Index 
Texts adopted
Thursday, 18 April 2019 - Strasbourg 
China, notably the situation of religious and ethnic minorities
 Cameroon
 Brunei
 Eurojust-Denmark Agreement on Criminal Justice Cooperation *
 CO2 emission performance standards for new heavy duty vehicles ***I
 Promotion of clean and energy-efficient road transport vehicles ***I
 Use of digital tools and processes in company law ***I
 Cross-border conversions, mergers and divisions ***I
 European Defence Fund ***I
 Exposures in the form of covered bonds ***I
 Covered bonds and covered bond public supervision ***I
 InvestEU ***I
 European Maritime Single Window environment ***I
 Disclosures relating to sustainable investments and sustainability risks ***I
 Persistent organic pollutants ***I
 Clearing obligation, reporting requirements and risk-mitigation techniques for OTC derivatives, and trade repositories ***I
 Authorisation of CCPs and recognition of third-country CCPs ***I
 Promotion of the use of SME growth markets ***I
 Negotiations with Council and Commission on European Parliament's right of inquiry: legislative proposal
 A comprehensive European Union framework on endocrine disruptors

China, notably the situation of religious and ethnic minorities
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European Parliament resolution of 18 April 2019 on China, notably the situation of religious and ethnic minorities (2019/2690(RSP))
P8_TA-PROV(2019)0422RC-B8-0255/2019

The European Parliament,

–  having regard to its previous resolutions on the situation in China, in particular those of 26 November 2009 on China: minority rights and application of the death penalty(1), of 10 March 2011 on the situation and cultural heritage in Kashgar (Xinjiang Uyghur Autonomous Region)(2), of 15 December 2016 on the cases of the Larung Gar Tibetan Buddhist Academy and Ilham Tohti(3), of 12 September 2018 on the state of EU-China relations(4) and of 4 October 2018 on mass arbitrary detention of Uyghurs and Kazakhs in the Xinjiang Uyghur Autonomous Region(5),

–  having regard to the EU-China Strategic Partnership launched in 2003 and to the joint communication from the Commission and the High Representative of the Union for Foreign Affairs and Security Policy of 22 June 2016 entitled ‘Elements for a new EU strategy on China’(JOIN(2016)0030),

–  having regard to the EU guidelines on the promotion and protection of freedom of religion or belief, adopted by the Foreign Affairs Council on 24 June 2013,

–  having regard to the joint communication from the Commission and the High Representative of the Union for Foreign Affairs and Security Policy of 12 March 2019 entitled ‘EU-China – A strategic outlook’(JOIN(2019)0005),

–  having regard to the ‘Joint statement of the 21st EU-China summit’ of 9 April 2019,

–  having regard to the EU-China dialogue on human rights, launched in 1995, and the 37th round thereof, held in Brussels on 1 and 2 April 2019,

–  having regard to Article 36 of the Constitution of the People’s Republic of China, which guarantees all citizens the right to freedom of religious belief, and to Article 4 thereof, which upholds the rights of ‘minority nationalities’,

–  having regard to the International Covenant on Civil and Political Rights of 16 December 1966, signed by China in 1998, but not ratified,

–  having regard to the Universal Declaration of Human Rights of 1948,

–  having regard to the concluding observations of the UN Committee on the Elimination of Racial Discrimination’s review of China,

–  having regard to Rules 135(5) and 123(4) of its Rules of Procedure,

A.  whereas in its strategic framework on human rights and democracy, the EU pledges that human rights, democracy, and the rule of law will be promoted ‘in all areas of the EU’s external actions without exception’, and that the EU will ‘place human rights at the centre of its relations with all third countries including strategic partners’; whereas this should remain at the centre of the long-standing relationship between the EU and China, in accordance with the EU’s commitment to uphold these very same values in its external action and China’s expressed interest in respecting international laws and standards relating to human rights in its own development;

B.  whereas China has been successful in lifting 700 million people out of poverty, but whereas since President Xi Jinping assumed power in March 2013, the human rights situation in China has continued to deteriorate, with the government stepping up its hostility towards peaceful dissent, the freedoms of expression and religion, and the rule of law; whereas the Chinese authorities have detained and prosecuted hundreds of human rights defenders, lawyers and journalists;

C.  whereas the new regulations on religious affairs that took effect on 1 February 2018 are more restrictive towards religious groups and activities, and force them to fall more closely into line with party policies; whereas freedom of religion and conscience has reached a new low point since the start of the economic reforms and the opening up of China in the late 1970s; whereas China is home to one of the largest populations of religious prisoners;

D.  whereas, while an accord was reached between the Holy See and the Chinese Government in September 2018 concerning the appointments of bishops in China, the Christian religious communities have been facing increasing repression in China, with Christians, both in underground and government-approved churches, being targeted through the harassment and detention of believers, the demolition of churches, the confiscation of religious symbols and the crackdown on Christian gatherings; whereas Chinese authorities in some provinces do not allow persons under 18 years of age to attend religious activities; whereas in September 2018 China banned the Zion Church, the biggest house congregation in China with more than 1 500 followers;

E.  whereas the situation in Xinjiang, where 10 million Muslim Uyghurs and ethnic Kazakhs live, has rapidly deteriorated, as stability and the control of Xinjiang has been elevated to a top priority of the Chinese authorities, driven by both periodic terrorist attacks in, or allegedly connected to, Xinjiang by Uyghurs and the strategic location of the Xinjiang Uyghur Autonomous Region for the Belt and Road Initiative; whereas there is information that the Xinjiang camp system has expanded into other parts of China;

F.  whereas an extrajudicial detention programme has been established, holding ‘from tens of thousands to upwards of a million Uyghurs’ who are being forced to undergo political ‘re-education’ according to estimates cited by the UN Committee on the Elimination of Racial Discrimination, without being charged or tried, for undetermined periods of time, and are therefore being arbitrarily detained under the pretext of countering terrorism and religious extremism; whereas a policy of strict restrictions on religious practices and the Uyghur language and customs has been developed in the Xinjiang province;

G.  whereas a sophisticated network of invasive digital surveillance has been developed, including facial recognition technology and data collection;

H.  whereas the Chinese Government has refused numerous requests from the UN Working Group on Enforced or Involuntary Disappearances (WGEID), the UN High Commissioner for Human Rights and other UN Special Procedures mandates to send independent investigators to Xinjiang;

I.  whereas the situation in Tibet has deteriorated over the past few years, in spite of economic growth and infrastructure development, with the Chinese Government curtailing a wide range of human rights under the pretext of security and stability, and engaging in relentless attacks against Tibetan identity and culture;

J.  whereas the surveillance and control measures in Tibet have been on the increase over the past few years, as well as arbitrary detentions, acts of torture and ill-treatment; whereas the Chinese Government has created an environment in Tibet in which there are no limits to state authority, the climate of fear is pervasive, and every aspect of public and private life is tightly controlled and regulated; whereas in Tibet, any acts of non-violent dissent or criticism of state policies with regard to ethnic or religious minorities can be considered as ‘splittist’ and therefore criminalised; whereas access to the Tibet Autonomous Region today is more restricted than ever before;

K.  whereas an extremely high number of Tibetans, mostly monks and nuns, have reportedly set themselves on fire since 2009 in protest against restrictive Chinese policies in Tibet, and in support of the return of the Dalai Lama and the right to religious freedom in the Aba/Ngaba county prefecture in Sichuan Province and other parts of the Tibetan plateau; whereas no progress has been made in the resolution of the Tibetan crisis in the last 10 years;

1.  Is deeply concerned about the increasingly repressive regime that many religious and ethnic minorities, in particular Uyghurs and Kazakhs, Tibetans and Christians face, placing additional restraints on the constitutional guarantees of their right to freedom of cultural expression and religious belief, to freedom of speech and expression and to peaceful assembly and association; demands that the authorities respect these fundamental freedoms;

2.  Calls on the Chinese Government to immediately end the practice of arbitrary detentions, without any charge, trial or conviction for criminal offence, of members of the Uyghur and Kazakh minority and Tibetans , to close all camps and detention centres and to release the detained persons immediately and unconditionally;

3.  Calls for the immediate release of arbitrarily detained people, prisoners of conscience, including practitioners of Falun Gong and for a stop to be put to enforced disappearances, and insists that all individuals are able to choose their legal representative, have access to their family and to medical assistance, as well as have their cases investigated;

4.  Calls on the Chinese Government to immediately release: Uyghurs, including Ilham Tohti, Tashpolat Tiyip, Rahile Dawut, Eli Mamut, Hailaite Niyazi, Memetjan Abdulla, Abduhelil Zunun, and Abdukerim Abduweli; individuals persecuted for their religious beliefs, including Zhang Shaojie, Hu Shigen, Wang Yi, and Sun Qian; Tibetan activists, writers and religious figures who face criminal charges or have been imprisoned for exercising their right to freedom of expression, including Tashi Wangchuk and Lobsang Dargye;

5.  Calls for the immediate release of the Swedish national book publisher Gui Minhai and the two Canadian citizens Michael Spavor and Michael Kovrig;

6.  Urges the Chinese Government to release the full details of persons disappeared in Xinjiang to their families;

7.  Calls on the Chinese authorities to end their campaigns against Christian congregations and organisations and to stop the harassment and detention of Christian pastors and priests and the forced demolitions of churches;

8.  Calls on the Chinese authorities to uphold the linguistic, cultural, religious and other fundamental freedoms of Tibetans, and to refrain from settlement policies in favour of the Han people and to the disadvantage of the Tibetans, as well as from forcing Tibetan nomads to abandon their traditional lifestyle;

9.  Condemns the campaigns carried out via the ‘patriotic education’ approach, including measures to stage-manage Tibetan Buddhist monasteries; is concerned that China’s criminal law is being abused to persecute Tibetans and Buddhists, whose religious activities are equated with ‘separatism’; deplores the fact that the environment for practising Buddhism in Tibet has worsened significantly after the Tibetan protests of March 2008, with the Chinese Government adopting a more pervasive approach to ‘patriotic education’;

10.  Urges the Chinese authorities to implement the constitutionally guaranteed right to freedom of religious belief for all Chinese citizens;

11.  Recalls the importance of the EU and its Member States raising the issue of human rights violations at every political level with the Chinese authorities, in line with the EU’s commitment to project a strong, clear and unified voice in its approach to the country, including the annual Human Rights Dialogue, Strategic Dialogue, High-Level Economic Dialogue, and Summit, as well as the forthcoming Euro-Asia Summit;

12.  Underlines that while in their joint statement issued after the 21st EU-China Summit, the EU and China reaffirmed that all human rights are universal, indivisible, interdependent and interrelated, the EU should urge China to act accordingly; deplores the fact that at the EU-China Summit of 9 April 2019 urgent human rights concerns once again played a marginal role; takes the view that if and when EU-China summit language is weak on human rights, the Council, the European External Action Service (EEAS) and the Commission should decline to include it at all and issue a separate communication on the topic with a meaningful assessment both of the situation and why stronger language could not be agreed;

13.  Calls on EU Member States to prevent any activities undertaken by the Chinese authorities in the EU’s territory to harass members of Turkic communities, Tibetans and other religious or ethnic groups in order to compel them to act as informants, to force their return to China or silence them;

14.  Calls on the Chinese authorities to allow free, meaningful and unhindered access to Xinjiang province and Tibet Autonomous Region for journalists and international observers, including for the UN High Commissioner for Human Rights and UN Special Procedures; calls for the EU and the Member States to take the lead during the next session of the UN Human Rights Council on a resolution establishing a fact-finding mission to Xinjiang;

15.  Calls on the Chinese Government to guarantee unfettered respect of citizens’ rights in the Chinese Constitution, with regard to Article 4, which protects national minorities; Article 35, which protects the freedoms of speech, the press, assembly, association, procession and demonstration; Article 36, which recognises the right to freedom of religious belief; and Article 41, which guarantees the right to criticise and make suggestions regarding any state organ or official;

16.  Urges China to ratify the International Covenant on Civil and Political Rights;

17.  Urges China to give EU diplomats, journalists and citizens unfettered access to Tibet in reciprocity for the free and open access to the entire territories of the EU Member States that Chinese travellers enjoy; urges the EU institutions to take the issue of access to Tibet into serious consideration in the discussions on the EU-China visa facilitation agreement;

18.  Expresses its disappointment at the fact that the 37th round of the EU-China Human Rights Dialogue brought no substantial results; regrets, furthermore, that the Chinese delegation did not take part on 2 April in the continuation of the dialogue that provided for an exchange of views with civil society organisations;

19.  Urges the VP/HR, the EEAS and Member States to monitor the worrying human rights developments in Xinjiang more intensively, including increased government repression and surveillance, and to speak out against violations of human rights in China both privately and publicly;

20.  Calls on the Council to consider adopting targeted sanctions against officials responsible for the crackdown in the Xinjiang Uyghur Autonomous Region;

21.  Calls for the EU, its Member States and the international community to halt all exports and technology transfers of goods and services that are being used by China to extend and improve its cyber surveillance and predictive profiling apparatus; is deeply concerned that China is already exporting such technologies to authoritarian states around the world;

22.  Instructs its President to forward this resolution to the Vice-President of the Commission / High Representative of the Union for Foreign Affairs and Security Policy, the Council, the Commission, the governments and parliaments of the Member States, and the Government and the Parliament of the Peoples’ Republic of China.

(1) OJ C 285 E, 21.10.2010, p. 80.
(2) OJ C 199 E, 7.7.2012, p. 185.
(3) OJ C 238, 6.7.2018, p. 108.
(4) Texts adopted, P8_TA(2018)0343.
(5) Texts adopted, P8_TA(2018)0377.


Cameroon
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European Parliament resolution of 18 April 2019 on Cameroon (2019/2691(RSP))
P8_TA-PROV(2019)0423RC-B8-0245/2019

The European Parliament,

–  having regard to the statement of 7 March 2019 by the Chair of its Subcommittee on Human Rights, Antonio Panzeri, on the situation in Cameroon,

–  having regard to the declaration of 5 March 2019 by the Vice-President of the Commission / High Representative of the Union for Foreign Affairs and Security Policy (VP/HR) on the deteriorating political and security situation in Cameroon,

–  having regard to the various statements by the Spokesperson of the VP/HR on the situation in Cameroon, in particular that of 31 January 2019,

–  having regard to the Preliminary Statement of 9 October 2018 of the African Union Election Observation Mission to the 2018 presidential elections in Cameroon,

–  having regard to the statement of 11 December 2018 by UN experts on the crackdown on protests,

–  having regard to the statement of 6 March 2019 of the African Commission on Human and Peoples’ Rights on the human rights situation in Cameroon,

–  having regard to Cameroon’s anti-terrorism law of 2014,

–  having regard to the Universal Declaration of Human Rights,

–  having regard to the International Covenant on Civil and Political Rights of 1966,

–  having regard to the ACP-EU Partnership Agreement (‘Cotonou Agreement’),

–  having regard to the African Charter on Human and Peoples’ Rights of 1981, which Cameroon has ratified,

–  having regard to the Constitution of the Republic of Cameroon,

–  having regard to Rules 135(5) and 123(4) of its Rules of Procedure,

A.  whereas Cameroon faces a number of simultaneous political and security challenges, including threats from Boko Haram in its Far North region, cross-border threats along its eastern border with the Central African Republic, and an internal armed separatist rebellion in its Anglophone Northwest and Southwest regions;

B.  whereas presidential elections were held in Cameroon on 7 October 2018; whereas these elections were marked by allegations of fraud and the reporting of irregularities; whereas President Paul Biya has been in power since 1982; whereas the constitution of Cameroon was amended in 2008 to remove term limits;

C.  whereas supporters and allies of the Cameroon Renaissance Movement (MRC) opposition party led by Maurice Kamto organised protests in Douala, Yaoundé, Dshang, Bafoussam and Bafang; whereas state security forces used disproportionate force, including tear gas and rubber bullets, to suppress these protests;

D.  whereas around 200 people, including Maurice Kamto and other opposition leaders, were arbitrarily arrested in January 2019 and detained without immediate access to a lawyer; whereas the crimes with which these opposition supporters and their leader have been charged include insurrection, hostilities against the fatherland, rebellion, destruction of public buildings and goods, contempt of the President of the Republic and gatherings of a political nature;

E.  whereas on 9 April 2019 the Court of Appeal in Cameroon’s Central Region confirmed the decision taken in the first instance, and rejected the release of Maurice Kamto and six others; whereas the proceedings in the Court of Appeal took place in the absence of Maurice Kamto and his lawyers;

F.  whereas the Cameroonian authorities have taken disproportionate action in initiating military trials of some of the opposition members, exacerbating the political unrest in Cameroon; whereas the accused, if convicted, could face the death penalty;

G.  whereas the Cameroonian authorities have repeatedly restricted freedom of expression by shutting down the internet, harassing and detaining journalists, refusing licenses to independent media and stepping up political attacks against the independent press;

H.  whereas tensions persist between Cameroon’s majority Francophone and minority Anglophone communities; whereas Cameroon’s Northwest and Southwest regions remain predominantly English-speaking with different education and legal systems;

I.  whereas in late 2016 the discrimination against and relative neglect of the Anglophone regions, and the imposition of the French legal system and language in their courts and classrooms, led to peaceful strikes by teachers and lawyers and to peaceful demonstrations;

J.  whereas the violence has escalated since October 2018, and the large-scale operations conducted by the security forces often involve abuses and lead to human rights violations, including unlawful killings, rape, violence against women and children, and the destruction of property;

K.  whereas armed separatists have carried out mass kidnappings, including of schoolchildren and students, have undertaken targeted killings of police, law enforcement and local authority officials, have been involved in extortion, have enforced weekly ‘ghost town’ protests, and have boycotted and torched educational institutions and hospitals, thereby depriving thousands of young people of access to education, and the general population of access to healthcare;

L.  whereas, as a result of the crisis, an estimated 444 000 people have been internally displaced and a further 32 000 have fled to neighbouring Nigeria; whereas the overall humanitarian crisis facing Cameroon encompasses over 600 000 internally displaced people, around 35 000 refugees from neighbouring conflicts, and 1.9 million people at risk of food insecurity;

M.  whereas in 2018 and 2019 the Government of Cameroon implemented the Emergency Humanitarian Assistance Plan for the Northwest and Southwest regions with a view to ensuring multi-faceted protection of and assistance to displaced persons as a matter of priority and the provision of healthcare to people affected by the crisis;

N.  whereas gender-based violence and the persecution of minorities remain serious problems; whereas Cameroon’s penal code punishes sexual relations between persons of the same sex with up to five years of imprisonment; whereas the police and ‘gendarmes’ (military police) continue to arrest and harass LGTBQI people;

O.  whereas Boko Haram continues to commit serious human rights abuses and violations of international humanitarian law in the Far North region, including the looting and destruction of property, and the killing and abduction of civilians;

1.  Deplores the cases of torture, forced disappearances and extrajudicial killings perpetrated by the security services and armed separatists; expresses particular concern at the actions of government forces in the violence; calls on the security forces to respect international human rights law when carrying out operations, and calls on the Government to take immediate steps to end the violence and impunity in the country;

2.  Condemns the use of excessive force against protestors and political opponents, and violations of the freedoms of the press, expression and assembly; deeply regrets the arrest and detention of Maurice Kamto and other peaceful protestors; calls for the immediate release by the Cameroonian authorities of Maurice Kamto and all other detainees held on politically motivated charges, regardless of whether they were arrested before or after the 2018 presidential elections;

3.  Further calls on the Government of Cameroon to cease all harassment and intimidation of political activists, including by lifting the ban on peaceful political gatherings, demonstrations and protests, and to take action to clamp down on instances of hate speech;

4.  Recalls that military courts should not, under any circumstances, have jurisdiction over the civilian population; reminds Cameroon of its international obligations to uphold the right to a fair trial for all citizens before independent courts of law;

5.  Recalls that the death penalty has not been used in Cameroon since 1997; notes that this is a milestone in the country’s path to full abolition; reiterates the European Union’s absolute opposition to the death penalty and calls on the Government of Cameroon to confirm that it will not seek the death penalty for political activists and protesters;

6.  Expresses concern at the Government of Cameroon’s failure to hold its security forces to account, which has exacerbated the violence and the culture of impunity; calls for an independent and transparent investigation into the use of force by the police and security forces against protesters and political opponents, and for those responsible to be held to account in fair trials;

7.  Urges Cameroon’s authorities to adopt all necessary measures consistent with the country’s human rights obligations to end the cycle of violence; calls in particular for the Government to organise an inclusive political dialogue aimed at finding a peaceful and lasting solution to the crisis in the Anglophone regions; calls on the international community to help facilitate an inclusive national peace dialogue by offering to play a mediating role;

8.  Regrets the unwillingness of both parties to the conflict to engage in peace talks; urges the African Union and the Economic Community of the Central African States to push for the organisation of such talks and calls for the EU to stand ready to support this process; considers that, in the absence of progress, the crisis in Cameroon should be considered by the United Nations Security Council; further calls for the EU to use the political leverage provided by development aid and other bilateral programmes to enhance the defence of human rights in Cameroon;

9.  Urges the Government of Cameroon to build a genuine, representative and vibrant democracy; calls therefore on the Government to convene all political stakeholders for a consensual review of the electoral system, with the aim of ensuring a free, transparent and credible electoral process; calls for this process to take place before any further elections are held in order to promote peace and avoid post-electoral crises; calls for the EU to step up technical assistance to support Cameroon in its efforts to strengthen its electoral procedures and make them more democratic;

10.  Reiterates that a vibrant and independent civil society is essential for upholding human rights and the rule of law; expresses concern that the activities of the Cameroon Anglophone Civil Society Consortium have been banned; urges the Government to lift the ban and ensure an open space in which civil society can operate;

11.  Expresses concern that the 2014 anti-terrorism law is being misused to restrict fundamental freedoms; supports the requests made by UN experts that the law be reviewed to ensure that it is not used to restrict the rights to freedom of expression, peaceful assembly and association;

12.  Notes the decision of the United States to scale back its military assistance to Cameroon owing to credible allegations of gross violations of human rights by security forces; calls on the Commission to undertake an assessment of EU support to security services in this regard and to report back to the European Parliament; calls for the EU and its Member States to ensure that no support given to the Cameroonian authorities contributes to or facilitates human rights violations;

13.  Instructs its President to forward this resolution to the Council, the Commission, the Vice-President of the European Commission / High Representative of the Union for Foreign Affairs and Security Policy, the EU Special Representative for Human Rights, the ACP-EU Council, the institutions of the African Union, and the Government and Parliament of Cameroon.


Brunei
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European Parliament resolution of 18 April 2019 on Brunei (2019/2692(RSP))
P8_TA-PROV(2019)0424RC-B8-0242/2019

The European Parliament,

–  having regard to the statement of 3 April 2019 by the Spokesperson of the Vice-President of the Commission / High Representative of the Union for Foreign Affairs and Security Policy (VP/HR) on the implementation of the Penal Code Order in Brunei Darussalam,

–  having regard to the EU Guidelines on the death penalty, on torture and other cruel, inhuman or degrading treatment or punishment, on human rights defenders, and on the promotion and protection of the enjoyment of all human rights by LGTBI persons,

–  having regard to the statement of 1 April 2019 by the UN High Commissioner for Human Rights, Michelle Bachelet, urging Brunei to stop the entry into force of the ‘draconian’ new penal code,

–  having regard to the Universal Declaration of Human Rights,

–  having regard to the UN Convention against Torture and Other Cruel, Inhuman or Degrading Treatment or Punishment, which Brunei signed in 2015,

–  having regard to the Convention on the Rights of the Child,

–  having regard to the Convention on the Elimination of All Forms of Discrimination against Women,

–  having regard to the ASEAN Human Rights Declaration of 2012,

–  having regard to the ASEAN-EU Plan of Action 2018-2022,

–  having regard to the ASEAN-EU Policy Dialogue on Human Rights of 29 November 2017,

–  having regard to the statement of 2 April 2019 by the Deputy Spokesperson of the US State Department on the implementation of phases two and three of the Sharia Penal Code in Brunei,

–  having regard to Rules 135(5) and 123(4) of its Rules of Procedure,

A.  whereas in 2014 Brunei introduced the Sharia Penal Code, to be implemented in three phases; whereas the third phase of implementation entered into force on 3 April 2019; whereas this third phase puts into effect provisions including death by stoning for consensual same-sex acts, extramarital sex and abortion, as well as amputation of limbs for stealing; whereas the code also imposes the death penalty for insulting or defamation of Prophet Mohammad by both Muslims and non-Muslims; whereas the Sharia Penal Code applies to both Muslims and non-Muslims, including foreigners, as well as to offences committed outside the country by citizens or permanent residents;

B.  whereas children who have reached puberty and are convicted of the offences concerned can receive the same punishments as adults; whereas some younger children may be subjected to whipping;

C.  whereas, prior to the introduction of the Sharia Penal Code, homosexuality was illegal in Brunei and was punishable by up to 10 years’ imprisonment;

D.  whereas the last elections in Brunei were held in 1962; whereas the Sultan occupies the roles of both Head of State and Prime Minister, and is invested with full executive authority;

E.  whereas the UN Special Rapporteur on Torture has stated that any form of corporal punishment is contrary to the prohibition of torture and other cruel, inhuman or degrading treatment or punishment, and cannot be considered a lawful sanction under international law; whereas some of the punishments enshrined in the Penal Code amount to torture, cruel, inhumane and degrading treatment as prohibited by the Convention against Torture and Other Cruel, Inhuman or Degrading Treatment or Punishment, to which Brunei has been a signatory since 2015;

F.  whereas the provisions under the Sharia Penal Code violate Brunei’s obligations in international human rights law, including the right to life, freedom from torture and other ill-treatment, freedom of expression, freedom of religion and the right to privacy; whereas the provisions of the code discriminate on the basis of sexual orientation, as well as against women and against religious minorities in Brunei, and may incite violence;

G.  whereas the Joint UN Programme on HIV and AIDS (UNAIDS) and the UN Population Fund (UNFPA) have stated that the provisions of the Brunei Penal Code that criminalise homosexuality and punish forms of reproductive healthcare have a disproportionate impact on women and LGBTI people, creating barriers to accessing health information and services, impeding access to sexual and reproductive health and rights, and negatively affecting public health;

H.  whereas tradition, religion and culture in Brunei are used to justify discrimination against women and LGTBI people; whereas the report on Brunei of 11 March 2019 of the Office of the UN High Commissioner for Human Rights i states that there are deep-rooted patriarchal attitudes and use of discriminatory stereotypes which are reflected in women’s academic and professional choices, their unequal position in the labour market, and in marriage and family relations; whereas these stereotypes are root causes of violence against women;

I.  whereas Brunei is known for its multi-ethnic population with a wide variety of religions, including Islam, Christianity, Buddhism, Hinduism and various indigenous religions, living peacefully together; whereas Brunei’s constitution recognises religious freedom and prescribes that ‘all religions may be practised in peace and harmony by the persons professing them’; whereas, despite Brunei’s constitution, the Government has prohibited the proselytising and teaching of all religions but Islam, and has banned all public Christmas celebrations;

J.  whereas Brunei has a de facto moratorium on the use of the death penalty, with the last execution having been carried out in 1957; whereas the Sharia Penal Code will effectively reintroduce the death penalty if implemented; whereas the EU condemns the death penalty, wherever, whenever;

K.  whereas the adoption of the new laws has sparked international outrage and calls for a boycott of the hotels owned by the Brunei Investment Agency (BIA); whereas this agency is part of Brunei’s Ministry of Finance and Economy and owns a variety of investment projects all over the world; whereas the BIA has stated that its core values include mutual respect and the positive valuation of difference and diversity;

L.  whereas Brunei has only ratified two UN core international human rights conventions, the Convention on the Rights of the Child and the Convention on the Elimination of All Forms of Discrimination against Women; whereas the third cycle of the Universal Periodic Review of Brunei will be launched on 10 May 2019;

M.  whereas the EU has suspended the negotiations for a partnership and cooperation agreement with Brunei;

1.  Strongly condemns the entry into force of the retrograde Sharia Penal Code; urges the Brunei authorities to immediately repeal it and to ensure that Brunei’s laws comply with international law and standards consistently with Brunei’s obligations under international human rights instruments, including with regard to sexual minorities, religious minorities and non-believers;

2.  Reiterates its condemnation of the death penalty; calls on Brunei to continue its moratorium on the use of the death penalty as a step towards abolition;

3.  Strongly condemns the use of torture and cruel, degrading and inhuman treatment in all circumstances; underlines that the provisions of the Sharia Penal Code violate Brunei’s obligations under international human rights law, and that the punishments under it violate customary international law prohibitions against torture and other ill-treatment;

4.  Is deeply concerned by the fact that while many countries are decriminalising consensual same-sex conduct, Brunei has regrettably become the seventh country to punish consensual homosexual acts with the death penalty; calls on the authorities of Brunei to respect international human rights and to decriminalise homosexuality;

5.  Calls on the Brunei authorities to ensure the principle of equality before the law of all citizens and respect for the fundamental rights of all citizens, without distinction on any grounds, including gender, sexual orientation, race or religion; is strongly concerned about the possible application of the criminal law to children; calls on Brunei under no circumstances to apply capital punishment, torture or imprisonment to such children;

6.  Calls on the Brunei authorities to fully respect religious freedom in the Sultanate, as laid down in its own constitution, and to allow the public celebration of all religious festivals, including Christmas; stresses that legislation in this regard must strictly comply with human rights;

7.  Encourages the Brunei authorities to foster political dialogue with key civil society stakeholders, human rights organisations, faith-based institutions and business organisations, both inside and outside Brunei, in order to foster and safeguard human rights on its territory; highlights the right to express critical or satirical opinions as a legitimate exercise of freedom of expression, enshrined in the international human rights framework;

8.  Urges Brunei to ratify the remaining UN core international human rights instruments, including the International Covenant on Civil and Political Rights and the Convention against Torture and Other Cruel, Inhuman or Degrading Treatment or Punishment; calls on the Brunei authorities to extend a standing invitation to visit in the framework of all Special Procedures of the UN Human Rights Council;

9.  Calls on the European External Action Service (EEAS), in the event of effective implementation of the Sharia Penal Code, to consider the adoption at EU level of restrictive measures related to serious human rights violations, including asset freezes and visa bans;

10.  Calls on the VP/HR to make the relaunch of the negotiations for the EU-Brunei partnership and cooperation agreement subject to the conformity of the Penal Code with international law and international human rights standards;

11.  Highlights the work of human rights defenders in promoting and protecting the rights of LGTBI persons; calls on the EU institutions to increase their support to civil society organisations and human rights defenders in Brunei;

12.  Calls on the EU Delegation to Indonesia and Brunei Darussalam in Jakarta, the EU Delegation to ASEAN and the EEAS to closely monitor the situation and to consult with the Brunei authorities, ambassadors and representatives in this regard; calls on the EEAS to include the situation in Brunei as an item on the agenda of the next ASEAN-EU Policy Dialogue on Human Rights;

13.  Encourages the Member States to actively participate in the forthcoming Universal Periodic Review, which will take place from 6 to 17 May 2019 and will examine Brunei’s human rights record;

14.  Stresses that for as long as the current Penal Code is in force, the EU institutions must consider blacklisting the hotels owned by the Brunei Investment Agency;

15.  Calls for the EU and its Member States to respect the international legal framework with regard to access to asylum procedures and humanitarian protection for victims of Brunei’s current Penal Code;

16.  Instructs its President to forward this resolution to the Council, the Commission, the Vice-President of the Commission / High Representative of the Union for Foreign Affairs and Security Policy, the European External Action Service, the governments of the Member States, the UN Secretary-General, the UN High Commissioner for Human Rights, the UN Commission on the Status of Women, the UN Human Rights Council, the ASEAN Secretariat, the ASEAN Intergovernmental Commission on Human Rights, the Sultan of Brunei, Hassanal Bolkiah, and the Government of Brunei.


Eurojust-Denmark Agreement on Criminal Justice Cooperation *
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European Parliament legislative resolution of 18 April 2019 on the draft Council implementing decision approving the conclusion by Eurojust of the Agreement on Criminal Justice Cooperation between Eurojust and the Kingdom of Denmark (07770/2019 – C8-0152/2019 – 2019/0805(CNS))
P8_TA-PROV(2019)0425A8-0192/2019

(Consultation)

The European Parliament,

–  having regard to the Council draft (07770/2019),

–  having regard to Article 39(1) of the Treaty on European Union, as amended by the Treaty of Amsterdam, and Article 9 of Protocol No 36 on transitional provisions, pursuant to which the Council consulted Parliament (C8-0152/2019),

–  having regard to Council Decision 2002/187/JHA of 28 February 2002 setting up Eurojust with a view to reinforcing the fight against serious crime(1), and in particular Article 26a(2) thereof,

–  having regard to Rule 78c of its Rules of Procedure,

–  having regard to the report of the Committee on Civil Liberties, Justice and Home Affairs (A8-0192/2019),

1.  Approves the Council draft;

2.  Calls on the Council to notify Parliament if it intends to depart from the text approved by Parliament;

3.  Asks the Council to consult Parliament again if it intends to substantially amend the text approved by Parliament;

4.  Instructs its President to forward its position to the Council and the Commission.

(1) OJ L 63, 6.3.2002, p. 1.


CO2 emission performance standards for new heavy duty vehicles ***I
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Resolution
Consolidated text
European Parliament legislative resolution of 18 April 2019 on the proposal for a regulation of the European Parliament and of the Council setting CO2 emission performance standards for new heavy-duty vehicles (COM(2018)0284 – C8-0197/2018 – 2018/0143(COD))
P8_TA-PROV(2019)0426A8-0354/2018

(Ordinary legislative procedure: first reading)

The European Parliament,

–  having regard to the Commission proposal to Parliament and the Council (COM(2018)0284),

–  having regard to Article 294(2) and Article192(1) of the Treaty on the Functioning of the European Union, pursuant to which the Commission submitted the proposal to Parliament (C8‑0197/2018),

–  having regard to Article 294(3) of the Treaty on the Functioning of the European Union,

–  having regard to the opinion of the European Economic and Social Committee of 17 October 2018(1),

–  after consulting the Committee of the Regions,

–  having regard to the provisional agreement approved by the committee responsible under Rule 69f(4) of its Rules of Procedure and the undertaking given by the Council representative by letter of 22 February 2019 to approve Parliament’s position, in accordance with Article 294(4) of the Treaty on the Functioning of the European Union,

–  having regard to Rule 59 of its Rules of Procedure,

–  having regard to the report of the Committee on the Environment, Public Health and Food Safety and the opinion of the committee on Transport and Tourism (A8-0354/2018),

1.  Adopts its position at first reading hereinafter set out(2);

2.  Takes note of the statement by the Commission annexed to this resolution;

3.  Calls on the Commission to refer the matter to Parliament again if it replaces, substantially amends or intends to substantially amend its proposal;

4.  Instructs its President to forward its position to the Council, the Commission and the national parliaments.

Position of the European Parliament adopted at first reading on 18 April 2019 with a view to the adoption of Regulation (EU) 2019/… of the European Parliament and of the Council setting CO2 emission performance standards for new heavy-duty vehicles and amending Regulations (EC) No 595/2009 and (EU) 2018/956 of the European Parliament and of the Council and Council Directive 96/53/EC

P8_TC1-COD(2018)0143


(Text with EEA relevance)

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the Functioning of the European Union, and in particular Article 192(1) thereof,

Having regard to the proposal from the European Commission,

After transmission of the draft legislative act to the national parliaments,

Having regard to the opinion of the European Economic and Social Committee(3),

After consulting the Committee of the Regions,

Acting in accordance with the ordinary legislative procedure(4),

Whereas:

(1)  The Paris Agreement sets out, inter alia, a long-term goal in line with the objective to keep the global average temperature increase well below 2 °C above pre-industrial levels and to pursue efforts to keep it to 1,5 °C above pre-industrial levels. The latest scientific findings reported by the Intergovernmental Panel on Climate Change (IPCC) in its special report on the impacts of global warming of 1,5 °C above pre-industrial levels and related global greenhouse gas emission pathways unequivocally confirm the negative impacts of climate change. That special report concludes that emissions reductions in all sectors are crucial to limit global warming.

(2)   In order to contribute to the objectives of the Paris Agreement, the transformation of the entire transport sector towards zero emissions needs to be accelerated, considering the Commission’s communication of 28 November 2018 entitled ‘A Clean Planet for all – a European strategic long-term vision for a prosperous, modern, competitive and climate neutral economy’, which outlines a vision of the economic and societal transformations required, engaging all sectors of the economy and society, to achieve the transition to net-zero greenhouse gas emissions by 2050. Emissions of air pollutants from transport that significantly harm our health, and the environment, need also to be drastically reduced without delay.

(3)  ▌The Commission adopted mobility packages on 31 May 2017 (‘Europe on the Move: An agenda for a socially fair transition towards clean, competitive and connected mobility for all’) and 8 November 2017 (‘Delivering on low-emission mobility - A European Union that protects the planet, empowers its consumers and defends its industry and workers’). Those packages set out a positive agenda which also aimed at ensuring a smooth transition towards clean, competitive and connected mobility for all.

(4)  This Regulation is part of the Commission's third mobility package, of 17 May 2018, entitled ‘Europe on the Move - Sustainable Mobility for Europe: safe, connected and clean’, which is a follow-up to the Commission's communication of 13 September 2017 entitled ‘Investing in a smart, innovative and sustainable Industry: A renewed EU Industrial Policy Strategy’. This Regulation is also designed to complete the process of enabling the Union to reap the full benefits of the modernisation and decarbonisation of mobility. The aim of that third mobility package is to make European mobility safer and more accessible, European industry more competitive, European jobs more secure, and the mobility system cleaner and better adapted to the imperative of tackling climate change. That will require the full commitment of the Union, Member States and stakeholders, not least in strengthening efforts to reduce carbon dioxide (CO2) emissions and air pollution.

(5)  This Regulation, together with Regulation (EU) 2019/… of the European Parliament and of the Council(5)(6), provides a clear pathway for CO2 emissions reductions from the road transport sector and contributes to the binding target of at least a 40 % domestic reduction in economy-wide greenhouse gas emissions by 2030 compared to 1990, as was endorsed in the conclusions of the European Council of 23-24 October 2014, and approved by the Council on 6 March 2015 as the ‘Union Intended Nationally Determined Contribution under the Paris Agreement’ ▌.

(6)  The European Council conclusions of 23-24 October 2014 endorsed a greenhouse gas emissions reduction of 30 % by 2030 compared to 2005 for the sectors that are not part of the Union’s emissions trading system. Greenhouse gas emissions from the road transport sector constitute a major contribution to the emissions of those sectors. The road transport sector was responsible for around a quarter of the total Union’s emissions in 2016. Its emissions show an increasing trend and remain significantly above 1990 levels. If road transport emissions increase further, they will offset emissions reductions made by other sectors to combat climate change.

(7)  The European Council conclusions of 23-24 October 2014 highlighted the importance of reducing greenhouse gas emissions and risks related to fossil fuel dependency in the transport sector through a comprehensive and technology neutral approach for the promotion of emissions reductions and energy efficiency in transport, for electric transportation and for renewable energy sources in the transport sector also after 2020.

(8)  In order to give consumers in the Union secure, sustainable, competitive and affordable energy, the contribution of energy efficiency to moderation of demand is one of the five mutually-reinforcing and closely interrelated dimensions set out in the Commission's communication of 25 February 2015 entitled ‘A Framework Strategy for a Resilient Energy Union with a Forward-Looking Climate Change Policy ’. That communication states that, while all economic sectors must take steps to increase the efficiency of their energy consumption, the transport sector has huge energy efficiency potential.

(9)  CO2 emissions from heavy-duty vehicles, including lorries, buses and coaches, represent around 6 % of total CO2 emissions in the Union and about 25 % of total road transport CO2 emissions. Without further action, the share of CO2 emissions from heavy-duty vehicles is expected to grow by around 9 % between 2010 and 2030. Currently, Union law does not set any CO2 emissions reduction requirements for heavy-duty vehicles, and therefore specific measures for such vehicles are needed without delay.

(10)  CO2 emissions reduction targets for the Union-wide fleets of new heavy-duty vehicles should therefore be set for 2025 and for 2030, taking into account the vehicle fleet renewal time and the need for the road transport sector to contribute to the Union climate and energy targets for 2030 and beyond. Such a stepwise approach also provides a clear and early signal for the industry to accelerate the market introduction of energy efficient technologies and zero- and low-emission heavy-duty vehicles. The deployment of zero-emission heavy-duty vehicles should also contribute to addressing urban mobility problems. While it is essential to reduce CO2 emissions from road transport, the promotion of such heavy-duty vehicles by manufacturers is also important for the effective reduction of air pollutants and excessive noise levels in cities and urban areas.

(11)  In order to fully realise the energy efficiency potential and ensure that the road transport sector as a whole contributes to the greenhouse gas emission reductions agreed, it is appropriate to complement the already existing CO2 emission performance standards for new passenger cars and for light commercial vehicles by setting CO2 emission performance standards for new heavy-duty vehicles. Those performance standards will be a driver for innovation in fuel-efficient technologies, contributing to the strengthening of the technological leadership of the Union’s manufacturers and suppliers, and securing high-skilled jobs in the long term.

(12)  Taking into account that climate change is a trans-boundary problem and the need to safeguard a well-functioning single market both for road transport services as well as for heavy-duty vehicles while avoiding market fragmentation, it is appropriate to set CO2 emission performance standards for heavy-duty vehicles at Union level. Those performance standards should be ▌without prejudice to Union competition law.

(13)  In defining the CO2 emissions reduction levels that should be achieved by the Union fleet of heavy-duty vehicles, account should be taken of the effectiveness of those reduction levels in delivering a cost-effective contribution to reducing the CO2 emissions of the sectors covered by Regulation ▌(EU) 2018/842 of the European Parliament and of the Council(7) by 2030, of the resulting costs and savings for society, manufacturers, transport operators, consumers, as well as of their direct and indirect implications for employment, innovation and co-benefits generated in terms of reduced air pollution and improved energy security.

(14)  A socially acceptable and just transition towards zero-emission mobility should be ensured. It is therefore important to take into account the social effects of the transition throughout the whole automotive value chain and to address proactively the implications on employment. Targeted programmes at Union, national and regional levels are therefore to be considered for the re-skilling, up-skilling and redeployment of workers, as well as education and job-seeking initiatives in adversely affected communities and regions, in close dialogue with the social partners and competent authorities. As part of that transition, the employment of women as well as equal opportunities in that sector should be strengthened.

(15)  A successful transition to zero-emission mobility requires an integrated approach and the right enabling environment to stimulate innovation and maintain the Union’s technological leadership in the road transport sector. This includes public and private investments in research and innovation, the increasing supply of zero-and low-emission heavy-duty vehicles, the roll-out of recharging and refuelling infrastructure, integration into the energy systems, as well as the sustainable materials supply for, and sustainable production, re-use and recycling of, batteries in Europe. This requires coherent action at Union, national, regional and local levels, including through incentives to support the uptake of zero- and low-emission heavy-duty vehicles.

(16)  A new procedure for determining the CO2 emissions and fuel consumption of individual heavy-duty vehicles has been introduced as part of the implementation of Regulation (EC) No 595/2009 of the European Parliament and of the Council(8). Commission Regulation (EU) 2017/2400(9) provides a methodology, based on the VECTO tool, through which the CO2 emissions and fuel consumption of whole heavy-duty vehicles can be simulated. That methodology allows the diversity of the heavy-duty vehicle sector and the high degree of customisation of individual heavy-duty vehicles to be taken into account. As a first step, from 1 July 2019, the CO2 emissions are determined for four groups of heavy-duty vehicles that account for around 65 % to 70 % of all CO2 emissions from the Union fleet of heavy-duty vehicles.

(17)  In light of innovation and to take into account the implementation of new technologies that improve the fuel efficiency of heavy-duty vehicles, the VECTO simulation tool as well as Regulation (EU) 2017/2400 will be continually updated in a timely manner.

(18)  The CO2 emissions data determined pursuant to Regulation (EU) 2017/2400 are to be monitored under Regulation (EU) 2018/956 of the European Parliament and of the Council(10). Those data should form the basis for determining the CO2 emissions reduction targets to be achieved by the four groups of the most emitting heavy-duty vehicles in the Union, as well as for determining a manufacturer’s average specific CO2 emissions in a given reporting period.

(19)  A CO2 emissions reduction target should be set for 2025 as a relative reduction based on the average CO2 emissions of those heavy-duty vehicles that were newly registered in the period from 1 July 2019 to 30 June 2020, reflecting the deployment of readily available cost-effective technologies for conventional vehicles. For 2030 onwards, a CO2 emissions reduction target should also be set. That target should apply unless decided otherwise pursuant to the review to be carried out in 2022 ▌. The 2030 target should be assessed in accordance with the European Union commitments under the Paris Agreement.

(20)  To ensure the robustness of the reference CO2 emissions against increasing CO2 emissions of heavy-duty vehicles by undue procedural means, which would not be representative for a situation where CO2 emissions are already regulated, it is appropriate to provide a methodology for correcting the reference CO2 emissions where necessary.

(21)  Liquefied natural gas (LNG) is an available alternative fuel to diesel for heavy-duty vehicles. The deployment of current and upcoming more innovative LNG-based technologies will contribute to meeting the CO2 emissions reduction targets in the short and medium term as the use of LNG technologies leads to lower CO2 emissions when compared to diesel vehicles. The CO2 emissions reduction potential of LNG vehicles is already fully reflected in VECTO. In addition, current LNG technologies ensure a low level of air pollutant emissions, such as NOx and particulate matters. A sufficient minimum refuelling infrastructure is also in place and is being further deployed as part of national policy frameworks for alternative fuel infrastructure.

(22)  In calculating the ▌reference CO2 emissions serving as the basis for determining the 2025 and 2030 specific CO2 emissions targets, the expected CO2 emissions reduction potential of the heavy-duty fleet ▌should be taken into account. It is therefore appropriate to exclude vocational vehicles, such as vehicles used for garbage collection or construction works, from that calculation. Those vehicles have a comparatively low mileage, and due to their specific driving pattern, technical measures for reducing CO2 emissions and fuel consumption do not appear to be as cost effective in the same way as they are for heavy-duty vehicles used for the delivery of goods.

(23)  The CO2 emissions reduction requirements should be expressed in grams of CO2 per tonne kilometre to reflect the utility of the heavy-duty vehicles.

(24)  A fair distribution of the overall CO2 emissions reduction requirements among the manufacturers needs to be ensured, taking into account the diversity of heavy-duty vehicles in terms of their design and driving pattern, annual mileage, payload and trailer configuration. It is therefore appropriate to distinguish the heavy-duty vehicles according to different and separate vehicle sub-groups that reflect the vehicles’ typical usage pattern and specific technical characteristics. By setting annual manufacturer specific CO2 emissions targets as a weighted average of the targets defined for each such vehicle sub-group, manufacturers are also given the means to effectively balance a possible underperformance of vehicles in certain vehicle sub-groups with an overachievement in other vehicle sub-groups, taking into account the average lifetime CO2 emissions of vehicles in the different vehicle sub-groups.

(25)  A manufacturer’s compliance with its annual specific CO2 emissions targets should be assessed on the basis of its average CO2 emissions. In determining the average specific CO2 emissions, the specificities that are reflected in the different vehicle sub-groups should also be considered. As a consequence, the average specific CO2 emissions of a manufacturer should be based on the average CO2 emissions determined for each vehicle sub-group, including a weighting based on its assumed average annual mileage and average payload, which reflects the total lifetime CO2 emissions. Due to the limited CO2 emissions reduction potential of vocational vehicles, those vehicles should not be taken into account for the calculation of the average specific CO2 emissions.

(26)  In order to ensure the smooth transition towards zero-emission mobility and to provide incentives for the development and deployment on the Union market of zero- and low-emission heavy-duty vehicles that would complement demand-side instruments, such as Directive 2009/33/EC of the European Parliament and of the Council(11), a dedicated mechanism in the form of super credits should be introduced for the reporting periods before 2025 and a benchmark for the share of zero- and low-emission heavy-duty vehicles in a manufacturer’s fleet should be set for the reporting periods as from 2025.

(27)  The incentive system should be designed so as to ensure investment certainty for charging infrastructure providers and manufacturers in order to promote the rapid deployment on the Union market of zero- and low-emission heavy-duty vehicles, while allowing certain flexibility for the manufacturers to decide on their investment timeline.

(28)  For the purpose of calculating the average specific CO2 emissions of a manufacturer, in the reporting periods prior to 2025, all zero- and low-emission heavy-duty vehicles shouldbe counted multiple times. For the reporting periods as from 2025, the average specific CO2 emissions of a manufacturer should be calculated taking into account its performance against the benchmark of zero- and low-emission heavy-duty vehicles. The level of incentives should vary according to the actual CO2 emissions of the vehicle. In order to avoid a weakening of the environmental objectives, the resulting CO2 emissions reduction should be subject to a cap.

(29)  Low-emission heavy-duty vehicles should only be incentivised if their CO2 emissions are less than ▌half of the reference CO2 emissions of all vehicles in the vehicle sub-group to which the heavy-duty vehicle belongs. That ▌would incentivise innovation in this field.

(30)  In designing the incentive mechanism for the deployment of zero-emission heavy-duty vehicles, smaller lorries ▌that are not subject to the CO2 emissions reduction targets under this Regulation should also be included. Those vehicles also have significant benefits in terms of helping to address air pollution problems in cities. ▌In order to ensure that the incentives are well balanced between the different types of vehicles, the reduction in the average specific CO2 emissions of a manufacturer resulting from zero-emission smaller lorries ▌should therefore also be subject to a cap.

(31)  In order to promote a cost-effective implementation of the CO2 emissions reduction requirements, while taking into account fluctuations in the heavy-duty vehicles fleet composition and CO2 emissions over the years, manufacturers should have the possibility of balancing their overachievement in complying with their specific CO2 emissions target in one year with an underperformance in another year.

(32)  In order to incentivise early CO2 emissions reductions, a manufacturer whose average specific CO2 emissions are below the CO2 emissions reduction trajectory defined by the reference CO2 emissions ▌and the 2025 CO2 emissions target, should be able to bank those emission credits for the purpose of compliance with the 2025 target. Similarly, a manufacturer whose average specific CO2 emissions are below the CO2 emissions reduction trajectory between the 2025 target and the target applicable from 2030 onwards, should be able to bank those emission credits for the purpose of compliance with the CO2 emissions targets from 1 July 2025 to 30 June 2030.

(33)  In the case of non-compliance with its specific CO2 emissions target in any of the 12-month reporting periods starting from 1 July 2025 to 30 June 2030, a manufacturer should also have the possibility to acquire a limited emission debt. However, manufacturers should clear any remaining emission debt in the reporting period of the year 2029 ending on 30 June 2030.

(34)  Emission credits and emission debts should be considered only for the purpose of determining a manufacturer’s compliance with its specific CO2 emissions target and not as assets that are transferrable or subject to fiscal measures.

(35)  The Commission should impose a financial penalty, in the form of an excess CO2 emissions premium, where a manufacturer is found to have excess CO2 emissions, taking into account the emission credits and emission debts. Information about excess CO2 emissions of manufacturers should be made publicly available. In order to provide manufacturers with sufficient incentive to take measures to reduce the specific CO2 emissions from heavy-duty vehicles, it is important that the premium ▌exceeds the average marginal costs of the technologies needed to meet the CO2 emissions targets. The methodology for collecting the premiums should be determined by means of an implementing act, taking into account the methodology adopted pursuant to Regulation (EC) No 443/2009 of the European Parliament and of the Council(12). The premium should be considered as revenue for the general budget of the European Union. As part of the evaluation to be performed pursuant to Regulation (EU) 2019/…(13), the Commission should evaluate the possibility of allocating those amounts to a specific fund or a relevant programme that aims to ensure a just transition towards zero-emission mobility and to support re-skilling, up-skilling and other skills training of workers in the automotive sector.

(36)  A robust compliance mechanism is necessary in order to ensure that the CO2 emissions targets under this Regulation are met. The obligations on manufacturers to deliver accurate data pursuant to Regulation (EU) 2018/956 and the administrative fines that may be imposed in the case of non-compliance with that obligation contribute to ensuring the robustness of the data used for target compliance purposes under this Regulation.

(37)  In order to achieve the CO2 emissions reductions pursuant to this Regulation, the CO2 emissions of heavy-duty vehicles in use should be in conformity with the values determined pursuant to Regulation (EC) No 595/2009 and its implementing measures. It should therefore be possible for the Commission to take into account, in the calculation of the average specific CO2 emissions of a manufacturer, any systematic non-conformity found by type-approval authorities with regard to the CO2 emissions of heavy-duty vehicles in use.

(38)  In order to be in a position to take such measures, the Commission should have the powers to establish and implement a procedure for verifying the correspondence between the CO2 emissions of heavy-duty vehicles in-service as determined in accordance with Regulation (EC) No 595/2009 and its implementing measures, and the CO2 emission values recorded in the certificates of conformity, individual approval certificates or customer information files. In developing that procedure, particular consideration should be given to identifying methods, including the use of data from on-board fuel and/or energy consumption monitoring devices, for detecting strategies through which a vehicle’s CO2 performance is artificially improved in the certification procedure. Where deviations or strategies that artificially improve a vehicle’s CO2 performance are found in the course of such verifications, those findings are to be considered as sufficient reason to suspect that there is a serious risk of non-compliance with the requirements laid down in Regulation (EC) No 595/2009 and in Regulation (EU) 2018/858 of the European Parliament and of the Council(14) , and Member States should, on that basis, take the necessary measures pursuant to Chapter XI of Regulation (EU) 2018/858.

(39)  The effectiveness of the CO2 emissions targets set out in this Regulation is strongly dependent on the real-world representativeness of the methodology used for determining the CO2 emissions. In line with the 2016 Opinion of the Scientific Advice Mechanism (SAM) as regards light-duty vehicles, and the recommendation of the European Parliament following its inquiry into emission measurements in the automotive sector, it is appropriate also in the case of heavy-duty vehicles to put in place a mechanism to assess the real-world representativeness of the CO2 emission and energy consumption values determined pursuant to Regulation (EU) 2017/2400. The most reliable way to ensure the real-world representativeness of those values is by using data from the on-board fuel and/or energy consumption monitoring devices. The Commission should therefore have the powers to develop the procedures needed for collecting and processing fuel and energy consumption data required for making such assessments and to ensure the public availability of such data, whilst providing for the protection of any personal data.

