Digital Single Market Policy

The European Commission presented its Digital Single Market (DSM) Strategy for Europe on 6 May. The intention of the DSM Strategy is to bring cheaper and better quality digital services to European citizens and to stimulate the creation of a ‘vibrant knowledge-based society’ in the EU. It is structured around three policy areas or ‘pillars’: (i) better online access to digital goods and services, (ii) an environment where digital networks and services can prosper, and (iii) digitalisation as a driver for growth. Noticeable elements of the final strategy are the attention to cross-border parcel delivery and the proposed examination of the Audiovisual Media Services Directive.

However, the strategy will be challenging to implement. Similar initiatives from previous EU Commissions such as the 2013 ‘Connected Continent’ Telecoms Package failed to meet their expectations. In addition, the implementation of the Digital Single Market Strategy will require the adoption of several large and complicated pieces of legislation on key issues such as data protection, digital privacy, telecoms, and copyrights. In the past such legislation has often been weakened to protect vested interests of industry or individual Member States. Finally, the whole-hearted adoption of the strategy will be complicated by the interdependent nature of the various policy initiatives and legislative proposals that shape the Digital Single Market. Therefore, the threshold for the success of this strategy is higher than the mere adoption and implementation of the individual proposed measures; the whole package of measures must also be coherent.

Beyond the Digital Single Market Strategy, progress has been made on the negotiations on the proposed Network and Information Security Directive (NIS) in the Council of Ministers. The directive aims at improving the security of information systems, internet and private networks, such as national power grids or a city’s public transport system. The proposal can be divided into three types of obligations. First, the proposal requires that Member States establish a minimum capacity in information security by creating a national computer emergency response team and national information security plans. Second, the proposal obliges the competent national authorities to cooperate more at the European level. And third, the proposal aims at improving the assessment of cyber risks in Europe by obliging public administrations and companies in certain sectors to report on serious incidents compromising their networks.

The last two parts of the proposal are likely to prove difficult to negotiate. The larger Member States are hesitant to cooperate with the other Member States because of a lack of trust. They prefer not to disclose their capabilities in cyber security. In addition, the notification duty for private companies remains a point for discussion. At the Council, a majority of the Member States insist that services should fall within the scope of the duty to notify. However, the UK and Ireland oppose this on the grounds that defining and including such services would create too much legal uncertainty. In a last effort to unblock the negotiations, the Commission proposed to amend the list of information society services falling under the scope of the notification duty through delegated acts. This effort is likely to be in vain since the new proposal would enhance the Commission’s powers, something few Member States are willing to accept.

Energy & Climate Change Policy

On 29 April, the Commission launched a State Aid inquiry into national measures ensuring adequate electricity production capacity (so-called capacity mechanisms). The inquiry will gather information to examine whether capacity mechanisms ensure supply without distorting competition in the EU single market. The Commission has noticed that an increasing number of Member States are introducing capacity mechanisms to encourage investment or provide incentives for power plants to continue operating. While the Commission recognises that capacity mechanisms may be justified, this requires an assessment using the criteria set out in its Guidelines on State Aid for environmental protection and energy (which include Member States demonstrating the need for the measures, and designing them to avoid undue negative effects on competition and trade). The initial information requests will go to a representative sample of Member States that have capacity mechanisms in place or are considering them, namely Belgium, Croatia, Denmark, France, Germany, Ireland, Italy, Poland, Portugal, Spain and Sweden.

Last month, the Council and the ENVI-Committee of the European Parliament agreed to establish a Market Stability Reserve (MSR) in the context of the EU’s Emissions Trading System (ETS). The MSR is intended to stabilize the EU’s emissions trading market in order to ensure the long term development of clean energy technologies in Europe. The MSR will become operational in 2019 and will oblige authorities to withdraw and put 12% of the auctioned allowances in the reserve every year. These allowances will be re-released on the market at a maximum of 100 million a year, if the total volume of auctioned allowances falls below 400 million in a particular year. The Council and the ENVI-Committee also agreed that the 900 million allowances removed from the market in 2014-2016 (so-called “backloaded” allowances), will be put into the MSR, rather than auctioned in 2019-2020 as previously foreseen. The European Parliament and the Council must now ratify the agreement. The Council is expected to give its final approval by the end of June.

