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MEMO/02/249

Brussels, 13th November 2002

Preparation of the Competitiveness Council of Ministers, Brussels, 14-15 November 2002

The second ever meeting of the EU's Council of Ministers under the title "Competitiveness" takes place in Brussels on Thursday 14th November from 11.30am, and will continue if necessary on Friday 15th November. Following a decision of the Seville European Council in June 2002, Internal Market, Industry and Research Ministers now meet in the "Competitiveness Council" rather than three separate Councils. At this Council meeting, the Commission will be represented by Internal Market Commissioner Frits Bolkestein and Health and Consumer Protection Commissioner David Byrne. On behalf of the Danish Presidency, the Council will be chaired by the Danish Vice-Prime Minister and Minister for Economic and Business Affairs Bendt Bendtsen.

Community Patent (JT)

The Council will hold a further discussion on the main outlines of the future jurisdictional system for the proposed Community Patent (see MEMO/01/451, IP/00/714 and MEMO/00/41). The Community Patent would give inventors the option of obtaining a single patent legally valid throughout the European Union.

The Council has already reached broad agreement on the basis for compromise on other aspects such as languages, cost and the central role of Munich-based European Patent Office (EPO established under the 1972 European Patent Convention) (see MEMO/02/99). The jurisdiction is the last and decisive piece of the puzzle. Mr Bolkestein will make clear that the Commission cannot accept that the proposed central and specialised EU jurisdiction should be watered down. This is because the Commission is determined that companies using the Community Patent should not have to run the risk of potential legal action before courts in each and every Member State which could adopt divergent interpretations of disputed patents.

The key issue in the new Presidency proposal is the possible creation of regional chambers in addition to the central chamber at Luxembourg. Mr Bolkestein will say that certain key elements need to be reinforced to avoid "running round in circles":

  • the jurisdiction for the Community Patent should start as one central chamber and regional chambers should only be created after the central chamber has reached a certain workload, thus creating unitary case-law and a common culture

  • the location of the regional chambers should depend on justified needs (shown on the basis of the cases handled by the central chamber up to the moment of decentralisation)

  • the number of regional chambers should be limited, as agreed at the May 2002 Internal Market Council. There should not necessarily be one in each Member State. They should only be established on the basis of strict and objective criteria.

Patentability of computer-implemented inventions (Software patents) (JT)

The Council will be invited to agree a general approach on the Commission's proposal (see IP/02/277 and MEMO/02/32) for a Directive to harmonise the way in which national patent laws deal with inventions using software. A significant barrier to trade in patented products within the Internal Market exists as long as certain inventions can be protected by patent in some Member States but not others.

Mr Bolkestein will thank the Spanish and Danish Presidencies for their efforts on this matter and reiterate that European industry needs a legal environment that encourages innovation without stifling competition.

The text before the Council includes changes to the original proposal, and would tighten its effects in some respects, but nevertheless affirms its most important features which are that computer-implemented inventions should be treated like any other inventions, and most importantly, that patents should only be granted for inventions which make a so-called "technical contribution". The clear message is that non-technical patents, like patents for business methods, are not needed and not wanted in Europe.

However there is one amendment to the proposal that gives the Commission cause for concern. Mr Bolkestein will make clear that the Commission continues to believe that patent claims for computer programs as products in their own right (as opposed to programs linked to computer hardware) should not be allowed, though the Commission is sensitive to the need to ensure that right holders can enforce patents for inventions which include computer programs.

Recognition of professional qualifications (JT)

The Council will hold a debate on the Commission's proposal for a Directive to clarify and simplify the rules on recognition of professional qualifications (IP/02/393).

Mr Bolkestein will remind the Council that the proposal is critical to achieving a more dynamic and competitive European economy by making it easier for engineers, architects, doctors and others to move to where their skills are most needed.

The proposal is a good example of better regulation (see above). It would combine 15 existing Directives into one, reduce the number of articles from 300 to 60, and rationalise committee structures.