(40)  The Commission should assess how fuel and energy consumption data may help to ensure that the vehicle CO2 emissions determined with the VECTO tool in accordance with Regulation (EC) No 595/2009 and its implementing measures remain representative of real-world CO2 emissions over time for all manufacturers, and, more precisely, how such data can be used to monitor the gap between the CO2 emission values determined by the VECTO tool and real-world CO2 emissions and, where necessary, to prevent this gap increasing.

(41)  In 2022, the Commission should assess the effectiveness of the CO2 emission performance standards laid down in this Regulation and in particular the level of the CO2 emissions reduction target to be achieved by 2030, the modalities that should be available for achieving that target and beyond, as well as the setting of CO2 emissions reduction targets for other types of heavy-duty vehicles, such as smaller lorries, vocational vehicles, buses, coaches and trailers. That assessment should also include, strictly for the purpose of this Regulation, considerations of heavy-duty vehicles and vehicle combinations, taking into account weights and dimensions applicable to national transport, for example modular and intermodal concepts, while also assessing possible transport safety and efficiency aspects, intermodal, environmental, infrastructural and rebound effects as well as the geographical situation of Member States.

(42)  It is important to assess the full life-cycle CO2 emissions from heavy-duty vehicles at Union level. To that end, the Commission should evaluate not later than 2023 the possibility of developing a common Union methodology for the assessment and the consistent data reporting of the full life-cycle CO2 emissions of heavy-duty vehicles that are placed on the Union market. The Commission should adopt follow-up measures, including, where appropriate, legislative proposals.

(43)  In order to ensure that the specific CO2 emissions of heavy-duty vehicles remain representative and fully up-to-date, amendments to Regulation (EC) No 595/2009, and its implementing measures that affect those specific CO2 emissions, need be reflected in this Regulation. For that purpose, the Commission should have the powers to determine a methodology for defining a representative heavy-duty vehicle for each vehicle sub-group, on the basis of which changes of the specific CO2 emissions should be assessed.

(44)  In order to ensure uniform conditions for the implementation of this Regulation, implementing powers in relation to the publication of a list of certain data and manufacturer performance should be conferred on the Commission.

(45)  In order to ensure uniform conditions for the implementation of this Regulation, implementing powers in relation to identifying vehicles that are certified as vocational vehicles and applying corrections to the annual average specific CO2 emissions of a manufacturer, collecting excess CO2 emissions premiums, reporting deviations in CO2 emissions values and taking them into account in the calculation of the average specific CO2 emissions, assessing the application of the conditions under which the reference CO2 emissions have been determined and the criteria to determine whether those emissions have been unduly increased and, if so, how they are to be corrected, ensuring that certain parameters relating to real world CO2 emissions and energy consumption of heavy-duty vehicles are made available to the Commission, performing verifications that the CO2 emission and fuel consumption values in the customer information files correspond to the CO2 emission from and fuel consumption of heavy-duty vehicles in-service and on the presence of strategies to artificially improve the vehicle’s performance in the tests performed or in calculations made, and defining one or more representative vehicles of a vehicle sub-group on the basis of which a payload adjustment is to be determined, should be conferred on the Commission. In order to ensure uniform conditions for the implementation of Regulation (EC) 595/2009, implementing powers in relation to determining certain aspects of the environmental perfomance of vehicles of categories M2, M3, N2, N3, O3 and O4 should be conferred on the Commission. The implementing powers referred to in this recital should be exercised in accordance with Regulation (EU) No 182/2011 of the European Parliament and of the Council(15).

(46)  In order to amend or supplement non-essential elements of the provisions of this Regulation, the power to adopt acts in accordance with Article 290 of the Treaty of the Functioning of the European Union should be delegated to the Commission in respect of adjusting the reference CO2 emissions , in respect of setting out the guiding principles and criteria to define the procedures to verify CO2 emissions of heavy-duty vehicles in-service and in respect of amending the Annexes to this Regulation as regards certain technical parameters, including the mission profile weights, the payload values, the annual mileage values and the payload adjustment factors. It is of particular importance that the Commission carry out appropriate consultations during its preparatory work, including at expert level, and that those consultations be conducted in accordance with the principles laid down in the Interinstitutional Agreement of 13 April 2016 on Better Law-Making(16). In particular, to ensure equal participation in the preparation of delegated acts, the European Parliament and the Council should receive all documents at the same time as Member States’ experts, and their experts should systematically have access to meetings of Commission expert groups dealing with the preparation of delegated acts.

(47)  Since the objective of this Regulation, namely the establishment of CO2 emissions performance standards for new heavy-duty vehicles, cannot be sufficiently achieved by the Member States, but can rather, by reason of its scale and effects, be better achieved at Union level, the Union may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on European Union. In accordance with the principle of proportionality, as set out in that Article, this Regulation does not go beyond what is necessary in order to achieve that objective.

(48)  Regulations (EC) No 595/2009 and (EU) 2018/956 and Council Directive 96/53/EC(17) should therefore also be amended accordingly,

HAVE ADOPTED THIS REGULATION:

Article 1

Subject matter and objective

In order to contribute to achieving the Union’s target of reducing its greenhouse gas emissions by 30 % below 2005 levels in 2030 in the sectors covered by Article 2 of Regulation (EU) 2018/842, and to achieving the objectives of the Paris Agreement and to ensure the proper functioning of the internal market, this Regulation sets CO2 emission performance requirements for new heavy-duty vehicles whereby the specific CO2 emissions of the Union fleet of new heavy-duty vehicles shall be reduced compared to the reference CO2 emissions as follows:

(a)   for the reporting periods of the year 2025 onwards by 15 %;

(b)   for the reporting periods of the year 2030 onwards by ▌30 %, unless decided otherwise pursuant to the review referred to in Article 15.

The reference CO2 emissions shall be based on the ▌ monitoring data reported pursuant to Regulation (EU) 2018/956 for the period from 1 July 2019 to 30 June 2020 ('the reference period'), excluding vocational vehicles, and shall be calculated in accordance with point 3 of Annex I to this Regulation.

Article 2

Scope

1.  This Regulation shall apply to new heavy-duty vehicles of categories N2 and N3 that meet the following characteristics:

(a)  rigid lorries with an axle configuration of 4x2 and a technically permissible maximum laden mass exceeding 16 tonnes;

(b)  rigid lorries with an axle configuration of 6x2;

(c)  tractors with an axle configuration of 4x2 and a technically permissible maximum laden mass exceeding 16 tonnes; and

(d)  tractors with an axle configuration of 6x2.

It shall also apply, for the purposes of Article 5 of, and point 2.3 of Annex I to, this Regulation, ▌to new heavy-duty vehicles of category N that do not fall within the scope of Regulation (EU) No 510/2011 of the European Parliament and of the Council(18) and do not meet the characteristics set out in points (a) to (d) of the first subparagraph.

The vehicle categories referred to in the first and second subparagraphs of this paragraph refer to the vehicle categories as defined in Annex II to Directive 2007/46/EC of the European Parliament and of the Council(19).

2.  The vehicles referred to paragraph 1 shall, for the purposes of this Regulation, be considered as new heavy-duty vehicles in a given 12-month period starting from 1 July, if they are registered in the Union for the first time in that period and have not been previously registered outside the Union.

A previous registration outside the Union made less than three months before registration in the Union shall not be taken into account.

3.  The Commission shall, by means of implementing acts, adopt a specific procedure for identifying heavy-duty vehicles that are certified as vocational vehicles pursuant to Regulation (EC) No 595/2009 and its implementing measures but are not registered as such, and shall apply corrections to the annual average specific CO2 emissions of a manufacturer to take those vehicles into account, starting from the reporting period of the year 2021 and for each subsequent reporting period. Those implementing acts shall be adopted in accordance with the examination procedure referred to in Article 16(2) of this Regulation.

Article 3

Definitions

For the purposes of this Regulation, the following definitions apply:

(1)  ‘reference CO2 emissions’ means the average of the specific CO2 emissions in the reference period referred to in the second paragraph of Article 1 of all new heavy-duty vehicles in each of the vehicle sub-groups, excluding vocational vehicles, determined in accordance with point 3 of Annex I;

(2)  ‘specific CO2 emissions’ means the CO2 emissions of an individual heavy-duty vehicle determined in accordance with point 2.1 of Annex I;

(3)  'reporting period of the year Y' means the period from 1 July of the year Y to 30 June of the year Y+1;

(4)  ‘average specific CO2 emissions’ means the average of the specific CO2 emissions of a manufacturer’s new heavy-duty vehicles in a given reporting period determined in accordance with point 2.7 of Annex I;

(5)  ‘specific CO2 emissions target’ means the CO2 emissions target of an individual manufacturer, expressed in g/tkm and determined annually for the preceding reporting period in accordance with point 4 of Annex I;

(6)  ‘rigid lorry’ means a lorry that is not designed or constructed for the towing of a semi-trailer;

(7)  ‘tractor’ means a tractor unit that is designed and constructed exclusively or principally to tow semi-trailers;

(8)  ‘vehicle sub-group’ means a grouping of vehicles as defined in point 1 of Annex I, that are characterised by a common and distinctive set of technical criteria relevant for determining the CO2 emissions and fuel consumption of those vehicles;

(9)  ‘vocational vehicle’ means a heavy-duty vehicle ▌for which the CO2 emissions and fuel consumption have been determined, in accordance with Regulation (EC) No 595/2009 and its implementing measures, only for mission profiles other than those defined in point 2.1 of Annex I to this Regulation;

(10)  'manufacturer' means the person or body responsible for submitting the data related to new heavy-duty vehicles pursuant to Article 5 of Regulation (EU) 2018/956 or, in the case of zero-emission heavy-duty vehicles, the person or body responsible to the approval authority for all aspects of the EC whole vehicle type-approval procedure or of the individual approval procedure in accordance with Directive 2007/46/EC and for ensuring conformity of production;

(11)  'zero-emission heavy-duty vehicle’ means a heavy-duty vehicle without an internal combustion engine, or with an internal combustion engine that emits less than 1 g CO2/kWh as determined in accordance with Regulation (EC) No 595/2009 and its implementing measures, or which emits less than 1 g CO2/km as determined in accordance with Regulation (EC) No 715/2007 of the European Parliament and of the Council(20) and its implementing measures;

(12)  ‘low-emission heavy-duty vehicle’ means a heavy-duty vehicle, other than a zero-emission heavy-duty vehicle, with specific CO2 emissions of less than half of the reference CO2 emissions of all vehicles in the vehicle sub-group to which the heavy-duty vehicle belongs, as determined in accordance with point 2.3.3 of Annex I;

(13)  ‘mission profile’ means a combination of a target speed cycle, a payload value, a body or trailer configuration and other parameters, if applicable, reflecting the specific use of a vehicle, on the basis of which official CO2 emissions and fuel consumption of a heavy-duty vehicle are determined;

(14)  'target speed cycle' means the description of the vehicle velocity, which the driver wants to reach or to which he is limited by traffic conditions, as a function of the distance covered in a trip;

(15)  ‘payload’ means the weight of the goods that a vehicle is carrying under different conditions.

Article 4

Average specific CO2 emissions of a manufacturer

Starting from 1 July 2020, and in each subsequent reporting period, the Commission shall ▌ determine for each manufacturer the average specific CO2 emissions in g/tkm for the preceding reporting period, by taking the following into account:

(a)  the data reported pursuant to Regulation (EU) 2018/956 for the manufacturer’s new heavy-duty vehicles registered in the preceding reporting period, excluding vocational vehicles; and

(b)  the zero- and low-emission factor determined in accordance with Article 5.

The average specific CO2 emissions shall be determined in accordance with point 2.7 of Annex I.

Article 5

Zero- and low-emission heavy-duty vehicles

1.  Starting from 1 July 2020 and for each subsequent reporting period, the Commission shall ▌determine for each manufacturer the zero- and low-emission factor for the preceding reporting period.

The zero- and low-emission factor shall take into account the number and the CO2 emissions of zero- and low-emission heavy-duty vehicles in the manufacturer’s fleet in a reporting period, including zero-emission heavy-duty vehicles referred to in the second subparagraph of Article 2(1), as well as zero- and low-emission vocational vehicles and shall be determined in accordance with point 2.3 of Annex I.

2.  For the reporting periods 2019 to 2024, the zero- and low-emission heavy-duty vehicles shall be counted as follows for the purposes of paragraph 1:

(a)  a zero-emission heavy-duty vehicle shall be counted as two vehicles; and

(b)  a low-emission heavy-duty vehicle shall be counted as up to two vehicles according to a function of its specific CO2 emissions and the low-emission threshold of the vehicle sub-group to which the vehicle belongs as defined in point 2.3.3 of Annex I.

The zero- and low-emission factor shall be determined in accordance with point 2.3.1 of Annex I.

3.  For the reporting periods from 2025 onwards the zero- and low-emission factor shall be determined on the basis of a 2 % benchmark in accordance with point 2.3.2 of Annex I.

4.  The zero- and low-emission factor shall reduce the average specific CO2 emissions of a manufacturer by a maximum of 3 %. The contribution of the zero-emission heavy-duty vehicles referred to in the second subparagraph of Article 2(1) to that factor shall reduce the average specific CO2 emissions of a manufacturer by a maximum of 1,5 %.

Article 6

▌Specific CO2 emissions targets of a manufacturer

Starting from 1 July 2026 and in each subsequent reporting period, the Commission shall determine for each manufacturer a specific CO2 emissions target for the preceding reporting period. That specific CO2 emissions target shall be the sum, over all vehicle sub-groups, of the products of the following values:

(a)  the CO2 emissions reduction target referred to in point (a) or (b) of the first paragraph of Article 1, as applicable;

(b)  the reference CO2 emissions;

(c)  the manufacturer’s share of vehicles in each vehicle sub-group;

(d)  the annual mileage and payload weighting factors applied to each vehicle sub-group.

The specific CO2 emissions target shall be determined in accordance with point 4 of Annex I.

Article 7

Emission credits and emission debts

1.  For the purpose of determining a manufacturer’s compliance with its specific CO2 emissions targets in the reporting periods of the years 2025 to 2029, account shall be taken of its emission credits or emission debts determined in accordance with point 5 of Annex I, which correspond to the number of new heavy-duty vehicles, excluding vocational vehicles, of the manufacturer in a reporting period, multiplied by:

(a)  the difference between the CO2 emissions reduction trajectory as referred to in paragraph 2 and the average specific CO2 emissions of that manufacturer, if that difference is positive (‘emission credits’); or

(b)  the difference between the average specific CO2 emissions and the specific CO2 emissions target of that manufacturer, if that difference is positive (‘emission debts’).

Emission credits shall be acquired in the reporting periods of the years 2019 to 2029. However, the emission credits acquired in the reporting periods of the years 2019 to 2024 shall be taken into account for the purpose of determining the manufacturer’s compliance with the ▌specific CO2 emissions target of the reporting period of the year 2025 only.

Emission debts shall be acquired in the reporting periods of the years 2025 to 2029. However, the total emission debt of a manufacturer shall not exceed 5 % of the manufacturer’s specific CO2 emissions target in the reporting period of the year 2025 multiplied by the number of heavy-duty vehicles of the manufacturer in that period (‘emission debt limit’).

Emission credits and emission debts acquired in the reporting periods of the years 2025 to 2028 shall, where applicable, be carried-over from one reporting period to the next reporting period. Any remaining emission debts shall be cleared in the reporting period of the year 2029.

2.  The CO2 emissions reduction trajectory ▌shall be set for each manufacturer in accordance with point 5.1 of Annex I, based on a linear trajectory between the reference CO2 emissions referred to in the second paragraph of Article 1 and the ▌CO2 emissions target for the reporting period of the year 2025 as specified in point (a) of the first paragraph of that Article, and between the ▌CO2 emissions target for the reporting period of the year 2025 and the ▌CO2 emissions target for the reporting periods of the year 2030 onwards as specified in point (b) of the first paragraph of that Article.

Article 8

Compliance with the specific CO2 emissions targets

1.  Where a manufacturer is found, pursuant to paragraph 2, to have excess CO2 emissions in a given reporting period from 2025 onwards, the Commission shall impose an excess CO2 emissions premium, calculated in accordance with the following formula:

(a)  from 2025 to 2029,

(Excess CO2 emissions premium) = (Excess CO2 emissions x 4 250 €/gCO2/tkm)

(b)  from 2030 onwards,

(Excess CO2 emissions premium) = (Excess CO2 emissions x 6 800 €/gCO2/tkm).

2.  A manufacturer shall be deemed to have excess CO2 emissions in any of the following cases:

(a)  where, in any of the reporting periods of the years 2025 to 2028, the sum of the emission debts reduced by the sum of the emission credits exceeds the emission debt limit referred to in the third subparagraph of Article 7(1);

(b)  where, in the reporting period of the year 2029, the sum of the emission debts reduced by the sum of the emission credits is positive;

(c)   where, from the reporting period of the year 2030 onwards, the manufacturer's average specific CO2 emissions exceed its specific CO2 emissions target.

The excess CO2 emissions in a given reporting period shall be calculated in accordance with point 6 of Annex I.

3.  The Commission shall, by means of implementing acts, determine the means for collecting excess CO2 emissions premiums under paragraph 1 of this Article▌. Those implementing acts shall be adopted in accordance with the examination procedure referred to in Article 16(2).

4.  The excess CO2 emissions premiums shall be considered as revenue for the general budget of the European Union.

Article 9

Verification of the monitoring data

1.  Type-approval authorities shall, without delay, report to the Commission any deviations in the CO2 emission values of heavy-duty vehicles in service as compared to the values that are indicated in certificates of conformity or in the customer information file referred to in Article 9(4) of Regulation (EU) 2017/2400 as a result of verifications performed in accordance with the procedure referred to in Article 13 of this Regulation.

2.  The Commission shall take the deviations referred to in paragraph 1 into account for the purpose of calculating the average specific CO2 emissions of a manufacturer.

3.  The Commission shall, by means of implementing acts, adopt detailed rules on the procedures for reporting such deviations and for taking them into account in the calculation of the average specific CO2 emissions. Those implementing acts shall be adopted ▌ in accordance with the examination procedure referred to in Article 16(2).

Article 10

Assessment of reference CO2 emissions

In order to ensure the robustness and representativeness of the reference CO2 emissions as a basis for determining the Union fleet-wide CO2 emissions targets, the Commission shall, by means of implementing acts, establish the methodology for assessing the application of the conditions under which the reference CO2 emissions have been determined and establish the criteria to determine whether those emissions have been unduly increased and, if so, how they are to be corrected.

Those implementing acts shall be adopted in accordance with the examination procedure referred to in Article 16(2).

Article 11

Publication of data and manufacturer performance

1.  By 30 April each year, the Commission shall, by means of implementing acts, publish a list indicating:

(a)  from 1 July 2020, for each manufacturer, its average specific CO2 emissions in the preceding reporting period, as referred to in Article 4;

(b)  from 1 July 2020, for each manufacturer, the zero- and low-emission factor in the preceding reporting period, as referred to in Article 5(1);

(c)  from 1 July 2026, for each manufacturer, its specific CO2 emissions target for the preceding reporting period, as referred to in Article 6;

(d)  from 1 July 2020 until 30 June 2031, for each manufacturer, its CO2 emissions reduction trajectory, its emission credits and, from 1 July 2026 until 30 June 2031, its emission debts in the preceding reporting period, as referred to in Article 7;

(e)  from 1 July 2026, for each manufacturer, its excess CO2 emissions in the preceding reporting period, as referred to in Article 8(1);

(f)  from 1 July 2020, the average specific CO2 emissions of all new heavy-duty vehicles registered in the Union in the preceding reporting period.

The list to be published by 30 April 2021 shall include the reference CO2 emissions referred to in the second paragraph of Article 1.

2.  The Commission shall adopt delegated acts in accordance with Article 17 to adjust the reference CO2 emissions in accordance with the following:

(a)  where the mission profile weights or the payload values have been adjusted pursuant to point (b) or (c) of Article 14(1), by applying the procedure set out in point 1 of Annex II;

(b)  where ▌ adjustment factors have been determined pursuant to Article 14(2), by applying those adjustment factors to the reference CO2 emissions;

(c)   where an undue increase in the reference CO2 emissions has been determined in accordance with the methodology referred to in Article 10, by correcting the reference CO2 emissions by 30 April 2022.

The Commission shall publish the adjusted reference CO2 emissions values and shall apply those values for the calculation of the manufacturer specific CO2 emissions targets applicable in the reporting periods starting from the date of application of the delegated acts adjusting the values.

Article 12

Real-world CO2 emissions and energy consumption

1.  The Commission shall monitor and assess the real-world representativeness of the CO2 emissions and energy consumption values determined within the framework of Regulation (EC) No 595/2009.

Furthermore, the Commission shall regularly collect data on the real-world CO2 emissions and energy consumption of heavy-duty vehicles using on-board fuel and/or energy consumption monitoring devices, starting with new heavy-duty vehicles registered from the date of application of the measures referred to in point (b) of Article 5c of Regulation (EC) No 595/2009.

The Commission shall ensure that the public is informed of how that representativeness evolves over time.

2.  For the purpose of paragraph 1 of this Article, the Commission shall ensure that the following parameters relating to real-world CO2 emissions and energy consumption of heavy-duty vehicles are made available to it at regular intervals, starting from the date of application of the measures referred to in point (b) of Article 5c of Regulation (EC) No 595/2009, by manufacturers, national authorities or through direct data transfer from vehicles, as the case may be:

(a)  vehicle identification number;

(b)  fuel and electric energy consumed;

(c)  total distance travelled;

(d)  payload;

(e)  for externally chargeable hybrid electric heavy-duty vehicles, the fuel and electric energy consumed, and the distance travelled distributed over the different driving modes;

(f)  other parameters necessary to ensure that the obligations set out in paragraph 1 of this Article can be met.

The Commission shall process the data received under the first subparagraph of this paragraph to create an anonymised and aggregated dataset, including per manufacturer, for the purposes of paragraph 1. The vehicle identification numbers shall be used only for the purpose of that data processing and shall not be retained longer than needed for that purpose.

3.  In order to prevent the real-world emissions gap from growing, the Commission shall, not later than two years and five months following the date of application of the measures referred to in point (b) of Article 5c of Regulation (EC) No 595/2009, assess how fuel and energy consumption data may be used to ensure that the vehicle CO2 emission and energy consumption values determined pursuant to that Regulation remain representative of real-world emissions over time for each manufacturer.

The Commission shall monitor and report annually on how the gap referred to in the first subparagraph evolves, and shall, with a view to preventing an increase in that gap, assess, in 2027, the feasibility of a mechanism to adjust the manufacturer’s average specific CO2 emissions as of 2030, and, if appropriate, submit a legislative proposal to put such a mechanism in place.

4.  The Commission shall adopt, by means of implementing acts, the detailed procedure for collecting and processing the data referred to in paragraph ▌2 of this Article. Those implementing acts shall be adopted in accordance with the examination procedure referred to in Article 16(2).

Article 13

Verification of the CO2 emissions of heavy-duty vehicles in-service

1.  Manufacturers shall ensure that the CO2 emission and fuel consumption values recorded in the customer information file referred to in Article 9(4) of Regulation (EU) 2017/2400 correspond to the CO2 emissions from and fuel consumption of heavy-duty vehicles in-service as determined in accordance with that Regulation.

2.  Following the entry into force of the procedures referred to in paragraph 4, type-approval authorities shall verify, for those manufacturers to which they have granted a licence to operate the simulation tool in accordance with Regulation (EC) No 595/2009 and its implementing measures, on the basis of appropriate and representative vehicle samples, that the CO2 emission and fuel consumption values recorded in the customer information files correspond to the CO2 emissions from and fuel consumption of heavy-duty vehicles in-service as determined in accordance with that Regulation and its implementing measures, while considering, inter alia, using available data from on-board fuel and/or energy consumption monitoring devices.

Type-approval authorities shall also verify the presence of any strategies on board or relating to the sampled vehicles that artificially improve the vehicle’s performance in the tests performed or in the calculations made for the purpose of certifying the CO2 emissions and fuel consumption by, inter alia, using data from on-board fuel and/or energy consumption monitoring devices.

3.  Where a lack of correspondence of CO2 emission and fuel consumption values which cannot be attributed to a malfunctioning of the simulation tool, or the presence of any strategies artificially improving a vehicle’s performance, is found as a result of the verifications performed pursuant to paragraph 2, the responsible type-approval authority shall, in addition to taking the necessary measures set out in Chapter XI of Regulation (EU) 2018/858, ensure that the customer information files, the certificates of conformity and the individual approval certificates are corrected, as the case may be.

4.  The Commission shall determine, by means of implementing acts, the procedures for performing the verifications referred to in paragraph 2 of this Article. Those implementing acts shall be adopted in accordance with the examination procedure referred to in Article 16(2).

The Commission is empowered , prior to adopting the implementing acts referred to in the first subparagraph, to adopt a delegated act in accordance with Article 17, in order to supplement this Regulation by setting out the guiding principles and criteria for defining the procedures referred to in the first subparagraph.

Article 14

Amendments to Annexes I and II

1.  In order to ensure that the technical parameters used for the calculation of the average specific CO2 emissions of a manufacturer pursuant to Article 4 and the calculation of the specific CO2 emissions targets pursuant to Article 6 take into account technical progress and the evolution of freight transport logistics, the Commission is empowered to adopt delegated acts in accordance with Article 17 to amend the following provisions set out in Annexes I and II:

(a)  the entries for cab type and engine power set out in Table 1 of Annex I and the definitions of ‘sleeper cab’ and ‘day cab’ referred to in that Table;

(b)  the mission profile weights set out in Table 2 of Annex I;

(c)  the payload values set out in Table 3 of Annex I, and the payload adjustment factors set out in Table 1 of Annex II;

(d)  the annual mileage values set out in Table 4 of Annex I.

2.  Where the type-approval procedures laid down in Regulation (EC) No 595/2009 and its implementing measures are modified by amendments other than those referred to in points (b) and (c) of paragraph 1 of this Article in such a way that the level of the CO2 emissions of the representative vehicles defined pursuant to this paragraph increase or decrease by more than 5 g CO2/km, the Commission shall, in accordance with point (b) of the first subparagraph of Article 11(2), apply an adjustment factor to the reference CO2 emissions that is to be calculated in accordance with the formula set out in point 2 of Annex II.

3.   The Commission shall, by means of implementing acts, ▌ establish a methodology for defining one or more representative vehicles of a vehicle sub-group, including their statistical weightings, on the basis of which the adjustment referred to in paragraph 2 of this Article shall be determined, taking into account the monitoring data reported pursuant to Regulation (EU) 2018/956 and the technical characteristics of the vehicles listed in Article 12(1) of Regulation (EU) 2017/2400. Those implementing acts shall be adopted in accordance with the examination procedure set out in Article 16(2) of this Regulation.

Article 15

Review and report

1.   By 31 December 2022, the Commission shall submit a report to the European Parliament and to the Council on the effectiveness of this Regulation, on the CO2 emissions reduction target and the level of the incentive mechanism for zero- and low-emission heavy-duty vehicles applicable from 2030, ▌on setting CO2 emissions reduction targets for other types of heavy-duty vehicles, including trailers, buses and coaches, and vocational vehicles, and on the introduction of binding CO2 emissions reduction targets for heavy-duty vehicles for 2035 and 2040 onwards. The 2030 target shall be assessed in accordance with the European Union commitments under the Paris Agreement.

2.   The report referred to in paragraph 1 of this Article shall also, in particular, include the following:

(a)  an assessment of the effectiveness of the system of emission credits and emission debts referred to in Article 7 and the appropriateness of extending its application to 2030 and beyond;

(b)  an assessment of the deployment of zero- and low-emission heavy-duty vehicles, ▌taking into account the targets set out in Directive 2009/33/EC, as well as relevant parameters and conditions affecting the placing on the market of such heavy-duty vehicles;

(c)  an assessment of the effectiveness of the incentive mechanism for zero- and low-emission heavy-duty vehicles set out in Article 5 and the appropriateness of its different elements, with a view to adjusting it for the period after 2025 towards a possible differentiation by zero-emission driving range and vehicle sub-group, combined with mileage payload weighting factors, with a date of application that provides at least three years of lead time;

(d)  an assessment of the roll-out of the necessary recharging and refuelling infrastructure, of the possibility of introducing engine CO2 emission performance standards, in particular for vocational vehicles, and of the real-world representativeness of the CO2 emission and fuel consumption values determined in accordance with Regulation (EU) 2017/2400;

(e)  strictly for the purpose of this Regulation, considerations of heavy-duty vehicles and vehicle combinations taking into account weights and dimensions applicable to national transport, for example modular and intermodal concepts, while also assessing possible transport safety and efficiency aspects, intermodal, environmental, infrastructural and rebound effects as well as the geographical situation of Member States;

(f)  an assessment of the VECTO simulation tool to ensure that this tool is updated continually and in a timely manner;

(g)  an assessment of the possibility of developing a specific methodology to include the potential contribution to CO2 emissions reductions of the use of synthetic and advanced alternative liquid and gaseous renewable fuels, including e-fuels, produced with renewable energy and meeting the sustainability and greenhouse gas emissions saving criteria referred to in Directive (EU) 2018/2001 of the European Parliament and of the Council(21);

(h)  an assessment of the feasibility of introducing an open, transparent and non-discriminatory pooling mechanism between manufacturers;

(i)  an assessment of the level of the excess CO2 emissions premium to ensure that it exceeds the average marginal costs of the technologies needed to meet the CO2 emissions targets.

3.  The report referred to in paragraph 1 shall, where appropriate, be accompanied by a legislative proposal to amend this Regulation.

4.  As part of the evaluation pursuant to Article 15(5) of Regulation (EU) 2019/…(22), the Commission shall evaluate the possibility to assign the revenues from the excess CO2 emissions premiums to a specific fund or a relevant programme, with the objective of ensuring a just transition towards a climate-neutral economy as referred to in Article 4.1 of the Paris Agreement, in particular to support re-skilling, up-skilling and other skills training and reallocation of workers in the automotive sector in all affected Member States, in particular in the regions and the communities most affected by the transition. The Commission shall, if appropriate, submit a legislative proposal to that effect by 2027 at the latest.

5.  The Commission shall, not later than 2023, evaluate the possibility of developing a common Union methodology for the assessment, and the consistent data reporting, of the full life-cycle CO2 emissions of new heavy-duty vehicles that are placed on the Union market. The Commission shall transmit that evaluation, including where appropriate proposals for follow-up measures, such as legislative proposals, to the European Parliament and to the Council.

Article 16

Committee procedure

1.  The Commission shall be assisted by the Climate Change Committee referred to in point (a) of Article 44(1) of Regulation (EU) 2018/1999 of the European Parliament and of the Council(23). That committee shall be a committee within the meaning of Regulation (EU) No 182/2011.

2.  Where reference is made to this paragraph, Article 5 of Regulation (EU) No 182/2011 shall apply.

3.  Where the committee delivers no opinion, the Commission shall not adopt the draft implementing act and the third subparagraph of Article 5(4) of Regulation (EU) No 182/2011 shall apply.

Article 17

Exercise of the delegation

1.  The power to adopt delegated acts is conferred on the Commission subject to the conditions laid down in this Article.

2.  The power to adopt delegated acts referred to in Article 11(2), the second subparagraph of Article 13(4) and Article 14(1) shall be conferred on the Commission for a period of five years from [the date of entry into force of this Regulation]. The Commission shall draw up a report in respect of the delegation of power not later than nine months before the end of the five-year period. The delegation of power shall be tacitly extended for periods of an identical duration, unless the European Parliament or the Council opposes such extension not later than three months before the end of each period.

3.  The delegation of power referred to in Article 11(2), the second subparagraph of Article 13(4) and Article 14(1) may be revoked at any time by the European Parliament or by the Council. A decision to revoke shall put an end to the delegation of the power specified in that decision. It shall take effect the day following the publication of the decision in the Official Journal of the European Union or at a later date specified therein. It shall not affect the validity of any delegated act already in force.

4.  Before adopting a delegated act, the Commission shall consult experts designated by each Member State in accordance with the principles laid down in the Interinstitutional Agreement of 13 April 2016 on Better Law-Making.

5.  As soon as it adopts a delegated act, the Commission shall notify it simultaneously to the European Parliament and to the Council.

6.  A delegated act adopted pursuant to Article 11(2), the second subparagraph of Article 13(4) and Article 14(1) shall enter into force only if no objection has been expressed either by the European Parliament or by the Council within a period of two months of notification of that act to the European Parliament and to the Council or if, before the expiry of that period, the European Parliament and the Council have both informed the Commission that they will not object. That period shall be extended by two months at the initiative of the European Parliament or of the Council.

Article 18

Amendments to Regulation (EC) No 595/2009

Regulation (EC) No 595/2009 is amended as follows:

(1)  in Article 2, first paragraph, the following sentence is added:"

‘It shall also apply, for the purpose of Articles 5a, 5b, and 5c, to vehicles of categories O3 and O4.’;

"

(2)  the following Articles are inserted:"

‘Article 5a

Specific requirements for manufacturers with regard to the environmental performance of vehicles of categories M2, M3, N2, N3, O3 and O4

1.  Manufacturers shall ensure that new vehicles of categories O3 and O4 that are sold, registered or put into service meet the following requirements:

   (a) the influence of those vehicles on the CO2 emissions, fuel consumption, electric consumption and zero-emission driving range of motor vehicles is determined in accordance with the methodology referred to in point (a) of Article 5c;
   (b) they are fitted with on-board devices for the monitoring and recording of the payload in accordance with the requirements referred to in point (b) of Article 5c.

2.  Manufacturers shall ensure that new vehicles of categories M2, M3, N2 and N3 that are sold, registered or put into service are fitted with on-board devices for the monitoring and recording of fuel and/or energy consumption, payload and mileage in accordance with the requirements referred to in point (b) of Article 5c.

They shall also ensure that the zero-emission driving range and electricity consumption of those vehicles are determined in accordance with the methodology referred to in point (c) of Article 5c.

Article 5b

Specific requirements for Member States with regard to the environmental performance of vehicles of categories M2, M3, N2, N3, O3 and O4

1.  National authorities shall, in accordance with the implementing measures referred to in Article 5c, refuse to grant EC type-approval or national type-approval in respect of new vehicle types of categories M2, M3, N2, N3, O3 and O4 which do not comply with the requirements set out in those implementing measures.

2.  National authorities shall, in accordance with the implementing measures referred to in Article 5c, prohibit the sale, registration or entry into service of new vehicles of categories M2, M3, N2, N3, O3 and O4 which do not comply with the requirements set out in those implementing measures.

Article 5c

Measures for determining certain aspects of the environmental performance of vehicles of categories M2, M3, N2, N3, O3 and O4

By 31 December 2021, the Commission shall, by means of implementing acts, adopt the following measures:

   (a) a methodology for assessing the performance of vehicles of categories O3 and O4 with regard to their influence on the CO2 emissions, fuel consumption, electricity consumption and zero-emission driving ranges of motor vehicles;
   (b) technical requirements for the fitting of on-board devices for the monitoring and recording of fuel and/or energy consumption and mileage of motor vehicles of categories M2, M3, N2 and N3, and for determining and recording the payloads or total weight of vehicles meeting the characteristics set out in point (a), (b), (c) or (d) of the first subparagraph of Article 2(1) of Regulation (EU) 2019/... of the European Parliament and of the Council*(24) and of their combinations with category O3 and O4 vehicles, including the transmission of data between vehicles within a combination, as necessary;
   (c) a methodology for determining the zero-emission driving range and electricity consumption of new vehicles of categories M2, M3, N2 and N3.

Those implementing acts shall be adopted in accordance with the examination procedure referred to in Article 13a.

___________________

* Regulation (EU) 2019/… of the European Parliament and of the Council of … setting CO2 emission performance standards for new heavy-duty vehicles and amending Regulations (EC) No 595/2009 and (EU) 2018/956 of the European Parliament and of the Council and Council Directive 96/53/EC (OJ L …, …, p. …).';

"

(3)  the following Article is added:"

‘Article 13a

Committee procedure

1.  The Commission shall be assisted by the Technical Committee for Motor Vehicles established by Regulation (EU) 2018/858 of the European Parliament and of the Council*. That committee shall be a committee within the meaning of Regulation (EU) No 182/2011.

2.  Where reference is made to this paragraph, Article 5 of Regulation (EU) No 182/2011 shall apply.

3.  Where the Committee delivers no opinion, the Commission shall not adopt the draft implementing act and the third subparagraph of Article 5(4) of Regulation (EU) No 182/2011 shall apply.

___________________

* Regulation (EU) 2018/858 of the European Parliament and of the Council of 30 May 2018 on the approval and market surveillance of motor vehicles and their trailers, and of systems, components and separate technical units intended for such vehicles, amending Regulations (EC) No 715/2007 and (EC) No 595/2009 and repealing Directive 2007/46/EC (OJ L 151, 14.6.2018, p. 1).’.

"

Article 19

Amendments to Regulation (EU) 2018/956

Regulation (EU) 2018/956 is amended as follows:

(1)  Article 3 is replaced by the following:"

‘Article 3

Definitions

For the purposes of this Regulation, the definitions set out in Directive 2007/46/EC of the European Parliament and of the Council*, in Regulation (EC) No 595/2009 and in Regulation (EU) 2019/… of the European Parliament and of the Council**(25) apply.

____________________

* Directive 2007/46/EC of the European Parliament and of the Council of 5 September 2007 establishing a framework for the approval of motor vehicles and their trailers, and of systems, components and separate technical units intended for such vehicles (Framework Directive) (OJ L 263, 9.10.2007, p. 1).

** Regulation (EU) 2019/… of the European Parliament and of the Council of … setting CO2 emission performance standards for new heavy-duty vehicles and amending Regulations (EC) No 595/2009 and (EU) 2018/956 of the European Parliament and of the Council and Council Directive 96/53/EC (OJ L …, …, p. …).';

"

(2)  in Article 4, paragraph 1 is replaced by the following:"

‘1. Starting from 1 January 2019, Member States shall monitor the data specified in Part A of Annex I relating to new heavy-duty vehicles registered for the first time in the Union.

By 30 September each year, starting in 2020, the competent authorities of the Member States shall report those data of the previous reporting period of 1 July to 30 June to the Commission in accordance with the reporting procedure set out in Annex II.

With regard to 2019, the data reported by 30 September 2020 shall include data monitored from 1 January 2019 to 30 June 2020.

Data relating to new heavy-duty vehicles that were registered previously outside the Union shall not be monitored and reported, unless that registration was made less than three months before registration in the Union.’;

"

(3)  in Article 5, paragraph 1 is replaced by the following:"

'1. From the starting years set out in point 1 of Part B of Annex I, manufacturers of heavy-duty vehicles shall monitor the data specified in point 2 of Part B of Annex I, for each new heavy-duty vehicle.

By 30 September each year, from the starting years set out in point 1 of Part B of Annex I, manufacturers of heavy-duty vehicles shall report those data for each new heavy-duty vehicle with a date of simulation falling within the preceding reporting period of 1 July to 30 June to the Commission in accordance with the reporting procedure set out in Annex II.

With regard to 2019, manufacturers shall report the data for each new heavy-duty vehicle with a date of simulation falling within the period 1 January 2019 to 30 June 2020.

The date of simulation shall be the date reported in accordance with data entry 71 in point 2 of Part B of Annex I.';

"

(4)  in Article 10, paragraph 1 is replaced by the following:"

‘1. By 30 April every year, the Commission shall publish an annual report with its analysis of the data transmitted by Member States and manufacturers for the preceding reporting period.’;

"

(5)  in Annex II, point 3.2 is replaced by the following:"

‘3.2. The data relating to heavy-duty vehicles registered in the preceding reporting period and recorded in the Register shall be made public by 30 April each year, starting from 2021, with the exception of the data entries specified in Article 6(1).'.

"

Article 20

Amendments to Directive 96/53/EC

Directive 96/53/EC is amended as follows:

(1)  in Article 2, the following definition is inserted after the definition of 'alternatively fuelled vehicle':"

"- 'zero-emission vehicle' shall mean a 'zero-emission heavy-duty vehicle' as defined in point (11) of Article 3 of Regulation (EU) 2019/… of the European Parliament and of the Council*(26),

_________________________________

* Regulation (EU) 2019/… of the European Parliament and of the Council of … setting CO2 emission performance standards for new heavy-duty vehicles and amending Regulations (EC) No 595/2009 and (EU) 2018/956 of the European Parliament and of the Council and Council Directive 96/53/EC (OJ L, …,…, p. ).';

"

(2)  Article 10b is replaced by the following:"

‘Article 10b

The maximum authorised weights of alternatively fuelled or zero-emission vehicles shall be those set out in points 2.2.1, 2.2.2, 2.2.3, 2.2.4, 2.3.1, 2.3.2 and 2.4 of Annex I.

Alternatively fuelled or zero-emission vehicles shall also comply with the maximum authorised axle weight limits set out in point 3 of Annex I.

The additional weight required by alternatively fuelled or zero-emission vehicles shall be defined on the basis of the documentation provided by the manufacturer when the vehicle in question is approved. That additional weight shall be indicated in the official proof required in accordance with Article 6.

The Commission shall be empowered to adopt delegated acts in accordance with Article 10h to update, for the purposes of this Directive, the list of alternative fuels referred to in Article 2 that require additional weight. It is of particular importance that the Commission follow its usual practice and carry out consultations with experts, including Member States' experts, before adopting those delegated acts.’;

"

(3)  Annex I is amended as follows:

(a)  the following subparagraph is added to the second column of points 2.2.1, 2.2.2, 2.2.3 and 2.2.4:"

‘In the case of vehicle combinations including alternatively fuelled or zero-emission vehicles, the maximum authorised weights provided for in this section shall be increased by the additional weight of the alternative fuel or zero-emission technology with a maximum of 1 tonne and 2 tonnes respectively.’;

"

(b)  the following subparagraph is added to the second column of point 2.3.1: "

‘Zero-emission vehicles: the maximum authorised weight of 18 tonnes is increased by the additional weight of the zero-emission technology with a maximum of 2 tonnes.’;

"

(c)  the following subparagraph is added to the third column of point 2.3.2:"

‘Three-axle zero-emission vehicles: the maximum authorised weight of 25 tonnes, or 26 tonnes where the driving axle is fitted with twin tyres and air suspension or suspension recognised as being equivalent within the Union as defined in Annex II or where each driving axle is fitted with twin tyres and the maximum weight of each axle does not exceed 9,5 tonnes, is increased by the additional weight of the zero-emission technology with a maximum of 2 tonnes.’;

"

(d)  the following subparagraph is added to the third column of point 2.4:"

‘Three-axle articulated buses that are zero-emission vehicles: the maximum authorised weight of 28 tonnes is increased by the additional weight of the zero-emission technology with a maximum of 2 tonnes.’.

"

Article 21

Entry into force

This Regulation shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union

This Regulation shall be binding in its entirety and directly applicable in all Member States.

Done at ...,

For the European Parliament For the Council

The President The President

ANNEX I

Average specific CO2 emissions, specific CO2 emissions targets and excess CO2 emissions

1.  vehicle sub-groups

Each new heavy-duty vehicle shall be attributed to one of the vehicle sub-groups defined in Table 1 in accordance with the conditions set out therein.

Table 1 – Vehicle sub-groups (sg)

Heavy-duty vehicles

Cab type

Engine power

Vehicle sub-group (sg)

Rigid lorries with axle configuration 4x2 and technically permissible maximum laden mass > 16 tonnes

All

<170 kW

4-UD

Day cab

≥170 kW

4-RD

Sleeper cab

≥170 kW and <265 kW

Sleeper cab

≥265 kW

4-LH

Rigid lorries with axle configuration 6x2

Day cab

All

9-RD

Sleeper cab

9-LH

Tractors with axle configuration 4x2 and technically permissible maximum laden mass >16 tonnes

Day cab

All

5-RD

Sleeper cab

< 265 kW

Sleeper cab

≥ 265 kW

5-LH

Tractors with axle configuration 6x2

Day cab

All

10-RD

Sleeper cab

10-LH

‘Sleeper cab’ means a type of cab that has a compartment behind the driver's seat intended to be used for sleeping as reported in accordance with Regulation (EU) 2018/956.

‘Day cab’ means a type of cab that is not a sleeper cab.

If a new heavy-duty vehicle cannot be attributed to a vehicle sub-group because information on the cab type or engine power is not available, it shall be attributed to the long-haul (LH) vehicle sub-group corresponding to its chassis type (rigid lorry or tractor) and axle configuration (4x2 or 6x2).

Where a new heavy-duty vehicle is attributed to vehicle sub-group 4-UD, but data on the CO2 emissions in g/km are not available for the UDL or UDR mission profiles as defined in Table 2 of point 2.1, the new heavy-duty vehicle shall be attributed to vehicle sub-group 4-RD.

1.  Average specific CO2 emissions of a manufacturer

1.1.  Specific CO2 emissions of a new heavy-duty vehicle

The specific CO2 emissions in g/km (CO2v) of a new heavy-duty vehicle v, attributed to the vehicle sub-group sg shall be calculated in accordance with the following formula:

where,

is the sum over all mission profiles mp listed in Table 2;

sg is the vehicle sub-group to which the new heavy-duty vehicle v has been attributed according to point 1 of this Annex;

Wsg,mp is the mission profile weight specified in Table 2;

CO2v,mp is the CO2 emissions in g/km of a new heavy-duty vehicle v determined for a mission profile mp and reported in accordance with Regulation (EU) 2018/956.

The specific CO2 emissions of a zero-emission heavy-duty vehicle shall be set to 0 g CO2/km.

The specific CO2 emissions of a vocational vehicle shall be the average of the CO2 emissions in g/km reported in accordance with Regulation (EU) 2018/956.

Table 2 - Mission profile weights (Wsg,mp)

Vehicle sub-group

(sg)

Mission profile1 (mp)

RDL

RDR

LHL

LHR

UDL

UDR

REL, RER, LEL, LER

4-UD

0

0

0

0

0,5

0,5

0

4-RD

0,45

0,45

0,05

0,05

0

0

0

4-LH

0,05

0,05

0,45

0,45

0

0

0

9-RD

0,27

0,63

0,03

0,07

0

0

0

9-LH

0,03

0,07

0,27

0,63

0

0

0

5-RD

0,27

0,63

0,03

0,07

0

0

0

5-LH

0,03

0,07

0,27

0,63

0

0

0

10-RD

0,27

0,63

0,03

0,07

0

0

0

10-LH

0,03

0,07

0,27

0,63

0

0

0

Mission profile definitions

RDL

Regional delivery payload low

RDR

Regional delivery payload representative

LHL

Long haul payload low

LHR

Long haul payload representative

UDL

Urban delivery payload low

UDR

Urban delivery payload representative

REL

Regional delivery (EMS) payload low

RER

Regional delivery (EMS) payload representative

LEL

Long haul (EMS) payload low

LER

Long haul (EMS) payload representative

1.2.  Average specific CO2 emissions of all new heavy-duty vehicles in a vehicle sub-group for a manufacturer

For each manufacturer and each reporting period, the average specific CO2 emissions in g/tkm () of all new heavy-duty vehicles in the vehicle sub-group sg shall be calculated as follows:

where,

is the sum over all new heavy-duty vehicles of the manufacturer in the vehicle sub-group sg, excluding vocational vehicles, in accordance with point (a) of the first paragraph of Article 4;

CO2v is the specific CO2 emissions of a new heavy-duty vehicle v determined in accordance with point 2.1;

Vsg is the number of new heavy-duty vehicles of the manufacturer in the vehicle sub-group sg, excluding vocational vehicles, in accordance with point (a) of the first paragraph of Article 4;

PLsg is the average payload of vehicles in the vehicle sub-group sg as determined in point 2.5.

1.3.  The zero- and low-emission factor referred to in Article 5

2.3.1  Reporting periods 2019 to 2024

For each manufacturer and reporting period from 2019 to 2024, the zero- and low-emission factor (ZLEV) referred to in Article 5 shall be calculated as follows:

ZLEV = V / (Vconv + Vzlev) with a minimum of 0,97

where,

V is the number of new heavy-duty vehicles of the manufacturer that meet the characteristics set out in the first subparagraph of Article 2(1), excluding vocational vehicles, in accordance with point (a) of the first paragraph of Article 4;

Vconv is the number of new heavy-duty vehicles of the manufacturer that meet the characteristics set out in the first subparagraph of Article 2(1), excluding vocational vehicles, in accordance with point (a) of the first paragraph of Article 4 and excluding zero- and low-emission heavy-duty vehicles;

Vzlev is the sum of Vin and Vout,

where,

Vin is ∑ v (1+ (1 – CO2v/LETsg))

with 20190418-P8_TA-PROV(2019)0426_EN-p0000007.png being the sum over all new zero- and low-emission heavy-duty vehicles that meet the characteristics set out in the first subparagraph of Article 2(1);

CO2v is the specific CO2 emissions in g/km of a zero- or low-emission heavy-duty vehicle v determined in accordance with point 2.1;

LETsg is the low-emission threshold of the vehicle sub-group sg to which the vehicle v belongs as defined in point 2.3.3;

Vout is the total number of newly registered zero-emission heavy-duty vehicles referred to in the second subparagraph of Article 2(1), multiplied by 2, and with a maximum of 1,5 % of Vconv.

2.3.2  Reporting periods from 2025 onwards

For each manufacturer and reporting period, the zero- and low-emission factor (ZLEV) referred to in Article 5 shall be calculated as follows:

ZLEV = 1 - (y - x) unless this sum is larger than 1 or lower than 0,97 in which case the ZLEV factor shall be set to 1 or 0,97, as the case may be

where,

x is 0,02

y is the sum of Vin and Vout, divided by Vtotal, where:

Vin is the total number of newly registered low- and zero-emission heavy-duty vehicles that meet the characteristics set out in the first subparagraph of Article 2(1), where each of them is counted as ZLEVspecific in accordance with the formula below:

ZLEVspecific = 1 - (CO2v / LETsg )

where:

CO2v is the specific CO2 emissions in g/km of a zero- or low-emission heavy-duty vehicle v determined in accordance with point 2.1;

LETsg is the low-emission threshold of the vehicle sub-group sg to which the vehicle v belongs as defined in point 2.3.3;

Vout is the total number of newly registered zero-emission heavy-duty vehicles referred to in the second subparagraph of Article 2(1), and with a maximum of 0,035 of Vtotal;

Vtotal is the total number of newly registered heavy-duty vehicles of the manufacturer in that reporting period.

Where Vin/Vtotal is lower than 0,0075, the ZLEV factor shall be set to 1.

2.3.3  Low-emission threshold

The low-emission threshold LETsg of the vehicle sub-group sg is defined as follows:

LETsg = (rCO2sg x PLsg) / 2

where,

rCO2sg is the reference CO2 emissions of the vehicle sub-group sg, as determined in point 3;

PLsg is the average payload of vehicles in the vehicle sub-group sg, as determined in point 2.5.

1.4.  The manufacturer’s share of new heavy-duty vehicles in a vehicle sub-group

For each manufacturer and each reporting period, the share sharesg of new heavy-duty vehicles in the vehicle sub-group sg shall be calculated as follows:

where,

Vsg is the number of new heavy-duty vehicles of the manufacturer in the vehicle sub-group sg, excluding vocational vehicles, in accordance with point (a) of the first paragraph of Article 4;

V is the number of new heavy-duty vehicles of the manufacturer, excluding vocational vehicles, in accordance with point (a) of the first paragraph of Article 4.

1.5.  Average payload values of all vehicles in a vehicle sub-group

The average payload value PLsg of a vehicle in the vehicle sub-group sg shall be calculated as follows:

where,

is the sum over all mission profiles mp;

Wsg,mp, is the mission profile weight specified in Table 2 under point 2.1;

PLsg,mp is the payload value attributed to the vehicles in the vehicle sub-group sg for the mission profile mp, as specified in Table 3.

Table 3 - Payload values PL sg, mp (in tonnes)

Vehicle sub-group sg

Mission profile1 mp

RDL

RDR

LHL

LHR

UDL

UDR

REL

RER

LEL

LER

4-UD

0,9

4,4

1,9

14

0,9

4,4

3,5

17,5

3,5

26,5

4-RD

4-LH

5-RD

2,6

12,9

2,6

19,3

2,6

12,9

3,5

17,5

3,5

26,5

5-LH

9-RD

1,4

7,1

2,6

19,3

1,4

7,1

3,5

17,5

3,5

26,5

9-LH

10-RD

2,6

12,9

2,6

19,3

2,6

12,9

3,5

17,5

3,5

26,5

10-LH

1 See mission profile definitions under Table 2 of point 2.1

1.6.  Mileage and payload weighting factor

The mileage and payload weighting factor (MPWsg) of the vehicle sub-group sg is defined as the product of the annual mileage specified in Table 4 and the payload value per vehicle sub-group specified in Table 3 of point 2.5, normalised to the respective value for vehicle sub-group 5-LH, and shall be calculated as follows:

where,

AMsg is the annual mileage specified in Table 4 for the vehicles in the respective vehicle sub-group;

AM5-LH is the annual mileage specified for the vehicle sub-group 5-LH in Table 4;

PLsg is the average payload value as determined in point 2.5;

PL5-LH is the average payload value for the vehicle sub-group 5-LH as determined in point 2.5.

Table 4 - Annual mileages

Vehicle

sub-group sg

Annual mileage AMsg (in km)

4-UD

60 000

4-RD

78 000

4-LH

98 000

5-RD

78 000

5-LH

116 000

9-RD

73 000

9-LH

108 000

10-RD

68 000

10-LH

107 000

1.7.  Average specific CO2 emissions in g/tkm of a manufacturer referred to in Article 4

For each manufacturer and each reporting period, the average specific CO2 emissions in g/tkm (CO2) shall be calculated as follows:

CO2 = ZLEV × ∑ sg share,sg × MPWsg × avgCO2sg

where,

sg is the sum over all vehicle sub-groups;

ZLEV is the zero- and low-emission factor as determined in point 2.3;

share,sg is the share of new heavy-duty vehicles in the vehicle sub-group sg as determined in point 2.4;

MPWsg is the mileage and payload weighting factor as determined in point 2.6;

avgCO2sg is the average specific CO2 emissions in g/tkm as determined in point 2.2.

