Towards a new multilateral energy architecture? Security Policy Brief No. 39, October 2012

From climate change over peak oil to the geopolitical scramble for the Arctic, there are ample signs that a global energy crisis is unfolding. The sheer scale and urgency of this looming crisis calls for international coordination. Yet, even a cursory look at the existing international energy institutions leads to a sobering conclusion: the global energy governance architecture is weak, fragmented and incomplete. This policy brief discusses both the flaws in the multilateral energy architecture and some emerging ideas to strengthen it, such as the proposal for a Sustainable Energy Trade Agreement and the new American disclosure rules for the extractive sector.

Standard-setting abuse: the case for antitrust control. Bruegel Policy Brief 2013/01, February 2013

Standards reduce production costs and increase the value of products to consumers; ultimately they significantly contribute to economic development. Standards however entail risks of anti-competitive abuse. After the adoption of a standard, the elimination of competition between technologies can lead to consumer harm. Fair, reasonable, nondiscriminatory (FRAND) commitments made by patent holders have been used to mitigate that risk. The European Commission recognises the importance of standards, but European Union competition policy is still seeking to identify well-targeted and efficient enforcement rules.

Deploying the energy incentive: reinforcing EU integration in South-East Europe. CEPS Policy Brief No. 296, July 2013

This Policy Brief urges the European Union to consider reinforcing the Energy Community by further Europeanising the Energy Community Treaty. It argues that the level of dysfunctionality with respect to the rule of law and corruption will make it very hard to establish a pathway for accession for most Balkan states. However, the demand across the region for a sustainable, competitive and stable energy sector creates an ‘energy incentive’ that the Union can leverage to improve the rule of law and adherence to European rules. Furthermore, a juridical strengthening of the Energy Community Treaty will also strengthen the hand of those parties supporting energy liberalisation rules across the region, such as independent businesses, consumers and NGOs. In addition, there is likely to be significant spill-over effects from decisions of a European Energy Community Court operating in the region on the rule of law in general and the accession process in particular.

Survey on Rules on Loss of Nationality in International Treaties and Case Law. CEPS Paper in Liberty and Security in Europe No. 57, 30 August 2013

This paper offers a picture of the obligations existing under international and European law in respect of the loss of nationality. It describes international instruments including obligations in this field with direct relevancy for the loss of nationality of Member States of the European Union, but also obligations regarding loss of nationality in regional non-European treaties. Attention is given to two important judicial decisions of the European Court of Justice (Janko Rottmann) and the European Court of Human Rights (Genovese v Malta) regarding nationality. Special attention is devoted to Article 15 of the Universal Declaration of Human Rights, which forbids the arbitrary deprivation of nationality. A survey is provided of possible sub-principles that can be derived from this rule. Finally, some observations are made on the burden of proof in cases of loss of nationality.

The Revision of the Insurance Mediation Rules at EU Level and its Impact on Consumer Protection

The European Commission has put forward a new proposal for a directive on insurance mediation which should provide for significant changes in practices of selling insurance products and guarantee enhanced level of consumer protection. This proposal accompanies other regulatory initiatives in the insurance sector, all of them pursuing three main objectives: firstly, a strengthened insurance supervision with convergent supervisory standards at EU level; secondly, a better risk management of insurance companies; and thirdly a greater protection of policyholders. All these initiatives contribute to the EU programme on consumer protection and herald a new approach to EU insurance regulation and supervision. However, while the new supervisory rules are a direct response to the financial crisis and shortcomings of crossborder cooperation between national supervisors, the plans for the revision of insurance mediation rules were conceived much earlier due to scandals with mis-selling of insurance products in the United States and some EU Member States. This article will focus entirely on the Commission’s initiative in the consumer mediation area and the aspects of insurance supervision and risk management will be dealt with in separate articles.

Prospects and challenges of a Pan-European post-trade infrastructure. ECMI Policy Brief No. 20, 8 November 2012

After more than a decade of indecision, the EU is finally now set to implement a consistent regulatory architecture for clearing and settlement. Following the agreement on a European market infrastructure Regulation (EMIR), the European Commission has proposed harmonised rules for centralised settlement depositaries (CSDs), while the European Central Bank is moving forward with its plans for a central eurozone settlement engine. This paper analyses three components of the new post-trade infrastructure measures: 1) the regulatory framework for and supervision of central counterparties under the new EMIR legislation, 2) the authorisation requirements of trade repositories and 3) the draft CSD Regulation and the progress with the ECB’s Target 2 Securities project. It then discusses the impact of the new rules, and argues that, analogous to the unexpected impact of MiFID on trading infrastructures, a similar EMIR revolution may be on its way.

