ISSN 1725-2423

doi:10.3000/17252423.C_2011.084.eng

Official Journal

of the European Union

C 84

European flag  

English edition

Information and Notices

Volume 54
17 March 2011


Notice No

Contents

page

 

III   Preparatory acts

 

EUROPEAN ECONOMIC AND SOCIAL COMMITTEE

 

468th plenary session held on 19 and 20 January 2011

2011/C 084/01

Opinion of the European Economic and Social Committee on the Green Paper from the Commission on policy options for progress towards a European contract law for consumers and businesses COM(2010) 348 final

1

2011/C 084/02

Opinion of the European Economic and Social Committee on the Report from the Commission — Report on Competition Policy 2009 COM(2010) 282 final

7

2011/C 084/03

Opinion of the European Economic and Social Committee on the Green Paper — Corporate governance in financial institutions and remuneration policies COM(2010) 284 final

13

2011/C 084/04

Opinion of the European Economic and Social Committee on the Report from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions: Retail market monitoring report Towards more efficient and fairer retail services in the internal market for 2020COM(2010) 355 final

19

2011/C 084/05

Opinion of the European Economic and Social Committee on the Proposal for a Regulation of the European Parliament and of the Council on the marketing and use of explosives precursors COM(2010) 473 final — 2010/0246 (COD)

25

2011/C 084/06

Opinion of the European Economic and Social Committee on the Proposal for a European Parliament and Council Regulation — Regulation (EU) No …/2010 of the European Parliament and of the Council on the approval and market surveillance of two- or three-wheel vehicles and quadricycles COM(2010) 542 final — 2010/0271 (COD)

30

2011/C 084/07

Opinion of the European Economic and Social Committee on the Proposal for a Regulation of the European Parliament and of the Council on Short Selling and certain aspects of Credit Default Swaps COM(2010) 482 final — 2010/0251 (COD)

34

2011/C 084/08

Opinion of the European Economic and Social Committee on the Green Paper — Towards adequate, sustainable and safe European pension systems COM(2010) 365 final

38

2011/C 084/09

Opinion of the European Economic and Social Committee on the Proposal for a Directive of the European Parliament and of the Council amending Council Directive 2001/112/EC relating to fruit juices and certain similar products intended for human consumption COM(2010) 490 final

45

2011/C 084/10

Opinion of the European Economic and Social Committee on the Proposal for a Regulation of the European Parliament and of the Council amending Council Regulation (EC) No 1288/2009 establishing transitional technical measures from 1 January 2010 to 30 June 2011COM(2010) 488 final — 2010/0255(COD)

47

2011/C 084/11

Opinion of the European Economic and Social Committee on the Amended proposal for a Regulation of the European Parliament and of the Council amending Council Regulations (EC) No 1290/2005 and (EC) No 1234/2007, as regards distribution of food products to the most deprived persons in the Union COM(2010) 486 final — 2008/0183 (COD)

49

2011/C 084/12

Opinion of the European Economic and Social Committee on the Amended proposal for a Council Directive on the structure and rates of excise duty applied to manufactured tobacco COM(2010) 641 final — 2007/0206 (CNS)

53

2011/C 084/13

Opinion of the European Economic and Social Committee on the Proposal for a Directive of the European Parliament and of the Council on roll-over protection structures mounted in front of the driver’s seat on narrow-track wheeled agricultural and forestry tractors COM(2010) 610 final — 2010/0302 (COD)

54

2011/C 084/14

Opinion of the European Economic and Social Committee on the Proposal for a Regulation of the European Parliament and of the Council on establishing a system for the identification and registration of ovine and caprine animals COM(2010)635 final — 2010/0309(COD)

55

EN

 


III Preparatory acts

EUROPEAN ECONOMIC AND SOCIAL COMMITTEE

468th plenary session held on 19 and 20 January 2011

17.3.2011   

EN

Official Journal of the European Union

C 84/1


Opinion of the European Economic and Social Committee on the Green Paper from the Commission on policy options for progress towards a European contract law for consumers and businesses

COM(2010) 348 final

2011/C 84/01

Rapporteur: Mr PEZZINI

On 1 July 2010 the European Commission decided to consult the European Economic and Social Committee, under Article 304 of the of the Treaty on the Functioning of the European Union, on the

Green Paper from the Commission on policy options for progress towards a European contract law for consumers and businesses

COM(2010) 348 final.

The Section for the Single Market, Production and Consumption, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 17 December 2010.

At its 468th plenary session, held on 19 and 20 January 2011 (meeting of 19 January), the European Economic and Social Committee adopted the following opinion by 148 votes to five with eight abstentions.

1.   Conclusions and recommendations

1.1   The European Economic and Social Committee (EESC) concurs with the Commission's view regarding the need to complete the EU's internal market, inter alia in respect of European contract law, and recognises the importance of the academic work done on the Common Frame of Reference, which ought to be put to practical use.

1.2   Of the various options proposed by the Commission, the Committee favours a hybrid option which takes account of the need to reduce costs and provide legally certain solutions by means of:

a ‘toolbox’ serving as a common frame of reference available to parties drawing up cross-border contracts, accompanied by,

an optional regulatory regime establishing an ‘optional advanced new regime’ which could be used by the parties as a more favourable basis when entering into cross-border contracts, as an alternative to national rules, provided that both the toolbox and the regulation are available in all EU languages and ensure legal certainty based on the most advanced forms of protection for individual citizens and companies. Such regulation shall not prevent any Member State from maintaining or introducing more stringent protective measures for consumers.

1.3   The Committee believes that these objectives should be achieved incrementally, starting with cross-border commercial sales contracts for goods (B2B) on a pilot basis, as a useful means of putting the coexistence of the regimes to the test and monitoring how they are applied in practice.

1.4   The Committee believes that the toolbox provided by the common frame of reference could help ensure the overall coherence of European contract law, reduce obstacles to trade and promote competition in the internal market.

1.5   Moreover, the Committee believes that incorporating the ‘optional advanced new regime’ into the body of EU law and into the Member States' national laws, by means of an EU regulation, should ensure that it is all-encompassing, straightforward to implement and provides legal certainty to contracting parties that opt to use it in cross-border commercial transactions.

1.6   The scope of the two new instruments – the ‘common toolbox’ and the ‘optional advanced new regulatory regime’ – should encompass cross-border commercial sale-of-goods contracts (B2B). Labour contract law and social security contract law are excluded from the scope of the new instruments.

1.7   The Committee supports the freedom of contract and of freely negotiating contractual terms. For Business to Consumer (B2C) contracts, and those involving SMEs, maximum effective protection in addition to legal certainty and safeguards for consumers must be secured.

1.8   The Committee believes that before potentially proceeding to extend the two new instruments to cover other types of cross-border sale-of-goods contracts, the Commission should undertake an impact analysis of the instruments on the internal market – after they have been in place for a number of years – and review their added European value, in terms of costs and benefits for economic operators and consumers.

1.9   The Committee considers it vital that the Commission identify forthwith the obstacles posed by transaction costs and legal uncertainty; these obstacles prevent full advantage being taken of the benefits and opportunities of the single market, particularly by SMEs – i.e. 99 % of EU businesses – and by consumers.

1.10   The EESC calls on the Commission to carry out an impact assessment of the means available in the single market and an examination of the European value added brought by this new legislative system when it comes to costs and benefits for economic operators and consumers.

1.11   The Committee also asks the Commission to immediately launch training and information initiatives regarding the newly established legal instruments to cover both legal theory and practice, for all legal operatives, academics and final users.

1.12   The Committee asks to be more closely associated – in the role of an observer – with the work of the expert groups set up by the Commission, as is the case with the European Parliament, in order to more closely scrutinise the development of these initiatives, particularly as regards the common frame of reference for European contract law and the follow-up to the findings of the current public consultation.

2.   Introduction

2.1   The internal market is built on a multitude of contracts governed by different national contract laws. Yet, differences between national contract laws may entail:

additional transaction costs;

legal uncertainty for businesses;

a lack of consumer confidence in the internal market; and

barriers to trade.

2.1.1   The Lisbon Treaty makes action at the European level easier in the field of judicial cooperation and consumer protection in civil matters:

by guaranteeing the primacy of national rules – under Articles 12, 38, 164, 168, and 169(4) of the Treaty – where these are more advantageous for consumers;

by increasing use of the Community method (1);

with the Commission's proposals being adopted by qualified majority;

by boosting the role of the European Parliament;

by boosting democratic scrutiny via national parliaments; and

by enhancing the Court of Justice's role in monitoring legality.

2.1.2   Under the Stockholm Programme – aimed at an open and secure Europe serving and protecting the citizens – the Union may adopt common minimum rules in order to facilitate mutual recognition of judgments and judicial decisions, and police and judicial cooperation in criminal matters.

2.1.3   Every day businesses and members of the public are faced with the reality that bottlenecks to cross-border activity remain despite the legal existence of the single market. They realise that networks are not sufficiently interconnected and that enforcement of single market rules remains uneven.

2.1.4   The Commission proposes action to tackle bottlenecks in the single market by (2):

‘pressing ahead with the Smart Regulation agenda, including considering the wider use of regulations rather than directives;

making it easier, more efficient and less costly for businesses and consumers to conclude contracts with partners in other EU countries, by offering harmonised solutions for consumer contracts, [and] EU model contract clauses; and

making it easier and less costly for businesses and consumers to enforce contracts and to recognise court judgments and documents in other EU countries’.

2.1.5   Establishing an optional contract law instrument is also one of the key measures of the European Digital Agenda presented by the Commission on 19 May 2010.

2.1.6   Back in 2001, the Commission launched a debate on European contract law, involving the European Parliament and the Council, as well as the various stakeholders, including businesses, legal practitioners, academics and consumer groups.

2.1.7   The European Parliament adopted a series of resolutions on the possible harmonisation of substantive private law. In 1989 and 1994 the Parliament called for work to be started on the possibility of drawing up a common European code of private law.

2.1.8   The European Parliament pointed out that harmonisation of certain sectors of private law was essential to the completion of the internal market. It further stated that unification of major branches of private law in the form of a European civil code would be the most effective way of carrying out harmonisation.

2.1.9   The Committee has previously stated, in a 2002 opinion, that ‘creation of a uniform, general European contract law, for example by means of a regulation, a solution the Committee considers preferable in order to avoid disparities, could be a lengthy process and require further studies, but it should be based on the work already carried out by the various commissions and institutions referred to previously and on current international rules and practice’ (3).

2.1.10   In a subsequent opinion in 2010, the Committee pointed out that ‘the network on “Common Principles of European Contract Law” (CoPECL-Network) has recently finished its Draft Common Frame of Reference [DCFR] and submitted it to the European Commission. Clearly, those rules provide the European legislator with a model which it could use when enacting an optional instrument as advocated by Commissioner Reding  (4)’.

2.1.11   The Committee also made the point that ‘the DCFR, which covers general contract law, is in fact not drafted as an optional instrument. However, the editors of the DCFR highlight in their introduction that it might be used as “the basis for one or more optional instruments”’. In the Committee's view, ‘this proposal could also be implemented in a restrictive manner by introducing the general provisions of the DCFR into an optional instrument which applies only in specific areas of contract law. This would help to avoid regulatory gaps which would necessarily appear if only provisions specific to particular types of contracts were enacted’.

3.   The new Commission Green Paper

3.1   In the Green Paper, the Commission proposes a number of different approaches aimed at increasing the coherence of contract law, including:

publication online of (non-binding) model contract rules which could be used within the European single market;

a (binding or non-binding) ‘toolbox’ available to EU legislators when adopting new legislation, to ensure better, more coherent rules;

a recommendation on contract law, which would urge Member States to incorporate the European contract law instrument into their respective national legal systems, partly based on the United States model, where all but one of the 50 states voluntarily adopted the uniform commercial code;

an optional European contract law (or a ‘28th system’), which could be chosen freely by consumers and businesses in their contractual relations. This optional law would be an alternative to the existing national contract laws and would be available in all languages. It could apply in cross-border contracts only, or in both cross-border and domestic contracts. It would have to guarantee a high level of consumer protection and legal certainty throughout the life cycle of a contract;

harmonisation of national contract laws by means of an EU directive;

full harmonisation of national contract laws by means of an EU regulation; or

the creation of a fully-fledged European civil code, replacing all national rules on contracts.

3.2   The European Parliament gave its backing to the idea of a European contract law in a resolution on 25 November 2009. Former Internal Market and Competition Commissioner Mario Monti also identified in his Single Market Report of 9 May the advantages that an optional ‘28th system’ would bring for consumers and businesses (5).

3.3   On 7 September 2010, the Commission held the first meeting of business, consumer and legal practitioners' groups to discuss European contract law.

3.4   The Commission has also set up an expert group, which includes observers from the European Parliament, to transform the so-called ‘Draft Common Frame of Reference’ (6) – a first draft of a European contract law developed in the last few years under the EU's FP6 RTD.

3.5   A public consultation has been launched by the Commission on its strategic policy paper, due to conclude at the end of January 2011.

4.   General comments

4.1   The EU's single market is built on contract laws. The Committee is deeply concerned, however, that despite the efforts to complete the single market, businesses – particularly small and medium-sized companies – are hampered in cross-border sales because they must follow different contract laws for each of the EU’s 27 Member States. Only 8 % of consumers buy online from another Member State.

4.2   At the moment, different national contract laws lead to higher transaction costs for businesses. Companies – particularly small businesses – cannot exploit economies of scale in the EU’s single market. Consumers suffer because there are fewer goods sold across borders, leading to less choice and higher prices.

4.3   In addition, 61 % of cross-border sales fail to go through because traders refuse to serve the consumer's country. This is largely due to regulatory barriers and legal uncertainty about the applicable rules.

4.4   To address some of these problems and boost the potential of Europe's single market, there is a need to ensure more legal certainty for businesses – particularly small companies – and simpler rules for consumers, providing a higher degree of protection.

4.5   The Committee believes that the Commission should do more in this area and go beyond measures for judicial cooperation in civil-law matters, which, while necessary, are not sufficient to ensure the proper functioning of the internal market.

4.6   The debate proposed by the Commission is relevant, in light of the experience of a European single market built on a multitude of contracts governed by different national contract laws, entailing additional transaction costs, which, according to recent studies, amount to an average of around EUR 15 000 (7).

4.7   Both consumers and businesses face significant barriers when seeking to take advantage of the EU’s single market. Transaction costs (for adapting contractual terms and commercial policies or obtaining a translation of the rules) and legal uncertainty make it particularly hard for small and medium-sized enterprises to expand within the single market and for consumers to be accorded a high level of protection.

4.8   Coherence in contract law could be extremely useful; this could be achieved by means of an optional European contract law (or ‘28th system’). References to the possible use of a so-called 28th regime have begun to appear in various Commission and EP documents, mainly relating to important subjects where the desired full harmonisation would have been neither easy nor achievable at all.

4.8.1   Apart from the undertaking initiated with the EESC own-initiative opinion on The European Insurance Contract  (8), and carried out by the Project Group on ‘Restatement of European insurance contract law’ with the recent publication of the ‘Principles of European insurance contract law (PEICL)’, only on a few occasions has a similar approach been followed by the European legislator in the area of company law, intellectual property law and international law.

4.9   The introduction of standard contract terms could benefit all contracting parties on condition that:

the most robust guarantees are put in place to safeguard the weaker party and the highest possible level of consumer protection is taken as a point of departure when framing those standard terms;

the social partners and all parties representing civil society – especially consumer organisations and SMEs – are given an active role in the negotiations towards the creation of standard contract terms;

contractual terms comply with the provisions of the Directive on unfair terms and with the Directive on compliance with payment terms in commercial transactions, implementing the Small Business Act – SBA;

freedom of contract is still guaranteed, e.g. with recommended standard contracts;

access to justice is untouched;

the standard contract terms are monitored and reviewed at certain intervals.

4.10   In the Committee's view an incremental approach is needed, starting with cross-border commercial sales contracts for goods on a pilot basis, as a useful means of putting the coexistence of the regimes to the test, monitoring how they are applied in practice by the parties concerned and carrying out effective impact assessments.

4.11   It is particularly important to define the following substantive law concepts:

legal persons;

consumers and professionals;

unfair contract terms;

duty to provide pre-contractual information on goods and services;

duty to provide information when concluding a contract with a consumer who is at particular disadvantage;

remedies for breach of information duties;

delivery – time of delivery – link with the transfer of risk;

point in time for and means of assessing conformity and hierarchy of remedies for non-conformity;

situations when termination of the contract can take place;

notification to the seller of defects which were discovered/ought to have been discovered by the buyer;

right of withdrawal; scope of application; exercise of the right of withdrawal; cooling-off period and time limits for withdrawal;

notion of strict liability;

inclusion of the notion of loss of profits and resulting damage;

producers' liability and burden of proof; and

e-commerce.

4.12   The Committee could suggest a combination of legislative and non-legislative measures:

increase the coherence of the Community acquis in the field of contract law;

promote the establishment of standard contract terms applicable EU-wide;

examine further whether problems in the European contract law area may require non-sector-specific solutions.

4.13   In the Committee's view, an optional European contract law should be able to co-exist in parallel with national contract laws, providing standard terms and conditions, along with the possibility of opting for the 28th regime.

4.14   In any case, new developments (such as e-contractors and their influence on contract rules) and emerging legal issues present a number of challenges to applying the Rome Convention (9).

4.15   With regard to the scope of the ‘common toolbox’ in respect of the optional European contract law and of the ‘optional advanced new regulatory regime’, the Committee advocates starting with a pilot implementation project, limited to cross-border commercial sale-of-goods contracts.

4.16   The Committee believes that greater coherence should be ensured between horizontal and vertical rules, with particular regard to the need for transparency, clarity and simplicity, not only for the sake of legal practitioners and their ability to incorporate the new guidelines, but also and most importantly for the small business and the average consumer, who stand to be particularly affected by legal complexity and opacity, and the ensuing excessive burden in terms of additional cost and time.

Brussels, 19 January 2011.

The President of the European Economic and Social Committee

Staffan NILSSON


(1)  The Community method is based on the idea that the public's general interest is better protected when the Community institutions play their full role in the decision-making process, whilst respecting the principle of subsidiarity.

(2)  Europe 2020. A strategy for smart, sustainable and inclusive growth. COM(2010) 2020 final.

(3)  OJ C 241, 7.10.2002, p. 1.

(4)  OJ C 21, 21.01.2011, p. 26.

(5)  OJ C 21, 21.01.2011, p. 26.

(6)  The Common Frame of Reference (CFR) is a long-term project which aims at providing the European legislators (Commission, Council and European Parliament) with a ‘toolbox’ or a handbook to be used for the revision of existing and the preparation of new legislation in the area of contract law. This toolbox could contain fundamental principles of contract law, definitions of key concepts and model provisions. Under the 6th Framework Programme, the Directorate General for Research has funded, from 2005 until 2009, in the area of Social Sciences and Humanities, the Network of Excellence COPECL - ‘Common Principles of European Contract Law’. This network comprised more than 150 researchers as well as several institutions and organisations operating in all EU Member States in the field of European private law. The final product was the text entitled the ‘Draft Common Frame of Reference (DCFR)’.

(7)  htpp://www.europe.org.

(8)  OJ C 157, 28.6.2005, p. 1.

(9)  Rome Convention on the law applicable to contractual obligations, 19 June 1980.


17.3.2011   

EN

Official Journal of the European Union

C 84/7


Opinion of the European Economic and Social Committee on the Report from the Commission — Report on Competition Policy 2009

COM(2010) 282 final

2011/C 84/02

Rapporteur: Mr CHIRIACO

On 3 June 2010, the European Commission decided to consult the European Economic and Social Committee, under Article 304 of the Treaty on the Functioning of the European Union, on the

Report from the Commission - Report on Competition Policy 2009

COM(2010) 282 final.

The Section for the Single Market, Production and Consumption, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 17 December 2010.

At its 468th plenary session, held on 19 and 20 January 2011 (meeting of 19 January), the European Economic and Social Committee adopted the following opinion by 148 votes to 2 with 4 abstentions.

1.   Conclusions and recommendations

1.1   In 2009, competition policy was heavily influenced by the international economic crisis and the need to manage its after effects.

1.2   The EESC hopes that there will be maximum synergy, not only between the 2020 strategy and the strategy for sustainable development (1), as it has already recommended (2), but also between those strategies and competition policy so as to avoid overlaps or, worse still, contradictions between measures.

1.3   The Committee would again highlight the danger that this difficult economic situation could generate systemic imbalances, particularly regarding financial services, with negative effects on competition, encouraging damaging practices. Although, as already pointed out (3), the Commission cannot be responsible for managing all aspects relating to the economic crisis, it is called upon to support the work of the authorities responsible, in particular the European Central Bank and the other competition authorities, by means of a Community policy based on guidance and supervision.

1.4   This is all the more important during the current revision of the Basel Accord  (4). Whereas, on the one hand, this review raises the guarantee requirements that banks must satisfy in order to limit the danger of new financial crises arising from a lack of liquidity, on the other hand the new rules would make it harder for companies to access credit, with the danger that the risk is transferred from the financial markets to the real economy. Furthermore, this review could put European banks at a disadvantage compared with their US counterparts, leading to a fall in profits and fiercer competition in the field of high risk investments.

1.5   The Committee also supports the Commission in its plan to monitor the national economic recovery plans, so as to provide an overview of progress on implementing the individual programmes, list the instruments available to speed up progress with these measures and check that coordination is functioning properly (5).