2.  The reference CO2 emissions referred to in the second paragraph of Article 1

The reference CO2 emissions (rCO2sg) shall be calculated for each vehicle sub-group sg on the basis of all new heavy-duty vehicles of all manufacturers of the reference period as follows:

where,

is the sum over all new heavy-duty vehicles registered in the reference period in the vehicle sub-group sg, excluding vocational vehicles, in accordance with the second paragraph of Article 1;

CO2v are the specific CO2 emissions of the new heavy-duty vehicle v as determined in accordance with point 2.1, if applicable adjusted pursuant to Annex II;

rVsg is the number of all new heavy-duty vehicles registered in the reference period in the vehicle sub-group sg, excluding vocational vehicles, in accordance with the second paragraph of Article 1;

PLsg is the average payload of vehicles in the vehicle sub-group sg as determined in point 2.5.

3.  The specific CO2 emissions target of a manufacturer referred to in Article 6

For each manufacturer and each reporting period, from 1 July 2025 onwards, the specific CO2 emissions target T shall be calculated as follows:

T = ∑ sg sharesg × MPWsg × (1 - rf) × rCO2sg

where,

sg is the sum over all vehicle sub-groups;

sharesg is the share of new heavy-duty vehicles in the vehicle sub-group sg as determined in point 2.4;

MPWsg is the mileage and payload weighting factor as determined in point 2.6;

rf is the CO2 emissions reduction target (in %) applicable in that specific reporting period;

rCO2sg is the reference CO2 emissions as determined in point 3.

4.  Emission credits and emission debts referred to in Article 7

4.1.  CO2 emissions reduction trajectory for emission credits

For each manufacturer and each reporting period of the years Y from 2019 to 2030, a CO2 emissions reduction trajectory (ETY) is defined as follows:

ETY = sg sharesg × MPWsg × R-ETY × rCO2sg

where,

sg (…) is the sum over all vehicle sub-groups;

share,sg is the share of new heavy-duty vehicles in the vehicle sub-group sg as determined in point 2.4;

MPWsg is the mileage and payload weighting factor as determined point 2.6;

rCO2sg is the reference CO2 emissions as determined in point 3;

where,

for the reporting periods of the years Y from 2019 to 2025:

R-ETY, = (1-rf2025)+ rf2025 × (2025 – Y)/6

and, for the reporting periods of the years Y from 2026 to 2030:

R-ETY = (1-rf2030 ) + (rf2030 - rf2025) × (2030 – Y)/5

rf2025 and rf2030 are the CO2 emissions reduction targets (in %) applicable for the reporting periods of the years 2025 and 2030, respectively.

4.2.  Emission credits and emission debts in each reporting period

For each manufacturer and each reporting period of the years Y from 2019 to 2029, the emission credits (cCO2Y) and emission debts (dCO2Y) shall be calculated as follows:

If CO2Y < ETY:

cCO2Y = (ETY – CO2Y) × Vy and

dCO2Y = 0

If CO2Y > TY for the years 2025 to 2029:

dCO2Y = (CO2Y - TY) × VY and

cCO2Y = 0

In all other cases dCO2Y and cCO2Y are set to 0.

where,

ETY is the manufacturer’s CO2 emissions reduction trajectory in the reporting period of the year Y determined in accordance with point 5.1;

CO2Y is the average specific CO2 emissions of the manufacturer in the reporting period of the year Y determined in accordance with point 2.7;

TY is the manufacturer specific CO2 emissions target in the reporting period of the year Y determined in accordance with point 4;

VY is the number of new heavy-duty vehicles of the manufacturer in the reporting period of the year Y, excluding vocational vehicles, in accordance with point (a) of the first paragraph of Article 4.

4.3.  Emission debt limit

For each manufacturer the emission debt limit (limCO2) is defined as follows:

limCO2 = T2025 × 0,05 × V2025

where,

T2025 is the manufacturer specific CO2 emissions target in the reporting period of the year 2025 determined in accordance with point 4;

V2025 is the number of new heavy-duty vehicles of the manufacturer in the reporting period of the year 2025, excluding vocational vehicles, in accordance with point (a) of the first paragraph of Article 4.

4.4.  Emission credits acquired before the year 2025

Emission debts acquired for the reporting period of the year 2025 shall be reduced by an amount (redCO2) corresponding to the emission credits acquired prior to that reporting period, which is determined for each manufacturer as follows:

20190418-P8_TA-PROV(2019)0426_EN-p0000014.png

where,

min is the minimum of the two values mentioned between the brackets;

is the sum over the reporting periods of the years Y from 2019 to 2024;

dCO22025 is the emission debts for reporting period of the year 2025 as determined in accordance with point 5.2;

cCO2Y is the emission credits for the reporting period of the year Y as determined in accordance with point 5.2.

5.  A manufacturer’s excess CO2 emissions referred to in Article 8(2)

For each manufacturer and each reporting period from the year 2025 onwards, the value of the excess CO2 emissions (exeCO2Y) shall be calculated as follows, if the value is positive:

For the reporting period of the year 2025

20190418-P8_TA-PROV(2019)0426_EN-p0000016.png

For the reporting periods of the years Y from 2026 to 2028

20190418-P8_TA-PROV(2019)0426_EN-p0000017.png

For the reporting period of the year 2029

20190418-P8_TA-PROV(2019)0426_EN-p0000018.png

For the reporting periods of the years Y from 2030 onwards

exeCO2y = (CO2Y - TY) x VY

where,

is the sum over the reporting periods of the years Y from 2019 to 2025;

is the sum over the reporting periods of the years I from 2025 to the year Y;

is the sum over the reporting periods of the years J from 2025 to the year (Y-1);

is the sum over the reporting periods of the years J from 2025 to 2028;

is the sum over the reporting periods of the years I from 2025 to 2029;

dCO2Y is the emission debts for the reporting period of the year Y as determined in accordance with point 5.2;

cCO2Y is the emission credits for the reporting period of the year Y as determined in accordance with point 5.2;

limCO2 is the emission debt limit as determined in accordance with point 5.3;

redCO2 is the reduction of emission debts of the reporting period of the year 2025 as determined in accordance with 5.4.

In all other cases the value of the excess CO2 emissions exeCO2Y shall be set to 0.

ANNEX II

Adjustment procedures

1.  Payload adjustment factors referred to in point (c) of Article 14(1)

Subject to point (a) of Article 11(2), for the purposes of calculating the reference CO2 emissions referred to in the second paragraph of Article 1, the mission profile weights and payload values applicable in the reporting period when the changes referred to in point (c) of Article 14(1) take effect for all new heavy-duty vehicles shall be used and the CO2 emissions in g/km of a heavy-duty vehicle v determined for a mission profile mp referred to in Table 2 in point 2.1 of Annex I shall be adjusted as follows:

CO2v,mp = CO2(RP)v,mp x (1+ PLasg,mp x (PLsg,mp – PL(RP)sg,mp))

where,

sg is the vehicle sub-group to which the vehicle v belongs;

CO2(RP)v,mp is the specific CO2 emissions of vehicle v in g/km, as determined on mission profile mp and based on the monitoring data for the reference period as reported in accordance with Regulation (EU) 2018/956;

PL(RP)sg, mp is the payload value, which was attributed to vehicle v in the vehicle sub-group sg on the mission profile mp in the reference period, in accordance with Table 3 of point 2.5 of Annex I, for the purposes of establishing the monitoring data for the reference period as reported in accordance with Regulation (EU) 2018/956;

PLsg, mp is the payload value attributed to vehicles in the vehicle sub-group sg on the mission profile mp in the reporting period when the changes referred to in point (c) of Article 14(1) take effect for all new heavy-duty vehicles, in accordance with Table 3 of point 2.5 of Annex I;

PLasg, mp is the payload adjustment factor defined in Table 5.

Table 5 - Payload adjustment factors PLa sg, mp

PLasg,mp

(in 1/tonnes)

Mission profiles mp1

RDL, RDR

REL, RER

LHL, LHR

LEL, LER

UDL, UDR

Vehicle

sub-

groups sg

4-UD

0,026

N.A.

0,015

N.A.

0,026

4-RD

4-LH

5-RD

0,022

0,022

0,017

0,017

0,022

5-LH

9-RD

0,026

0,025

0,015

0,015

0,026

9-LH

10-RD

0,022

0,021

0,016

0,016

0,022

10-LH

1 see mission profile definitions in point 2.1 of Annex I.

2.  Adjustment factors referred to in Article point (b) of article 11(2)

Subject to point (b) of Article 11(2), for the purposes of calculating the reference CO2 emissions referred to in the second paragraph of Article 1, the mission profile weights and payload values applicable in the reporting period when the changes referred to in point (c) of Article 14(1) take effect for all new heavy-duty vehicles shall be used and the CO2 emissions in g/km of a heavy-duty vehicle v determined for a mission profile mp referred to in point 2.1 of Annex I shall be adjusted as follows:

CO2v,mp = CO2(RP)v,mp x (∑ r s r,sg x CO2 r,mp )/ (∑ r s r,sg x CO2(RP)r,mp )

where,

r is the sum over all representative vehicles r for the vehicle sub-group sg;

sg is the vehicle sub-group to which the vehicle v belongs;

s r,sg is the statistical weight of the representative vehicle r in the vehicle sub-group sg;

CO2(RP)v,mp is the specific CO2 emissions of vehicle v in g/km, as determined on mission profile mp and based on the monitoring data of the reference period as reported in accordance with Regulation (EU) 2018/956;

CO2(RP)r,mp is the specific CO2 emissions of the representative vehicle r in g/km, as determined on mission profile mp in accordance with Regulation (EC) No 595/2009 and its implementing measures in the reference period when CO2(RP)v,mp was determined;

CO2r,mp is the specific CO2 emissions of the representative vehicle r, as determined on mission profile mp in accordance with Regulation (EC) No 595/2009 and its implementing measures in the reporting period when the changes referred to in Article 14(2) of this Regulation take effect for all new heavy-duty vehicles.

The representative vehicle r shall be defined in accordance with the methodology referred to in Article 14(3) of this Regulation.

ANNEX TO THE LEGISLATIVE RESOLUTION

Statement by the Commission

The Commission is pursuing the technical development of the Vehicle Energy Consumption Calculation Tool (VECTO) with a view of updating it regularly and in a timely manner, in the light of innovation and to take account of the implementation of new technologies improving the fuel efficiency of heavy-duty vehicles.

(1) OJ C 62, 15.2.2019, p. 286.
(2) This position replaces the amendments adopted on 14 November 2018 (Texts adopted, P8_TA(2018)0455).
(3)OJ C 62, 15.2.2019, p. 286.
(4) Position of the European Parliament of 18 April 2019.
(5)Regulation (EU) 2019/… of the European Parliament and of the Council of … setting CO2 emission performance standards for new passenger cars and for light commercial vehicles and repealing Regulations (EC) No 443/2009 and (EU) No 510/2011 (OJ L, …,…, p. ).
(6)+ OJ: please insert in the text the number of the Regulation contained in document 2017/0293 (COD) - pe 6/19, and complete the corresponding footnote.
(7) Regulation (EU) 2018/842 of the European Parliament and of the Council of 30 May 2018 on binding annual greenhouse gas emission reductions by Member States from 2021 to 2030 contributing to climate action to meet commitments under the Paris Agreement and amending Regulation (EU) No 525/2013 (OJ L 156, 19.6.2018, p. 26).
(8)Regulation (EC) No 595/2009 of the European Parliament and of the Council of 18 June 2009 on type-approval of motor vehicles and engines with respect to emissions from heavy-duty vehicles (Euro VI) and on access to vehicle repair and maintenance information and amending Regulation (EC) No 715/2007 and Directive 2007/46/EC and repealing Directives 80/1269/EEC, 2005/55/EC and 2005/78/EC (OJ L 188, 18.7.2009, p.1).
(9)Commission Regulation (EU) 2017/2400 of 12 December 2017 implementing Regulation (EC) No 595/2009 of the European Parliament and of the Council as regards the determination of the CO2 emissions and fuel consumption of heavy-duty vehicles and amending Directive 2007/46/EC of the European Parliament and of the Council and Commission Regulation (EU) No 582/2011 (OJ L 349, 29.12.2017, p. 1).
(10) Regulation (EU) 2018/956 of the European Parliament and of the Council of 28 June 2018 on the monitoring and reporting of CO2 emissions from and fuel consumption of new heavy-duty vehicles (OJ L 173, 9.7.2018, p. 1).
(11)Directive 2009/33/EC of the European Parliament and of the Council of 23 April 2009 on the promotion of clean and energy-efficient road transport vehicles (OJ L 120, 15.5.2009, p. 5).
(12) Regulation (EC) No 443/2009 of the European Parliament and of the Council of 23 April 2009 setting emission performance standards for new passenger cars as part of the Community's integrated approach to reduce CO2 emissions from light-duty vehicles (OJ L 140, 5.6.2009, p. 1).
(13)+ OJ: please insert in the text the number of the Regulation contained in document 2017/0293 (COD) - pe 6/19.
(14) Regulation (EU) 2018/858 of the European Parliament and of the Council of 30 May 2018 on the approval and market surveillance of motor vehicles and their trailers, and of systems, components and separate technical units intended for such vehicles, amending Regulations (EC) No 715/2007 and (EC) No 595/2009 and repealing Directive 2007/46/EC (OJ L 151, 14.6.2018, p. 1).
(15)Regulation (EU) No 182/2011 of the European Parliament and of the Council of 16 February 2011 laying down the rules and general principles concerning mechanisms for control by Member States of the Commission’s exercise of implementing powers (OJ L, 55, 28.2.2011, p. 13).
(16)OJ L 123, 12.5.2016, p. 1.
(17) Council Directive 96/53/EC of 25 July 1996 laying down for certain road vehicles circulating within the Community the maximum authorized dimensions in national and international traffic and the maximum authorized weights in international traffic (OJ L 235 17.9.1996, p. 59).
(18) Regulation (EU) No 510/2011 of the European Parliament and of the Council of 11 May 2011 setting emission performance standards for new light commercial vehicles as part of the Union's integrated approach to reduce CO2 emissions from light-duty vehicles (OJ L 145, 31.5.2011, p. 1).
(19) Directive 2007/46/EC of the European Parliament and of the Council of 5 September 2007 establishing a framework for the approval of motor vehicles and their trailers, and of systems, components and separate technical units intended for such vehicles (Framework Directive) (OJ L 263, 9.10.2007, p. 1).
(20) Regulation (EC) No 715/2007 of the European Parliament and of the Council of 20 June 2007 on type approval of motor vehicles with respect to emissions from light passenger and commercial vehicles (Euro 5 and Euro 6) and on access to vehicle repair and maintenance information (OJ L 171, 29.6.2007, p. 1).
(21) Directive (EU) 2018/2001 of the European Parliament and of the Council of 11 December 2018 on the promotion of the use of energy from renewable sources (OJ L 328, 21.12.2018, p. 82).
(22)+ OJ: please insert in the text the number of the Regulation contained in document 2017/0293 (COD) - pe 6/19.
(23) Regulation (EU) 2018/1999 of the European Parliament and of the Council of 11 December 2018 on the Governance of the Energy Union and Climate Action, amending Regulations (EC) No 663/2009 and (EC) No 715/2009 of the European Parliament and of the Council, Directives 94/22/EC, 98/70/EC, 2009/31/EC, 2009/73/EC, 2010/31/EU, 2012/27/EU and 2013/30/EU of the European Parliament and of the Council, Council Directives 2009/119/EC and (EU) 2015/652 and repealing Regulation (EU) No 525/2013 of the European Parliament and of the Council (OJ L 328, 21.12.2018, p. 1).
(24)+ OJ: please insert in the text the number of the Regulation contained in this document (2018/0143(COD) - pe 60/19), and complete the corresponding footnote.
(25)+ OJ: please insert in the text the number of the Regulation contained in this document (2018/0143(COD) - pe 60/19), and complete the corresponding footnote.
(26)+ OJ: please insert in the text the number of the Regulation contained in this document (2018/0143(COD) - pe 60/19), and complete the corresponding footnote.


Promotion of clean and energy-efficient road transport vehicles ***I
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Resolution
Consolidated text
European Parliament legislative resolution of 18 April 2019 on the proposal for a directive of the European Parliament and of the Council amending Directive 2009/33/EU on the promotion of clean and energy-efficient road transport vehicles (COM(2017)0653 – C8-0393/2017 – 2017/0291(COD))
P8_TA-PROV(2019)0427A8-0321/2018

(Ordinary legislative procedure: first reading)

The European Parliament,

–  having regard to the Commission proposal to Parliament and the Council (COM(2017)0653),

–  having regard to Article 294(2) and Article 192 of the Treaty on the Functioning of the European Union, pursuant to which the Commission submitted the proposal to Parliament (C8‑0393/2017),

–  having regard to Article 294(3) of the Treaty on the Functioning of the European Union,

–  having regard to the opinion of the European Economic and Social Committee of 19 April 2018(1),

–  having regard to the opinion of the Committee of the Regions of 5 July 2018(2),

–  having regard to the provisional agreement approved by the committee responsible under Rule 69f(4) of its Rules of Procedure and the undertaking given by the Council representative by letter of 20 February 2019 to approve Parliament’s position, in accordance with Article 294(4) of the Treaty on the Functioning of the European Union,

–  having regard to Rule 59 of its Rules of Procedure,

–  having regard to the report of the Committee on the Environment, Public Health and Food Safety and the opinion of the Committee on Transport and Tourism (A8-0321/2018),

1.  Adopts its position at first reading hereinafter set out(3);

2.  Calls on the Commission to refer the matter to Parliament again if it replaces, substantially amends or intends to substantially amend its proposal;

3.  Instructs its President to forward its position to the Council, the Commission and the national parliaments.

Position of the European Parliament adopted at first reading on 18 April 2019 with a view to the adoption of Directive (EU) 2019/… of the European Parliament and of the Council amending Directive 2009/33/EC on the promotion of clean and energy-efficient road transport vehicles

P8_TC1-COD(2017)0291


(Text with EEA relevance)

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the Functioning of the European Union, and in particular Article 192(1) thereof,

Having regard to the proposal from the European Commission,

After transmission of the draft legislative act to the national parliaments,

Having regard to the opinion of the European Economic and Social Committee(4),

Having regard to the opinion of the Committee of the Regions(5),

Acting in accordance with the ordinary legislative procedure(6),

Whereas:

(1)  In accordance with the conclusions of the European Council of 23-24 October 2014, the Union is committed to a sustainable, competitive, secure and decarbonised energy system. The Commission’s Communication of 22 January 2014 entitled ‘A policy framework for climate and energy for the period from 2020 to 2030’ establishes ambitious commitments for the Union to further reduce greenhouse gas emissions by at least 40 % by 2030 as compared to 1990 levels, to increase the proportion of renewable energy consumed to at least 27 %, to make energy savings of at least 27 %, and to improve the Union’s energy security, competitiveness and sustainability. Since then, Directive (EU) 2018/2001 of the European Parliament and of the Council(7) set out a share of energy from renewable sources of at least 32 % of the Union’s gross final consumption of energy by 2030, and Directive (EU) 2018/2002 of the European Parliament and of the Council(8) set out a new energy efficiency target for the Union by 2030 of at least 32,5 %.

(2)  In its Communication of 20 July 2016 entitled ‘A European Strategy for Low-Emission Mobility’ the Commission announced that in order to meet the Union's commitments pledged at the 21st Conference of the Parties to the United Nations Framework Convention on Climate Change held in Paris in 2015, the decarbonisation of the transport sector must be accelerated and that therefore greenhouse gas emissions and air pollutant emissions from transport will need to be firmly on the path towards zero by mid-century. Moreover, emissions of air pollutants from transport that are harmful to health and the environment need to be significantly reduced without delay. That can be achieved by an array of policy initiatives, including measures that support a shift towards public transport and the use of public procurement to promote clean vehicles.

(3)  In its Communication of 31 May 2017 entitled ‘Europe on the Move: an agenda for a socially fair transition towards clean, competitive and connected mobility for all’ the Commission underlines that increased production and uptake of clean vehicles, alternative fuels infrastructure and new mobility services which take advantage of digitalisation and automation in the Union offer multiple benefits to Union citizens, Member States and industries. Those benefits include safer and seamless mobility solutions and the reduction of exposure to harmful pollutant emissions. Furthermore, as stated in the State of the Union address of 13 September 2017, one of the main objectives for the Union is to become a world leader in decarbonisation.

(4)  As was announced in the Commission's Communication ‘Europe on the Move’, this Directive forms part of a second package of proposals, which will contribute to the Union's drive towards low-emission mobility. That package, which was presented in the Commission's Communication of 8 November 2017 entitled ‘Delivering on low-emission mobility - A European Union that protects the planet, empowers its consumers, and defends its industry and workers” includes a combination of supply- and demand-oriented measures to put the Union on a path towards low-emission mobility and at the same time strengthen the competitiveness of the Union's mobility eco-system. The promotion of clean vehicles should take place in parallel with the further development of public transport, as a way to reduce road congestion and consequently to reduce emissions and improve air quality.

(5)  Innovation in new technologies helps to lower vehicle CO2 emissions and to reduce air and noise pollution, while supporting the decarbonisation of the transport sector. An increased uptake of low- and zero-emission road vehicles will reduce CO2 emissions and certain pollutant emissions (particulate matter, nitrogen oxides and non-methane hydrocarbons) and thus improve the air quality in cities and other polluted areas, while contributing to ▌ the competitiveness and growth of Union industry in the increasing global markets for low- and zero-emission vehicles. The Commission should pursue policy measures to foster widespread industrial uptake of and the growth of manufacturing capacity for such new technologies in all Member States in order to contribute to a level-playing field and a balanced development across Member States.

(6)  Market forecasts estimate that the purchase prices of clean vehicles will continue to fall. Lower operational and maintenance costs already contribute towards competitive total cost of ownership. The expected reduction of purchase prices will further reduce barriers to market availability and uptake of clean vehicles in the next decade.

(7)  While the Union is one of the leading regions for research and high value eco‑innovation, the Asia-Pacific region hosts the largest producers of battery electric buses and batteries. Similarly, global market developments in battery electric vehicles are driven by markets in China and the United States. An ambitious Union policy on the procurement of clean vehicles will help to stimulate innovation and further promote competitiveness and growth of the Union industry in the increasingly global markets for clean vehicles and associated technology infrastructure. As noted in its Communication of 3 October 2017 entitled ‘Making public procurement work in and for Europe’, the Commission will continue to lead efforts to ensure a level playing field and promote better access to third countries’ public procurement markets, including for the purchase, leasing, rental or hire-purchase of road transport vehicles.

(8)  Taking into account that public expenditure on goods, works and services represented approximately 16 % of GDP in 2018, public authorities, through their public procurement policy, can foster and support markets for innovative goods and services. In order to achieve that goal, Directive 2009/33/EC of the European Parliament and of the Council(9) should set out clear and transparent requirements, including clear, long‑term procurement targets and a simple method for their calculation. Directives 2014/24/EU(10) and 2014/25/EU(11) of the European Parliament and of the Council set out minimum public procurement rules which coordinate the way contracting authorities and contracting entities procure works, supplies and services. In particular, those Directives set out overall monetary thresholds for determining which public contracts are to be subject to Union public procurement legislation. Those thresholds are also applicable to ▌ Directive 2009/33/EC.

(9)  The availability of sufficient recharging and refuelling infrastructure is necessary for the deployment of alternative fuel vehicles. On 8 November 2017, the Commission adopted an action plan to support the accelerated roll-out of alternative fuels infrastructure in the Union, including strengthened support to the roll-out of publicly available infrastructure by means of Union funds, helping to create more favourable conditions for the transition towards clean vehicles, including in public transport. The Commission will review the implementation of Directive 2014/94/EU of the European Parliament and of the Council(12) by 31 December 2020, and will submit a legislative proposal to amend that Directive, if it considers it necessary on the basis of that review.

(10)  Directive 2009/33/EC complements the horizontal public procurement legislation of the Union and adds sustainability criteria, thereby aiming to stimulate the market for clean and energy efficient road transport vehicles. The Commission carried out an ex-post evaluation of Directive 2009/33/EC in 2015 and concluded that that Directive did not trigger a market uptake of clean vehicles across the Union, in particular due to shortcomings as regards its scope and the provisions on vehicle purchase. That evaluation concluded that the impact of that Directive has been very limited in reducing greenhouse gas and air pollutant emissions and in promoting industry competitiveness.

(11)  The impact assessment carried out by the Commission on the revision of Directive 2009/33/EC underlines the benefits of changing the overall governance approach to clean vehicle procurement at Union level. Setting minimum procurement targets can effectively help to reach the objective of promoting and stimulating the market uptake of clean vehicles in comparison to relying on the internalisation of external cost into overall procurement decisions, while noting the relevance of considering environmental aspects in all procurement decisions. The medium and long-term benefits for Union citizens and enterprises fully justify that approach insofar as it leaves sufficient flexibility to contracting authorities and contracting entities in the choice of the technologies to be used.

(12)  Extending the scope of Directive 2009/33/EC by including practices such as lease, rental and hire-purchase of vehicles, as well as contracts for certain services, ensures that all relevant procurement practices are covered. The services covered by the scope of this Directive, such as public road transport services, special purpose road transport passenger services, non-scheduled passenger transport, as well as specific mail and parcel services and refuse collection services, should be those where the vehicles that are used for the provision of these services fall within the vehicle categories covered by this Directive, and where they represent a major element in the contract. Those services should be identified using their respective Common Procurement Vocabulary codes listed in the Annex. Existing contracts should not be retrospectively affected by this Directive.

(13)  There is widespread support from key stakeholders for a definition of clean vehicles which takes into account the requirements for the reduction of greenhouse gases and air pollutant emissions from light-duty vehicles. To ensure that there are adequate incentives to promote market uptake of low- and zero-emission vehicles in the Union, provisions for their public procurement under this Directive should be aligned with the definition of zero- and low-emission vehicles provided for in Regulation (EU) 2019/... of the European Parliament and of the Council(13)(14). Action carried out under this Directive will contribute to compliance with the requirements of the standards laid down in Regulation (EU) 2019/…(15). ▌ In order to improve air quality, clean vehicles should perform better compared to the minimum requirements for nitrogen oxides (NOx) and for ultrafine particles - Particle Number (PN) set by the real-driving emission (RDE) limit values in force. In addition to zero-emission vehicles, today there are few light-duty vehicles with air pollutant emissions of 80 % or less of the current emission limits. The number of such vehicles, however, is expected to increase in the coming years, especially plug-in hybrids. A more ambitious approach for public procurement can provide a significant additional market stimulus.

(14)  Clean heavy-duty vehicles should be defined through the use of alternative fuels in line with Directive 2014/94/EU. Where liquid biofuels, synthetic or paraffinic fuels are to be used by procured vehicles, contracting authorities and contracting entities have to ensure, through mandatory contract clauses or through similarly effective means within the public procurement procedure, that only such fuels are to be used in those vehicles. While it is possible for those fuels to contain fuel additives, as is the case for example with ethanol-based fuel for adapted diesel engines (ED95), they should not be blended with fossil fuels.

(15)  In order to improve air quality in municipalities, it is crucial to renew the transport fleet with clean vehicles. Furthermore, the principles of the circular economy require the extension of product life. Therefore, vehicles that meet the clean vehicles or zero-emission vehicles requirements as a result of retrofitting should also be counted towards the achievement of the respective minimum procurement targets.

(16)  Light-duty and heavy-duty vehicles are used for different purposes and have different levels of market maturity, and it would be beneficial that public procurement provisions acknowledge those differences. The impact assessment ▌ recognised that markets for low- and zero-emission urban buses are characterised by increased market maturity, whereas markets for low- and zero-emission trucks are at an earlier stage of market development. Due to the limited level of market maturity of low- and zero-emission coaches, the relatively limited role of public procurement in this market segment and their specific operational requirements, coaches should not be included in the scope of this Directive. In line with the approach followed in Regulation (EC) No 661/2009 of the European Parliament and of the Council(16) and United Nations Economic Commission for Europe (UNECE) Regulation 107, vehicles of category M3 with areas for standing passengers to allow for frequent passenger movement are considered to be buses, while vehicles of category M3 with very limited or no area for standing passengers are considered to be coaches. Given the very limited market for double-decker buses and their specific design limitations, it is appropriate to apply, during the first reference period covered by this Directive, lower minimum procurement targets for zero-emission vehicles belonging to that category of heavy‑duty vehicles in Member States where double-decker buses represent a significant share of public procurement.

(17)  In order to avoid imposing disproportionate burdens on public authorities and operators, Member States should be able to exempt from the requirements of this Directive the public procurement of certain vehicles with specific characteristics linked to their operational requirements. Those vehicles include armoured vehicles, ambulances, hearses, wheelchair accessible vehicles of category M1, mobile cranes, vehicles designed and constructed for use principally on construction sites or in quarries, port or airport facilities, as well as vehicles specifically designed and constructed or adapted for use by the armed forces, civil protection, fire services and forces responsible for maintaining public order. Such adaptations may relate to the installation of specialised communications equipment or emergency lights. The requirements provided for in this Directive should not apply to vehicles that are designed and constructed specifically to perform works and which are not suitable for carrying passengers or for transporting goods. Those vehicles include vehicles for road maintenance such as snow ploughs.

(18)  Setting minimum targets for the procurement of clean vehicles to be met in two reference periods ending in 2025 and in 2030 at Member State level should contribute to policy certainty for markets where investment in low- and zero-emission mobility is needed. The minimum targets support market creation for clean vehicles throughout the Union. They provide time for the adjustment of public procurement processes and give a clear market signal. Moreover, requiring half of the minimum target for the buses procured in those reference periods to be fulfilled through the procurement of zero-emission buses strengthens the commitment to decarbonisation of the transport sector. It should be noted that trolley buses are considered to be zero-emission buses, provided that they run only on electricity or that they use only a zero-emission powertrain when they are not connected to the grid, otherwise they still count as clean vehicles. The impact assessment notes that Member States increasingly set targets depending on their economic capacity and on the seriousness of the problem. Different targets should be set for different Member States in accordance with their economic capacity (Gross Domestic Product per capita) and exposure to pollution (urban population density). ▌ The territorial impact assessment conducted for this Directive illustrated that the impact will be evenly distributed among regions in the Union.

(19)  Member States should have the flexibility to distribute efforts to meet the minimum targets within their territory, in accordance with their constitutional framework and in line with their transport policy objectives. In the allocation of efforts within a Member State, different factors could be taken into account, such as differences in economic capacity, air quality, population density, characteristics of the transport systems, policies to decarbonise transport and reduce air pollution, or any other relevant criteria.

(20)  Vehicles with zero emissions at the tail-pipe also leave an environmental footprint due to the emissions deriving from the fuel supply chain, from the extraction phase to the tank, as well as due to the process of manufacture of the components and their level of recyclability. In order to be consistent with the objectives of sustainability, batteries should be produced with the minimum environmental impact inside and outside the Union, in particular regarding the process of extraction of the raw materials to be used in the production of the batteries. The promotion of technologies that address that challenge, such as sustainable and recyclable batteries, can contribute to the overall sustainability of electric vehicles through initiatives such as the EU Battery Alliance and the EU Battery Action Plan and in the context of the review of Directive 2006/66/EC of the European Parliament and of the Council(17). The possible reflection of life cycle CO2 emissions and of well-to-wheel CO2 emissions of vehicles should be considered for the period after 2030, taking into account relevant provisions of Union law on their calculation at that point in time.

(21)  In its recommendation of 4 April 2017 to the Council and the Commission following the inquiry into emission measurements in the automotive sector(18), the European Parliament called on Member States to foster green public procurement policies through the purchasing of zero-emission vehicles and ultra-low emission vehicles by public authorities for their own fleets or for public or semi-public car-sharing programmes, and for the phasing out of new CO2-emitting cars by 2035.

(22)  The maximum impact can be achieved if public procurement of clean vehicles is targeted in areas that have a relatively high degree of air and noise pollution. Public authorities in Member States are encouraged to focus particularly on those areas when implementing domestic minimum procurement targets. Public authorities are also encouraged to take measures, such as making available sufficient financial resources to contracting authorities and contracting entities, to avoid that the costs of compliance with the minimum procurement targets established in this Directive lead to higher ticket prices for consumers or to a reduction in public transport services, or discourage the development of non-road clean transport such as trams and metro trains. Public authorities should reflect related action in their reporting under this Directive. In order to avoid a disproportionate burden and optimise the potential results of this Directive, appropriate technical assistance should be provided to public authorities.

(23)  Public transport only contributes to a small share of the emissions originating from the transport sector. In order to further promote transport decarbonisation, improve air quality and maintain a level playing field between different operators, Member States can, in compliance with Union law, decide to impose similar requirements also on private operators and services outside the scope of this Directive, such as taxi, car rental and ride-pooling companies.

(24)  Life-cycle costing is an important tool for contracting authorities and contracting entities to cover energy and environmental costs during the life-cycle of a vehicle, including the cost of greenhouse gas emissions and other pollutant emissions on the basis of a relevant methodology to determine their monetary value. Given the scarce use of the methodology for the calculation of operational lifetime costs under Directive 2009/33/EC and the information provided by contracting authorities and contracting entities on the use of own methodologies tailored to their specific circumstances and needs, no mandatory methodology should be required to be used, but contracting authorities and contracting entities should be able to choose any life-cycle costing methodology in order to support their procurement processes on the basis of the most economically advantageous tender (‘MEAT’) criteria as described in Article 67 of Directive 2014/24/EU and Article 82 of Directive 2014/25/EU, taking into account cost-effectiveness over the lifetime of the vehicle, as well as environmental and social aspects.

(25)  Reporting on public procurement under this Directive should provide a clear market overview to enable effective monitoring of ▌ its implementation. Such reporting should start with a preliminary submission of information by Member States to the Commission by …[36 months after the date of entry into force of this amending Directive], and continue with a first comprehensive report on the implementation of the minimum procurement targets in 2026 and every three years thereafter. The timeframe should be aligned with existing reporting obligations under Directives 2014/24/EU and 2014/25/EU. To minimise the administrative burden on public bodies and establish an effective market overview, simplified reporting should be facilitated. The Commission will provide solutions for the registration and monitoring under the Tenders Electronic Daily database, and will ensure comprehensive reporting on low- and zero-emission vehicles and other alternative fuels vehicles within the context of the Common Procurement Vocabulary of the Union. Specific codes in the Common Procurement Vocabulary will help the registration and monitoring under the Tenders Electronic Daily database.

(26)  Further support for market uptake of clean vehicles and their infrastructure can be achieved by providing targeted public support measures at national and Union level. Such measures include the increased use of Union funds to support the renewal of public transport fleets and better exchange of knowledge and alignment of procurement to enable actions at a scale great enough for cost reductions and market impact. The possibility of public support in favour of promoting the development of infrastructure necessary for the distribution of alternative fuels is recognised in the Guidelines on State aid for environmental protection and energy 2014-2020(19). However, the Treaty on the Functioning of the European Union, and in particular Articles 107 and 108 thereof, will continue to apply to such public support.

(27)  Targeted support measures for the procurement of clean vehicles can help contracting authorities and contracting entities. Under the current Multiannual Financial Framework (MFF) for 2014-2020, the Union already possesses an array of different funds to support Member States, local authorities and the operators concerned in their transition to sustainable mobility. In particular, the European Structural and Investment Funds are a key source of financing for urban mobility projects. Horizon 2020, the Union's research programme, established by Regulation (EU) No 1291/2013 of the European Parliament and of the Council(20), funds research and innovation projects on urban mobility and smart cities and communities, while the Connecting Europe Facility, established by Regulation (EU) No 1316/2013 of the European Parliament and of the Council(21), devotes support to deployment of relevant infrastructure in urban nodes. The introduction of a clean vehicle definition and the setting of minimum targets for their procurement in this Directive can help ensure even better targeted use of Union financial instruments including in the next MFF for 2021-2027. Those support measures will help to reduce the initial high investment in infrastructural changes and will support the decarbonisation of transport.

(28)  In order to help ensure that the potential benefits are fully exploited, the Commission should provide guidance to Member States with regard to the different Union funds that might be used, and should facilitate and structure the exchange of knowledge and best practices between Member States in order to promote the purchase, lease, rent or hire-purchase of clean and energy-efficient road transport vehicles by contracting authorities and contracting entities. The Commission should also continue to provide technical and financial advisory services to local authorities and operators through instruments such as the European Investment Advisory Hub, JASPERS and JESSICA. Such assistance should include encouraging contracting authorities and contracting entities to pool their resources in the joint procurement of low emission and energy-efficient road transport vehicles, in order to achieve economies of scale and facilitate the achievement of the objectives of this Directive.

(29)  In order to maximise the impact of investments, mobility and urban planning need to be better coordinated, such as through the use of sustainable urban mobility plans (SUMPs). SUMPs are plans that are developed across individual policy areas and in cooperation with different levels of governance combining different transport modes, road safety, freight delivery, mobility management and intelligent transport systems. SUMPs can play an important role in achieving the Union’s targets regarding reductions of CO2 emissions, noise and air pollution.

(30)  In order to ensure uniform conditions for the implementation of this Directive, implementing powers should be conferred on the Commission in relation to setting out the common format for the reports from Member States and their transmission arrangements. Those powers should be exercised in accordance with Regulation (EU) No 182/2011 of the European Parliament and of the Council(22).

(31)  By 31 December 2027, the Commission should review the implementation of Directive 2009/33/EC. That review should be accompanied, where appropriate, by a legislative proposal to amend that Directive for the period after 2030, including for the setting of new ambitious targets and the extension of the scope to other categories of vehicles, such as L-category vehicles and construction site machinery. In its review, the Commission should also assess, inter alia, the possibility of aligning this Directive to any methodology for counting life-cycle CO2 emissions and well-to-wheel CO2 emissions developed in the context of EU vehicle CO2 emission performance standards, as well as the possibility of promoting sustainable and recyclable batteries, and the use of best-graded and retreated tyres.

(32)  Although minimum procurement targets set out in this Directive do not apply to the Union institutions, it is desirable for the Union institutions to lead by example.

(33)  Since the objectives of this Directive, namely to provide a demand-side stimulus for clean vehicles in support of a low-emission mobility transition, cannot be sufficiently achieved by the Member States alone, but can rather, by reason of a common and long-term policy framework and for reasons of scale be better achieved at Union level, the Union may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on the European Union. In accordance with the principle of proportionality, as set out in that Article, this Directive does not go beyond what is necessary in order to achieve those objectives.

(34)  In accordance with the Joint Political Declaration of 28 September 2011 of Member States and the Commission on explanatory documents(23), Member States have undertaken to accompany, in justified cases, the notification of their transposition measures with one or more documents explaining the relationship between the components of a Directive and the corresponding parts of national transposition instruments. With regard to this Directive, the legislator considers the transmission of such documents to be justified.

(35)  Directive 2009/33/EC should therefore be amended accordingly,

HAVE ADOPTED THIS DIRECTIVE:

Article 1

Amendments to Directive 2009/33/EC

Directive 2009/33/EC is amended as follows:

(1)  the title is replaced by the following:"

‘Directive 2009/33/EC on the promotion of clean road transport vehicles in support of low-emission mobility’;

"

(2)  Article 1 is replaced by the following:"

Article 1

Subject matter and objectives

This Directive requires Member States to ensure that contracting authorities and contracting entities take into account lifetime energy and environmental impacts, including energy consumption and emissions of CO2 and of certain pollutants, when procuring certain road transport vehicles with the objectives of promoting and stimulating the market for clean and energy-efficient vehicles and of improving the contribution of the transport sector to the environment, climate and energy policies of the Union.;

"

(3)  Article 2 is replaced by the following:"

Article 2

Exemptions

Member States may exempt from the requirements laid down in this Directive vehicles referred to in point (d) of Article 2(2) and in points (a) and (b) of Article 2(3) of Regulation (EU) 2018/858 of the European Parliament and of the Council* and in points 5.2. to 5.5. and point 5.7. of Part A of Annex I to that Regulation.

_____________

* Regulation (EU) 2018/858 of the European Parliament and of the Council of 30 May 2018 on the approval and market surveillance of motor vehicles and their trailers, and of systems, components and separate technical units intended for such vehicles, amending Regulations (EC) No 715/2007 and (EC) No 595/2009 and repealing Directive 2007/46/EC (OJ L 151, 14.6.2018, p. 1).;

"

(4)  Article 3 is replaced by the following:"

‘Article 3

Scope

1.  This Directive shall apply to procurement through:

   (a) contracts for the purchase, lease, rent or hire-purchase of road transport vehicles awarded by ▌ contracting authorities or contracting entities in so far as they are under an obligation to apply the procurement procedures set out in Directives 2014/24/EU* and 2014/25/EU** of the European Parliament and of the Council;
   (b) ▌ public service contracts within the meaning of Regulation (EC) No 1370/2007 of the European Parliament and of the Council*** having as their subject matter the provision of passenger road transport services in excess of a threshold which shall be defined by Member States not exceeding the applicable threshold value set in Article 5(4) of that Regulation;
   (c) ▌ service contracts ▌ set out in Table 1 of the Annex to this Directive in so far as the contracting authorities or contracting entities are under an obligation to apply the procurement procedures set out in Directives 2014/24/EU and 2014/25/EU ▌.

This Directive shall only apply to such contracts for which the call for competition has been sent after ... [24 months after the date of entry into force of this amending directive] or, in cases where a call for competition is not foreseen, where the contracting authority or contracting entity has commenced the procurement procedure after that date.

2.  This Directive shall not apply to:

   (a) vehicles referred to in points (a), (b) and (c) of Article 2(2) and in point (c) of Article 2(3) of Regulation(EU) 2018/858;
   (b) vehicles of category M3 other than Class I and Class A vehicles as defined in points (2) and (3) of Article 3 of Regulation (EC) No 661/2009 of the European Parliament and of the Council****.

_______________

* Directive 2014/24/EU of the European Parliament and of the Council of 26 February 2014 on public procurement and repealing Directive 2004/18/EC (OJ L 94, 28.3.2014, p. 65).

** Directive 2014/25/EU of the European Parliament and of the Council of 26 February 2014 on procurement by entities operating in the water, energy, transport and postal services sectors and repealing Directive 2004/17/EC (OJ L 94, 28.3.2014, p. 243).

*** Regulation (EC) No 1370/2007 of the European Parliament and of the Council of 23 October 2007 on public passenger transport services by rail and by road and repealing Council Regulations (EEC) Nos 1191/69 and 1107/70 (OJ L 315, 3.12.2007, p. 1).

**** Regulation (EC) No 661/2009 of the European Parliament and of the Council of 13 July 2009 concerning type-approval requirements for the general safety of motor vehicles, their trailers and systems, components and separate technical units intended therefor (OJ L 200, 31.7.2009, p. 1).;

"

(5)  Article 4 is replaced by the following:"

‘Article 4

Definitions

For the purpose of this Directive:

   (1) “contracting authorities means contracting authorities as defined in point 1 of Article 2(1) ▌ of Directive 2014/24/EU and in Article 3 of Directive 2014/25/EU;
   (2) “contracting entities means contracting entities as defined in Article 4 of Directive 2014/25/EU;
   (3) “road transport vehicle means a vehicle of category M or N, as defined in points (a) and (b) of Article 4(1) of Regulation (EU) 2018/858;
   (4) “clean vehicle means:
   (a) a vehicle of category M1, M2 or N1 ▌ with a maximum tail-pipe emission expressed in CO2 g/km and real driving pollutant emissions below a percentage of the applicable emission limits as laid down in Table 2 of the Annex, or;
   (b) a vehicle of category M3, N2 or N3 using alternative fuels as defined in points (1) and (2) of Article 2 of Directive 2014/94/EU of the European Parliament and of the Council*, excluding fuels produced from high indirect land-use change-risk feed stock for which a significant expansion of the production area into land with high-carbon stock is observed in accordance with Article 26 of Directive (EU) 2018/2001 of the European Parliament and of the Council**. In the case of vehicles using liquid biofuels, synthetic and paraffinic fuels, those fuels shall not be blended with conventional fossil fuels;

   (5) zero-emission heavy duty vehicle” means a clean vehicle as defined in point 4(b) of this Article without an internal combustion engine, or with an internal combustion engine that emits less than 1 g CO2/kWh as measured in accordance with Regulation (EC) No 595/2009 of the European Parliament and of the Council*** and its implementing measures, or that emits less than 1 g CO2/km as measured in accordance with Regulation (EC) No 715/2007 of the European Parliament and of the Council**** and its implementing measures.

_____________

* Directive 2014/94/EU of the European Parliament and of the Council of 22 October 2014 on the deployment of alternative fuels infrastructure (OJ L 307, 28.10.2014, p. 1).

** Directive (EU) 2018/2001 of the European Parliament and of the Council of 11 December 2018 on the promotion of the use of energy from renewable sources (OJ L 328, 21.12.2018, p. 82).

*** Regulation (EC) No 595/2009 of the European Parliament and of the Council of 18 June 2009 on type-approval of motor vehicles and engines with respect to emissions from heavy duty vehicles (Euro VI) and on access to vehicle repair and maintenance information and amending Regulation (EC) No 715/2007 and Directive 2007/46/EC and repealing Directives 80/1269/EEC, 2005/55/EC and 2005/78/EC (OJ L 188, 18.7.2009, p. 1).

**** Regulation (EC) No 715/2007 of the European Parliament and of the Council of 20 June 2007 on type approval of motor vehicles with respect to emissions from light passenger and commercial vehicles (Euro 5 and Euro 6) and on access to vehicle repair and maintenance information (OJ L 171, 29.6.2007, p. 1).;

"

(6)  Article 5 is replaced by the following:"

‘Article 5

Minimum procurement targets

1.  Member States shall ensure that the procurement of vehicles and services referred to in Article 3 complies with the minimum procurement targets for clean light-duty vehicles set out in Table 3 of the Annex and for clean heavy-duty vehicles set out in Table 4 of the Annex. Those targets are expressed as minimum percentages of clean vehicles in the total number of road transport vehicles covered by the aggregate of all contracts referred to in Article 3, awarded between … [24 months after the date of entry into force of this amending Directive] and 31 December 2025, for the first reference period, and between 1 January 2026 and 31 December 2030, for the second reference period.

2.  For the purpose of calculating the minimum procurement targets, the date of the public procurement to be taken into account is the date of completion of the public procurement procedure, by way of awarding of the contract.

3.  Vehicles that meet the definition of clean vehicle under point 4 of Article 4 or of zero‑emission heavy-duty vehicle under point 5 of Article 4 as a result of retrofitting may be counted as clean vehicles or zero-emission heavy-duty vehicles, respectively, for the purpose of compliance with the minimum procurement targets.

4.  In the case of contracts referred to in point (a) of Article 3(1), the number of road transport vehicles purchased, leased, rented or hire-purchased under each contract shall be taken into account for the purpose of assessing compliance with the minimum procurement targets.

5.  In the case of contracts referred to in points (b) and (c) of Article 3(1), the number of road transport vehicles to be used for the provision of the services covered by each contract shall be taken into account for the purpose of assessing compliance with the minimum procurement targets.

6.  Where new targets for the period after 1 January 2030 are not adopted, the targets set for the second reference period shall continue to apply, and shall be calculated in accordance with paragraphs 1 to 5, over subsequent five-year periods.

7.  Member States may apply or authorise their contracting authorities or contracting entities to apply higher national targets or more stringent requirements than those referred to in the Annex ▌.’;

"

(7)  Articles 6 and 7 are deleted;

(8)  Article 8 is replaced by the following:"

Article 8

Exchange of knowledge and best practices

The Commission shall facilitate and structure the exchange of knowledge and best practices between Member States on practices for promoting procurement of clean and energy-efficient road transport vehicles by contracting authorities and contracting entities.;

"

(9)  Article 9 is replaced by the following:"

Article 9

Committee procedure

1.  The Commission shall be assisted by the committee established by Article 9 of Directive 2014/94/EU.

That committee shall be a committee within the meaning of Regulation (EU) No 182/2011 of the European Parliament and of the Council*.

2.  Where reference is made to this paragraph, Article 5 of Regulation (EU) No 182/2011 shall apply. ▌

3.  Where the opinion of the committee is to be obtained by written procedure, that procedure shall be terminated without result when, within the time limit for delivery of the opinion, the chair of the committee so decides or a simple majority of committee members so request.

_______________

* Regulation (EU) No 182/2011 of the European Parliament and of the Council of 16 February 2011 laying down the rules and general principles concerning mechanisms for control by Member States of the Commission’s exercise of implementing powers (OJ L 55, 28.2.2011, p. 13).;

"

(10)  Article 10 is replaced by the following:"

Article 10

Reporting and review

1.  By … [36 months after the date of entry into force of this amending Directive] Member States shall inform the Commission of the measures taken to implement this Directive and of the Member States' intentions regarding future implementation activities, including the timing and possible effort-sharing between different levels of governance, as well as on any other information which the Member State considers relevant.

2.   By 18 April 2026, and every three years thereafter, Member States shall submit to the Commission a report on the implementation of this Directive. Those reports shall accompany the reports provided for in the second subparagraph of Article 83(3) of Directive 2014/24/EU and the second subparagraph of Article 99(3) of Directive 2014/25/EU, and they shall contain information on the measures taken to implement this Directive, on future implementation activities, as well as any other ▌ information which the Member State considers relevant. Those reports shall also include the number and the categories of vehicles covered by the contracts referred to in Article 3(1) of this Directive, based on the data provided by the Commission in accordance with paragraph 3 of this Article. The information shall be presented on the basis of the categories set out in Regulation (EC) No 2195/2002 of the European Parliament and of the Council*.

3.  In order to assist the Member States in their reporting obligations, the Commission shall collate and publish the number and the categories of vehicles covered by the contracts referred to in points (a) and (c) of Article 3(1) of this Directive by extracting the relevant data from contract award notices published on the Tenders Electronic Daily (TED) database in accordance with Directives 2014/24/EU and 2014/25/EU.

4.  By 18 April 2027, and every three years thereafter, the Commission shall submit a report to the European Parliament and to the Council on the implementation of this Directive, specifying the measures taken by Member States in this regard, following the reports referred to in paragraph 2.

5.   By 31 December 2027, the Commission shall review the implementation of this Directive and, where appropriate, submit a legislative proposal for its amendment for the period after 2030, including for the setting of new targets and for the inclusion of other categories of vehicles, such as two- and three-wheeled vehicles.

6.  The Commission shall ▌ adopt ▌ implementing acts in accordance with Article 9(2) setting out the format of the reports referred to in paragraph 2 of this Article and their transmission arrangements.

__________________

* Regulation (EC) No 2195/2002 of the European Parliament and of the Council of 5 November 2002 on the Common Procurement Vocabulary (CPV) (OJ L 340, 16.12.2002, p. 1).;

"

(11)  the Annex is replaced by the text in the Annex to this Directive.

Article 2

Transposition

1.  Member States shall bring into force the laws, regulations and administrative provisions necessary to comply with this Directive by … [24 months after the date of entry into force of this amending Directive] ▌. They shall immediately inform the Commission thereof.

When Member States adopt those measures, they shall contain a reference to this Directive or be accompanied by such a reference on the occasion of their official publication. The methods of making such reference shall be laid down by Member States..

2.  Member States shall communicate to the Commission the text of the main measures of national law which they adopt in the field covered by this Directive.

Article 3

Entry into force

This Directive shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union.

Article 4

Addressees

This Directive is addressed to the Member States.

Done at ...,

For the European Parliament For the Council

The President The President

ANNEX

ANNEX

Information for the implementation of minimum procurement targets for clean road transport vehicles in support of low-emission mobility in Member States

Table 1: Common Procurement Vocabulary codes for services referred to in point (c) of Article 3(1)

CPV Code

Description

60112000-6

Public road transport services

60130000-8

Special-purpose road passenger-transport services

60140000-1

Non-scheduled passenger transport

90511000-2

Refuse collection services

60160000-7

Mail transport by road

60161000-4

Parcel transport services

64121100-1

Mail delivery services

64121200-2

Parcel delivery services

Table 2: Emission thresholds for clean light-duty vehicles

Vehicle categories

Until 31 December 2025

From 1 January 2026

 

CO2 g/km

RDE air pollutant emissions* as a percentage of emission limits**

CO2 g/km

RDE air pollutant emissions* as a percentage of emission limits**

M1

50

80 %

0

n.a.

M2

50

80 %

0

n.a.

N1

50

80 %

0

n.a.

* Declared maximum real-driving emission (RDE) values of particles number (PN) in #/km and nitrogen oxides (NOx) in mg/km as reported in point 48.2 of the Certificate of Conformity, as described in Annex IX to Directive 2007/46/EC for both complete and urban RDE trips.

** The applicable emission limits laid down in Annex I to Regulation (EC) No 715/2007, or its successors.

Table 3: Minimum procurement targets for the share of clean light-duty vehicles in accordance with Table 2 in the total number of light-duty vehicles covered by contracts referred to in Article 3 at Member State level

Member State

From … [24 months after the date of entry into force of this amending Directive] to 31 December 2025

From 1 January 2026 to 31 December 2030

Luxembourg

38,5 %

38,5 %

Sweden

38,5 %

38,5 %

Denmark

37,4 %

37,4 %

Finland

38,5 %

38,5 %

Germany

38,5 %

38,5 %

France

37,4 %

37,4 %

United Kingdom

38,5 %

38,5 %

Netherlands

38,5 %

38,5 %

Austria

38,5 %

38,5 %

Belgium

38,5 %

38,5 %

Italy

38,5 %

38,5 %

Ireland

38,5 %

38,5 %

Spain

36,3 %

36,3 %

Cyprus

31,9 %

31,9 %

Malta

38,5 %

38,5 %

Portugal

29,7 %

29,7 %

Greece

25,3 %

25,3 %

Slovenia

22 %

22 %

Czechia

29,7 %

29,7 %

Estonia

23,1 %

23,1 %

Slovakia

22 %

22 %

Lithuania

20,9 %

20,9 %

Poland

22 %

22 %

Croatia

18,7 %

18,7 %

Hungary

23,1 %

23,1 %

Latvia

22 %

22 %

Romania

18,7 %

18,7 %

Bulgaria

17,6 %

17,6 %

Table 4: Minimum procurement targets for the share of clean heavy-duty vehicles in the total number of heavy‑duty vehicles covered by contracts referred to in Article 3 at Member State level*

Member State

Trucks (vehicle category N2 and N3)

Buses (vehicle category M3)*

 

From … [24 months after the date of entry into force of this amending Directive] to 31 December 2025

From 1 January 2026 to 31 December 2030

From … [24 months after the date of entry into force of this amending Directive] to 31 December 2025

From 1 January 2026 to 31 December 2030

Luxembourg

10 %

15 %

45 %

65 %

Sweden

10 %

15 %

45 %

65 %

Denmark

10 %

15 %

45 %

65 %

Finland

9 %

15 %

41 %

59 %

Germany

10 %

15 %

45 %

65 %

France

10 %

15 %

43 %

61 %

United Kingdom

10 %

15 %

45 %

65 %

Netherlands

10 %

15 %

45 %

65 %

Austria

10 %

15 %

45 %

65 %

Belgium

10 %

15 %

45 %

65 %

Italy

10 %

15 %

45 %

65 %

Ireland

10 %

15 %

45 %

65 %

Spain

10 %

14 %

45 %

65 %

Cyprus

10 %

13 %

45 %

65 %

Malta

10 %

15 %

45 %

65 %

Portugal

8 %

12 %

35 %

51 %

Greece

8 %

10 %

33 %

47 %

Slovenia

7 %

9 %

28 %

40 %

Czechia

9 %

11 %

41 %

60 %

Estonia

7 %

9 %

31 %

43 %

Slovakia

8 %

9 %

34 %

48 %

Lithuania

8 %

9 %

42 %

60 %

Poland

7 %

9 %

32 %

46 %

Croatia

6 %

7 %

27 %

38 %

Hungary

8 %

9 %

37 %

53 %

Latvia

8 %

9 %

35 %

50 %

Romania

6 %

7 %

24 %

33 %

Bulgaria

7 %

8 %

34 %

48 %

* Half of the minimum target for the share of clean buses has to be fulfilled by procuring zero-emission buses as defined in point 5 of Article 4. This requirement is lowered to one quarter of the minimum target for the first reference period if more than 80 % of the buses covered by the aggregate of all contracts referred to in Article 3, awarded during that period in a Member State, are double-decker buses.