The Dragon awakes: Is Chinese competition policy a cause for concern? Bruegel Policy Contribution 2013/14, 22 October 2013

China’s Anti-Monopoly Law, adopted in 2007, is largely compatible with antitrust law in the European Union, the United States and other jurisdictions. Enforcement activity by the Chinese authorities is also approaching the level seen in the EU. The Chinese law, however, leaves significant room for the use of competition policy to further industrial policy objectives. The data presented in this Policy Contribution indicates that Chinese merger control might have asymmetrically targeted foreign companies, while favouring domestic companies. However, there are no indications that antitrust control has been used to favour domestic players. A strategy to achieve convergence in global antitrust enforcement should include support for Chinese competition authorities to develop the institutional tools they already have, and to improve merger control by promoting the adoption of a consumer-oriented test and enforcing M&A notification rules.

Cameron's proposals to limit EU citizens' access to the UK: lawful or not, under EU rules? CEPS Commentary, 29 November 2013

This Commentary briefly examines each of Prime Minister Cameron's headline proposals to limit EU citizens’ access to social benefits. Are these proposals in breach of the UK’s obligations under EU law? The paper also makes some general comments about the end of the transitional arrangements for Bulgarian and Romanian work-seekers, and ‘benefits tourism’ in general.

Financial services and the Transatlantic Trade and Investment Partnership. CEPS Policy Brief No. 302, 20 November 2013

Given the size of the financial markets on both sides of the Atlantic and the symmetry in the follow-up of the G-20 standards, Karel Lannoo argues in this Policy Brief that the Transatlantic Trade and Investment Partnership (TTIP) provides a good opportunity to put in place a more institutionalised framework. He finds that both blocs have reacted in similar ways to the financial crisis in strengthening their regulatory and supervisory frameworks and incorporating the G-20 recommendations into federal law. He also notes that consumer protection has been reinforced, certainly in the US, with the creation of the Consumer Financial Protection Bureau. And on the EU side, the Single Supervisory Mechanism (SSM) will radically change banking supervision. In his view, inclusion of financial services could also be an opportunity to strengthen prudential rules and consumer protection provisions on both sides. Rather than leading to a reduction of consumer protection, as had been feared in the post-crisis environment, it could lead to an examination, exchange and recognition of best practices in regulation and enforcement. Finally, he concludes that inclusion of financial services would make it part of the permanent regulatory dialogue that will be established as a result of a successful TTIP.

Ending uncertainty: recapitalisation under European Central Bank supervision. Bruegel Policy Contribution 2013/18, 17 December 2013

Estimates of the recapitalisation needs of the euro-area banking system vary between €50 and €600 billion. The range shows the considerable uncertainty about the quality of banks’ balance sheets and about the parameters of the forthcoming European Central Bank stress tests, including the treatment of sovereign debt and systemic risk. Uncertainty also prevails about the rules and discretion that will applyto bank recapitalisation, bank restructuring and bank resolution in 2014 and beyond. The ECB should communicate the relevant parameters of its exercise early and in detail to give time to the private sector to find solutions. The ECB should establish itself as a tough supervisor and force non-viable banks into restructuring. This could lead to short-term financial volatility, but it should be weighed against the cost of a durably weak banking system and the credibility risk to the ECB. The ECB may need to provide large amounts of liquidity to the financial system. Governments should support the ECB, accept cross-border bank mergers and substantial creditor involvement under clear bail-in rules and should be prepared to recapitalise banks. Governments should agree on the eventual creation of a single resolution mechanism with efficient and fast decision-making procedures, and which can exercise discretion where necessary. A resolution fund, even when fully built-up, needs to have a common fiscal backstop to be credible.

The Asset Quality Review and Capital Needs: Why re-capitalise banks with public money? CEPS Policy Brief No. 311, 19 December 2013

It is generally assumed that any capital needs discovered by the Asset Quality Review the ECB is scheduled to finish by the end of 2014 should be filled by public funding (= fiscal backstop). This assumption is wrong, however. Banks that do not have enough capital should be asked to obtain it from the market; or be restructured using the procedures and rules recently agreed. The Directorate-General for Competition at the European Commission should be particularly vigilant to ensure that no further state aid flows to an already oversized European banking system. The case for a public backstop was strong when the entire euro area banking system was under stress, but this is no longer the case. Banks with a viable business model can find capital; those without should be closed because any public-sector re-capitalisation would likely mean throwing good money after bad.

Net Neutrality and Mandatory Network-Sharing: How to disconnect the continent. CEPS Policy Brief No. 309, 18 December 2013

A lively debate emerged on the proposed “Connected Continent” legislative package presented by the European Commission in September 2013. The package contains a proposed rule on the ‘open Internet’, which was heavily discussed in European Parliament hearings in early December. This commentary argues that while the proposed rule is in principle balanced and appealing, it is utterly impractical due to the enormous uncertainty that its application would entail. At the same time, the rule is very far from what neutrality proponents have argued for almost a decade: rather than the place for internet freedom, it would transform the Web into a place requiring constant micro-management and tutoring of user behaviour. Both arguments lead to the conclusion that the current proposal should be at once reformed and analysed under a more holistic lens. On the one hand, Europe should launch an ambitious project for the future, converged infrastructure by mobilising resources and reforming rules to encourage investment into ubiquitous, converged, ‘always on’ connectivity. On the other hand, enhanced legal certainty for broadband investment could justify a more neutrality-oriented approach to traffic management practices on the Internet. The author proposes a new approach to Internet regulation which, altogether, will lead to a more balanced and sustainable model for the future, without jeopardising user freedom.