1.6   As regards the danger of bond shocks arising from the scale of the debt, especially in countries such as Portugal, Ireland, Greece and Spain, there is evidence that speculation may undermine the raw materials markets. In this regard, the Committee urges the Commission to pay attention to the problems that this would entail in terms of prices and salaries, in particular for SMEs, and act accordingly.

1.7   The Committee would propose the regular publication of a state aid monitoring report to provide a detailed picture of progress in implementing measures and quantify the fall-out on markets, with a view to preparing a plan for maximising industrial sector potential by strengthening companies, especially SMEs, and related employment levels, something that will be necessary for EU economic recovery.

1.8   The EESC (6) has already expressed its concern regarding the possible consequences of interaction between the industrial property rights system and competition policy. It would therefore recommend that, in 2010, European competition policy should cover the application of fair and non-discriminatory conditions in this area too, and encourage small and medium-sized companies in particular to acquire industrial property rights, the difficulty of which is recognised by both the EESC and the Commission. With particular regard to the European Commission's proposal for a regulation on the language arrangements for the EU patent, and the request by some Member States for enhanced cooperation, the EESC recommends seeking a formula that helps to boost competitiveness, innovation and a stronger internal market under equal conditions. To this end, the EU patent must not display any discrimination towards economic operators or Member States, as this would create competitive disadvantages.

1.9   The EESC argues that the agricultural sector market should be mainstreamed into all other EU policies, starting with competition policy.

1.10   In the energy sector, consumers in the various Member States are voicing great dissatisfaction with the electricity and gas markets. High prices and poor quality services generate greater costs for consumers and companies, with a clear distortion of competition.

1.11   In keeping with the principle of technological neutrality, it is necessary to increase the awareness and skill levels of managers and final users of electronic communication services in order for technology to have a positive impact on economic development, not least so as to implement the Digital Agenda principles as effectively as possible (7).

1.12   The EESC endorses the definition of the right to information as a combination of freedom of information, the right to inform and the right to be informed (8). It follows that pluralist information should be full, unbiased and independent. In addition to penalising companies that restrict pluralism to the detriment of free competition, the Commission could also be much more proactive in promoting freedom of information.

1.13   The EESC considers that since the decision was taken to open up the entire postal market to competition from 1 January 2011, the economic crisis has placed the financial stability of the traditional postal service operators responsible for services of general interest (SGI) in lasting danger. In order to ensure that these operators are able to carry out the tasks entrusted to them properly and to maintain the level and quality of employment in this sector, the EESC calls on the European institutions to put a support system in place that provides for this new situation, whose scale and potential effects were unknown at the time of adopting the third postal directive (2008/6/EC) of 20 February 2008. More generally, in the context of the current crisis, the EESC calls for the SGI to be reinforced and developed, so as to strengthen the economic, social, territorial and cultural cohesion of the European Union.

1.14   In the sphere of consumer protection, the EESC welcomes the developments towards a more structured relationship between DG Comp and the other DGs concerned with consumer affairs and consumer organisations, but regrets that another year has passed without any progress being made on the real implementation of the ‘private’ enforcement of the EU antitrust rules.

1.14.1   In spite of support from the European Parliament and the EESC, the Commission has been unable to press ahead with the initiative it launched with the 2005 green paper and the 2008 white paper aimed at securing effective EU antitrust damages actions, leaving the rights of consumers who are adversely affected by breaches of the antitrust rules unprotected.

1.14.2   The European Court of Justice has long confirmed that the full effectiveness of the antitrust rules could be jeopardised unless each individual citizen is able to seek damages for loss caused by infringements of the rules.

1.15   The EESC would like to add that concentration processes in the economy should be observed, in order to study the social and cultural impact on the industrial, commercial, craft and agricultural sectors and to develop appropriate recommendations for an active and sustainable economic policy and balanced economic structures.

1.16   As in previous opinions on competition policy, the EESC would once more draw the Commission's attention to the issue of social dumping. Whereas on the one hand, it appreciates the Commission's efforts on environmental issues, as reflected in the many measures adopted to address the crisis, the Committee would, on the other hand, reiterate the need to give greater and more practical consideration to the still considerable differences between national legislations on equal opportunities and employment protection. The Committee would argue that these aspects must be part and parcel not only of employment policy but also of competition policy as they are factors that can have a significant impact on market dynamics.

1.17   The EESC is pleased that in 2009 the Commission continued its efforts to clarify the relation between social and healthcare systems and the economy. It supports the Commission's efforts to strengthen solidarity-financed social infrastructure and civil society, and to focus on the interests of European society as a whole. The EESC believes that public social systems governed by national social law should be structured in such a way as to be accessible in a non-discriminatory manner to providers and beneficiaries, and that cross-border services provision should be encouraged where the State or local/regional authorities do not themselves provide services. Relations between legally and economically independent service providers operating under public contract should be governed primarily by national social law.

2.   Content of the 2009 report

2.1   The 2009 annual report on competition describes the development and application of competition policy instruments, actions to benefit consumers and cooperation at European, international and inter-institutional levels.

2.2   The Focus Chapter this year takes an in-depth look at Competition policy and the financial and economic crisis.

2.3   Competition policy and the financial and economic crisis

2.3.1   The role of competition policy in the context of the crisis

2.3.1.1   Faced with the serious economic crisis, the Commission has sought to frame policies to minimise the impact of the crisis on the real economy, to stabilise the financial system and make sure that a similar crisis does not occur again, its objective being that of preserving the internal market.

2.3.2   The Commission's policy response

2.3.2.1   The Commission found itself managing numerous notifications of emergency aid measures adopted by the Member States, and responded within extremely tight time frames.

2.3.3   Recapitalisation of banks

2.3.3.1   Already at the end of 2008, the Commission had adopted its Recapitalisation Communication  (9) which differentiates between banks that are sound and banks that are in distress, laying down guidelines for evaluating those capital injections that constitute aid.

2.3.3.2   Guarantee schemes were approved for 12 Member States (10). Seven Member States launched pure recapitalisation schemes (11), while seven others designed mixed/holistic schemes (12). Spain, Slovenia, the United Kingdom, Hungary and Germany also implemented other forms of support scheme. In terms of aid to individual entities, recapitalisation measures and other forms of support were approved for 29 organisations (13).

2.3.4   Impaired assets

2.3.4.1   In February, the Commission adopted an Impaired Assets Communication  (14), which set out how it would assess asset relief measures for financial institutions under State aid rules.

2.3.5   Restructuring

2.3.5.1   In its Restructuring Communication  (15) the Commission addressed the issue of moral hazard, clearly setting out the requirements that beneficiaries of aid must satisfy and ensuring that risky behaviour that has occurred in the past would not be rewarded.

2.3.6   Beyond State aid

2.3.6.1   The conditions for ‘inability to pay’ were reviewed with regard to the fines imposed by the Commission under the antitrust rules. The Commission assessed the individual requests on a case by case basis.

2.3.7   The effects of the crisis on the real economy

2.3.7.1   The Temporary Community framework  (16), valid until the end of 2010, focuses on two objectives: guaranteeing companies continuity of access to financing and encouraging them to continue investing in a ‘sustainable future’.

2.3.8   Deliveries and costs

2.3.8.1   In 2008, owing to the financial and economic crisis, the total volume of aid increased from approximately 0.5 % to 2.2 % of GDP, i.e. EUR 279.6 billion. Crisis related aid amounted to approximately 1.7 % of the total.

2.4   Instruments

2.4.1   State aid control

2.4.1.1   In 2009, implementation of the State aid action plan  (17) continued with the adoption of guidance papers on training aid (18) and aid for disadvantaged and disabled workers (19). In addition, guidelines were adopted for the detailed assessment of regional aid for major investment projects (20).

2.4.1.2   The validity of the Community Guidelines on State Aid for Rescuing and Restructuring Firms in Difficulty (21) was prolonged until to October 2012.

2.4.1.3   The Simplification Package, designed to improve the effectiveness, transparency and predictability of Commission state aid procedures, came into effect on 1 September 2009 (22).

2.4.2   Antitrust

2.4.2.1   The Commission adopted six cartel decisions (23), fining 43 companies a total of EUR 1.62 billion.

2.4.2.2   The Commission adopted final decisions in the energy (RWE and GdF) and information technology (Intel, Microsoft and Rambus) sectors and decided to launch proceedings in the electronic communications (Polish and Slovak incumbents in the broadband markets) and financial services (Standard & Poor's and Thomson Reuters) sectors.

2.4.3   Merger control

2.4.3.1   The number of mergers notified was lower than the record levels of previous years: in total the Commission was notified of 259 transactions and 243 final decisions were adopted. No prohibition decisions were taken and no new proceedings were opened under Article 21 of the EC merger regulation.

2.5   Sector developments

2.5.1   Financial Services

2.5.1.1   The Commission continued to monitor cross-border Multilateral Interchange Fees (MIFs) closely, with particular regard to VISA Europe and MasterCard.

2.5.1.2   It carried out a review of the functioning of the insurance Block Exemption Regulation, which was to expire on 31 March 2010. The new draft regulation, published for consultation in October, renews the exemption for two categories of agreement: joint compilations, tables and studies, and agreements on co-insurance and co-reinsurance pools.

2.5.2   Energy and the environment

2.5.2.1   The climate-energy legislative package adopted in April contains a directive on renewable energy, establishing sustainability criteria for biofuels and bioliquids (24) that are also relevant for the assessment of State aid in that area. The European Parliament and the Council also adopted a directive revising the EU Emissions Trading System (ETS) for greenhouse gases (25).

2.5.2.2   With regard to the energy market, in July the European Parliament and the Council adopted the Internal Energy Market package  (26) and the Commission adopted a proposal for a regulation concerning measures to safeguard security of gas supply.

2.5.2.3   For the first time, the Commission imposed fines totalling EUR 1 106 million for an antitrust infringement involving market sharing in the energy sector by E.ON and GDF Suez (27).

2.5.3   Electronic communications

2.5.3.1   Up to 2009, the Commission had assessed and approved the use of State aid and other types of public funding to the sum of approximately EUR 2 billion (28) in order to promote broadband access for all European citizens.

2.5.4   Information technology

2.5.4.1   In 2009, the Commission adopted two decisions, making commitments offered by Microsoft and Rambus in relation to competition rules infringements legally binding; a third decision meanwhile imposed a fine of EUR 1.06 billion on Intel, the highest ever imposed by the Commission on a single company (29).

2.5.5   Media

2.5.5.1   The Commission continued to monitor the switch-over from analogue to digital terrestrial broadcasting in the EU Member States, especially in Italy and Germany.

2.5.6   Pharmaceutical industry and health

2.5.6.1   Having completed its inquiry on the pharmaceuticals sector, the Commission reaffirmed the urgent need for the establishment of a Community patent and for a unified and specialised patent litigation system in Europe.

2.5.6.2   The Commission's actions in the field of health services were geared towards State aid, following a number of complaints from private hospitals against allegedly unfair treatment or excessive compensation towards publicly-owned hospitals in various Member States (30).

2.5.7   Transport

2.5.7.1   In the area of rail transport, the Commission approved the acquisition of Polish railway company PCC Logistics by Deutsche Bahn AG (31); meanwhile it also referred back to France a concentration by which SNCF would take joint control of Keolis, an undertaking active in passenger public transport (32).

2.5.7.2   In the area of maritime transport, the Commission adopted a communication on State aid to ship management companies (33). Positive decisions were also adopted regarding State aid to seafarers in Italy (34) and Finland (35) and the Commission concluded the formal procedure opened in 2007 regarding the DIS regime in Denmark, and the investigation regarding tonnage tax schemes in Ireland (36), Denmark (37), the Netherlands (38), Slovenia (39) and Poland (40).

2.5.7.3   The Commission is monitoring the airline industry, which is going through a process of consolidation with joint venture agreements covering transatlantic routes (41), mergers of both network and low-cost carriers (42), and acquisitions by large network carriers of smaller regional players (43).

2.5.8   Postal services

2.5.8.1   As regards the application of State aid rules to the postal sector, the Commission adopted several decisions aiming to ensure that postal operators entrusted with services of general economic interest and their subsidiaries do not enjoy unduly granted advantages.

2.5.9   Automotive industry

2.5.9.1   The Commission welcomed the positive impact on sales of the scrapping schemes introduced in various national markets. The smooth running of the information mechanism set up by Directive 98/34/EC guaranteed transparency, exchange of information and the prevention of obstacles to the single market.

2.5.9.2   The Commission also authorised several State aid schemes to encourage vehicle development in response to growing demand from customers for greener cars, and to tighter environmental regulations.

2.5.9.3   In the antitrust field, a new draft Block Exemption Regulation for the automotive sector was published for public consultation in December.

2.5.10   Food industry

2.5.10.1   In October, the Commission published the results of a food industry fact-finding exercise and incorporated it into the Commission Communication on A better functioning of the food supply chain  (44).

2.5.10.2   A Dairy market situation report (45) was also adopted, this being one of the sectors that faced the greatest difficulties in 2009; links with the sector's national authorities also intensified.

2.6   Consumer activities

2.6.1   The Commission continued its activities in this field during the year both through the work of the Consumer Liaison Unit, set up by DG Competition in 2008, and through the Subgroup on competition set up as part of the European Consumer Consultative Group (ECCG) in 2003.

2.7   The European Competition Network and cooperation with national courts

2.7.1   A meeting between DG Competition and the heads of all the national competition authorities (NCAs) resulted in the unanimous endorsement of the report on leniency convergence under the European Competition Network Model Leniency Programme (46).

2.7.2   The Commission was informed of 129 new case investigations launched by NCAs and of 69 envisaged decisions (47) representing an increase of 15 % as compared with 2008.

2.8   International activities

2.8.1   DG Competition continued to work together with other international organisations active in the field (International Competition Network (ICN); OECD Competition Committee; UNCTAD's Intergovernmental Group of Experts (IGE) on Competition Law and Policy).

2.8.2   The Commission maintained close cooperation with the United States, Canada, Japan, China and India and signed new cooperation agreements with South Korea (48) and Brazil. Special attention has been given to cooperation with Croatia and Turkey, which have to fulfil ‘opening benchmarks’ before accession negotiations on the competition chapter can begin and with the western Balkan countries and Iceland with a view to future EU membership.

2.9   Interinstitutional cooperation

2.9.1   The European Parliament (EP) adopted a resolution on the White Paper on Damages Actions for breach of the EC antitrust rules and the Annual Competition Reports for 2006 and 2007.

2.9.2   The Council received various contributions from the Commission on competition policy in respect of conclusions adopted in different Council formations such as ECOFIN, the Competitiveness, Transport, Telecommunications and Energy councils and the European Council.

2.9.3   DG Competition has cooperated actively with the EESC on various subjects, including the adaptation of SMEs to global market changes, shipbuilding and State aid.

Brussels, 19 January 2011.

The President of the European Economic and Social Committee

Staffan NILSSON


(1)  COM(2001) 264 final.

(2)  OJ C 128, 18.5.2010, p. 18.

(3)  OJ C 228, 22.9.2009, p. 47.

(4)  See Basel Committee press release on raising minimum capital requirements, at: http://www.bis.org/press/p100912.pdf.

(5)  OJ C 228, 22.9.2009, p. 149.

(6)  OJ C 306, 16.12.2009, p. 7.

(7)  COM(2010) 245 final.

(8)  OJ C 44, 11.2.2011, p. 62.

(9)  OJ C 10, 15.1.2009, p. 2.

(10)  Cyprus, Denmark, Finland, Ireland, Italy, Latvia, the Netherlands, Poland, Portugal, Slovenia, Spain and Sweden.

(11)  Denmark, Finland, France, Italy, Poland, Portugal and Sweden.

(12)  Germany, United Kingdom, Greece, Austria, Poland, Hungary and Slovakia.

(13)  ING, KBC, Parex Banka, Anglo Irish Bank, Bank of Ireland, Allied Irish Bank, Fortis, Dexia, Nord LB, IKB, Kaupthing Bank Finland, Ethias, SdB, Banco Privado Portugues, Hypo Real Estate, WestLB, Fionia, HSH Nordbank, Hypo Tirol, LBBW, Kaupthing Luxemburg, Caisse d'Epargne/Banque Populaire, Mortgage Bank of Latvia, Northern Rock, Commerzbank, Lloyds Banking Group, BAWAG, Hypo Group Alpe Adria and RBS.

(14)  OJ C 72, 26.3.2009, p. 1.

(15)  OJ C 195, 19.8.2009, p. 9.

(16)  OJ C 83, 7.4.2009, p. 1.

(17)  COM(2005) 107 final.

(18)  OJ C 188, 11.8.2009, p. 1.

(19)  OJ C 188, 11.8.2009, p. 6.

(20)  OJ C 223, 16.9.2009, p. 3.

(21)  OJ C 156, 9.7.2009, p. 3.

(22)  OJ C 136, 16.6.2009, p. 3 (3-12 and 13-20).

(23)  Cases: COMP/39406 Marine Hoses; COMP/39401 E.ON/GDF; COMP/39396 Calcium Carbide; COMP/37956 Concrete Reinforcement Bars (readoption); COMP/39129 Power Transformers and COMP/38589 Heat Stabilisers.

(24)  OJ L 140, 5.6.2009, p. 16.

(25)  OJ L 140, 5.6.2009, p. 63.

(26)  OJ L 211, 14.8.2009, p. 1.

(27)  Case COMP/39401. See IP/09/1099 of 8.7.2009.

(28)  Including EUR 1.5 billion constituting State aid according to Article 107 TFEU.

(29)  OJ C 220, 12.9.2009, p. 41.

(30)  Case NN54/2009.

(31)  Case COMP/M.5480.

(32)  Case COMP/M.5557, SNCF/CDPQ/Keolis/Effia.

(33)  OJ C 132, 11.6.2009, p. 6.

(34)  Case N219/2009 – OJ C 196, 20.8.2009.

(35)  Cases: N120/2009 - OJ C 232, 26.9.2009; N67/2009 - OJ C 232, 26.9.2009; and N300/2009 - OJ C 299, 9.12.2009.

(36)  Case C2/2008 – OJ L 228, 1.9.2009.

(37)  Case C5/2007 – OJ L 315, 2.12.2009.

(38)  Case N219/2008 – OJ C 106, 8.5.2009.

(39)  Case N219/2007 – OJ C 53, 6.3.2009.

(40)  Case C34/2007.

(41)  MEMO/09/168 of 20.4.2009.

(42)  COMP/M.5364, Iberia/Vueling/Clickair.

(43)  COMP/M.5335, Lufthansa/Brussels Airlines; COMP/M.5403, Lufthansa/Bmi; COMP/M.5440, Lufthansa/Austrian Airlines.

(44)  http://ec.europa.eu/economy_finance/publications/publication16061_en.pdf.

(45)  http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2009:0385:FIN:EN:PDF.

(46)  http://ec.europa.eu/competition/ecn/documents.html.

(47)  Decisions expected pursuant to Article 11(4) of Regulation (EC) No 1/2003.

(48)  OJ L 202, 4.8.2009, p. 36.


17.3.2011   

EN

Official Journal of the European Union

C 84/13


Opinion of the European Economic and Social Committee on the Green Paper — Corporate governance in financial institutions and remuneration policies

COM(2010) 284 final

2011/C 84/03

Rapporteur: Mr SMYTH

On 2 June 2010 the European Commission decided to consult the European Economic and Social Committee, under Article 304 of the Treaty on the Functioning of the EU, on the:

Green Paper — Corporate governance in financial institutions and remuneration policies

COM(2010) 284 final.

The Section for the Single Market, Production and Consumption, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 6 January 2011.

At its 468th plenary session, held on 19 and 20 January 2011 (meeting of 20 January), the European Economic and Social Committee adopted the following opinion by 173 votes with four abstentions.

1.   Conclusions and recommendations

1.1   In this opinion the EESC sets out its considered responses to the lengthy list of questions posed in the Commission's Green Paper. The questions deal with eight key aspects of the governance of financial institutions ranging from the performance of boards of directors, the performance of supervisory authorities, through the management of risk, conflicts of interest, the role of shareholders through to the vexed question of the remuneration of directors.

1.2   The EESC welcomes the intent behind the Commission's Green Paper but notes some definitional shortcomings in its content, particularly on the precise definition of corporate governance which the Committee believes should be more robust, and on the differences in board structures between the British and Continental systems. It also considers that it would be helpful to define the concept of ‘financial institution’ more clearly so that the recommendations should focus in particular on credit institutions.

1.3   In its consideration of the Green Paper, the EESC has found that the differences between the British and continental models of corporate governance are irreconcilable at the structural level because the organizational concepts are so different. Accordingly the EESC recommends that the Commission give consideration to the principles which should underlie corporate governance practice in the EU. For example, the British model is built on the principle of competent independence which facilitates the independent role of key board committees. Should independence be a key principle throughout EU corporate governance? If so, how should it be achieved in the continental model?

1.4   The Green paper is also relatively parsimonious in its treatment of the needs of consumers. Consumers of financial services have also been hit very hard by the effects of poor governance across the financial system.

1.5   In terms of remuneration policy the EESC has already expressed its general views in a number of recent opinions. In short, the Committee believes that remuneration policy should not just be about those at the top of financial institutions but also about remuneration at all levels.

1.6   The broad thrust of the opinion is that there is scope for a tightening up of certain aspects of the governance of financial institutions but that while governance codes remain voluntary, the onus is upon the supervisory authorities to ensure that as far as possible, these codes are adhered to across the European Union.