(1) OJ C 262, 25.7.2018, p. 58.
(2) OJ C 387, 25.10.2018, p. 70.
(3) This position replaces the amendments adopted on 25 October 2018 (Texts adopted, P8_TA(2018)0424).
(4)OJ C 262, 25.7.2018, p. 58.
(5)OJ C 387, 25.10.2018, p. 70.
(6)Position of the European Parliament of 18 April 2019.
(7) Directive (EU) 2018/2001 of the European Parliament and of the Council of 11 December 2018 on the promotion of the use of energy from renewable sources (OJ L 328, 21.12.2018, p. 82).
(8)Directive (EU) 2018/2002 of the European Parliament and of the Council of 11 December 2018 amending Directive 2012/27/EU on energy efficiency (OJ L 328, 21.12.2018, p. 210).
(9)Directive 2009/33/EC of the European Parliament and of the Council of 23 April 2009 on the promotion of clean and energy-efficient road transport vehicles (OJ L 120, 15.5.2009, p. 5).
(10)Directive 2014/24/EU of the European Parliament and of the Council of 26 February 2014 on public procurement and repealing Directive 2004/18/EC (OJ L 94 28.3.2014, p. 65).
(11)Directive 2014/25/EU of the European Parliament and of the Council of 26 February 2014 on procurement by entities operating in the water, energy, transport and postal services sectors and repealing Directive 2004/17/EC (OJ L 94 28.3.2014, p. 243).
(12)Directive 2014/94/EU of the European Parliament and of the Council of 22 October 2014 on the deployment of alternative fuels infrastructure (OJ L 307, 28.10.2014, p. 1).
(13)Regulation (EU) 2019/... of the European Parliament and of the Council of … setting CO2 emission performance standards for new passenger cars and for new light commercial vehicles and repealing Regulations (EC) No 443/2009 and (EU) No 510/2011 (OJ L ...)
(14)+OJ: Please insert in the text the number of the Regulation contained in document PE-CONS 6/19 (2017/0293(COD)) and insert the number, date, title and OJ reference of that Regulation in the footnote.
(15)++OJ: Please insert in the text the number of the Regulation contained in document PE-CONS 6/19 (2017/0293(COD)).
(16) Regulation (EC) No 661/2009 of the European Parliament and of the Council of 13 July 2009 concerning type-approval requirements for the general safety of motor vehicles, their trailers and systems, components and separate technical units intended therefor (OJ L 200 31.7.2009, p. 1).
(17)Directive 2006/66/EC of the European Parliament and of the Council of 6 September 2006 on batteries and accumulators and waste batteries and accumulators and repealing Directive 91/157/EEC (OJ L 266 26.9.2006, p. 1).
(18)OJ C 298, 23.8.2018, p. 140.
(19)OJ C 200, 28.6.2014, p. 1.
(20) Regulation (EU) No 1291/2013 of the European Parliament and of the Council of 11 December 2013 establishing Horizon 2020 - the Framework Programme for Research and Innovation (2014-2020) and repealing Decision No 1982/2006/EC (OJ L 347, 20.12.2013, p. 104).
(21) Regulation (EU) No 1316/2013 of the European Parliament and of the Council of 11 December 2013 establishing the Connecting Europe Facility, amending Regulation (EU) No 913/2010 and repealing Regulations (EC) No 680/2007 and (EC) No 67/2010 (OJ L 348, 20.12.2013, p. 129).
(22)Regulation (EU) No 182/2011 of the European Parliament and of the Council of 16 February 2011 laying down the rules and general principles concerning mechanisms for control by Member States of the Commission's exercise of implementing powers (OJ L 55, 28.2.2011, p. 13).
(23)OJ C 369, 17.12.2011, p. 14.


Use of digital tools and processes in company law ***I
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Resolution
Consolidated text
European Parliament legislative resolution of 18 April 2019 on the proposal for a directive of the European Parliament and of the Council amending Directive (EU) 2017/1132 as regards the use of digital tools and processes in company law (COM(2018)0239 – C8-0166/2018 – 2018/0113(COD))
P8_TA-PROV(2019)0428A8-0422/2018

(Ordinary legislative procedure: first reading)

The European Parliament,

–  having regard to the Commission proposal to Parliament and the Council (COM(2018)0239),

–  having regard to Article 294(2) and Article 50 (1) and points (b), (c), (f) and (g) of Article 50 (2) of the Treaty on the Functioning of the European Union, pursuant to which the Commission submitted the proposal to Parliament (C8‑0166/2018),

–  having regard to Article 294(3) of the Treaty on the Functioning of the European Union,

–  having regard to the opinion of the European Economic and Social Committee of 17 October 2018(1),

–  having regard to the provisional agreement approved by the committee responsible under Rule 69f(4) of its Rules of Procedure and the undertaking given by the Council representative by letter of 14 February 2019 to approve Parliament’s position, in accordance with Article 294(4) of the Treaty on the Functioning of the European Union,

–  having regard to Rule 59 of its Rules of Procedure,

–  having regard to the report of the Committee on Legal Affairs (A8-0422/2018),

1.  Adopts its position at first reading hereinafter set out;

2.  Calls on the Commission to refer the matter to Parliament again if it replaces, substantially amends or intends to substantially amends its proposal;

3.  Instructs its President to forward its position to the Council, the Commission and the national parliaments.

Position of the European Parliament adopted at first reading on 18 April 2019 with a view to the adoption of Directive (EU) 2019/… of the European Parliament and of the Council amending Directive (EU) 2017/1132 as regards the use of digital tools and processes in company law

P8_TC1-COD(2018)0113


(Text with EEA relevance)

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the Functioning of the European Union, and in particular Article 50(1) and points (b), (c), (f) and (g) of Article 50(2) thereof,

Having regard to the proposal from the European Commission,

After transmission of the draft legislative act to the national parliaments,

Having regard to the opinion of the European Economic and Social Committee(2),

Acting in accordance with the ordinary legislative procedure(3),

Whereas:

(1)  Directive (EU) 2017/1132 of the European Parliament and of the Council(4) lays down inter alia rules on disclosure and the interconnection of central, commercial and companies registers of Member States.

(2)  The use of digital tools and processes to more easily, rapidly and time- and cost-effectively initiate economic activity by setting up a company or by opening a branch of that company in another Member State, and to provide comprehensive and accessible information on companies, is one of the prerequisites for the effective functioning, modernisation and administrative streamlining of a competitive internal market and for ensuring the competitiveness and trustworthiness of companies.

(3)  Ensuring that a legal and administrative environment equal to the new social and economic challenges of globalisation and digitalisation exists is essential, on the one hand, in order to provide the necessary safeguards against abuse and fraud and, on the other, in order to pursue objectives such as promotion of economic growth, creation of jobs and attracting investment to the Union, all of which would bring economic and social benefits to society as a whole.

(4)  There are currently significant differences between Member States when it comes to the availability of online tools enabling entrepreneurs and companies to communicate with authorities on matters of company law. eGovernment services vary between Member States. Some Member States provide comprehensive and user-friendly services entirely online, while others are unable to provide online solutions at certain major stages of a company’s lifecycle. For example, some Member States only allow the formation of companies, or the filing of changes to documents and information with the register, to be done in person, some allow those actions to be done either in person or online, and in other Member States they can only be done online.

(5)  Furthermore, regarding access to company information, Union law stipulates that a minimum set of data always has to be provided free of charge. However, the scope of such information remains limited. Access to such information varies, with more information being made available free of charge in some Member States than in others, thus causing an imbalance in the Union.

(6)  The Commission, in its Communication ‘A Digital Single Market Strategy for Europe’ and in its Communication ‘EU e-Government Action Plan 2016-2020: Accelerating the digital transformation of government’, stressed the role of public administrations in helping businesses to easily start their activities, operate online and expand across borders. The EU e-Government Action Plan specifically recognised the importance of improving the use of digital tools when complying with company law-related requirements. Furthermore, in the ‘Tallinn declaration on eGovernment’ of 6 October 2017, Member States made a strong call to step up efforts for the provision of efficient, user-centric electronic procedures in the Union.

(7)  In June 2017, the interconnection of Member States' central, commercial and companies registers became operational thereby greatly facilitating cross-border access to company information in the Union and allowing registers in Member States to communicate with each other electronically in relation to certain cross-border operations which affect companies.

(8)  In order to facilitate the formation of companies and the registration of ▌branches and to reduce the costs, time and administrative burdens associated with those processes, in particular by micro, small and medium-sized enterprises (‘SMEs’) as defined in Commission Recommendation 2003/361/EC(5), procedures should be put in place to enable the formation of companies and registration of branches to be completed fully online. This Directive should not oblige companies to use such procedures. Member States should however be able to decide to make some or all online procedures mandatory. The current costs and burdens associated with formation and registration procedures derive not only from administrative fees charged for forming a company or registering a branch, but also from other requirements which make the overall process longer to complete, in particular when the physical presence of the applicant ▌is required. In addition, information on such procedures should be made available online and free of charge.

(9)  Regulation (EU) 2018/1724 of the European Parliament and of the Council(6) which establishes the Single Digital Gateway provides for general rules for online provision of information, procedures and assistance services relevant for the functioning of the internal market. This Directive establishes specific rules relating to the formation of limited liability companies, to the registration of branches, and to the filing of documents and information by companies and branches (‘online procedures’), which are not covered by that Regulation. In particular, Member States should provide specific information about online procedures provided for in this Directive and models of instruments of constitution (‘templates’) on the websites accessible by means of the Single Digital Gateway.

(10)  Enabling formation of companies, registration of ▌branches and filing of documents and information to be done fully online would allow companies to use digital tools in their contacts with competent authorities of Member States. In order to enhance trust, Member States should ensure that secure electronic identification and the use of trust services is possible for national as well as cross-border users in accordance with Regulation (EU) No 910/2014 of the European Parliament and of the Council(7). Furthermore, in order to enable cross-border electronic identification, Member States should set up electronic identification schemes which provide for authorised electronic identification means. Such national schemes would be used as a basis for the recognition of electronic identification means issued in another Member State. In order to ensure that there is a high level of trust in cross-border situations, only electronic identification means which comply with Article 6 of Regulation (EU) No 910/2014 should be recognised. ▌In any event, this Directive should only oblige Member States to enable online formation of companies, registration of branches and online filing of documents and information by applicants who are Union citizens, through the recognition of their electronic identification means. Member States should decide on the way in which the identification means that they recognise, including those not falling under Regulation (EU) No 910/2014, are made publicly available.

(11)  Member States should remain free to decide which person or persons are to be considered under national law as applicants with regard to online procedures, provided that that does not limit the scope and the objective of this Directive.

(12)  In order to facilitate online procedures for companies, Member States' registers should ensure that the rules on fees applicable to the online procedures provided for in this Directive are transparent and applied in a non-discriminatory manner. However, the requirement of transparency of rules on fees should be without prejudice to contractual freedom, where applicable, between applicants and persons who assist them in any part of the online procedures, including the freedom to negotiate an appropriate price for such services.

(13)  Fees charged by the registers for online procedures should be calculated on the basis of the costs of the services in question. Such fees could also cover, inter alia, the costs of minor services performed without charge. In calculating their amount, Member States should be entitled to take account of all the costs related to carrying out the online procedures, including the proportion of the overheads which can be attributed thereto. Furthermore, Member States should be allowed to impose flat-rate charges and fix the amount of such charges for an indefinite period, provided that they check at regular intervals that such charges continue not to exceed the average cost of the services in question. Any fees for online procedures charged by the register in the Member States should not exceed the recovery cost of providing such services. Moreover, where the completion of the procedure requires a payment, it should be possible that the payment can be made by means of widely available cross-border payment services, such as credit cards and bank transfers.

(14)  Member States should assist persons seeking to form a company or register a branch by providing certain information through the Single Digital Gateway and, where applicable, on the e-Justice Portal, in a concise and user-friendly way, concerning the procedures and requirements on the formation of limited liability companies, registration of branches and filing of documents and information, rules relating to the disqualification of directors and an outline of the powers and responsibilities of the administrative, management and supervisory bodies of companies.

(15)  It should be possible to form companies fully online. However, Member States should be allowed to limit online formation to certain types of limited liability companies, as specified in this Directive, due to the complexity of the formation of other types of companies in national law. ▌In any event, Member States should lay down detailed rules for online formation. It should be possible to carry out online formation with the submission of documents or information in electronic form, without prejudice to Member States’ material and procedural requirements, including those relating to legal procedures for drawing up instruments of constitution, and to the authenticity, accuracy, reliability, trustworthiness and appropriate legal form of documents or information that are submitted. However, those material and procedural requirements should not make online procedures, in particular those for the online formation of a company and online registration of a branch, impossible. Where obtaining electronic copies of documents satisfying the requirements of Member States is not technically possible, by way of exception, the documents in paper form could be required.

(16)   Where all formalities required for the online formation of a company are complied with, including the requirement for all documents and information to be correctly provided by the company, the online formation before any authorities or any persons or bodies mandated under national law to deal with any aspect of online procedures, should be fast. However, in cases where there are doubts about the fulfilment of necessary formalities, including concerning the identity of an applicant, the legality of the name of the company, the disqualification of a director or the compliance of any other information or document with legal requirements, or in cases of suspicion of fraud or abuse, the online formation might take longer and the deadline for the authorities should not commence until such formalities are complied with. In any event, where it is not possible to complete the procedure within the deadlines, Member States should ensure that the applicant is notified of the reasons for any delay.

(17)  In order to ensure the timely online formation of a company or online registration of a branch, Member States should not make that formation or registration conditional on obtaining any licence or authorisation before that formation or registration can be completed, unless national law so provides for the purpose of ensuring that there is a proper oversight of certain activities. After formation or registration, national law should govern the situations in which companies or branches are not allowed to carry out certain activities without obtaining a licence or authorisation.

(18)  In order to assist businesses, in particular, SMEs in setting-up, it should be possible to form a private limited liability company with the use of templates, which should be available online. Member States should ensure that such templates can be used for online formations, and should remain free to determine what their legal value is. Such templates could contain a pre-defined set of options in accordance with national law. The applicants should be able to choose between using templates or forming a company with bespoke instruments of constitution, and Member States should have the option of providing templates also for other types of companies.

(19)  In order to respect Member States’ existing traditions regarding company law, it is important to allow flexibility as regards the manner in which they provide a fully online system for formation of companies, registration of branches and filing of documents and information, including in relation to the role of notaries or lawyers in any part of such online procedures. Matters concerning online procedures which are not regulated in this Directive should continue to be governed by national law.

(20)  Furthermore, in order to tackle fraud and company hijacking and to provide safeguards for the reliability and trustworthiness of documents and information contained within national registers, provisions concerning online procedures provided for in this Directive should also include controls on the identity and legal capacity of persons seeking to form a company or register a branch or to file documents or information. Those controls could be a part of the legality check required by some Member States. The means and methods for carrying out those controls should be left to Member States to develop and adopt. ▌To that effect, Member States should be able to require the involvement of notaries or lawyers in any part of the online procedures. However, such involvement should not prevent the completion of the ▌procedure in its entirety online.

(21)  Where justified by reason of the public interest in preventing identity misuse or alteration, or in ensuring that the rules on legal capacity and on applicants’ authority to represent a company are complied with, Member States should be allowed to take measures, in accordance with national law, ▌which could require ▌the physical presence of the applicant ▌before any authority or person or body mandated under national law to deal with any aspect of online procedures, of the Member State in which the company is to be formed or a branch is to be registered. However, such physical presence should not be required systematically, but only on a case-by-case basis where there are reasons to suspect identity falsification, or non-compliance with the rules on legal capacity and on applicants’ authority to represent a company. Such ▌suspicion ▌ should be based on ▌information available to the authorities or persons or bodies mandated under national law to perform such kinds of controls. In the event that physical presence is required, Member States should ensure that any other steps of the procedure can be completed online. The concept of legal capacity should be understood to include the capacity to act.

(22)  Member States should be allowed also to enable their competent authorities, persons or bodies to verify, by complementary electronic controls of identity, legal capacity and legality, whether all the conditions required for the formation of companies are met. Such controls could include, inter alia, video-conferences or other online means that provide a real-time audio-visual connection.

(23)  In order to ensure that all persons interacting with companies are protected, Member States should be able to prevent fraudulent or other abusive behaviour by refusing the appointment of a person as a director of a company, taking into account not only the former conduct of that person in their own territory, but, where so provided under national law, also information provided by other Member States. Member States should, therefore, be allowed to request information from other Member States. The reply could either consist of information on a disqualification in force or other information which is relevant for disqualification in the Member State that received the request. Such requests for information ▌should be possible by means of the system of interconnection of registers. In that regard, Member States should be free to choose how to best collect this information, such as by gathering the relevant information from any registers or other places where it is stored in accordance with their national law or by creating dedicated registers or dedicated sections in business registers. Where further information, such as on the period and grounds of disqualification, is needed, Member States should be allowed to provide it through all available systems of exchange of information, in accordance with national law. However, this Directive should not create an obligation to request such information in every case. Moreover, being allowed to take into account information on disqualification in another Member State should not oblige Member States to recognise disqualifications in force in other Member States.

(24)  To ensure that all persons interacting with companies or branches are protected and that fraudulent or other abusive behaviour is prevented, it is important that competent authorities in Member States are able to verify whether the person to be appointed as a director is not prohibited from performing the duties of a director. To that end, competent authorities should also know whether the given person is recorded in any of the registers relevant for disqualification of directors in other Member States by means of the system of interconnection of business registers. The registers, the authorities or persons or bodies mandated under national law to deal with any aspect of online procedures should not store such personal data longer than is necessary to assess the eligibility of the person to be appointed as a director. However, such entities might need to store such information for a longer period of time for the purpose of a possible review of a negative decision. In any case, the retention period should not exceed the period laid down in national rules for retention of any personal data related to the formation of a company or the registration of a branch or related filing of documents and information.

(25)  The obligations provided for in this Directive relating to the online formation of companies and registration of branches should be without prejudice to any other, non-company law related, formalities that a company has to fulfil to start activity in accordance with Union and national law.

(26)  As with online formation of companies and registration of branches, in order to reduce the costs and burdens on companies, it should also be possible throughout the companies' lifecycle to submit documents and information fully online to national registers. At the same time, Member States should be free to allow ▌documents and information to be filed by other means, including paper means. In addition, the disclosure of company information should be effected once that information is made publicly available in those national registers, since they are now interconnected and provide a comprehensive point of reference for users. In order to avoid disruption to existing means of disclosure, Member States should have the choice also of publishing either all or some company information in a national gazette, whilst at the same time ensuring that the information is sent electronically by the register to that national gazette. This Directive should not affect national rules relating to the legal value of the register and the role of a national gazette.

(27)  In order to facilitate the way in which the information stored by national registers can be searched for and exchanged with other systems, Member States should ▌ensure that after the relevant transposition period has expired, all documents and information provided to any authority or person or body mandated under national law to deal with any aspect of the online procedures, as part of the online procedures provided for in this Directive, can be stored by the registers in a machine-readable and searchable format or as structured data. That means that the file format should be structured in such a way that software applications can easily identify, recognise and extract specific data and their internal structure. The requirement to ensure that the format of documents and information is searchable should not encompass scanned signatures or other data which are not suitable for machine-readability. As this could require changes to the existing information systems of Member States, there should be a longer transposition period for this requirement.

(28)  In order to cut costs and reduce administrative burden and the length of procedures for companies, Member States should apply the ‘once-only’ principle in the area of company law, which is established in the Union, as evidenced, inter alia, by Regulation (EU) 2018/1724, the European Commission eGovernment Action Plan or the Tallinn Declaration on eGovernment. Applying the once-only principle entails that companies are not asked to submit the same information to public authorities more than once. For example, companies should not have to submit the same information both to the national register and to the national gazette. Instead, the register should provide the information already submitted directly to the national gazette. Similarly, where a company is formed in one Member State and wants to register a branch in another Member State, it should be possible for the company to make use of the documents or information previously submitted to a register. Furthermore, where a company is formed in one Member State but has a branch in another Member State, it should be possible for the company to submit certain changes to their company information only to the register where the company is registered, without the need to submit the same information to the register where the branch is registered. Instead, information such as a change of company name or change of registered office of the company should be exchanged electronically, between the register where the company is registered and the register where the branch is registered using the system of interconnection of registers.

(29)  In order to ensure that consistent and up-to-date information is available about companies in the Union and to further increase transparency, it should be possible to use the interconnection of registers to exchange information about any type of company registered in the Member States' registers in accordance with national law. Member States should have the option of making electronic copies of the documents and information of those other types of companies available also through that system of interconnection of registers.

(30)  In the interest of transparency, protection of the interests of workers, creditors and minority shareholders and to promote trust in business transactions, including those with a cross-border nature within the internal market, it is important that investors, stakeholders, business partners and authorities can easily access company information. To improve the accessibility of that information, more information should be available free of charge in all Member States. Such information should include, the ▌status of a company and information on its branches in other Member States, as well as information concerning the persons who, either as a body or as members of any such body, are authorised to represent the company. Furthermore, the price of obtaining a copy of all or part of the documents and information disclosed by the company, whether by paper or electronic means, should not exceed the administrative cost thereof, including the costs of development and maintenance of registers, provided that the price is not disproportionate with regard to the information sought.

(31)  It is currently possible for Member States to establish optional access points in relation to the system of interconnection of registers. However, it is not possible for the Commission to connect other stakeholders to the system of interconnection of registers. In order for other stakeholders to benefit from the interconnection of registers and ensure that their systems retain accurate, up-to-date and reliable information on companies, the Commission should be authorised to establish additional access points. Such access points should refer to systems developed and operated by the Commission or other Union institutions, bodies, offices or agencies in order to perform their administrative functions or to comply with provisions of Union law.

(32)  In order to help companies established in the internal market to expand their business activities cross-border more easily, it should be possible for them to open and register branches in another Member State online. Member States should, therefore, make possible, in a similar manner to companies, the online registration of branches and the online filing of documents and information, thereby helping to cut costs, while reducing the administrative burden and the length of time taken by formalities relating to cross-border expansion.

(33)  When registering a branch of a company registered in another Member State, Member States should also be able to verify certain information about the company through the interconnection of registers. Furthermore, where a branch is closed in one Member State, the register of that Member State should inform the Member State where the company is registered of such closure through the system of interconnection of registers and both registers should record this information.

(34)  To ensure consistency with Union and national law, it is necessary to delete the provision relating to the Contact Committee which has ceased to exist, and to update the types of companies set out in Annexes I and II to Directive (EU) 2017/1132.

(35)  In order to accommodate future changes in the laws of Member States and to Union legislation concerning company types, the power to adopt acts in accordance with Article 290 of the Treaty on the Functioning of the European Union should be delegated to the Commission to update the list of the types of companies contained in Annexes I, II and IIA to Directive (EU) 2017/1132. It is of particular importance that the Commission carry out appropriate consultations during its preparatory work, including at expert level, and that those consultations be conducted in accordance with the principles laid down in the Interinstitutional Agreement of 13 April 2016 on Better Law-Making(8). In particular, to ensure equal participation in the preparation of delegated acts, the European Parliament and the Council receive all documents at the same time as Member States' experts, and their experts systematically have access to meetings of Commission expert groups dealing with the preparation of delegated acts.

(36)  The provisions of this Directive, including the obligations for registration of companies, do not affect national law relating to tax measures of Member States, or their territorial and administrative subdivisions.

(37)  The power of Member States to reject applications for the formation of companies and registration of branches in the event of fraud or abuse, and Member States' investigation and enforcement actions, including by the police or other competent authorities, should not be affected by this Directive. Other obligations under Union and national law, including those arising from anti-money laundering, counter terrorist financing and beneficial ownership rules, should also remain unaffected. This Directive does not affect the provisions of Directive (EU) 2015/849 of the European Parliament and of the Council(9) addressing risks of money laundering and terrorist financing, in particular the obligations related to carrying out the appropriate customer due diligence measures on a risk-sensitive basis and to identifying and registering the beneficial owner of any newly created entity in the Member State of its incorporation.

(38)  This Directive should be applied in compliance with Union data protection law and the protection of privacy and personal data as enshrined in Articles 7 and 8 of the Charter of Fundamental Rights of the European Union. Any processing of the personal data of natural persons under this Directive is to be undertaken in accordance with Regulation (EU) 2016/679 of the European Parliament and of the Council(10).

(39)  The European Data Protection Supervisor was consulted in accordance with Article 28(2) of Regulation (EC) No 45/2001 of the European Parliament and of the Council(11) and delivered an opinion on 26 July 2018.

(40)  Since the objective of this Directive, namely, to provide more digital solutions for companies in the internal market, cannot be sufficiently achieved by the Member States, but can rather, by reason of their scale and effects, be better achieved at Union level, the Union may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on European Union. In accordance with the principle of proportionality, as set out in that Article, this Directive does not go beyond what is necessary to achieve that objective.

(41)  In accordance with the Joint Political Declaration of 28 September 2011 of Member States and the Commission on explanatory documents(12), Member States have undertaken to accompany, in justified cases, the notification of their transposition measures with one or more documents explaining the relationship between the components of a directive and the corresponding parts of national transposition instruments. With regard to this Directive, the legislator considers the transmission of such documents to be justified.

(42)  Given the complexity of the changes required to be made to national systems in order to comply with the provisions of this Directive, and the substantial differences currently existing among Member States with regard to the use of digital tools and processes in the area of company law, it is appropriate to provide that Member States that encounter particular difficulties in transposing certain provisions of this Directive can notify the Commission of their need to benefit from an extension of up to one year of the relevant implementation period. Member States should state their objective reasons for applying for such an extension.

(43)  The Commission should carry out an evaluation of this Directive. Pursuant to paragraph 22 of the Interinstitutional Agreement of 13 April 2016 on Better Law-Making, that evaluation should be based on the five criteria of efficiency, effectiveness, relevance, coherence and EU value added and should provide the basis for impact assessments of possible further measures. Member States should help to carry out that evaluation by providing to the Commission the data that is available to them on how online formation of companies is working in practice, for example data on the number of online formations, the number of cases in which templates were used, or where physical presence was required and the average duration and costs of online formations.

(44)  Information should be collected in order to assess the performance of this Directive against the objective it pursues and in order to carry out an evaluation in accordance with paragraph 22 of the Interinstitutional Agreement of 13 April 2016 on Better Law-Making.

(45)  Directive (EU) 2017/1132 should therefore be amended accordingly,

HAVE ADOPTED THIS DIRECTIVE:

Article 1

Amendments to Directive (EU) 2017/1132

Directive (EU) 2017/1132 is amended as follows:

(1)  in Article 1, the following indent is inserted after the second indent:"

"- the rules on online formation of companies, on online registration of branches and on online filing of documents and information by companies and branches,";

"

(2)  in Title I, the title of Chapter III is replaced by the following:"

"Online procedures (formation, registration and filing), disclosure and registers";

"

(3)  Article 13 is replaced by the following:"

"Article 13

Scope

The coordination measures prescribed by this Section and by Section 1A shall apply to the laws, regulations and administrative provisions of the Member States relating to the types of companies listed in Annex II, and, where specified, to the types of companies listed in Annexes I and IIA.";

"

(4)  the following Articles are inserted:"

"Article 13a

Definitions

For the purposes of this Chapter:

   (1) "electronic identification means" means an electronic identification means as defined in point (2) of Article 3 of Regulation (EU) No 910/2014 of the European Parliament and of the Council ▌*;
   (2) "electronic identification scheme" means an electronic identification scheme as defined in point (4) of Article 3 of Regulation (EU) No 910/2014;
   (3) "electronic means" means electronic equipment used for the processing, including digital compression, and the storage of data, and through which information is initially sent and received at its destination; that information being entirely transmitted, conveyed and received in a manner to be determined by Member States;
   (4) "formation" means the whole process of establishing a company in accordance with national law, including the drawing up of the company’s instrument of constitution and all the necessary steps for the entry of the company in the register;
   (5) "registration of a branch" means a process leading to disclosure of documents and information relating to a branch newly opened in a Member State;
   (6) "template" means a model for the instrument of constitution of a company which is drawn up by Member States in compliance with national law and is used for the online formation of a company in accordance with Article 13g.

Article 13b

Recognition of identification means for the purposes of online procedures

1.  Member States shall ensure that the following electronic identification means can be used by applicants who are Union citizens in the online procedures referred to in this Chapter:

   (a) an electronic identification means issued under an electronic identification scheme approved by their own Member State;
   (b) an electronic identification means issued in another Member State and recognised for the purpose of cross-border authentication in accordance with Article 6 of Regulation (EU) No 910/2014.

2.  Member States may refuse to recognise electronic identification means where the assurance levels of those electronic identification means do not comply with the conditions set out in Article 6(1) of Regulation (EU) No 910/2014.

3.  All identification means recognised by Member States shall be made publicly available.

4.  Where justified by reason of the public interest in preventing identity misuse or alteration, Member States may for the purposes of verifying an applicant’s identity take measures which could require the physical presence of that applicant before any authority or person or body mandated under national law to deal with any aspect of the online procedures referred to in this Chapter, including the drawing up of the instrument of constitution of a company. Member States shall ensure that the physical presence of an applicant may only be required on a case-by-case basis where there are reasons to suspect identity falsification, and that any other steps of the procedure can be completed online.

Article 13c

General provisions on online procedures

1.  This Directive shall be without prejudice to national laws that, in accordance with Member States’ legal systems and legal traditions, designate any authority or person or body mandated under national law to deal with any aspects of online formation of companies, online registration of branches and online filing of documents and information.

2.  This Directive shall also be without prejudice to the procedures and requirements laid down by national law, including those relating to legal procedures for the drawing up of instruments of constitution, provided that online formation of a company, as referred to in Article 13g, and online registration of a branch, as referred to in Article 28a, as well as online filing of documents and information, as referred to in Articles 13j and 28b, is possible.

3.  The requirements under applicable national law concerning the authenticity, accuracy, reliability, trustworthiness and the appropriate legal form of documents or information that are submitted shall remain unaffected by this Directive, provided that online formation, as referred to in Article 13g, and online registration of a branch, as referred to in Article 28a, as well as online filing, as referred to in Articles 13j and 28b, is possible.

Article 13d

Fees for online procedures

1.  Member States shall ensure that the rules on fees applicable to the online procedures referred to in this Chapter are transparent and are applied in a non-discriminatory manner.

2.  Any fees for online procedures charged by the registers referred to in Article 16 ▌shall not exceed the recovery of the costs of providing such services.

Article 13e

Payments

Where the completion of a procedure laid down in this Chapter requires a payment, Member States shall ensure that that payment can be made by means of a widely available online payment service that can be used for cross-border payments, that permits identification of the person that made the payment and is provided by a financial institution or payment service provider established in a Member State.

Article 13f

Information requirements

Member States shall ensure that concise and user-friendly information, provided free of charge and at least in a language broadly understood by the largest possible number of cross-border users, is made available on registration portals or websites that are accessible by means of the Single Digital Gateway to assist in the formation of companies and the registration of branches. The information shall cover at least the following:

   (a) rules on the formation of companies, including online procedures referred to in Articles 13g and 13j, and requirements relating to the use of templates and to other formation documents, identification of persons, the use of languages and to applicable fees;
   (b) rules on the registration of branches, including online procedures referred to in Articles 28a and 28b, and requirements relating to ▌registration documents, identification of persons and the use of languages;
   (c) an outline of the applicable rules on becoming a member of the administrative body, the management body or the supervisory body of a company, including of the rules on disqualification of directors, and on the authorities or bodies responsible for keeping information about disqualified directors;

   (d) an outline of the powers and responsibilities of the administrative body, the management body and the supervisory body of a company ▌, including the authority to represent a company ▌in dealings with third parties.

________________________________

* Regulation (EU) No 910/2014 of the European Parliament and of the Council of 23 July 2014 on electronic identification and trust services for electronic transactions in the internal market and repealing Directive 1999/93/EC (OJ L 257, 28.8.2014, p. 73).";

"

(5)  in Title I, Chapter III, the following Section is inserted:"

"Section 1A

Online formation, online filing and disclosure

Article 13g

Online formation of companies

1.  Member States shall ensure that the online formation of companies may be carried out fully online without the necessity for the applicants ▌to appear in person before any ▌authority or ▌ person or body mandated under national law to deal with any aspect of the online formation of companies, including drawing up the instrument of constitution of a company, subject to the provisions laid down in Article 13b(4) and paragraph (8) of this Article.

However, Member States may decide not to provide for▌online formation procedures for types of companies other than those listed in Annex IIA.

2.  Member States shall lay down detailed rules for the online formation of companies, including rules on the use of templates as referred to in Article 13h, and on the documents and information required for the formation of a company. As part of those rules, Member States shall ensure that such online formation may be carried out by submitting documents or information in electronic form, including electronic copies of the documents and information referred to in Article 16a(4).

3.  The rules referred to in paragraph 2 shall at least provide for the following:

   (a) the procedures to ensure that the applicants have the necessary legal capacity and have authority to represent the company;
   (b) the means to verify the identity of the applicants in accordance with Article 13b;
   (c) the requirements for the applicants to use trust services referred to in Regulation (EU) No 910/2014;
   (d) the procedures to verify the legality of the object of the company insofar as such checks are provided for under national law;
   (e) the procedures to verify the legality of the name of the company insofar as such checks are provided for under national law;
   (f) the procedures to verify the appointment of directors.

4.  The rules referred to in paragraph 2 may, in particular, also provide for the following:

   (a) the procedures to ensure the legality of the company instruments of constitution, including verifying the correct use of templates;
   (b) the consequences of the disqualification of a director by the competent authority in any Member State;
   (c) the ▌role of a notary or any other person or body mandated under national law to deal with any aspect of the online formation of a company;
   (d) the exclusion of online formation in cases where the share capital of the company is paid by way of contributions in kind.

5.  Member States shall not make the online formation of a company conditional on obtaining a licence or authorisation before the company is registered, unless such a condition is indispensable for the proper oversight of certain activities laid down in national law.

6.  Member States shall ensure that where the payment of share capital is required as part of the procedure to form a company, ▌such payment can be made online, in accordance with Article 13e, to a bank account of a bank operating in the Union. In addition, Member States shall ensure that proof of such payments can also be provided online.

7.  Member States shall ensure that the online formation is completed within ▌five working days where a company is formed exclusively by natural persons who use the templates referred to in Article 13h, or within ten working days in other cases, from the later of the following:

   (a) the date of the completion of all formalities required for the online formation, including the receipt of all documents and information, which comply with national law, by an authority or ▌a person or body mandated under national law to deal with any aspect of the formation of a company;
   (b) the date of the payment of a registration fee, the payment in cash for share capital, or the payment for the share capital by way of a contribution in kind, as provided for under national law.

Where it is not possible to complete the procedure within the deadlines referred to in this paragraph, Member States shall ensure that the applicant is ▌notified of the reasons for the delay.

8.  Where justified by reason of the public interest in ensuring compliance with the rules on legal capacity and on the authority of applicants to represent a company, any authority or person or body mandated under national law to deal with any aspect of the online formation of a company, including the drawing up of the instrument of constitution, may request the physical presence of the applicant. Member States shall ensure that, in such cases, the physical presence of an applicant may only be required on a case-by-case basis where there are reasons to suspect non-compliance with the rules referred to in point (a) of paragraph 3. Member States shall ensure that any other steps of the procedure can nonetheless be completed online.

Article 13h

Templates for online formation of companies

1.  Member States shall make templates available, for the types of companies listed in Annex IIA, on registration portals or websites that are accessible by means of the Single Digital Gateway. Member States may also make templates available online for the formation of other types of companies ▌.

2.  Member States shall ensure that the templates, referred to in paragraph 1 of this Article, may be used by applicants as part of the online formation procedure referred to in Article 13g. Where those templates are used by applicants in compliance with the rules referred to in point (a) of Article 13g(4), ▌the requirement to have the company instruments of constitution drawn up and certified in due legal form where preventive administrative or judicial control is not provided for, as laid down in Article 10, shall be deemed to have been fulfilled.

This Directive shall not affect any requirement under national law to have the drawing up of instruments of constitution done in due legal form, as long as the online formation referred to in Article 13g is possible.

3.  Member States shall at least make the templates available in an official Union language broadly understood by the largest possible number of cross-border users. The availability of templates in languages other than the official language or languages of the Member State concerned shall be for information purposes only, unless that Member State decides that it is also possible to form a company with templates in such other languages.

4.  The content of the templates shall be governed by national law.

Article 13i

Disqualified directors

1.  ▌Member States shall ensure that they have rules on disqualification of directors. Those rules shall include providing for the possibility to take into account any disqualification that is in force, or information relevant for disqualification, in another Member State. For the purpose of this Article, directors shall at least include ▌the persons referred to in point (i) of Article 14(d).

2.  Member States may require that persons applying to become directors declare whether they are aware of any circumstances which could lead to a disqualification in the Member State concerned.

Member States may refuse the appointment of a person as a director of a company where that person is currently disqualified from acting as a director in another Member State.

3.  Member States shall ensure that they are able to reply to a request from another Member State for information relevant for the disqualification of directors under the law of the Member State replying to the request.

4.   In order to reply to a request referred to in paragraph 3 of this Article, Member States shall at least make the necessary arrangements to ensure that they are able to provide without delay information on whether a given person is disqualified or is recorded in any of their registers that contain information relevant for disqualification of directors, by means of the system referred to in Article 22. Member States may also exchange further information, such as on the period and grounds of disqualification. Such exchange shall be governed by national laws.

5.  The Commission shall lay down detailed arrangements and technical details for the exchange of the information referred to in paragraph 4 of this Article, by means of the implementing act referred to in Article 24.

6.   Paragraphs 1 to 5 of this Article shall apply mutatis mutandis where a company files information concerning the appointment of a new director in the register referred to in Article 16.

7.  The personal data of persons referred to in this Article shall be processed in accordance with Regulation (EU) 2016/679 and national law, in order to enable the authority or the person or body mandated under national law to assess necessary information relating to the disqualification of a person as a director, with a view to preventing fraudulent or other abusive behaviour and ensuring that all persons interacting with companies or branches are protected.

Member States shall ensure that the registers referred to in Article 16, authorities or persons or bodies mandated under national law to deal with any aspect of online procedures do not store personal data transmitted for the purposes of this Article any longer than is necessary, and in any event no longer than any personal data related to the formation of a company, the registration of a branch or a filing by a company or branch is stored.

Article 13j

Online filing of company documents and information

1.  Member States shall ensure that ▌documents and information referred to in Article 14, including any modification thereof, can be filed online with the register within the time limit provided by the laws of the Member State where the company is ▌registered. Member States shall ensure that such filing can be completed online in its entirety without the necessity for an applicant to appear in person before any ▌authority or ▌person or body mandated under national law to deal with the online filing, subject to the provisions laid down in Article 13b(4) and, where applicable, Article 13g(8).

2.  Member States shall ensure that the origin and integrity of the documents filed online may be verified electronically.

3.  Member States may require that certain companies or that all companies file certain or all of the documents and information referred to in paragraph 1 online.

4.  Article 13g (2) to (5) shall apply mutatis mutandis to online filing of documents and information.

5.  Member States may continue to allow forms of filing other than those referred to in paragraph 1, including by electronic or by paper means, by companies, by notaries or by any other persons or bodies mandated under national law to deal with such forms of filing.”;

"

(6)  Article 16 is replaced by the following:"

"Article 16

Disclosure in the register

1.  In each Member State, a file shall be opened in a central, commercial or companies register (‘the register’), for each of the companies registered therein.

Member States shall ensure that companies have a European unique identifier (‘EUID’), referred to in point (8) of the Annex to Commission Implementing Regulation (EU) 2015/884(13), allowing them to be unequivocally identified in communications between registers through the system of interconnection of registers established in accordance with Article 22 (‘the system of interconnection of registers’). That unique identifier shall comprise, at least, elements making it possible to identify the Member State of the register, the domestic register of origin and the company number in that register and, where appropriate, features to avoid identification errors.

2.  All documents and information that are required to be disclosed pursuant to Article 14 shall be kept in the file referred to in paragraph 1 of this Article, or entered directly in the register, and the subject matter of the entries in the register shall be recorded in the file.

All documents and information referred to in Article 14, irrespective of the means by which they are filed, shall be kept in the file in the register or entered directly into it in electronic form. Member States shall ensure that all documents and information that are filed by paper means are converted by the register to electronic form as quickly as possible.

Member States shall ensure that documents and information referred to in Article 14 that have been filed by paper means, before 31 December 2006, are converted into electronic form by the register upon receipt of an application for disclosure by electronic means.

3.  Member States shall ensure that the disclosure of the documents and information referred to in Article 14 is effected by making them publicly available in the register. In addition, Member States may also require that some or all of those documents and information are published in a national gazette designated for that purpose, or by equally effective means. Those means shall entail at least the use of a system whereby the documents or information published can be accessed in chronological order through a central electronic platform. In such cases, the register shall ensure that those documents and information are sent electronically by the register to the national gazette or to a central electronic platform.

4.  Member States shall take the necessary measures to avoid any discrepancy between what is in the register and in the file.

Member States that require the publication of documents and information in a national gazette or on a central electronic platform shall take the necessary measures to avoid any discrepancy between what is disclosed in accordance with paragraph 3 and what is published in the gazette or on the platform.

In cases of any discrepancies under this Article, the documents and information made available in the register shall prevail.

5.  The documents and information referred to in Article 14 may be relied on by the company as against third parties only after they have been disclosed in accordance with paragraph 3of this Article, unless the company proves that the third parties had knowledge thereof.

However, with regard to transactions taking place before the sixteenth day following the disclosure, the documents and information shall not be relied on as against third parties who prove that it was impossible for them to have had knowledge thereof.

Third parties may always rely on any documents and information in respect of which the disclosure formalities have not yet been completed, save where non-disclosure causes such documents or information to have no effect.

6.  Member States shall ensure that all documents and information ▌submitted as part of the ▌formation of a company, the registration of a branch, or a filing by a company or a branch, is stored by the registers in a machine-readable and searchable format or as structured data.";

"

(7)  the following Article is inserted:"

"Article 16a

Access to disclosed information

1.  Member States shall ensure that copies of all or any part of the documents and information, referred to in Article 14, may be obtained from the register on application, and that such an application may be submitted to the register by either paper or electronic means.

However, Member States may decide that certain types or parts of the documents and information, which were filed by paper means on or before 31 December 2006, cannot be obtained by electronic means where a specified period has elapsed between the date of filing and the date of the application. Such a specified period shall not be less than 10 years.

2.  The price of obtaining a copy of all or any part of the documents and information referred to in Article 14, whether by paper or electronic means, shall not exceed the administrative costs thereof, including the costs of development and maintenance of registers.

3.  Electronic and paper copies supplied to an applicant shall be certified as ‘true copies’ unless the applicant dispenses with such certification.

4.  Member States shall ensure that electronic copies and extracts of the documents and information provided by the register have been authenticated by means of trust services referred to in Regulation (EU) No 910/2014, in order to guarantee that the electronic copies or extracts have been provided by the register and that their content is a true copy of the document held by the register or that it is consistent with the information contained therein.";

"

(8)  in Article 17, paragraph 1 is replaced by the following:"

"1. Member States shall ensure that up-to-date information is made available explaining the provisions of national law pursuant to which third parties may rely on information and each type of document referred to in Article 14, in accordance with Article 16(3), (4) and (5).";

"

(9)  Article 18 is amended as follows:

(a)  paragraph 1 is replaced by the following:"

"1. Electronic copies of the documents and information referred to in Article 14 shall also be made publicly available through the system of interconnection of registers. Member States may also make available documents and information referred to in Article 14 for types of companies other than those listed in Annex II.";

"

(b)  in paragraph 3, point (a) is replaced by the following:"

"(a) the documents and information referred to in Article 14, including for types of companies other than those listed in Annex II, where such documents are made available by Member States;";

"

(10)  Article 19 is replaced by the following:"

"Article 19

Fees chargeable for documents and information

1.  The fees charged for obtaining documents and information referred to in Article 14 through the system of interconnection of registers shall not exceed the administrative costs thereof, including the costs of development and maintenance of registers.

2.  Member States shall ensure that at least the following information and documents are available free of charge through the system of interconnection of registers:

   (a) the name or names and legal form of the company;
   (b) the registered office of the company and the Member State where it is registered;
   (c) the registration number of the company and its EUID;
   (d) details of the company website, where such details are recorded in the national register;
   (e) the status of the company, such as when it is closed, struck off the register, wound up, dissolved, economically active or inactive as defined in national law and where recorded in the national registers;
   (f) the object of the company, where it is recorded in the national register;

   (g) the particulars of any persons who either as a body or as members of any such body are currently authorised by the company to represent it in dealing with third parties and in legal proceedings and information as to whether the persons authorised to represent the company may do so alone or are required to act jointly;
   (h) information on any branches opened by the company in another Member State including the name, registration number, EUID and the Member State where the branch is registered.

3.  The exchange of any information through the system of interconnection of registers shall be free of charge for the registers.

4.  Member States may decide that the information referred to in points (d) and (f) is to be made available free of charge only for the authorities of other Member States.";

"

(11)  Article 20(3) is deleted;

(12)  Article 22 is amended as follows:

(a)  in paragraph 4, the following subparagraph is added:"

"The Commission may also establish optional access points to the system of interconnection of registers. Such access points shall consist of systems developed and operated by the Commission or other Union institutions, bodies, offices or agencies in order to perform their administrative functions or to comply with provisions of Union law. The Commission shall notify the Member States without undue delay of the establishment of such access points and of any significant changes to their operation.";

"

(b)  paragraph 5 is replaced by the following:"

"5. Access to information from the system of interconnection of registers shall be provided through the portal and through the optional access points established by the Member States and by the Commission.";

"

(13)  Article 24 is amended as follows:

(a)  point (d) is replaced by the following:"

"(d) the technical specification defining the methods of exchange of information between the register of the company and the register of the branch as referred to in Article 20, Article 28a (4) and (6) and Articles 28c, 30a and 34;";

"

(b)  point (e) is replaced by the following:"

"(e) the detailed list of data to be transmitted for the purpose of exchange of information between the registers, as referred to in Articles 20, 28a, 28c, 30a, 34 and 130;";

"

(c)  point (n) is replaced by the following:"

"(n) the procedure and technical requirements for the connection of the optional access points to the platform as referred to in Article 22;";

"

(d)  the following point (o) is added:"

"(o) the detailed arrangements for and technical details of the exchange between registers of the information referred to in Article 13i.";

"

(e)  at the end of the Article, the following paragraph is added:"

“The Commission shall adopt the implementing acts pursuant to points (d), (e), (n) and (o) by ... [ 18 months after the date of entry into force].”;

"

(14)  in Title I, Chapter III, Section 2, the title is replaced by the following:"

"Registration and disclosure rules applicable to branches of companies from other Member States";

"

(15)  in Title I, Chapter III, Section 2, the following Articles are inserted:"

"Article 28a

Online registration of branches

1.  Member States shall ensure that the registration in a Member State of a branch of a company that is governed by the law of another Member State may be fully carried out online without the necessity for the applicants to appear in person before any ▌authority or ▌any person or body mandated under national law to deal with any aspect of the application for registration of branches, subject to Article 13b(4) and mutatis mutandis to Article 13g(8).

2.  Member States shall lay down detailed rules for the online registration of branches, including rules on the documents and information required to be submitted to a competent authority. As part of those rules Member States shall ensure that online registration may be carried out by submitting information or documents in electronic form, including electronic copies of the documents and information referred to in Article 16a(4), or by making use of the information or documents previously submitted to a register.

3.  The rules, referred to in paragraph 2, shall at least provide for the following:

   (a) the procedure to ensure that the applicants have the necessary legal capacity and that they have authority to represent the company;
   (b) the means for verifying the identity of the person or persons registering the branch or their representatives;
   (c) the requirements for the applicants to use the trust services referred to in Regulation (EU) No 910/2014.

4.  The rules referred to in paragraph 2 may also provide for procedures to do the following:

   (a) verify the legality of the object of the branch;
   (b) verify the legality of the name of the branch;
   (c) verify the legality of the documents and information submitted for the registration of the branch;
   (d) provide for the role of a notary or any other person or body involved in the process of registration of the branch under the applicable national provisions.

5.  Member States may verify the information about the company by means of the system of interconnection of registers when registering a branch of a company established in another Member State.

Member States shall not make the online registration of a branch conditional on obtaining any licence or authorisation before the branch is registered, unless such a condition is indispensable for the proper oversight of certain activities laid down in national law.

6.  Member States shall ensure that the online registration of a branch is completed within 10 working days of the completion of all formalities, including the receipt of all the necessary documents and information which comply with national law by an authority or ▌a person or body mandated under national law to deal with any aspect of the registration of a branch.

Where it is not possible to register a branch within the deadlines referred to in this paragraph, Member States shall ensure that the applicant is notified of the reasons for the delay.

7.  Following the registration of a branch of a company established under the laws of another Member State, the register of the Member State in which that branch is registered shall notify the Member State where the company is registered that the branch has been registered by means of the system of interconnection of registers. The Member State, where the company is registered, shall acknowledge receipt of such notification and shall record the information in their register without delay.

Article 28b

Online filing of documents and information for branches

1.  Member States shall ensure that documents and information referred to in Article 30 or any modification thereof may be filed online within the period provided by the laws of the Member State where the branch is established. Member States shall ensure that such filing may be completed online in its entirety without the necessity for the applicants to appear in person before any authority or person or body mandated under national law to deal with the online filing, subject to the provisions laid down in Article 13b(4) and mutatis mutandis in Article 13g(8).

2.  Article 28a (2) to (5) shall apply mutatis mutandis to online filing for branches.

3.  Member States may require that certain or all documents and information referred to in paragraph 1 are only filed online.

Article 28c

Closure of branches

Member States shall ensure that upon receipt of the documents and information referred to in point (h) of Article 30(1), the register of a Member State in which a branch of a company is registered informs, by means of the system of interconnection of registers, the register of a Member State where the company is registered that its branch has been closed and struck off the register. The register of the Member State of the company shall acknowledge receipt of such notification also by means of that system and ▌shall record the information ▌without delay.";

"

(16)  the following Article is inserted:"

"Article 30a

Changes to documents and information of the company

1.  The Member State where a company is registered shall notify, by means of the system of interconnection of registers, without delay, the Member State where a branch of the company is registered, in the event that a change has been filed with regard to any of the following:

   (a) the company’s name;
   (b) the company's registered office;
   (c) the company's registration number in the register;
   (d) the company's legal form;
   (e) the documents and information referred to in points (d) and (f) of Article 14.

Upon receipt of the notification referred to in the first subparagraph of this paragraph, the register in which the branch is registered shall, by means of the system of interconnection of registers, acknowledge receipt of such notification and shall ensure that the documents and information referred to in Article 30(1) are updated without delay.";

"

(17)  in Article 31, the following paragraph is added:"

"Member States may provide that the mandatory disclosure of accounting documents referred to in point (g) of Article 30(1) may be considered fulfilled by the disclosure in the register of the Member State in which the company is registered in accordance with point (f) of Article 14.";

"

(18)  Article 43 is deleted;

(19)  Article 161 is replaced by the following:"

"Article 161

Data protection

The processing of any personal data carried out in the context of this Directive shall be subject to Regulation (EU) 2016/679.";

"

(20)  the following Article is inserted:"

"Article 162a

Amendments to the Annexes

Member States shall inform the Commission without delay of any changes to the types of limited liability companies provided for in their national law which would affect the contents of Annexes I, II and IIA.

Where a Member State informs the Commission pursuant to the first paragraph of this Article, the Commission shall be empowered to adapt the list of the types of the companies contained in Annexes I, II and IIA in line with the information referred to in the first paragraph of this Article, by means of delegated acts in accordance with Article 163.”;

"

(21)  Article 163 is replaced by the following:"

"Article 163

Exercise of the delegation

1.  The power to adopt delegated acts is conferred on the Commission subject to the conditions laid down in this Article.

2.  The power to adopt delegated acts referred to in Article 25(3) and Article 162a shall be conferred on the Commission for an indeterminate period of time from … [date of entry into force of this directive].

3.  The delegation of power referred to in Article 25(3) and Article 162a may be revoked at any time by the European Parliament or by the Council. A decision to revoke shall put an end to the delegation of the power specified in that decision. It shall take effect the day following the publication of the decision in the Official Journal of the European Union or at a later date specified therein. It shall not affect the validity of any delegated acts already in force.

4.  Before adopting a delegated act, the Commission shall consult experts designated by each Member State in accordance with the principles laid down in the Interinstitutional Agreement of 13 April 2016 on Better Law-Making.

5.  As soon as it adopts a delegated act, the Commission shall notify it simultaneously to the European Parliament and to the Council.

