European Union: EU Impact - Issue 5/2019

Last Updated: 12 July 2019
Article by Valerijus Ostrovskis, Alexis Fierens, Laura Semmler and Camille Vermosen

Despite record temperatures in some EU countries these days, political developments in Brussels and Member States' capitals have rather sped up than slowed down. Following the elections to the EU Parliament in May 2019, the leaders of the EU Member States have been engaged in intense negotiations on the upcoming major re-shuffle of EU top jobs. Political analysts and journalists are busy trying to predict the names that are likely to be part of the infamous (albeit unofficial) 'package deal' whereby the posts of the heads of the key EU Institutions will be allocated, trying to find a right balance between the preferences of the EU Member States (with the largest Member States exerting the strongest influence), the geographical, political group and gender representation.

The upcoming weeks will reveal how the leadership of the key EU Institutions will look like. After no clear decisions were taken at the informal summit of EU Leaders on 30 June 2019, more clarity on a potential 'package deal' is expected to come from the follow-up meeting of EU leaders on 2 July 2019, just ahead of the planned election of the President of the European Parliament during the plenary session on 3 July 2019.

These institutional changes are relevant far beyond the "Brussels bubble", as the renewed EU Institutions will shape the EU regulatory and policy agenda for the next five years, with the agenda to be announced once the new European Commission is appointed and starts its work in November 2019. This agenda will translate into concrete legislative proposals in the coming years, that will affect millions of companies operating in the EU.

Besides these matters of high politics, the EU Institutions have been busy with more specific decisions and regulations affecting businesses in various sectors. Among the most interesting and impactful of these developments, discussed in this newsletter, are the following:

  • European Commission calls on Member States to agree on minimum corporate taxation level
  • Commission adopts advanced rules for the safe operation of drones
  • Trademarks & the right to one's own name: General Court reiterates the way to determine the concept of "bad faith"
  • European Court of Justice confirms compatibility of Investment Court System with EU Treaties
  • Clean energy for all Europeans package completed: What impact for business?

Taxation

European Commission calls on Member States to agree on minimum corporate taxation level

At the Economic and Financial Affairs Council on 17 May 2019, ministers discussed the strategy proposed by Pierre Moscovici, Commissioner in charge of Taxation, to modernise the corporate tax framework across the EU and create a business taxation environment fit for the 21st century.

The new strategy, known as "Business Taxation 21", combines three main objectives:

  • Renewing the tax system, in order to account for new business models such as companies without a physical presence and those operating in the digital economy;
  • Limiting tax competition amongst the Member States; and
  • Avoiding distortions and double taxation within the European Single Market.

The existing corporate tax rules across the EU are set by national authorities and differ by Member State. The corporate tax rate in France, for instance, is 33.33%, while it is 15% in Germany and 10% in Bulgaria. The introduction of uniform EU corporate tax rules would expectedly simplify and stabilise the business environment, and antagonise tax evasion and unfair tax competition.

The strategy proposed by the Commission is to be seen in the context of the current global debate on tax matters. The Organisation for Economic Cooperation and Development (OECD), meanwhile, is drafting plans for a minimum corporate tax rate as part of a global revision on tax rules for the digital era.

For EU decisions on tax matters, unanimity amongst the EU Member States is required. According to the Commission, however, this remains difficult to achieve, as some countries have expressed concerns and called for a detailed impact assessment at both Member State and EU level. The future developments will depend on the next Commission, which is expected to assume office on 1 November 2019.

Technology

Commission adopts common rules for the safe operation of drones

On 24 May 2019, following the adoption of EU-wide rules setting out technical requirements for drones, the European Commission adopted Implementing Regulation (EU) 2019/947 and Delegated Regulation (EU) 2019/945, which aim to ensure the safety and security of drone operations across the EU. The rules are, inter alia, intended to help protect the safety and privacy of EU citizens while enabling the free circulation of drones within the EU. Moreover, the framework also contains provisions to mitigate drone-related security risks.

The set of new regulations will replace existing national rules in the EU Member States, with the objective of introducing a uniform and clear set of rules regulating drone operators working across borders. The new rules are in line with the Aviation Strategy for Europe, which has the core objective of maintaining the highest level of safety and reinforcing the competitiveness of the EU's aviation industry.

The new regulations contain the following key elements:

  • The rules apply both to professionals and to those operating drones for leisure;
  • As of 2020, drone operators will have to be registered with national authorities to receive an authorisation with EU-wide validity;
  • The rules will apply to all drones, regardless of weight;
  • Operators of drones weighing less than 25 kg will be able to fly those without prior permission. Certain conditions, however, shall be respected, such as a height limit of 120 meters and the obligation to keep the drone in visual line of sight and far from people;
  • Member States will be able to define "no-fly zones", such as airports and airfields or city centres, where drones will not be allowed to enter.