2.   Introduction and Background to the Opinion

2.1   The aim of the Green Paper is to address perceived deficiencies in the system of corporate governance, whether in substance or in implementation. In the context of the financial and economic crises the strengthening of corporate governance lies at the heart of the Commission's reform programme. The proposals outlined in the Green Paper should be seen in the context of wider reforms of the European supervisory architecture, the Capital Requirements Directive (CRD), the Solvency II Directive, the reform of the Undertakings for Collective Investment in Transferable Securities (UCITS) and the regulation of Alternative Investment Fund Managers. They should also be taken in the broader context of a review by the Commission of corporate governance within listed companies dealing with the role of shareholders, the appropriate supervision of senior management teams, the composition of boards of directors and corporate social responsibility.

2.2   The Commission defines corporate governance as the relations between a company's senior management, board of directors, shareholders and other stakeholders such as employees and their representatives. It also concerns the setting of a company's objectives, the means of achieving them and the monitoring of the outcomes of the corporate effort. Within the financial sector governance takes on an even greater significance because the failure of a (large) financial institution brings with it a systemic risk to the entire financial sector as evidenced in the recent financial crisis, when governments had to shore up the banking system with public funding.

2.3   The EESC is surprised to note that the Green Paper does not make any distinction between the structure of boards in British and continental European economies. In the former there is only one board comprising executive and non-executive directors, although it is customary for there to be an executive board working under the CEO. In the continental model there are two boards - a managing board, and a supervisory board. In the rest of this opinion and to avoid confusion, reference to the ‘board’ is normally in terms of the British model unless specifically stated otherwise.

2.4   The Green Paper does not formally note that each Member State has its own corporate governance system and that there is no distinction made in the case of the corporate governance of financial institutions. The Commission's definition of corporate governance is also somewhat partial in nature and so should be made more robust. The EESC suggests a stronger, more comprehensive definition of corporate governance. The main objective of corporate governance is to ensure that the company survives and thrives. To do this the board must meet the reasonable expectations of shareholders while ensuring the reasonable satisfaction of the stakeholder community – consumers, partners, contractors, suppliers and employees. When the board cannot ensure the survival of the company, it should dispose of the assets for optimum value.

2.5   The Green Paper outlines a range of deficiencies and weaknesses in corporate governance within financial institutions and seeks responses to a set of eight general questions dealing with:

1.

issues with boards of directors;

2.

deficiencies in risk management problems with conflicts of interest;

3.

the role of auditors;

4.

deficiencies in the supervisory authorities;

5.

problems with the role of shareholders;

6.

the lack of effective implementation of corporate governance principles;

7.

the remuneration of directors of financial institutions;

8.

conflicts of interest.

3.   Answering the Green Paper questions

3.1   The EESC considered responses to the specific questions emerging from the Green Paper are as follows:

3.2   Issues with boards of directors

3.2.1   Specific question 1: Should the number of boards on which a director may sit be limited (for example, no more than three at once)?

Setting a precise number is arbitrary. It would be better to ensure that on appointment, and thereafter, a director can commit and subsequently spend the time in the company which his or her role requires. The time needed should be specified and divided between formal board and committee meetings and less formal visits to and reviews of departments, divisions and regions. In some cases an appointment could be virtually full time. There is always a benefit from at least two appointments for cross company comparisons.

3.2.2   Specific question 2: Should combining the functions of chairman of the board of directors and chief executive officer be prohibited in financial institutions?

This is already best practice in some jurisdictions. The division of roles should be mandatory in financial institutions because of the tension between the operational role of the executives and the stewardship role of the board.

3.2.3   Specific question 3: Should recruitment policies specify the duties and profile of directors, including the chairman, ensure that directors have adequate skills, and ensure that the composition of the board of directors is suitably diverse? If so, how?

It is fairly common practice in some jurisdictions to analyse the skills and experience needed within the board and then to recruit accordingly. For example, for a major financial institution one might expect a successful retired banking executive, perhaps as Chairman, senior partners of legal and accounting firms with finance industry experience, a CEO from a major commercial company as a counterpoint to the CEO and to bring a corporate customer perspective and someone with a consumer background as a core group around which a larger team could be built. This might include credit, actuarial, economic, industrial and commercial experience at the highest level. Ideally the ratio would be no less than 60 % non-executive directors: 40 % executive directors. Between them, the executives and non executives also need to incorporate an understanding of the major geographies in which the business operates. In some jurisdictions the Supervisory Authority now carries out an in depth review of the skills, experience and record of candidate before an appointment is authorised. This is to be welcomed.

3.2.4   Specific question 4: Do you agree that including more women and individuals with different backgrounds in the board of directors could improve the functioning and efficiency of boards of directors?

In the context of question 3 above, gender and ethnic balance is desirable if it does not dilute experience and expertise. It can bring different and valuable perspectives. There has to be a practical limit to the size of boards.

3.2.5   Specific question 5: Should a compulsory evaluation of the functioning of the board of directors, carried out by an external evaluator, be put in place? Should the result of this evaluation be made available to supervisory authorities and shareholders?

Supervisory authorities should mandate all Chairman to audit their governance arrangements in the context of the above four factors. At the same time the Authorities should undertake an audit to certify any directors whom they did not certify on appointment. The on-going responsibility for board performance must rest with the Chairman. It would be appropriate for Chairmen to commission a periodic external evaluation of board effectiveness for their own use. In the continental model, it is the duty of the supervisory board to take action if the business is not going well or if the auditor's report alerts the board to some important issues.

3.2.6   Specific question 6: Should it be compulsory to set up a risk committee within the board of directors and establish rules regarding the composition and functioning of this committee?

There are three issues: audit, compliance and risk. The committee configuration should reflect the particular business mix. From a macro point of view, risk is inherent in the board’s strategic plans. This is where the risk appetite and risk profile should be established and measured. In a bank, this is where policies would be established for the risk acceptable in each business sector: domestic mortgages, credit cards, commercial property, industrial loans, fund management, foreign exchange and commodities, as well as the composition of reserves, counterparty limits, etc. It is not possible to have a risk committee inside the continental managing board which is composed of a few people (usually not exceeding 5-7 persons) who tend to be specialists in various activities.

3.2.7   Specific question 7: Should it be compulsory for one or more members of the audit committee to be part of the risk committee and vice versa?

Risks at the micro level, as opposed to the macro level discussed in 3.2.6 above, could actually form part of the audit committee’s brief.

3.2.8   Specific question 8: Should the chairman of the risk committee report to the general meeting?

Risk is a key component of any business strategy. Risk appetite and risk profile define how a business is likely to perform and how volatile its results may be. These are matters for the Chairman and CEO to explain and their statements will allow shareholders to increase or reduce their investment in the business according to their own risk appetite.

3.2.9   Specific question 9: What should be the role of the board of directors in a financial institution's risk profile and strategy?

Setting the strategy is the central task of a board. Since finance is, by definition, a risk business, the strategy must be developed within a risk envelope which defines the range of potential outcomes. The chosen strategy will be that which meets shareholders reasonable expectations and delivers stakeholder satisfaction. Whilst the responsibility of permanent executives for risk management must not be understated, the role of the board is fundamental to say the least. In the continental model the supervisory board approves the management board's strategy.

3.2.10   Specific question 10: Should a risk control declaration be put in place and published?

The answer is affirmative but only within the context of strategy communication to shareholders and stakeholders. Disclosure of commercial and confidential information should be avoided.

3.2.11   Specific question 11: Should an approval procedure be established for the board of directors to approve new financial products?

Yes, if they are material. Product introduction would normally be a function of strategy implementation and therefore a matter of considerable interest to the board.

3.2.12   Specific question 12: Should an obligation be established for the board of directors to inform the supervisory authorities of any material risks they are aware of?

It is to be expected that this would be a regular element in the on-going dialogue between the institution and the supervisory authorities.

3.2.13   Specific question 13: Should a specific duty be established for the board of directors to take into account the interests of depositors and other stakeholders during the decision-making procedure (‘duty of care’)?

In some jurisdictions there is already an obligation to take account of the interests of stakeholders. This should be routine. If stakeholders are dissatisfied, a business will not thrive. No given set of stakeholder interests should dominate. Board proceedings should record that all interests were considered when the strategy was set.

3.3   Deficiencies in risk management problems with conflicts of interest

3.3.1   Specific question 14: How can the status of the chief risk officer be enhanced? Should the status of the chief risk officer be at least equivalent to that of the chief financial officer?

This question implies that we know what a chief risk officer (CRO) is supposed to do. If risk is integral to business strategy, then the CFO is the chief risk officer. Risk at the micro level puts the CRO at the same level as the head of internal audit. Both report to a committee of the board and have unfettered access to the chairman of that committee. Both should report periodically to the full board.

3.3.2   Specific questions 15: How can the communication system between the risk management function and the board of directors be improved? Should a procedure for referring conflicts/problems to the hierarchy for resolution be set up?

This is covered by the response set out in 3.3.1 above. This procedure should already be part of the functioning of the committee and the board.

3.3.3   Specific question 16: Should the chief risk officer be able to report directly to the board of directors, including the risk committee?

This is also covered by the response set out in 3.3.1 above.

3.3.4   Specific question 17: Should IT tools be upgraded in order to improve the quality and speed at which information concerning significant risks is transmitted to the board of directors?

It depends on what exists at the moment in each institution. Not all risks can be routinely monitored by IT. In many cases an email alert can suffice. The larger and more complex the organisation, in terms of divisions, geographies and products, the more sense it makes to install an IT based active risk manager.

3.3.5   Specific question 18: Should executives be required to approve a report on the adequacy of internal control systems?

Yes. In certain jurisdictions this is already mandatory. It will usually be managed through the audit committee.

3.4   The role of external auditors

3.4.1   Specific question 19: Should cooperation between external auditors and supervisory authorities be deepened? If so, how?

Audit firms must work for the members of the company. However, if they find serious issues of risk or non-compliance, which have systemic implications, supervisors should be alerted. Issues which can be corrected by the company and which do not have external ramifications should be left to the company to correct. In the continental governance system, the supervisory board appoints the auditors and meets them annually without the presence of the management board and the chief executive officer.

3.4.2   Specific question 20: Should their duty of information towards the board of directors and/or supervisory authorities on possible serious matters discovered in the performance of their duties be increased?

It depends on the status quo. In certain jurisdictions, the provisions are already adequate. In the continental European system it should be decided by the contractual basis between supervisory board and auditor.

3.4.3   Specific question 21: Should external auditors' control be extended to risk-related financial information?

Auditors are required to confirm that a company’s accounts give a true and fair view on a going concern basis. In this context, any material risk should already be shown as a provision or a note to the accounts. No extension would appear to be needed.

3.5   Deficiencies in the Supervisory authorities

3.5.1   Specific question 22: Should the role of supervisory authorities in the internal governance of financial institutions be redefined and strengthened?

Yes, in jurisdictions where that has not already taken place.

3.5.2   Specific question 23: Should supervisory authorities be given the power and duty to check the correct functioning of the board of directors and the risk management function? How can this be put into practice?

As already outlined in 3.5.1 above.

3.5.3   Specific question 24: Should the eligibility criteria (‘fit and proper test’) be extended to cover the technical and professional skills, as well as the individual qualities, of future directors? How can this be achieved in practice?

This is custom and practice in the continental system to ensure this. The UK Financial Services Authority (FSA) has put in new procedures to give effect to this.

3.6   Problems with the role of shareholders

3.6.1   Specific question 25: Should disclosure of institutional investors' voting practices and policies be compulsory? How often?

Yes, in relation to the agenda of general meetings.

3.6.2   Specific question 26: Should institutional investors be obliged to adhere to a code of best practice (national or international) such as, for example, the code of the International Corporate Governance Network (ICGN)? This code requires signatories to develop and publish their investment and voting policies, to take measures to avoid conflicts of interest and to use their voting rights in a responsible way.

Yes, on a voluntary basis initially.

3.6.3   Specific question 27: Should the identification of shareholders be facilitated in order to encourage dialogue between companies and their shareholders and reduce the risk of abuse connected to ‘empty voting’? Empty voting refers to a situation in which there is a vote by a shareholder with no corresponding financial interest in the company for which they are voting, with potentially negative consequences for the integrity of the corporate governance of listed companies and the markets on which their shares are traded.

The issue of shareholders should be examined by the Commission because they are not the same as they were in the past. Today shareholders can be global companies, global shareholders, hedge funds etc. and as such are just traders in shares. They do not fulfil the role traditionally associated with the term ‘shareholders’.

3.6.4   Specific question 28: Which other measures could encourage shareholders to engage in financial institutions' corporate governance?

One possible measure might be the creation of a proxy organisation to represent the private shareholders in each company. Alternatively there could be pressure from supervisory institutions, from politicians, from the media on institutional investors to become more active.

3.7   More effective implementation of corporate governance principles

3.7.1   Specific question 29: Is it necessary to increase the accountability of members of the board of directors?

Not if we want good candidates to come forward. It would be helpful for many institutions to better define their expectations of board members.

3.7.2   Specific question 30: Should the civil and criminal liability of directors be reinforced, bearing in mind that the rules governing criminal proceedings are not harmonised at European level?

In certain jurisdictions the provisions are already adequate. The greatest risk to director is usually the reputational risk of being associated with a business that fails. Recently there have been calls for automatic bans from similar roles for directors who fail to warn about undue risks. This is arguably a more precise and promising policy tool.

3.8   Remuneration of directors of financial institutions

3.8.1   Specific question 31: What could be the content and form, binding or non-binding, of possible additional measures at EU level on remuneration for directors of listed companies?

The provisions of CRD3 appear to be adequate. This will engage the supervisory authorities. Publication of institutional voting policies on remuneration will also be a good move, see 3.8.4 above.

3.8.2   Specific question 32: Do you consider that problems related to directors' stock options should be addressed? If so, how? Is it necessary to regulate at Community level, or even prohibit the granting of stock options?

CRD3 appeared to address this. The issues relating to time, hurdles and quantum are covered in that directive.

3.8.3   Specific question 33: Whilst respecting Member States' competence where relevant, do you think that the favourable tax treatment of stock options and other similar remuneration existing in certain Member States helps encourage excessive risk-taking? If so, should this issue be discussed at EU level?

The Commission should be encouraged to examine this issue, but, as things stand, taxation is a Member State matter.

3.8.4   Specific question 34: Do you think that the role of shareholders, and also that of employees and their representatives, should be strengthened in establishing remuneration policy?

In certain jurisdictions, the remuneration report is subject to shareholder approval. Publication of institutional shareholder votes will make the system more transparent. The problem of the leverage/ratchet effect of the remuneration consultants needs to be addressed by the Commission. The system of shareholder representative organisations in the Netherlands may be a useful template for the Commission to consider.

3.8.5   Specific question 35: What is your opinion of severance packages (so-called ‘golden parachutes’)? Is it necessary to regulate at Community level, or even prohibit the granting of such packages? If so, how? Should they be awarded only to remunerate effective performance of directors?

Severance packages are not service rewards. Service rewards are earned in service. Severance packages are the contractual obligations when a company releases an executive director. They are usually granted as a lifeline to give a new recruit some security in the event that his appointment does not work out. Dismissal does not necessarily equate to failure. A strategy change can make a perfectly good performer redundant. Therefore the packages are needed. In some circumstances they may be too rich, especially with respect to pensions. They could be contractually set up to reduce over time and also to be discounted where there has ‘clearly’ been failure. Increasing CEO packages in service should also be discouraged. Rewards should be earned by performance. In the continental system, employees are represented on the supervisory board and they can influence such remuneration practices.

3.8.6   Specific question 36: Do you think that the variable component of remuneration in financial institutions which have received public funding should be reduced or suspended?

This question refers principally to the remuneration of high level positions in financial institutions. It is less relevant to ordinary employees. There have been some extraordinary remuneration packages for individuals and such abnormal situations should be avoided. It is up to the government owners of institutions that have received public funding to do as they see fit.

3.9   Conflicts of interest

3.9.1   Specific question 37: What could be the content of possible additional measures at EU level to reinforce the combating and prevention of conflicts of interest in the financial services sector?

The concept of ‘Chinese walls’ refers to the procedures enforced within a securities or investment firm to prevent the exchange of confidential information between the firm's departments so as to avoid the illegal use of inside information. It has been relied upon within the financial and other sectors to prevent damaging conflicts of interest. In practice, however, Chinese walls are far from infallible because they rely on the honour system. Information is only restricted by the discretion and meticulousness of the parties involved. It may be that regulations that specify legal requirements for information security would lead to an improvement in compliance in this regard.

3.9.2   Specific question 38: Do you agree with the view that, while taking into account the different existing legal and economic models, it is necessary to harmonise the content and detail of Community rules on conflicts of interest to ensure that the various financial institutions are subject to similar rules, in accordance with which they must apply the provisions of MiFID, the CRD, the UCITS Directive or Solvency 2?

Yes.

Brussels, 20 January 2011.

The President of the European Economic and Social Committee

Staffan NILSSON


17.3.2011   

EN

Official Journal of the European Union

C 84/19


Opinion of the European Economic and Social Committee on the Report from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions: Retail market monitoring report ‘Towards more efficient and fairer retail services in the internal market for 2020’

COM(2010) 355 final

2011/C 84/04

Rapporteur: Mr ALMEIDA FREIRE

On 5 July 2010 the European Commission decided to consult the European Economic and Social Committee, under Article 262 of the Treaty on the Functioning of the European Union, on the

Report from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions: Retail market monitoring report ‘Towards more efficient and fairer retail services in the internal market for 2020’

COM(2010) 355 final.

The Section for the Single Market, Production and Consumption, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 6 January 2011.

At its 468th plenary session, held on 19 and 20 January 2011 (meeting of 20 January), the European Economic and Social Committee adopted the following opinion by 192 votes to four with four abstentions.

1.   Conclusions and recommendations

1.1   The EESC acknowledges the importance of the retail sector in the Single Market as well as its contribution to the overall European economy. Due to the specific nature of retailing, the EESC welcomes the holistic approach developed by the European Commission in the Retail Market Monitoring Report and concurs with the need to avoid focusing on individual sub-sectors.

1.2   The EESC regrets that too little attention is paid to SMEs who play a fundamental role in terms of employment, value creation as well as in the life of rural areas and city centres. In accordance with the Small Business Act, more priority should be given to SMEs and measures to encourage them to develop and create employment.

1.3   Across Europe there is a concentration of High Volume Retailers, who are attracting more customers through the strength of their offer (the top 5 grocery retailers made up more than 70 % of the market in 2005). Similarly, there is high concentration in a number of product markets, especially for must have products that retailers cannot afford not to offer in their shops.

1.4   Bargaining power is a general practice in a market economy which is exerted by any company, including farmers, collectors and processors of their products, suppliers and retailers. The EESC is concerned with measures in some countries aimed at controlling price levels or margins, which is in opposition with the principles of free competition and a functioning single market.

1.4.1   Due to important socio-political reasons, e.g. in social or environmental areas, such regulations can be necessary to guarantee social cohesion or environmental protection.

1.5   Considerable price differences among Member States for similar products have been reported within the internal market. The EESC recommends that any study on prices focuses on the transmission of prices and margins throughout the entire supply chain.

1.6   The EESC recalls that retail markets – and retail contractual relationships – are, by nature, national - with differing legal, economic, political and cultural characteristics. Recognising the importance of the food supply chain, the EESC calls for manifestly unfair practices occurring in the entire food supply chain to be analysed and addressed appropriately.

1.7   More specifically, the EESC calls on the Commission to study how ‘unfair contractual relations’ are dealt with at national level, including enforcement. Furthermore, the EESC recalls the importance, at times of crisis, of ensuring a proper enforcement of existing legislation and that this is a responsibility of Member States, and highlights where action is needed and what would be the most appropriate level, in line with the principles of subsidiarity and proportionality.

1.8   Employment in retail is important and is often the entry point into the labour market for many young, low skilled or unskilled workers. Retail also offers considerable opportunities for entrepreneurs.

1.9   The EESC calls on the Commission to support the promotion of self employment, entrepreneurship and skills development as means to tackle the crisis and to facilitate the entry or re-entry of people into the labour market.

1.10   The Commission rightly identifies areas for priority action. Moreover, the EESC calls for a timely adoption of proposals, and urges the European Commission to speed up its decision-making in an area that requires urgent, practical and tangible action. In particular, the renewed High Level Forum on the Better Functioning Food Supply Chain should become the linchpin for new and nascent agri-food policies, including more balanced relations throughout the entire supply chain.

1.11   Furthermore, the EESC calls on the Commission to study the implementation of the services directive and take appropriate measures with the Member States concerned. The EESC also urges the Commission to take action on interchange fees which act as a hidden tax on consumers.

2.   Introduction

2.1   The European Commission acknowledges the important role played by the retail sector in the Single Market. In fact, its economic significance for the European Union (4,2 % of the EU's GDP, 17,4 million employees and 20 % of European SMEs as well as the close links with a multitude of markets) explains why retail was chosen for a market monitoring exercise.

2.2   The retail market monitoring report and its staff accompanying paper provide an analysis of issues affecting - from a Single Market point of view - the economic, social and environmental performance of the retail sector. In doing so, the report and staff working document look at the performance of the sector, recent trends and the impact of modernisation on other competitors. They identify problems affecting the performance of retailers also from the point of view of their interlocutors in the upstream and downstream markets.