6.  A delegated act adopted pursuant to Article 25(3) or Article 162a shall enter into force only if no objection has been expressed either by the European Parliament or by the Council within a period of three months of notification of that act to the European Parliament and to the Council or if, before the expiry of that period, the European Parliament and the Council have both informed the Commission that they will not object. That period shall be extended by three months at the initiative of the European Parliament or of the Council.";

"

(22)  in Annex I, the twenty-seventh indent is replaced by the following:"

"— Sweden:

publikt aktiebolag;";

"

(23)  in Annex II, the twenty-seventh indent is replaced by the following:"

"— Sweden:

privat aktiebolag

publikt aktiebolag;";

"

(24)  Annex IIA, as set out in the Annex to this Directive, is inserted.

Article 2

Transposition

1.  Member States shall bring into force the laws, regulations and administrative provisions necessary to comply with this Directive by … [2 years after the entry into force of this amending Directive]. They shall immediately communicate to the Commission the text of those provisions.

2.  Notwithstanding paragraph 1 of this Article, Member States shall bring into force the laws, regulations and administrative provisions necessary to comply with point (5) of Article 1 of this Directive, as regards Article 13i and Article 13j(2) of Directive (EU) 2017/1132, and point (6) of Article 1 of this Directive, as regards Article 16(6) of Directive (EU) 2017/1132, by … [4 years after the date of entry into force of this amending Directive].

3.  By way of derogation from paragraph 1, Member States which encounter particular difficulties in transposing this Directive shall be entitled to benefit from an extension of the period provided for in paragraph 1 of up to one year. They shall provide objective reasons for the need for such extension. Member States shall notify the Commission of their intention to avail of such an extension by ... [18 months after the date of entry into force of this amending Directive].

4.  When Member States adopt those provisions, they shall contain a reference to this Directive or be accompanied by such a reference on the occasion of their official publication. Member States shall determine how such reference is to be made.

5.  Member States shall communicate to the Commission the text of the main provisions of national law which they adopt in the field covered by this Directive.

Article 3

Reporting, review and data collection

1.  The Commission shall, no later than … [5 years after the date of entry into force of this amending Directive], or if any Member State makes use of the derogation provided for in Article 2(3) no later than ... [6 years after the date of entry into force of this amending Directive], carry out an evaluation of the provisions introduced by this Directive into Directive (EU) 2017/1132 and present a report on the findings to the European Parliament, to the Council and to the European Economic and Social Committee, except as regards the provisions referred to in Article 2(2) for which the evaluation and report shall be carried out no later than … [7 years after the date of entry into force of this amending Directive].

Member States shall provide the Commission with the information necessary for the preparation of the reports, namely by providing data on the number of online registrations and related costs.

2.  The report of the Commission shall evaluate, inter alia, the following:

(a)  the ▌feasibility of providing for fully online registration of the types of companies other than those listed in Annex IIA;

(b)  the ▌feasibility of providing templates by Member States for all types of limited liability companies and the need and feasibility of providing a harmonised template across the Union to be used by all Member States for the types of companies listed in Annex IIA;

(c)  the practical experience with the application of the rules on disqualification of directors referred to in Article 13i;

(d)  the methods of online filing and online access, including the use of application programming interfaces;

(e)  the need for and feasibility of making more information available free of charge than that required in Article 19(2) and ensuring unencumbered access to such information;

(f)  the need for and feasibility of further application of the once-only principle.

3.  The report shall be accompanied, if appropriate, by proposals for amendment of Directive (EU) 2017/1132.

4.  With a view to providing a reliable evaluation of the provisions introduced by this Directive into Directive (EU) 2017/1132, Member States shall collect data on how online formation is working in practice. Normally, this information should comprise the number of online formations, the number of cases in which templates were used or where physical presence was required and the average duration and costs of online formations. They shall notify this information to the Commission twice, not later than two years after the date of transposition.

Article 4

Entry into force

This Directive shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union.

Article 5

Addressees

This Directive is addressed to the Member States.

Done at …,

For the European Parliament For the Council

The President The President

ANNEX

ANNEX IIA

TYPES OF COMPANIES REFERRED TO IN ARTICLES 13, 13f, 13g, 13h, and 162a

—  Belgium:

société privée à responsabilité limitée/besloten vennootschap met beperkte aansprakelijkheid,

société privée à responsabilité limitée unipersonnelle/Eenpersoons besloten vennootschap met beperkte aansprakelijkheid;

—  Bulgaria:

дружество с ограничена отговорност,

еднолично дружество с ограничена отговорност;

—  Czech Republic:

společnost s ručením omezeným;

—  Denmark:

Anpartsselskab;

—  Germany:

Gesellschaft mit beschränkter Haftung;

—  Estonia:

osaühing;

—  Ireland:

private company limited by shares or by guarantee/cuideachta phríobháideach faoi theorainn scaireanna nó ráthaíochta,

designated activity company/cuideachta ghníomhaíochta ainmnithe;

—  Greece:

εταιρεία περιορισμένης ευθύνης,

ιδιωτική κεφαλαιουχική εταιρεία;

—  Spain:

sociedad de responsabilidad limitada;

—  France:

société à responsabilité limitée,

entreprise unipersonnelle à responsabilité limitée,

société par actions simplifiée,

société par actions simplifiée unipersonnelle;

—  Croatia:

društvo s ograničenom odgovornošću,

jednostavno društvo s ograničenom odgovornošću;

—  Italy:

società a responsabilità limitata,

società a responsabilità limitata semplificata;

—  Cyprus:

ιδιωτική εταιρεία περιορισμένης ευθύνης με μετοχές ή/και με εγγύηση;

—  Latvia:

sabiedrība ar ierobežotu atbildību;

—  Lithuania:

uždaroji akcinė bendrovė;

—  Luxembourg:

société à responsabilité limitée;

—  Hungary:

korlátolt felelősségű társaság;

—  Malta:

private limited liability company/kumpannija privata;

—  Netherlands:

besloten vennootschap met beperkte aansprakelijkheid;

—  Austria:

Gesellschaft mit beschränkter Haftung;

—  Poland:

spółka z ograniczoną odpowiedzialnością;

—  Portugal:

sociedade por quotas;

—  Romania:

societate cu răspundere limitată;

—  Slovenia:

družba z omejeno odgovornostjo;

—  Slovakia:

spoločnosť s ručením obmedzeným;

—  Finland:

yksityinen osakeyhtiö/privat aktiebolag;

—  Sweden:

privat aktiebolag;

—  United Kingdom:

private limited by shares or guarantee. ”

(1) OJ C 62, 15.2.2019, p. 24.
(2)OJ C 62, 15.2.2019, p. 24.
(3) Position of the European Parliament of 18 April 2019.
(4)Directive (EU) 2017/1132 of the European Parliament and of the Council of 14 June 2017 relating to certain aspects of company law (OJ L 169, 30.6.2017, p. 46).
(5) Commission Recommendation 2003/361/EC of 6 May 2003 concerning the definition of micro, small and medium-sized enterprises (OJ L 124, 20.5.2003, p. 36).
(6) Regulation (EU) 2018/1724 of the European Parliament and of the Council of 2 October 2018 establishing a single digital gateway to provide access to information, to procedures and to assistance and problem-solving services and amending Regulation (EU) No 1024/2012 (OJ L 295, 21.11.2018, p. 1).
(7) Regulation (EU) No 910/2014 of the European Parliament and of the Council of 23 July 2014 on electronic identification and trust services for electronic transactions in the internal market and repealing Directive 1999/93/EC (OJ L 257, 28.8.2014, p. 73).
(8)OJ L 123, 12.5.2016, p. 1.
(9)Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, amending Regulation (EU) No 648/2012 of the European Parliament and of the Council, and repealing Directive 2005/60/EC of the European Parliament and of the Council and Commission Directive 2006/70/EC (OJ L 141, 5.6.2015, p. 73).
(10) Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing Directive 95/46/EC (General Data Protection Regulation) (OJ L 119, 4.5.2016, p. 1).
(11)Regulation (EC) No 45/2001 of the European Parliament and of the Council of 18 December 2000 on the protection of individuals with regard to the processing of personal data by the Community institutions and bodies and on the free movement of such data (OJ L 8, 12.1.2001, p. 1).
(12)OJ C 369, 17.12.2011, p. 14.
(13) Commission Implementing Regulation (EU) 2015/884 of 8 June 2015 establishing technical specifications and procedures required for the system of interconnection of registers established by Directive 2009/101/EC of the European Parliament and of the Council (OJ L 144, 10.6.2015, p. 1).


Cross-border conversions, mergers and divisions ***I
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Resolution
Consolidated text
European Parliament legislative resolution of 18 April 2019 on the proposal for a directive of the European Parliament and of the Council amending Directive (EU) 2017/1132 as regards cross-border conversions, mergers and divisions (COM(2018)0241 – C8-0167/2018 – 2018/0114(COD))
P8_TA-PROV(2019)0429A8-0002/2019

(Ordinary legislative procedure: first reading)

The European Parliament,

–  having regard to the Commission proposal to Parliament and the Council (COM(2018)0241),

–  having regard to Article 294(2) and Article 50(1) and (2), of the Treaty on the Functioning of the European Union, pursuant to which the Commission submitted the proposal to Parliament (C8-0167/2018),

–  having regard to Article 294(3) of the Treaty on the Functioning of the European Union,

–  having regard to the opinion of the European Economic and Social Committee of 17 October 2018(1),

–  having regard to the provisional agreement approved by the committee responsible under Rule 69f(4) of its Rules of Procedure and the undertaking given by the Council representative by letter of 27 March 2019 to approve Parliament’s position, in accordance with Article 294(4) of the Treaty on the Functioning of the European Union,

–  having regard to Rule 59 of its Rules of Procedure,

–  having regard to the report of the Committee on Legal Affairs and also the opinions of the Committee on Employment and Social Affairs and the Committee on Economic and Monetary Affairs (A8-0002/2019),

1.  Adopts its position at first reading hereinafter set out;

2.  Calls on the Commission to refer the matter to Parliament again if it replaces, substantially amends or intends to substantially amend its proposal;

3.  Instructs its President to forward its position to the Council, the Commission and the national parliaments.

Position of the European Parliament adopted at first reading on 18 April 2019 with a view to the adoption of Directive (EU) 2019/… of the European Parliament and of the Council amending Directive (EU) 2017/1132 as regards cross-border conversions, mergers and divisions(2)

P8_TC1-COD(2018)0114


(Text with EEA relevance)

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

the Treaty on the Functioning of the European Union, and in particular Article 50 (1) and (2) thereof,

Having regard to the proposal from the European Commission,

After transmission of the draft legislative act to the national parliaments,

Having regard to the opinion of the European Economic and Social Committee(3),

Acting in accordance with the ordinary legislative procedure(4),

Whereas:

(1)  The Directive (EU) 2017/1132 of the European Parliament and of the Council(5) regulates cross-border mergers of limited liability companies. These rules represent a significant milestone in improving the functioning of the Single Market for companies and firms and to exercise the freedom of establishment. However, evaluation of these rules shows that there is a need for modifications in cross-border merger rules. Furthermore, it is appropriate to provide for rules regulating cross-border conversions and divisions, since Directive (EU) 2017/1132 only provides rules for domestic divisions of public limited liability companies.

(2)  Freedom of establishment is one of the fundamental principles of Union law. Under the second paragraph of Article 49 of the Treaty on the Functioning of the European Union (‘TFEU’), when read in conjunction with Article 54 of the TFEU, the freedom of establishment for companies or firms includes, inter alia, the right to form and manage such companies or firms under the conditions laid down by the legislation of the Member State of establishment. This has been interpreted by the Court of Justice of the European Union as encompassing the right of a company or firm formed in accordance with the legislation of a Member State to convert itself into a company or firm governed by the law of another Member State, provided that the conditions laid down by the legislation of that other Member State are satisfied and, in particular, that the test adopted by the latter Member State to determine the connection of a company or firm to its national legal order is satisfied.

(3)  In the absence of harmonisation of Union law, the definition of the connecting factor that determines the national law applicable to a company or firm falls, in accordance with Article 54 of the TFEU, within the competence of each Member State to ▌ define. Article 54 of the TFEU places the connecting factors of the registered office, the central administration and the principal place of business of a company or firm at equal footing. Therefore, as clarified in case-law, ▌the fact that only the registered office (and not the central administration or principal place of business) is transferred does not as such exclude the applicability of the freedom of establishment under Article 49 of the TFEU. ▌

(4)  These developments in the case-law have opened up new opportunities for companies ▌ in the Single Market in order to foster economic growth, effective competition and productivity. At the same time, the objective of a Single Market without internal borders for companies must also be reconciled with other objectives of European integration such as social protection as set out in Article 3 TEU and Article 9 TFEU as well as promotion of social dialogue as set out in Articles 151 and 152 TFEU). The right of companies to convert, merge and divide across borders should go hand in hand and should be properly balanced with the protection of employees, creditors and members.

(5)  The lack of a legal framework on cross-border conversions and divisons leads to legal fragmentation and legal uncertainty, and thus to barriers to the exercise of the freedom of establishment. It also leads to a suboptimal protection of employees, creditors and minority members within the Single Market.

(6)  The European Parliament has called upon the Commission to adopt harmonised rules on cross-border conversions and divisions. A harmonised legal framework would further contribute to the removal of restrictions on the freedom of establishment whilst at the same time providing adequate ▌ protection for stakeholders such as employees, creditors and members.

(7)  This Directive should be without prejudice to Member States’ powers to provide strengthened protection for employees, in accordance with the existing social acquis.

(8)  The carrying out of a cross-border conversion entails a change of the legal form for a company without losing its legal personality. However, neither a cross-border conversion nor a cross-border merger or division should ▌ lead to the circumvention of the requirements for incorporation in the ▌ Member State in which the company is to be registered after the operation. Such conditions, including the requirements to have the head office in the destination Member State and those relating to the disqualification of directors, should be fully respected by the company. However, in case of cross-border conversions, the application of such conditions by the destination Member State may not affect the continuity of the converted company's legal personality. ▌

(9)  This Directive should not apply to companies in liquidation where the distribution of assets has begun. In addition, Member States may decide also to exclude companies subject to other liquidation proceedings. Member States should also be able to choose not to apply this Directive to companies subject to insolvency proceedings, as defined by the national law, or to preventive restructuring frameworks, as defined by the national law, no matter whether such proceedings are part of a national insolvency framework or regulated outside of it, and to companies subject to crisis prevention measures in the meaning of Directive 2014/59/EU of the European Parliament and of the Council(6).

This Directive should be without prejudice to the Directive on preventive restructuring frameworks, second chance and measures to increase the efficiency of restructuring, insolvency and discharge procedures.

(10)   Given the complexity of cross-border conversions, mergers and divisions (hereinafter referred to as cross-border operations) and the multitude of the interests concerned, it is appropriate to provide for a scrutiny of the legality of the cross-border operation before it takes effect in order to create legal certainty. To that effect, ▌ the competent authorities of ▌ the Member States involved should ensure that a decision on the approval of a cross-border operation is taken in a fair, objective and non-discriminatory manner on the basis of all relevant elements required by national and EU law.

(11)   To allow all stakeholders' legitimate interests to be taken into account in the procedure governing a cross-border operation, the company should draw up and disclose the draft terms of the proposed operation containing the most important information about it. The administrative or management body should, where provided for in national law and/or in accordance with national practice, include board level employee representatives in the decision on the draft terms of a cross-border operation. Such information should at least include the envisaged legal form of the company or companies, the instrument of constitution, where applicable, the statutes, the proposed indicative timetable for the operation and details of the safeguards offered to members and creditors. A notice should be disclosed in the business register informing the members, creditors and representatives of the employees of the company, or, where there are no such representatives, the employees themselves that they may submit comments with regard to the proposed operation. Member States may also decide that the independent expert report is disclosed.

(12)  In order to provide information to its members and employees, the company carrying out the cross-border operation should prepare a report for them. The report should explain and justify the legal and economic aspects of the proposed cross-border operation and the implications of the proposed cross-border operation for employees. In particular, the report should explain implications of the cross-border operation with regard to the future business of the company including its subsidiaries. Concerning members, the report should, in particular, include potential remedies available to them, especially information about their exit right. As to the employees, the report should also explain, in particular, the implications of the proposed cross-border operation on the employment situation., In particular it should explain whether there would be any material change in the employment conditions laid down by law, collective agreements and transnational company agreements and in the locations of the companies’ places of business, such as the location of the head office, as well as information on the management body and, where applicable, staff, equipment, premises and assets before and after the cross-border operation and the likely changes to the organisation of work, the wages, the place of specific posts and the expected consequences for the employees occupying such posts, as well as the company level social dialogue including, where applicable, board level employee representation. It should also explain how those changes would affect any subsidiaries of the company. This requirement should not however apply where the only employees of the company are in its administrative organ. Furthermore, in order to enhance the protection afforded to the employees, employees or their representatives should be able to provide their opinion on the report setting out the implications of the cross-border operation for them. The provision of the report and the possibility to provide an opinion should be without prejudice to the applicable information and consultation proceedings instituted at national level including those following the implementation of Directive 2002/14/EC of the European Parliament and of the Council(7) or Directive 2009/38/EC of the European Parliament and of the Council(8). The report or reports, in case they are established separately, shouldbeavailable to the members and to the representatives of the employees of the company carrying out the cross-border conversion or, where there are no such representatives, the employees themselves.

(13)  The draft terms of the cross-border operation, the offer of cash compensation by the company to those members who wish to exit the company and, where applicable, the share-exchange ratio including the amount of a possible complementary cash payment included in the draft terms should be examined by an expert who is independent from the company. With regard to the independence of the expert, Member States should take into account the principles laid down in Articles 22 and 22b of Directive 2006/43/EC of the European Parliament and of the Council(9).

(14)  The information disclosed by the company should be comprehensive and make it possible for stakeholders to assess the implications of the intended cross-border operation. However, companies should not be obliged to disclose confidential information, the disclosure of which would be prejudicial to their business position in accordance with national or Union law. Such non-disclosure should not undermine the other requirements under this Directive.

(15)  On the basis of the draft terms ▌ and the reports, the general meeting of the members of the company or companies should decide on whether or not to approve those draft terms and the necessary amendments to the instruments of constitution, including the statutes. It is important that the majority requirement for such a vote should be sufficiently high in order to ensure that the decision ▌ is based on a solid majority. In addition, members should also have the right to vote on any arrangements concerning employee participation, if they have reserved that right during the general meeting.

(16)  As a consequence of a cross-border operation, members often face a situation whereby the law applicable to their rights would change, because they would become members in a company governed by the law of a Member State other than the law applicable to the company before the operation. Therefore, Member States should, at least, offer the right to exit the company and receive a cash compensation for their shares equivalent to their value for members holding shares with voting rights and who voted against the approval of the draft terms. However, Member States may decide to offer this right also to other members, for example for members holding shares without voting rights or members who, as a result of a cross-border division, would acquire shares in the company in different proportions than what they held before the operation or to members for whom there was no change of applicable law but for whom certain rights have changed due to the operation. This Directive should not affect national rules on validity of contracts for the sale and transfer of shares in companies nor special legal form requirements. For example, Member States should be able require a notarial deed or a confirmation of signatures.

(17)  Companies should be able to estimate, to the extent possible, the costs related to the cross-border operation. Members should therefore be required to declare to the company, whether they exercise the right to dispose of their shares. This should be without prejudice to any formal requirements set up by national law. Members could also be required to indicate together with the declaration or within a specific time limit, whether they intend to challenge the offered cash compensation and demand additional cash compensation.

(18)  The calculation of the offer of cash compensation should be based on generally accepted valution methods. Members should have a right to challenge the calculation and question the adequacy of the cash compensation before a competent administrative or judicial authority or a body mandated under national law including arbitral tribunals. Member States should be able to provide that members who have exercised the right to dispose of the shares are entitled to join the proceedings and Member States should be able to establish time limits for doing it in national law.

(19)  In case of a cross-border merger or division, members who did not have or did not exercise an exit right should, however, have a right to challenge the share exchange ratio. When assessing the adequacy of the share-exchange ratio, the competent administrative or judicial authority or a body mandated under national law should also take into account the amount of a possible complementary cash payment included in the draft terms.

(20)   ▌ In addition, in order to protect the ▌ creditors against the risk of insolvency of the company following the cross-border operation, Member States should be allowed to require the company or companies to make a declaration of solvency stating that they are not aware of any reason why the company or companies resulting from the cross-border operation should not be able to meet their liabilities. In those circumstances, Member States should be able to make the members of the management organ personally liable for the accuracy of that declaration. As legal traditions vary amongst Member States with regard to the use of solvency declarations and their possible consequences, it should be up to Member States to draw appropriate consequences for providing inaccurate or misleading declarations, including effective and proportionate sanctions and liabilities in compliance with Union law.

(21)  In order to guarantee the appropriate protection of creditors in cases where they are not satisfied with the protection offered by the company in the draft terms and where they may not have found a satisfactory solution with the company, creditors, who have notified the company beforehand, may apply for safeguards to the competent ▌ authority. When assessing these safeguards, the appropriate authority should take into account whether the creditor’s claim against the ▌ company or ▌ a third party is of at least equivalent value and of a commensurate credit quality as before the cross-border operation and whether the claim may be brought in the same jurisdiction ▌.

(22)  Member States should ensure adequate protection for those creditors, who entered into a relationship with the company before the company had made public its intention to carry out a cross-border operation. In addition to the general rules set out in the Brussels Ia Regulation, Member States should therefore provide that such creditors should have the choice of filing a claim in the departure Member States for a period of two years after the disclosure of the draft terms of the cross-border conversion. After the draft terms have been disclosed, creditors should be able to take into account the potential impact of the change of jurisdiction and applicable law as a result of the cross-border operation. Creditors of a company to be protected could also be active and former employees with occupational vested pension rights and persons receiving occupational pension benefits. Also, the two year protection measure envisaged by this directive with respect to the jurisdiction to which creditors whose claims antedate the disclosure of the draft-terms of the cross-border conversion may apply, shall be without prejudice to national law determining the statute of limitations of claims.

(23)  It is important to ensure that the rights of employees to be informed and consulted in the context cross-border operations are fully respected. The information and consultation of employees in the context of cross-border operations should be carried out in accordance with the legal framework set out by the Directive 2002/14/EC, where applicable for Community-scale undertakings or Community-scale groups of undertakings, in accordance with Directive 2009/38/EC, and Council Directive 2001/23/EC(10), where the cross-border merger or cross-border division is considered as transfer of undertaking within the meaning of that Directive. This Directive does not affect Directive 2009/38/EC, Council Directive 98/59/EC, Directive 2001/23/EC, and Directive 2002/14/EC. However, given that this Directive lays down a harmonised procedure for cross-border operations, it is appropriate to specify in particular the time frame within which the information and consultation of employees related to the cross-border operation should take place.

(24)  Employees’ representatives provided for by national law and/or in accordance with national practice, where applicable, should include also relevant bodies established in accordance with EU law, if any, such as European Works Council established in accordance with Directive 2009/38/EC and the representative body established in accordance with Council Directive 2001/86/EC(11).

(25)  Member States should ensure that employee’s representatives, when carrying out their functions, enjoy adequate protection and guarantees in accordance with Article 7 of Directive 2002/14/EC to enable them to perform properly the duties which have been assigned to them.

(26)  In order to conduct an analysis of the report, the company carrying out the cross-border operation should provide the employee representatives with resources necessary as to enable them to apply the rights arising from this Directive in an appropriate manner.

(27)   In order to ensure that employee participation is not unduly prejudiced as a result of the cross-border operation, where the company carrying out the cross-border operation has implemented an employee participation system ▌, the company or companies resulting from the cross-border operation should be obliged to take a legal form allowing for the exercise of such participation, including through the presence of representatives of the employees in the appropriate management or supervisory organ of the company or companies. Moreover, in such a case, where a bona fide negotiation between the company and its employees takes place, it should be carried out along the lines of the procedure provided for in Directive 2001/86/EC, with a view to finding an amicable solution reconciling the right of the company to carry out a cross-border operation with the employees' rights of participation. As a result of those negotiations, either a bespoke and agreed solution or, in the absence of an agreement, the application of standard rules as set out in the Annex to Directive 2001/86/EC should apply, mutatis mutandis. In order to protect either the agreed solution or the application of those standard rules, the company should not be able to remove the participation rights through carrying out subsequent domestic or cross-border conversion, merger or division within four years.

(28)  In order to prevent the circumvention of employee participation rights by means of a cross-border operation, the company or companies carrying out the cross-border operation and registered in the Member State which provides for the employee participation rights, should not be able to perform a cross-border operation without first entering into negotiations with its employees or their representatives when the average number of employees employed by that company is equivalent to four fifths of the national threshold for triggering such employee participation.

(29)  The involvement of all stakeholders, in particular employees, contributes to a long-term and sustainable approach by companies across the Single Market. In this regard, safeguarding and promoting employees' participation rights in companies' board, in particular when companies move or restructure cross-border, plays an important role. Therefore, the successful completion of negotiations on participation rights in the context of cross-border operations is essential and should be encouraged.

(30)   To ensure a proper allocation of tasks among Member States and an efficient and effective ex-ante control of cross-border operations, the competent authorities of the ▌ Member States of the company or companies carrying out the cross-border operation should have the power to issue a pre-conversion, pre-merger or pre-division certificate (herein referred to as ‘pre-operation certificate’). Without such a certificate the competent authorities of the Member States of the converted company or of the company or companies resulting from the cross-border operation should not be able to complete the cross-border operation procedures.

(31)  In order to issue the pre-operation certificate, the Member States of the company or companies carrying out the cross-border operation should designate, in accordance with national law, an authority or several authorities competent to scrutinise the legality of the operation. The competent authority or authorities may comprise: courts, notaries or other authorities, a tax authority or financial service authority. If there is more than one competent authority, the company should be able to apply for the pre-operation certificate to one single competent authority, as designated by the Member States, which should co-ordinate with the other competent authorities. The competent authority or authorities should assess the compliance with all relevant conditions and the proper completion of all procedures and formalities in that Member State and should decide whether to issue a pre-operation certificate within three months of the application by the company, unless it has serious doubts that the cross-border operation is set up for abusive or fraudulent purposes leading or aimed to lead to evasion or circumvention of national or EU law, or for criminal purposes and the examination requires the consideration of additional information or performing additional investigative activities.

(32)  In certain circumstances, the right of companies to carry out a cross-border operation could be used for abusive or fraudulent purposes such as for the circumvention of the rights of employees, social security payments or tax obligations or for criminal purposes. In particular, it is important to counteract ‘shell’ or ‘front’ companies set up for the purpose of evading, circumventing or infringing national and/or Union law. Where in the course of the scrutiny of legality, the competent authority has become aware, including through consultation of relevant authorities, that the cross-border operation is set up for abusive or fraudulent purposes, leading or aimed to lead to the evasion or circumvention of national or EU law, or for criminal purposes, it should not authorise the operation. The relevant procedure, including any detailed assessment, should be carried out in accordance with national law. In such case the competent authority may extend the assessment up to a maximum of further three months.

(33)  Where the competent authority has serious doubts that the cross-border operation is set up for abusive or fraudulent purposes, the assessment should consider all relevant facts and circumstances, and should take into account, where relevant, at a minimum, indicative factors relating to the characteristics of the establishment in the Member State in which the company or companies are to be registered after the cross-border operation, including the intent of the operation, the sector, the investment, the net turnover and profit or loss, number of employees, the composition of the balance sheet, the tax residence, the assets and their location, equipment, beneficial owners of the company, the habitual place of work of the employees and of specific groups of employees, the place where social contributions are due, the number of employees posted in the year prior to the conversion within the meanings of Regulation (EC) No 883/2004 of the European Parliament and of the Council(12) and Directive 96/71/EC of the European Parliament and of the Council (13), and the number of employees working simultaneously in more than one Member State within the meaning of Regulation (EC) No 883/2004 and the commercial risks assumed by the company or companies before and after the cross-border operation. The assessment should also take into account the relevant facts and circumstances related to employee participation rights, in particular as regards negotiations on such rights where those were triggered by the four fifths of the applicable national threshold. All these elements should only be considered as indicative factors in the overall assessment and therefore should not be regarded in isolation. The competent authority may consider it as an indication of absence of circumstances leading to abuse or fraud if the cross-border operation results in having the place of the effective management and/or the economic activity of the company in the Member State, where the company or companies are to be registered after the cross-border operation.

(34)  The competent authority should also be able to obtain from the company carrying out the cross-border operation, or from other competent authorities, including those from the destination Member State, all relevant information and documents with the view to carry out the control of legality within the procedural framework laid down in national law. Member States should be able to stipulate which are the possible consequences on the issuance on the pre-operation certificate of the procedures initiated by members and creditors in accordance with this Directive.

(35)  In the assessment of the application submitted by the company in order to obtain a pre-operation certificate the competent authority can have recourse to an independent expert. Member States should lay down rules to ensure that the expert or the legal person on whose behalf the expert is operating is independent from the company applying for the pre-operation certificate. The expert or experts should be appointed by the competent authority, and should have no past or current link with the company concerned which might affect his/her/its independence.

(36)  In order to ensure that the company carrying out the cross-border operation does not prejudice its creditors, the competent authority should be able to check, in particular, whether the company has fulfilled its obligations towards public creditors or whether any open obligations are sufficiently secured. In particular, the competent authority should also be able to check whether the company is subject to any on-going court proceedings concerning for example infringement of social, labour or environmental law, which as an outcome may establish further obligations on the company, including towards citizens and private entities.

(37)  Member States should provide for procedural safeguards in line with the general principles of access to justice, including for the possibility to review the decisions of the competent authorities in the proceedings concerning cross-border operations, the possibility to delay the effectiveness of the certificate to allow parties to bring an action before the competent court and the possibility to obtain, where appropriate, interim measures.

(38)   After having received a pre-operation certificate, and after verifying that the legal requirements of the ▌ Member State in which the company is to be registered after the operation are fulfilled, including the check whether the transaction constitutes a circumvention of national or EU law, the competent authorities ▌should register the company in the business register of that Member State. Only after this registration should the competent authority of the former Member State of the company or companies carrying out the cross-border operation strike the company off its own register. It should not be possible for the competent authorities of the ▌ Member State in which the company is to be registered after the cross-border operation to challenge the ▌ information provided by the pre-operation certificate. ▌

(39)  Member States should ensure that the completion of certain procedural steps, namely, the disclosure of the draft terms, the application for pre-conversion, pre-merger or pre-division certificate (herein referred to as ‘pre-operation certificate’) as well as the submission of any information and documents for the scrutiny of the legality of the cross-border conversion, merger or division by the destination Member State, may be completed online in their entirety without the necessity for the applicants to appear in person before any competent authority in the Member States. The rules on the use of digital tools and processes in company law including the relevant safeguards should apply as appropriate. The competent authority should be able to receive the application for the pre-conversion certificate, including submission of any information and documents, online, unless exceptionally technically impossible for the authority.

(40)  In order to cut costs and reduce the length of the procedures and administrative burden for companies, Member States should apply the ‘once-only’ principle in the area of company law, which entails that companies are not asked to submit the same information to public authorities more than once. For example, companies should not have to submit the same information both to the national register and to the national gazette.

(41)  As a consequence of the cross-border conversion, the converted company should retain its legal personality, its assets and liabilities and all rights and obligations, including rights and obligations arising from contracts, acts or omissions. In particular, company should respect the rights and obligations arising from contracts of employment or from employment relationships including the terms and conditions agreed in any collective agreements.

(42)   In order to provide for the appropriate level of transparency and use of digital tools and processes, the pre-operation certificates issued by the competent authorities in different Member States should be shared by means of the system of interconnection of business registers and should be made publically available. In accordance with the general principle underlying this Directive, such exchange of information should always be free of charge.

(43)  To enhance the transparency about the cross-border operations, it is important that the registers of the Member States involved contain necessary information from the other register or registers about the companies involved in the cross-border operation in order to be able to track the history of those companies. In particular, the file in the register of the company where it was registered prior to the cross-border operation should contain the new registration number of the company attributed to it after the cross-border operation. Similarly, the file in the register of the company where it was registered after the cross-border operation should contain the initial registration number of the company attributed to it prior to the cross-border operation.

(44)  As regards the existing rules on cross-border mergers, the Commission announced in its Communication entitled ‘Upgrading the Single Market: more opportunities for people and business’ ▌ that it would assess the need to update those rules ▌ in order to make it easier for SMEs to choose their preferred business strategy and to better adapt to changes in market conditions, whilst at the same time not weakening the existing employment protection. In its Communication entitled ‘Commission Work Programme 2017 Delivering a Europe that protects, empowers and defends’, the Commission announced an initiative to facilitate the implementation of cross-border mergers.

(45)   The lack of harmonisation of safeguards for members ▌ has been identified as an obstacle for cross-border operations. Companies and members face a wide variety of different forms of protection leading to complexity and legal uncertainty. Members ▌ should, therefore, be offered the same minimum level of protection regardless of the Member State in which the company is situated. Member States may therefore maintain or introduce additional protection rules for members, unless they are in conflict with those provided by this Directive or with the freedom of establishment. Members‘ individual rights to information remain unaffected.

(46)   Following a cross-border operation, the former creditors of the company or companies carrying out that operation may see their claims affected where the ▌ company which is liable for the debt is thereafter governed by the law of another Member State. Currently, creditor protection rules vary across Member States which adds significant complexity to the cross-border operation process and leads to uncertainty both for the companies involved and for their creditors in relation to the recovery or satisfaction of their claim.

(47)  Besides the new rules on conversions this Directive lays down rules on cross-border divisions, both for partial and full divisions, but only through the formation of new companies. This Directive does not provide a harmonised framework for cross-border divisions in which a company transfers assets and liabilities to more than one existing company as these instances had been viewed as being very complex, requiring the involvement of competent authorities from several Member States and entailing additional risks in terms of the circumvention of national and EU rules.The possibility to form a company through a division by separation as provided for in this Directive offers companies a new harmonised procedure in the Single Market, however, companies should be free to directly set up subsidiaries in other Member States.

(48)   As a consequence of the cross-border merger, the assets and liabilities and all rights and obligations, including rights and obligations arising from contracts, acts or omissions should be transferred to the acquiring company or to the new company and the members of the merging companies, who do not exercise the exit-right, should become members of the acquiring or the new company respectively. In particular, the acquiring or the new company should respect the rights and obligations arising from contracts of employment or from employment relationships including the terms and conditions agreed in any collective agreements.

(49)  As a consequence of the cross-border division, the assets and liabilities and all rights and obligations, including rights and obligations arising from contracts, acts or omissions of the company being divided should be transferred to the recipient companies in accordance with the allocation specified in the draft terms of division and the members of the company being divided who do not exercise the exit-right should become members of the recipient companies or remain members of the company being divided or should become members of both. In particular, the recipient companies should respect the rights and obligations arising from contracts of employment or from employment relationships including the terms and conditions agreed in any collective agreements.

(50)  In order to ensure legal certainty, it should not be possible to declare a cross- border operation which has taken effect in accordance with the procedure laid down in this Directive null and void. This should be without prejudice to Member States' powers, inter alia, in the field of criminal law, terrorist financing, social law, taxation and law enforcement in accordance with national laws, in particular in case the competent or other relevant authorities establish, in particular through new substantive information, after the cross-border operation took effect, that the cross-border operation was set up for abusive or fraudulent purposes leading or aimed to lead to evasion or circumvention of national or EU law or criminal purposes. In this context, the competent authorities could also assess whether the applicable national threshold for employee participation of the Member State of the company carrying out the cross-border operation was met or exceeded in the subsequent years following the cross-border operation.

(51)  Any cross-border operation should be without prejudice to the liablity for tax obligations related to the company's or companies’ activity before that operation.

(52)   To guarantee the employees' rights other than rights of participation, Directive 2009/38/EC, Council Directive 98/59/EC(14), Directive 2001/23/EC, and Directive 2002/14/EC, are not affected by this Directive. National laws should also apply to matters outside the scope of this Directive such as tax or social security.

(53)   The provisions of this Directive do not affect the legal or administrative provisions, including the enforcement of tax rules in cross-border conversions, mergers and divisions, of national law relating to the taxes of Member States, or its territorial and administrative subdivisions.

(54)  This Directive is without prejudice to Council Directive (EU) 2016/1164(15) laying down rules against tax avoidance practices that directly affect the functioning of the internal market, Council Directive 2009/133/EC(16) on the common system of taxation applicable to mergers, divisions, partial divisions, transfers of assets and exchanges of shares concerning companies of different Member States and to the transfer of the registered office of an SE or SCE between Member States, Council Directive (EU) 2015/2376(17) as regards mandatory automatic exchange of information on advance tax rulings and advance pricing arrangements between Member States, Council Directive (EU) 2016/881(18) on mandatory automatic exchange of information in the field of taxation and Council Directive (EU) 2018/822(19) as regards mandatory automatic exchange of information in the field of taxation in relation to reportable cross-border arrangements.

(55)   This Directive does not affect the provisions of Directive (EU) 2015/849 of the European Parliament and the Council(20) addressing risks of money laundering and terrorist financing, in particular the obligations related to carrying out the appropriate customer due diligence measures on a risk-sensitive basis and to identifying and registering the beneficial owner of any newly created entity in the Member State of its incorporation.

(56)  The Directive does not affect Union legislation and national rules made or introduced pursuant to such Union legislation regulating transparency and rights of shareholders in listed companies.

(57)  This Directive does not affect Union legislation regulating credit intermediaries and other financial undertakings and national rules made or introduced pursuant to such Union legislation.

(58)   Since the objectives of this Directive, to facilitate and regulate cross-border conversions, mergers and divisions cannot be sufficiently achieved by the Member States, but can be better achieved at Union level, the Union may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the TFEU. In accordance with the principle of proportionality, as set out in that Article, this Directive does not go beyond what is necessary to achieve those objectives.

(59)   This Directive respects the fundamental rights and observes the principles recognised in particular by the Charter of Fundamental Rights of the European Union.

(60)   In accordance with the Joint Political Declaration of 28 September 2011 of Member States and the Commission on explanatory documents(21), Member States have undertaken to accompany, in justified cases, the notification of their transposition measures with one or more documents explaining the relationship between the components of a directive and the corresponding parts of national transposition instruments. With regard to this Directive, the legislator considers the transmission of such documents to be justified.

(61)   The Commission should carry out an evaluation of this Directive including an evaluation of the implementation of employee information, consultation and participation in the context of the cross-border operations. The evaluation should, in particular, aim to assess those cross-border operations where the negotiations on employee participation were trigged by the 4/5 of the applicable threshold and to see whether those companies, after the cross-border operation, met or exceeded the applicable threshold for employee participation of the Member State of the company which carried out the cross-border operation. Pursuant to paragraph 22 of the Interinstitutional Agreement between the European Parliament, the Council of the European Union and the European Commission on Better Law-Making of 13 April 2016(22) that evaluation should be based on the five criteria of efficiency, effectiveness, relevance, coherence and value added and should provide the basis for impact assessments of possible further measures.

(62)   Information should be collected in order to assess the performance of the legislation against the objectives its pursues and in order to inform an evaluation of the legislation in accordance with paragraph 22 of the Interinstitutional Agreement between the European Parliament, the Council of the European Union and the European Commission on Better Law-Making of 13 April 2016.

(63)  Directive (EU) 2017/1132 should therefore be amended accordingly,

HAVE ADOPTED THIS DIRECTIVE:

Article 1

Amendments to Directive (EU) 2017/1132

Directive (EU) 2017/1132 is amended as follows:

(1)  in Article 18(3), the following point (aa) is inserted:"

"(aa) the documents and information referred to in Article 86h, 86o, 86q, 123, 127a, 160j, 160q, 160s;"

"

(2)  ▌Article 24 is amended as follows:

(a)   point (e) is replaced by the following:"

"(e) the detailed list of data to be transmitted for the purpose of exchange of information between registers and for the purpose of disclosure, as referred to in Articles 20, 34, ▌86o, 86p, 86q, 127a, 128, 130 ▌, 160q, 160r and 160s";

"

(b)  in the second subparagraph, the following sentence is added:"

"The Commission shall adopt the implementing acts pursuant to point e) by 18 months after the day of entry into force at the latest.";

"

(3)  the title of Title II is replaced by the following:"

"CONVERSIONS, MERGERS AND DIVISIONS OF LIMITED LIABILITY COMPANIES";

"

(4)  in Title II, the following Chapter -I is inserted:"

"CHAPTER -I

Cross-border conversions

Article 86a

Scope

1.  This Chapter shall apply to the conversion of a limited liability company formed in accordance with the law of a Member State and having its registered office, central administration or principal place of business within the Union into a limited liability company governed by the law of another Member State (hereinafter referred to as ‘cross-border conversion’).

Article 86b

Definitions

For the purposes of this Chapter

   (1) 'limited liability company' hereinafter referred to as "company", means a company of a type listed in Annex II carrying out a cross-border conversion;
   (2) 'cross-border conversion' means an operation whereby a company, without being dissolved, wound up or going into liquidation, converts the legal form under which it is registered in a departure Member State into a legal form of the destination Member State and listed in Annex II and transfers at least its registered office into the destination Member State whilst retaining its legal personality;
   (3) 'departure Member State' means a Member State in which a company is registered in its legal form prior to the cross-border conversion;
   (4) 'destination Member State' means a Member State in which a company shall be registered as a result of the cross-border conversion;

   (5) 'converted company' means the ▌ company formed in the destination Member State as a result of the process of the cross-border conversion ▌.

Article 86c

Further provisions concerning the scope

1.  This Chapter shall not apply to cross-border conversions involving a company the object of which is the collective investment of capital provided by the public, which operates on the principle of risk-spreading and the units of which are, at the holders' request, repurchased or redeemed, directly or indirectly, out of the assets of that company. Action taken by such a company to ensure that the stock exchange value of its units does not vary significantly from its net asset value shall be regarded as equivalent to such repurchase or redemption.

2.  Member States shall ensure that this Chapter does not apply in any of the following circumstances:

   (a) the company is in liquidation and has begun to distribute assets to its shareholders;

   (b) the company is subject to resolution tools, powers and mechanisms provided for in Title IV of Directive 2014/59/EU of the European Parliament and of the Council*.

3.  Member States may decide not to apply this Chapter to companies subject to:

   (a) insolvency proceedings or preventive restructuring frameworks;
   (aa) liquidation proceedings other than those referred to in paragraph 2, or
   (b) crisis prevention measures in the meaning of Article 2 paragraph 1 point (101) of Directive 2014/59/EU of the European Parliament and of the Council.

4.  The national law of the departure Member State shall govern that part of the procedures and formalities to be complied with in connection with the cross-border conversion in order to obtain the pre-conversion certificate, and the national law of the destination Member State shall govern that part of the procedures and formalities to be complied with following receipt of the pre-conversion certificate, in compliance with Union law.

Article 86d

Draft terms of cross-border conversions

1.   The management or administrative organ of the company ▌ shall draw up the draft terms of a cross-border conversion. The draft terms of a cross-border conversion shall include at least the following particulars:

   (a) the legal form, name and location of its registered office of the company in the departure Member State;
   (b) the legal form, name and location of its registered office proposed for the converted company ▌ in the destination Member State;
   (c) the instrument ▌ of constitution, where applicable, and the statutes if they are contained in a separate instrument, of a company in the destination Member State;
   (d) the proposed indicative timetable for the cross-border conversion;
   (e) the rights conferred by the converted company on members enjoying special rights or on holders of securities other than shares representing the company capital, or the measures proposed concerning them;
   (f) ▌ safeguards, such as guarantees or pledges, where offered to ▌ creditors;

   (h) any special advantages granted to members of the administrative, management, supervisory or controlling organs of the ▌ company;
   (ha) if any incentive or subsidies were received by the company in the departure Member State in the last 5 years;
   (i) details of the offer of cash compensation for the members ▌ in accordance with Article 86j;
   (j) the likely repercussions of the cross-border conversion on employment;
   (k) where appropriate, information on the procedures by which arrangements for the involvement of employees in the definition of their rights to participation in the converted company are determined pursuant to Article 86l ▌.

Article 86e

Report of the management or administrative organ to the members and the employees

1.  The management or administrative organ of the company ▌ shall draw up a report to members and employees explaining and justifying the legal and economic aspects of the cross-border conversion as well as explaining the implications of the cross-border conversion for employees.

2.  The report referred to in paragraph 1, shall, in particular, explain the implications of the cross-border conversion on the future business of the company:

It shall also include a section for members and a section for employees.

3.  The section of the report for members shall in particular explain the following:

   (aa) an explanation of the cash compensation and of the method used to arrive at it;
   (b) the implications of the cross-border conversion for members;
   (c) the rights and remedies available to members ▌ in accordance with Article 86j.

4.  The section of the report for members shall not be required where all the members of the company have agreed to waive this requirement. Member States may exclude single member companies from the provisions of this Article.

5.  The section of the report for employees shall in particular explain the following:

   (ca) the implications of the cross-border conversion for employment relationships, as well as, where applicable, any measure in order to safeguard them;
   (cb) any material changes in the applicable conditions of employment, and in the location of the company’s places of business;
   (d) how the factors set out in points (ca) and (cb) affect also any subsidiaries of the company.

6.  Where the management or administrative organ of the company receives, in good time, an opinion on the parts of the report referred to in paragraphs 1, 2 and 4 from the representatives of their employees or, where there are no such representatives, from the employees themselves, as provided for under national law, the members shall be informed thereof and that opinion shall be appended to that report.

7.  The section to employees shall not be required, where a company and its subsidiaries, if any, have no employees other than those who form part of the management or administrative organ.

8.  The company may decide whether to draw up one report containing the two sections referred to in paragraphs 3 and 4 or whether to draw up separate reports to members and employees respectively.

9.  The report referred to in paragraph 1 or the reports referred to in paragraph 5 shall be made available in any case electronically, together with the draft terms of the cross-border conversion, if available, to the members and to the representatives of the employees of the company ▌ or, where there are no such representatives, to the employees themselves, not less than 6 weeks before the date of the general meeting referred to in Article 86i.

10.  Where the section for members referred to in paragraph 3 is waived in accordance with paragraph 3 and the section for employees referred to in paragraph 4 is not required in accordance with paragraph 4a, the report referred to in paragraph 1 is not required.

9.  Paragraphs 1 to 8 of this Article shall be without prejudice to the applicable information and consultation rights and proceedings instituted at national level following the transposition of Directives 2002/14/EC and 2009/38/EC.

Article 86g

Independent expert report

1.  Member States shall ensure that an independent expert examines the draft terms of the cross-border conversion and draws up a report intended for members which is made available to them not less than one month before the date of the general meeting referred to in Article 86i ▌. Depending on the law of Member States, the expert may be a natural person or a legal person.

2.   The report referred to in paragraph 1 shall in any case include the expert’s opinion whether the cash compensation is adequate. With regard to the cash compensation referred to in Article 86d point (i), the expert shall consider any market price of those shares in the company prior to the announcement of the conversion proposal or to the value of the company excluding the effect of the proposed conversion as determined according to generally accepted valuation methods. The report shall at least:

   (a) indicate the method used to arrive at the cash compensation proposed;
   (b) state whether such method is adequate for the assessment of the cash compensation and indicate the value arrived at using that method and give an opinion on the relative importance attributed to that method in arriving at the value decided on;
   (c) describe any special valuation difficulties which have arisen.

▌The expert shall be entitled to secure from the company all the necessary information for the discharge of his/her duties.

3.  Neither an examination of the draft terms of cross-border conversion by an independent expert nor an expert report shall be required if all the members of the company have so agreed. Member States may exclude single member companies from the provisions of this Article.

Article 86h

Disclosure

1.  Member States shall ensure that the following documents are disclosed and made publically available in the register of the departure Member State, at least one month before the date of the general meeting referred to in Article 86i:

   (a) the draft terms of the cross-border conversion;

   (b) notice informing the members, creditors and representatives of the employees of the company, or, where there are no such representatives, the employees themselves that they may submit to the company, at the latest 5 working days before the date of the general meeting, comments concerning the draft terms of the cross-border conversion.

Member States may require that the independent expert report, if drafted in accordance with Article 86g, is disclosed and made publically available in the register.

Member States shall ensure that the company is able to exclude confidential information from the disclosure of the independent expert report.

The documents disclosed in accordance with this paragraph shall also be accessible by means of the system referred to in Article 22.

2.  Member States may exempt the company ▌ from the disclosure requirement referred to in paragraph 1 where, for a continuous period beginning at least one month before the date fixed for the general meeting referred to in Article 86i and ending not earlier than the conclusion of that meeting, it makes the documents referred to in paragraph 1, available on its website free of charge to the public.

However, Member States shall not subject that exemption to any requirements or constraints other than those which are necessary in order to ensure the security of the website and the authenticity of the documents unless and only to the extent that they are proportionate in order to achieve those objectives.

3.  Where the company ▌ discloses the draft terms of the cross-border conversion in accordance with paragraph 2 of this Article, it shall submit at least one month before the date of the general meeting referred to in Article 86i to the register of the departure Member State, the following information which has to be disclosed:

   (a) the legal form, name and registered office of the company in the departure Member State as well as those proposed for the converted company in the destination Member State;
   (b) the register in which the documents referred to in Article 14 are filed in respect of the company, ▌ and the registration number in that register;
   (c) an indication of the arrangements made for the exercise of the rights of creditors, employees and members;
   (d) details of the website where the draft terms of the cross-border conversion, the notice and the expert report referred to in paragraph 1 and complete information on the arrangements referred to in point (c) of this paragraph may be obtained online and free of charge.

4.  Member States shall ensure that the requirements referred to in paragraphs 1 and 3 can be completed online in their entirety without the necessity for the applicants to appear in person before any competent authority in the departure Member State, in compliance with the relevant provisions of Chapter III of Title I.

5.  Member States may require, in addition to the disclosure referred to in paragraphs 1, 2 and 3, that the draft terms of the cross-border conversion, or the information referred to in paragraph 3 is published in their national gazette or through a central electronic platform in accordance with Article 16 paragraph 3. In that instance, Member States shall ensure that the register transmits the relevant information to the national gazette.

6.  Member States shall ensure that the documentation referred to in paragraph 1 or the information referred to in paragraph 3 is accessible by the public free of charge through the system of interconnection of registers.

Member States shall further ensure that any fees charged to the company ▌ by the registers for the disclosure referred to in paragraphs 1 and 3 and, where applicable, for the publication referred to in paragraph 5 shall not exceed the recovery of costs of providing such services.

Article 86i

Approval by the general meeting

1.  After taking note of the reports referred to in Articles 86e ▌ and 86g, where applicable, and the employees’ opinions submitted in accordance with Article 86e and comments submitted in accordance with 86h, the general meeting of the company ▌ shall decide, by means of a resolution, whether to approve the draft terms of the cross-border conversion and whether to adapt the instrument of constitution, and the statutes if they are contained in a separate instrument.

2.  The general meeting of the company ▌ may reserve the right to make implementation of the cross-border conversion conditional on express ratification by it of the arrangements referred to in Article 86l.

3.  Member States shall ensure that the approval of ▌ the draft terms of the cross-border conversion or any amendment thereof requires a majority of not less than two thirds but not more than 90 % of the votes attached either to the shares or to the subscribed capital represented at the meeting. In any event the voting threshold shall not be higher than that provided for in national law for the approval of cross-border mergers.

4.  Where a clause of the draft terms of the cross border conversion or any amendment of the instrument of constitution of the converting company leads to an increase of the economic obligations of a shareholder towards the company or third parties, Member States may provide in such specific circumstances that this clause or the amendment of the instrument of constitution shall be approved by the shareholder concerned, provided that this shareholder is unable to exercise the rights laid down in Article 86j.

5.   Member States shall ensure that the approval of the cross-border conversion by the general meeting cannot be challenged solely on the following grounds:

   (a) the cash compensation referred to in Article 86d (i) has been inadequately set; or
   (b) the information given on point (a) did not comply with the legal requirements.

Article 86j

Protection of members

1.  Member States shall ensure that at least the ▌ members of a company who voted against the approval of the draft-terms of the cross-border conversion have the right to dispose of their shares, in consideration for adequate cash compensation, under the conditions laid down in paragraphs 2 to 6.

Member States may provide such a right also to other members of the company.

Member States may require that the explicit opposition to the draft terms of the cross-border conversion and/or the members' intention to exercise their right to dispose of their shares shall be appropriately documented at the latest at the general meeting referred to in Article 86i. Member States may allow to consider the recording of the objection to the draft terms of the cross-border conversion as proper documentation of a negative vote.

2.  Member States shall establish the period within which the members▌ referred to in paragraph 1 have to declare to the company their decision to exercise the right to dispose of their shares.That period shall not exceed one month after the general meeting referred to in Article 86i. Member States shall ensure that the company provides an electronic address for receiving this declaration electronically.

3.  Member States shall further establish the period within which the cash compensation specified in the draft terms of cross-border conversion is to be paid. This period may not end later than two months after the cross-border conversion takes effect according to Article 86r.

4.   Member States shall ensure that any member who has declared the decision to exercise the right to dispose of the shares but who considers that the compensation offered by the company has not been adequately set, is entitled to demand additional cash compensation before a competent authorities or bodies mandated under national law. Member States shall establish a time limit for the demand relating to additional cash compensation.

Member States may provide that the final decision providing an additional cash compensation is valid for those members who have declared the decision to exercise the right to dispose of their shares according to paragraph 2.

5.  Member States shall ensure that the law of the departure Member State governs the rights referred to in paragraphs 1 to 4 and that the exclusive competence to resolve any disputes relating to those rights lies within the departure Member State.

Article 86k

Protection of creditors

1.  Member States shall provide for an adequate system of protection of the interest of creditors, whose claims antedate the disclosure of the draft terms of the cross-border conversion and have not fallen due at the time of such disclosure. Member States shall ensure that creditors who are dissatisfied with the safeguards offered in the draft terms of the cross-border conversion, as provided for in Article 86d (1) point (f), may apply within three months of the disclosure of the draft terms of cross-border conversion referred to in Article 86h to the appropriate administrative or judicial authority for adequate safeguards provided that they can credibly demonstrate that due to the cross-border conversion the satisfaction of their claims is at stake and that no adequate safeguards have been obtained from the company. Member States shall ensure that the safeguards are dependent on the cross-border conversion taking effect in accordance with Article 86r.

2.  Member States may require that the management or administrative organ of the company ▌ provides a declaration accurately reflecting the current financial status of the company at the date of the declaration, which shall not be earlier than one month before its disclosure. The declaration shall declare that, on the basis of the information available to the management or administrative organ of the company at the date of the declaration, and after having made reasonable enquiries, they are unaware of any reason why the company should, after the conversion takes effect, be unable to meet the liabilities when those liabilities fall due. The declaration shall be disclosed together with the draft terms of the cross-border conversion ▌ in accordance with Article 86h.

