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Brussels, 31 May 2001

Preparation of the Internal Market Council Brussels, 31 May 2001

Discussions on internal market issues at the 30-31 May 2001 meeting of the EU's Council of Ministers responsible for the Internal Market, Consumer Affairs and Tourism in Brussels are due to begin on Thursday 31st May 2001 at 10:00am under the chairmanship of Swedish Trade Minister, Leif Pagrotsky.

Community Patent (JT)

Internal Market Commissioner Frits Bolkestein will ask Member States to agree on a common approach to resolving at least some of the outstanding issues concerning the proposal to establish a Community Patent, so that work can continue on this initiative.

The proposal for a Council Regulation to create a Community Patent would give inventors the option of obtaining a single patent legally valid throughout the European Union (see IP/00/714). The proposal would significantly lessen the burden on business and encourage innovation by making it cheaper to obtain a patent and by providing a clear legal framework in case of dispute. The Lisbon and Feira European Councils cited the creation of a Community Patent as an essential part of Europe's efforts to harness the results of research to new scientific and technological developments and so contribute to ensuring a competitive, knowledge-based economy in Europe. The Summits recommended that the Community Patent should be available by the end of 2001. The Stockholm summit expressed its concern at the lack of progress on the Community Patent and urged the Council and the Commission to speed up work in accordance with the Lisbon and Feira conclusions.

Under the Commission's proposal, Community Patents would be issued by the existing European Patent Office in Munich. National and European Patents would coexist with the Community Patent system, so that inventors would be free to choose which type of patent protection best suited their needs. This proposal would provide for a Community Patent system that was both affordable and legally certain.

However, Member States have yet to reach agreement on a number of key issues: the role of the National Patent Offices; financial arrangements; the language regime; the judicial system to apply; and relationship between the Community Patent and the European Patent Convention.

Parallel imports/exhaustion of trademark rights (JT)

The Presidency is expected to inform Ministers on the outcome of the discussions at the Lund informal Ministerial seminar on April 27-28th and to present a joint Swedish/UK price survey (also presented at Lund).

Some Member States have asked the Commission to reconsider its decision of May 2000 not to propose a change to the current Community-wide exhaustion regime for trade marks. The issue is currently under discussion in the European Parliament and has recently been debated in the Economic and Social Committee, which concluded that the current regime should be maintained. The issue was also discussed at the informal Internal Market Council in Lund.

Single Market Scoreboard (JT)

Commissioner Bolkestein will present to the Council the latest edition (Number 8) of the Internal Market Scoreboard (see IP/01/750 and MEMO/01/196). The Scoreboard has been shown to be a useful tool for monitoring progress in the Internal Market. The latest issue reflects efforts by Member States to give priority to the transposition of Internal Market Directives and shows that the average transposition deficit for all Member States has been reduced.

Sweden, Portugal and Luxembourg have significantly reduced their deficits in implementing Internal Market Directives since the last Scoreboard in November 2000. The deficits of some Member States, particularly Austria and the UK, have worsened, although Greece and France still remain at the bottom of the rankings. Implementation of environmental Directives relating to the Internal Market is highlighted. Information is also included on infringements and standardisation.

The Scoreboard also includes a feature on a recent price study carried out by the Commission to ascertain the level of price dispersion throughout the EU. This shows that the variation in prices for consumer electronic goods can be as high as 40%, and even higher for fresh foods. Price variations across Member States are up to three times higher than regional price variations within Member States.

2001 Review of the Internal Market Strategy (JT)

Commissioner Bolkestein will present to the Council the Commisison's second annual review of the Internal Market Strategy (See IP/01/564). The Review, entitled "Working together to maintain momentum", shows that progress in improving the performance of the Internal Market has been disappointing and stresses the need for closer co-operation between all parties to improve performance. Of the 36 actions scheduled to be achieved by June 2001, only 20 (or 55%) are expected to be completed on time.

As well as assessing progress since last year, the Review sets the direction of Internal Market policy for the next 18 months. The Internal Market is at the heart of the Lisbon strategy to make the EU the most dynamic and competitive economy in the world by 2010 , and the updated Strategy reflects this ambition.

It is expected that the Council will adopt conclusions containing a commitment to meet deadlines for action set out in the Strategy to improve the performance of the Internal Market.

Strategy for integration of environmental protection and sustainable development into Internal Market policy (JT)

In response to the conclusions of the Vienna European Council, the Internal Market Council presented its first report on the integration of environmental protection and sustainable development into Internal Market policies to the Helsinki European Council in December 1999. As a follow-up, the Internal Market, Consumer Affairs and Tourism Council will submit this Strategy to the Goteborg European Council.

