Brexit and the EU’s Response

This month brought some concrete news on the timeline for negotiation of a UK exit from the EU.  Theresa May used her speech to the Conservative Party Conference on October 3 to set a March 2017 deadline for triggering Article 50, and to reveal some of her strategy going into negotiations.  She told Conference delegates that, following the completion of negotiations, the UK will be a “fully independent and sovereign country.”  The UK will initially transfer the entire existing body of EU law (known as the “acquis”) into UK statute.  However, EU courts will no longer have jurisdiction in the UK, and the EU’s supranational institutions will no longer be able to legislate for the UK. Some commentators have suggested this would in essence amount to a “hard brexit”, with the UK leaving the single market.  See the Prime Minister’s full speech here.

On September 16, an informal summit of Member States except the UK took place in Bratislava, capital of Slovakia, which holds the rotating Council presidency.  The meeting had been announced shortly after the Brexit referendum, not to discuss Britain leaving the EU—there will be no discussion before the UK triggers the start of the two-year negotiating period under Article 50 of the Lisbon Treaty—but to demonstrate that the “27” (the other Member States) remain committed to furthering the European project.

The best illustration of this point could have been a further integration of the Eurozone, as the UK is not part of it.  Indeed, the completion of the Banking Union and further measures to integrate the fiscal and economic policies of the Eurozone members have been on the table for a long time, and most economists consider them as key for the survival of the common currency.  However, progress in this field will have to wait—with Italian Prime Minister Matteo Renzi facing the challenge of a referendum in December, and elections in the Netherlands, France and Germany next year, it seems too early for either compromises on austerity policy, or attempts at greater solidarity among members of the Eurozone.

It was therefore decided to deal with what is perhaps the greatest contribution the EU can make to its citizens in today’s context: to protect them better.  To protect them by bringing illegal immigration under control, to protect them against terrorist attacks, and to protect them from external threats, by reinforcing cooperation in defence.

This is the thrust of the ‘roadmap’ adopted in Bratislava: ‘Never allow return to uncontrolled flows’ of illegal migrants, ‘full control of the external borders’, intensified cooperation and information-exchange among security services,’ and ‘strengthening EU cooperation on external security and defense’.

No concrete decisions were made, but the roadmap outlines a series of meetings that will take place on these issues, culminating in a summit (of all 28 Member States) in Rome on March 25, 2017—the date of the 60th anniversary of the Treaty of Rome, which launched the European Economic Community.  See the Covington blog post on the plans for European defense here.

This was followed, on September 26 and 27, by an informal meeting of EU defense ministers in Bratislava.  In the joint press conference following the summit, High Representative and Commission Vice-President Frederica Mogherini stated there had been a general consensus to “proceed in parallel with three pillars of this work […] to the end of this year”.  The first pillar is the implementation of the Global Strategy in the field of defense and security—with concrete proposals for action that can be taken forward within existing EU treaties to be tabled at the November Defense Ministers Council.  The second pillar focuses on the European Defense Action Plan—defense cooperation, and supporting research and development in the European defense industry.  The third pillar is the proper implementation of the EU-NATO Joint Declaration that was signed in July in Warsaw.  See the transcript of the press conference following the meeting here.

Tech and Digital Single Market Policies

On September 28, the European Commission released its proposed regulations for the export of surveillance software and encryption tools.  This is software often for civil use, but which can also be used for military or security purposes.  The export controls now include “cyber surveillance technologies” in their scope, defined as technology which “can be used for the commission of serious violations of human rights or international humanitarian law, or can pose a threat to international security or the essential security interests of the Union and its Member States”.  This is likely to include big data analysis software that could be used as a surveillance tool for an oppressive regime.  The draft regulation includes protections to ensure the technology is not used to violate human rights—e.g., by mass surveillance—including privacy and freedom of expression.  See the text of the proposal here.

In August, the French and German ministers of interior sent a joint proposal for an EU law requiring tech companies to decrypt data for investigators.  The proposal reflects deepening frustration with fragmented European counterterrorism operations and the investigative challenges posed by widespread encryption.  See the press release on the proposal here (in French).

On September 5, the European Commission launched a public consultation on cloud computing.  The consultation will run until Monday, October 10, 2016.  The European Commission is consulting all interested stakeholders on the future research and innovation challenges in the area of Cloud Computing to be addressed in the forthcoming Horizon 2020 ICT Work Programme 2018-2020.  See the consultation and background documents here.