Internal Market & Financial Services Policies

The Greek saga drags on, yet deadlines are coming into sight. The current bailout programme expires at the end of June and any new agreement, including a new bailout programme, will require the approval of national parliaments in certain Member States. This may prove to be a particularly high hurdle in the case of Germany. Since the reshuffling of the Greek negotiation team at the end of April, small but real progress has been made on VAT reform, non-performing loans, the creation of an independent tax collection agency and the country’s privatisation programme. Central elements of disagreement in the negotiations remain the pension and labour market reforms.

On 19 May, First Vice-President Timmermans unveiled the EU Agenda for Better Regulation. The Agenda would give impact assessments a more central role in the legislative process but also make it a more burdensome process. The proposal to make substantial amendments from the Parliament and the Council subject to an impact assessment has drawn a lot of attention. Some of the changes will require adapting the Inter-Institutional Agreement on Better Law-Making from 2003, for which Timmermans will have to negotiate with the Parliament and the Council. He hopes to reach an agreement by Christmas 2015, which may be an unrealistic timeline.

Life Sciences & Healthcare Policies

The three-way talks between the Commission, the Council and the European Parliament seem to be making progress on the draft Regulation for Novel Foods. These are foods that are either new, because they were not consumed in significant amounts before, or produced by the application of a new method. Both foods from cloned animals as well as the delegated powers to the Commission remain controversial aspects in the talks. Nevertheless, a consensus has been reached on including a reference to foods from cloned animals in a recital. However, the Committee of Permanent Representatives (COREPER) rejected the proposal of the European Parliament to use delegated acts to develop and update the list of novel foods.

In April, the Commission and the Member States concluded a joint procurement agreement for vaccines and medicines. The initiative was launched with pandemics such as swine flu in mind, where some Member States had difficulties purchasing vaccines in sufficient quantities and at a correct price. With the joint procurement agreement in place, any EU Member State can make a proposal to other Member States to buy medicines and vaccines together, but the procedure only applies when at least five contracting parties participate.

In addition, at the EU summit in Riga, Belgium and the Netherlands announced to cooperate on the procurement of orphan drugs. The countries will start a pilot project next year, where they will work together to negotiate with pharmaceutical companies on the purchase of orphan medicines. The objective of the initiative is to reduce prices for these drugs. The ministers of health of the two countries also agreed to cooperate on the exchange of information, to create registers and evaluate drugs together.

Trade Policy & Sanctions

On 7 May, Commissioner Malmström, Commissioner for International Trade, published her concept paper for a reformed Investor-State Dispute Settlement mechanism (ISDS) for the EU-US Transatlantic Trade and Investment Partnership (TTIP). Pressured by the growing public concerns on TTIP in general and ISDS in particular, the Commission was forced to present alternatives. The proposal highlights the changes already included under CETA, the free trade agreement between the EU and Canada, and proposes that the EU should pursue the establishment of a more permanent international investment court. The Commission hopes that in the framework of TTIP these elements can evolve towards the new international standard for ISDS mechanisms. The International Trade Committee of the European Parliament (INTA) gave its go-ahead to the Commission to include the ISDS mechanism in the TTIP negotiation in a non-binding vote on 28 May. The vote came after hectic negotiations among the political groups, with the final result of 28 in favour, 13 against and no abstentions.

On 20 May, the European Parliament decided to establish a mandatory reporting regime for "all Union importers" of conflict minerals from all conflict zones in the world. The plenary hereby substantially modified the proposal of the Commission of a voluntary “self-certification” regime as well as the text adopted by the Parliament’s International Trade committee (INTA) in April, which included a mandatory certification only at the level of smelters and refiners. The debate was very animated and the amendments reversing the the Commission’s initial proposal were adopted at the very last minute. The negotiations with the Council are expected to start soon, with a view to reaching a first-reading agreement.