the courts of the Member States in the taking of evidence in civil or commercial matters, adopted on the initiative of the Federal Republic of Germany (‘Taking of Evidence Regulation’), in force in all Member States except Denmark.

2.3.2.

This Regulation establishes a direct and rapid EU-wide system to transmit and implement requests for the taking and execution of evidence between courts and lays down precise rules as to the form and content of such requests. It has put in place a system of direct dealings between courts, replacing the previous system, under which requests were sent from a court in one Member State to the central body of the other Member State.

2.3.3.

Regulation (EC) No 1393/2007 (2) of the European Parliament and of the Council on the service in the Member States of judicial and extrajudicial documents in civil or commercial matters (‘Service of Documents Regulation’), in force in all Member States (3).

2.3.4.

This Regulation applies in civil and commercial matters where a judicial or extrajudicial document has to be transmitted from one Member State to another for service there. However, it does not extend to revenue, customs or administrative matters or to liability of the state for actions or omissions in the exercise of state authority (acta iure imperii).

2.4.

The EESC has always been in favour of creating a common area of freedom, security and justice in the EU, which (among other things) involves adopting measures in the area of judicial cooperation and in civil matters — measures that are needed so that citizens and enterprises are not prevented or discouraged from exercising their rights due to the incompatibility or complexity of the Member States’ judicial systems.

2.5.

In any event, in order to create the European judicial area, it is imperative to improve cooperation between courts, thus simplifying and speeding up procedures so as to eliminate dysfunctions and delays.

3.   Commission proposals

3.1.

The Commission’s proposals seek to amend the two existing regulations on the taking of evidence and the service of documents.

3.2.   The proposal to amend the Taking of Evidence Regulation

3.2.1.

The proposal aims to improve the smooth functioning of the area of freedom, security and justice, and of the internal market, improving and speeding up the cross-border taking of evidence.

3.2.2.

It seeks to bring the Regulation into line with technical developments, exploiting the benefits of digitalisation; requiring that the communication and exchange of documents be carried out electronically by default; and respecting data protection and privacy, without any infringement upon parties’ procedural rights. To this end, the system will have to incorporate a decentralised structure enabling direct communication between end-users.

3.2.3.

The proposal encourages the use of modern methods of taking evidence, such as videoconferencing when there is a need to hear a person who is in another Member State. It seeks to ensure a more appropriate, more frequent and faster use of direct taking of evidence when hearing a person domiciled in another Member State as a witness, expert or party.

3.2.4.

It removes legal barriers to the acceptance of electronic (digital) evidence. The proposal provides for the mutual recognition of digital evidence. This will reduce the burden for citizens and businesses in proceedings, and will also limit the instances where electronic evidence is rejected.

3.2.5.

It seeks to solve the issue of the divergent interpretations of the term ‘court’, which is currently not defined in the Taking of Evidence Regulation. The proposal aims to dispel uncertainties in this regard.

3.2.6.

The proposal is in line with other EU instruments in relation to civil judicial cooperation. It is also without prejudice to the possible exchange of information between authorities with regard to recognition and enforcement in matrimonial matters and matters of parental responsibility (4) or with regard to maintenance obligations (5), even where that information has evidentiary value, so the requesting authority is free to choose the most suitable method.

3.2.7.

The proposal regulates the ability of one Member State’s diplomatic officers or consular agents to take evidence in the territory of another Member State and in the area where they exercise their functions, without the need for a prior request to the central body or competent authority of that Member State.

3.2.8.

To ensure mutual recognition of digital evidence, such evidence taken in a Member State in accordance with its law should not be denied recognition as evidence only because of its digital nature.

3.2.9.

A delegation to the Commission, in accordance with Article 290 TFEU, is included, for the sake of making changes to or updating the standard forms in the Annexes.

3.3.   Service of Documents Regulation

3.3.1.

The main focus of its rules is in fact to lay down uniform channels for transmission of documents from one Member State to another for purposes of serving those documents in the other Member State. The experience of applying the current Regulation, and the relevant case law issued by the Court of Justice of the European Union (CJEU), have been particularly useful in this connection.

3.3.1.1.

Its scope of application is being changed, but the current language of the provision on extrajudicial documents remains. Meanwhile, as regards judicial documents, the Regulation will apply in all situations where the domicile of the addressee is in another Member State.