The main objective of the strategy is to ensure that the further development of the Internal Market takes account of the need for integration of environmental protection, whilst promoting economic growth and social cohesion. By encouraging efficient use of resources, it is consistent with and contributes to sustainable development.

The Commission will express its broad support for the strategy.

Public Procurement Legislative Package (JT)

Council will take note of a progress report presented by the Swedish Presidency highlighting developments in negotiations on the Commission's package of amendments to simplify and modernise the EU public procurement Directives (see IP/00/461). These proposals would modernise and simplify the existing procurement Directives that impose competitive tendering for public contracts, transparency and equal treatment for all tenderers to ensure that the contract is awarded to the tender offering best value for money. Contracts for public works and for purchases of goods and services by public authorities and public utilities account for around 14% of the Union's GDP.

Fair Value Accounting (JT)

The Council is due to adopt, after a single Parliamentary reading, a February 2000 proposal for a Directive amending the 4th Directive on Annual Accounts, the 7th Directive on consolidated accounts and the Bank Accounts Directive, to enable the valuation of certain financial instruments at fair value (see IP/00/187). The main objective of the proposal is to enable companies to fully apply IAS (International Accounting Standards), including IAS 39 on the valuation of financial instruments which is mandatory as of financial year 2001, within the framework of the Accounting Directives.

The fair value of financial instruments is determined by the market value or generally accepted valuation models if there is not a reliable (liquid) market. Nearly all changes in fair value, even though not realised, need to be shown in the company's profit and loss account. Fair value provides a more accurate but potentially less "prudent" view of a company's financial position and performance. The proposal defines those financial instruments that can be valued fairly, in line with IAS 39. The proposal also lays down rules for Member States to define the scope of companies that shall be permitted or can be required to use fair value accounting. A Member State can, for example, permit (or require) fair value only for listed companies. The proposal also requires that all companies disclose information on derivative financial instruments such as options, swaps, futures in the notes on the accounts. However, small companies can be excluded from this disclosure.

An important amendment introduced under the Swedish Presidency, with the support of the Commission, includes banks within the scope of the proposal. It should, however, be clear that the present proposal is not about the introduction of "full" fair value reporting, a concept raising concerns with the banking industry, which is presently being discussed at international level and which will be assessed on its own merits by the Commission.

Life Assurance (JT)

It is expected that the Council will reach Political Agreement on the Commission's proposal for a recast Directive to replace with one single legal instrument the existing Directives in the field of life assurance (79/267/EEC, 90/619/EEC, 92/96/EEC, 95/26/EC, 2000/64/EC). Adoption of this Directive will result in a greatly simplified legislative framework establishing the conditions for access to and activities in the field of life assurance. It will not result in any substantive modification of the existing legal framework. The Commission plans to put forward a proposal for the official codification of these Directives.

If the Parliament and Council rapidly adopt the proposed Directive on solvency margin requirements for insurance undertakings (see below), which amends some of the life assurance Directives included in the proposed recast, these amendments will be integrated in the Council's Common Position on the life assurance recast Directive. All Member States, the Council, Commission and Parliament agree on this approach, which will ensure that the recast text adopted will be fully up to date.

The proposed recast Directive was presented by the Commission 28 June 2000 and the European Parliament approved the proposal without amendments on 15 March 2001.

Solvency margin for insurance undertakings (JT)

In accordance with the Financial Services Action Plan, the Commission presented on 25th October 2000, two proposals for Directives (one for life insurance, one for non-life) amending the rules for the solvency margin requirements of insurance undertakings (see IP/00/1233). The solvency margin is the extra capital that insurance undertakings are required to hold to act as a buffer against unforeseen events such as higher than expected claims levels or unfavourable investment results. The proposals update and strengthen the existing solvency margin requirements so as to reinforce safeguards for policyholders' interests. They also introduce higher regulatory capital requirements for certain, more volatile risks.

The Swedish Presidency will present a progress report on the two proposals. The Council has made very rapid progress in its assessments and there is now almost unanimity on all proposed amendments. While the Parliament has not yet completed its examination, this is proceeding favourably and the prospects are good that the proposal will be approved under the 'fast-track' procedure introduced by the Amsterdam Treaty after a single reading by Parliament.