One important simplification proposed is that where a service provider intends to provide services for a limited period of time (in principle, not more than 16 weeks) he or she could do so on the basis of a declaration made in the home Member State, rather than in the state where services will be provided. This information should be provided on request, and preferably electronically, to the Member State where the services will be provided, to ensure that national authorities have all necessary information on activities taking place within their territories. The proposed Directive also improves the information to be provided to patients and consumers.

Service providers will still be subject to the laws and rules of the Member States where they provide services and which are applied to locally qualified professionals. Mr Bolkestein will make clear that the Commission is open to suggestions that Member States to exchange information on disqualifications in order to reinforce safeguards still further.

He will add that the practical operation of the rules on professional recognition depends on national practices and procedures. The Commission has recently launched the Signpost Service and SOLVIT network to increase information for citizens (see IP/02/1110). Migrants would benefit from more support at national level to inform them of national procedures and on the progress of their applications for recognition, as well as to provide documentation on national education and training.

Takeover Bids (JT)

The Commission will present the main lines of the new proposal for a Directive on takeover bids, adopted on 2 October 2002 (see IP/02/1402 and MEMO/02/201). The proposal sets out to offer European firms greater legal certainty for cross-border takeover bids and to protect minority shareholders where control of a company changes hands.

The new proposal is intended to meet the European Parliament's concerns by introducing:

  • a common definition of the "equitable price" in a mandatory bid

  • a squeeze-out right enabling a majority shareholder to require the remaining minority shareholders to sell him their securities

  • a sell-out right enabling minority shareholders to require the majority shareholder to buy their securities following a takeover bid

  • greater transparency concerning companies' capital structure and control and the defensive mechanisms they have put in place

  • a break-through rule whereby structural defensive measures were neutralised following a successful takeover bid.

However, it would avoid encroaching on anyone's acquired rights for example by banning multiple voting rights - so as not to raise legal or even constitutional problems that would be intractable in most Member States and which would prevent the Directive being adopted.

The proposal represents the best possible compromise aimed satisfying the key concerns of all parties while preserving the basic principles approved unanimously in the Council's common position on the previous proposal. The most important of these is that the future of the company has to be decided by its owners the shareholders - and not by its managers.

Fifth Motor Insurance Directive (JT)

The Commission will present to the Council its proposal for a fifth Motor Insurance Directive (see IP/02/838 and MEMO/02/133). The proposal aims to make it easier for people to find car insurance for a temporary stay in another Member State. It will also make it easier to get short-term insurance covering cars bought outside the owner's Member State of residence. The proposal would update some existing provisions, for example on the minimum amount of cover motorists must have. It would make it easier for customers to change insurance provider. Last but not least, it aims to improve protection for pedestrians and cyclists who are involved in traffic accidents.

Mr Bolkestein will emphasise the importance of this proposal, which improves the protection of policyholders and accident victims and will stimulate cross-border competition in both the insurance and vehicle sectors. He will express the Commission's hope that a political agreement can be reached by early in 2003.

Role of Competitiveness Council - follow up to Nyborg informal Ministerial meeting (JT)

The Presidency will recap on the results of discussions on the role of the Competitiveness Council, held at the informal meeting in Nyborg on 11-12 October.

It was agreed in Nyborg that the EU needs to strengthen its efforts on growth and competitiveness if the EU is to become "the most dynamic and competitive knowledge-based economy in the world by 2010" and that the Competitiveness Council should assume a key strategic role, in particular on the areas where the EU lags behind, notably the completion of the internal market, research and development, innovation, entrepreneurship and access to capital.

The Presidency will also inform the Council about the outcome of the discussions in Nyborg on better regulation in Europe, which concluded that improving the quality of rules and regulation is critical to the Union becoming more competitive. The informal meeting also recognised that implementation of EU law must have high priority and that there is no excuse for failing to meet the implementation date. Also discussed was the need to tackle the issue of "gold plating" unnecessarily complicating Community Directives when they are implemented into national law.