3.   Paragraphs ▌ 2 and 3 are without prejudice to the application of national laws of the departure Member State concerning the satisfaction of payments or securing payments or non-pecuniary obligations due to public bodies.

4.  Member States shall ensure that creditors whose claims antedate the disclosure of the draft terms of the cross-border conversion are able to institute proceedings against the company also in the departure Member State within two years from the date the conversion has taken effect, without prejudice to the rules on jurisdiction arising from national or EU law or from a contractual agreement. The possibility to institute such proceedings shall be in addition to other rules on choice of jurisdiction applicable pursuant to Union law

Article 86ka

Employee’s information and consultation

1.  Member States shall ensure that employees’ rights to information and consultation are respected in relation to the cross-border conversion and are exercised in accordance with the legal framework set out by the Directive 2002/14/EC and, where applicable for Community-scale undertakings or Community-scale groups of undertakings, in accordance with Directive 2009/38/EC. Member States may decide to apply information and consultation rights to other companies than those referred to in Article 3 paragraph 1 of the Directive 2002/14/EC.

2.  Notwithstanding Article 86e(6) and Article 86h(1)(b), Member States shall ensure that rights of employees to information and consultation are respected, at least before the draft terms of the cross-border conversion or the report referred to in Article 86e, are decided, whichever is earlier in such a way that a reasoned response is given to the employees before the general meeting referred to in Article 86i.

3.  Without prejudice to any provisions and/or practices in force more favourable to employees, the Member States shall determine the practical arrangements for exercising the right to information and consultation in accordance with Article 4 of Directive 2002/14/EC.

Article 86l

Employee participation

1.  Without prejudice to paragraph 2, the converted company ▌ shall be subject to the rules in force concerning employee participation, if any, in the destination Member State.

2.  However, the rules in force concerning employee participation, if any, in the destination Member State shall not apply, where the company carrying out the conversion has, in the six months prior to the publication of the draft terms of the cross-border conversion as referred to in Article 86d of this Directive, an average number of employees equivalent to four fifths of the applicable threshold, laid down in the law of the departure Member State, which triggers the participation of employees within the meaning of point (k) of Article 2 of Directive 2001/86/EC, or where the national law of the destination Member State does not:

   (a) provide for at least the same level of employee participation as operated in the company prior to the conversion, measured by reference to the proportion of employee representatives amongst the members of the administrative or supervisory organ or their committees or of the management group which covers the profit units of the company, subject to employee representation; or
   (b) provide for employees of establishments of the converted company ▌ that are situated in other Member States the same entitlement to exercise participation rights as is enjoyed by those employees employed in the destination Member State.

3.  In the cases referred to in paragraph 2 of this Article, the participation of employees in the converted company and their involvement in the definition of such rights shall be regulated by the Member States, mutatis mutandis and subject to paragraphs 4 to 7 of this Article, in accordance with the principles and procedures laid down in Article 12(2) ▌ and (4) of Regulation (EC) No 2157/2001 and the following provisions of Directive 2001/86/EC:

   (a) Article 3(1), (2)(a)(i), 2(b) and (3), the first two sentences of Article 3(4),▌ Article 3(5) and Article 3(7);
   (b) Article 4(1), Article 4(2)(a), (g) and (h), Article 4(3) and Article 4(4);
   (c) Article 5;
   (d) Article 6;
   (e) ▌Article 7 paragraph 1 except the second indent of (b);
   (f) Articles 8, ▌ 10, 11 and 12;
   (g) point (a) of Part 3 of the Annex.

4.  When regulating the principles and procedures referred to in paragraph 3, Member States:

   (a) shall confer on the special negotiating body the right to decide, by a majority of two thirds of its members representing at least two thirds of the employees, not to open negotiations or to terminate negotiations already opened and to rely on the rules on participation in force in the destination Member State;
   (b) may, in the case where, following prior negotiations, standard rules for participation apply and notwithstanding such rules, decide to limit the proportion of employee representatives in the administrative organ of the converted company. However, if in the company ▌ employee representatives constituted at least one third of the administrative or supervisory board, the limitation may never result in a lower proportion of employee representatives in the administrative organ than one third;
   (c) shall ensure that the rules on employee participation that applied prior to the cross-border conversion continue to apply until the date of application of any subsequently agreed rules or in the absence of agreed rules until the application of standard rules in accordance with point (a) of Part 3 of the Annex.

5.  The extension of participation rights to employees of the converted company employed in other Member States, referred to in point (b) of paragraph 2, shall not entail any obligation for Member States which choose to do so to take those employees into account when calculating the size of workforce thresholds giving rise to participation rights under national law.

6.  Where the converted company ▌ is to be governed by an employee participation system, in accordance with the rules referred to in paragraph 2, it shall be obliged to take a legal form allowing for the exercise of participation rights.

7.  Where the converted company is operating under an employee participation system, that company shall be obliged to take measures to ensure that employees' participation rights are protected in the event of any subsequent cross-border or domestic merger, division or conversion for a period of four years after the cross-border conversion has taken effect, by applying mutatis mutandis the rules laid down in paragraphs 1 to 6.

8.  A company shall communicate to its employees or their representatives the outcome of the negotiations concerning employee participation without undue delay.

Article 86m

Pre-conversion certificate

1.  Member States shall designate the court, notary or other authority or authorities competent ("the competent authority") to scrutinise the legality of the cross-border conversion as regards that part of the procedure which is governed by the law of the departure Member State and to issue a pre-conversion certificate attesting compliance with all the relevant conditions and the proper completion of all procedures and formalities in the departure Member State.

Such completion of procedures and formalities may comprise the satisfaction of payments, or securing payments or non-pecuniary obligations due to public bodies or the compliance with special sectorial requirements, including securing payments or obligations arising from ongoing proceedings.

2.  Member States shall ensure that the application to obtain a pre-conversion certificate by the company ▌ is accompanied by the following:

   (a) the draft terms of conversion referred to in Article 86d;
   (b) the report and the appended opinion, if any, referred to in Article 86e, as well as the report referred to in Article 86g, where they are available;
   (ba) any comments submitted in accordance with Article86h (1);
   (c) information on the approval by the general meeting ▌ referred to in Article 86i.

3.  Member States may require that the application to obtain a pre-conversion certificate is accompanied by additional information, such as, in particular:

   (a) on the number of employees at the time of the drawing up of the draft terms of the conversion;
   (b) on subsidiaries and their respective geographic allocation;
   (c) regarding the fulfilment of obligations due to public bodies by the company;

For the purpose of this paragraph, competent authorities may request this information, if not provided, from other relevant authorities.

4.  Member States shall ensure that the application referred to in paragraphs 2 and 3, including submission of any information and documents, may be completed online in its entirety without the necessity to appear in person before the competent authority referred to in paragraph 1, in compliance with the relevant provisions of Chapter III of Title I.

5.  In respect of compliance with the rules concerning employee participation as laid down in Article 86l, the competent authority in the departure Member State shall verify that the draft terms of the cross-border conversion referred to in paragraph 2 of this Article, include information on the procedures by which the relevant arrangements are determined and on the possible options for such arrangements.

6.  As part of the assessment ▌ referred to in paragraph 1, the competent authority, shall examine the following:

   (a) all documents and information submitted to the authority in accordance with paragraphs 2 and 3;
   (b) an indication by the company that the procedure referred to in Article 86l(3) and (4) has started, where relevant.

7.   Member States shall ensure that the assessment referred to in paragraph 1 is carried out within three months of the date of receipt of the documents and information concerning the approval of the cross-border conversion by the general meeting of the company. It shall have one of the following outcomes:

   (a) where it is determined that the cross-border conversion ▌ complies with all the relevant conditions and that all necessary procedures and formalities have been completed, the competent authority shall issue the pre-conversion certificate;
   (b) where it is determined that the cross-border conversion does not comply with all the relevant conditions or that not all necessary procedures and/or formalities have been completed, the competent authority shall not issue the pre-conversion certificate and shall inform the company of the reasons for its decision. In that case, the competent authority may give the company the possibility to fulfil the relevant conditions or to complete the procedures and formalities within an appropriate period of time.

8.  Member States shall ensure that the competent authority shall not issue the pre-conversion certificate, if it is determined in compliance with national law that a cross-border conversion is set-up for abusive or fraudulent purposes leading or aimed to lead to evasion or circumvention of national or EU law, or for criminal purposes.

9.  If the competent authority, through the scrutiny of legality referred to in paragraph 1, has serious doubts that the cross-border conversion is set up for abusive or fraudulent purposes leading or aimed to lead to evasion or circumvention of national or EU law, or for criminal purposes, it shall take into consideration relevant facts and circumstances, such as, where relevant and not considered in isolation, indicative factors of which, the competent authority has become aware, in the course of the scrutiny of legality referred to in paragraph 1, including through consultation of relevant authorities. The assessment for the purposes of this paragraph shall be conducted on a case-by-case basis, through a procedure governed by national law.

10.  Where it is necessary for the assessment under paragraph 8 to take into account additional information or performing additional investigative activities, the period of three months as provided in paragraph 7 may be extended for a maximum of further 3 months.

11.  Where due to the complexity of the cross border procedure it is not possible to carry out the assessment within the deadlines as provided in this Article, Member States shall ensure that the applicant is notified of the reasons for any delay before the expiry of the original deadline.

12.  Member States shall ensure that competent authorities designated in accordance with paragraph 1 may consult other relevant authorities with competence in the different fields concerned by the cross-border conversion, including those from the destination Member State and obtain from these authorities as well as from the company, information and documents necessary to carry out the control of legality, within the procedural framework laid down in national law. In the assessment the competent authority may have recourse to an independent expert.

Article 86o

▌Transmission of the pre-conversion certificate

1.   Member States shall ensure that thepre-conversion certificate is shared with the authorities referred to in Article 86p (1) through the system of interconnection of registers set up in accordance with Article 22.

Member States shall also ensure that the pre-conversion certificate is available through the system of interconnection of registers set up in accordance with Article 22.

2.  The access to the information referred to in paragraph 1 shall be free of charge for the competent authorities referred to in Article 86p(1) and registers.

Article 86p

Scrutiny of the legality of the cross-border conversion by the destination Member State

1.  Member States shall designate the court, notary or other authority competent to scrutinise the legality of the cross-border conversion as regards that part of the procedure which is governed by the law of the destination Member State and to approve the cross-border conversion where ▌ all the relevant conditions ▌ and formalities in the destination Member State have been properly completed.

The competent authority of the destination Member State shall in particular ensure that the proposed converted company complies with provisions of national law on the incorporation and registration of companies and, where appropriate, that arrangements for employee participation have been determined in accordance with Article 86l.

2.  For the purpose of paragraph 1, the company carrying out the cross-border conversion shall submit to the authority, referred to in paragraph 1, the draft terms of the cross-border conversion approved by the general meeting referred to in Article 86i.

3.  Each Member State shall ensure that the application referred to in paragraph 1, by the company carrying out the cross-border conversion, which includes the submission of any information and documents, may be completed online in its entirety without the necessity for the applicants to appear in person before the competent authority in compliance with the relevant provisions of Chapter III of Title I.

4.  The competent authority referred to in paragraph 1 shall ▌ approve the cross-border conversion as soon as it has completed its assessment of the relevant conditions.

5.  The pre-conversion certificate referred to in Article 86o(1) shall be accepted by the competent authority, referred to in paragraph 1, as conclusively attesting to the proper completion of the procedures and formalities under the national law of the departure Member State without which the cross-border conversion cannot be approved.

Article 86q

Registration

1.  The law of the departure and destination Member States shall determine, with respect to the territory of those States, the arrangements to disclose the completion of the cross-border conversion in the register.

2.  Member States shall ensure that at least the following information shall be entered in their registers, which are made publically available and accessible by means of the system referred to in Article 22:

   (a) in the ▌ register of the destination Member State – that the registration of the converted company is a result of a cross-border conversion;
   (b) in the register of the destination Member State – the date of registration of the converted company;
   (c) in the register of the departure Member State – that the striking off or removal of the company from the register is the result of a cross-border conversion ▌;
   (d) in the register of the departure Member State the date of striking off or removal of the company from register;
   (e) in the registers of the departure and the destination Member States respectively – the registration number, name and legal form of the company in the departure Member State and the registration number, name and legal form of the converted company in the destination Member State.

3.  Member States shall ensure that the registry in the destination Member State notifies the registry in the departure Member State by means of the system referred to in Article 22, that the cross-border conversion has taken effect. Member States shall also ensure that the registration of the company is removed immediately upon receipt of that notification ▌.

Article 86r

Date on which the cross-border conversion takes effect

The law of the destination Member State shall determine the date on which the cross-border conversion takes effect ▌. That date shall be after the scrutiny ▌ referred to in Article 86p has been carried out.

Article 86s

Consequences of the cross-border conversion

A cross-border conversion, carried out in compliance with the national provisions transposing this Directive, shall by reason of the cross-border conversion taking effect and from the date referred to in Article 86r have the following consequences:

   (a) all the assets and liabilities of the company ▌ including all contracts, credits, rights and obligations shall ▌ continue with the converted company;
   (b) the members of the company ▌shall continue to be members of the converted company, unless they exercise the exit right referred to in Article 86j(1);
   (c) the rights and obligations of the company ▌ arising from contracts of employment or from employment relationships and existing at the date on which the cross-border conversion takes effect shall, continue with the converted company ▌.

Article 86t

Liability of the independent experts

Member States shall lay down rules governing at least the civil liability of the independent expert responsible for drawing up the report referred to in Article 86g ▌.

Member States shall have rules in place to ensure that the expert or the legal person on whose behalf the expert is operating, is independent and has no conflict of interest from the company applying for the pre-conversion certificate and that the expert's opinion is impartial, objective, and given with a view to providing assistance to the competent authority in compliance with the independence and impartiality requirements under the applicable law or professional standards to which the expert is subject.

Article 86u

Validity

A cross-border conversion which has taken effect in compliance with the procedures transposing this Directive may not be declared null and void.

This does not affect Member States' powers, inter alia, in the field of criminal law, terrorist financing, social law, taxation and law enforcement, to impose measures and penalties, in accordance with national laws, after the date on which the cross-border conversion took effect.

______________

(*) Directive 2014/59/EU of the European Parliament and of the Council of 15 May 2014 establishing a framework for the recovery and resolution of credit institutions and investment firms and amending Council Directive 82/891/EEC, and Directives 2001/24/EC, 2002/47/EC, 2004/25/EC, 2005/56/EC, 2007/36/EC, 2011/35/EU, 2012/30/EU and 2013/36/EU, and Regulations (EU) No 1093/2010 and (EU) No 648/2012, of the European Parliament and of the Council (OJ L 173, 12.6.2014, p. 190).”;

"

(5)  in Article 119, point (2) is amended as follows:

(a)  at the end of point (c) the following is added "; or";

(b)  the following point (d) is added:"

"(d) one or more companies, on being dissolved without going into liquidation, transfer all their assets and liabilities to another existing company, the acquiring company, without the issue of any new shares by the acquiring company, provided that one person holds directly or indirectly all the shares in the merging companies or the members of the merging companies hold their shares in the same proportion in all merging companies.";

"

(6)  Article 120 is amended as follows:

(a)  the title is replaced by the following:"

“Article 120

Further provisions concerning the scope”;

"

(b)  in Article 120, paragraph 4 is replaced by the following:"

"4. Member States shall ensure that this Chapter does not apply in any of the following circumstances:

   (a) the company or companies are in liquidation, and have begun to distribute assets to their shareholders;

   (d) the company is subject to resolution tools, powers and mechanisms provided for in Title IV of Directive 2014/59/EU of the European Parliament and of the Council;

"

(f)  the following paragraph is added:"

"5. Member States may decide not to apply this Chapter to companies subject to:

   (a) insolvency proceedings or preventive restructuring frameworks"
   (b) liquidation proceedings other than those referred to in paragraph 4 point a, or
   (c) crisis prevention measures in the meaning of Article 2 paragraph 1 point (101) of Directive 2014/59/EU of the European Parliament and of the Council.”;

"

(7)  Article 121 is amended as follows:

(a)  in paragraph 1, point (a) is deleted;

(b)  paragraph 2 is replaced by the following:"

"2. The provisions and formalities referred to in the point (b) of paragraph 1 shall, in particular, include those concerning the decision-making process relating to the merger and the protection of employees as regards rights other than those governed by Article 133.";

"

(8)  Article 122 is amended as follows:

(a)  points (a) and (b) are replaced by the following:"

"(a) the legal form, name and location of registered office of the merging companies and those proposed for the company resulting from the cross-border merger;

   (b) the ratio applicable to the exchange of securities or shares representing the company capital and the amount of any cash payment where appropriate;"

"

(b)  point (h) is replaced by the following:"

"(h) any special advantages granted ▌ to members of the administrative, management, supervisory or controlling organs of the merging companies;"

"

(c)   point (i) is replaced by the following:"

(i) the instrument or instruments of constitution, where applicable, and the statutes if they are contained in a separate instrument, of the company resulting from the cross-border merger";

"

(d)   following points (m) and (n) are added:"

"(m) details of the offer of cash compensation for the members ▌ in accordance with Article 126a;

   (n) ▌ safeguards, such as guarantees or pledges, where offered to creditors.";

"

(9)  Articles 123 and 124 are replaced by the following:"

"Article 123

Disclosure

1.  Member States shall ensure that the following documents are disclosed and made publically available in ▌registers of Member State of each of the merging companies, at least one month before the date of the general meeting referred to in Article 126:

   (a) the common draft terms of the cross-border merger;
   (b) a notice informing the members, creditors and representatives of the employees of the merging company, or, where there are no such representatives, the employees themselves, that they may submit to the respective company, at the latest 5 working days before the date of the general meeting, comments concerning the common draft terms of the cross-border merger.

Member States may require that the independent expert report, if drafted in accordance with Article 125, is disclosed and made publically available in the register.

Member States shall ensure that the company is able to exclude confidential information from the disclosure of the independent expert report.

The documents disclosed in accordance with this paragraph shall also be accessible by means of the system referred to in Article 22.

2.  Member States may exempt merging companies from the disclosure requirement referred to in paragraph 1 where, for a continuous period beginning at least one month before the date fixed for the general meeting referred to in Article 126 and ending not earlier than the conclusion of that meeting, those companies make the documents referred to in paragraph 1, available on their websites free of charge to the public.

However, Member States shall not subject that exemption to any requirements or constraints other than those which are necessary in order to ensure the security of the website and the authenticity of the documents unless and only to the extent that they are proportionate in order to achieve those objectives.

3.  Where merging companies disclose the common draft terms of the cross-border merger in accordance with paragraph 2 of this Article, they shall submit at least one month before the date of the general meeting referred to in Article 126 to the respective national registers the following information which has to be disclosed:

   (a) the legal form, name and registered office of each of the merging companies and the legal form, name and registered office proposed for any newly created company;
   (b) the register in which the documents referred to in Article 14 are filed in respect of each of the merging companies and the registration number in that register;
   (c) an indication, for each of the merging companies, of the arrangements made for the exercise of the rights of creditors, employees and members;
   (d) details of the website where the common draft terms of the cross-border merger, the notice and the expert report referred to in paragraph 1 and complete information on the arrangements referred to in point (c) of this paragraph may be obtained online and free of charge.

4.  Member States shall ensure that the requirements referred to in paragraphs 1 and 3 can be completed online in their entirety without the necessity for the applicants to appear in person before any competent authority in ▌ the Member States of the merging companies, in compliance with the relevant provisions of Chapter III of Title I.

5.  Where the approval of the merger is not required by the general meeting of the acquiring company in accordance with Article 126(3), the disclosure referred to in paragraphs 1, 2 and 3 of this Article shall be made at least one month before the date of the general meeting of the other merging company or companies.

6.  Member States may require, in addition to the disclosure referred to in paragraphs 1, 2 and 3, that the common draft terms of the cross-border merger, or the information referred to in paragraph 3 is published in their national gazette or through a central electronic platform in accordance with Article 16 paragraph 3. In that instance, Member States shall ensure that the register transmits the relevant information to the national gazette.

7.  Member States shall ensure that the documentation referred to in paragraph 1 or the information referred to in paragraph 3 is accessible by the public free of charge through the system of interconnection of registers.

Member States shall further ensure that any fees charged to the company by the registers for the disclosure referred to in paragraphs 1 and 3 and, where applicable, for the publication referred to in paragraph 5 shall not exceed the recovery of costs of providing such services.

Article 124

Report of the ▌ administrative or management body to the members and employees

1.  The management or administrative organ of each of the merging companies shall draw up a report to members and employees explaining and justifying the legal and economic aspects of the cross-border merger as well as explaining the implications of the cross-border merger for employees.

2.  The report referred to in paragraph 1, shall, in particular, explain the implications of the cross-border merger on the future business of the company

It shall also include a section for members and a section for employees.

3.  The section of the report for members shall in particular explain the following:

   (aa) an explanation of the cash compensation and of the method used to arrive at it;
   (b) an explanation of the share exchange ratio and of the method or methods used to arrive at it, where applicable;

   (d) the implications of the cross-border merger for members;
   (e) the rights and remedies available to members ▌in accordance with Article 126a.

3a.  The section of the report for members shall not be required where all the members of the company have agreed to waive this requirement. Member States may exclude single member companies from the provisions of this Article.

4.  The section of the report for employees shall in particular explain the following:

   (ca) the implications of the cross-border merger for employment relationships, as well as, where applicable, any measure in order to safeguard them;
   (cb) any material changes in the applicable conditions of employment, and in the location of the company’s places of business;
   (d) how the factors set out in points (ca) and (cb) affect also any subsidiaries of the company.

4aa.  Where the management or administrative organ of the merging company receives, in good time, an opinion on the parts of the report referred to in paragraphs 1, 2 and 4 from the representatives of their employees or, where there are no such representatives, from the employees themselves, as provided for under national law, the members shall be informed thereof and that opinion shall be appended to that report.

4a.  The section to employees shall not be required, where a merging company and its subsidiaries, if any, have no employees other than those who form part of the management or administrative organ.

5.  Each merging company may decide whether to draw up one report containing the two sections referred to in paragraphs 3 and 4 or whether to draw up separate reports to members and employees respectively

6.  The report referred to in paragraph 1 or the reports referred to in paragraph 5 shall be made available in any case electronically, together with the common draft terms of the cross-border merger, if available, to the members and to the representatives of the employees of each of the merging companies or, where there are no such representatives, to the employees themselves, not less than 6 weeks before the date of the general meeting referred to in Article 126.

However, where the approval of the merger is not required by the general meeting of the acquiring company in accordance with Article 126(3), the report shall be made available, at least 6 weeks before the date of the general meeting of the other merging company or companies.

8.  Where the section for members referred to in paragraph 3 is waived in accordance with paragraph 3 and the section for employees referred to in paragraph 4 is not required in accordance with paragraph 4a, the report referred to paragraph 1 is not required.

9.  Paragraphs 1 to 8 shall be without prejudice to the applicable information and consultation rights and proceedings instituted at national level following the transposition of Directives 2002/14/EC and 2009/38/EC.

"

(10)  Article 125 is amended as follows :

(a)  in paragraph (1), the following second subparagraph is added:"

"However, where the approval of the merger is not required by the general meeting of the acquiring company in accordance with Article 126(3), the report shall be made available, at least one month before the date of the general meeting of the other merging company or companies.";

"

(b)  paragraph 3 is replaced by the following:"

"3. The report referred to in paragraph 1 shall in any case include the experts' opinion whether the cash compensation and the share exchange ratio are adequate. With regard to the cash compensation referred to in Article 122 point (m), the experts shall consider any market price of those shares in the merging companies prior to the announcement of the merger proposal or to the value of the companies excluding the effect of the proposed merger as determined according to generally accepted valuation methods. The reports shall at least:

   (a) indicate the method or methods used to arrive at the cash compensation proposed;
   (b) indicate the method or methods used to arrive at the share exchange ratio proposed;
   (c) state whether the method or methods used are adequate for the assessment of the cash compensation and the share exchange ratio and indicate the value arrived at using each such methods and give an opinion on the relative importance attributed to such methods in arriving at the value decided on; and in case different methods are used in the merging companies, also whether the use of different methods was justified;
   (d) describe any special valuation difficulties which have arisen.

The experts shall be entitled to secure from the merging companies all the necessary information for the discharge of his their duties.

"

(c)  in paragraph 4, the following sentence is added:"

"Member States may exclude single member companies from the provisions of this Article."

"

(11)  Article 126 is amended as follows:

(a)  paragraph 1 is replaced by the following:"

"1. After taking note of the reports referred to in Articles 124, ▌ and 125, where applicable, and the employees' opinions submitted in accordance with Article 124 and comments submitted in accordance with 123, the general meeting of each of the merging companies shall decide, by means of a resolution, on the approval of the common draft terms of the cross-border merger and whether to adapt the instrument of constitution, and the statutes if they are contained in a separate document.";

"

(b)  the following paragraph 4 is added:"

"4. Member States shall ensure that the approval of the cross-border merger by the general meeting cannot be challenged ▌ solely on the following grounds:

   (a) the share exchange ratio referred to in Article 122(b) has been inadequately set;
   (b) the cash compensation referred to in Article 122(m) has been inadequately set;

   (d) the information given on points (a) or (b) did not comply with the legal requirements.

"

(12)  the following Articles ▌ are inserted:"

"Article 126a

Protection of members

1.  Member States shall ensure that at least the ▌members of the merging companies who voted against the approval of the common draft-terms of the cross-border merger have the right to dispose of their shares, in consideration for adequate cash compensation, under the conditions laid down in paragraphs 2 to 6 provided that as a result of the merger they would acquire shares in the company resulting from the merger which would be governed by the law of a Member State other than the Member State of the respective merging company.

Member States may provide such a right also to other members of the merging companies.

Member States may require that the explicit opposition to the common draft terms of the cross-border merger and/or the members' intention to exercise their right to dispose of their shares shall be appropriately documented at the latest at the general meeting referred to in Article 126. Member States may allow to consider the recording of the objection to the common draft terms of the cross-border merger as proper documentation of a negative vote.

2.  Member States shall establish the period within which the members referred to in paragraph 1 have to declare to the merging company concerned their decision to exercise the right to dispose of their shares. That period shall not exceed one month after the general meeting referred to in Article 126. Member States shall ensure that the merging companies provide an electronic address for receiving this declaration electronically.

3.  Member States shall further establish the period within which the cash compensation specified in the common draft terms of cross-border merger is to be paid. This period may not end later than two months after the cross-border merger takes effect according to Article 129.

4.  Member States shall ensure that any member who has declared the decision to exercise the right to dispose of the shares but who considers that the cash compensation offered by the merging company concerned has not been adequately set, is entitled to demand additional cash compensation before competent authorities or bodies mandated under national law. Member States shall establish a time limit for the demand relating to additional cash compensation.

Member States may provide that the final decision providing an additional cash compensation is valid for those members of the merging company concerned who have declared the decision to exercise the right to dispose of their shares according to paragraph 2.

5.   Member States shall ensure that the national law of the Member State to which a merging company is subject, governs the rights referred to in paragraphs 1 to 6 and that the exclusive competence to resolve any disputes relating to those rights lies within the Member State concerned.

6.   Member States shall ▌ ensure that members of the merging companies who did not have or did not exercise the right to dispose of their shares, but who consider that the share-exchange ratio is inadequate may challenge that ▌ ratio, set out in the common draft terms of the cross-border merger ▌ and demand cash payment. That proceeding shall be initiated before a the competent authorities or bodies mandated under national law of the Member State to which the respective merging company is subject, within the time limit laid down in the national law of that Member State and shall not prevent the registration of the cross-border merger. The decision shall be binding on the company resulting from the cross-border merger.

Member States may also provide that the share exchange ratio as established in the decision is valid for those members of the merging company concerned who did not have or did not exercise the right to dispose of their shares.

7.  Member States may also provide that the company resulting from the cross-border merger can provide for shares or other compensation instead of a cash payment.

Article 126b

Protection of creditors

1.  Member States shall provide for an adequate system of protection of the interest of creditors, whose claims antedate the disclosure of the common draft terms of the cross-border merger and have not fallen due at the time of such disclosure.

Member States shall ensure that the creditors who are dissatisfied with the safeguards offered in the common draft terms of the cross-border merger, as provided for in Article 122 point (m), may apply within three months of the disclosure of the common draft terms of cross-border merger referred to in Article 123 to the appropriate administrative or judicial authority for adequate safeguards provided that they can credibly demonstrate that due to the cross-border merger the satisfaction of their claims is at stake and that no adequate safeguards have been obtained from the merging companies.

Member States shall ensure that the safeguards are dependent on the cross-border merger taking effect in accordance with Article 129.

2.   Member States may require that the management or administrative organ of the merging companies provides a declaration accurately reflecting the current financial status of these companies at the date of the declaration, which shall not be earlier than one month before its disclosure. The declaration shall declare that, on the basis of the information available to the management or administrative organ of the merging companies at the date of that declaration, and having made reasonable enquiries, they are unaware of any reason why the company resulting from the merger would be unable to meet the liabilities when those liabilities fall due. The declaration shall be disclosed together with the common draft terms of the cross-border merger ▌ in accordance with Article 123.

3.   Paragraphs ▌2 and 3 are without prejudice to the application of national laws of the Member State of the merging companies concerning the satisfaction of payments or securing payments or non-pecuniary obligations due to public bodies."

Article 126c

Employees' information and consultation

1.  Member States shall ensure that employees’ rights to information and consultation are respected in relation to the cross-border merger and are exercised in accordance with the legal framework set out by the Directive 2002/14/EC and Directive 2001/23/EC where the cross-border merger is considered as transfer of undertaking within the meaning of Directive 2001/23/EC and, where applicable for Community-scale undertakings or Community-scale groups of undertakings, in accordance with Directive 2009/38/EC. Member States may decide to apply information and consultation rights to other companies than those referred to in Article 3 paragraph 1 of the Directive 2002/14/EC.

2.  Notwithstanding Article 124(4aa) and Article 123(1)(b), Member States shall ensure that rights of employees to information and consultation are respected, at least before the common draft terms of the cross-border merger or the report referred to in Article 124, are decided, whichever is earlier in such a way that a reasoned response is given to the employees before the general meeting referred to in Article 126.

3.  Without prejudice to any provisions and/or practices in force more favourable to employees, the Member States shall determine the practical arrangements for exercising the right to information and consultation in accordance with Article 4 of Directive 2002/14/EC."

"

(13)  Article 127 is replaced by the following:"

"Article 127

Pre-merger certificate

1.  Member States shall designate the court, notary or other authority or authorities competent ("the competent authority"), to scrutinise the legality of the cross-border merger as regards that part of the procedure which is governed by the law of the Member State of the merging company and to issue a pre-merger certificate attesting compliance with all the relevant conditions and the proper completion of all procedures and formalities in the Member State of the merging company.

Such completion of procedures and formalities may comprise the satisfaction of payments, or securing payments or non-pecuniary obligations due to public bodies or the compliance with special sectorial requirements, including securing payments or obligations arising from ongoing proceedings.

2.  Member States shall ensure that the application to obtain a pre-merger certificate by the company is accompanied by the following:

   (a) the draft terms of merger referred to in Article 122;
   (b) the report and the appended opinion, if any, referred to in Article 124, as well as the report referred to in Article 125, where they are available;
   (ba) any comments submitted in accordance with Article 123 (1);
   (c) information on the approval by the general meeting referred to in Article 126.

3.  Member States may require that the application to obtain a pre-merger certificate is accompanied by additional information, such as, in particular:

   (a) on the number of employees at the time of the drawing up of the common draft terms of the merger;
   (b) on subsidiaries and their respective geographic allocation;
   (c) regarding the fulfilment of obligations due to public bodies by the company;

For the purpose of this paragraph, competent authorities may request this information, if not provided, from other relevant authorities.

4.  Member States shall ensure that the application referred to in paragraph 2 and 2a, including submission of any information and documents, may be completed online in its entirety without the necessity to appear in person before the competent authority referred to in paragraph 1, in compliance with the relevant provisions of Chapter III of Title I.

5.  In respect of compliance with the rules concerning employee participation as laid down in Article 133, the competent authority in the Member State of the merging company shall verify that the common draft terms of cross-border merger, referred to in paragraph 2 of this Article, include information on the procedures by which the relevant arrangements are determined and on the possible options for such arrangements.

6.  As part of the assessment referred to in paragraph 1, the competent authority, shall examine the following:

   (a) all documents and information submitted to the authority in accordance with paragraph 2 and 2a;
   (c) an indication by the merging companies that the procedure referred to in Article 133(3) and (4) has started, where relevant.

7.  Member States shall ensure that the assessment referred to in paragraph 1 is carried out within three months of the date of receipt of the documents and information concerning the approval of the cross-border merger by the general meeting of the company. It shall have one of the following outcomes:

   (a) where it is determined that the cross-border merger complies with all the relevant conditions and that all necessary procedures and formalities have been completed, the competent authority shall issue the pre-merger certificate;
   (b) where it is determined that the cross-border merger does not comply with all the relevant conditions or that not all necessary procedures and/or formalities have been completed, the competent authority shall not issue the pre-merger certificate and shall inform the company of the reasons for its decision. In that case, the competent authority may give the company the possibility to fulfil the relevant conditions or to complete the procedures and formalities within an appropriate period of time.

8.  Member States shall ensure that the competent authority shall not issue the pre-merger certificate, if it is determined in compliance with national law that a cross-border merger is set-up for abusive or fraudulent purposes leading or aimed to lead to evasion or circumvention of national or EU law, or for criminal purposes.

9.  If the competent authority, through the scrutiny of legality referred to in paragraph 1, has serious doubts that the cross-border merger is set up for abusive or fraudulent purposes leading or aimed to lead to evasion or circumvention of national or EU law, or for criminal purposes, it shall take into consideration relevant facts and circumstances, such as, where relevant and not considered in isolation, indicative factors of which, the competent authority has become aware, in the course of the scrutiny of legality referred to in paragraph 1, including through consultation of relevant authorities. The assessment for the purposes of this paragraph shall be conducted on a case-by-case basis, through a procedure governed by national law.

10.  Where it is necessary for the assessment under paragraph 7 to take into account additional information or performing additional investigative activities, the period of three months as provided in paragraph 6 may be extended for a maximum of further 3 months.

11.  Where due to the complexity of the cross border procedure it is not possible to carry out the assessment within the deadlines as provided in this article, Member States shall ensure that the applicant is notified of the reasons for any delay before the expiry of the original deadline.

12.  Member States shall ensure that competent authorities designated in accordance with paragraph 1 may consult other relevant authorities with competence in the different fields concerned by the cross-border merger, including those from the Member State of the company resulting from the merger and obtain from these authorities as well as from the company, information and documents necessary to carry out the control of legality, within the procedural framework laid down in national law. In the assessment the competent authority may have recourse to an independent expert."

"

(14)  The following article is inserted:"

"Article 127a

Transmission of the pre-merger certificate

1.  Member States shall ensure that the pre-merger certificate is shared with the authorities referred to in Article 128(1) through the system of interconnection of registers set up in accordance with Article 22.

Member States shall also ensure that the pre-merger certificate is available through the system of interconnection of registers set up in accordance with Article 22.

2.  The access to the information referred to in paragraph 1 shall be free of charge for the competent authorities referred to in Article 128(1) and registers."

"

(15)  Article 128 is amended as follows:

(a)  paragraph 2 is replaced by the following:"

"2. For the purpose of paragraph 1 ▌, each merging company shall submit to the authority referred to in ▌ paragraph 1 the common draft terms of cross-border merger, approved by the general meeting referred to in Article 126 or, in case the approval of the general meeting is not required in accordance with Article 132 paragraph 3, the draft terms of the cross-border merger approved by each merging company in accordance with national law."

"

(b)  the following paragraphs ▌ are added:"

3. Each Member State shall ensure that the application referred to in paragraph 1, by any of the merging companies, which includes the submission of any information and documents, may be completed online in its entirety without the necessity for the applicants to appear in person before the competent authority referred to in paragraph 1 in compliance with the relevant provisions of Chapter III of Title I.

4.  The competent authority referred to in paragraph 1 shall approve the cross-border merger as soon as it has completed its assessment of the relevant conditions.

5.   The pre-merger certificate or certificates referred to in Article 127a(1) shall be accepted by a competent authority of a Member State of a company resulting from the cross-border merger, as conclusively attesting to the proper completion of the pre-merger procedures and formalities in the respective Member State or Member States ▌.";

"

(16)  Article 130 is amended as follows:

(a)  paragraph 1 is replaced by the following:"

"1. The law of the Member States of the merging companies and of the company resulting from the merger shall determine, with respect to the territory of that State, the arrangements, in accordance with Article 16, to disclose the completion of the cross-border merger in the public register in which each of the companies is required to file documents."

"

(b)  paragraph 1a is inserted:"

"1a. Member States shall ensure that at least the following information shall be entered in their registers, which are made publically available and accessible by means of the system referred to in Article 22:

   (a) in the register of the Member State of the company resulting from the merger - that the registration of the company resulting from the merger is a result of a cross-border merger;
   (b) in the register of the Member State of the company resulting from the merger - the date of registration of the company resulting from the merger
   (c) in the register of the Member State of each merging company - the date of striking off or removal of the company from the register
   (d) in the register of the Member State of each merging company - that the striking off or removal of the company is a result of a cross-border merger;
   (e) in the registers of the Member States of each merging company and the company resulting from the merger respectively - the registration numbers, names and legal form of each merging company and of the company resulting from the merger."

"

(17)  Article 131 is amended as follows:

(a)  paragraph 1 is replaced by the following:"

"1. A cross-border merger carried out as laid down in subpoints (a), (c) and (d) of point (2) of Article 119 shall, from the date referred to in Article 129, have the following consequences:

   (a) all the assets and liabilities of the company being acquired herein including all contracts, credits, rights and obligations shall be transferred to and shall continue with the acquiring company;";
   (b) the members of the company being acquired shall become members of the acquiring company, unless they exercise the exit right referred to in Article 126a(1);
   (c) the company being acquired shall cease to exist.";

"

(b)  in paragraph 2, points (a) and (b) are replaced by the following:"

"(a) all the assets and liabilities of the merging companies herein including all contracts, credits, rights and obligations shall be transferred to and shall continue with the new company;";

   (b) the members of the merging companies shall become members of the new company, unless they exercise the exit right referred to in Article 126a (1);";

"

(18)  Article 132 is amended as follows:

(a)  paragraph 1 is replaced by the following:"

"1. Where a cross-border merger by acquisition is carried out by either a company which holds all the shares and other securities conferring the right to vote at general meetings of the company or companies being acquired or by a person who holds directly or indirectly all the shares in the acquiring company and in the companies being acquired and the acquiring company does not allot any shares under the merger:

   points (b), (c), (e) and (m) of Article 122 , Article 125, and point (b) of Article 131(1) shall not apply;
   Article 124 and Article 126(1) shall not apply to the company or companies being acquired.";

"

(b)  the following paragraph 3 is added:"

"3. Where the laws of Member States of all of the merging companies provide for the exemption from the approval by general meeting in accordance with Article 126(3) and paragraph 1 of this Article, the common draft terms of cross-border merger or the information referred to in paragraphs 1 to 3 of Article 123 respectively and the reports referred to in Articles 124 and 124a, shall be made available at least one month before the decision on the merger is taken by the company in accordance with the national law.";

"

(19)  Article 133 is amended as follows:

(a)  in paragraph 2, the introductory part is replaced by the following:"

“2. However, the rules in force concerning employee participation, if any, in the Member State where the company resulting from the cross-border merger has its registered office shall not apply, where at least one of the merging companies, in the six months prior to the publication of the draft terms of the cross-border merger as referred to in Article 123, an average number of employees equivalent to four fifths of the applicable threshold, laid down in the law of the Member State to whose jurisdiction the merging company is subject, which triggers the participation of employees within the meaning of point (k) of Article 2 of Directive 2001/86/EC, or where the national law applicable to the company resulting from the cross-border merger does not:”

"

(b)  in paragraph 4, point (a) is replaced by the following:"

“(a) shall confer on the relevant organs of the merging companies, in case at least one of the merging companies is operating under an employee participation system within the meaning of point (k) of Article 2 of Directive 2001/86/EC, the right to choose without any prior negotiation to be directly subject to the standard rules for participation referred to in point (h) of paragraph 3, as laid down by the legislation of the Member State in which the company resulting from the cross-border merger is to have its registered office, and to abide by those rules from the date of registration;”

"

(c)   paragraph 7 is replaced by the following:"

"7. Where the company resulting from the cross-border merger is operating under an employee participation system, that company shall be obliged to take measures to ensure that employees' participation rights are protected in the event of any subsequent cross-border or domestic merger, division or conversion for a period of four years after the cross-border merger has taken effect, by applying mutatis mutandis the rules laid down in paragraphs 1 to 6.";

"

(d)   the following paragraph 8 is added:"

"8. A company shall communicate to its employees or their representatives whether it chooses to apply standard rules for participation referred to in point (h) of paragraph 3 or whether it enters into negotiations within the special negotiating body. In the latter case the company shall communicate to its employees or their representatives the outcome of the negotiations without undue delay.";

"

(20)  the following Article 133a is inserted:"

"Article 133a

Liability of independent experts

Member States shall lay down rules governing the civil liability of the independent experts responsible for drawing up the report referred to in Article 125.

Member States shall have rules in place to ensure that the expert or the legal person on whose behalf the expert is operating, is independent and has no conflict of interest from the company applying for the pre-merger certificate and that the expert's opinion is impartial, objective, and given with a view to providing assistance to the competent authority in compliance with the independence and impartiality requirements under the applicable law or professional standards to which the expert is subject."

"

(21)  in Article 134, the following paragraph is added:"

"This does not affect Member States' powers, inter alia, in the field of criminal law, terrorist financing, social law, taxation and law enforcement, to impose measures and penalties, in accordance with national laws, after the date on which the cross-border conversion took effect."

"

(22)  in Title II, the following Chapter IV is added:"

"CHAPTER IV

Cross-border divisions of limited liability companies

Article 160a

Scope

This Chapter shall apply to the cross-border division of a limited liability company, formed in accordance with the law of a Member State and having its registered office, central administration or principal place of business within the Union provided that at least two of the limited liability companies involved in the division are governed by the laws of different Member States (hereinafter referred to as "cross-border division").

Article 160b

Definitions

For the purposes of this Chapter:

   (1) ‘limited liability company’, hereinafter referred to as ‘company’, means a company of a type listed in Annex II;
   (2) ‘company being divided’ means a company which in a process of the cross-border division in case of a full division transfers all its assets and liabilities to two or more companies, or in case of a partial division or division by separation transfers part of its assets and liabilities to one or more companies;
   (3) ‘division’ means an operation whereby either:
   (a) a company being divided, on being dissolved without going into liquidation, transfers all its assets and liabilities to two or more newly formed companies (‘the recipient companies’), in exchange for the issue to the members of the company being divided of securities or shares in the recipient companies and, if any, a cash payment not exceeding 10 % of the nominal value of those securities or shares or, where they have no nominal value, a cash payment not exceeding 10% of the accounting par value of their securities or shares ('full division');
   (b) a company being divided transfers part of its assets and liabilities to one or more newly formed companies (‘the recipient companies’), in exchange for the issue to the members of the company being divided of securities or shares in the recipient companies or in the company being divided or in both the recipient companies and in the company being divided, and if any a cash payment not exceeding 10 % of the nominal value of those securities or shares, or▌ in the absence of a nominal value, a cash payment not exceeding 10 % of the accounting par value of their securities or shares (‘partial division’).
   (c) a company being divided transfers part of its assets and liabilities to one or more newly formed companies (‘the recipient companies’), in exchange for the issue of securities or shares in the recipient companies to the company being divided (‘division by separation’).

Article 160c

Further provisions concerning the scope

1.  Notwithstanding Article 160b(3), this Chapter shall also apply to cross-border divisions where the national law of at least one of the Member States concerned allows the cash payment referred to in points (a) and (b) of Article 160b(3) to exceed 10 % of the nominal value or, in the absence of a nominal value, 10% of the accounting par value of the securities or shares representing the capital of the recipient companies.

3.  This Chapter shall not apply to cross-border divisions involving a company the object of which is the collective investment of capital provided by the public, which operates on the principle of risk-spreading and the units of which are, at the holders’ request, repurchased or redeemed, directly or indirectly, out of the assets of that company. Action taken by such a company to ensure that the stock exchange value of its units does not vary significantly from its net asset value shall be regarded as equivalent to such repurchase or redemption.

4.  Member States shall ensure that this Chapter does not apply in any of the following circumstances:

   (a) the company being divided is in liquidation and has begun to distribute assets to its shareholders;
   (b) the company is subject to resolution tools, powers and mechanisms provided for in Title IV of Directive 2014/59/EU of the European Parliament and of the Council.

5.  Member States may decide not to apply this Chapter to companies subject to:

   (a) insolvency proceedings or preventive restructuring frameworks
   (aa) liquidation proceedings other than those referred to in paragraph 4 point a, or
   (b) crisis prevention measures in the meaning of Article 2 paragraph 1 point (101) of Directive 2014/59/EU of the European Parliament and of the Council.

6.  The national law of the Member State of the company being divided shall govern the part of the procedures and formalities to be complied with in connection with the cross-border division in order to obtain the pre-division certificate, and the national laws of the Member States of the recipient companies shall govern the part of the procedure and the formalities to be complied with following receipt of the pre-division certificate in compliance with Union law.

Article 160e

Draft terms of cross-border divisions

The management or administrative organ of the company being divided shall draw up the draft terms of a cross-border division. The draft terms of cross-border division shall include at least the following particulars:

   (a) the legal form, name and location of the registered office of the company being divided and those proposed for the new company or companies resulting from the cross-border division;
   (b) the ratio applicable to the exchange of securities or shares representing the companies’ capital and the amount of any cash payment, where appropriate;
   (c) the terms for the allotment of securities or shares representing the capital of the recipient companies or, of the company being divided;
   (d) the proposed indicative timetable for the cross-border division;
   (e) the likely repercussions of the cross-border division on employment;
   (f) the date from which the holding of securities or shares representing the companies' capital will entitle the holders to share in profits and any special conditions affecting that entitlement;
   (g) the date or dates from which the transactions of the company being divided will be treated for accounting purposes as being those of the recipient companies;
   (h) ▌any special advantages granted to members of the administrative, management, supervisory or controlling organs of the company being divided;
   (i) the rights conferred by the recipient companies on members of the company being divided enjoying special rights or on holders of securities other than shares representing the divided company capital, or the measures proposed concerning them;

   (j) the instruments of constitution, where applicable, and the statutes if they are contained in a separate instrument, of the recipient companies and any changes to the instrument of constitution of the company being divided in case of a partial division;
   (k) where appropriate, information on the procedures by which arrangements for the involvement of employees in the definition of their rights to participation in the recipient companies are determined pursuant to Article160n ▌;
   (l) the precise description of the assets and liabilities of the company being divided and a statement of how these assets and liabilities are to be allocated between the recipient companies, or retained by the company being divided in the case of a partial division, including provision for the treatment of assets or liabilities not explicitly allocated in the draft terms of cross-border division, such as assets or liabilities which are unknown on the date on which the draft terms of cross-border division are drawn up;
   (m) information on the evaluation of the assets and liabilities which are allocated to each company involved in a cross-border division;
   (n) the date of the accounts of the company being divided, which is used to establish the conditions of the cross-border division;
   (o) where appropriate the allocation to the members of the company being divided of shares and securities in the recipient companies or in the company being divided or in the combination of the recipient company and company being divided and the criterion upon which such allocation is based;
   (p) details of the offer of cash compensation for the members ▌ in accordance with Article 160l;
   (q) ▌ safeguards, such as guarantees or pledges, where offered to creditors.

Article 160g

Report of the management or administrative organ to the members and the employees

1.  The management or administrative organ of the company being divided shall draw up a report to members and employees explaining and justifying the legal and economic aspects of the cross-border division as well as explaining the implications of the cross-border division for employees.

2.  The report referred to in paragraph 1, shall, in particular, explain the implications of the cross-border division on the future business of the companies.

It shall also include a section for members and a section for employees.

3.  The section of the report for members shall in particular explain the following:

   (aa) an explanation of the cash compensation and of the method used to arrive at it;
   (b) an explanation of the share exchange ratio and of the method used to arrive at it, where applicable;

   (d) the implications of the cross-border division for members;
   (e) the rights and remedies available to members ▌ in accordance with Article 160l.

4.  The section of the report for members shall not be required where all the members of the company have agreed to waive this requirement. Member States may exclude single member companies from the provisions of this Article.

5.  The section of the report for employees shall in particular explain the following:

   (ca) the implications of the cross-border division for employment relationships, as well as, where applicable, any measure in order to safeguard them;
   (cb) any material changes in the applicable conditions of employment, and in the location of the company’s places of business;
   (d) how the factors set out in points (ca) and (cb) affect also any subsidiaries of the company.

6.  Where the management or administrative organ of the company being divided receives, in good time, an opinion on the parts of the report referred to in paragraphs 1, 2 and 4 from the representatives of their employees or, where there are no such representatives, from the employees themselves, as provided for under national law, the members shall be informed thereof and that opinion shall be appended to that report.

7.  The section to employees shall not be required, where a company and its subsidiaries, if any, have no employees other than those who form part of the management or administrative organ.

8.  The company may decide whether to draw up one report containing the two sections referred to in paragraphs 3 and 4 or whether to draw up separate reports to members and employees respectively.

9.   The report referred to in paragraph 1 or the reports referred to in paragraph 5 shall be made available in any case electronically, together with the draft terms of the cross-border division, if available, to the members and to the representatives of the employees of the company being divided or, where there are no such representatives, to the employees themselves, not less than 6 weeks before the date of the general meeting referred to in Article 160k.

10.  Where the section for members referred to in paragraph 3 is waived in accordance with paragraph 3 and the section for employees referred to in paragraph 4 is not required in accordance with paragraph 4a, the report referred to paragraph 1 is not required.

11.  Paragraphs 1 to 8 of this Article shall be without prejudice to the applicable information and consultation rights and proceedings instituted at national level following the transposition of Directives 2002/14/EC and 2009/38/EC

Article 160i

Independent expert report

1.  Member States shall ensure that an independent expert examines the draft terms of the cross-border division and draws up a report intended for members which is made available to them not less than one month before the date of the general meeting referred to in Article 160k, ▌ the draft terms of cross-border division and ▌. Depending on the law of Member States, the experts may be a natural person or a legal person.

2.  The report referred to in paragraph 1 shall in any case include the expert’s opinion whether the cash compensation and the share exchange ratio are adequate. With regard to the cash compensation referred to in Article 160e point(q),the expert shall consider any market price of those shares in the company being divided prior to the announcement of the division proposal or to the value of the company excluding the effect of the proposed division as determined according to generally accepted valuation methods. The report shall at least:

   (a) indicate the method used to arrive at the cash compensation proposed;
   (b) indicate the method used to arrive at the share exchange ratio proposed;
   (c) state whether such method is adequate for the assessment of the cash compensation and share exchange ratio and indicate the value arrived at using such methods and give an opinion on the relative importance attributed to that methods in arriving at the value decided on;
   (d) describe any special valuation difficulties which have arisen.

▌The expert shall be entitled to secure from the company being divided all the necessary information for the discharge of his/her duties.

3.  Neither an examination of the draft terms of cross-border division by an independent expert nor an expert report shall be required if all the members of the company being divided have so agreed. Member States may exclude single member companies from the provisions of this Article.

Article 160j

Disclosure

1.  Member States shall ensure that the following documents are disclosed and made publicly available in the register of the Member State of the company being divided, at least one month before the date of the general meeting referred to in Article 160k:

   (a) the draft terms of the cross-border division;

   (b) a notice informing the members, creditors and representatives of the employees of the company being divided or, where there are no such representatives, the employees themselves, that they may submit to the company, at the latest five working days before the date of the general meeting, comments concerning the draft terms of the cross-border division.

Member States may require that the independent expert report, if drafted in accordance with Article 160i, is disclosed and made publically available in the register.

Member States shall ensure that the company is able to exclude confidential information from the disclosure of the independent expert report.

The documents disclosed in accordance with this paragraph shall be also accessible by means of the system referred to in Article 22.

2.  Member States may exempt the company being divided from the disclosure requirement referred to in paragraph 1 where, for a continuous period beginning at least one month before the date fixed for the general meeting referred to in Article 160k and ending not earlier than the conclusion of that meeting, it makes the documents referred in paragraph 1, available on its website free of charge to the public.

However, Member States shall not subject that exemption to any requirements or constraints other than those which are necessary in order to ensure the security of the website and the authenticity of those documents unless and only to the extent that they are proportionate in order to achieve those objectives.

3.  Where the company being divided discloses the draft terms of the cross-border division in accordance with paragraph 2 of this Article, it shall submit, at least one month before the date of the general meeting referred to in Article 160k, to the register, the following information which has to be disclosed:

   (a) the legal form, name and registered office of the company being divided and the legal form, name and registered office proposed for any newly created company resulting from the cross-border division;
   (b) the register in which the documents referred to in Article 14 are filed in respect of the company being divided and the registration number in that register;
   (c) an indication of the arrangements made for the exercise of the rights of creditors, employees and members;
   (d) details of the website where the draft terms of the cross-border division, the notice and the expert report referred to in paragraph 1 and complete information on the arrangements referred to in point (c) of this paragraph may be obtained online and free of charge.

4.  Member States shall ensure that the requirements referred to in paragraphs 1 and 3 can be completed online in their entirety without the necessity for the applicants to appear in person before any competent authority in the Member State concerned, in compliance with the relevant provisions of Chapter III of Title I.

5.  Member States may require, in addition to the disclosure referred to in paragraphs 1, 2 and 3, that the draft terms of the cross-border division, or the information referred to in paragraph 3 is published in their national gazette or through a central electronic platform in accordance with Article 16 paragraph 3. In that instance, Member States shall ensure that the register transmits the relevant information to the national gazette.

6.  Member States shall ensure that the documentation referred to in paragraph 1 or the information referred to in paragraph 3 is accessible by the public free of charge through the system of interconnection of registers.

Member States shall further ensure that any fees charged to the company ▌ by the registers for the disclosure referred to in paragraphs 1 and 3 and, where applicable, for the publication referred to in paragraph 5 shall not exceed the recovery of costs of providing such services.