3.3.1.2.

This new standard, under which all instances of service of documents are obligatorily covered when the addressee is domiciled in another Member State, only applies to the service of the documents instituting the proceedings and the ‘service of process’. As to the subsequent instances of service of judicial documents in the course of a judicial proceeding, the extra protection is less relevant.

3.4.

The communication and exchange of documents between sending and receiving authorities is carried out electronically, through a decentralised IT system made up of national IT systems interconnected by a secure and reliable communication infrastructure; however, there is the option of using alternative (traditional) means of communication in cases of unforeseen and exceptional disruption of the IT system.

3.5.

It is stipulated that Member States must provide assistance in locating the whereabouts of a recipient in another Member State; there are three alternative options: — judicial assistance through authorities designated by the Member States; — providing access to public domicile registers through the European e-justice Portal; — providing detailed information via the European e-justice Portal on available tools for locating persons in their territories.

3.6.

Foreign parties to proceedings may be required to appoint a representative in the Member State of the proceedings for the purposes of service of documents related to the proceedings.

3.7.

There is an improvement to the procedure on the right of the addressee to refuse to accept the document if it is not drawn up or translated into an appropriate language.

3.8.

The proposal obliges the postal service providers to use a specific return slip (acknowledgement of receipt) when serving documents by post under the Regulation. It also introduces a minimum rule concerning persons to be regarded as eligible ‘substituting recipients’ if the postal service provider cannot hand over the document to the addressee in person.

3.9.

The proposal introduces the electronic service of documents as an additional alternative method of service under the Regulation.

3.10.

In the event of the defendant not entering an appearance, there are two substantial new elements: a) the court seised with the proceedings is required to send an alert message about the initiation of the proceedings or about the default judgment to the available user account of the defendant; b) a uniform period of two years is set, as of the issuance of the default judgment, for the availability of extraordinary relief from the effects of the expiry of the time for appeal in the context of challenging the recognition and enforcement of that judgment in another Member State.

4.   General comments

4.1.

The EESC welcomes the Commission’s proposals to amend the Taking of Evidence Regulation and the Service of Documents Regulation, as they facilitate judicial integration in the Member States by establishing uniform channels in their respective fields of application.

4.2.

Both proposals contribute to: improving judicial cooperation in the EU, based on the principle of mutual recognition of judgments (Article 81 TFEU); reinforcing the area of freedom, security and justice (Article 3(2) and Article 67 TFEU); and establishing the internal market (Article 26 TFEU).

4.3.

In sum, the adoption and application of the regulatory framework proposed by the Commission should contribute objectively to the dismantling of several invisible barriers that directly affect the lives of all citizens — whether nationals of the Member States or people who are resident in the EU — and the commercial activities of companies that operate in the EU.

4.4.

In order to guarantee access to justice and to a fair trial, it is essential that the provisions of these two proposals be applied in judicial cases that have cross-border implications, as well as being appropriately substantiated.

4.5.

The proposals are also in line with the digital market strategy in relation to e-government, especially as regards the need to take steps to modernise public administration and achieve cross-border interoperability, which facilitates interaction with the general public.

4.6.

The proposals increase legal certainty and thereby help to avoid delays and undue costs for citizens, companies and public administrations, as well as addressing shortcomings in the protection of parties’ procedural rights, since they try to avoid legal defencelessness in accordance with the ‘principle of equality of arms’.

4.7.

It should be noted that the provision concerning delegated acts to update and amend the annex to the two proposed regulations is not in line with the position held by the EESC (6) in this regard, since the proposal provides that the delegation may be of indeterminate duration, despite the call for the adoption of delegated acts to be subject to a time limit.

4.8.

In short, the EESC considers that without a genuine judicial area the freedoms of the single market cannot be fully taken advantage of.

5.   General comments on the Taking of Evidence Regulation

5.1.

The proposed amendment to the Taking of Evidence Regulation aims to enhance electronic communications between the relevant competent bodies as a replacement for the use of paper, which is slower and more expensive, as well as to use videoconferencing to take evidence in other Member States, without incurring any loss to the procedural rights of the parties.

5.2.