2.3   The analysis of the sector made in the report is based on an analysis of interactions of retailers with their suppliers (upstream markets) and their consumers (downstream markets). In doing so, the Commission recognises the complexity of interactions that retailers develop in order to ensure that consumers find the right product at the right location, at the right time and at the best price.

2.4   The report announces that the Commission will define measures to improve the smooth functioning of the Internal Market for retail on the basis of the consultation, with an aim to help retailers make the best use of the Single Market and improve their economic, social and environmental performance.

3.   General comments

3.1   With this report, the European Commission recognises the importance of the retail sector in the Single Market and its contribution to growth, employment and sustainability issues. As the perception of the sector is often based on a simplistic view of retailers buying from farmers and selling to consumers, the approach taken in this report outlines the complexity of the supply chain and of retailers' interactions with their interlocutors. It further helps explain how retailers perform their mission to provide consumers with the right product at the right place at the right time and at the best price, and their challenges.

3.2   The report recognises the role that modernisation in the retail sector has played to help combat inflation over the past 50 years and to increase consumer choice. Greater competition and consolidation in retail have led to lower prices, increased consumer choice and comparatively low margins (as opposed to other sectors, including manufacturing) with an impact on competitors, local authorities, farmers, suppliers, employees, etc.

3.3   The EESC regrets that the report may be too focused on food retail and in doing so, fails to capture the importance of SMEs (over 95 % of companies in retail and 11 million workers), their specific needs and difficulties, including after sales services, their role in the life of city centres, rural areas or suburban areas, their dependence on large manufacturers and competition with suppliers setting up their own distribution networks.

3.4   The report also fails to recognise the importance of the cooperative business model particularly in food retail through consumer cooperatives.

3.5   The report analyses the performance of the retail sector against public policy objectives –accessibility and affordability. In practice however, retailers operate in a highly competitive environment in which companies strive to attract customers and offer them good value for money. Decisions made by retailers regarding establishment and their services therefore respond to market dynamics rather than public policy objectives. Benchmarking the performance of retailers against public policy objectives overlooks the fact that retail is a commercial activity that, to survive in a market economy, needs to remain profitable. Similar conclusions could be drawn for any other market activity.

3.6   Consumer demand has over time grown more sophisticated and cannot be considered as homogeneous. This combined with the importance of competition in commerce explains the complexity of market forces and why different retail formats, with different after sales services, co-exist in reality. This means that smaller formats can be successful if they provide a specific service to specific consumers. Over 11 million Europeans work in an SME in retail. It is therefore crucial that the development of SMEs is further encouraged, in particular through a better regulatory environment and reduced administrative burdens.

4.   Specific comments

4.1   More efficient and fairer retail services for consumers in the internal market

4.1.1   The core activity of retailers is to provide consumers with a wide range of products meeting quality and safety requirements at the best price. Modernisation in the retail sector over the past 20 years is characterised by swift concentration into large, multinational retail chains operating in different EU and non-EU countries, leading to the saturation of markets in the EU, the integration of information and communication technologies and globalisation, including expansion into other markets and access to a wider choice of products at a lower price for consumers (affordability).

4.1.2   The EESC and the Commission agree that the imbalances with regard to accessibility to outlets and the need to keep rural areas vibrant are key questions to be addressed. Retailers tend to establish in city centres or suburban shopping centres, hence the need to ensure that city centres remain accessible for supply. Increasingly people living in rural areas rely on the use of a car, with an environmental impact, to do their daily shopping meaning that those who cannot afford a car or are not able to drive have a limited access to retail services.

4.1.3   Retailer's decisions on establishment are based on a number of factors, one of the most important being the need to maximise foot flow. This factor alone explains that sparsely populated areas would be less prone to retail establishment as opposed to city centres or purpose built out-of-town shopping centres. Accessibility issues should therefore be addressed on the basis of a thorough understanding of the environment in which retailers operate.

4.1.4   The difficulty for consumers to access a wider choice of retail outlets depends on economic and non economic factors, such as the regulatory environment, including urban planning and retailers' access to property markets. They can be related to local regulations imposing entry barriers to certain types of activities or certain types of stores, authorisation procedures which may remain overly complex and discretionary in spite of the services directive. Furthermore, regulations reserving the sale of over-the-counter health products to certain monopolies limit competition, hence consumers' access to reasonably priced pharmaceuticals.

4.1.5   Over the past 20 years, people with lower incomes have largely benefited from access to a wider choice of products and better prices as a result of modernisation, increased competition and globalisation. The development of private labels, which are on average 30 % cheaper than branded products, has played an instrumental role in this process.

4.1.6   Due to the retail business model, retail prices reflect operational costs with a relatively small margin as compared to other sectors, which run on higher margins. The EESC is concerned with measures in some countries aimed at controlling price levels or margins. Due to the important socio-political area, such regulations can be necessary to guarantee social cohesion and prevent poverty.

4.1.7   Considerable price differences among Member States for similar products have been reported within the internal market. The EESC recommends that any study on prices focuses on the transmission of prices and margins throughout the entire supply chain. The EESC further agrees with the Commission that various factors influence the formation of a price. Apart from operational costs, these include average household disposable income, VAT, transport costs, rental costs, salary costs, the regulatory framework, the level of competition or commercial practices such as territorial supply constraints and abusive practices taking place throughout the entire supply chain. The EESC calls on the Commission to study the impact of these practices and take action to ensure that procurement is possible in other Member States so that consumers can benefit from lower prices, better choice, higher quality, alternative products, etc.

4.1.8   The EESC notes that consumer surveys have identified the need to develop sources of independent comparative information on retail offers.

4.1.9   The EESC agrees that e-commerce could play a role to increase competition in some areas, which would help lower prices and is concerned with the slow take up of e-commerce, especially for cross border transactions. The EESC notes that one of the obstacles to the development of cross border e-commerce transactions, especially for SMEs, is the lack of common consumer protection rules across Europe and urges the European institutions to rapidly adopt a directive on consumer digital rights based on ‘targeted full harmonisation’ in the most advanced form. Such directive shall not prevent any Member State from maintaining or introducing more stringent protective measures for consumers, in accordance with Art. 169(4) TFEU.

4.2   More efficient and fairer retail services for operators in the Internal Market

4.2.1   The EESC concurs with the statement that ‘an internal market for retail services (…) must allow those that are competitive, whatever their size to coexist and grow on the market’.

4.2.2   Location is a key determinant when opening a new outlet and it is the case that retailers may have to wait for several years before they can open a new outlet in a given area and create jobs. Difficult entry into the market and access to the property market are identified as potential impediments to the development of small retail and should be further analysed. This analysis could be carried on the basis of readily available information taking into account the consumer perspective (choice of shopping location), competition policy aspects, subsidiarity and proportionality.

4.2.3   The services directive, which was due to be implemented in all EU Member States by 31 December 2009, aimed at doing away with a number of discriminatory practices linked to the granting of an authorisation to establish. In practice, however, a number of new barriers are being erected and there are cases of urban planning regulations being misused to control competition and favour the establishment of certain forms of retail or enterprises. The EESC calls on the Commission to study the implementation of the services directive and take appropriate measures with the Member States concerned.

4.2.4   Another problem encountered by retailers is the absence of a transparent and competitive internal market for payments. Current practices of card schemes are anti-competitive and breach a fundamental tenet of the Internal Market. Interchange fees act as a hidden tax on retailers, especially the smallest. With interchange fees at the heart of the system, SEPA will lead to the extinction of cheap and efficient national debit card schemes. As a result, the cards market will shrink to a duopoly leading to higher interchange fee levels to the detriment of consumers. The EESC calls on the Commission to take action on interchange fees which act as a hidden tax on consumers.

4.3   More efficient and fairer retail services for suppliers in the internal market

4.3.1   As service providers, retailers provide their suppliers with an access to their distribution network be that for one outlet or across the EU. Services include for example specific placement on shelves, marketing and logistic activities, etc. Each of these bears a price, which often takes the form of fees.

4.3.2   Retail is only one of several other distribution channels that are available to suppliers. Without retailers, only a few suppliers would be able to build large distribution networks and consumers would suffer from less choice and higher prices. However, every link in the supply chain is important, as without raw materials there would be no processing and without processing there would be no retail. The EESC therefore believes that the EU must establish the mechanisms needed to ensure real balance in the product retail and distribution chain.

4.3.3   Across Europe there is a concentration of High Volume Retailers, who are attracting more customers through the strength of their offer (the top 5 grocery retailers made up more than 70 % of the market in 2005). Similarly, there is high concentration in a number of product markets, especially for must have products that retailers cannot afford not to offer in their shops. High competition between retailers results in tensions in the supply chain to reduce prices and margins. Bargaining power is a general practice in an open market economy which is exerted by any company, including both retailers and their suppliers, but when this practice becomes abusive, it must be eradicated. Retailers, including the larger ones, have no negotiation power with manufacturers of ‘must have’ products, be they large or small suppliers. Equally, small and medium sized suppliers have no negotiation power vis-à-vis large retailers for certain product categories. It is reported that operators in the supply chain are unable to complain out of fear of reprisal. The EESC encourages small retailers to form together buying alliances so as to increase their bargaining power vis-à-vis their suppliers, obtain better conditions and better serve consumers. Cases of abuse of buying power should be condemned and the EESC calls on a proper enforcement of competition rules for all actors of the supply chain.

4.3.4   The European Economic and Social Committee has adopted two opinions relative to the functioning of the food supply chain (1) recommending a Code of Practice at Member State level and the appointment of a mediator to intervene if necessary. The European Parliament, the Spanish Presidency of the European Union and the European Commission (2) have also adopted a series of recommendations for a better functioning of the food supply chain. The EESC also welcomes the launch of the High Level Forum (3) for a better functioning food supply chain which establishes a platform of stakeholders on business to business contractual practices throughout the entire food supply chain.

4.3.5   The EESC recalls that retail markets - and retail contractual relationships - are, by nature, national - with differing legal, economic, political and cultural characteristics. Commercial relationships are usually dealt with at national level either through regulation, case law and/or codes of good practice. Many Member States have attempted to regulate a number of practices. In many cases however, such attempts have led to the erection of new barriers by limiting the capacity of foreign businesses to establish in a given country, in breach of internal market principles. The EESC calls for manifestly unfair practices occurring in the entire supply chain to be analysed and addressed appropriately. More specifically, the EESC calls on the Commission to study how ‘unfair contractual relations’ are dealt with at national level, including enforcement. Such a study would outline the effectiveness of national practices; highlight whether action is needed and what would be the most appropriate level, in line with the principles of subsidiarity and proportionality. Furthermore, the EESC recalls the importance, at times of crisis, of ensuring a proper enforcement of existing legislation and that this is a responsibility of Member States.

4.3.6   To ensure consumer choice, retain their individuality and strengthen their local image, retailers have developed private label products, for which they bear producer responsibility. The success of these products is based on wide consumer acceptance as nearly 80 % of European consumers (4) consider those supermarket brands as a good alternative to other brands.

4.3.7   Private label ranges are developed in partnership with their suppliers, which in a vast majority of cases are SMEs. The European Commission recognises that those partnerships, based on a subcontracting relation, have often proven to be the most stable and durable relationships. Suppliers benefit from consumer data, incentives to further innovate and access to a wider market. However, concerns have been raised on their impact on innovation, competition, SME development and consumer choice. The EESC calls on the Commission to study the impact of own brand products on suppliers, competition, innovation and consumer choice.

4.4   More efficient and fairer retail services for employees in the internal market

4.4.1   Employment in retail is important and is often the entry point into the labour market for many young, low skilled or unskilled workers. The retail sector heavily relies on flexible work patterns so as to adapt to consumer demand throughout the day, week or seasons. Fierce price competition generates pressure for flexible working hours on the part of employees, which has in many cases become incompatible with the organisation of their private lives. Legislation and collective bargaining should therefore identify forms of flexibility that are compatible with both the necessary organisation of businesses and with employees' need to effectively balance their private and professional lives. In this respect, female participation in retail is higher than in any other sector and part time work is also important. Retail also offers considerable opportunities for entrepreneurs.

4.4.2   The EESC calls on the Commission to support the promotion of self employment, entrepreneurship and skills development as means to tackle the crisis and to facilitate the entry or re-entry of people into the labour market. The EESC urges businesses in the sector to apply national and Community rules in the area of equal opportunities and gender equality in order to help boost both the quality and the level of female employment in the sector.

4.4.3   The current financial crisis and the contraction of consumption have triggered closures, restructurings, mergers and take-overs of commercial activities across Europe. The risk of long-term unemployment for individuals therefore remains high. The EESC calls on the Commission to support the promotion of self-employment and workforce skills development as a means to tackle the crisis and enable people to re-enter the employment market.

4.4.4   There is a long tradition of collective bargaining in commerce both at European and national level. Differences between countries result from different cultures and tradition of industrial relations and any proposed measure in this field should remain subject to the principle of subsidiarity. The EESC calls on the Member States and the candidate countries to reinforce social dialogue between the partners and an industrial relations system within the sector.

4.4.5   Undeclared work and the informal economy are a major issue and should be dealt with as a matter of urgency as they generate both unfair competition among businesses as a result of tax and contribution evasion, and harmful effects on employees' working conditions, particularly regarding workforce health and safety protection. The EESC calls on the Commission and the Member States to take measures to simplify and reduce administrative burdens in particular for small and micro-enterprises and to further raise awareness of the benefits of regular work.

4.4.6   The EESC calls for an open debate with the Social Partners on franchising and urges Member States to reinforce measures to fight against the informal economy as it creates further discrimination and unfair competition to the detriment of SMEs.

4.4.7   Modernisation, technological development and increased use of ICT in retail has led to an increasing mismatch between skill needs of companies and those of staff in retail. The EESC draws the Commission's attention to the need to better equip workers with better skills throughout their career paths/working lives. In this respect, the EESC also calls on the social partners in commerce to deepen their on-going cooperation in addressing the mismatch between the skill needs of companies and those of employees through the identification of sectoral solutions and means to anticipate and manage the impact of new technologies on skills and employment.

4.4.8   There is a long tradition of Corporate Social Responsibility in retail. In fact, for many years commerce companies have been initiating and implementing a broad range of responsible practices. These practices do not only cover social and environmental issues but also other fields such as health, product safety, and supply chain related matters or local engagement.

4.4.9   The EESC agrees with the Commission that it is essential to tackle the issue of price competition, which generates powerful pressure on wage costs and employees' working hours. To this end, the EESC proposes that the Commission carry out a specific study on the impact of shop opening hours, including Sundays, on local economic and social development, the level of service provided for consumers, and employees' quality of life.

4.4.10   Major pockets of unfair competition and social dumping persist among businesses in the sector, regardless of size, as differing employment legislation and collective bargaining arrangements between countries produce different investment policies and economic and social models. The EESC urges the social partners to open, within the European social dialogue arena, a debate to identify the best policies in order to contribute to economic, social and territorial cohesion and remove those obstacles in the path of harmonious development and fair competition in the sector across Europe. The Commission should support such an initiative and take appropriate measures to eliminate conduct hampering the creation and operation of a fair, efficient internal market that promotes development.

4.4.11   Employee Financial Participation is playing an increasing role in the retail sector, particularly in the larger European retailers, allowing employees to have a greater say in the quality of employment, motivation and working conditions. The Commission should review this tool as part of its monitoring of the sector.

4.5   More efficient and fairer retail services for future generations in the internal market

4.5.1   The EESC acknowledges the importance of retailing in encouraging more sustainable consumption and production patterns in the EU. It recalls that the direct impact of retailing operations as such has been overestimated but that indirectly, as the closest link between consumers and manufacturers, retailing can do a lot. The EESC welcomes the Retail Forum whose role is to share good practice amongst retailers and between retail and stakeholders on specific issues. The EESC also recognises the work of the Sustainable Consumption and Production Round table.

4.5.2   The EESC draws the Commission's attention to the need to ensure consistency in policy making between environmental and other policy goals such as the internal market. Over the past years conflicts have arisen and it has become increasingly common for the basic principles of the Internal Market to be overruled on the grounds of environmental protection. Furthermore, the EESC warns against a possible shift of responsibility from producer to retailer.

Brussels, 20 January 2011.

The President of the European Economic and Social Committee

Staffan NILSSON


(1)  NAT/460: A better functioning food supply chain in Europe by Mr Narro and Kapuvari; CCMI/050 Retail industry: developments and impact by Ms Sharma.

(2)  COM(2009) 591 Commission communication A better functioning food supply chain in Europe.

(3)  Commission decision of 30 July 2010 establishing the High Level Forum for a Better Functioning Food Supply Chain (2010/C 210/03).

(4)  AC Nielsen study consumer attitudes towards private labels, 2005.


17.3.2011   

EN

Official Journal of the European Union

C 84/25


Opinion of the European Economic and Social Committee on the Proposal for a Regulation of the European Parliament and of the Council on the marketing and use of explosives precursors

COM(2010) 473 final — 2010/0246 (COD)

2011/C 84/05

Rapporteur-General: Mr SEARS

On 15 October 2010, the Council, and, on 7 October 2010, the Parliament decided to consult the European Economic and Social Committee, under Article 114 of the Treaty on the Functioning of the European Union, on the

Proposal for a Regulation of the European Parliament and of the Council on the marketing and use of explosives precursors

COM(2010) 473 final — 2010/0246 (COD).

On 20 October 2010 the Committee Bureau instructed the Section for the Single Market, Production and Consumption to prepare the Committee's work on the subject.

Given the urgent nature of the work, the European Economic and Social Committee appointed Mr Sears as rapporteur-general at its 468th plenary session, held on 19-20 January 2011 (meeting of 19 January), and adopted the following opinion by 149 votes with seven abstentions.

1.   Summary and recommendations

1.1

The proposal seeks to reduce the frequency and impact of terrorist attacks by limiting access by the general public to, and reporting suspicious transactions of, widely and legitimately used substances (and mixtures thereof) which in high concentrations can also be used to manufacture explosives.

1.2

The proposal is directed at wholesalers, retailers and Member States. Chemical manufacturers already have controls and voluntary reporting codes in place for weapon and drug precursors, for instance, and should not be materially affected by these proposals. The tonnages involved are small compared to the total amounts sold. There are no concerns with respect to worker health or environmental exposure. Success will depend upon actions by competent authorities with respect to the gathering and sharing of relevant information.

1.3

The EESC supports actions to combat terrorism and agrees with the overall rationale for the proposal, specifically a Regulation under Article 114 preventing fragmentation of the internal market.

1.4

The EESC also agrees with the list of eight substances (and mixtures thereof) included in Annex I as requiring controls under this heading. It is therefore reasonable to allow sales in high concentrations to the general public to continue only under licence for legitimate end uses.

1.5

The EESC also agrees that it is reasonable to put in place centralised systems in the Member States to receive, share and respond to, reports of suspicious transactions of any of these eight substances plus the further seven listed in Annex II, together with any other transactions falling under this heading.

1.6

The EESC however regrets that there are a number of shortfalls in the proposal, with respect to the supporting evidence presented on specific substances; to the other possibilities for control, for instance maximum package size; to the practicalities of controls at the points of sale, including the definition of ‘businesses’ to be excluded from this proposal; and with some inconsistencies within the text, for instance, with regard to the eventual scope of the reporting requirement.

1.7

The EESC is also surprised that, although costs for the retail sector and for governments have been broadly quantified, this has not happened for the assumed benefits. Although the value of a human life saved is indeed subjective, this approach has been used in the past to balance the costs of EU proposals. The reasons for not doing so here are not discussed.

1.8

Despite these concerns, the EESC strongly supports the proposal. Communicating this to the affected groups and to civil society as a whole will be a major challenge. The EESC would be happy to contribute to this in any way possible.

2.   Introduction

2.1

Improvised explosive devices (IEDs), often incorporating home-made explosives (HMEs), are increasingly used by terrorists and other criminal groups and individuals to attack military or economic targets around the world and to instil terror in civilian populations in pursuit of political or religious ideals.

2.2

Although the bulk of these incidents have so far occurred outside the EU, and despite the best efforts of national intelligence agencies, the Member States and citizens of the EU have not been spared. Richer countries have become prime targets; no country can be wholly safe. The driving forces of ideology, together with practical guidelines on bomb making, are circulated globally on the internet. The required precursors are readily available from retail stores or on-line, often at low cost and in the high concentrations that are required for HMEs, as well as for other legitimate industrial and domestic end-uses.

2.3

Given that these other uses exist and that any control measures should be both effective and proportionate, there is a clear need to determine which substances should be regulated and how; what other measures are required in support; and which Treaty base is appropriate.

2.4

These questions were addressed in a previous opinion (1), on an amendment to Council Directive 76/769/EEC on the marketing and use of ‘certain dangerous substances’ including ammonium nitrate (AN) used in very large quantities world-wide as a nitrogen-based fertiliser and also as an effective low cost component of both commercial and improvised explosives.

2.5

As noted at the time, other bases for legislation addressing terrorism or explosive precursors could have been chosen, but, under the existing EU Treaty, would have required unanimity across the Member States. This was thought to have been difficult to achieve in the short time available before the repeal of this long-standing Directive and its replacement by Regulation (EC) 1907/2006 (REACH), to Annex XVII of which ammonium nitrate was eventually added.

2.6

A number of Member States have since adopted national measures to limit the availability of explosives precursors of particular concern. To avoid fragmentation of the internal market and to ensure that there are no gaps in intelligence gathering and other measures against terrorism, a proposal from the Commission is now required.

