November 2015 – What’s app in Europe?
What’s going on in Brussels? This section aims to provide the reader with an overview of some of the most significant issues being addressed by the EU institutions and the main topics that have been discussed in the last month.
On Transit passenger taxes
Air travel passengers in Ireland have to pay an air travel tax. The tax is similar in many other Member States. However, transit and transfer passengers are not required to pay this tax. To qualify as a transfer or a transit passenger the booking for the two flights must be made as a single booking. Thus, the exemption benefits airlines which book double flights in a single booking and does not apply to airlines which do not book double flights as a single booking but consider them as two separate bookings. In concrete terms Aer Lingus which is developing a strong business on the basis of a single booking policy gets the exemption but Ryanair, which applies a double booking policy (even if the bookings are done at the same time), does not.
The European Commission (‘Commission’) found that the exemption was not a state aid benefitting Aer Lingus. The General Court (Case T-512/11) found that decision was not properly made according to basic administrative procedures. Because of the General Court’s ruling, the Commission has to go back and review the matter again. How the Commission will decide the second time is not clear.
Liability of non-EU entities facilitating an EU cartel
AC Treuhand is located in Switzerland. It is an entity providing services to trade associations. AC Treuhand managed the trade association of EU producers of heat stabilisers. The Commission found in an investigation lasting nearly 10 years
that the association facilitated a cartel between the members of the association. AC Treuhand appealed that Decision to the General Court (the EU’s court of first instance) and lost.1 It then re- appealed to the Court of Justice (the EU’s supreme court) on the basis that the size of the fine was disproportionate. The Court of Justice rejected the appeal.2 At the same time it took the opportunity to confirm certain basic principles in relation to facilitators of cartels. Firstly, the service agreement between AC Treuhand and the heat stabiliser producers could be an illegal agreement. It does not matter that AC Treuhand does not producer heat stabilisers. Secondly, the Commission was entitled to fix a lump sum as a fine instead of using the normal benchmark of sales of heat stabilisers as the basis of the fine. Thirdly, the judgement simple confirms that being outside the EU does not provide any protection.
Edward Snowden, Maximillian Schrems and the protection of EU data in the United States
EU privacy law is based on the Data Protection Directive from 1995 (‘Data Protection Directive’).3 The Directive allows the transfer of data from the EU to third countries if that third country ensures that the data will be protected. The Commission is given competence to determine if a particular third country ensures that data is adequately protected. At the same time the Directive provides for national competent authorities responsible for the proper implementation of the Directive in the national territory.
The Commission determined in July 2000 that the US ensured that EU data transferred to the US was adequately protected. The basis of the Commission decision was the US Safe Harbour scheme. In 2013 Edward Snowden revealed that Facebook, Google and other US companies were transferring data to the National Security Agency. So the Safe Harbour scheme did not work. Max Schrems, an Austrian student, was a user of Facebook. He complained to the Irish data protection authority that the Facebook was transferring data from Ireland (where it has it EU base) to the US and then from its US servers to the NSA. The Irish authority rejected the complaint on the basis of the Commission 2000 agreement with the US. Schrems appealed this decision to the Irish High Court. The Irish High Court asked the Court of Justice (‘Court’) for assistance in interpreting the Data Protection Directive.
The core of the Court’s ruling4 is that the national authority responsible for protecting data cannot abdicate from its responsibility to protect Mr Schrems’ data just because of the Commission 2000 Decision on the Safe Harbour scheme. In effect the national competent authority needs to review whether the basis of the Commission’s decision still subsists. As Snowden revealed the Safe Harbour scheme did not work. Because of this, the Irish competent authority must examine Mr Schrems complaint with due diligence to see if the transfer of data by Facebook from Ireland to the US should be suspended for not compliance with the Data Protection Directive.
This is a difficult case from a lawyers’ point of view. It is possible that the Court came to the right decision on the facts. However, in doing so the Court has undermined the authority of the Commission as the body entitled to conclude agreements with third countries to determine if a third country provides equivalent protection. It comes back to the old lawyers adage: hard facts can make bad law.