Implementing the Commission's Action Plan on better regulation (JT)

In reporting on progress on implementing the Commission's Action Plan on Better Regulation (see IP/02/825), Mr Bolkestein will express his gratitude to the Presidency for its strong focus on simplification. He will stress that, as agreed in Nyborg, achieving better regulation is a shared responsibility and that the time to move from talk to action has arrived.

By early next year, the Commission will present an initiative, identifying priority areas where simplification should be actively pursued. But the Commission cannot achieve better regulation alone. Mr Bolkestein will suggest ways in which Member States can contribute, for example, by organising public consultations, impact assessments and legislative simplification at national level. He will welcome progress being made on the inter-institutional agreement requested by the Seville European Council, to cement the EU institutions' common responsibilities to achieve a higher quality legal framework and to set out steps to do so.

He will inform the Council on the Commission's own progress in driving forward better regulation, notably in:

  • consolidating best practice for consultation exercises in a set of standards to apply as of 1 January, 2003

  • drawing up new guidelines on assessing the economic, social and environmental impact of new legislative proposals, to be progressively introduced from 2003 and generally applied by 2005. The Commissioner will emphasise his support for also conducting impact assessments when Council and/or Parliament introduce substantive amendments to Commission proposals during negotiations

  • simplifying and reducing the volume of the existing body of Community law. The Commission has set the target of a 25% reduction by 2005.

Work programme of the "three Presidencies" (JT)

The Danish Presidency and the following two Presidencies (Greek and Italian) will set out their joint working programme highlighting legislative and non-legislative priorities. Among these will be further progress towards adopting Commission proposals on public procurement, intellectual property rights, food stuffs, services (including financial services), company law (including corporate governance), free movement of persons, recognition of professional qualifications, pharmaceuticals, dangerous substances and preparations (including chemicals) and customs legislation.

The Commission's Strategy for the Internal Market, as updated and modified following its yearly review (see IP/02/541), provides an important framework for the Presidencies' planning.

The insufficient progress so far on the Community Patent proposal (see above) is a source of concern for the Presidencies, who will also, among other things, underline the importance of swift progress on the proposed Takeovers Directive.

For the Commission, Mr Bolkestein will say that the programme of the three Presidencies must in future be the focal point for a political debate. The challenge is not simply to make a long list of things that need to be done, but to prioritise. And then to deliver.

Internal Market Scoreboard (JT)

Mr Bolkestein will present to the Council the latest "Internal Market Scoreboard" (see IP/02/1644), a special edition marking the approach of the tenth anniversary of the opening of Europe's frontiers on 31 December 1992.

He will express disappointment that the implementation deficit - the percentage of EU Internal Market laws currently in force which Member States have not yet passed into national law - has started to grow again, rising from 1.8% in May 2002 to 2.1%. He will welcome France's recent pledge, as the country with the highest deficit, to improve its situation and remind all Member States that their performance in implementing and enforcing EU laws will come under scrutiny again very soon at next spring's European Council.

The Commissioner will remind the Council that the number of Internal Market infringement cases open remains too high at over 1500. The Commission will soon publish a Communication on improving the application of EU law, particularly through improved co-operation between Member States and the Commission.

Mr Bolkestein will also draw attention to:

  • the new "Internal Market Index" which shows that the Member States which most recently joined the EU have benefited rapidly from internal market policies. This augurs well for enlargement

  • the survey of citizens and businesses (see MEMO 02/231) featured in the Scoreboard, which shows that a large majority of EU companies and citizens recognise the important benefits the Internal Market has brought to them since 1992 and want more.

The Internal Market, environmental protection and sustainable development (JT)

Mr Bolkestein will welcome the Council's interim report on the integration of environmental protection and sustainable development into Internal Market policies and suggest that the Council devotes some time in the future to discussing the relationship between competitiveness and sustainable development, possibly also involving other relevant work.