Although this proposal presupposes that the courts concerned will behave in a diligent and effective way and that scrupulous respect will be shown for the principles of sincere cooperation and mutual recognition — the latter expressly invoked to prevent the evidential value of digital evidence from being rejected (fourth recital and Article 18(a) of the proposal) — it does not establish any provision in the case of a refusal on the part of the requested court due to: — undue delay; — lack of motivation; or — insufficient motivation. These cases amount in practice to the impossibility of accessing effective judicial protection and a solution should be found to ensure that this does not happen.

5.2.1.

This is relevant in relation to the current state of EU law, in which the mere refusal of a court required to refer a preliminary ruling to the CJEU in a case that is under its jurisdiction could be considered a serious breach of the obligations of the state under EU law (7).

5.2.2.

There are many situations in which the requested court can severely impair defendants’ rights if it does not cooperate with due diligence, especially with regard to interim judicial protection, by resorting to reservations about national sovereignty, national security, public order, etc. (see Article 4(2) TEU) or in the case of divergences arising from the different procedural practices in the Member States.

5.2.3.

The latter situation occurs, for example, during pre-trial discovery, as Article 23 of the Hague Convention of 18 March 1970 on the taking of evidence abroad in civil or commercial matters allows the Contracting States to introduce a sovereignty reservation to reject letters of request that originated in the preliminary phase of the proceedings (after the lawsuit has been filed but before the trial has begun).

5.2.4.

The current Regulation (EC) No 1206/2001, although it does not explicitly address this issue, excludes it from its scope of application, as is clear from Council Declaration 54/01 of 4 July 2001 (doc. 10571/01, p. 1).

5.2.5.

Occasionally, undue delays may be the result of insufficient technical skills on the part of the requested courts or of inadequate technological infrastructure. In order to prevent and eliminate these situations as much as possible, the proposal should lay down a provision requiring Member States to guarantee that their courts will be digitally up-to-date and to ensure that their technological infrastructure is adequate.

5.3.

On the other hand, certain provisions of the proposal should be made specific. For example, Article 1(4) establishes a restrictive notion of ‘court’ by defining it as ‘any judicial authority in a Member State which is competent for the performance of taking of evidence’ according to the Regulation.

5.3.1.

While this definition could include public officials (e.g. notaries public), it excludes private arbitration bodies, whether in the fields of investment, commercial or consumer arbitration, or arbitration bodies that resolve other issues.

5.3.2.

The major significance of arbitration bodies for the commercial and economic activities of the Member States and of third countries is therefore not recognised.

5.3.3.

With regard to the latter, situations of lis pendens may arise, as well as problems relating to the execution of their decisions by the Member States’ requested courts (e.g. an anti-suit injunction), which could cause legal uncertainty.

5.3.4.

Certainly, this restrictive definition of ‘court’ tallies with the case law of the CJEU, which usually denies the status of ‘court’ to private arbitration bodies (8).

5.3.5.

In the EESC’s opinion, automatically applying the case law of the CJEU to the field in question could lead to a situation in which the decisions of the arbitration tribunals are not recognised or the requested court refuses to cooperate, which — in some cases — could ultimately leave the parties in question defenceless.

5.3.6.

However, arbitration clauses between the investor and the state referred to in bilateral investment treaties should be excluded from this assessment, as they are incompatible with EU law and have no legal effect inasmuch as they are illegal, overlapping with the rules of the single market and discriminating between investors in the EU, in line with the case law of the CJEU in the ‘Achmea’ judgment (9).

5.4.

For its part, Article 17(b) recognises the right of diplomatic or consular representatives of a Member State to take evidence, without prior request, on the territory of another Member State in which they are accredited. This power is limited to hearing nationals of the Member State which they represent without compulsion, in the context of proceedings pending in the courts of that Member State.

5.5.

It would be useful to extend the judicial assistance tasks that are set out in the proposal for these officials, in order to adapt them to the current situation in the EU, particularly as regards the free movement and residence of Member State nationals and freedom of establishment on the part of businesses. As a result, non-nationals would also be permitted to perform these officials’ tasks without the need for prior authorisation, as would nationals of the receiving state, provided that the state in question gives its authorisation.

5.6.

The EESC agrees with the need to establish an obligation to assist the serving Member State in its search for the address in the receiving Member State of the person to whom the judicial or extrajudicial document must be served, when that address is not known.

5.7.

On the other hand, in the context of the present proposal, the EU Justice Agenda for 2020 seeks to reinforce fundamental rights, including civil procedural rights.