Article 160k

Approval by the general meeting

1.  After taking note of the reports referred to in Articles 160g, ▌ and 160i, where applicable, and the employees’ opinions submitted in accordance with Article 160g and comments submitted in accordance with 160j, the general meeting of the company being divided shall decide by means of a resolution, whether to approve the draft terms of cross-border division and whether to adapt the instrument of constitution, and the statutes if they are contained in a separate instrument.

2.  The general meeting may reserve the right to make implementation of the cross-border division conditional on express ratification by it of the arrangements referred to in Article 160n.

3.  Member States shall ensure that the approval of ▌ the draft terms of the cross-border division or any amendment thereof requires a majority of not less than two thirds but not more than 90 % of the votes attached either to the shares or to the subscribed capital represented at the meeting. In any event the voting threshold shall not be higher than that provided for in national law for the approval of cross-border mergers.

4.  Where a clause of the draft terms of the cross border division or any amendment to the instrument of constitution of the company being divided leads to an increase of the economic obligations of a shareholder towards the company or third parties, Member States may provide in such specific circumstances that this clause or the amendment of the instrument of constitution of the company being divided shall be approved by the shareholder concerned, provided that this shareholder is unable to exercise the rights laid down in Article 160l.

5.  Member States shall ensure that the approval of the cross-border division by the general meeting cannot be challenged solely on the following grounds:

   (a) the share exchange ratio referred to in Article 160e (b) has been inadequately set;
   (b) the cash compensation referred to in Article 160e (q) has been inadequately set;
   (c) the information given on points (a) or (b) did not comply with the legal requirements.

Article 160l

Protection of members

1.  Member States shall ensure that at least the ▌ members who voted against the approval of the draft terms of the cross-border division of a company being divided have the right to dispose of their shares in consideration for adequate cash compensation under the conditions laid down in paragraphs 2 to 6 provided that, as a result of the division, they would acquire shares in the recipient companies which would be governed by the law of a Member State other than the company being divided.

Member States may provide such a right also to other members of the company being divided.

Member States may require that the explicit opposition to the draft terms of the cross-border division and/or the members' intention to exercise their right to dispose of their shares shall be appropriately documented at the latest at the general meeting referred to in Article 160k.Member States may allow to consider the recording of the objection to the draft terms of the cross-border division as proper documentation of a negative vote.

2.  Member States shall establish the period within which the members referred to in paragraph 1 have to declare to the company being divided their decision to exercise the right to dispose of the shares. That period shall not exceed one month after the general meeting referred to in Article 160k. Member States shall ensure that a company being divided provides an electronic address for receiving this declaration electronically.

3.  Member States shall further establish the period within which the cash compensation specified in the draft terms of cross-border division is to be paid. This period may not end later than two months after the cross-border division takes effect according to Article 160t.

4.  Member States shall ensure that any member who has declared the decision to exercise the right to dispose of the shares but who considers that the cash compensation offered by the merging company concerned has not been adequately set, is entitled to demand additional cash compensation before competent authorities or bodies mandated under national law. Member States shall establish a time limit for the demand relating to additional cash compensation.

Member States may provide that the final decision providing an additional cash compensation is valid for those members of the merging company concerned who have declared the decision to exercise the right to dispose of their shares according to paragraph 2a.

5.   Member States shall ensure that the national law of the Member State of a company being divided governs the rights referred to in paragraphs 1 to 5 and that the exclusive competence to resolve any disputes relating to those rights lies within the Member State of the company being divided.

6.   Member States shall ▌ensure that members of the company being divided who did not have or did not exercise the ▌right to dispose of their shares, but consider that the share-exchange ratio is inadequate may challenge that ▌ ratio set out in the draft terms of the cross-border division and demand cash payment. That proceeding shall be initiated before the competent authorities or bodies mandated under national law of the company being divided, within the time limit laid down in the national law of that Member State and shall not prevent the registration of the cross-border division. The decision shall be binding on the recepient companies and, in case of a partial division, also on the company being divided.

7.  Member States may also provide that the recipient company concerned and, in case of a partial division, also the company being divided, can provide for shares or other compensation ▌instead of a cash payment.

Article 160m

Protection of creditors

1.  Member States shall provide for an adequate system of protection of the interest of creditors, whose claims antedate the disclosure of the draft terms of the cross-border division and have not fallen due at the time of such disclosure. Member States shall ensure that creditorswho are dissatisfied with the safeguards offered in the draft terms of the cross-border division, as provided for in Article 160e point (r), may apply within three months of the disclosure of the draft terms of cross-border division referred to in Article 160j to the appropriate administrative or judicial authority for adequate safeguards provided that they can credibly demonstrate that due to the cross-border division the satisfaction of their claims is at stake and that no adequate safeguards have been obtained from the company.

Member States shall ensure that the safeguards are dependent on the cross-border division taking effect in accordance with Article 160t.

2.  Where a creditor of the company to be divided ▌ does not obtain satisfaction from the company whom the liability is allocated to, the other recipient companies, and in the case of a partial division or a division by separation, the company being divided, shall be jointly and severally liable with the company whom the liability is allocated to for that obligation. However, the maximum amount of joint and several liability of any company involved in the division shall be limited to the value, at the date on which the division takes effect, of the net assets allocated to that company.

3.   Member States may require that the management or administrative organ of the company being divided provides a declaration accurately reflecting the current financial status of the company at the date of the declaration, which shall not be earlier than one month before its disclosure. The declaration shall declare that, on the basis of the information available to the management or administrative organ of the company being divided at the date of the declaration, and after having made reasonable enquiries, they are unaware of any reason why any recipient company and, in the case of a partial division, the company being divided, should, after the division takes effect, be unable to meet the liabilities allocated to them under the draft terms of the cross-border division when those liabilities fall due. The declaration shall be disclosed together with the draft terms of the cross-border division in accordance with Article 160j.

4.  Paragraphs 1, 2 and 3 are without prejudice to the application of national laws of the Member State of the dividing company concerning the satisfaction of payments or securing payments or non-pecuniary obligations to public bodies.

Article 160ma

Employees’ information and consultation

1.  Member States shall ensure that employees’ rights to information and consultation are respected in relation to the cross-border division and are exercised in accordance with the legal framework set out by the Directive 2002/14/EC and Directive 2001/23/EC where the cross-border division is considered as transfer of undertaking within the meaning of Directive 2001/23/EC and, where applicable for Community-scale undertakings or Community-scale groups of undertakings, in accordance with Directive 2009/38/EC. Member States may decide to apply information and consultation rights to other companies than those referred to in Article 3 paragraph 1 of the Directive 2002/14/EC.

2.  Notwithstanding Article 160g(6) and Article 160j(1)(b), Member States shall ensure that rights of employees to information and consultation are respected, at least before the draft terms of the cross-border division or the report referred to in Article 160g, are decided, whichever is earlier in such a way that a reasoned response is given to the employees before the general meeting referred to in Article 160k.

3.  Without prejudice to any provisions and/or practices in force more favourable to employees, the Member States shall determine the practical arrangements for exercising the right to information and consultation in accordance with Article 4 of Directive 2002/14/EC.

Article 160n

Employee participation

1.  Without prejudice to paragraph 2, each recipient company shall be subject to the rules in force concerning employee participation, if any, in the Member State where it has its registered office.

2.  However, the rules in force concerning employee participation, if any, in the Member State where the company resulting from the cross-border division has its registered office shall not apply, where the company being divided, in the six months prior to the publication of the draft terms of the cross-border division as referred to in Article 160e of this Directive, has an average number of employees equivalent to four fifths of the applicable threshold, laid down in the law of the Member State of the company being divided, which triggers the participation of employees within the meaning of point (k) of Article 2 of Directive 2001/86/EC, or where the national law applicable to each of the recipient companies does not:

   (a) provide for at least the same level of employee participation as operated in the company being divided prior to the division, measured by reference to the proportion of employee representatives amongst the members of the administrative or supervisory organ or their committees or of the management group which covers the profit units of the company, subject to employee representation; or
   (b) provide for employees of establishments of the recipient companies that are situated in other Member States the same entitlement to exercise participation rights as is enjoyed by those employees employed in the Member State where the recipient company has its registered office.

3.  In the cases referred to in paragraph 2, the participation of employees in the companies resulting from the cross-border division and their involvement in the definition of such rights shall be regulated by the Member States, mutatis mutandis and subject to paragraphs 4 to 7 of this Article, in accordance with the principles and procedures laid down in Article 12(2), (3) and (4) of Regulation (EC) No 2157/2001 and the following provisions of Directive 2001/86/EC:

   (a) Article 3(1), (2)(a)(i), 2(b) and (3), the first two sentences of Article 3(4), Article 3(5 ▌) and Article 3(7);
   (b) Article 4(1), Article 4(2)(a), (g) and (h), Article 4(3) and Article 4(4);
   (c) Article 5;
   (d) Article 6;
   (e) ▌Article 7 paragraph 1 except the second indent of (b);
   (f) Articles 8, ▌10, 11 and 12;
   (g) point (a) of part 3 of the Annex.

4.  When regulating the principles and procedures referred to in paragraph 3, Member States:

   (a) shall confer on the special negotiating body the right to decide, by a majority of two thirds of its members representing at least two thirds of the employees, not to open negotiations or to terminate negotiations already opened and to rely on the rules on participation in force in the Member States of each of the recipient companies;
   (b) may, in the case where, following prior negotiations, standard rules for participation apply and notwithstanding such rules, decide to limit the proportion of employee representatives in the administrative organ of the recipient companies. However, if in the company being divided the employee representatives constituted at least one third of the administrative or supervisory board, the limitation may never result in a lower proportion of employee representatives in the administrative organ than one third;
   (c) shall ensure that the rules on participation that applied prior to the cross-border division continue to apply until the date of application of any subsequently agreed rules or in the absence of agreed rules until the application of standard rules in accordance with point (a) of Part 3 of the Annex.

5.  The extension of participation rights to employees of the recipient companies employed in other Member States, referred to in point (b) of paragraph 2, shall not entail any obligation for Member States which choose to do so to take those employees into account when calculating the size of workforce thresholds giving rise to participation rights under national law.

6.  Where any of the recipient companies is to be governed by an employee participation system in accordance with the rules referred to in paragraph 2, those companies shall be obliged to take a legal form allowing for the exercise of participation rights.

7.  Where the recipient company ▌ is operating under an employee participation system, that company shall be obliged to take measures to ensure that employees' participation rights are protected in the event of any subsequent cross-border or domestic merger, division or conversion for a period of four years after the cross-border division has taken effect, by applying, mutatis mutandis, the rules laid down in paragraphs 1 to 6.

8.  A company shall communicate to its employees or their representatives the outcome of the negotiations concerning employee participation without undue delay.

Article 160o

Pre-division certificate

1.  Member States shall designate the court, notary or other authority or authorities competent ("the competent authority") to scrutinise the legality of the cross-border divisions as regards the part of the procedure which is governed by the law of the Member State of the company being divided, and to issue a pre-division certificate attesting compliance with all relevant conditions, and the proper completion of all procedures and formalities in that Member State.

Such completion of procedures and formalities may comprise the satisfaction of payments, or securing payments or non-pecuniary obligations due to public bodies or the compliance with special sectorial requirements, including securing payments or obligations arising from ongoing proceedings.

2.  Member States shall ensure that the application for obtaining the pre-division certificate by the company being divided is accompanied by the following:

   (a) the draft terms of division referred to in Article 160e;
   (b) the report and the appended opinion, if any, referred to in Article 160g, as well as the report referred to in Article 160i, where they are available;
   (ba) any comments submitted in accordance with Article 160j(1);
   (c) information on the approval by the general meeting ▌referred to in Article 160k.

3.  Member States may require that the application to obtain a pre-division certificate is accompanied by additional information, such as, in particular:

   (a) on the number of employees at the time of the drawing up of the draft terms of the division;
   (b) on subsidiaries and their respective geographic allocation;
   (c) regarding the fulfilment of obligations due to public bodies by the company;

For the purpose of this paragraph, competent authorities may request this information, if not provided, from other relevant authorities.

4.   Member States shall ensure that the application referred to in paragraph 2 and 2a, including submission of any information and documents, may be completed online in its entirety without the necessity to appear in person before the competent authority referred to in paragraph 1, in compliance with the relevant provisions of Chapter III of Title I.

5.   In respect of compliance with the rules concerning employee participation as laid down in Article 160n, the competent authority in the Member State of the company being divided shall verify that the draft terms of cross-border division referred to in Article 160e include information on the procedures by which the relevant arrangements are determined and on the possible options for such arrangements.

6.   As part of the assessment ▌ referred to in paragraph 1 the competent authority shall examine the following information:

   (a) all documents and information submitted to the authority in accordance with paragraph 2 and 2a;
   (c) an indication by the company that the procedure referred to in Article 160n(3) and (4) has started, where relevant.

7.  Member States shall ensure that the assessment referred to in paragraph 1 is carried out within three months of the date of receipt of the documents and information concerning the approval of the cross-border division by the general meeting of the company. It shall have one of the following outcomes:

   (a) where it is determined that the cross-border division ▌ complies with all the relevant conditions and that all necessary procedures and formalities have been completed, the competent authority shall issue the pre-division certificate;
   (b) where it is determined that the cross-border division does not comply with all the relevant conditions or that not all necessary procedures and/or formalities have been completed, the competent authority shall not issue the pre-division certificate and shall inform the company of the reasons for its decision. In that case, the competent authority may give the company the possibility to fulfil the relevant conditions or to complete the procedures and formalities within an appropriate period of time.

8.  Member States shall ensure that the competent authority shall not issue the pre-division certificate, if it is determined in compliance with national law that a cross-border division is set-up for abusive or fraudulent purposes leading or aimed to lead to evasion or circumvention of national or EU law, or for criminal purposes.

9.  If the competent authority, through the scrutiny of legality referred to in paragraph 1, has serious doubts that the cross-border division is set up for abusive or fraudulent purposes leading or aimed to lead to evasion or circumvention of national or EU law, or for criminal purposes, it shall take into consideration relevant facts and circumstances, such as, where relevant and not considered in isolation, indicative factors of which, the competent authority has become aware, in the course of the scrutiny of legality referred to in paragraph 1, including through consultation of relevant authorities. The assessment for the purposes of this paragraph shall be conducted on a case-by-case basis, through a procedure governed by national law.

10.  Where it is necessary for the assessment under paragraph 7 to take into account additional information or performing additional investigative activities, the period of three months as provided in paragraph 6 may be extended for a maximum of further 3 months.

11.  Where due to the complexity of the cross border procedure it is not possible to carry out the assessment within the deadlines as provided in this article, Member States shall ensure that the applicant is notified of the reasons for any delay before the expiry of the original deadline.

12.  Member States shall ensure that competent authorities designated in accordance with paragraph 1 may consult other relevant authorities with competence in the different fields concerned by the cross-border division, including those from the Member State of the recipient companies and obtain from these authorities as well as from the company, information and documents necessary to carry out the control of legality, within the procedural framework laid down in national law. In the assessment the competent authority may have recourse to an independent expert.

Article 160q

▌ Transmission of the pre-division certificate

2.  Member States shall ensure that the pre-division certificate is shared with the authorities referred to in Article 160r(1) through the system of interconnection of registers set up in accordance with Article 22.

Member States shall also ensure that the pre-division certificate is available through the system of interconnection of registers set up in accordance with Article 22.

3.  The access to the information referred to in paragraph 2 shall be free of charge for the competent authorities referred to in Article 160r(1) and registers.

Article 160r

Scrutiny of the legality of the cross-border division

1.  Member States shall designate the court, notary or other authority competent to scrutinise the legality of the cross-border division as regards that part of the procedure which concerns the completion of the cross-border division governed by the law of the Member States of the recipient companies and to approve the cross-border division where ▌ all the relevant conditions ▌ and formalities in that Member State have been properly completed.

The competent authority or authorities shall in particular ensure that the proposed recipient companies comply with provisions of national law on the incorporation and registration of companies and, where appropriate, that arrangements for employee participation have been determined in accordance with Article 160n.

2.  For the purpose of paragraph 1, the company being divided shall submit to each authority referred to in ▌ paragraph 1, the draft terms of the cross-border division approved by the general meeting referred to in Article 160k.

3.  Each Member State shall ensure that the application referred to in paragraph 1, by the company carrying out the cross-border division, which includes the submission of any information and documents, may be completed online in its entirety without the necessity for the applicants to appear in person before the competent authority referred to in paragraph 1 in compliance with the relevant provisions of Chapter III of Title I.

4.  The competent authority referred to in paragraph 1 of this Article shall ▌ approve the cross-border division as soon as it has completed its assessment of the relevant conditions.

5.  The pre-division certificate, referred to in Article 160q(2), shall be accepted by any competent authority, referred to in paragraph 1 of this Article, as conclusively attesting of the proper completion of the pre-division procedures and formalities in the Member State of the company being divided without which the cross-border division cannot be approved.

Article 160s

Registration

1.  The law of ▌the Member States of the company being divided and the recipient companies, ▌shall determine, with respect to the territory of that State, the arrangements, in accordance with Article 16, to disclose the completion of the cross-border division in the register ▌.

2.  Member States shall ensure that at least the following information shall be entered in their registers, which are made publically available and accessible by means of the system referred to in Article 22:

   (a) in the ▌ register of the Member States of the recipient companies – that the registration of the recipient company is a result of a cross-border division;
   (b) in the register of the Member State of the recipient companiesthe dates of registration of the recipient companies;
   (c) in the register of the Member State of the company being divided – in case of a full division, the date of striking off from the register ▌;
   (d) in ▌ the register of the Member State of the company being divided – that the striking off or removal of the company is a result of a cross-border division;
   (e) in the registers of the Member States of the company being divided and of the recipient companies respectively the registration numbers, name and legal form of the company being divided and of the recipient companies.

3.  Member States shall ensure that the registers in the Member States of the recipient companies notify the registry in the Member State of the company being divided, by means of the system referred to in Article 22, that the recipient companies have been registered. In the case of a full division, the striking off of the company being divided from the register shall be effected immediately upon the receipt of all those notifications.

4.  Member States shall ensure that the register in the Member States of the company being divided notifies the registers in the Member States of the recipient companies by means of the system referred to in Article 22, that the cross-border division has taken effect.

Article 160t

Date on which the cross-border division takes effect

The law of the Member State of the company being divided shall determine the date on which the cross-border division takes effect. The date shall be after the scrutiny referred to in Articles 160o, ▌ and 160r has been carried out and after having received all notifications referred to in Article 160s(3).

Article 160u

Consequences of the cross-border division

1.  A full cross-border division carried out in compliance with the national provisions transposing this Directive shall, by reason of the cross-border division taking effect and from the date referred to in Article 160t, have the following consequences:

   (a) all the assets and liabilities of the company being divided, including all contracts, credits, rights and obligations shall be transferred to ▌the recipient companies in accordance with the allocation specified in the draft terms of the cross-border division;
   (b) the members of the company being divided shall become members of the recipient companies in accordance with the allocation of shares specified in the draft terms of the cross-border division, unless they exercise the exit right referred to in Article 160l(1);
   (c) the rights and obligations of the company being divided arising from the contracts of employment or from employment relationships and existing at the date on which the cross-border division takes effect shall be transferred to the recipient companies;
   (d) the company being divided shall cease to exist.

2.   A partial cross-border division carried out in compliance with the national provisions transposing this Directive shall, by reason of the cross-border division taking effect and from the date referred to in Article 160t, have the following consequences:

   (a) part of the assets and liabilities of the company being divided including contracts, credits, rights and obligations shall be transferred to ▌the recipient company or companies and the remaining part shall continue with the company being divided in accordance with the allocation specified in the draft terms of cross-border division;
   (b) at least some of the members of the company being divided shall become members of the recipient company or companies and at least some of the members shall remain in the company being divided or shall become members of both in accordance with the allocation of shares specified in the draft terms of cross-border division, unless they exercise the exit right referred to in Article 160l(1);
   (c) the rights and obligations of the company being divided arising from the contracts of employment or from employment relationship and existing at the date on which cross-border division takes effect, allocated to the recipient company or companies in accordance with the draft terms of cross-border division shall be transferred to the respective recipient company or companies.

3.  A cross-border division by separation carried out in compliance with the national provisions transposing this Directive, shall, by reason of the cross-border division taking effect and from the date referred to in Article 160t, have the following consequences:

   (a) the part of the assets and liabilities of the company being divided including contracts, credits, rights and obligations is transferred to the recipient company or companies and the remaining part shall continue with the company being divided in accordance with the allocation specified in the draft terms of cross-border division;
   (aa) the shares of the recipient company or companies are allocated to the company being divided.
   (b) the rights and obligations of the company being divided arising from the contracts of employment or from employment relationship and existing at the date on which cross-border division takes effect, allocated to the recipient company or companies in accordance with the draft terms of cross-border division shall be transferred to the respective recipient company or companies.

4.  Member States shall ensure that where an asset or a liability of the company being divided is not explicitly allocated under the draft terms of cross-border division as referred to in Article 160e point (m) and where the interpretation of these terms does not make a decision on its allocation possible, the asset, the consideration therefore or the liability is allocated to all the recipient companies or, in the case of a partial division or a division by separation, to all the recipient companies and the company being divided in proportion to the share of the net assets allocated to each of those companies under the draft terms of cross-border division. In any event, Article 160m(2) applies.

5.   Where, in the case of a ▌ cross-border division covered by this chapter, the laws of the Member States require the completion of special formalities before the transfer of certain assets, rights and obligations by the company being divided becomes effective as against third parties, those formalities shall be carried out by the company being divided or by the recipient companies, as appropriate.

6.  Member States shall ensure that shares in a recipient company may not be exchanged for shares in the company being divided which are either held by the company itself or through a person acting in his or her own name but on behalf of the company.

Article 160ua

Simplified formalities

Where a division is carried out as a ‘division by separation’ as referred to in Article 160b (3) point (c) then Article 160e points b, c, f, i, p and q and Articles 160g, 160i and 160l shall not apply.

Article 160v

Liability of the independent experts

Member States shall lay down rules governing at least the civil liability of the independent expert responsible for drawing up the report referred to in Article 160i.

Member States shall have rules in place to ensure that the expert or the legal person on whose behalf the expert is operating, is independent and has no conflict of interest from the company applying for the pre-division certificate and that the expert's opinion is impartial, objective, and given with a view to providing assistance to the competent authority in compliance with the independence and impartiality requirements under the applicable law or professional standards to which the expert is subject.

Article 160w

Validity

A cross-border division which has taken effect in compliance with the procedures transposing this Directive may not be declared null and void."

This does not affect Member States' powers, inter alia, in the field of criminal law, terrorist financing, social law, taxation and law enforcement, to impose measures and penalties, in accordance with national laws, after the date on which the cross-border division took effect."

"

Article 2

Penalties

Members States shall lay down the rules on measures and penalties applicable to infringements of national provisions adopted pursuant to this Directive and shall take all measures necessary to ensure that they are implemented. Such rules may include criminal penalties for serious infringements.

The measures and penalties provided for shall be effective, proportionate and dissuasive.

Article 3

Transposition

1.  Member States shall bring into force the laws, regulations and administrative provisions necessary to comply with this Directive … [OP set the date= the last day of the month of 36 months after entry into force] at the latest. They shall forthwith communicate to the Commission the text of those provisions.

When Member States adopt those provisions, they shall contain a reference to this Directive or be accompanied by such a reference on the occasion of their official publication. Member States shall determine how such reference is to be made.

2.  Member States shall communicate to the Commission the text of the main provisions of national law which they adopt in the field covered by this Directive.

Article 4

Reporting and review

1.  The Commission shall, no later than four years after … [OP please insert the date of the end of the transposition period of this Directive], carry out an evaluation of this Directive, including an evaluation of the implementation of employee information, consultation and participation in the context of the cross-border operations, including assessment of the rules on the proportion of employee representatives in the administrative organ of the company resulting from the cross-border operation, and of the effectiveness of the safeguards regarding negotiations of employee participation rights taking into consideration the dynamic nature of companies growing cross-border and present a Report to the European Parliament, the Council and the European Economic and Social Committee on the findings, in particular considering the possible need of introducing a harmonised framework on board level employee representation in Union law, accompanied, where appropriate, by a legislative proposal.

Member States shall provide the Commission with the information necessary for the preparation of that report in particular by providing data on the number of cross-border conversions, mergers and divisions, their duration and related costs, data on the cases where a pre-conversion certificate was refused as well as statistical aggregated data on number of negotiations on employee participation rights in cross-border operations, and by providing data on the functioning and effects of jurisdiction rules applicable in cross-border operations.

2.  The report shall in particular evaluate the procedures referred to in Chapter -I of Title II and Chapter IV of Title II, notably in terms of their duration and costs.

3.  The report shall include an assessment of the feasibility of providing rules for types of cross-border divisions which are not covered by this Directive, including in particular cross-border division by acquisition.

Article 5

Entry into force

This Directive shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union.

Article 6

Addressees

This Directive is addressed to the Member States.

Done at ...,

For the European Parliament For the Council

The President The President

(1) OJ C 62, 15.2.2019, p. 24.
(2)TEXT HAS NOT YET UNDERGONE LEGAL-LINGUISTIC FINALISATION.
(3)OJ C , , p. .
(4) Position of the European Parliament of 18 April 2019.
(5)Directive (EU) 2017/1132 of the European Parliament and of the Council of 14 June 2017 relating to certain aspects of company law (codification) (OJ L 169, 30.6.2017, p. 46).
(6) Directive 2014/59/EU of the European Parliament and of the Council of 15 May 2014 establishing a framework for the recovery and resolution of credit institutions and investment firms and amending Council Directive 82/891/EEC, and Directives 2001/24/EC, 2002/47/EC, 2004/25/EC, 2005/56/EC, 2007/36/EC, 2011/35/EU, 2012/30/EU and 2013/36/EU, and Regulations (EU) No 1093/2010 and (EU) No 648/2012, of the European Parliament and of the Council (OJ L 173, 12.6.2014, p. 190).
(7) Directive 2002/14/EC of the European Parliament and of the Council of 11 March 2002 establishing a general framework for informing and consulting employees in the European Community (OJ L 80, 23.3.2002, p. 29).
(8) Directive 2009/38/EC of the European Parliament and of the Council of 6 May 2009 on the establishment of a European Works Council or a procedure in Community-scale undertakings and Community-scale groups of undertakings for the purposes of informing and consulting employees (Recast) (OJ L 122, 16.5.2009, p. 28).
(9) Directive 2006/43/EC of the European Parliament and of the Council of 17 May 2006 on statutory audits of annual accounts and consolidated accounts, amending Council Directives 78/660/EEC and 83/349/EEC and repealing Council Directive 84/253/EEC (OJ L 157, 9.6.2006, p. 87).
(10) Council Directive 2001/23/EC of 12 March 2001 on the approximation of the laws of the Member States relating to the safeguarding of employees' rights in the event of transfers of undertakings, businesses or parts of undertakings or businesses (OJ L 82, 22.3.2001, p. 16).
(11) Council Directive 2001/86/EC of 8 October 2001 supplementing the Statute for a European company with regard to the involvement of employees (OJ L 294, 10.11.2001, p. 22).
(12) Regulation (EC) No 883/2004 of the European Parliament and of the Council of 29 April 2004 on the coordination of social security systems (OJ L 166, 30.4.2004, p. 1).
(13) Directive 96/71/EC of the European Parliament and of the Council of 16 December 1996 concerning the posting of workers in the framework of the provision of services( OJ L 18, 21.1.1997, p. 1).
(14) Council Directive 98/59/EC of 20 July 1998 on the approximation of the laws of the Member States relating to collective redundancies (OJ L 225, 12.8.1998, p. 1).
(15) OJ L 193, 19.7.2016, p. 1).
(16) Council Directive 2009/133/EC of 19 October 2009 on the common system of taxation applicable to mergers, divisions, partial divisions, transfers of assets and exchanges of shares concerning companies of different Member States and to the transfer of the registered office of an SE or SCE between Member States (OJ L 310, 25.11.2009, p. 34).
(17) Council Directive (EU) 2015/2376 of 8 December 2015 amending Directive 2011/16/EU as regards mandatory automatic exchange of information in the field of taxation (OJ L 332, 18.12.2015, p. 1).
(18) Council Directive (EU) 2016/881 of 25 May 2016 amending Directive 2011/16/EU as regards mandatory automatic exchange of information in the field of taxation (OJ L 146, 3.6.2016, p. 8).
(19) Council Directive (EU) 2018/822 of 25 May 2018 amending Directive 2011/16/EU as regards mandatory automatic exchange of information in the field of taxation in relation to reportable cross-border arrangements (OJ L 139, 5.6.2018, p. 1).
(20) Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, amending Regulation (EU) No 648/2012 of the European Parliament and of the Council, and repealing Directive 2005/60/EC of the European Parliament and of the Council and Commission Directive 2006/70/EC (Text with EEA relevance) (OJ L 141, 5.6.2015, p. 73).
(21) OJ C 369, 17.12.2011, p. 14.
(22) OJ L 123, 12.5.2016, p. 1.


European Defence Fund ***I
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Resolution
Consolidated text
European Parliament legislative resolution of 18 April 2019 on the proposal for a regulation of the European Parliament and of the Council establishing the European Defence Fund (COM(2018)0476 – C8-0268/2018 – 2018/0254(COD))
P8_TA(2019)0430A8-0412/2018

(Ordinary legislative procedure: first reading)

The European Parliament,

–  having regard to the Commission proposal to Parliament and the Council (COM(2018)0476),

–  having regard to Article 294(2), and Article 173(3), Article 182(4), Article 183 and the second paragraph of Article 188, of the Treaty on the Functioning of the European Union, pursuant to which the Commission submitted the proposal to Parliament (C8‑0268/2018),

–  having regard to Article 294(3) of the Treaty on the Functioning of the European Union,

–  having regard to the opinion of the European Economic and Social Committee of 12 December 2018(1),

–  having regard to the letter from its President to the committee chairs of 25 January 2019 outlining the Parliament's approach to the Multiannual Financial Framework (MFF) post-2020 sectorial programmes,

–  having regard to the letter from the Council to the President of the European Parliament of 1 April 2019 confirming the common understanding reached between the co-legislators during negotiations,

–  having regard to Rule 59 of its Rules of Procedure,

–  having regard to the report of the Committee on Industry, Research and Energy and the opinions of the Committee on Foreign Affairs, the Committee on Budgets and the Committee on the Internal Market and Consumer Protection (A8-0412/2018),

1.  Adopts its position at first reading hereinafter set out(2);

2.  Calls on the Commission to refer the matter to Parliament again if it replaces, substantially amends or intends to substantially amend its proposal;

3.  Instructs its President to forward its position to the Council, the Commission and the national parliaments.

Position of the European Parliament adopted at first reading on 18 April 2019 with a view to the adoption of Regulation (EU) …/… of the European Parliament and of the Council establishing the European Defence Fund

P8_TC1-COD(2018)0254


(Text with EEA relevance)

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the Functioning of the European Union, and in particular Article 173(3), Article 182(4), Article 183 and the second paragraph of Article 188 thereof,

Having regard to the proposal from the European Commission,

After transmission of the draft legislative act to the national parliaments,

Having regard to the opinion of the European Economic and Social Committee,

Acting in accordance with the ordinary legislative procedure(3),

Whereas:

(-1b)  The Union’s geopolitical context has changed dramatically in the last decade. The situation in Europe's neighbouring regions is unstable and the Union faces a complex and challenging environment combining the emergence of new threats, like hybrid and cyber-attacks and the return of more conventional challenges. Faced with that context both European citizens and their political leaders share the view that more has to be done collectively in the area of defence.

(-1c)  The defence sector is characterised by increasing costs of defence equipment and by high research and development ('R&D') costs that limit the launch of new defence programmes and directly impact on the competitiveness and innovation capacity of the European Defence Technological and Industrial Base. In view of this cost escalation, the development of a new generation of major defence systems and of new defence technologies should be supported at the Union level in order to increase cooperation between Member States in defence equipment investments.

(1)  In the European Defence Action Plan, adopted on 30 November 2016, the Commission committed to complement, leverage and consolidate collaborative efforts by Member States in developing defence technological and industrial capabilities to respond to security challenges, as well as to foster a competitive, innovative and efficient European defence industry throughout the Union and beyond, thus also supporting the creation of a more integrated defence market in Europe and fostering the internal market uptake of European defence products and technologies, thus increasing the non-dependency on non-EU sources. It proposed in particular to launch a European Defence Fund (the 'Fund') to support investments in joint research and the joint development of defence products and technologies, thus fostering synergies and cost-effectiveness, and to promote the Member States’ joint purchase and maintenance of defence equipment. This Fund would complement national funding already used for this purpose and should act as an incentive for Member States to cooperate and invest more in defence. The Fund would support cooperation during the whole cycle of defence products and technologies.

(2)  The Fund would contribute to the establishment of a strong, competitive and innovative European defence technological and industrial ▌base and go hand in hand with the Union's initiatives towards a more integrated European Defence Market and in particular, the two Directives(4) on procurement and on EU transfers in the defence sector adopted in 2009.

(3)  Following an integrated approach and in order to contribute to the enhancement of the competitiveness and innovation capacity of the Union's defence industry, a European Defence Fund should be established. The Fund should aim at enhancing the competitiveness, innovation, efficiency and technological autonomy of the Union's defence industry thereby contributing to the Union's strategic autonomy by supporting the cross border cooperation between Member States and cooperation between enterprises, research centres, national administrations, international organisations and universities throughout the Union, in the research phase and in the development phase of defence products and technologies. To achieve more innovative solutions and an open internal market, the Fund should support and facilitate the widening of cross-border cooperation of defence small and medium sized enterprises (“SMEs”) and middle capitalisation companies (“mid-caps”).

Within the Union, common defence capability shortfalls are identified in the Common Security and Defence Policy ▌ framework notably through the Capability Development Plan, while the Overarching Strategic Research Agenda also identifies common defence research objectives. Other Union processes such as the Coordinated Annual Review on Defence and ▌Permanent Structured Cooperation will support the implementation of relevant priorities through identifying and taking forward opportunities for enhanced cooperation with a view to fulfilling the EU level of ambition on security and defence. Where appropriate, regional and international priorities, including those in the North Atlantic Treaty Organisation context, may also be taken into account if they are in line with Union priorities and do not prevent any Member State or an associated country from participating, while also taking into account that unnecessary duplication should be avoided.

(4)  The research phase is crucial ▌, as it conditions the capacity ▌ and the autonomy of the European industry to develop products and the independence of Member States as defence end-users. The research phase linked to the development of defence capabilities may include significant risks, in particular related to the low level of maturity and the disruption of technologies. The development phase, which usually follows the research ▌ phase, also entails significant risks and costs that hamper the further exploitation of the results of research and adversely impact the competitiveness and innovation of the Union's defence industry. The Fund should thus foster the link between the research and the development phases.

(5)  The Fund should not support basic research, which should instead be supported through other schemes, but may include defence-oriented fundamental research likely to form the basis of the solution to recognised or expected problems or possibilities.

(6)  The Fund could support actions pertaining to both new and the upgrade of existing products and technologies. Actions for the upgrade of existing defence products and technologies should be eligible only where pre-existing information needed to carry out the action ▌ is not subject to any restriction by non-associated third countries or non-associated third country entities in such a way that the action cannot be carried out. When applying for the Union funding, legal entities should be required to provide the relevant information to establish the absence of restrictions. In the absence of such information, ▌ Union funding should not be possible.

(6a)   The Fund should financially support actions conducive to developing disruptive technologies for defence. As disruptive technologies can be based on concepts or ideas originating from non-traditional defence actors, the Fund should allow for sufficient flexibility in consulting stakeholders and regarding the implementation of such actions.

(7)  In order to ensure that the Union's and its Member States' international obligations are respected in the implementation of this Regulation, actions relating to products or technologies the use, development or production of which are prohibited by international law should not be financially supported by the Fund. In this respect, the eligibility of actions related to new defence products or technologies ▌should also be subject to developments in international law. Actions for the development of lethal autonomous weapons without the possibility for meaningful human control over the selection and engagement decisions when carrying out strikes against humans should also not be eligible for financial support by the Fund, without prejudice to the possibility to provide funding for actions for the development of early warning systems and countermeasures for defensive purposes.

(8)  The difficulty to agree on consolidated defence capability requirements and common technical specifications or standards hampers cross-border collaboration between Member States and between legal entities based in different Member States. The absence of such requirements, specifications and standards has led to increased fragmentation of the defence sector, technical complexity, delays and inflated costs, unnecessary duplication as well as decreased interoperability. The agreement on common technical specifications should be a prerequisite for actions involving a higher level of technological readiness. Activities leading to common defence capability requirements ▌ as well as activities aiming at supporting the creation of a common definition of technical specifications or standards should also be eligible for support by the Fund, in particular where they foster interoperability.

(9)  As the objective of the Fund is to support the competitiveness, efficiency and innovation of the Union defence industry by leveraging and complementing collaborative defence research and technology activities and de-risking the development phase of cooperative projects, actions related to the research and the development of a defence product or technology should be eligible to benefit from it. This will also apply to the upgrade, including the interoperability thereof, of existing defence products and technologies.

(10)  Given that the Fund aims particularly at enhancing cooperation between legal entities and Member States across Europe, an action should be eligible for funding ▌ if it is undertaken by a cooperation within a consortium of at least three legal entities based in at least three different Member States ▌ or associated countries. At least three of these ▌ eligible entities established in at least two different Member States ▌or associated countries should not be ▌controlled, directly or indirectly, by the same entity or should not control each other. In this context, control should be understood as the ability to exercise a decisive influence on a legal entity directly or indirectly through one or more intermediate legal entities. Taking into account the specificities of disruptive technologies for defence, as well as of studies, these activities could be carried out by a single legal entity. In order to boost the cooperation between Member States the Fund may also support joint pre-commercial procurement.

(11)  Pursuant to [reference to be updated as appropriate according to a new decision on OCTs: Article 94 of Council Decision 2013/755/EU(5)], entities established in Overseas Countries and Territories (OCTs) should be eligible for funding subject to the rules and objectives of the Fund and possible arrangements applicable to the Member State to which the OCTs is linked.

(12)  As the Fund aims at enhancing the competitiveness and efficiency ▌ of the Union's defence industry, only entities established in the Union or in associated countries and not subject to control by non-associated third countries or non-associated third country entities should in principle be eligible for support. In this context, control should be understood as the ability to exercise a decisive influence on a legal entity directly or indirectly through one or more intermediate legal entities. Additionally, in order to ensure the protection of essential security and defence interests of the Union and its Member States, the infrastructure, facilities, assets and resources used by the recipients and their subcontractors in actions financially supported by the Fund should not be located on the territory of non-associated third countries, and their executive management structures should be established in the Union or in an associated country. Accordingly, an entity which is established in a non-associated third country or an entity which is established in the Union or in an associated country but which has its executive management structures in a non-associated third country is not eligible to be a recipient or subcontractor involved in the action. In order to safeguard the essential security and defence interests of the Union and its Member States, those eligibility conditions should also apply to funding provided through procurement, by derogation from Article 176 of the Financial Regulation.

(13)  In certain circumstances, ▌ it should be possible to derogate from the principle that recipients and their subcontractors involved in an action financially supported by the Fund are not be subject to control by non-associated third countries or non-associated third country entities. In that context, legal entities established in the Union or in an associated country that are controlled by a non-associated third country or a non-associated third country entity should be eligible as recipients or subcontractors involved in the action provided that strict conditions relating to the security and defence interests of the Union and its Member States are fulfilled. The participation of such legal entities should not contravene the objectives of the Fund. Applicants should provide all relevant information about the infrastructure, facilities, assets and resources to be used in the action. Member States' concerns regarding security of supply should also be taken into account in this respect.

(13-a)  In the framework of the EU's restrictive measures, adopted on the basis of Article 29 TEU and 215(2) TFEU, no funds or economic resources may be made available, directly or indirectly, to or for the benefit of designated legal persons, entities or bodies. Such designated entities, and entities owned or controlled by them, therefore cannot be financially supported by the Fund.

(13a)  Union funding should be granted following competitive calls for proposals issued in accordance with the Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council (the ‘Financial Regulation’)(6). However, in certain duly justified and exceptional circumstances, Union funding may also be granted in accordance with Article 195(e) of the Financial Regulation. As the award of funding in accordance with Article 195(e) of the Financial Regulation constitutes a derogation from the general rule of following competitive calls for proposals, those exceptional circumstances should be interpreted strictly. In this context, for a grant to be awarded without a call for proposals, the degree to which the proposed action corresponds to the objectives of the Fund with respect to cross-border industrial collaboration and competition throughout the supply chain should be assessed by the Commission assisted by the committee of Member States (the 'committee').

(14)  If a consortium wishes to participate in an eligible action and the financial assistance of the Union is to take the form of a grant, the consortium should appoint one of its members as a coordinator who will be the principal point of contact.

(15)  In case an action financially supported by the Fund is managed by a project manager appointed by Member States or associated countries, the Commission should consult the project manager prior to executing the payment to the recipients, so that the project manager can ensure that the time-frames are respected by the recipients. ▌The project manager should provide the Commission with ▌ observations on the progress of the action so that the Commission can validate whether the conditions to proceed to the payment are fulfilled.

(15a)  The Commission should implement the Fund under direct management so as to maximise effectiveness and efficiency of the delivery and ensure full consistency with other Union initiatives. Therefore, the Commission should remain responsible for the selection and award procedures, including as regards ethics assessments. In justified cases, the Commission may however entrust certain implementation tasks for specific actions financially supported by the Fund to bodies referred to in Article 62(1)(c) of the Financial Regulation. This could for example be the case when a project manager has been appointed by Member States co-financing an action provided the requirements of the Financial Regulation are met. Such an entrustment would help to streamline the management of co-financed actions and ensure a smooth coordination of the financing agreement with the contract signed between the consortium and the project manager appointed by Member States which co-finance the action.

(16)  In order to ensure that the funded actions are financially viable, it is necessary that the applicants demonstrate that the costs of the action not covered by the Union's funding are covered by other means of financing.

(17)  Different types of financial arrangement should be at the disposal of Member States for the joint development and acquisition of defence capabilities. The ▌Commission could provide different types of arrangements that Member States could use on a voluntary basis to address challenges for collaborative development and procurement from a financing perspective. The use of such financial arrangements could further foster the launch of collaborative and cross-border defence projects and increase the efficiency of defence spending, including for projects supported by the ▌ Fund.

(18)  Given the specificities of the defence industry, where demand comes almost exclusively from Member States and associated countries, which also control all acquisition of defence-related products and technologies, including exports, the functioning of the defence sector is unique and does not follow the conventional rules and business models that govern more traditional markets. Industry therefore cannot undertake substantial self-funded defence Research and Development (R&D’) projects and Member States and associated countries often fully fund all R&D cost. To achieve the objectives of the Fund, notably to incentivise cooperation between legal entities from different Member States and associated countries, and taking into account the specificities of the defence sector, up to the totality of the eligible costs should be covered for actions that take place ahead of the development of prototype phase.

(19)  The prototype phase is a crucial phase where Member States or associated countries usually decide on their consolidated investment and start the acquisition process of their future defence products or technologies. This is the reason why, at this specific stage, Member States and associated countries agree on the necessary commitments including cost-sharing and ownership of the project. To ensure the credibility of their commitment, the financial assistance of the Union under the Fund should normally not exceed 20 % of the eligible costs.

(20)  For actions beyond the prototype phase, funding up to 80% should be foreseen. These actions which are closer to product and technology finalisation may still involve substantial costs.

(21)  Stakeholders in the defence sector are facing specific indirect costs, such as costs for security. Furthermore, stakeholders are working in a specific market where they – without any demand on the buyers' side – cannot recover the R&D costs like in the civilian sector. Therefore, it is justified to allow a flat rate of 25 % as well as the possibility ▌to charge indirect costs calculated in accordance with the usual accounting practices of the recipients if these practises are accepted by their national authorities for comparable activities in the defence domain, which have been communicated to the Commission. ▌

(21a)  Actions with participation of cross-border SMEs and mid-caps support the opening up of the supply chains and contribute to the objectives of the Fund. Such actions should therefore be eligible for an increased funding rate benefitting all participating entities.

(22)  In order to ensure that the funded actions will contribute to the competitiveness and efficiency of the European defence industry, it is important that Member States ▌ intend to jointly procure the final product or use the technology, notably through joint cross-border procurement, where Member States jointly organise their procurement procedures in particular with the use of a central purchasing body.

(22a)  In order to ensure that the actions financially supported by the Fund contribute to the competitiveness and efficiency of the European defence industry, they should be market-oriented, demand driven and commercially viable in the medium to long term. The eligibility criteria for development actions should therefore take into account the fact that Member States intend, including through a Memorandum of Understanding or a letter of intent, to procure the final defence product, or use the technology, in a coordinated way. The award criteria for development actions should also take into account the fact that Member States commit politically or legally, to jointly use, own or maintain the final defence product or technology.

(23)  The promotion of innovation and technological development in the Union defence industry should take place in a manner coherent with the security and defence interests of the Union. Accordingly, the actions contribution to those interests and to the defence research and capability priorities commonly agreed by Member States should serve as an award criterion. ▌

(24)  Eligible actions developed in the context of Permanent Structured Cooperation ▌ in the institutional framework of the Union should ensure enhanced cooperation between legal entities in the different Member States on a continuous basis and thus directly contribute to the aims of the Fund. If selected, such projects should thus be eligible for an increased funding rate.

(25)  The Commission will take into account the other activities financed under the Horizon Europe Framework programme in order to avoid unnecessary duplication and ensure the cross-fertilisation and synergies between civil and defence research.

(26)  Cybersecurity and cyber defence are increasingly important challenges and the Commission and the High Representative of the Union for Foreign Affairs and Security Policy recognised the need to establish synergies between cyber defence actions within the scope of the Fund and Union initiatives in the field of cybersecurity, such as those announced in the Joint Communication on cybersecurity. In particular, the European Cybersecurity Industrial, Technology and Research Competence Centre to be set up should seek synergies between the civilian and defence dimensions of cybersecurity. It could actively support Member States and other relevant actors by providing advice, sharing expertise and facilitating collaboration with regard to projects and actions as well as when requested by Member States acting as a project manager in relation to the ▌ Fund.

(27)  An integrated approach should be ensured by bringing together activities covered by the Preparatory Action on Defence Research ('PADR') launched by the Commission within the meaning of Article 58(2)(b) of the Financial Regulation and the European Defence Industrial Development Programme ('EDIDP') established by Regulation (EU) 2018/1092 of the European Parliament and of the Council(7), and to harmonise the conditions for participation, to create a more coherent set of instruments, and to increase the innovative, collaborative and economic impact, while avoiding unnecessary duplication and fragmentation. With this integrated approach, the Fund would also contribute to a better exploitation of the results of defence research, covering the gap between the research and the development phases taking into account the specificities of the defence sector, and promoting all forms of innovation, including disruptive innovation ▌. Positive spillover effects can also be expected, where applicable, in the civilian field.

(28)  Where appropriate in view of the specificities of the action, the ▌ objectives of the Fund should be also addressed through financial instruments and budgetary guarantees under ▌ InvestEU.

(29)  Financial support should be used to address market failures or sub-optimal investment situations, in a proportionate manner and actions should not duplicate or crowd out private financing or distort competition in the internal market. Actions should have a clear ▌ added value for the Union.

(30)  The types of financing and the methods of implementation of the Fund should be chosen on the basis of their ability to achieve the specific objectives of the actions and to deliver results, taking into account, in particular, the costs of controls, the administrative burden, and the expected risk of non-compliance. This should include consideration of the use of lump sums, flat rates and unit costs, as well as financing not linked to costs as referred to in Article ▌ 125(1) ▌ of the Financial Regulation.

(31)  The Commission should establish annual ▌ work programmes in line with the objectives of the Fund, and taking into account the initial lessons learned from the EDIDP and the PADR. The Commission should be assisted in the establishment of the work programmes by the committee. The Commission should endeavour to find solutions which command the widest possible support within the committee. In that context, the committee may meet in the configuration of national defence and security experts to provide specific assistance to the Commission, including to provide advice with regard to the protection of classified information in the framework of the actions. It is for the Member States to designate their respective representatives on that committee. Committee members should be given early and effective opportunities to examine the draft implementing acts and express their views.

(31a)  The categories of the work programmes should contain functional requirements in order to clarify for industry what functionalities and tasks have to be carried out by the capabilities which will be developed. Such requirements should give a clear indication of the expected performances but should not be directed to specific solutions or specific entities and should not prevent competition at the level of the calls for proposals.

(31b)  During the elaboration of the work programmes, the Commission should also ensure, through appropriate consultations with the committee, that the proposed research or development actions avoid unnecessary duplication. In this context, the Commission may carry out an upfront assessment of possible duplication cases with existing capabilities or already funded research or development projects within the Union.

(31bb)  The Commission should ensure the coherence of the work programmes throughout the industrial cycle of defence products and technologies.

(31bc)  The work programmes should also ensure that a credible proportion of the overall budget benefits actions enabling the cross-border participation of SMEs.

(31c)   In order to benefit from its expertise in the defence sector, the European Defence Agency will be given the status of an observer in the committee. Given the specificities of the defence area, the European External Action Service should also assist in the committee.

(32)  In order to ensure uniform conditions for the implementation of this Regulation implementing powers should be conferred on the Commission as regards the adoption of the work programme and for awarding the funding to selected development actions. In particular, while implementing development actions, the specificities of the defence sector, notably the responsibility of Member States and/or associated countries for the planning and acquisition process, should be taken into account. These implementing powers should be exercised in accordance with Regulation (EU) ▌ No 182/2011 of the European Parliament and of the Council ▌(8).

(32a)  After evaluation of the proposals with the help of independent experts, whose security credentials should be validated by the relevant Member States, the Commission should select the actions to be financially supported by the Fund. The Commission should establish a database of independent experts. The database should not be made public. The independent experts should be appointed on the basis of their skills, experience and knowledge, taking account of the tasks to be assigned to them. As far as possible, when appointing the independent experts, the Commission should take appropriate measures to seek a balanced composition within the expert groups and evaluation panels in terms of variety of skills, experience, knowledge, geographical diversity and gender, taking into account the situation in the field of the action. An appropriate rotation of experts and appropriate private-public sector balance should also be sought. Member States should be informed of the evaluation results with the ranking list of selected actions and of the progress of the funded actions. In order to ensure uniform conditions for the implementation of this Regulation, implementing powers should be conferred on the Commission as regards the adoption and the implementation of the work programme, as well as for the adoption of the award decisions. Those powers should be exercised in accordance with Regulation (EU) No 182/2011 of the European Parliament and of the Council.

(32b)  Independent experts should not evaluate, advise or assist on matters with regard to which they have a conflict of interests, in particular as regards their current position. In particular, they should not be in a position where they could use the information received to the detriment of the consortium they evaluate.

(32bb)  ▌When proposing new defence products or technologies or the upgrade of existing ones, applicants should commit themselves to complying with ethical principles, such as those relating to the welfare of human beings and the protection of the human genome, reflected also in relevant national, Union and international law, including the Charter of Fundamental Rights of the European Union and the European Convention on Human Rights and, where relevant, its Protocols. The Commission should ensure that proposals are systematically screened to identify those actions raising serious ethical issues and submit them to an ethics assessment.

(33)  In order to support an open internal market, the participation of cross-border SMEs and mid-caps, either as members of consortia, ▌ subcontractors or as entities in the supply chain should be encouraged.

(34)  The Commission should endeavour to maintain a dialogue with ▌Member States and industry to ensure the success of the Fund. As a co-legislator and key stakeholder, the European Parliament should also be engaged in this regard.

(35)  This Regulation lays down a financial envelope for the European Defence Fund which is to constitute the prime reference amount, within the meaning of [the new inter-institutional agreement] between the European Parliament, the Council and the Commission on budgetary discipline, on cooperation in budgetary matters and on sound financial management(9), for the European Parliament and the Council during the annual budgetary procedure. The Commission should ensure that administrative procedures are kept as simple as possible and incur a minimum amount of additional expenses.

(36)  The Financial Regulation applies to the Fund, unless otherwise specified. It lays down rules on the implementation of the Union budget, including the rules on grants, prizes, procurement, financial assistance, financial instruments and budgetary guarantees.

(37)  Horizontal financial rules adopted by the European Parliament and the Council on the basis of Article 322 of the Treaty on the Functioning of the European Union (TFEU) apply to this Regulation. These rules are laid down in the Financial Regulation and determine in particular the procedure for establishing and implementing the budget through grants, procurement, prizes, indirect implementation, and provide for checks on the responsibility of financial actors. Rules adopted on the basis of Article 322 TFEU also concern the protection of the Union's budget in case of generalised deficiencies as regards the rule of law in the Member States, as the respect for the rule of law is an essential precondition for sound financial management and effective EU funding.

(38)  In accordance with the Financial Regulation, Regulation (EU, Euratom) No 883/2013 of the European Parliament and of the Council(10), Council Regulation (Euratom, EC) No 2988/95(11), Council Regulation (Euratom, EC) No 2185/96(12) and Council Regulation (EU) 2017/1939(13), the financial interests of the Union are to be protected through proportionate measures, including the prevention, detection, correction and investigation of irregularities, including fraud, the recovery of funds lost, wrongly paid or incorrectly used and, where appropriate, the imposition of administrative sanctions. In particular, in accordance with Regulation (EU, Euratom) No 883/2013 and Regulation (Euratom, EC) No 2185/96, the European Anti-Fraud Office (OLAF) may carry out administrative investigations, including on-the-spot checks and inspections, with a view to establishing whether there has been fraud, corruption or any other illegal activity affecting the financial interests of the Union. In accordance with Regulation (EU) 2017/1939, the European Public Prosecutor's Office (the ‘EPPO) may investigate and prosecute ▌offences against the Union's financial interests, ▌as provided for in Directive (EU) 2017/1371 of the European Parliament and of the Council(14). In accordance with the Financial Regulation, any person or entity receiving Union funds is to fully cooperate in the protection of the Union’s financial interests, to grant the necessary rights and access to the Commission, OLAF, the EPPO in respect of those Member States participating in enhanced cooperation pursuant to Regulation (EU) 2017/1939, and the European Court of Auditors (ECA) and to ensure that any third parties involved in the implementation of Union funds grant equivalent rights.