Work to update the Council's 2001 strategy on this matter will begin during the Greek Presidency, on the basis of a contribution from the Commission, with the aim of agreement under the Italian Presidency before the end of 2003. This new strategy will take into account the results of the Johannesburg Summit of September 2002 on sustainable development.

Internal Market for Services (JT)

The Council is expected to adopt conclusions welcoming the Commission's July 2002 report on the Internal Market for services (see IP/02/1180 and MEMO/02/178), and endorsing the Commission's approach of presenting a legislative proposal to address remaining barriers by the end of 2003.

This proposal will mix mutual recognition, administrative co-operation and targeted harmonisation. It will be complemented by non-legislative action, for instance to address business complaints about lack of information on the regulatory framework in other Member States.

The Commission's report confirmed that cross-border services are much harder hit by barriers than exports of goods. Barriers occur at every stage of the business process and across different sectors. As services account for 70% of GDP and employment, such barriers affect the whole economy.

Mr Bolkestein will remind Member States that they too need to show commitment to removing existing barriers if the Internal Market in services is going to work. Achieving this will be a key factor in determining whether the EU fulfils its aim of becoming the most competitive and knowledge based economy in the world by 2010.

Corporate governance report by the high-level group of company law experts (JT)

There will be an initial exchange of views on the report by the high level group on company law chaired by Jaap Winter (see IP/02/1600). Mr Winter made an oral presentation of the main recommendations of his Group at the September Competitiveness Council.

Mr Bolkestein will welcome the early opportunity for discussion and stress again that the report is a high-quality piece of work of which the Commission intends to take full account. However, since the final Report was only officially presented on 4th November, he is not yet in a position to make detailed comments on how the Commission will follow-up the Group's recommendations. The Commission will hold meetings with the European Parliament and Member States experts in the next couple of months, so that an action plan for company law, including corporate governance and consisting of legislative and non-legislative initiatives, can be on the table in the first quarter of next year as requested by the Council in its September conclusions.

Green Paper on Consumer Protection (TM)

Health and Consumer Protection Commissioner David Byrne will present an overall progress report on the 2001 Green Paper on consumer protection and follow-up communication (see IP/02/842). The progress report includes an impact assessment of the options for harmonisation of commercial practices set out in the Green Paper. That paper presented an analysis of the shortcomings of the internal market, from the perspectives of consumers and the businesses that sell to them. Fragmentation along national lines is still the rule. The Euro and e-commerce opened up new opportunities for consumers and business alike and have exposed national rules on commercial practices as barriers for consumers and business. The Green Paper set out two main options to tackle these barriers either a series of limited harmonisation measures or a framework directive complemented, where appropriate by specific measures. It also set out ideas to improve the enforcement of EU rules by enabling consumer authorities to cooperate better (see also MEMO/02/135).

New Consumer Credit Directive (TM)

Health and Consumer Protection Commissioner David Byrne will present the Commission's proposal for a new directive on consumer credit. Ministers will then have a public debate on the basis of Commissioner Byrne's introduction. The Commission adopted the proposal in September (see IP/02/1289). The existing EU-wide rules from 1987 have not kept pace with the important evolution in this sector and, at the same time, only set minimum standards. They have largely been overtaken by national regulation. The absence of common rules reduced cross-border transactions and led to differences in consumer protection in Member States. New EU-wide rules for consumer credit will be expanded to modern forms of consumer credit today. Home loans remain outside the scope. Borrowers will gain improved transparency on products (costs, terms and conditions) and can more easily compare offers on a cross-border basis. Lenders will gain improved opportunity to assess borrower risk, but in return they will be subject to "know thy client" obligations before granting any credit. Consumers will also have the right of withdrawal within 14 days, free of charge and without justification. Harmonised consumer credit rules throughout the Union will not only increase the protection of consumers across borders but also their confidence and thus strengthen the functioning and the stability of the consumer credit market in the EU.


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