5.8.

In this regard, the digitalisation measures set out in the proposal take into account the data protection and privacy requirements in the system for electronic exchanges between the courts concerned, such as the establishment of a predefined set of users of the system (which is limited to the courts and the judicial authorities of the Member States).

5.9.

Yet despite the fact that attacks on this electronic infrastructure are expected to multiply in the future — a risk that may be exacerbated as a result of any interconnection between the computer systems concerned — no provision is made for ascertaining who is responsible in the event that cyber-attacks, or computer system failures and crashes, lead to the dissemination of sensitive information or even destroy the evidence of a proceeding.

5.10.

Accordingly, serious injury to the rights of individuals may occur without there being any foreseeable way of insisting upon the liability of their perpetrators. It may even be the case that the individuals themselves must bear these injuries if those responsible claim that they are the result of force majeure.

6.   General comments on the proposed Service of Documents Regulation

6.1.

The EESC believes that the proposed Service of Documents Regulation will improve and speed up judicial proceedings, as it will simplify and streamline cooperation mechanisms for the service of documents. This will improve the administration of justice in cross-border cases, strengthen civil procedural rights and enhance mutual trust between Member States’ justice systems.

6.2.

This proposal seeks to do away with slowness and with the frequent breach of deadlines — situations that occur because the documents are served by the competent bodies — by insisting that the service of documents be carried out electronically. It also strengthens the rights of defence of the recipient by means of targeted interventions on the part of the competent bodies with regard to uncertainty arising from the non-acceptance of a document or in cases of default judgments.

6.3.

The wide range of subjective and material applications of this proposal is worth noting, given that it includes all persons, both physical and legal. It therefore also applies to all retailers, including micro-enterprises, and only allows those exceptions that are specifically mentioned (Article 1(1) and (3)). All the linguistic versions would need to be aligned in order to make clear that the proposed Regulation affects not only the document that triggers the procedure, but also all the judicial documents that relate to the proceedings.

6.4.

The EESC agrees with the guarantees and safeguards laid down to deal with the ‘refusal to accept a document’ on the part of the recipient and the obligation of the receiving body to provide notification of this. On the other hand, in order to balance the rights of the parties to the proceedings, the defendant must have full knowledge of the document that gives rise to the proceedings, and so it seems appropriate for it to be drafted in a language understood by the recipient or one of the official languages of the place of service of the document.

6.5.

The provision of additional means of serving documents by post, the possibility for service to be carried out directly by judicial agents, officials or other competent persons from the requested Member State, and the electronic service of documents, all appear to be appropriate.

6.6.

In any case, it is important to safeguard and guarantee the integrity and purpose of the document, whether judicial or extrajudicial.

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(1)  Council Regulation (EC) No 1206/2001 of 28 May 2001 (OJ L 174, 27.6.2001, p. 1).

(2)  Regulation (EC) No 1393/2007 of 13 November 2007, repealing Council Regulation (EC) No 1348/2000 (OJ L 324, 10.12.2007, p. 79).

(3)  By virtue of the ‘parallel agreement’ with Denmark (OJ L 300, 17.11.2005, p. 55). The United Kingdom and Ireland, in accordance with Article 3 of Protocol No 21 to the Treaty, notified at that time that they wished to take part in the adoption and application of these two regulations.

(4)  Council Regulation (EC) No 2201/2003 of 27 November 2003 (OJ L 338, 23.12.2003, p. 1).

(5)  Council Regulation (EC) No 4/2009 of 18 December 2008 (OJ L 7, 10.1.2009, p. 1).

(6)  OJ C 288, 31.8.2017, p. 29; OJ C 345, 13.10.2017, p. 67.

(7)  See Advocate General Wathelet’s opinion in case C-416/17, European Commission v French Republic, points 95-103.

(8)  For example, in the following cases: Nordsee case 102/81 (1982), paragraphs 10-13; Eco Swiss case C-126/97 (1999), paragraph 34; Denuit and Cordier case C-125/04 (2005), paragraph 13; Gazprom case C-536/13 (2015), paragraph 36; Achmea case C-284/16 (2018), paragraphs 45-49, etc.

(9)  ‘Achmea’ judgment, case C-284/16 of 6 March 2018 (ECLI:EU:C:2018:158).