Communication and Media Policies

On Wednesday September 14, 2016, the European Commission released its plans to reform the EU copyright regime which includes a new Directive on copyright in the EU and a draft Regulation on certain online transmissions of broadcasting organizations and retransmissions.  The proposed Directive introduces  new exceptions to copyright and imposes new obligations on  platforms.  Among other reforms the proposed Directive recognizes press publishers as a new category of rights holder, whilst “Information Society Service Providers,” who store and give access to “large amounts” of works uploaded by their users, will be obliged to take measures to “ensure the functioning of agreements concluded with rights holders for the use of their works or other subject-matter.”  The draft reforms include proposals relating to ancillary copyright for news publishers and the use of copyrighted material by information society service providers.  These proposals will now be reviewed and debated by the European Parliament and Council.  See the Communication outlining the key proposals here; the draft Directive on copyright here; and the draft Regulation here.


On September 14, the European Commission also published its proposal for the European Electronic Communications Code which will review and amend the current EU telecoms rules last updated in 2009 (see here).  This “communications code” is intended to encourage monopolies or businesses that control cable tunnels, pipes and other infrastructure that carry fixed-line internet to open up to rival operators for upgrades.  See the Commission press release here, the Q&A here, and a Factsheet on telecoms here.

Among the proposals is an initiative to introduce free wi-fi in urban public places and a new initiative to better co-ordinate spectrum management in cooperation with Member States.  The European Commission will seek to cover all urban areas and major transport infrastructure across the EU with 5G technology through its 5G Action Plan.  The proposals also give BEREC a more active role in monitoring the market with increased powers to make regulatory interventions.  For the Communication and Staff Working Document, see here; for the Action plan and accompanying Staff Working Document, see here.

Energy and Climate Change Policies

Between September 27 and October 7, the 39th Assembly of the UN’s International Civil Aviation Organization (“ICAO”) in Montreal  is discussing a proposal for a global scheme to offset CO2 emissions from international flights.   The adoption of the scheme and the support it receives from governments around the world is particularly important for the European Union, which must decide whether the scheme is ambitious enough to continue to exclude intercontinental civil aviation from the emission reduction targets of the EU Emissions Trading System by the end of the year.  See the ICAO proposal here, and more information about its 39th Assembly here.

Following the Council’s vote on Friday, September 30, to ratify the Paris Agreement through a fast-track mechanism, the European Parliament voted its consent thereto on Tuesday, October 4.  The EU has taken longer than the United States and China to ratify the agreement, and faced pressure to hit an October 7 deadline set by the Slovakian presidency.  While various Member States, including Slovakia and France, have already ratified the deal at national level, they have not offered formal notification to the UN, preferring to allow the EU to ratify as a bloc.  The EU and its Member States are expected to notify the UN formally of their ratification, concurrently, by the end of the year.

Internal Market and Financial Services Policies

On August 30, 2016, Competition Commissioner Vestager announced the Commission Decision to order Ireland to recover €13 billion in back taxes, with interest, from a major tech company, two years after the probe was opened in June 2014. Following an in-depth state aid investigation, the European Commission concluded that two tax rulings granted by Ireland to that company significantly reducing the taxes it paid in Ireland since 1991 had amounted to state aid.  The U.S. Treasury issued a critical statement, stating that the EU was acting as a “supranational tax authority” which threatened global tax reform efforts.  The Irish cabinet narrowly agreed to pursue an appeal.  It could take up to another 4 to 6 years before the case is finally resolved, following the appeal process.  In the meantime, recovery will take place in Ireland on the basis of Irish tax legislation.  See the Commission press release here.

On September 14, 2016, the European Commission set out the next steps to accelerate the completion of the Capital Markets Union (“CMU”), a key project of the Juncker Commission, based on the CMU Action Plan established last year.  The CMU aims to give businesses access to diverse sources of funding, make Europe’s financial system more stable, and allow capital to move freely across borders in the Single Market.  The Commission hopes for the first round of proposed actions will be implemented by the end of 2016.  Additionally, the Commission will double the size of the European Fund for Strategic Investments to €500 billion, from €315 billion as it stands today.  The Commission will amend insurance and banking legislation by the end of the year to “further unlock private investment in infrastructure and small and medium-sized enterprises.”  Under its revised CMU roadmap, the Commission will follow these measures with proposals on business restructuring and insolvency to speed up the recovery of assets, encouraging equity financing over debt, and unlocking private investment in infrastructure and SMEs.  To view the Commission’s press release, see here.