Intellectual property

Trademarks & the right to one's own name: General Court reiterates the way to determine the concept of "bad faith"

In its judgment of 14 May 2019 in the case Carlos Moreira v EUIPO, the General Court of the EU upheld the decision of the European Union Intellectual Property Office (EUIPO) that the application for registration of the word mark "NEYMAR" by Carlos Moreira is invalid, because it was filed in bad faith.

Carlos Moreira, a Portuguese citizen, filed an application at the EUIPO in December 2012 for the word mark "NEYMAR", which was duly registered in April 2013 for clothing, footwear and headgear. Neymar, a famous Brazilian football player, filed In 2016 for a declaration of invalidity in respect of said EUTM, invoking as main ground that the application was filed in bad faith. The declaration was upheld by the EUIPO.

Carlos Moreira did not support this decision and appealed before the General Court. In his view, he did not act in bad faith and perseveres that the choice for the specific word mark was based on coincidence and not on the intention to take undue financial advantage of the reputation of the renowned football player.

The General Court stresses that although the concept of bad faith is not defined, the guidance given by the Court of Justice in its Chocoladefabriken Lindt & Sprüngli case shall still be taken into account to determine whether the applicant for registration acted in bad faith. Account must be taken of all the relevant factors specific to the particular case, and the determination of bad faith cannot be limited to certain criteria. In particular the elements of knowledge, intention and similarity formed the basis of this judgment that Carlos Moreira acted in bad faith when filing the application for the word sign "NEYMAR".

Trade

European Court of Justice confirms compatibility of Investment Court System with EU Treaties

On 30 April 2019, the European Court of Justice (ECJ) ruled that the Comprehensive Economic and Trade Agreement (CETA) between Canada and the EU complies with EU laws. The Court decision, relating to the section of CETA concerning the resolution of investment disputes between investors and states, was requested by Belgium.

Under CETA, the investor-state dispute settlement (ISDS) mechanism is replaced by a new, Investment Court System (ICS), which is intended to be effective, fair and transparent in handling disputes between investors and states. The system will include a Tribunal, an Appellate Tribunal, and a multilateral investment tribunal. The Tribunal will consist of 15 members: five from Canada, five from EU Member States and five from third countries. The ruling now enables the EU to establish the ICS as its standard model in trade and investment deals, with important implications for investors and states alike.

In short, CETA will:

  • limit the grounds on which an investor can challenge a state; and
  • prevent public bodies from being forced to change legislation or pay damages.

The ECJ's ruling is instrumental for the full application of CETA. The Court decision means that no changes will have to be made to the text of the trade agreement, and ratification by the Member States can proceed. Parts of CETA have been provisionally applied since September 2017. Only on the basis of Member States' ratifications and a Council conclusion (Member States representatives) can the Investment Court System become operational.

Energy

Clean energy for all Europeans package completed: What impact for business?

On 22 May 2019, the EU Member States in the Council formally adopted four new pieces of legislation that seek to modernise the EU's electricity market and facilitate the EU's clean energy transition. The completion of this new energy rule book – called the 'Clean energy for all Europeans package' - represents a major step towards the implementation of the Energy Union strategy, adopted in 2015. In detail, the EU has (i) updated the previous Electricity Directive and (ii) Electricity Regulation, (iii) introduced a new Regulation on risk preparedness, and (iv) enhanced the role of the Agency for the Cooperation of Energy Regulators (ACER).

The new legislation will bring the following key changes:

  • The new Electricity Directive and Regulation, replacing the previous Electricity Directive (2009/72/EC) and Electricity Regulation (EC/714/2009), will introduce a new limit for power plants eligible to receive subsidies as capacity mechanisms, supporting the phasing-out of subsidies to plants emitting 550gr CO2/kWh or more. The new legislation also aims to facilitate cross-border trade and competition, trigger investments to ensure security of supply, and support decarbonisation by increasing electrification.
  • The Regulation on Risk Preparedness of the electricity sector requires Member State to set out plans to prevent, prepare for and manage potential crisis situations in the supply of electricity, in coordination with neighbouring Member States. It also introduces a new framework to enable the Electricity Coordination Group to monitor the security of supply issues more effectively.

The new rules for the electricity market were published in the EU Official Journal in June 2019. The new Electricity Regulation will be directly applicable in the Member States from 1 January 2020. The changes are expected to bring considerable benefits to consumers, the environment and the wider economy.

EU Regulatory, Trade and Government Affairs

DLA Piper’s EU Regulatory, Trade and Government Affairs team of lawyers, policy experts, former diplomats and government officials stands ready to represent your client's interests in Brussels. By monitoring and analysing legislative and political developments, we identify regulatory and policy changes that can impact clients.

Through strategic engagement and regulatory advocacy we represent clients before the EU institutions, including the European Commission, the Council, and the European Parliament.

DLA Piper’s EU Regulatory, Trade, and Government Affairs team ensures that your client's position is heard and understood by those that matter - in Brussels and beyond.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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