Due to the closure of the Commission and other European Institutions over the Christmas period, the next Brussels Brief will be published on Friday 13 January 2006.
Mergers: GE v Commission – A Sour Victory for the Commission
The European Commission has been quick to issue a press release hailing the Court of First Instance’s (CFI’s) dismissal of the legal actions brought by GE and Honeywell against the Commission Decision blocking their merger. However, a closer look suggests that the ruling only concedes a formal win to the Commission, whilst dealing a substantive blow to its policy on vertical and conglomerate mergers. The CFI upheld the Commission’s finding that the merger would have created a dominant position in jet engines for large regional aircraft, engines for corporate jet aircraft and small marine gas turbines. It rejected the Commission’s analysis on (i) the vertical overlap between Honeywell’s engine starters and GE’s engines, (ii) the conglomerate effects owing to GE’s financial strength and vertical integration, and (iii) the conglomerate effects resulting from bundling. It is likely that the parties would have offered satisfactory remedies if the Commission’s concerns had been limited to horizontal overlaps. The Commission should draw lessons from this judgment rather than rest on the laurels of a pyrrhic victory.
Taxation: M&S Ruling Brings UK Tax Law in Line with EU Law
The European Court of Justice (ECJ) has reaffirmed the principle of freedom of establishment in the European Union (EU), whilst respecting the autonomy of Member States in the field of taxation. The request for a preliminary ruling was submitted by the High Court of Justice of England and Wales in proceedings between the retailer Marks & Spencer plc (M&S) and the United Kingdom Tax Authority. M&S had sought to deduct losses incurred by its subsidiaries in Belgium, Germany and France from its taxable profits in the UK. The UK Tax Authority rejected the claim for group tax relief on the ground that it could only be granted for losses of subsidiaries resident in the UK. The ECJ concluded that although this restriction is an obstacle to freedom of establishment, it is justifiable under EU law for overriding reasons of public interest, inter alia, the need to prevent losses being accounted for twice. The ECJ found, however, that the parent company should be able to deduct the losses of the subsidiary in those cases where the subsidiary is unable to take the losses in its own Member State. In this particular case, M&S had closed its subsidiaries in Belgium and Germany, and sold its business in France.
Media: Commission Proposes Amendment of TV Without Frontiers Directive
The European Commission has proposed the amendment of the 1989 TV without Frontiers Directive, with the aim of keeping pace with recent technological developments in the audiovisual sector. The proposal will bring a number of changes to the Directive. One of the most important changes is the introduction of the distinction between “linear” and “non-linear” broadcasting services. The former include scheduled broadcasting via TV, internet or mobile phones, while the latter relate to on-demand content that the viewer can “pull” from a certain source. The distinction is important, as non-linear services will only be subject to minimum restrictions, for example in the case of advertising. Another important change that the proposal brings about is the removal of the prohibitions regarding product placement.
Intellectual Property : Evaluation of EU Rules on Databases
The European Commission has published its evaluation of the EU rules on databases. Databases that are sufficiently creative are protected by copyright. Other databases, and in particular those that are compilations of information or commonplace data, such as telephone directories, music charts or football match listings, benefit from a “sui generis” property right instituted by the 1996 Database Directive. The evaluation was conducted on the basis of (i) an online survey addressed to the European database industry, and (ii) the Gale Directory of Databases, which is the largest existing database directory and contains statistics indicating the growth of the global database industry. The evaluation revealed that the economic impact of the “sui generis” right on database production is unproven. This finding is in spite of most respondents to the online survey believing that the "sui generis" right has brought about legal certainty, has reduced the costs associated with database protection, created more business opportunities and facilitated the database marketing. Stakeholders are invited to submit their views on the evaluation and to provide further evidence on the economic impact of "sui generis" protection by 12 March 2006.
Internal Market : CARS 21 Adopts Ten-Year Roadmap for a Competitive EU Motor Industry
The high level group for a Competitive Automotive Regulatory System for the 21st Century, CARS 21, has adopted a ten-year “roadmap” to increase the competitiveness of the motor industry. The roadmap proposes the removal of 38 European Directives, replacing them with the relevant United Nations regulations so that any overlap of legislation is avoided. It endorses the EU’s goal to reduce carbon dioxide emissions from cars, and highlights the need to further develop vehicle technology and find alternative fuel sources, as well as improve road safety. Moreover, the CARS 21 report urges the EU to seize the opportunity presented by the Doha Development Agenda to improve market access to third countries. China, for example, favours domestic producers at the expense of EU motor manufacturers. The CARS 21 report will be followed by Commission proposals in 2006.
Trade: EU and Iraq Trade and Cooperation Negotiations
The European Commission has proposed that the EU should commence negotiations on a Trade and Cooperation Agreement with Iraq in early 2006. Once the negotiation mandate is approved by the Council, the Commission will negotiate the Agreement with the first constitutionally elected Iraqi Government. Negotiations on the Trade and Cooperation Agreement are a crucial part in facilitating Iraq’s engagement with the international community. The European Commission has already granted Iraq preferential access to EU markets and is supporting its bid to join the World Trade Organisation. The European Commission has also signed an agreement with the Iraqi Government to open a permanent European Commission delegation office in Baghdad.
State Aid: Commission Opens Investigation in the Aid Granted by Greece
The European Commission has initiated a formal investigation regarding the aid granted to Hellenic Vehicle Industry S.A. (ELVO). ELVO is involved in the production of military and civil vehicles and their spare parts. In 1999 the Greek Government decided to write off the debts accumulated by this company from 1989 - 1998. It argues that the debts were written off only with respect to the military business of ELVO, as military activities are exempt from EU State aid rules. The Commission doubts that the aid was limited to the military business and did not affect the civil business of the company in any way. Thus only part of the aid could have been eligible for exemption. Interested parties have one month in which to submit their comments.
State Aid: ECJ Rules on Trade Associations’ Right to Challenge State Aid Decisions
Following a judgment from the European Court of Justice (ECJ), it remains unclear to which extent a trade association is able to challenge before the European Courts a Commission decision not to oppose State aid. The ECJ overturned a judgment from the Court of First Instance (CFI). The CFI had granted an association of farmers standing to challenge a Commission decision which cleared a German scheme allowing certain individuals in the former DDR to acquire land at a specially low price. The ECJ considered that the CFI had erred in law for the following reasons: (i) it could not assume that the association was seeking to safeguard its procedural rights under the Treaty when the association itself had not made this specific point in its application to the Court, (ii) the fact that the association had participated actively in the Commission investigation was not sufficient to make it individually concerned by the decision, and (iii) in order for the association to be regarded as individually concerned by the decision, it should have demonstrated that its own negotiating position, or that of its members in the market, was substantially affected.
NEXT WEEK’S EVENTS
Monday 19 December – Friday 23 December 2005
Agriculture and Fisheries Council (19 - 21 December 2005)
Competitiveness Council (19 December 2005)
COURT OF JUSTICE
Judicial vacation of the Court of Justice from 19 December 2005 to 8 January 2006 inclusive
COURT OF FIRST INSTANCE
Judicial vacation of the Court of First Instance from 19 December 2005 to 8 January 2006 inclusive