TTIP and dispute settlement
The TransAtlantic Trade and Investment Partnership (‘TTIP’ or ‘Agreement’) is designed to be a bilateral trade agreement between the EU and the US. It will contain two types of dispute settlement provisions. One is in relation to disputes between the US and the EU. If the EU were to consider that the US was acting in breach of the final Agreement then it would be able to invoke State-to-State dispute settlement. The Agreement will set out how this will work.
At the same time, TTIP will be a bilateral investment treaty or BIT. All BITs contain Investor-to-State dispute settlement provisions. This is known as ISDS or investor state dispute settlement. Typically ISDS allows investors established in one state to sue the other state if it has made an investment and that other state has, in some way, usually by changing the regulatory framework or nationalising the investment, impeded the realisation of the benefits of the investment.
When it became clear that TTIP would contain ISDS provisions many EU NGO protested that this would undermine the regulatory discretion or sovereignty of the EU. The background to this concern seems to be the view that standards in the EU are higher than those in the US. While this might be true for some standards it is not necessarily true for all sectors (vis the Volkswagen scandal where emissions standards in the US are clearly higher than in the EU).
To address the objections that ISDS is typically a non-transparent process with adjudicators normally from the business world or lawyers to the business world, the Commission has come up with a new model. The Commission is proposing a Investment Court system made up of a Tribunal of First Instance and an Appeal’s Court. Judges would be appointed with qualifications similar to those required for the permanent international courts or the WTO. At the same time TTIP would guarantee the right of regulators to regulate.
Whether this solution will satisfy the objectors to TTIP is not clear. But it will expose the core of their complaints and may divide what has been to date a very unified protest. If the new Investment Court answers the problem of transparency and the quality of the judges and the regulatory guarantee answers the fear of a dilution of EU standards, what should on-going protests be based on. This comes down to the question of whether the EU should conclude this sort of trade agreement at all. This is a much bigger question.
Today’s global market was made by trade agreements that gradually reduced the barriers to trade. Now that the global market has, to a large degree been achieved, the question is how to regulate the market. If there are no mechanisms for setting global rules for a global market should not the biggest traders, the EU and the US, not set rules themselves. That is what TTIP is attempting to start to do. It has been seen in the EEC that breaking down barriers to trade leads inevitably to the need to regulate the single market that has been created. A single regulator is needed. TTIP is the first step in a similar process at the global level.
The EU is scrambling to catch up on the Volkswagen scandal. The EU Commissioner responsible for the Internal Market has called on all national authorities to verify that EU standards for emissions from diesel and petrol engines are complied with. There must be ‘zero tolerance and rigorous compliance with EU rules’ she said. The simple problem is that it appears that Volkswagen engines do comply with EU standards as these standards are not as rigorous in relation to particulate emissions as in the US. This consideration must be linked to the whole TTIP debate.
Geographical Indications for non-agricultural products
What is the difference between stone from a quarry, say from the Carrara in Italy, and a good wine from Tuscany with qualities determined by the terroir on which the grapes are grown. Both are inherently linked to their geographical origin. However EU law allows the protection of Tuscan wine as a geographical indication but does not have rules for the protection of stone or other non-agricultural goods. Take glass as an example. There is Bohemian glass, glass from Murano or glass from Waterford. These are all geographical names which indicate that the glass has specific qualities or a reputation derived from that geographic origin. The same could be said for pottery or ceramics. There is Limoges in France or Delft in the Netherlands.
The Commission is currently determining whether the protection of GIs currently available for foods and products of the soil (wool, fur etc.) wines and aromatic wines and spirits, should be extended to non-agricultural products. As a contribution to this reflection, the EU Parliament voted in early October by a margin of 606 votes in favour and 43 votes against, to expand the EU system to cover non-agricultural products. All parties have to wait to see what the Commission will propose.
1 Case T-27/10, AC-Treuhand AG v Commission, judgment of 6 February 2014, , not published yet.
2 Case C-194/14 P, AC-Treuhand AG v Commission, judgment of 22 October 2015, not published yet.
3 Directive 95/46/EC of 24 October 1995 on the protection of
individuals with regard to the processing of personal data and on the free movement of such data, OJ L 281, 23.11.1995, p.31.
4 Case C-362/14, Maximillian Schrems v Data Protection Commissioner, judgment of 6 October 2015, not published yet.