The Governance Gap in European Security and Defence. CEPS Policy Brief No. 310, 19 December 2013

The true causes of the EU’s inertia as a security actor in its neighbourhood and beyond are not a lack of capability or even austerity measures, but the absence of a core group of states committed to driving integration forward, argues Giovanni Faleg. Member states are reluctant to set clear common strategic priorities and struggle to agree on a revision of the institutional rules. Their strategic cultures and interests differ significantly; they hold different visions of the Common Security and Defence Policy (CSDP) and are unwilling to use the CSDP instruments at their disposal.

The Judicial Dimension of the European Neighbourhood Policy. EU Diplomacy Paper 08/2013, November 2013

In this paper, the expression “neighbourhood policy” of the European Union (EU) is understood in a broad way which includes the members of the European Free Trade Association (EFTA) contracting parties to the European Economic Area (EEA), the EFTA State Switzerland, candidate states, the countries of the European Neighbour-hood Policy (ENP), and Russia. The European Court of Justice (ECJ) is the centre of gravity in the judicial dimension of this policy. The innermost circle of integration after the EU itself comprises the EFTA States who are party to the European Economic Area. With the EFTA Court, they have their own common court. The existence of two courts – the ECJ and the EFTA Court – raises the question of homogeneity of the case law. The EEA homogeneity rules resemble the ones of the Lugano Convention. The EFTA Court is basically obliged to follow or take into account relevant ECJ case law. But even if the ECJ has gone first, there may be constellations where the EFTA Court comes to the conclusion that it must go its own way. Such constellations may be given if there is new scientific evidence, if the ECJ has left certain questions open, where there is relevant case law of the European Court of Human Rights or where, in light of the specific circumstances of the case, there is room for “creative homogeneity”. However, in the majority of its cases the EFTA Court is faced with novel legal questions. In such cases, the ECJ, its Advocates General and the Court of First Instance make reference to the EFTA Court’s case law. The question may be posed whether the EEA could serve as a model for other regional associations. For the ENP states, candidate States and Russia this is hard to imagine. Their courts will to varying degrees look to the ECJ when giving interpretation to the relevant agreements. The Swiss Government is – at least for the time being – unwilling to make a second attempt to join the EEA. The European Commission has therefore proposed to the Swiss to dock their sectoral agreements with the EU to the institutions of the EFTA pillar, the EFTA Surveillance Authority (ESA) and the EFTA Court. Switzerland would then negotiate the right to nominate a member of the ESA College and of the EFTA Court. The Swiss Government has, however, opted for another model. Swiss courts would continue to look to the ECJ, as they did in the past, and conflicts should also in the future be resolved by diplomatic means. But the ECJ would play a decisive role in dispute settlement. It would, upon unilateral request of one side, give an “authoritative” interpretation of EU law as incorporated into the relevant bilateral agreement. In a “Non-Paper” which was drafted by the chief negotiators, the interpretations of the ECJ are even characterised as binding. The decision-making power would, however, remain with the Joint Committees where Switzerland could say no. The Swiss Government assumes that after a negative decision by the ECJ it would be able to negotiate a compromise solution with the Commission without the ECJ being able to express itself on the outcome. The Government has therefore not tried to emphasise that the ECJ would not be a foreign court. Whether the ECJ would accept its intended role, is an open question. And if it would, the Swiss Government would have to explain to its voters that Switzerland retains the freedom to disregard such a binding decision and that for this reason the ECJ is not only no foreign court, but no adjudicating court at all.

Commitments or prohibition? The EU antitrust dilemma. Bruegel Policy Brief 2014/01, 31 January 2014

The issue: Excluding cartels, most investigations into suspected infringements of European Union competition law are resolved with ‘commitment decisions’. The European Commission drops the case in exchange for a commitment from the company under investigation to implement measures to stop the presumed anti-competitive behaviour. Commitment decisions are considered speedier than formal sanctions (prohibition decisions) in restoring normal competitive market conditions. They have a cost, however: commitments are voluntary and are unlikely to be subject to judicial review. This reduces the European Commission’s incentive to build a robust case. Because commitment decisions do not establish any legal precedent, they provide for little guidance on the interpretation of the law. Policy challenge: The European Commission relies increasingly on commitment decisions. More transparency on the substance of allegations, and the establishment of a higher number of legal precedents, are however necessary. This applies in particular to cases that tackle antitrust issues in new areas, such as markets for digital goods, in which companies might find it difficult to assess if a certain behaviour constitutes a violation of competition rules. To ensure greater transparency and mitigate some of the drawbacks of commitment decisions, while retaining their main benefits, the full detail of the objections addressed by the European Commission to defendants should be published.