3.   Summary of the Commission's proposal

3.1

The Commission's proposal is for a Regulation restricting access by members of the public to specific substances in general use but which can also be misused as explosives precursors. To protect the free movement of goods, eight substances listed in Annex I may continue to be sold in concentrated form under a licence granted by a national competent authority for a documented legitimate purpose or, without a licence, at concentration levels which render them ineffective for the manufacture of HMEs. A further seven substances are listed in Annex II where no licences or concentration levels apply. However for all 15 substances, and indeed for sales of any other substance, mixture (or article?) not specifically listed in these Annexes but identified by the Commission from time to time as having been used for the manufacture of HMEs, any transaction deemed to be ‘suspicious’ on any ‘reasonable’ grounds should be reported to a single national contact point.

3.2

Professional users of these materials and business-to-business sales would not be affected. The rights of individuals to privacy must be fully respected. The regulatory process should be flexible enough to allow a rapid response to changing needs. Voluntary agreements, codes of conduct and improved information systems would all be required in support of these measures.

3.3

The burden of costs would be shared approximately equally between the manufacturers and retailers (through the costs of compliance, labelling, reformulating and loss of sales) and the national competent authorities (who would have to set up and staff the necessary licensing and information gathering and reporting systems).

3.4

In the case of ammonium nitrate, included in Annex I of this proposal, references to the substance in Annex XVII of (EC) 1907/2006 (REACH), which does not provide for licensing or the reporting of suspicious transactions, would now be deleted. Specific derogations for use by farmers would continue.

3.5

The Regulation would come into force 18 months after its adoption and would be binding in its entirety on all Member States. A transition period of up to 36 months would be required to allow all existing stocks of high concentration substances listed in Annex I held by members of the public to be used or removed. The Regulation would be extended to the Member States of the EEA and would be reviewed after five years.

3.6

The proposal is accompanied by an explanatory memorandum, a Commission staff working document and summary of the impact assessment, and the impact assessment (IA) itself based on a Preparatory Study prepared by an external contractor (GHK in collaboration with Rand Europe and Comstratos) working closely with the Standing Committee on Explosives Precursors (SCP) established under the Action Plan for Enhancing the Security of Explosives agreed by the Council on 18 April 2008. The IA was reviewed by the Commission's Impact Assessment Board in March 2010 and a number of recommendations made.

3.7

Background is also available in the Commission's Communication on enhancing the security of explosives, dated 6 November 2007, and in the 2008 and 2009 Annual Reports of the SCP.

4.   General comments

4.1

The EESC clearly supports the Council's 2004 Declaration on Combating Terrorism and the more detailed actions and documents that have followed and has noted the key role that civil society has to play in ensuring the safety of its citizens. The EESC therefore welcomes this proposal with respect to explosives precursors.

4.2

The EESC agrees that a Regulation applicable to all Member States is required, irrespective of their current exposure to or awareness of terrorist activity. Existing terrorist groups can cross national borders to purchase or store precursors or to manufacture HMEs. Global terrorists do not recognise borders at all. There is a trend towards higher impact explosives with a decreasing regard for human life. Although the majority of planned attacks are foiled, when they are successful, the effects are devastating.

4.3

The EESC also agrees that Article 114 is the correct legal base to prevent the fragmentation of the internal market for substances that are and will remain in wide circulation, with many legitimate and essential uses. In some cases alternative products may be available, however total substitution is generally impossible and complete withdrawal from the market would have a disproportionate effect on the manufacturers, retailers and consumers concerned. Conflicts with other legislation, for instance on drug precursors or the use of agro-chemicals should also be avoided. National derogations, in particular for substances listed in Annex I, should not be permitted.

4.4

The EESC notes that lists of controlled precursors tend to reflect local experience of recent attacks rather than a globally agreed minimum list which should be the eventual aim. However a convincing case can be made for each of the substances listed here, and there is a provision for prompt updating as new routes to HMEs are identified. The eight substances in Annex I will be available to the general public in high concentrations only under licence. This should be sufficient to limit occasional, individual, casual or opportunistic purchases. The control of more ‘professional’ and determined activity will continue to depend primarily on good intelligence being relayed to, and used by, the police or other centralised security agencies.

4.5

The EESC therefore welcomes the proposals for additional education and training initiatives and voluntary codes of conduct. These must be directed primarily at wholesalers and retailers who must take a greater share of responsibility for the goods marketed and for the reporting, in a reasonable and effective manner, of any transaction deemed to be ‘suspicious’. The need for good feedback to encourage good practice is also recognised – and this will be an interesting challenge for the regulatory authorities and law-enforcement agencies involved. Given the short time frame for introduction, and competing needs for public finance, the Commission will have a key role in facilitating the exchange of good practice between Member States who have already introduced such measures and those who have not.

4.6

However, the EESC regrets that it has proved impossible for the Commission, despite the best efforts of its consultants, to fully describe or quantify the impacts of this proposal on the retail sector and therefore on consumers. During the preparation of the IA it became clear that there are few, if any, representative organisations capable of addressing the wide range of products potentially affected. Response rates to questionnaires addressed to individual suppliers were generally poor. The practicalities of enabling check-out staff to manage goods sold only under licence or to identify and report suspicious transactions of many others were not addressed. The difficulties of defining a ‘business’, however temporary and established for whatever purpose, which would be exempt from any control, versus ‘a member of the public’ who might or might not be willing or able to provide identification or to disclose the final end use, were discussed in the IA but are not fully resolved in the proposal.

4.7

As a further complication, the impact assessment depends on an economic model which was developed in full for only 14 of the 15 substances now listed (hydrochloric acid being omitted at the last moment and ‘ammonium calcium nitrate’, normally sold as ‘CAN’, being added without comment or explanation). The substances and their markets are certainly not homogenous, ranging from hexamine, a specialty solid fuel for toys and cooking stoves with retail sales of less than EUR 10M, to AN (and CAN) and acetone sold in millions of tons for agricultural fertilisers and cosmetics and household goods respectively, with EU markets measured in billions of euro.

4.8

Given these limitations, the best estimate appears to be that around EUR 300M sales, 10 % of the total value, of high concentration substances listed in Annex I would be directly affected, with perhaps half continuing under licence and the remainder being substituted or lost. Sales of concentrated hydrogen peroxide, a well known and widely used HME precursor, account for around 60 % of these totals. The rather larger markets for products listed in Annex II, dominated by sales of concentrated sulphuric acid and acetone, also common HME precursors, should not be significantly affected by the reporting requirements; if they are, then perhaps the Regulation could indeed be taken as working.

4.9

The off-setting economic and social benefits of limiting access by the general public to HME precursors and thereby reducing the frequency and intensity of terrorist attacks were addressed in the Preparatory Study but have not been quantified in this proposal. The assessment of proportionality between costs and benefits is therefore not easy. However, on balance the EESC believes that the measures do meet all relevant guidelines and should therefore be fully supported. Continuing actions by, in and between Member States will however be critical to ensuring longer term success.

5.   Specific comments

5.1

Both the EESC and the Commission recognise that any proposal on this topic has to be a careful balance between restrictions on the unlawful use of specific substances in the general good, and the rights of citizens to follow their own interests with a reasonable degree of privacy. It is also accepted that security issues and remedial measures, by their nature, cannot always be fully documented. However, as far as possible this should be the case.

5.2

The EESC therefore regrets that the final proposal is not fully supported by the Preparatory Study and IA, in particular with respect to the deletion of hydrochloric acid, even from Annex II, and by the addition of CAN, without any supporting evidence of use or market impact. As the proposal quite reasonably suggests that other substances may be added in future, there is a clear need to ensure that proper procedures are followed – and seen to be followed, by all those affected. Even at this late stage, an addendum to this effect would be helpful.

5.3

The rationale behind splitting the 15 substances into two groups, with only eight selected for restrictions on sales in high concentrations, is also not fully discussed in either the proposal or the working documents, although such discussions certainly took place in the SCP and were made available on request. Ideally these too should be included in the proposal and in any subsequent explanatory notes.

5.4

The EESC is also surprised that, given the relatively short list of very disparate substances, that there were no opportunities identified or discussed for actions under EU rules on the classification, packaging and labelling (CPL) of dangerous substances and mixtures – for instance to limit the size of individual packages and thereby highlighting unusually large and therefore ‘suspicious’ transactions at any stage in the supply chain. Whether or not this is reasonable depends on the scale of purchases required to make an explosive of the required size; information on this could have been included in the original IA and would have helped focus the proposed ‘intelligence’ gathering systems.

5.5

Specific proposals under this heading would also be helpful to resolve the practicalities of control at the points of sale where labels, bar codes or other internal control systems will be essential to limit unlawful or undesirable transactions. Given the free movement of all goods across the EU, a unified system will be essential to allow manufacturers and wholesalers to meet these obligations in a cost-effective manner.

5.6

As a small detail, it is noted that mixtures of all the substances in both Annexes are shown as having the same CN code (3824 90 27); although this has been confirmed as being correct, it does highlight the difficulty of identifying cross-border movements of products or mixtures of concern.

5.7

It is noted that business to business (b2b) transactions are excluded – but the definition of what constitutes a business is unclear. Not all self-employed gardeners, builders, dentists or hairdressers will be able to provide VAT numbers, for instance, or to show any other evidence of an ongoing business. Even if the evidence is provided, and the business is shown to be ongoing and legitimate, it still seems possible that a transaction could reasonably be regarded as ‘suspicious’ – and therefore some provision must be made for reporting at this stage of the supply chain as well.

5.8

Finally, there are no restrictions on sales on the substances listed in Annex II, merely a requirement to report ‘suspicious’ transactions. Given that any ‘suspicious’ transaction can, and probably will, be reported, whether or not the substance, mixture or article is actually listed, it is surprising that this list is not longer, to include a wider list of precursors and supporting materials. This would allow some freedom at national level to identify local preferences (for instance the use of black powder or propane cylinders) and to react quickly to newer formulations and trends.

5.9

It would also help to clarify the text and the underlying assumptions on the scope of the reporting requirement. The Explanatory Memorandum, under the heading ‘impact on fundamental rights’, states that this will apply ‘only to the chemicals listed in the Annexes and will be based on a risk assessment carried out be the economic operators’. This is however extended in Article 6, indent 4, to ‘any other non-scheduled substance’. Given that the evaluation of a transaction as being ‘suspicious’ is itself a value judgement reflecting local norms and attitudes, this cannot be made either obligatory or 100 % complete; neither can reports of transactions of substances not listed or not relevant be totally excluded. Given the myriad of retailers involved and the difficulty of raising awareness or sharing best practice, let alone of imposing controls, the problems of the quality and quantity of the data provided to the national contact points will also have to be addressed before this can be considered a source of useful ‘intelligence’.

5.10

Despite the above concerns, the EESC strongly supports the proposal and believes that it will contribute to the security of citizens both in and outside the EU. There will be a continuing need for the exchange of best practice, in particular in communicating to and with front-line retailers and other affected groups in civil society. The EESC would be happy to contribute to this in any way possible.

Brussels, 19 January 2011.

The President of the European Economic and Social Committee

Staffan NILSSON


(1)  OJ C 204/13, of 9.8.2008.


17.3.2011   

EN

Official Journal of the European Union

C 84/30


Opinion of the European Economic and Social Committee on the Proposal for a European Parliament and Council Regulation — Regulation (EU) No …/2010 of the European Parliament and of the Council on the approval and market surveillance of two- or three-wheel vehicles and quadricycles

COM(2010) 542 final — 2010/0271 (COD)

2011/C 84/06

Rapporteur: Mr RANOCCHIARI

On 5 November 2010, the Council, and, on 19 October 2010, the Parliament decided to consult the European Economic and Social Committee, under Article 114 of the Treaty on the Functioning of the European Union, on the

Proposal for a European Parliament and Council Regulation — Regulation (EU) No …/2010 of the European Parliament and of the Council on the approval and market surveillance of two- or three-wheel vehicles and quadricycles

COM(2010) 542 final — 2010/0271 (COD).

The Section for the Single Market, Production and Consumption, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 17 December 2010.

At its 468th plenary session, held on 19 and 20 January 2011 (meeting of 19 January 2011), the European Economic and Social Committee adopted the following opinion unanimously.

1.   Conclusions and recommendations

1.1

The economic and financial crisis which hit Europe in 2008 did not spare the motorcycle sector. Over the period ranging from the last quarter of 2008 to the last quarter of 2010, the EU market fell by 33 %, with adverse effects on employment.

1.2

Notwithstanding the present situation, the EESC welcomes the European Commission proposed regulation, which addresses among others two sensitive issues such as road safety and the environment, for which a legislative initiative had long been awaited.

1.3

‘L’ category vehicles (1) play also a social role in providing access to mobility, helping to reduce congestion in cities and offering alternatives in rural areas where public transport are scarce.

1.4

Therefore, the EESC recommends that attention should be given to limiting the overall increase in consumer costs coming from the proposed changes, in particular for smaller mobility-oriented products, to further avoid negatively impacting the market. Consequently, the EESC recommends that the regulation should foresee adequate lead time to implement the proposed measures, associated with higher flexibility in the technical solutions to be applied on smaller vehicles, in order to keep them affordable for the consumer.

2.   Introduction

2.1

The EESC welcomes the European Commission proposal, which intends to address several issues related to type approval and market surveillance in the motorcycle sector. This long awaited proposal provides the motorcycle sector with the necessary visibility on upcoming requirements for the manufacturing of two-, three wheel vehicles and quadricycles (‘L’ category vehicles).

2.2

Currently applying environmental standards for ‘L’ category vehicles dating back to 2006 (2), the European Commission proposes to continue progress with the progressive introduction of new Euro steps over the present decade. The proposal also includes provisions in the area of vehicle safety, given that improved road safety of motorcyclists is amongst the strategic objectives of the European Union for the period 2011-2020 (3).

2.3

As already mentioned in previous EESC opinion (4), the powered two-wheeler industry (PTW) plays an important role in the EU in terms of the economy and jobs. 90'% of the European production is carried out by a hundred or so medium-large and medium-small manufacturers operating in various EU countries (mainly Italy, United Kingdom, Germany, France, Spain and Austria, as well as Czech Republic, the Netherlands, Portugal, Slovenia and Sweden) as well as Norway and Switzerland. The remaining 10 % of European production is shared by a number of small and very small manufacturers. The average turnover of EUR 8 million reflects the substantial number of SMEs. In 2007, the manufacturing sector was employing 25 000 people, while the employment in the whole motorcycle sector (including component manufacturing, distribution and maintenance) was estimated at around 150 000.

2.4

Manufacturers' situations vary widely: some global operators are active across all segments (motorcycles for various uses with various cylinder capacities, scooters with various cylinder capacities, mopeds, three- and four-wheeled motorcycles) or in very specialised segments, while others operate country-wide or even local businesses which at times verge on craft trades in terms of size and production processes.

2.5

The sector was struck by the crisis in the last quarter of 2008, and the adverse effects of the fall in demand have been felt throughout the sector, with severe structural and employment consequences (31 % fall in demand resulting in a 35 % reduction in turnover and orders, with adverse effects on employment). Over the period last quarter 2008 to last quarter 2010, the EU market fell by 33 %. This fall in demand also resulted in a fall in turnover and orders and produced adverse effects on employment, within the manufacturing sector (mostly through less seasonal work, reduced working hours and redundancy payment) as well as for the upstream suppliers and downstream sale, maintenance and repair (estimated –25 % workforce, 2010 over 2007) (5).

This is the background against which EC proposal COM(2010) 542 was adopted, and which the EESC wishes to take into account in formulating its opinion.

3.   European Commission proposal

3.1

On October 4th, the European Commission adopted the proposal for a regulation on ‘Approval and market surveillance of two-or-three wheel vehicles and quadricycles’. This proposal uses the ‘split-level approach’, with the framework regulation on which the EESC is currently providing comments going through codecision procedure, to be followed by four comitology regulations (delegated acts), within 2012:

1.

Environmental and propulsion performance requirements;

2.

Vehicle functional safety requirements and related subjects;

3.

Vehicle construction requirements;

4.

Implementing act on administrative provisions.

The EC intention is to apply the whole package from 1 January 2013.

3.2

The EESC welcomes this legislative approach, aiming at progressively improving environmental performance and increasing vehicle safety features, as well as achieving simplification in type approval legislation for ‘L’ category vehicles, for which new sub-categories are introduced. Such simplification will result in the repeal of 13 directives and in the application of UNECE (6) Regulations, whenever possible. Furthermore, the EESC supports the renewed emphasis put on market surveillance, necessary to ensure a level-playing field as well as to protect the consumer from non compliant products, mostly coming from South-East Asia.

4.   General comments

4.1

The EESC evaluates positively the EC proposal as a whole, in particular its progressive nature in terms of application dates, however some aspects still need to be addressed with the European Parliament and Council in order to achieve well-balanced legislation with cost-beneficial measures, especially in light of the sector’s specificities and the current economic and financial crisis.

4.2

In the EESC opinion, the first item requiring attention is the calendar for the introduction of the new vehicle features, which must provide manufacturers with sufficient lead time to implement the different provisions, once the full content of the regulation as well as the delegated acts have been approved. Given that the delegated acts are expected to be finalised at the earliest at the end of 2012, the EESC believes that the application date for the whole package should start on 1 January 2014, in order to provide the necessary lead time to manufacturers and component suppliers. This lead time is necessary for manufacturers to have sufficient visibility on new requirements, and together with component suppliers develop the appropriate solutions to meet the proposed provisions.

4.3

The new requirements must then be implemented on production, at a reasonable cost to the consumer. This is particularly important in the current economic context. Additional percentage increase of consumer cost, coming from the application of the different environmental and safety provisions proposed in the regulation, are estimated (7) to range between +5 % and +10 % for the high end of the market (motorcycles above 750cc) and up to +30 % for the low end of the market (motorcycles under 300cc). This +30 % increase appears disproportionate and risks limiting consumer purchasing attitude, leading to a more ageing fleet, with adverse effects on environment and safety, as well as industry, employment and society. In terms of volumes, small and medium displacement motorcycles account for more than 80 % of EU registrations. It should be noted that vehicles under 300cc represent two thirds of EU registrations, most of them being urban commuters providing social and professional mobility.

4.4

On the environmental side, the EC proposed timeline for the introduction of the new Euro environmental steps is welcome, however the EESC notes that hybrid technology appears to have been to some extent penalised, with its alignment to diesel limit values, whilst presently used fuel on these vehicles is gasoline.

4.5

On the safety side, the EESC welcomes the legislative approach to advanced braking systems on motorcycles, but it reiterates (8) the need to properly evaluate the cost-effectiveness of the different systems, depending on the different products and their usage patterns. The EESC supports a technology-neutral approach in the area of advanced braking systems, in order to provide manufacturers with the necessary flexibility and stimulate innovation, in the interest of the consumer.

4.6

Whilst the EESC supports the proposed application dates of the different provisions for new type approvals, additional time appears necessary for vehicles registered according to an existing type approval, due to the extra complications and costs burden linked to their adaptation.

4.7

The EESC also supports the higher focus given to anti-tampering measures on vehicles legally limited in their dynamic performance and market surveillance provisions, to prevent vehicles non-compliant with type-approval provisions from entering the EU market. In these areas, Member States will also have a key role to play, through regular controls performed on the fleet and at the point of distribution.

5.   Specific comments

5.1

Within article 2 (2) (g), ‘vehicles primarily intended for off-road use and designed to travel on unpaved surfaces’ have been excluded from the scope of the EC proposal. This poses a problem for existing trial and enduro vehicles production, which until now were covered by type approval legislation, and also creates an uncertainty due to the subjective interpretation of the exclusion for other borderline vehicles. The EESC supports maintaining trial and enduro vehicles (9) within the scope of type approval legislation, also to avoid negative impacts on the environment, and using clear requirements in order to insert the exemptions from advanced braking systems necessary due to their specific conditions of use.

5.2

The EESC also welcomes the deletion of the optional 74 kW power limit, currently only used in one EU Member State, which supports the objectives of the EU internal market completion.

5.3

The EESC questions the proportionality of the provision requiring the use of On Board Diagnostics on L1 and L2 mopeds, given that the technical implications associated to the measure have a disproportionate cost in relation to the low purchasing cost of these vehicles (around EUR 1 000). The EESC wishes to underline the social role mopeds play in providing access to mobility, education and job opportunities, to young people and to fringes of the population for which these vehicles represent the only affordable form of private mobility, in cities and in particular in rural areas where public transport alternatives are scarce.

5.4

The EESC notices that limits for ‘small series’ have been lowered from currently applying 200 vehicles to 100 (L4e, L5Be, L6Be, L7Be), 50 (L5Ae) and even 20 (L1Ae, L1Be, L2e, L6Ae, L7Ae). The EESC is of the view that these limits are too low and impractical for the many SMEs involved in the sector; the EESC therefore proposes to maintain the 200 vehicles limit presently applying, in order to enable these SMEs to be granted some limited exemptions from type-approval requirements economically unaffordable for such small businesses.

5.5

The EESC believes that the proposed maximum mass for L6e and L7e quadricycles in Annex I are premature. Whilst the maximum mass appears unchanged, it is now referred to mass in running order. This is not only more severe in itself, but it does not take into account the additional weight impact of newly proposed requirements in Annex II, in particular but not limited to ‘front and rear protective structures’. The technical characteristics of these new requirements having to be established by the delegated acts, the EESC believes that setting maximum mass limits should be done in light of the technical requirements.