New customs strategy (JT)

The Council is due to adopt a Resolution concerning the new Strategy for the Customs Union outlined in a Commission Communication adopted on 8 February 2001 (see IP/01/219). The Communication outlines orientations for actions in five main areas to enable customs administrations to meet their present and future challenges such as the enlargement of the European Union, the growth in e-commerce related traffic and the increasing amount of fraud. These five areas are

  • continuing the simplification and the rationalisation of the customs legislation,

  • improving the operational implementation of the legislation,

  • improving the service to business,

  • deepening training activities for both customs and economic operators, and

  • promoting international co-operation.

Cosmetics (PH)

The Council will examine a compromise proposal elaborated by the Swedish Presidency relating to the seventh amendment of Council Directive 76/768/EEC on cosmetic products aiming at eliminating the suffering of animals while respecting consumer interests and international trading rules. Enterprise Commissioner Erkki Liikanen will represent the Commission during the discussion of this point.

The Swedish Presidency will attempt to reach a political agreement with a view to adopting Common Position subsequently. The revised compromise text:

  • provides for a ban on animal tests performed within the EU on finished cosmetic products to take effect not later than a certain cut-off date (which is to be specified)

  • provides for a ban on animal tests performed within the EU on cosmetic ingredients to take effect as soon as an alternative testing method has been validated at EU level, and in any case not later than a certain cut-off date (to be specified), supplemented by the introduction of a derogation under special circumstances

- includes a derogation from the testing ban to allow national supervisory authori-ties responsible for market surveillance to carry out tests on animals for public health reasons

- makes the proposal's labelling provisions more easily applicable

 does not provide for a marketing ban

- takes on board several amendments proposed by the European Parliament at the first reading (3 April 2001) . To this end, it provides for consultation of the Scientific Committee on Cosmetic Products and non-food Products on the use in cosmetics of all substances classified as carcinogenic, mutagenic or toxic; it requests the information on minimum durability (shelf life) for all cosmetics; it supplements the safety requirements for specific type of products intended for children and for intimate hygiene; and it requires the labelling of fragrance ingredients that are potentially allergenic.

The objectives of the initial Commission proposal adopted on 5 April 2000 were to:

- prohibit testing on animals for finished cosmetic products

- prohibit the testing on animals for ingredients and combinations of ingredients for cosmetic products

- allow the use of claims relating to animal testing, provided that these claims do not mislead consumers.

Short-chain chlorinated paraffins (SCCP) (PH)

The Commission can accept the Presidency's compromise text for a proposed Directive to amend Directive 76/769/EEC on the marketing and use of dangerous substances and preparations, so as to introduce a ban on the placing on the market and use of short-chain chlorinated paraffins (SCCPs) in metalworking and in leather treatment.

The Commission's proposal is based on comprehensive risk assessment, finalised in 1999, which uses recent scientific knowledge and a methodology approved by EU Mem-ber States. This assessment, carried out under Regulation 793/93 on the Evaluation and Control of Existing Substances, concluded that certain uses of SCCPs pose a risk to the acquatic environment and recommended a risk reduction strategy, including restrictions on the marketing and use of SCCPs. The results of the risk assessment and the recommended risk reduction strategy were unanimously approved by the Member States .

The Commission's original proposal for a 20th amendment to Directive 76/769/EEC was adopted on 21 June 2000. An amended proposal was adopted on 17 May 2001 following the European Parliament's first reading opinion. The Commission agreed to clarify that other known uses of SCCPs should be included in the future review of the provisions foreseen in the proposed Directive and that the European Parliament should be informed about the outcome of the review. The Commission did not accept amendments that would extend the scope of the proposed ban as this would not be justified by the current knowledge about risks. However, if further risks are identified in the future, the Directive could be adapted to technical progress.

The proposed Directive was discussed at Coreper on 23 May 2001. A majority of Member States support the Presidency's compromise proposal. The Commission lifted its reserves on some technical drafting points and can thus also support the text proposed by the Presidency.

Network Security (PH)

Commissioner Liikanen will briefing the Council on the Commission's forthcoming communication on Network and Information Security. Security is becoming a key priority because communication and information have become a key factor in economic and societal development. Networks and information systems are now supporting services and carrying data to an extent inconceivable only a few years ago. Their availability is critical for other infrastructures such as water and electricity supply. As everybody, business, private individuals, public administrations want to exploit the possibilities of communication networks, security of these systems is becoming a prerequisite for further progress. Against this background the Stockholm European Council on 23-24 March 2001 concluded "the Council together with the Commission will develop a comprehensive strategy on security of electronic networks including practical implementing action. This should be presented in time for the Göteborg European Council." The forthcoming Communication will be the Commission's response to this request.

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