Life Sciences and Healthcare Policies

Over September 1 to 2, the EMA held a tripartite meeting with the U.S. Food and Drug Administration and Japanese Pharmaceuticals and Medical Device Agency to discuss regulatory approaches to the evaluation of antibacterial agents. The three regulators noted in their meeting summary that flexibility is appropriate in approving antibacterial agents, especially where limited treatment options exist because of anti-microbial resistance. They also considered how to balance benefits and risks concerning new antibacterial agents. The agencies agreed to meet again in Spring 2017 to discuss both pre-approval and post-approval regulation. See the meeting summary here.

On September 14, the United Nations High Level Panel on Access to Medicines released its final report.  The report made three key recommendations.  First, it called for countries to embrace the flexibilities available under the World Trade Organization to tailor national intellectual property, competition, government procurement and drug regulatory law to help them fulfil public health obligations, including through compulsory licensing.  Second, it encouraged Governments to invest more in health technology innovation, and de-link the cost of research and development from end prices.  Third, it called for improved governance, accountability and transparency, in trade negotiations, access to health technologies, drug pricing, trials data, and patent information.  See the final report here, and the press release here.

On September 15, Advocate General (AG) Sharpston delivered her Opinion relating to the liability of notified bodies under the Medical Devices Directive 93/42/EEC (see here) for harm suffered due to defective medical devices.  The case arises in the context of defective breast implants produced by the French firm, Poly Implant Prothèse.  AG Sharpston made three key points.  First, given the vital role of notified bodies in the procedure leading to the placing of medical devices on the European market, those bodies can in principle bear liability under national law to patients and users for failure to fulfill their obligations under the Medical Devices Directive.  Second, the role of notifying bodies is by its nature essentially a documentary and procedural one; it therefore does not create a general obligation for a notified body to inspect devices, examine the manufacturer’s business records or carry out unannounced inspections.  Third, there is a general duty of due care and diligence on notified bodies in exercising their powers.  Therefore, if a notified body is aware that a device may be possibly defective, that duty will require it to exercise the available powers to determine whether the authorization of the device may stand.  The extent of the duty of due care and diligence must be assessed on a case-by-case basis, and will be a matter for the national courts to decide.  See the full report of the AG Sharpston’s Opinion here.

Trade Policy and Sanctions

At their informal meeting in Bratislava on September 23-24, EU Trade ministers discussed CETA and TTIP.  As an agreement on signing CETA and have it provisionally implemented is now clearly in sight, TTIP will not, contrary to what some continued to expect, be concluded, even partly, before the end of the Obama administration.

As for CETA, the last obstacles to a signature came from Germany, Austria and Belgium.  The German agreement came after the Social Democrats gave their consent to CETA at a Party Convention in Wolfsburg mid-September—asking at the same time for TTIP to be delayed.  To get the support of the Austrian Social Democrats (who are in a coalition with the pro-CETA People’s Party), the Commission is negotiating with Canada for a legally binding declaration on the interpretation of certain issues.  In Belgium, efforts are still underway to convince the Parliament of Wallonia to allow the Federal government to sign the agreement.

A formal Trade Ministers Council in Luxemburg on October 18 should be able to register the unanimous approval of the Member States, making the signature of CETA possible on the occasion of the EU-Canada summit on October 27.  The Ministers should also decide on the provisional implementation—with the likely exclusion of some sensitive issues, such as the provisions relating to investor-state dispute settlement.

As for TTIP, even though the talks are continuing actively, with the next round planned for October 3 in New York, there’s no illusion left that this deal can be sealed soon.  Cecilia Malmström, the European Commissioner for Trade, said after the Bratislava meeting on September 23 that “all ministers expressed their doubts about being able to conclude this before the end of the Obama presidency, and indeed, it looks increasingly unlikely.”

The 17th round of trade negotiations between the EU and Japan took place in Brussels in the last week of September.  The EU put forward an offer to reduce car tariffs to zero in exchange for greater concessions from Japan on the agricultural side—mainly dairy, wine and pork.  The negotiations seem to have been given new impetus by the prospect of Brexit—and after the Japanese government, on the occasion of the September 4 G20 summit in China, published a document in which it presented Japan’s views on how Brexit would affect the Japanese investments in the UK, notably in the automobile industry.  See “Japan’s Message to the United Kingdom and the European Union” here.