Brussels, 19 January 2011.

The President of the European Economic and Social Committee

Staffan NILSSON


(1)  ‘L’ vehicles consist of L1e mopeds, L2e three-wheel mopeds, L3e motorcycles, L4e motorcycles with sidecar, L5e tricycles, L6e light quadricycles, L7e heavy quadricycles.

(2)  Directive 2002/51/EC introduced Euro2 (since 2003) and Euro3 (since 2006).

(3)  Road safety policy orientations, European Commission, 2010.

(4)  OJ C 354, 28.12.2010, p. 30.

(5)  Data for Italy, ANCMA (Associazione Nazionale Ciclo Motociclo e Accessori).

(6)  United Nations Economic Commission for Europe.

(7)  Source ACEM. See http://circa.europa.eu/Public/irc/enterprise/automotive/library?l=/mcwg_motorcycle/meeting_june_2009&vm=detailed&sb=Title

(8)  CESE 1187/2010,‘Strategic guidelines for road safety up to 2020’, September 2010.

(9)  As defined in Directive 2002/51/EC, article 2 paragraph 4.


17.3.2011   

EN

Official Journal of the European Union

C 84/34


Opinion of the European Economic and Social Committee on the Proposal for a Regulation of the European Parliament and of the Council on Short Selling and certain aspects of Credit Default Swaps

COM(2010) 482 final — 2010/0251 (COD)

2011/C 84/07

Rapporteur-General: Mr MORGAN

On 7 October, the European Parliament and, on 13 October 2010, the Council decided to consult the European Economic and Social Committee, under Article 114 of the Treaty on the Functioning of the European Union, on the

Proposal for a Regulation of the European Parliament and of the Council on Short Selling and certain aspects of Credit Default Swaps

COM(2010) 482 final — 2010/0251 (COD).

On 20 October 2010 the Committee Bureau instructed the Section for the Single Market, Production and Consumption to prepare the Committee's work on the subject.

Given the urgent nature of the work, the European Economic and Social Committee appointed Mr Morgan as rapporteur-general at its 468th plenary session, held on 19-20 January 2011 (meeting of 20 January), and adopted the following opinion by 200 votes to four with seven abstentions.

1.   Conclusions and recommendations

1.1

Short selling of equities in financial institutions was banned by the UK and other countries as a reaction to the post Lehman market meltdown. In response to the Greek sovereign debt crisis the German authorities banned short selling of the shares of certain German financial institutions, eurozone sovereign debt and ‘naked’ CDS positions in that debt. In this regulation, as part of its revision of financial regulation and supervision, the Commission proposes a single framework under the ESMA umbrella for the management of short selling and CDS throughout the EU. The EESC welcomes this initiative which will eliminate conflicting regimes and bring clarity to this area of the financial markets.

1.2

The EESC believes that, in general, outcomes will be optimum if markets are allowed to operate freely within an established regulatory framework. The EESC emphasises the importance of the ESMA umbrella. In the light of circumstances which ESMA considers to be adverse, ESMA may:

prohibit persons from engaging in any trading, or limit the value of such trading;

prohibit persons from entering into short sales or impose conditions on such sales;

prohibit sovereign credit default swaps transactions;

limit the value of sovereign CDSs; and

require public disclosure of short selling.

1.3

In general, the EESC would expect Member State Competent Authorities to exercise these powers in the first instance. ESMA coordination of Member State responses meets an existing need and will be highly beneficial. The EESC would expect direct ESMA intervention to be exceptional as foreseen in Article 24 of the regulation.

1.4

The EESC welcomes the proposal for a regulatory framework that will give competent authorities powers to require additional transparency for the instruments covered by the regulation. On a day to day basis, this will benefit regulators, investors and markets. Should any future intervention be considered, we can expect the regulators to be better informed than heretofore.

1.5

The EESC welcomes the proposal to formalise within a harmonised framework powers to place temporary restrictions on short selling when market stability is threatened. The EESC notes that objective measures of market instability remain to be defined. The current threshold for ‘significant price falls’ of 10 % could be too low for some instruments.

1.6

Subject to the provisions in paragraph 1.5 above, the Committee does not feel that an outright ban on naked CDS in all circumstances is justified.

1.7

The EESC considers that the proposed settlement regime for naked short selling could be more effective if there should be at least intra-day flexibility to cover short positions. The rather more flexible US model should provide the necessary assurance without putting market operators at a disadvantage.

1.8

The EESC supports the proposal for a two tier disclosure regime for equities, disclosing first privately and then publicly. This will give appropriate notice to both the regulators and the market.

1.9

The EESC is doubtful about the provision for the marking of short orders. The complexity is considerable, the utility is questionable and it will be a burden on all EU trading venues. The other transparency measures appear to be more than adequate to give control of the markets to ESMA and the Competent Authorities.

1.10

CDS related to sovereign debt have been the focus of eurozone angst as the sovereign debt crisis has erupted. The economic and social dimensions of this crisis are of enormous concern to the EESC. The Committee believes that naked CDS trading amplified the crisis and so it welcomes the regulation proposal. The Committee endorses the Commission's view, contained in Recitals 16 and 17 of the Explanatory Memorandum of the regulation, that ‘uncovered short selling of shares and sovereign debt is sometimes viewed as increasing the potential risk of settlement failure and volatility. Measures relating to sovereign debt and sovereign credit default swaps including increate transparency and restrictions on uncovered short selling should impose requirements which are proportionate and at the same time avoid an adverse impact on the liquidity of sovereign bond markets and sovereign bond repurchase (repo) markets’.

1.11

In summary, the Committee welcomes the regulatory role of ESMA as it is defined in the regulation. Excessive intervention could destabilise markets. The EESC welcomes the provisions for market transparency which it expects to be very beneficial. It welcomes most of the technical provisions with the exception of the concerns detailed above.

1.12

Taking account of the damage that out of control sovereign debt can cause to all citizens, the EESC expects the EU to give a global lead in the future management of sovereign debt.

2.   Introduction

Short Selling

2.1

The term ‘short selling’ means selling shares that are borrowed, rather than owned. Institutions which lend shares charge a fee which provides extra income for their funds. The borrower sells the shares in the expectation that the price will fall so that, in due course the shares can be repurchased at a lower price so that they can be returned to the lender, leaving the borrower in profit. Short selling is evidently risky. The loan of the shares may be arranged before the sale (covered short selling) or after the sale (‘naked’ or ‘uncovered short selling’).

2.2

Short selling can be used for a variety of reasons. Because both individual shares and the stock market as a whole can fall as well as rise, a portfolio of shares designed to rise with the market (a long position) is vulnerable to loss of value when the market falls. This type of ‘long’ portfolio can be protected by a ‘short’ component. While many institutions are ‘long’ only, some may be ‘short’ only. It is a moot point as to whether a long only portfolio, betting on upward market movement, or a short portfolio, betting on price falls, is the most speculative.

2.3

Short selling is used by a wide variety of market participants, ranging from traditional fund managers, such as pension funds and insurance companies, investment banks, hedge funds and market makers. Individual investors may also use short selling as part of their investment strategy. Short selling is regarded as a legitimate investment technique in normal market circumstances.

2.4

As rightly stated by the Commission, short selling is an established and common practice in most financial markets and should not be confused with market abuse, which is separately regulated in the EU. Rather, short selling has positive effects on the financial markets, including notably improved price discovery and reduced risk of bubbles as well as greater market liquidity.

2.5

In September 2008, days after the Lehman default, the UK prohibited the short selling of shares in publicly-quoted financial companies. Many other countries, including the USA, imposed similar restrictions, but for varying time periods. The new EU regulation will avoid any repetition of these disorderly measures.

2.6

The toxicity of the sub-prime derivatives, the viral nature of the cancer and the enormity of the melt down necessarily provoked action by regulators, even though their impact on the course of the crisis is debatable. It is difficult to envisage a similar future event, but in any case the framework now exists for an orderly response by supervisors and regulators.

Credit Default Swaps

2.7

Credit Default Swaps (CDS) are derivative contracts tied to an underlying debt security such as corporate bonds and government (sovereign) bonds. They are used to insure against the default on that debt. The protection buyer makes quarterly premium payments - the ‘spread’-to the protection seller. The spread of a CDS is how much must be paid to maintain them, and the spread widens in step with the perceived risk of default on the underlying debt.

2.8

If the borrower defaults, the protection seller pays the buyer the par value of the bond in exchange for physical delivery of the bond. A default may include such events as failure to pay, restructuring and bankruptcy. Most CDS are in the $10–$20 million range with maturities between one and 10 years. A CDS is similar to credit insurance, although CDS are not subject to insurance regulations.

2.9

Investors can also buy and sell protection without owning any of the debt being insured. These ‘naked credit default swaps’ allow traders to speculate on debt issues and the creditworthiness of the issuer. For example, if a supplier to General Motors had been concerned that GM was potentially insolvent, a naked CDS on GM bonds could have provided protection. Similarly, investors in sovereign debt can use CDS to create synthetic long and short positions in the selected bonds which in some cases may be a better way to create a portfolio.

2.10

It is important to avoid confusion between naked CDS and the naked short selling of stocks and shares. In the latter case, borrowed stock is sold. This can be a problematical concept. In the case of naked CDS, no sale is involved. A willing buyer has bought an option on a bond from a willing seller. As in any market, a price is struck. The performance of the underlying bond will decide which party profits. Naked CDS form the largest part of the CDS universe.

2.11

In May 2010, Germany announced a ban on naked CDS referencing Euro zone countries, as well as naked short sales of Euro zone sovereign debt and equities of certain German financial institutions. The regulator cited the ‘extraordinary volatility of debt securities’ to justify the move. This action took other Member States by surprise and upset the markets. As with short selling of equities, the new EU regulatory powers and provisions will prevent a repetition of such unexpected unilateral action in future.

2.12

While the focus on CDS is justified, there is still a danger that it deals with the symptom of the problem not the cause. The cause is the unresolved political and economic dilemma in which a currency union is faced with a debt crisis. The dilemma has caused economic uncertainty. Lenders need to cover their risks. Opportunists seek to profit from the uncertainty. It is difficult to separate one from the other. Bankers may be profiting, but eurozone governments are giving them every opportunity to do so.

2.13

In the light of the above, and taking account of the damage that out of control sovereign debt can cause to all citizens, the EESC expects the EU to give a global lead in the future management of sovereign debt.

3.   Gist of the Regulation

3.1

The proposal covers shares and derivatives relating to shares, sovereign bonds and derivatives relating to sovereign bonds and credit default swaps relating to sovereign issuers.

3.2

The proposal applies transparency requirements to natural or legal persons (henceforward persons) with significant net short positions relating to EU shares or EU sovereign debt or with significant CDS positions relating to EU sovereign debt.

3.3

For shares, a two tier transparency model is proposed: at a lower threshold, notification of a position must be made privately to the regulator; at a higher threshold, positions must be disclosed to the market.

3.4

The lower tier threshold proposed is 0.2 % of the issued share capital. The upper tier threshold is 0.5 %.

3.5

For EU sovereign debt, private disclosure is required of significant

net short positions in sovereign debt,

uncovered positions in CDS relating to sovereign debt.

3.6

Notification is also required when short positions are taken via either OTC (over the counter) transactions or by derivatives such as options, futures, etc.

3.7

There is also a requirement that short sales at any venue should be flagged so that the venue can publish daily information about volumes of short sales at that venue.

3.8

Persons entering into short sales of shares or sovereign debt must, at the time of sale, have either borrowed the instruments, entered into an agreement to borrow them or made other arrangements to ensure that the security can be borrowed so that settlement can be made when it is due.

3.9

Where a person who has sold short is not able to deliver shares for settlement on time, the trading venue will acquire shares to complete the sale and recover costs from the short seller. The short seller will pay a daily charge until the sale is settled.

3.10

Settlement periods vary between jurisdictions. Settlement generally is an issue which remains to be addressed.

3.11

In exceptional circumstances, it may be necessary to prohibit or restrict short selling activities that would otherwise be legitimate or pose little risk. In such cases competent authorities should have temporary powers to require further transparency or impose restrictions on the market.

3.12

Because of the EU wide ramifications of such measures ESMA (European Securities Market Authority) will be given two key roles: coordination of intervention between Member States and validation of the restrictions imposed by each Member State, especially with regard to the duration of any restriction.

3.13

Where a situation has cross border ramifications and ESMA deems that the measures taken by the competent authority are inadequate, ESMA may itself intervene, over-riding the Member State competent authority.

3.14

The Commission is given the power to further define criteria and factors that must be taken into account by both ESMA and competent authorities in determining when adverse events or developments create a serious threat to financial stability or market confidence.

3.15

Competent authorities are given the power to impose a very short prohibition on short selling of instruments or otherwise limit transactions to prevent a disorderly decline in price. This ‘circuit breaker’ would be triggered by objective criteria.

3.16

The proposal gives competent authorities all the powers necessary for the enforcement of the rules. The proposal requires Member States to provide for rules on administrative measures, sanctions and pecuniary measures necessary for the implementation and enforcement of the proposal.

Brussels, 20 January 2011.

The President of the European Economic and Social Committee

Staffan NILSSON


17.3.2011   

EN

Official Journal of the European Union

C 84/38


Opinion of the European Economic and Social Committee on the Green Paper — Towards adequate, sustainable and safe European pension systems

COM(2010) 365 final

2011/C 84/08

Rapporteur: Mr DANDEA

Co-rapporteur: Mr PATER

On 9 July 2010, the European Commission decided to consult the European Economic and Social Committee, under Article 304 of the Treaty on the Functioning of the European Union, on the

Green Paper – Towards adequate, sustainable and safe European pension systems

COM(2010) 365 final.

The Section for Employment, Social Affairs and Citizenship, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 16 December 2010.

At its 468th plenary session, held on 19 and 20 January 2011 (meeting of 20 January 2011), the European Economic and Social Committee adopted the following opinion by 185 votes to 9 with 8 abstentions.

1.   Main recommendations

1.1

As stated in the Green Paper – Towards adequate, sustainable and safe European pension systems, the Member States are free to define and fully responsible for defining the fundamentals of their social security systems and thus the design and performance of their pension systems. However, the EESC believes that a coordinated EU-level approach can contribute to coherence and ensure that national pension systems are in line with the social and employment pillars of the Europe 2020 strategy, bearing in mind that employment is crucial for the sustainability of pension systems. The EESC's comments should be taken as a whole, not picked out individually.

1.2

The reform of pension systems is a matter decided at national level, taking account of country-specific conditions and history and directed towards guaranteeing an adequate and sustainable pension system. No specific type of pension reform should be promoted or penalised – either directly or indirectly – by EU regulations. In its opinions adopted in 2000 and 2004 (1), the EESC stressed that this area should be left to the social partners. Despite major differences in national pension systems, the EESC feels that there are enough common features which could be tackled at EU level, from policy coordination to regulation, without exceeding EU competences in the area of funded pension schemes.

1.3

The proposals in the Green Paper should be reconsidered in the broader context of the social market economy. The crisis is detrimental to growth, employment and pensions. The EU would be fulfilling its supportive role by setting up in the same time a structured recovery policy designed to increase quality oriented growth by the means of active labour policy, vocational training, investments and innovation thus promoting the creation of more and decent workplaces so stabilising the pay-as-you-go schemes existing in the Member States. These schemes are powerful ‘shock-absorbers’ in times of crisis. Ahead of a possible shifting from fully solidarity-based pension schemes to mixed schemes (Pay-As-You-Go and pension funds) Member States, using among others the argument that solidarity-based Pay-As-You-Go schemes increase public deficit, should keep in mind that funded pension schemes could not help people overcome the effects of economic crises – rather, such schemes could be damaged by every financial and stock market crisis.

1.4

As a result of low birth rates and rising life expectancy, Europe is ageing. The EESC agrees that projections on demographics should be analysed and monitored on a regular basis to allow adequate and timely adjustments of pension systems to new conditions. However, these projections, including future public expenditure on pensions, must be used and viewed with care, as they may include many assumptions hard to predict in the long term (2). Eurostat's assumption that life expectancy will increase by seven years in the EU over the next 40 years, although based on the best expert knowledge, cannot be certain. Further improvements in longevity can be influenced by changes in working and living conditions. The EESC considers that the proposals made by the Commission in the Green Paper, which are based essentially on demographics and 50-year projections, fail to take into account the fact that the effects of the crisis on pension schemes owe more to the lack of jobs and investment than to demography.

1.5

The EESC doubts that a mere rise in legal retirement age can solve the problems connected with demographic challenges. On the contrary, it believes that this could push millions of elderly people below the poverty line, particularly women. What is needed is to increase the effective retirement age up to the existing legal retirement age using initiatives to foster extended working life, flanked by effective growth and employment policies. Only a real ‘active ageing’ policy, aimed at increased participation in training and lifelong learning, can sustainably boost employment rates for older people, who give up work early due to health problems, the intensity of work, early dismissals, and lack of opportunities for training or re-entering the labour market. In addition, a rise in legal retirement age can increase pressure on other pillars of social security (3), such as invalidity pensions or minimum income, as happened in some Member States, making the progress towards healthier public finances fake, so it needs to be considered on a voluntary basis.

1.6

Automatic adjustment mechanisms for retirement age, based either on longer life expectancy or demographic change, are assessed as dangerous for society as a whole and therefore not supported by the EESC. Most of these mechanisms automatically increase retirement age in correlation with extended life expectancy and other economic or labour market parameters. Such fundamental decisions on living conditions should be taken by parliaments, not computers, after a broad public debate, including social partners and other important stakeholders. In addition, any Member State introducing this mechanism should take into account the fact that although it reduces public pressure against reforms, in the absence of real job opportunities for older workers it could shift financial support for these workers to other social security pillars. Thus, implementing bluntly this mechanism into pension schemes to make pensions adequate and sustainable would fail to deliver the promised benefits.

1.7

Both Pay-As-You-Go and funded schemes are affected by the current economic crisis but in a different way. It should be stressed that the launch of funded mandatory pension schemes in some Member States in the 1990s was seen as a way of avoiding pension risks, such as sustainability or adequacy, caused by population ageing. The financial crisis and its consequences show that funded mandatory pension schemes are exposed to specific financial risks. Nevertheless, Pay-as-You-Go pension schemes are affected as well by economic crisis and ageing, due to the reduction of the aggregated wage sum. It is now clear that all pension schemes, regardless of financing method, can be affected both, but in different ways, by economic crises and by ageing. Therefore, good management and supervision of these schemes and economic policy are necessary to reduce considerably the risks that threaten their sustainability. Despite the diversity of pension systems in the EU, attempts to ensure adequacy and sustainability of these systems must take a holistic approach. The EESC believes that Pay-As-You-Go mandatory schemes must continue to play a fundamental role in assuring future pensions and therefore special attention should be devoted to them in order to inverse the observed tendency in many EU countries of decreased replacement ratios.

1.8

At a time of population ageing, success in ensuring sustainable public finances will depend on the EU's efforts in the following key areas: supporting quantity and quality of employment, raising productivity and economic performance, improving flexicurity in the labour market, lifelong learning, immigration and the integration of migrants. The EESC believes that the Commission should recommend working on a concept of employment for all, with decent work at every time of life, focusing in particular on bringing young people into the labour market, fostering active ageing and participation in training and lifelong learning. What people want is for everyone to work and work better, starting now. This means that it is crucial to create the right conditions to create new jobs.

1.9

The EESC underlines that a pension system must be credible and adequate, what implies searching for and implementing new financial resources in order to guarantee an inter-generational balance. Only then will future generations contribute to a pension system, a crucial condition for making pension schemes sustainable. Pension systems must be transparent, and information and statistics on their functioning as well as on all rights of the participants must be available and understandable. Training in financial literacy should become part of school curricula.

1.10

The EESC urges the Member States and the Commission to make gender equality a reality. Different retirement ages for women and men should be reviewed. When combined with women's lower retirement age, the interrelationship between benefits and demographic factors puts women at higher risk of poverty in old age. This adds to women's already higher risk of earning lower pensions as a result of lower wages (gender pay gap), longer parental breaks and higher risk of long term unemployment. Women’s careers are also more unstable. In this sense it is important to avoid long periods of disconnection with the labour market. For example improved provision of care facilities for children and elderly can help considerably many women entering and remaining on the labour market. The EESC urges the Member States to implement real policies addressing those issues.

1.11

The EESC reaffirms that pensions are not, as stated in the Green Paper, a ‘reward’ but rather a form of deferred wage or saving, irrespective of the type of system. Pensioners are a very important socio-economic category and should not be seen as a burden but a key economic player comprising on average 25 % of the population, who fuel global demand.

1.12

It should be borne in mind that even in Member States with Pay-As-You-Go schemes, the voluntary funded-pension schemes cannot be filled only by employees able to put money aside. In case of mandatory pension funded systems, if they were to become standard practice and the Pay-As-You-Go schemes were to shift partly towards funded pension schemes, the result must avoid creating inequalities and jeopardising the income of future pensioners.

1.13

Adequacy and sustainability of pensions should be considered as a priority both from a macroeconomic and a social perspective. This is a vital issue for the economy, and so the competent authorities should consider looking for sources of funding or ways of complementing it, other than levies on salaries, to help financing the pension systems.

1.14

The Commission should encourage the Member States to reform national pension schemes for reasons of adequacy, sustainability and security, with strong participation and involvement by the social partners.

2.   Responses to questions put by the European Commission

2.1

How can the EU support Member States' efforts to strengthen the adequacy of pension systems? Should the EU seek to define better what an adequate retirement income might entail?

2.1.1

The Commission's first step should be to define guiding principles of adequacy at EU level. Pensions must offer material security and dignity. There are many EU instruments providing support for Member States. These include the Open Method of Coordination, the Stability and Growth Pact and the Stockholm Strategy (4). Similarly, under the TFEU, regulations on social security and pension schemes can be approved at EU level. The EESC acknowledges the difficulty of regulating at EU level, but the Commission could assess and, if necessary, review the existing regulatory framework especially concerning funded pension schemes at least in the following areas:

the prudential aspects of investment for funded pension schemes;

gender aspects of funded pension schemes;

solvency of all funded pension schemes;

administration costs of funded pension schemes; and

guarantee systems for privately administered pension schemes.

2.1.2

The assessment should look, in particular, at the development of mandatory funded pension systems managed by private institutions with individual choice, which some Member States began to introduce in the late 1990s. The existing EU regulation is based on the experiences of countries which have not included this kind of solution in their pension systems. Therefore, the Commission should focus specifically on mandatory funded pension systems, looking at:

the treatment of assets of these schemes from the perspective of public finance;

the issue of dealing with currency risk;

ensuring proper supervision to guarantee appropriate safety for such schemes, which have a certain degree of public guarantees.

The EESC recommends caution when reforming, as transferring part of the contributions currently tapped by Pay-As-You-Go systems into funded systems should not weaken Pay-As-You-Go systems, in order to guarantee real benefit for future pensioners. The absence of effective regulation leads to increased financial risk, especially in times of economic crisis. Pension fund investments should take into account the need for lifecycle asset allocation.

2.1.3

The EESC considers that under the OMC, the Social Protection Committee and its Indicators Sub-Group, supported by the Economic Policy Committee and its Working Group on Ageing Populations, could develop and improve instruments for evaluating the potential impact of ageing on the sustainability of public finances and decent pension. Calculations of poverty risk for pensioners' households based on the general Eurostat method fail to shed sufficient light on pensioners' exposure to poverty, given the different income and expenditure structure of these households. A better method for estimating pensioners' exposure to poverty should be developed. It could also monitor the adequacy of retirement income. More statistical estimates should be carried out to evaluate the adequacy of pensions in the light of their ability to prevent poverty in old age and to ensure decent living standards for pensioners, allowing participation in public, social and cultural life (5). However, the adequacy of pensions needs to be defined at national level.

2.2

Is the existing pension framework at the EU level sufficient to ensure sustainable public finances?

2.2.1

The European pension framework focuses on monitoring future spending on the basis of accepted rules. This method pushes policy-makers to focus on the cut-off point for their projections. The EESC stresses that monitoring the general level of pension system liabilities is fundamental. Accordingly, the current framework could be supplemented by monitoring and reporting on implicit pension liabilities using an approved methodology.

2.2.2

Consideration could be given to revising Stability and Growth Pact rules to ensure that the outcome of reforms (including the shift from fully Pay-As-You-Go to partially funded pension systems) leading to changes in the financing of pension systems, which increase explicit and reduce implicit liabilities, are reflected appropriately. If this were done, such reforms, aimed at resolving long-term sustainability challenges, would not be penalised in the short term due to higher explicit public debt.

2.2.3

However, promoting today effective reforms on the basis of 2060 projections may lead to missing the target of adequacy and sustainability of pensions. The EESC recommends supplementing mandatory Pay-As-You-Go pension systems with buffer funds on a case-by-case basis in order to avoid risks of rapid adjustments for the most vulnerable.

2.2.4

The EESC considers the question of the Commission to be misleading for the general public. It is essential to guarantee sustainable public finances. This has to be done at national level and involves much more than merely looking at pension systems.

2.3

How can higher effective retirement ages best be achieved and how could increases in pensionable ages contribute? Should automatic adjustment mechanisms related to demographic changes be introduced in pension systems in order to balance the time spent in work and in retirement? What role could the EU level play in this regard?

2.3.1

By 2020, the legal retirement age in most Member States will be 65. According to Eurostat data, the average effective retirement age in the EU in 2008 was 61.4 (6). However, the employment rate of people in the 55-64 age bracket is still low, at around 40 %. Initiatives to create jobs for older workers, to change employers' attitudes to this age group and to change the attitudes of older employees themselves as well as initiatives to create conditions for active ageing are needed, as the introduction of automatic adjustment mechanisms for retirement age leading to increased legal retirement ages would shift millions of workers to other pillars of the social protection system (i.e. unemployment benefit, invalidity pension or guaranteed minimum income), with the risk of poverty for this category rising sharply. The EESC believes that policies supporting employment should be a priority in the EU. The key response to the demographic challenge has to be targeted at growth policy and increasing employment.

2.3.2

It is vital to promote EU-level initiatives under the current Europe 2020 strategy to give workers the opportunity to work. Member States should enhance employability and establish conditions for businesses to create jobs and employees to remain in employment if they so wish. Promoting longer working lives requires joint efforts on the part of the state, employers and individuals. Employers need vigorous support to provide more jobs for older workers, who quit work early due to health problems and working conditions, the intensity of work, early dismissal as well as due to lack of opportunities for training or re-entering the labour market. Elderly people should also be encouraged and stimulated in order to enhance their employability and to remain active in the labour market. Given that the right to retire is a fundamental right, any automatic increase in legal retirement age would be out of the question. The EESC notes that the issue of legal retirement age is a separate issue, distinct from that of the length of time spent contributing or paying in.

2.3.3

Whether merely raising the legal retirement age can increase the effective retirement age is debatable. This would certainly be the case if active labour market policies, proper industrial relations, active ageing strategies and measures to enhance solidarity in the pension system were not implemented. Only a conscious policy of ‘active ageing’, fostering further training and lifelong learning can raise the employment of older people.

2.3.4

The EESC is convinced that automatic adjustment mechanisms cannot replace a standard political decision. Fundamental decisions on people's living conditions have to be taken by parliaments after a broad public debate. If they were implemented, automatic adjustments would risk inappropriately combining extensions to periods of employment and retirement. In the past, changes in life expectancy have been accompanied by longer periods of education and retirement and reductions in the time spent in active employment. Increasing the retirement age should not be a stand-alone measure but should also be flanked by measures to improve employment opportunities for people close to retirement.

2.4

How can the implementation of the Europe 2020 strategy be used to promote longer employment, its benefits to business and to address age discrimination in the labour market?

2.4.1

Extending employment is relevant to all the goals of the Europe 2020 strategy. The social partners must be included in the initiatives oriented towards increasing the employment rate to 75 % of the active population. The EESC considers that a special approach is needed to meet the challenge of increasing the employment rate in the 55-64 age group. The EESC recommends that the Member States set a target negotiated with the social partners for this age group in their National Reform Programmes.

2.4.2

In the past, the EESC has issued detailed recommendations for the EU and the Member States (7) on policies encouraging longer employment. Alongside lifelong vocational learning, active labour market measures, financial incentives to continue in employment, including for self-employed workers, and changing corporate attitudes to older employees, the following measures must also be promoted to offer new choices to older workers:

amending legislation which, in some Member States, does not allow salaries and pensions to be combined for pensioners or beneficiaries of invalidity pensions who wish to work;

introducing a bonus system to encourage workers to continue working beyond the legal age of retirement: benefits accrued after reaching retirement age should be more attractive than those acquired previously;

encouraging the Member States to work with the social partners on the issue of onerous employment;

offering comprehensive advice and support for jobseekers and rehabilitation measures for long-term reintegration into the labour market;

implementing socially acceptable incentives for later retirement and, where desirable, development of attractive models for a flexible transition from work to retirement;

measures alleviating the physical and mental burden of work enabling employees to remain longer in employment;

encouraging older workers to upgrade their skills;

awareness-raising among older workers and companies, especially SMEs, about innovative staff management and organisation of work favourable to older workers (8).

2.4.3

Policies favouring longer employment should also address the issue of young people entering the labour market much later then previous generations. Extending working life also means tackling both unemployment, in particular long-term unemployed, and career breaks caused by childrearing, caring for a dependant family member, or temporary disability.

2.5

In which way should the Directive on Institutions for Occupational Retirement Provision be amended to improve the conditions for cross-border activity?

2.5.1

The Commission states in its report (9) on the implementation of the Directive on Institutions for Occupational Retirement Provision (IORP) that there are no reasons to amend the rules at this time. If after an assessment of its functioning a revision of the directive is needed, the EESC believes that the ambiguity surrounding the expression ‘venture capital markets’ should be addressed as it could lead to risks for pension funds and their members. Prudential aspects need to be clarified, and the right of funds to invest assets in risky financial instruments must be limited.

2.5.2

The EESC notes the possibility of additional individual voluntary private pension schemes, functioning alongside the current pension systems. In this context, the possibility of European guarantees could be studied in order to benefit cross-border workers. The demand for and possibility of developing pan-European individual pension accounts (along the lines of the Individual Retirement Accounts in the USA or a similar system (IKE) in Poland) for mobile workers could be studied, including the principles of operation, supervision and monitoring of such a system. Here the Commission could also consider using the 28th Regime, as proposed in the Monti Report and recommended by the EESC (10).

2.6

What should be the scope of schemes covered by EU level action on removing obstacles for mobility?

Should the EU look again at the issue of transfers or would minimum standards on acquisition and preservation plus a tracking service for all types of pension rights be a better solution?

2.6.1

EU regulations on the coordination of social security systems have proven to be extremely useful in protecting mobile workers. They have supported the principle of the accrual of pension rights for insurance periods spent in another Member State. The application of the same principle, adapted to all supplementary – occupational and individual - funded pension schemes, could be investigated The EESC believes that consideration should be given to the option of cross-border accrual of pension rights in funded-pension schemes.

2.6.2

The EESC asks the Commission to assess the option of defining a basic framework at EU level for the cross-border accrual and preservation of all pension rights. However, it believes that it would be difficult to combine this with the freedom of choice of the Member States. A tracking service for these rights coordinated at EU level would be useful. Likewise, within countries, European labour market mobility requires mobility of pension rights between employers. Each EU regulation should reflect the increased diversity of pension provision. Cross-border mobility of workers should be encouraged by removing barriers to the mobility, in particular tax and administrative burden, for all pension rights accumulated in funded voluntary pension schemes.

2.7

Does current EU legislation need reviewing to ensure a consistent regulation and supervision of funded (i.e. backed by a fund of assets) pension schemes and products? If so, which elements?

How could European regulation or a code of good practice help Member States achieve a better balance for pension savers and pension providers between risks, security and affordability?

2.7.1

The Commission acknowledges that EU regulations on funded pension schemes are patchy and inadequate. The EESC urges the Commission to evaluate and, if necessary, consider the possibility of regulating the accumulation and payout phases of these schemes at EU level, analysing the following:

the prudential aspects of investment;

gender aspects;

solvency;

costs;

non-discrimination in accessing the scheme (coverage);

guarantees for vested pension rights;

minimum requirements on information provided for individuals covered by the scheme;

guarantee or minimum return systems; and

supervision.

2.7.2

In the case of many funded pension schemes with defined contributions, the risks are largely borne by the participants. The administration costs of these schemes are also high. The EESC feels that some aspects of funded pension schemes need to be evaluated and, if necessary, regulated at EU level. According to the 2010 EPC Ageing Report, these pension schemes will play an important role in some Member States in assuring a decent income for future pensioners. Common European principles could therefore help Member States to ensure that these pension schemes, managed by financial institutions, are efficient and operate in the best interest of pensioners. The profits of pension fund managers should be performance-related and linked to the profits of pension fund members. A code of good practice is useful but insufficient. Payout systems from mandatory funded schemes are also a challenge that should be further discussed and analysed within the framework of the OMC.

2.8

What should an equivalent solvency regime for pension funds look like?

2.8.1

The Solvency II Directive focuses on general and life insurance and therefore could not be applied to pension products. However, the EESC believes that it could be a good example for designing a similar system for funded pensions, given the specific nature of pension products and what distinguishes them from insurance products.

2.8.2

A general system for the solvency of pension systems at national level, coordinated at EU level, would be the best solution for ensuring the solvency of all funded pension schemes, regardless of their structure. A similar type of solvency regime should cover at least the following:

monitoring implicit liabilities;

monitoring solvency and the level of reserves for mandatory funded pension systems;

monitoring the level of funding and potential risks for occupational pension schemes;

setting up an institution at national level to ensure solvency of occupational pension schemes (11).

2.9

Should the protection provided by EU legislation in the case of the insolvency of pension sponsoring employers be enhanced and if so how?

2.9.1

The occupational pension schemes and mandatory funded systems where they exist, play or will play an important role in ensuring a decent retirement income. The EESC considers that the EU should require Member States to regulate the setting-up of guarantee mechanisms (in the form of special funds) to protect future retirement income.

2.10

Is there a case for modernising the current minimum information disclosure requirements for pension products (e.g. in terms of comparability, standardisation and clarity)?

Should the EU develop a common approach for default options about participation and investment choice?

2.10.1

Funded pension products are complex and choice and responsibility are increasingly placed with the individual. In this context, the EESC believes that the EU should ensure that the regulatory framework at national level is improved to cover all pension schemes. A common approach through guidelines at EU level to investment choice and minimum information obligations (in particular on risks for participants) for pension providers is imperative.

2.10.2

The Commission admits that fully informed decisions by individuals are a factor in the adequate provision of pensions. The EESC calls on the Commission to introduce an EU initiative to raise citizens' level of financial literacy with regard to pension products. Given the complexity of this issue, the heavy responsibility for making strategic choices cannot be borne by individuals alone and, while it is primarily a government responsibility, the social partners should be involved as much as possible.

2.11

Should the policy coordination framework at EU level be strengthened? If so, which elements need strengthening in order to improve the design and implementation of pension policy through an integrated approach? Would the creation of a platform for monitoring all aspects of pension policy in an integrated manner be part of the way forward?

2.11.1

The policy coordination framework at EU level is currently relatively patchy. The EESC welcomes the Commission's idea of a common monitoring platform for all aspects of pensions, bringing together the public authorities, the social partners, civil society and the pension sector. The platform should make it possible to compare the situations of Member States and the living standards of retired people using a raft of indicators.

2.11.2

A common platform for monitoring all aspects of pension policy, including adequacy, coverage, risk of poverty, financial stability, investments, risk and solvency, would require up-to-date and reliable data. An EU methodology on pension statistics would therefore need to be developed, involving social partners and other main stakeholders. Similar instruments would also need to be developed to monitor the implicit liabilities of pension schemes operating at national level.

Brussels, 20 January 2011.

The President of the European Economic and Social Committee

Staffan NILSSON


(1)  EESC opinions: OJ C 14, 16.1.2001, p. 50 and OJ C 157, 28.6.2005, p. 120.

(2)  Projections carried out in 2000 for 2010 by the OECD, Eurostat or even the United Nations did not match actual developments.

(3)  This phenomenon took place during the last 10 years in some Member States: Eurostat: Population and social conditions; Statistics in focus 40/2009.

(4)  Council Conclusions – March 2001.

(5)  Private pension schemes, European Commission, 2009, page 5.

(6)  Eurostat, MISSOC, Ageing Report, 2010 Interim Joint Report on pensions of the Economic Policy Committee and the Social Protection Committee.

(7)  EESC opinion (OJ C 157, 28.6.2005, p. 120).

(8)  EESC opinions OJ C 256, 27.10.2007, p. 93 and OJ C 228, 22.9.2009, p. 24.

(9)  COM(2009) 203 final.

(10)  OJ C 21, 21.1.2011, p. 26.

(11)  Along similar lines to the PBGC (Pension Benefit Guaranty Corporation) which operates in the USA.


17.3.2011   

EN

Official Journal of the European Union

C 84/45


Opinion of the European Economic and Social Committee on the Proposal for a Directive of the European Parliament and of the Council amending Council Directive 2001/112/EC relating to fruit juices and certain similar products intended for human consumption

COM(2010) 490 final

2011/C 84/09

Rapporteur working without a study group: Pedro NARRO

On 23 September and 7 October 2010 respectively the European Parliament and the Council decided to consult the European Economic and Social Committee, under Article 43(2) of the Treaty on the Functioning of the European Union, on the

Proposal for a Directive of the European Parliament and of the Council amending Council Directive 2001/112/EC relating to fruit juices and certain similar products intended for human consumption

COM(2010) 490 final.

The Section for Agriculture, Rural Development and the Environment, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 15 December 2010.

At its 468th plenary session, held on 19 and 20 January 2011 (meeting of 20 January 2011), the European Economic and Social Committee adopted the following opinion by 159 votes to three with six abstentions.

1.   Conclusions

1.1

The EESC supports the European Commission's initiative to amend Directive 2001/112 for the second time to make it comply with the Codex Alimentarius for fruit juices and nectars. Nevertheless, this compliance procedure should not just single out certain very specific aspects of the Directive, but should apply generally to all points of the aforementioned Community legislation.

1.2

The ban on adding sugar to fruit juices is an appropriate means of helping to prevent obesity. Nevertheless, the EESC does not support the additional obligation to label nectars as containing added sugar: the measure could mislead consumers, would constitute flagrant discrimination vis-à-vis other products and is not included in the Codex Alimentarius.

1.3

The EESC regrets that the proposal for a Directive omits the addition of up to 10 % mandarin orange juice to orange juice in the section on authorised ingredients. The Codex Alimentarius rules, with which the Directive aims to comply, authorises this technique which is widely used at international level and should thus be included in the text of the Directive.

1.4

The wording of the second part of Annex II should expressly mention the possibility that the fruit intended to be made into juices and fruit purées may be processed post harvest.

1.5

The EESC is pleased that tomatoes are included in the list of fruits used for fruit juice production.

1.6

The EESC is pleased that the dual classification/description differentiating between fruit juices (obtained directly from crushing or pressing the fruit) and juices made from concentrates (obtained by reconstituting concentrated juices by addition of water) has been maintained. This differentiation ensures that consumers are given accurate information. It is important to maintain this distinction and that no nuances are included that might broaden the interpretation of the two definitions.

1.7

The EESC welcomes the fact that the European Commission's proposal allows the restitution of aromas in juices made from concentrate to be optional.

2.   Context and summary of the Commission proposal

2.1

The European Commission is proposing a second amendment of Council Directive 2001/112/EC relating to fruit juices and certain similar products intended for human consumption. The aforementioned Directive sets out the technical provisions governing the composition, description, manufacturing specifications and labelling of the products concerned.

2.2

Directive 2001/112 was first amended by Directive 2009/106/EC. This technical amendment was undertaken to make Community legislation comply with the Codex Alimentarius for fruit juices and nectars (STAN 247-2005, which establishes quality criteria and labelling requirements for fruit juices and certain similar products) and the AIJN (European Fruit Juice Association) Code of Practice. The changes made essentially affected the establishment of minimum Brix values for 18 reconstituted fruit juices and fruit purées and of the sales name to be used for fruit juices from concentrate. The final date for transposition is 1 January 2011.

2.3

The Proposal for a Directive of the European Parliament and of the Council, COM(2010) 490, that is the subject of this opinion, is a second amendment of a distinctly technical nature which, like the first amendment, is based on including a series of provisions from the Codex Alimentarius that reflect the stipulations of the AIJN Code of Practice. The main new features of this proposal for a directive are the following:

Removing sugar from the list of authorised ingredients for fruit juices. Nectars and specific products of Annex III may be sweetened by the addition of sugars or honey. The sales name must include the word ‘sweetened’ or ‘with added sugar’, followed by an indication of the maximum quantity of sugar added.

Simplification of the provisions governing the restitution of flavour and aroma.

The inclusion of tomatoes in the list of fruits used for fruit juice production.

2.4

The proposal for a Directive will follow the ordinary legislative procedure set out in the Treaty on the Functioning of the European Union. Member States will have 18 months to transpose the Directive into their national legislations once it has been approved.

3.   Comments

3.1

The proposal for a Directive that is the subject of this opinion is primarily based on the need to make Community rules comply with international legislation, more precisely, the Codex Alimentarius for fruit juices and fruit purées. Thus, the Commission's proposed amendments should not depart in any way from the internationally accepted Codex Alimentarius provisions. On the other hand, it would be useful to include new provisions in line with those set out in the Codex Alimentarius.

3.2

One of the most important amendments included in the proposal for a Directive is the ban on adding sugar to fruit juices and making it compulsory to indicate in the sales name that it has been added to nectars. The Commission-led ban is clearly justified in the context of the European strategy for preventing obesity. Nevertheless, in the case of nectars, the proposal departs from the provisions of the Codex Alimentarius, has no precedents as regards other products (soft drinks), is inconsistent with the horizontal regulations on labelling and seems unnecessary, given that the actual definition of nectars already indicates the addition of sugar.

3.3

The Commission proposal omits the option of adding mandarin orange juice without needing to label the product as a mixture of juices. However, the Codex Alimentarius (STAN 45-1981) allows the addition of up to 10 %, and this technique is used widely at international level by the main producer countries such as Brazil and the United States. In terms of globalised markets, the requirements of Directive 2001/112/EC put European citrus producers and their cooperatives at a competitive disadvantage compared with third countries. The EESC considers it necessary to make the European denomination ‘orange juice’ comply with the international rules of the Codex Alimentarius and thus supports the inclusion of up to 10 % mandarin orange juice as an authorised ingredient of orange juice. Adding mandarin orange juice to orange juice is justifiable because the two citrus species are botanically close and have similar organoleptic characteristics. Indeed, from an analytical point of view, this addition causes no discernable quality change.

3.4

The definition of fruit contained in Annex II (Definitions of Raw Materials) should clearly include treatment post harvest in the case of fruit intended for processing.

3.5

The EESC supports the inclusion of tomatoes in the list of fruits for fruit juice production and welcomes the fact that the two sales names for fruit juices and juices made from concentrate has been retained, thereby ensuring that consumers are given accurate information, and the fact that restituting the aroma of juices made from concentrate is an option.

Brussels, 20 January 2011.

The President of the European Economic and Social Committee

Staffan NILSSON


17.3.2011   

EN

Official Journal of the European Union

C 84/47


Opinion of the European Economic and Social Committee on the Proposal for a Regulation of the European Parliament and of the Council amending Council Regulation (EC) No 1288/2009 establishing transitional technical measures from 1 January 2010 to 30 June 2011

COM(2010) 488 final — 2010/0255(COD)

2011/C 84/10

Rapporteur working alone: Mr SARRÓ IPARRAGUIRRE

On 7 and 8 October 2010 respectively, the Council and the European Parliament decided to consult the European Economic and Social Committee, under Article 43(2) of the Treaty on the Functioning of the European Union, on the

Proposal for a regulation of the European Parliament and of the Council amending Council Regulation (EC) No 1288/2009 establishing transitional technical measures from 1 January 2010 to 30 June 2011

COM(2010) 488 final — 2010/0255(COD).

The Section for Agriculture, Rural Development and the Environment, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 15 December 2010.

At its 468th plenary session, held on 19 and 20 January 2011 (meeting of 19 January), the European Economic and Social Committee adopted the following opinion by 82 votes, nem con with one abstention.

1.   Conclusions and recommendations

1.1

In view of the fact that the temporary technical measures provided for in Council Regulation (EC) No 1288/2009 will cease to be applicable on 30 June 2011, the European Economic and Social Committee considers that the aforementioned Regulation should be amended to extend its validity until 1 January 2013 in accordance with the Proposal for a Regulation of the European Parliament and of the Council contained in COM(2010) 488 final of 23 September 2010.

1.2

In the absence of provisions laying down permanent technical measures, the adoption of this proposal for a regulation will guarantee legal certainty and the conservation of marine resources until 1 January 2013, when the new common fisheries policy, establishing the basic principles on technical measures, is due to enter into force.

1.3

The Committee suggests that, in the text of the proposal for a regulation, the European Parliament and the Council consider replacing ‘2010’ with ‘2011’ in paragraph 1(b)(i) of the Sole Article, which refers to Article 1(2)(a)(i) of Regulation (EC) No 1288/2009, in relation to points 9.3, 9.6 and 9.8.

2.   Background

2.1

On 4 June 2008, the Commission submitted a proposal for a Council Regulation concerning the conservation of fisheries resources through technical measures (1).

2.2

The European Economic and Social Committee issued an opinion on this proposal for a regulation, which, following the relevant procedures, was approved by the Committee's 451st plenary session on 25 February 2009 (2).

2.3

The Commission's processing of the regulation corresponding to this proposal for a regulation was hindered in 2009 by the negotiations on the adoption of the Lisbon Treaty.

2.4

In the intervening period, and in view of its urgency, Regulation (EC) No 43/2009, establishing for 2009 the fishing opportunities and associated conditions for certain fish stocks and groups of fish stocks, was adopted (3).

2.5

In the meantime, and while the proceedings for the Council Regulation on technical measures continued during 2009, the measures provided for in Annex III of the aforementioned Regulation (EC) No 43/2009 ceased to apply, since their period of application had come to an end.

2.6

For this reason, for reasons of legal certainty and to maintain the proper conservation and management of marine resources, Council Regulation (EC) No 1288/2009 establishing transitional technical measures from 1 January 2010 to 30 June 2011 (4) was adopted, providing for the continuation of temporary technical measures catered for in Annex III to Regulation (EC) No 43/2009 for a transitional period of 18 months.

2.7

In view of the new requirements of the Lisbon Treaty, in 2010 the Commission withdrew the proposal for a Council Regulation concerning the conservation of fisheries resources through technical measures.

2.8

Basic principles on technical measures would be considered by the new basic regulation for the ongoing reform of the common fisheries policy, for which the proposal is expected to be presented during the third quarter of 2011, for entry into force on 1 January 2013.

2.9

Given that Regulation (EC) No 1288/2009 will expire on 30 June 2011 and there is no current legal act to provide for permanent technical measures, it is appropriate to extend the validity of this regulation for another 18 months, until 1 January 2013.

2.10

The result of the above is the proposal for a Regulation of the European Parliament and of the Council, the subject of this draft EESC opinion, amending Council Regulation (EC) No 1288/2009, extending it by 18 months until 1 January 2013.

3.   The EESC's comments

3.1

The EESC endorses the text of the proposal for a regulation, since its provisions extend the application of Regulation (EC) No 1288/2009 to the new date of 1 January 2013, which will guarantee legal certainty and the conservation of marine resources until permanent technical measures are adopted.

3.2

However, in relation to paragraph 1b)i) of the Sole Article, the EESC considers that the European Parliament and the Council should consider also extending the time limit of 1 October 2010 for the Member States under Regulation (EC) No 1288/2009, to 1 October 2011, to enable their relevant scientific institutions to present their scientific reports on fishing at depths greater than 600 metres in ICES zones VIII, IX and X.

3.3

The reason for this request is that, as a result of a series of incidents during this legislative process, mentioned in point 2 of this opinion, the Member States have not been allowed sufficient time to carry out the scientific investigations required to be able to present a properly documented report on this type of fishing to the Scientific, Technical and Economic Committee for Fisheries.

Brussels, 19 January 2011.

The President of the European Economic and Social Committee

Staffan NILSSON


(1)  COM(2008) 324 final.

(2)  OJ C 218, 11.9.2009.

(3)  OJ L 22, 26.1.2009, p.1.

(4)  OJ L 347, 24.12.2009, p.6.


17.3.2011   

EN

Official Journal of the European Union

C 84/49


Opinion of the European Economic and Social Committee on the Amended proposal for a Regulation of the European Parliament and of the Council amending Council Regulations (EC) No 1290/2005 and (EC) No 1234/2007, as regards distribution of food products to the most deprived persons in the Union

COM(2010) 486 final — 2008/0183 (COD)

2011/C 84/11

Rapporteur: Mr LUCAN

On 23 September 2010 and 8 October 2010 respectively, the European Parliament and the Council decided to consult the European Economic and Social Committee, under Articles 43(2) and 304 of the Treaty on the Functioning of the European Union, on the

Amended proposal for a Regulation of the European Parliament and of the Council amending Council Regulations (EC) No 1290/2005 and (EC) No 1234/2007, as regards distribution of food products to the most deprived persons in the Union

COM(2010) 486 final — 2008/0183 (COD).

The Section for Agriculture, Rural Development and the Environment, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 15 December 2010.

At its 468th plenary session, held on 19 and 20 January 2011 (meeting of 20 January), the European Economic and Social Committee adopted the following opinion by 150 votes to four with 14 abstentions.

1.   Conclusions and recommendations

1.1   The EESC considers that the scheme for food distribution to the most deprived persons in the Union clearly demonstrates the promotion of economic development of the food product market and European values (particularly the principle of solidarity) among the most disadvantaged social groups in the EU. Guaranteeing the supply of food to all EU citizens, especially deprived groups, must remain one of the fundamental objectives of the EU's agricultural policy. The EESC believes that only strong and lasting economic development of agricultural policy can support the most deprived social groups in the EU.

1.2   The EESC considers that the revision of the European legal framework is both appropriate and necessary, given the modifications to the Treaty and the changes in the single market as regards prices, stock, market policies and the specific needs of each Member State.

1.3   In view of the fact that in the EU over 80 million people (1) (over 16 % of EU citizens) live in poverty, the priorities of the 2010 European year against poverty and social exclusion and the fact that the economic crisis is putting increasing numbers of people at even greater risk of poverty, the EESC is in favour of maintaining the scheme for food distribution to the most deprived people in the EU and financing it on a permanent basis from the CAP (Common Agricultural Policy) budget.

1.4   The EESC considers that the scheme for food distribution to the most deprived people must be a permanent part of the CAP, as it improves the situation of people vulnerable to fluctuations in the food product market. At the same time, the scheme balances and stabilises the internal market since the products distributed, produced by European farmers, come from intervention stocks as well as being purchased on the market. The EESC emphasises the need to maintain this indirect market mechanism which is part of the CAP and is vital for deprived people as well as for farmers in the current period of crisis.

1.5   Given the scale of the phenomenon of food poverty, which affects over 43 million European citizens, and the positive impact of the scheme over time on the most deprived social groups, the EESC believes that the scheme needs a permanent and stable budget.

1.6   An assessment of the national and European food distribution schemes should begin by evaluating the needs of all deprived people, including the poorest groups (street children, homeless people, asylum seekers and illegal workers or migrants, etc.) who receive no support under the guaranteed minimum income scheme or who are generally not included in official statistics. The first step in preventing and combating social exclusion is to include all groups of deprived people, a priority for the 2010 European year. The EESC calls on the competent authorities in the Member States, when determining groups of deprived people, to take account of databases of people who are not included in official statistics; this information is generally available in the statistics collected by NGOs and charities.

1.7   The EESC calls on the Commission to encourage Member States to promote public partnerships with civil society with a view to enabling as many NGOs and volunteers as possible to participate in the process of food distribution. The EESC believes that the food distribution scheme can supplement the social services provided as part of the process to socially integrate deprived people.

1.8   The EESC believes that NGOs and charities which provide food aid along with healthcare and social assistance (especially those providing shelter for deprived people and operating soup kitchens or day centres) should be given support to cover their administrative costs.

1.9   The EESC welcomes the Commission's decision to incorporate into the amended proposal the European Parliament's amendment proposing reimbursement of administrative and storage costs incurred by charities.

1.10   In the current economic crisis, particularly in Member States where income per capita is low and there are many deprived people, national co-financing could increase the red tape involved in the European scheme, making it inoperable. The EESC believes that this would be detrimental to the interests of the most deprived groups in the EU and violate the principles of social exclusion championed by the European year against poverty.

1.11   The EESC believes that the food scheme for deprived people should be run by the Union and fully funded by the CAP budget. The Member States and national charities currently bear some of the scheme's costs (cost of transporting goods to storage facilities, administrative costs, transport costs, storage costs, VAT and cost of social services flanking food distribution).

2.   The 2010 European year against poverty and social exclusion aims to support deprived people, including those at risk of food poverty

2.1   In the EU, over 80 million people live in poverty (2). 16 % of Europe's population is in a vulnerable position, and over 43 million people are at risk of food poverty. In 2006, the percentage of the population at risk of food poverty in the EU varied from 2 % (Denmark) to 37 % (Slovakia) meaning that over 20 % of people live in poverty in more than seven Member States. In Poland and Germany alone, 11 million and 9 million people respectively are at risk of poverty. These data prove that a food distribution scheme is needed.

2.2   The groups of people most at risk of subnutrition or malnutrition owing to inadequate food are children from poor families, old people, homeless people, asylum seekers and illegal migrant workers, and disabled adults or children. In certain Member States, some recipients of the food distribution scheme also receive social support on the basis of guaranteed minimum income.

2.2.1   The EESC draws attention to the fact that many disadvantaged people, particularly homeless people, asylum seekers and illegal workers or migrants, do not have any form of social protection and are not included in national statistics. Some of them do not have identity papers. It is difficult to assess their social and food needs and NGOs and charities could help carry out an accurate assessment.

2.2.2   The EESC recommends that particular attention be paid to children from poor families because diet can be at the root of future health problems, poor brain development and learning difficulties. The EESC therefore supports diversifying the products eligible for the food distribution scheme and including fruit and vegetables.

2.3   In 2010 – the European year against poverty and social exclusion – combating poverty is everyone's responsibility. The strategy to promote social inclusion and combat poverty has several priorities:

active inclusion through minimum income, the return to the labour market and provision of social services to help with reintegration;

combating child poverty;

preventing exclusion from access to housing and the exclusion of homeless people (3).

From this perspective, food distribution should be supplemented by healthcare services, education and social assistance, so that it is in line with the professional and social integration of the various groups of deprived people.

3.   Commission proposal

3.1   The current food distribution scheme relies on the distribution of products from EU intervention stocks supplemented, on a temporary basis, by purchases on the market. However, successive reforms of the CAP and favourable developments of prices have resulted in a progressive reduction in intervention stocks, as well as the range of products available. Consequently, market purchases should also be made a permanent source of supply for the scheme to complement intervention stocks, where suitable intervention stocks are not available.

3.1.1   The proposal to amend the basic regulation covers provisions to align the document with the TFEU and substantive changes concerning agricultural measures which have been proposed in order to standardise the implementation of the food distribution scheme in all Member States.

3.1.2   The Commission proposes to amend the legislative framework based on the following principles: two sources of supply (food would be sourced either from intervention stocks or from the market), wider variety of foods to be distributed and clearer priorities, a long-term perspective (three years), reinforcing monitoring and reporting, the introduction of co-financing (Union co-financing rates would be 75 % and 85 % in Cohesion Member States for the 2010/12 plan. Subsequently, under the 2013/15 plan, the Union co-financing rates would be 50 % and 75 % respectively).

4.   General and specific comments

4.1   The food distribution scheme for deprived people is operational in 20 Member States. In most of these, food is distributed in partnership with and with the help of non-governmental organisations.

4.2   In 2006, over 13 million people from 15 Member States benefited from the food scheme. In 2008, 19 Member States took part in a volunteer project with a budget of EUR 305 million. The food distribution scheme's budget increased in 2009 to EUR 500 million for the 20 Member States taking part.

4.3   The economic crisis, job losses and rising prices of some basic food products have led to an increase in the number of vulnerable people. It is estimated that the number of deprived people is rising constantly.

4.4   100 % financing or co-financing?

4.4.1   The Commission considers that the introduction of co-financing would underpin the cohesive dimension of the scheme, ensure proper planning and reinforce synergies. The Commission wants to ensure that outgoings match revenue and to give Member States more responsibilities. It is of the opinion that introducing co-financing will give the scheme a more stable budget.

4.4.2   The Commission takes into account the variable of private donations by charities, which could be deemed to form part of co-financing by Member States. The EESC considers that voluntary work by charities could be quantified and come under the principle of co-financing.

4.4.3   The European Parliament proposes that food distribution schemes be fully financed via the EU budget, because co-financing would prevent some Member States from taking part. The EESC considers that Member States financially unable to pay their share will be unable to achieve the objectives of the scheme, i.e. stabilising the market and the social aspect.

4.4.4   The EESC believes that with co-financing, the poorest beneficiaries from Member States with a low income per capita might be excluded from the scheme.

4.4.5   The EESC points out that one of the objectives of the 2010 European year is to combat exclusion. Co-financing could result in the social exclusion of disadvantaged groups during the very European year which is focusing on social inclusion.

4.4.6   The EESC points out that co-financing would exacerbate social problems and food poverty. If co-financing were implemented and with free movement established within the EU, some of the most disadvantaged people would migrate to more prosperous Member States. In practice, this would shift the issue of solving the food problems of some Europeans from the poorer regions to regions with a higher income per capita.

4.4.7   In the current economic crisis, the EESC believes that the food scheme for deprived people should be run by the Union and fully funded by the CAP budget.

4.5   The EESC supports the Commission proposal to purchase food products exclusively on the European market in order to provide indirect support for European farmers.

4.6   Diversifying the range of products offered through the scheme

4.6.1   Although it is difficult to ensure a balanced diet when much of the food distributed comes from intervention stocks, the EESC is in favour of distributing food which is as varied and healthy as possible, in line with nutritional recommendations and diet guidelines for Europeans.

4.6.2   The EESC is in favour of organising food distribution alongside social assistance and recommends frequent (rather than one-off) distribution of food particularly where NGOs or public authorities offer complementary services (accommodation, health care, education, job training, social inclusion, etc.).

5.   Involvement and role of civil society, charities and volunteers

5.1   On 30 June 2010, the European Commission held the meeting of parties involved in implementing the food distribution scheme. Representatives of 18 NGOs from 15 Member States, a European organisation (European Public Health Alliance) and payment and intervention agencies took part.

5.2   Some NGOs in Europe (4) treat food distribution as part of the general social services offered to deprived people to help them integrate further into society.

5.3   Charities are best placed to evaluate the scheme's impact as they interact directly with the groups of deprived people. Charities have said that some scheme recipients recommend extending the range of products in order to achieve a balanced diet, laying the legislative groundwork for the distribution of traditional local products and extending the duration of implementation of the scheme.

5.4   The involvement of NGOs and the large number of volunteers bear witness to the interest and support of European civil society as regards the most deprived members of society. The EESC considers that there is no infringement of the subsidiarity principle provided Member States are free to establish procedures and criteria for appointing the organisations which are involved in implementing the scheme. Similarly, selecting the beneficiaries of food aid falls within the remit of the Member States. This scheme helps develop cooperation between charities and public authorities.

5.5   In some Member States, NGOs and charities would play a greater role if sufficient financial resources were available to cover the administrative costs. The EESC welcomes the Commission decision to incorporate into the amended proposal the European Parliament's amendment proposing reimbursement of costs for administration, storage and transport (between storage facilities and distribution points) incurred by the charities (see Article 27(7) of the amended regulation).

Brussels, 20 January 2011.

The President of the European Economic and Social Committee

Staffan NILSSON


(1)  http://www.2010againstpoverty.eu/about/?langid=en.

(2)  See footnote 1.

(3)  See footnote 1.

(4)  For example, in Poland there are 44 regional representations, 100 Caritas centres, 4 500 employees and 70 000 volunteers involved in implementing this scheme. The charity Caritas Poland began implementing the scheme in 2004 and now has 44 storage facilities and 20 cold storage facilities. Caritas Poland has said that the future challenges will be to administer the scheme, transport food and purchase fixed assets.


17.3.2011   

EN

Official Journal of the European Union

C 84/53


Opinion of the European Economic and Social Committee on the Amended proposal for a Council Directive on the structure and rates of excise duty applied to manufactured tobacco

COM(2010) 641 final — 2007/0206 (CNS)

2011/C 84/12

On 23 November 2010 the European Parliament and on 8 December 2010 the Council decided to consult the European Economic and Social Committee, under Article 113 and 304 of the Treaty on the Functioning of the European Union, on the

Amended proposal for a Council Directive on the structure and rates of excise duty applied to manufactured tobacco

COM(2010) 641 final — 2007/0206 (CNS).

Since the Committee endorses the content of the proposal and feels that it requires no comment on its part, it decided, at its 468th plenary session of 19 and 20 January 2011 (meeting of 19 January 2011), by 90 votes to 3 with 8 abstentions, to issue an opinion endorsing the proposed text.

Brussels, 19 January 2011.

The President of the European Economic and Social Committee

Staffan NILSSON


17.3.2011   

EN

Official Journal of the European Union

C 84/54


Opinion of the European Economic and Social Committee on the Proposal for a Directive of the European Parliament and of the Council on roll-over protection structures mounted in front of the driver’s seat on narrow-track wheeled agricultural and forestry tractors

(codification)

COM(2010) 610 final — 2010/0302 (COD)

2011/C 84/13

On 10 November 2010, the European Parliament and, on 8 December 2010, the Council decided to consult the European Economic and Social Committee, under Article 114 of the Treaty on the Functioning of the European Union (TFEU), on the

Proposal for a Directive of the European Parliament and of the Council on roll-over protection structures mounted in front of the driver's seat on narrow-track wheeled agricultural and forestry tractors

COM(2010) 610 final — 2010/0302 (COD).

Since the Committee unreservedly endorses the proposal and feels that it requires no comment on its part, it decided, at its 467th plenary session of 19 and 20 January 2011 (meeting of 19 January), by 96 votes with two abstentions, to issue an opinion endorsing the proposed text.

Brussels, 19 January 2011.

The President of the European Economic and Social Committee

Staffan NILSSON


17.3.2011   

EN

Official Journal of the European Union

C 84/55


Opinion of the European Economic and Social Committee on the Proposal for a Regulation of the European Parliament and of the Council on establishing a system for the identification and registration of ovine and caprine animals

(codification)

COM(2010)635 final — 2010/0309(COD)

2011/C 84/14

On 23 November 2010 the European Parliament and on 13 December 2010 the Council decided to consult the European Economic and Social Committee, under Article 43 (2) and 304 of the Treaty on the Functioning of the EU, on the

Proposal for a regulation of the European Parliament and of the Council on establishing a system for the identification and registration of ovine and caprine animals (Codification)

COM(2010) 635 fin – 2010/0309 (COD).

Since the Committee endorses the content of the proposal and has already set out its views on the subject in its earlier opinion CESE 582/2003, adopted on 14 May 2003 (1), it decided, at its 468th plenary session of 19 and 20 January 2011 (meeting of 19 January 2011), by 104 votes with seven abstentions, to issue an opinion endorsing the proposed text and to refer to the position it had taken in the above-mentioned document.

Brussels, 19 January 2011.

The President of the European Economic and Social Committee

Staffan NILSSON


(1)  EESC opinion on the ‘Proposal for a Council Regulation establishing a system for the identification and registration of ovine and caprine animals and amending Regulation (EEC) No 3508/92’, OJ C 208, p. 32 of 3.9.2003.