(39)  Third countries which are members of the European Economic Area (EEA) may participate in Union programmes in the framework of the cooperation established under the EEA agreement, which provides for the implementation of the programmes by a decision under that agreement. A specific provision should be introduced in this Regulation to grant the necessary rights for and access to the authorising officer responsible, the European Anti-Fraud Office (OLAF) as well as the European Court of Auditors to comprehensively exert their respective competences.

(40)  Pursuant to paragraph 22 and 23 of the Inter-institutional agreement for Better Law-Making of 13 April 2016, there is a need to evaluate this regulation on the basis of information collected through specific monitoring requirements, while avoiding overregulation and administrative burdens, in particular on Member States. These requirements, where appropriate, can include measurable indicators, as a basis for evaluating the effects of the regulation on the ground. The Commission should carry out an interim evaluation no later than four years after the start of the Fund implementation, including with a view to submitting proposals for any appropriate amendments to the present Regulation, and a final evaluation at the end of the implementation period of the Fund, examining the financial activities in terms of financial implementation results and to the extent possible at that point in time, results and impact. In this context, the final evaluation report should also help identify where the Union is dependent on third countries for the development of defence products and technologies. This final report should also analyse the cross-border participation of SMEs and mid-caps in projects financially supported by the Fund as well as the participation of SMEs and mid-caps to the global value chain, and the contribution of the Fund to addressing the shortfalls identified in the Capability Development Plan, and should include information on the origin of the recipients, the number of Member States and associated countries involved in individual actions and the distribution of the generated intellectual property rights. The Commission may also propose amendments to this Regulation to react on possible developments during the implementation of the Fund.

(40a)  The Commission should regularly monitor the implementation of the Fund and annually report on the progress made, including how lessons identified and lessons learned from the EDIDP and the PADR are being taken into account in the implementation of the Fund. To this end, the Commission should put in place necessary monitoring arrangements. This report should be presented to the European Parliament and to the Council, and should not contain sensitive information.

(41)  Reflecting the importance of tackling climate change in line with the Union's commitments to implement the Paris Agreement and the United Nations Sustainable Development Goals, this Fund ▌will contribute to mainstream climate action in the Union's policies and to the achievement of an overall target of 25 % of the EU budget expenditures supporting climate objectives. Relevant actions will be identified during the Fund's preparation and implementation, and reassessed in the context of its mid-term evaluation.

(42)  As the Fund supports only the research and the development phases of defence products and technologies, in principle the Union should not have ownership or intellectual property rights (IPRs) over the products or technologies resulting from the funded actions unless the Union assistance is provided through public procurement. However, for research actions, interested Member States and associated countries should have the possibility to use the results of funded actions to participate in follow-up cooperative development ▌.

(43)  The Union financial support should not affect the transfer of defence-related products within the Union in accordance with Directive 2009/43/EC of the European Parliament and the Council(15) nor the export of products, equipment or technologies. The export of military equipment and technologies by the Member States is regulated by Common Position 944/2008/CFSP.

(44)  The use of sensitive background information, including data, know how or information, generated before or outside the performance of the Fund, or access by unauthorised individuals to ▌results generated in connection to actions financially supported by the Fund may have an adverse impact on the interests of the Union or of one or more of the Member States. The handling of sensitive information should thus be governed by ▌ relevant Union and national law ▌.

(44a)  In order to ensure the security of classified information at the requisite level, the minimum standards on industrial security should be complied with when signing classified funding and financing agreements. For that purpose, and in accordance with Commission Decision (EU, Euratom) 2015/444, the Commission is to communicate the Programme Security Instructions, including the Security Classification Guide, for advice to the experts designated by Member States.

(45)  In order to be able to supplement or amend the impact pathway indicators, where considered necessary, the power to adopt acts in accordance with Article 290 of the Treaty on the Functioning of the European Union should be delegated to the Commission. ▌It is of particular importance that the Commission carry out appropriate consultations during its preparatory work, including at expert level, and that those consultations be conducted in accordance with the principles laid down in the Interinstitutional Agreement on Better Law-Making of 13 April 2016. In particular, to ensure equal participation in the preparation of delegated acts, the European Parliament and the Council receive all documents at the same time as Member States' experts, and their experts systematically have access to meetings of Commission expert groups dealing with the preparation of delegated acts.

(46)  The Commission should manage the Fund having due regard to the requirements of confidentiality and security, in particular classified information and sensitive information.

▌HAVE ADOPTED THIS REGULATION:

TITLE I

COMMON PROVISIONS APPLICABLE FOR RESEARCH AND DEVELOPMENT

Article 1

Subject matter

This Regulation establishes the European Defence Fund ('the Fund'), as set out in Article 1(3)(b) of Regulation …/…/EU [Horizon - 2018/0224(COD)].

It lays down the objectives of the Fund, the budget for the period 2021-2027, the forms of Union funding and the rules for providing such funding.

Article 2

Definitions

For the purposes of this Regulation, the following definitions apply:

(0)  'applicant' means a legal entity submitting an application for support by the Fund after a call for proposals or in accordance with Article 195(e) of the Financial Regulation;

(1)  'blending operations' means actions supported by the EU budget, including within blending facilities pursuant to Article 2(6) of the Financial Regulation, combining non-repayable forms of support ▌or financial instruments from the EU budget with repayable forms of support from development or other public finance institutions, as well as from commercial finance institutions and investors;

(1a)  'certification' means the process by which a national authority certifies that the defence product, tangible or intangible component or technology complies with the applicable regulations;

(1b)  'classified information' means any information or material, in any form, the unauthorised disclosure of which could cause varying degrees of prejudice to the interests of the European Union, or of one or more of the Member States, and which bears an EU classification marking or a corresponding classification marking, in line with the agreement between the Member States of the European Union, meeting within the Council, regarding the protection of classified information exchanged in the interests of the European Union (2011/C 202/05);

(1c)  'consortium' means a collaborative grouping of applicants or recipients bound by a consortium agreement and constituted to carry out an action under the Fund;

(1d)  'coordinator' means a legal entity which is a member of a consortium and has been appointed by all the members of the consortium to be the principal point of contact in relations with the Commission;

(2)  'control' means the ability to exercise a decisive influence on an legal entity directly or indirectly through one or more intermediate legal entities;

(3)  'development action' means any action consisting ▌of defence-oriented activities primarily in the development phase, covering new products or technologies or the upgrading of existing ones, excluding the production or use of weapons;

(4)  'disruptive technology for defence' means a technology inducing radical change, including an enhanced or completely new technology, inducing a paradigm shift in the concepts and conduct of defence affairs including by replacing existing defence technologies or rendering them obsolete;

(5)  'executive management structures' means of a legal entity appointed in accordance with national law, and, where applicable, reporting to the chief executive officer, which is empowered to establish the legal entity's strategy, objectives and overall direction, and which oversees and monitors management decision-making;

(5a)  'foreground information' means data, know-how or information generated in the performance of the Fund, whatever its form or nature;

(6)  'legal entity' means any ▌legal person created and recognised as such under national law, Union law or international law, which has legal personality and which may, acting in its own name, exercise rights and be subject to obligations, or an entity without a legal personality in accordance with Article ▌ 197(2)(c) ▌of the Financial Regulation;

(7)  ‘middle capitalisation company' or 'mid-cap' means an enterprise that is not a ▌SME▌ and that has ▌up to 3 000 employees, where the staff headcount is calculated in accordance with Articles 3 to ▌6 of ▌the Annex to Commission Recommendation 2003/361/EC(16);

(8)  'pre-commercial procurement' means the procurement of research and development services involving risk-benefit sharing under market conditions, competitive development in phases, where there is a clear separation of the research and development services procured from the deployment of commercial volumes of end-products;

(9)  ‘project manager' means any contracting authority established in a Member State or an associated country, tasked by a Member State or an associated country or a group of Member States ▌or associated countries to manage multinational armament projects permanently or on an ad-hoc basis;

(9a)  'qualification' means the entire process of demonstrating that the design of a defence product, tangible or intangible component or technology meets the specified requirements, providing objective evidence by which particular requirements of a design are demonstrated to have been met;

(10)  'recipient' means any legal entity with which a funding or financing agreement has been signed or to which a funding or financing decision has been notified;

(11)  'research action' means any action consisting primarily of research activities, notably applied research and where necessary fundamental research, with the aim of acquiring new knowledge and with an exclusive focus on defence applications;

(12)  'results' means any tangible or intangible effect of the action, such as data, know-how or information, whatever its form or nature, whether or not it can be protected, as well as any rights attached to it, including intellectual property rights;

(12a)  'sensitive information' means information and data, including classified information, that must be protected from unauthorised access or disclosure because of obligations laid down in national or Union law or in order to safeguard the privacy or security of an individual or organisation;

(12b)  'small and medium-sized enterprises' or 'SMEs' means small and medium-sized enterprises as defined in Commission Recommendation 2003/361/EC;

(13)  'special report' means a specific deliverable of a research action summarising its results, providing extensive information on the basic principles, the aims, the actual outcomes, the basic properties, the performed tests, the potential benefits, the potential defence applications and the expected exploitation path of the research towards development, including information on the ownership of IPRs but not requiring the inclusion of IPR information;

(14)  'system prototype' means a model of a product or technology that can demonstrate performance in an operational environment;

(15)  'third country' means a country that is not a member of the Union;

(16)  'non-associated third country' means a third country that is not an associated country in accordance with Article 5;

(17)  'non-associated third country entity' means a legal entity established in a non-associated third country or, where it is established in the Union or in an associated country, having its executive management structures in a non-associated third country;

Article 3

Objectives of the Fund

1.  The general objective of the Fund is to foster the competitiveness, efficiency and innovation capacity of the European defence technological and industrial base throughout the Union, which contributes to the Union strategic autonomy and its freedom of action, by supporting collaborative actions and cross-border cooperation between legal entities throughout the Union, in particular SMEs and mid-caps as well as strengthening and improving the agility of both defence supply and value chains, widening cross-border cooperation between legal entities and fostering the better exploitation of the industrial potential of innovation, research and technological development, at each stage of the industrial life cycle of defence products and technologies. ▌

2.  The Fund shall have the following specific objectives:

(a)  support collaborative research ▌that could significantly boost the performance of ▌future capabilities throughout the Union, aiming at maximising innovation and introducing new defence products and technologies, including disruptive ones, and at the most efficient use of defence research spending in the Union;

(b)  support collaborative development ▌of defence products and technologies, thus contributing to greater efficiency of defence spending within the Union, achieving greater economies of scale, reducing the risk of unnecessary duplication and as such incentivising the market uptake of European products and technologies and reducing the fragmentation of defence products and technologies throughout the Union. Ultimately, the Fund will lead to an increase in the standardisation of defence systems and greater interoperability between Member States' capabilities.

Such cooperation shall be consistent with defence capability priorities commonly agreed by Member States within the framework of the Common Foreign and Security Policy and particularly in the context of the Capability Development Plan.

In this regard, regional and international priorities, when they serve the Union's security and defence interests as determined under the Common Foreign and Security Policy, and taking into account the need to avoid unnecessary duplication, may also be taken into account, where appropriate, wherever they do not exclude the possibility of participation of any Member State or associated country.

Article 4

Budget

1.  In accordance with Article 9(1) of Regulation …/…/EU the financial envelope for the implementation of the European Defence Fund for the period 2021 – 2027 shall be EUR 11 453 260 000 in 2018 prices EUR 13 000 000 000 in current prices.

2.  The ▌distribution of the amount referred to in paragraph 1 shall be:

(a)  ▌EUR 3 612 182 000 in 2018 prices (EUR 4 100 000 000 for research actions;

(b)  ▌ EUR 7 841 078 000 in 2018 prices (EUR 8 900 000 000 in current prices) for development actions.

2a.  In order to respond to unforeseen situations or new developments and needs, the Commission may reallocate amounts between the allocations for research actions and development actions referred to in paragraph 2, up to a maximum of 20 %.

3.  The amount referred to in paragraph 1 may be used for technical and administrative assistance for the implementation of the Fund, such as preparatory, monitoring, control, audit and evaluation activities including corporate information technology systems.

4.  At least 4 % and up to 8 % of the financial envelope referred to in paragraph 1 shall be allocated to calls for proposals or awards of funding supporting disruptive technologies for defence.

Article 5

Associated countries

The Fund shall be open to the European Free Trade Association (EFTA) members which are members of the European Economic Area (EEA), in accordance with the conditions laid down in the EEA agreement. Any financial contribution to the Fund pursuant to this Article shall constitute assigned revenue in accordance with Article [21(5)] of the Financial Regulation.

Article 6

Support to disruptive technologies for defence

1.  The Commission shall award funding following open and public consultations on ▌technologies with a focus on defence applications having the potential to disrupt defence affairs in the areas of intervention defined in the work programmes.

2.  The work programmes shall lay down the most appropriate form of funding to finance these disruptive technologies for defence.

Article 7

Ethics

1.  Actions implemented under the Fund shall comply with relevant national, Union and international law, including the Charter of Fundamental Rights of the European Union. These actions shall also comply with ethical principles reflected also in relevant national, Union and international law.

2.  Before the signature of the funding agreement, proposals shall be screened by the Commission, on the basis of an ethics self-assessment prepared by the consortium, to identify those actions raising ▌serious ethical issues including with regard to the conditions of implementation and, where appropriate, shall be submitted to an ethics assessment.

Ethics screenings and assessments shall be carried out by the Commission with the support of independent experts with various backgrounds, in particular with recognised expertise on defence ethics.

The conditions for the implementation of activities with ethically sensitive issues shall be specified in the funding agreement.

The Commission shall ensure the transparency of the ethics procedures as much as possible and shall report on this in the framework of its obligations under Article 32. Experts shall be nationals of as broad a range of Member States as possible.

3.  Entities participating in the action shall obtain all relevant approvals or other mandatory documents required by national or local ethics committees or other bodies such as data protection authorities before the start of the relevant activities. Those documents shall be kept on file and provided to the Commission upon request.

5.  Proposals which are not ethically acceptable shall be rejected ▌.

Article 8

Implementation and forms of EU funding

1.  The Fund shall be implemented in direct management in accordance with the Financial Regulation.

1a.  By derogation from paragraph 1, in justified cases, specific actions may be implemented under indirect management by bodies referred to in Article 62(1)(c) of the Financial Regulation. This may not cover the selection and award procedure, as referred to in Article 12.

2.  The Fund may provide funding in accordance with the Financial Regulation, through grants, prizes and procurement, and where appropriate in view of the specificities of the action, financial instruments within blending operations.

2a.  Blending operations shall be implemented in accordance with Title X of the Financial Regulation and the InvestEU Regulation.

2b.  Financial instruments shall be strictly directed to the recipients only.

Article 10

Eligible entities

1.  Recipients and ▌ subcontractors involved in the action financially supported by the Fund shall be ▌ established in the Union or in an associated country ▌.

1a.  The infrastructure, facilities, assets and resources of the recipients and subcontractors involved in an action which are used for the purposes of the actions financially supported by the Fund shall be located on the territory of a Member State or of an associated country for the entire duration of an action, and their executive management structures shall be established in the Union or in an associated country.

1b.  For the purpose of an action financially supported by the Fund, the recipients and subcontractors involved in an action shall not be subject to control by a non-associated third country or by a non-associated third country entity.

2.  By derogation from paragraph 1b of this Article, a legal entity established in the Union or in an associated country and controlled by a non-associated third country or a non-associated third country entity shall be eligible as a recipient or subcontractor involved in an action only if guarantees approved by the Member State or the associated country in which it is established, in accordance with its national procedures, are made available to the Commission. Those guarantees may refer to the legal entity's executive management structure established in the Union or in an associated country. If deemed to be appropriate by the Member State or associated country in which the legal entity is established, those guarantees may also refer to specific governmental rights in the control over the legal entity.

The guarantees shall provide assurances that the involvement in an action of such a legal entity would not contravene the security and defence interests of the Union and its Member States as established in the framework of the Common Foreign and Security Policy pursuant to Title V of the TEU, or the objectives set out in Article 3. The guarantees shall also comply with the provisions of Articles 22 and 25. The guarantees shall in particular substantiate that, for the purpose of the action, measures are in place to ensure that:

(a)  ▌control over the applicant legal entity is not exercised in a manner that retrains or restricts ▌ its ability to carry the action out the action and to deliver results, that imposes restrictions concerning its infrastructure, facilities, assets, resources, intellectual property or know-how needed for the purpose of the action, or that undermines its capabilities and standards necessary to carry out the action;

(b)  ▌access by a non-associated third countries or by a non-associated third country entity to ▌ sensitive information relating to the action is prevented; and the employees or other persons involved in the action ▌have a national security clearance issued by a Member State or an associated country, where appropriate;

(c)  ownership of the intellectual property arising from, and the results of, the action remain within the recipient during and after completion of the action, are not subject to control or restrictions by non-associated third countries or other non-associated third country entity, and are not exported outside the Union or outside associated countries, nor is access to them from outside the Union or outside associated countries granted, without the approval of the Member States or the associated country in which the legal entity is established and in accordance with the objectives set out in Article 3.

If deemed to be appropriate by the Member State or the associated country in which the legal entity is established, additional guarantees may be provided.

The Commission shall inform the committee referred to in Article 28 of any legal entity deemed to be eligible in accordance with this paragraph.

4.  Where are no competitive substitutes are readily available in the Union or in an associated country, recipients and subcontractors involved in an action may use their assets, infrastructure, facilities and resources located or held outside the territory of the Union’s Member States or associated countries provided that that usage does not contravene the security and defence interests of the Union and its Member States, is consistent with the objectives set out in Article 3 and is fully in line with Articles 22 and 25. ▌ The costs related to those activities shall not be eligible for financial support by the Fund.

4a.  When carrying out an eligible action, recipients and subcontractors involved in the action may also cooperate with legal entities established outside the territory of the Member States or of associated countries, or controlled by a non-associated third country or by a non-associated third country entity, including by using the assets, infrastructure, facilities and resources of such legal entities, provided that this does not contravene the security and defence interests of the Union and its Member States. Such cooperation shall be consistent with the objectives set out in Article 3 and shall be fully in line with Articles 22 and 25.

There shall be no unauthorised access by a non-associated third country or other non-associated third country entity to classified information relating to the carrying out of the action and potential negative effects over security of supply of inputs critical to the action shall be avoided.

The costs related to those activities shall not be eligible for support by the Fund.

6.  Applicants shall provide all relevant information necessary for the assessment of the eligibility criteria ▌. In the event of a change during the carrying out of an action which might put into question the fulfilment of the eligibility criteria, the relevant legal entity shall inform the Commission, which shall assess whether these eligibility criteria and conditions continue to be met and shall address the potential impact on the funding of the action.

7.  ▌

8.  ▌

9.  For the purpose of this Article, subcontractors involved in an action financially supported by the Fund refers to subcontractors with a direct contractual relationship to a recipient, other subcontractors to which at least 10% of the total eligible costs of the action is allocated, and subcontractors which may require access to classified information ▌ in order to carry out the action, and which are not members of the consortium.

Article 11

Eligible actions

1.  Only actions implementing the objectives referred to in Article 3 shall be eligible for funding.

2.  The Fund shall provide support for actions covering ▌new defence products and technologies and the upgrade of existing products and technologies provided that the use of pre-existing information needed to carry out the actions for the upgrade is not subject to a restriction by a non-associated third country or a non-associated third country entity, directly, or indirectly through one or more intermediary legal entities, in such a way that the action cannot be carried out.

3.  An eligible action shall relate to one or more of the following activities:

(a)  activities aiming to create, underpin and improve ▌knowledge, products and technologies, including disruptive ▌ technologies, which can achieve significant effects in the area of defence;

(b)  activities aiming to increase interoperability and resilience, including secured production and exchange of data, to master critical defence technologies, to strengthen the security of supply or to enable the effective exploitation of results for defence products and technologies;

(c)  studies, such as feasibility studies to explore the feasibility of a new or improved technologies, products, processes, services and solutions ▌;

(d)  the design of a defence product, tangible or intangible component or technology as well as the definition of the technical specifications on which such design has been developed which may include partial tests for risk reduction in an industrial or representative environment;

(e)  the development of a model of a defence product, tangible or intangible component or technology, which can demonstrate the element's performance in an operational environment (system prototype);

(f)  the testing of a defence product, tangible or intangible component or technology;

(g)  the qualification of a defence product, tangible or intangible component or technology ▌;

(h)  the certification of a defence product, tangible or intangible component or technology ▌;

(i)  the development of technologies or assets increasing efficiency across the life cycle of defence products and technologies;

4.  ▌The action shall be undertaken in a cooperation within a consortium of at least three eligible entities which are established in at least three different Member States ▌or associated countries. At least three of these eligible entities established in at least two Member States ▌or associated countries shall not, during the whole implementation of the action, be ▌controlled, directly or indirectly, by the same entity, and shall not control each other.

5.  Paragraph 4 shall not apply to ▌action relating to disruptive technologies for defence or to actions referred to in point c) ▌of paragraph 3 ▌.

6.  Actions for the development of products and technologies the use, development or production of which is prohibited by applicable international law shall not be eligible.

Actions for the development of lethal autonomous weapons without the possibility for meaningful human control over the selection and engagement decisions when carrying out strikes against humans shall also not be eligible for financial support by the Fund, without prejudice to the possibility to provide funding for actions for the development of early warning systems and countermeasures for defensive purposes.

Article 12

Selection and award procedure

1.  Union funding shall be granted following competitive calls for proposals issued in accordance with the Financial Regulation. In certain duly justified and exceptional circumstances, Union funding may also be granted in accordance with Article ▌ 195(e) ▌ of the Financial Regulation.

2a.  For the award of funding ▌, the Commission shall act by means of implementing acts adopted in accordance with the procedure referred to in Article 28 paragraph 2.

Article 13

Award criteria

▌Each proposal shall be assessed on the basis of the following criteria:

(a)  contribution to excellence or potential of disruption in the defence domain in particular by showing that the expected results of the proposed action present significant advantages over existing defence products or technologies;

(b)  contribution to the innovation and technological development of the European defence industry, in particular by showing that the proposed action includes ground-breaking or novel concepts and approaches, new promising future technological improvements or the application of technologies or concepts previously not applied in defence sector, while avoiding unnecessary duplication;

(c)  contribution to the competitiveness of the European defence industry by showing that the proposed action is a demonstrably positive balance of cost efficiency and effectiveness, thus creating new market opportunities across the Union and beyond and accelerating the growth of companies throughout the Union;

(d)  contribution to the autonomy of the European defence technological and industrial base, including by increasing the ‘non-dependency on non-EU sources and strengthening security of supply, and to the security and defence interests of the Union in line with the priorities referred to in Article 3 ▌;

(e)  contribution to the creation of new cross-border cooperation between legal entities established in Member States or associated countries, in particular for SMEs and mid-caps with a substantial participation in the action, as recipients, subcontractors or as other entities in the supply chain, and which are established in Member States ▌or associated countries other than those where the entities in the consortium which are not SMEs or mid-caps are established;

(f)  quality and efficiency of the implementation of the action.

Article 14

Co-financing rate

1.  The Fund shall finance up to 100 % of the eligible costs of an activity, listed in Article 11(3), without prejudice to Article 190 of the Financial Regulation.

2.  By derogation from paragraph 1:

(a)  for activities defined in Article 11(3) (e) the financial assistance of the Fund shall not exceed 20% of the eligible costs thereof,

(b)  for activities defined in Article 11(3) (f) to (h) the financial assistance of the Fund shall not exceed 80% of the eligible costs thereof.

3.  For development actions, the funding rates shall be increased in the following cases:

(a)  an activity developed in the context of Permanent Structured Cooperation as established by Council Decision (CFSP) 2017/2315 of 11 December 2017 may benefit from a funding rate increased by an additional 10 percentage points;

(b)  an activity may benefit from an increased funding rate, as referred to in the second and third subparagraphs of this paragraph, where at least 10 % of the total eligible costs of the activity are allocated to SMEs established in a Member State or in an associated country and which participate in the activity as recipients, subcontractors or as entities in the supply chain.

The funding rate may be increased by percentage points equivalent to the percentage of the total eligible costs of the activity allocated to SMEs established in Member States or in associated countries in which recipients that are not SMEs are established and which participate in the activity as recipients, subcontractors or as entities in the supply chain, up to an additional 5 percentage points.

The funding rate may be increased by percentage points equivalent to twice the percentage of the total eligible costs of the activity allocated to SMEs established in Member States or in associated countries other than those in which recipients that are not SMEs are established and which participate in the activity as recipients, subcontractors or as entities in the supply chain;

(c)  an activity may benefit from a funding rate increased by an additional 10 percentage points where at least 15 % of the total eligible costs of the activity are allocated to mid-caps established in the Union or in an associated country.

(d)  the overall increase in the funding rate of an activity shall not exceed 35 percentage points.

The financial assistance of the Union provided under the Fund, including increased funding rates, shall not cover more than 100 % of the eligible costs of the action.

Article 15

Financial capacity

By derogation from Article ▌ 198 ▌of the Financial Regulation:

(a)  the financial capacity shall be verified only for the coordinator and only if the requested funding from the Union is equal to or greater than EUR 500 000. However, if there are grounds to doubt the financial capacity, the Commission shall verify also the financial capacity of other applicants or of coordinators below the threshold referred to in the first sentence;

(b)  the financial capacity shall not be verified in respect of legal entities whose viability is guaranteed by a Member States’ relevant authorities;

(c)  if the financial capacity is structurally guaranteed by another legal entity, the financial capacity of the latter shall be verified.

Article 16

Indirect costs

1.  By derogation from Article 181(6) of the Financial Regulation, indirect eligible costs shall be determined by applying a flat rate of 25 % of the total direct eligible costs, excluding direct eligible costs of subcontracting and financial support to third parties and any unit costs or lump sums which include indirect costs.

2.  As an alternative, indirect eligible costs ▌may be determined in accordance with the recipient's usual cost accounting practices on the basis of actual indirect costs provided that these cost accounting practices are accepted by national authorities for comparable activities in the defence domain, in accordance with Article ▌ 185 ▌ of the Financial Regulation and communicated to the Commission.

Article 17

Use of single lump sum or contribution not linked to costs

1.  Where the Union grant co-finances less than 50 % of the total costs of the action, the Commission may use:

(a)  a contribution not linked to costs referred to in Article ▌ 180(3) ▌ of the Financial Regulation and based on the achievement of results measured by reference to previous set milestones or through performance indicators; or

(b)  a single lump sum referred to in Article ▌ 182 ▌ of the Financial Regulation and based on the provisional budget of the action already endorsed by the national authorities of the co-financing Member States and associated countries.

2.  Indirect costs shall be included in the lump sum.

Article 18

Pre-commercial procurement

1.  The Union may support pre-commercial procurement through awarding a grant to contracting authorities or contracting entities as defined in Directives 2014/24/EU(17), 2014/25/EU(18) and 2009/81/EC(19) of the European Parliament and of the Council, which are jointly procuring defence research and development ▌services or coordinating their procurement procedures.

2.  The procurement procedures:

(a)  shall be in line with the provisions of this Regulation;

(b)  may authorise the award of multiple contracts within the same procedure (multiple sourcing);

(c)  shall provide for the award of the contracts to the tender(s) offering best value for money while ensuring absence of conflict of interest.

Article 19

Guarantee Fund

Contributions to a mutual insurance mechanism may cover the risk associated with the recovery of funds due by recipients and shall be considered a sufficient guarantee under the Financial Regulation. The provisions laid down in [Article X of] Regulation XXX [successor of the Regulation on the Guarantee Fund] shall apply.

Article 20

Eligibility conditions for procurement and prizes

1.  Articles 10 and 11 shall apply mutatis mutandis to prizes.

2.  Article 10, by derogation from Article 176 of the Financial Regulation, and Article 11, shall apply mutatis mutandis for the procurement of studies referred to in Article 11(3)(c).

TITLE II

SPECIFIC PROVISIONS APPLICABLE FOR RESEARCH ACTIONS

Article 22

Ownership of results of research actions

1.  The results of research actions financially supported by the Fund shall be owned by the recipients generating them. Where legal entities jointly generate results, and where their respective contribution cannot be ascertained, or where it is not possible to separate such joint results, the legal entities shall have joint ownership of the results. The joint owners shall conclude an agreement regarding the allocation and terms of exercise of that joint ownership in accordance with their obligations under the grant agreement.

2.  By derogation from paragraph 1, if Union support is provided in the form of public procurement, results of research actions financially supported by the Fund shall be owned by the Union. Member States and associated countries shall enjoy access rights to the results, free of charge, upon their written request.

3.  ▌The results of research actions financially supported by the Fund shall not be subject to any control or restriction by a non-associated third country or by a non-associated third country entity, directly, or indirectly through one or more intermediate legal entities, including in terms of technology transfer.

4.  With regard to results generated by recipients through actions financially supported by the Fund and without prejudice to paragraph 8a of this Article, the Commission to be notified ex ante of any transfer of ownership ▌ or ▌ granting of an exclusive license ▌ to a non-associated third country or to a non-associated third country entity. If such transfer of ownership contravene the ▌ security and defence interests of the Union and its Member States or the objectives of this Regulation as set out in Article 3, the funding provided under the fund shall be reimbursed.

5.  The national authorities of Member States and associated countries shall enjoy access rights to the special report of research action that has received Union funding. Such access rights shall be granted on a royalty-free basis and transferred by the Commission to the Member States and associated countries after ensuring that appropriate confidentiality obligations are in place.

6.  The national authorities of Member States and associated countries shall use the special report solely for purposes related to the use by or for their armed forces, or security or intelligence forces, including within the framework of their cooperative programmes. Such usage shall include, but not be limited to, the study, evaluation, assessment, research, design, ▌ and product acceptance and certification, operation, training and disposal ▌, as well as the assessment and drafting of technical requirements for procurement.

7.  The recipients shall grant access rights to the results of research activities financially supported by the Fund on a royalty-free basis to the Union institutions, bodies or agencies, for the duly justified purpose of developing, implementing and monitoring existing Union policies or programmes in the fields of its competence. Such access rights shall be limited to non-commercial and non-competitive use.

8.  Specific provisions regarding ownership, access rights and licensing shall be laid down in the funding agreements and the contracts regarding pre-commercial procurement to ensure maximum uptake of the results and to avoid any unfair advantage. The contracting authorities shall enjoy at least royalty-free access rights to the results for their own use and the right to grant, or require the recipients to grant, non-exclusive licences to third parties to exploit the results under fair and reasonable conditions without any right to sub-license. All Member States and associated countries shall have royalty-free access to the special report. If a contractor fails to commercially exploit the results within a given period after the pre-commercial procurement as identified in the contract, it shall transfer any ownership of the results to the contracting authorities.

8a.  The provisions laid down in this Regulation shall not affect the export of products, equipment or technologies integrating results of research activities financially supported by the Fund, and shall not affect the discretion of Member States as regards policy on the export of defence-related products.

8b.   Any two or more Member States or associated countries that, multilaterally or within the frame of the Union organisation, have jointly concluded one or several contracts with one or more recipients to further develop together results of research activities supported by the Fund, shall enjoy access rights to those results owned by such recipients and that are necessary for the execution of the contract or contracts. Such access rights shall be granted on a royalty-free basis and under specific conditions aimed at ensuring that those rights will be used only for the purpose of the contract or contracts and that appropriate confidentiality obligations will be in place.

TITLE III

SPECIFIC PROVISIONS APPLICABLE FOR DEVELOPMENT ACTIONS

Article 23

Additional eligibility criteria for development actions

1.  ▌The consortium shall demonstrate that the remaining costs of an activity that are not covered by the Union support will be covered by other means of financing such as by Member States' ▌or associated countries’ contributions or co-financing from legal entities.

2.  Activities as referred to in point (d) of Article 11 paragraph 3▌ shall be based on harmonised capability requirements jointly agreed by at least two Member States ▌or associated countries.

3.  With regard to activities referred to in points (e) to (h) of Article 11 paragraph 3, the consortium shall demonstrate by means of documents issued by national authorities that:

(a)  at least two Member States ▌or associated countries intend to procure the final product or use the technology in a coordinated way, including through joint procurement where applicable;

(b)  the activity is based on common technical specifications jointly agreed by the Member States ▌or associated countries that are to co-finance the action or that intend to jointly procure the final product or to jointly use the technology.

Article 24

Additional award criteria for development actions

In addition to the award criteria referred to in Article 13, the work programme shall also take into consideration:

(a)  the contribution to increasing efficiency across the life cycle of defence products and technologies, including cost-effectiveness and the potential for synergies in the procurement and maintenance process and disposal processes;

(b)  the contribution to the further integration of the European defence industry throughout the Union through the demonstration by the recipients that Member States have committed to jointly use, own or maintain the final product or technology in a coordinated way.

Article 25

Ownership of results of development actions

1.  The Union shall not own the products or technologies resulting from development actions financially supported by the Fund, nor shall it have any intellectual property rights regarding the results of those actions.

2.  The results of actions financially supported by the Fund shall not be subject to any control or restriction by non-associated third countries or by non-associated third country entities, directly or indirectly through one or more intermediate legal entities, including in terms of technology transfer.

2a.  This Regulation shall not affect the discretion of Member States as regards policy on the export of defence-related products.

3.  With regard to results generated by recipients through actions financially supported by the Fund and without prejudice to paragraph 2a of this Article, the Commission shall be notified ex ante of any transfer of ownership ▌to a non-associated third countries or to non-associated third country entities. If such transfer of ownership ▌contravenes the ▌security defence and interests of the Union and its Member States or the objectives ▌ set out in Article 3, ▌the funding provided under the Fund shall be reimbursed.

4.  If Union assistance is provided in the form of public procurement of a study, Member States ▌or associated countries shall have the right, free of charge, to a non-exclusive licence for the use thereof upon their written request.

TITLE IV

GOVERNANCE, MONITORING, EVALUATION AND CONTROL

Article 27

Work programmes

1.  The Fund shall be implemented by annual work programmes established in accordance with Article 110 of the Financial Regulation. Work programmes shall set out, where applicable, the overall amount reserved for blending operations. Work programmes shall set out the overall budget benefiting the cross-border participation of SMEs.

2.  The Commission shall adopt the work programmes by means of implementing acts in accordance with the procedure referred to in Article 28 paragraph 2.

3.  The work programmes shall set out in detail the research topics and the categories of actions to be financially supported by the Fund. Those categories shall be in line with the defence priorities referred to in Article 3.

With the exception of the part of the work programme dedicated to disruptive technologies for defence applications, those research topics and categories of actions shall cover products and technologies in the fields of:

(a)  preparation, protection, deployment and sustainability;

(b)  information management and superiority and command, control, communication, computers, intelligence, surveillance and reconnaissance (C4ISR), cyber defence and cybersecurity; and

(c)  engagement and effectors.

4.  The work programmes shall contain, where appropriate, functional requirements and specify the form of EU funding in accordance with Article 8, while not preventing competition at the level of calls for proposals.

The transition of results of research actions demonstrating added value already financially supported by the Fund into the development phase may also be taken into consideration in the work programmes.

Article 28

Committee

1.  The Commission shall be assisted by a committee within the meaning of Regulation (EU) No 182/2011. The European Defence Agency shall be invited as an observer to provide its views and expertise. The European External Action Service shall also be invited to assist.

The committee shall also meet in special configurations, including in order to discuss defence and security aspects, relating to actions under the Fund.

2.  Where reference is made to this paragraph, Article 5 of Regulation (EU) No 182/2011 shall apply.

Where the committee delivers no opinion, the Commission shall not adopt the draft implementing act and the third sub-paragraph of Article 5(4) of Regulation (EU) No 182/2011 shall apply.

Article 28a

Consultation of the project manager

In case a project manager is appointed by a Member State or an associated country, the Commission shall consult the project manager on progress made with regard to the action before the payment is executed.

Article 29

Independent experts

1.  The Commission shall appoint independent experts to assist in the ethics scrutiny of Article 7 and in the evaluation of proposals pursuant to Article ▌ 237 ▌ of the Financial Regulation. ▌

2.  Independent experts shall be Union citizens from as broad a range of Member States as possible and be selected on the basis of calls for expressions of interest addressed to ▌ Ministries of Defence and subordinated agencies, other relevant governmental bodies, research institutes, universities, business associations or enterprises of the defence sector with a view to establishing a list of experts. By derogation from Article ▌ 237 ▌ of the Financial Regulation, this list shall not be made public.

3.  The security credentials of appointed independent experts shall be validated by the respective Member State.

4.  The Committee referred to in Article 28 shall be informed annually on the list of experts, to be transparent as to the security credentials of the experts. The Commission shall also ensure that experts do not evaluate, advise or assist on matters with regard to which they have a conflict of interests.

5.  Independent experts shall be chosen on the basis of their skills, experience and knowledge appropriate to carry out the tasks assigned to them.

Article 30

Application of the rules on classified information

1.  Within the scope of this Regulation:

(a)  each Member State ▌ shall ensure that it▌ offers a degree of protection of European Union classified information equivalent to that provided by the ▌ security rules of the Council set out in the Annexes to Decision 2013/488/EU (20);

(a1)  the Commission shall protect classified information in accordance with the rules on security as set out in Commission Decision (EU, Euratom) 2015/444 of 13 March 2015 on the security rules for protecting EU classified information;

(c)  natural persons resident in and legal persons established in ▌ third countries may deal with EU classified information regarding the Fund only where they are subject, in those countries, to security regulations ensuring a degree of protection at least equivalent to that provided by the Commission's rules on security set out in Commission Decision (EU, Euratom) 2015/444 and by the security rules of the Council set out in ▌Decision 2013/488/EU;

(c1)   the equivalence of the security regulations applied in a third country or international organisation shall be defined in a security of information agreement, including industrial security matters if relevant, concluded between the Union and that third country or international organisation in accordance with the procedure provided for in Article 218 TFEU and taking into account Article 13 of Decision 2013/488/EU;

(d)  without prejudice to Article 13 of Decision 2013/488/EU and to the rules governing the field of industrial security as set out in Commission Decision (EU, Euratom) 2015/444, a natural person or legal person, third country or international organisation may be given access to European Union classified information where deemed necessary on a case-by-case basis, according to the nature and content of such information, the recipient's need-to-know and the degree of advantage to the Union.

2.  When actions involve, require ▌or contain classified information, the relevant funding body shall specify in the call for proposals/tenders documents the measures and requirements necessary to ensure the security of such information at the requisite level.

3.  The Commission shall set up a secured exchange system in order to facilitate exchange of sensitive and classified information between the Commission and the Member States and associated countries and, where appropriate, with the applicants and the recipients. The system shall take into account the Member States' national security regulations.

4.  The originatorship of classified foreground information generated in the performance of a research or development action shall be decided upon by the Member States on whose territory the recipients are established. For that purpose, those Member States may decide on a specific security framework for the protection and handling of classified information relating to the action and shall inform the Commission thereof. Such a security framework shall be without prejudice to the possibility for the Commission to have access to the necessary information for the implementation of the action.

If no such specific security framework is set up by those Member States, the Commission shall set up the security framework for the action in accordance with the provisions of Commission Decision (EU, Euratom) 2015/444.

The applicable security framework for the action has to be in place at the latest before the signature of the funding agreement or the contract.

Article 31

Monitoring and reporting

1.  Indicators to monitor implementation and progress of the Fund towards the achievement of the general and specific objectives set out in Article 3 are set out in Annex.

2.  To ensure effective assessment of progress of the Fund towards the achievement of its objectives, the Commission is empowered to adopt delegated acts in accordance with Article 36 to amend the Annex to review or complement the indicators where considered necessary and to supplement this Regulation with provisions on the establishment of a monitoring and evaluation framework.

3.  The Commission shall regularly monitor the implementation of the Fund and annually report, to the European Parliament and the Council, on the progress made, including how lessons identified and lessons learned from EDIDP and PADR are being taken into account in the implementation of the Fund. To this end, the Commission shall put in place necessary monitoring arrangements.

4.  The performance reporting system shall ensure that data for monitoring the Fund implementation and results are collected efficiently, effectively and in a timely fashion. To that end, proportionate reporting requirements shall be imposed on recipients of Union funds.

Article 32

Evaluation of the Fund

1.  Evaluations shall be carried out in a timely manner to feed into the decision-making process.

2.  The interim evaluation of the Fund shall be performed once there is sufficient information available about its implementation ▌, but no later than four years after the start of its implementation. The interim evaluation report shall notably include ▌ an assessment of the governance of the Fund, including as regards the provisions related to independent experts, the implementation of the ethics procedures as referred to in Article 7 and of the lessons learned from EDIDP and PADR, implementation rates, project award results including the level of involvement of SMEs and mid-caps ▌ and the degree of their cross-border participation, rates of reimbursement of indirect costs as defined in Article 16, the amounts allocated to disruptive technologies in calls for proposals, and funding granted in accordance with Article ▌ 195 ▌ of the Financial Regulation, by 31 July 2024. The interim evaluation shall also contain information on the countries of origin of the recipients, the number of countries involved in individual projects and, where possible, the distribution of the generated intellectual property rights. The Commission may submit proposals for any appropriate amendments to the present Regulation.

3.  At the end of the implementation period but no later than four years after ▌31 December 2027, a final evaluation of the Fund implementation shall be carried out by the Commission. The final evaluation report shall include the results of the implementation and to the extent possible given timing the impact of the Fund. The report, building on relevant consultations of Member States and associated countries and key stakeholders, shall notably assess the progress made towards the achievement of the objectives set out in Article 3. It shall also help identify where the Union is dependent on third countries for the development of defence products and technologies. It shall also analyse cross border participation, including of SMEs and mid-caps, in projects implemented under the Fund as well as the integration of SMEs and mid-caps in the global value chain and the contribution of the Fund to addressing the shortfalls identified in the Capability Development Plan. The evaluation shall also contain information on the countries of origin of the recipients and, where possible, the distribution of the generated intellectual property rights.

4.  The Commission shall communicate the conclusions of the evaluations accompanied by its observations, to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions.

Article 33

Audits

Audits on the use of the Union contribution carried out by persons or entities, including by other than those mandated by the Union Institutions or bodies, shall form the basis of the overall assurance pursuant to Article ▌ 127 ▌of the Financial Regulation. The European Court of Auditors shall examine the accounts of all revenue and expenditure of the Union according to Article 287 TFEU.

Article 34

Protection of the financial interests of the Union

Where a third country participates in the Fund by a decision under an international agreement or by virtue of any other legal instrument, the third country shall grant the necessary rights and access required for the authorising officer responsible, ▌OLAF and the European Court of Auditors to comprehensively exert their respective competences. In the case of the OLAF, such rights shall include the right to carry out investigations, including on-the-spot checks and inspections, provided for in Regulation (EU, Euratom) No 883/2013 of the European Parliament and of the Council concerning investigations conducted by the European Anti-Fraud Office▌.

Article 35

Information, communication and publicity

1.  The recipients of Union funding shall acknowledge the origin and ensure the visibility of the Union funding (in particular when promoting the actions and their results) by providing coherent, effective and proportionate targeted information to multiple audiences, including, the media and the public. The possibility to publish academic papers based on the results of research actions shall be regulated in the funding or financing agreement.

2.  The Commission shall implement information and communication actions relating to the Fund, and its actions and results. Financial resources allocated to the Fund shall also contribute to the communication of the political priorities of the Union, as far as they are related to the objectives referred to in Article 3.

2a.  Financial resources allocated to the Fund may also contribute to the organisation of dissemination activities, match-making events and awareness-raising activities, in particular aiming at opening up supply chains to foster the cross-border participation of SMEs.

TITLE V

DELEGATED ACTS, TRANSITIONAL AND FINAL PROVISIONS

Article 36

Delegated acts

1.  The power to adopt delegated acts referred to in Article 31 shall be conferred on the Commission for an indeterminate period of time from the date of entry into force of this Regulation.

2.  The delegation of power referred to in Article 31 may be revoked at any time by the European Parliament or by the Council. A decision to revoke shall put an end to the delegation of the power specified in that decision. It shall take effect the day following the publication of the decision in the Official Journal of the European Union or at a later date specified therein. It shall not affect the validity of any delegated acts already in force.

3.  Before adopting a delegated act, the Commission shall consult experts designated by each Member State in accordance with the principles laid down in the Interinstitutional Agreement on Better Law-Making of 13 April 2016.

4.  As soon as it adopts a delegated act, the Commission shall notify it simultaneously to the European Parliament and to the Council.

5.  A delegated act adopted pursuant to Article 31 shall enter into force only if no objection has been expressed either by the European Parliament or by the Council within a period of two months of notification of that act to the European Parliament and the Council or if, before the expiry of that period, the European Parliament and the Council have both informed the Commission that they will not object. That period shall be extended by two months at the initiative of the European Parliament or of the Council.

Article 37

Repeal

Regulation (EU) No 2018/1092 (European Defence Industrial Development Programme) is repealed with effect from 1 January 2021.

Article 38

Transitional provisions

1.  This Regulation shall not affect the continuation or modification of the actions concerned, until their closure, under Regulation (EU) 2018/1092 as well as the Preparatory Action for Defence Research, which shall continue to apply to the actions concerned until their closure, as well as to their results.

2.  The financial envelope of the Fund may also cover technical and administrative assistance expenses necessary to ensure the transition between the Fund and the measures adopted under its predecessors, the European Defence Industrial Development Programme and the Preparatory Action for Defence Research.

3.  If necessary, appropriations may be entered in the budget beyond 2027 to cover the expenses provided for in Article 4 paragraph 4, to enable the management of actions not completed by 31 December 2027.

Article 39

Entry into force

This Regulation shall enter into force on the third day following that of its publication in the Official Journal of the European Union. It shall be applicable as from 1st January 2021.

This Regulation shall be binding in its entirety and directly applicable in all Member States.

Done at …,

For the European Parliament For the Council

The President The President

ANNEX

INDICATORS TO REPORT ON PROGRESS OF THE FUND TOWARDS THE ACHIEVEMENT OF ITS SPECIFIC OBJECTIVES

Specific objective set out in Article 3(2)(a):

Indicator 1 Participants

Measured by: Number of legal entities involved (sub-divided by size, type and nationality)

Indicator 2 Collaborative research

Measured by:

2.1  Number and value of funded projects

2.2  Cross-border collaboration: share of contracts awarded to SMEs and mid-caps, with value of contracts to cross-border collaboration

2.3  Share of recipients that did not carry out research activities with defence applications before the entry into force of the Fund

Indicator 3 Innovation products

Measured by:

3.1   Number of new patents deriving from projects financially supported by the Fund

3.2  Aggregated distribution of patents amongst mid-caps, SMEs and legal entities that are neither mid-caps nor SMEs

3.3  Aggregated distribution of patents per Member States

Specific objective set out in Article 3(2)(b):

Indicator 4 Collaborative capability development

Measured by: Number and value of funded actions address the capability shortfalls identified in the Capability Development Plan

Indicator 4 Continuous support over the full R&D cycle

Measured by: The presence in the background of IPRs or results generated in previously supported actions

Indicator 5 Job creation/support:

Measured by: Number of supported defence R&D employees per Member State

(1) OJ C 110, 22.3.2019, p. 75.
(2) This position replaces the amendments adopted on 12 December 2018 (Texts adopted, P8_TA(2018)0516).
(3) Position of the European Parliament of 18 April 2019. The text highlighted in grey has not been agreed in the framework of interinstitutional negotiations.
(4) Directive 2009/43/EC of the European Parliament and of the Council, simplifying terms and conditions of transfers of defence-related products within the Community, OJ L 146, 10.6.2009, p. 1; Directive 2009/81/EC of the European Parliament and of the Council on the coordination of procedures for the award of certain works contracts, supply contracts and service contracts by contracting authorities or entities in the fields of defence and security (OJ L 216, 20.8.2009, p. 76).
(5) Council Decision 2013/755/EU of 25 November 2013 on the association of the overseas countries and territories with the European Union (Overseas Association Decision) (OJ L 344, 19.12.2013, p. 1).
(6) Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council of 18 July 2018 on the financial rules applicable to the general budget of the Union, amending Regulations (EU) No 1296/2013, (EU) No 1301/2013, (EU) No 1303/2013, (EU) No 1304/2013, (EU) No 1309/2013, (EU) No 1316/2013, (EU) No 223/2014, (EU) No 283/2014, and Decision No 541/2014/EU and repealing Regulation (EU, Euratom) No 966/2012.
(7) Regulation (EU) 2018/1092 of the European Parliament and of the Council of 18 July 2018 establishing the European Defence Industrial Development Programme aiming at supporting the competitiveness and innovation capacity of the Union's defence industry (OJ L 200, 7.8.2018, p. 30).
(8) Regulation (EU) No 182/2011 of the European Parliament and of the Council of 16 February 2011 laying down the rules and general principles concerning mechanisms for control by Member States of the Commission’s exercise of implementing powers (OJ L 55, 28.2.2011, p. 13).
(9) Reference to be updated: OJ C 373, 20.12.2013, p. 1. The agreement is available at: http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=uriserv:OJ.C_.2013.373.01.0001.01.ENG&toc=OJ:C:2013:373:TOC
(10) Regulation (EU, Euratom) No 883/2013 of the European Parliament and of the Council of 11 September 2013 concerning investigations conducted by the European Anti-Fraud Office (OLAF) and repealing Regulation (EC) No 1073/1999 of the European Parliament and of the Council and Council Regulation (Euratom) No 1074/1999 (OJ L 248, 18.9.2013, p. 1.
(11) Council Regulation (EC, Euratom) No 2988/95 of 18 December 1995 on the protection of the European Communities financial interests (OJ L 312, 23.12.1995, p.1):
(12) Council Regulation (Euratom, EC) No 2185/96 of 11 November 1996 concerning on-the-spot checks and inspections carried out by the Commission in order to protect the European Communities' financial interests against fraud and other irregularities (OJ L 292, 15.11.1996, p. 2).
(13) Council Regulation (EU) 2017/1939 of 12 October 2017 implementing enhanced cooperation on the establishment of the European Public Prosecutor’s Office (‘the EPPO’) (OJ L 283, 31.10.2017, p. 1).
(14) Directive (EU) 2017/1371 of the European Parliament and of the Council of 5 July 2017 on the fight against fraud to the Union's financial interests by means of criminal law (OJ L 198, 28.7.2017, p. 29).
(15) Directive 2009/43/EC of the European Parliament and the Council of 6 May 2009 simplifying terms and conditions of transfers of defence-related products within the Community (OJ L 146, 10.6.2009, p. 1).
(16)
(17) Directive 2014/24/EU of the European Parliament and of the Council of 26 February 2014 on public procurement and repealing Directive 2004/18/EC (OJ L 94, 28.03.2014, p. 65).
(18) Directive 2014/25/EU of the European Parliament and of the Council of 26 February 2014 on procurement by entities operating in the water, energy, transport and postal services sectors and repealing Directive 2004/17/EC (OJ L 94, 28.03.2014, p. 243).
(19) Directive 2009/81/EC of the European Parliament and of the Council of 13 July 2009 on the coordination of procedures for the award of certain works contracts, supply contracts and service contracts by contracting authorities or entities in the fields of defence and security, and amending Directives 2004/17/EC and 2004/18/EC (OJ L 216, 20.08.2009, p. 76).
(20) OJ L 274, 15.10.2013, p. 1–50.


Exposures in the form of covered bonds ***I
PDF 202kWORD 56k
Resolution
Consolidated text
European Parliament legislative resolution of 18 April 2019 on the proposal for a regulation of the European Parliament and of the Council on amending Regulation (EU) No 575/2013 as regards exposures in the form of covered bonds (COM(2018)0093 – C8-0112/2018 – 2018/0042(COD))
P8_TA-PROV(2019)0431A8-0384/2018

(Ordinary legislative procedure: first reading)

The European Parliament,

–  having regard to the Commission proposal to Parliament and the Council (COM(2018)0093),

–  having regard to Article 294(2) and Article 114 of the Treaty on the Functioning of the European Union, pursuant to which the Commission submitted the proposal to Parliament (C8‑0112/2018),

–  having regard to Article 294(3) of the Treaty on the Functioning of the European Union,

–  having regard to the opinion of the European Central Bank of 22 August 2018(1),

–  having regard to the opinion of the European Economic and Social Committee of 11 July 2018(2),

–  having regard to the provisional agreement approved by the committee responsible under Rule 69f(4) of its Rules of Procedure and the undertaking given by the Council representative by letter of 20 March 2019 to approve Parliament’s position, in accordance with Article 294(4) of the Treaty on the Functioning of the European Union,

–  having regard to Rule 59 of its Rules of Procedure,

–  having regard to the report of the Committee on Economic and Monetary Affairs (A8-0384/2018),

1.  Adopts its position at first reading hereinafter set out;

2.  Calls on the Commission to refer the matter to Parliament again if it replaces, substantially amends or intends to substantially amend its proposal;

3.  Instructs its President to forward its position to the Council, the Commission and the national parliaments.

Position of the European Parliament adopted at first reading on 18 April 2019 with a view to the adoption of Regulation (EU) 2019/… of the European Parliament and of the Council on amending Regulation (EU) No 575/2013 as regards exposures in the form of covered bonds(3)

P8_TC1-COD(2018)0042


(Text with EEA relevance)

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the Functioning of the European Union, and in particular Article 114 thereof,

Having regard to the proposal from the European Commission,

After transmission of the draft legislative act to the national parliaments,

Having regard to the opinion of the European Central Bank(4),

Having regard to the opinion of the European Economic and Social Committee(5),

▌,

Acting in accordance with the ordinary legislative procedure(6),

Whereas:

(1)  Article 129 of Regulation (EU) No 575/2013 of the European Parliament and of the Council(7) grants, under certain conditions, preferential treatment to covered bonds. Directive (EU) 2019/... of the European Parliament and of the Council(8)(9)specifies the core elements of covered bonds and provides for a common definition of covered bonds.

(2)  On 20 December 2013 the Commission requested to the European Banking Authority (EBA) to provide an opinion regarding the appropriateness of the risk weights set out in Article 129 of Regulation (EU) No 575/2013. According to EBA's opinion,(10) the preferential risk weight treatment laid down in Article 129 of that Regulation is, in principle, an appropriate prudential treatment. However, EBA recommended that further consideration be given to the opportunity of complementing the eligibility requirements as set out by Article 129 of Regulation (EU) No 575/2013 to cover, at a minimum, the areas of liquidity risk mitigation, over-collateralisation, the role of the competent authority, and the further elaboration of existing requirements on disclosure to investors(11).

(3)  In the light of EBA's opinion, it is appropriate to amend Regulation (EU) No 575/2013 by adding additional requirements for covered bonds, thereby strengthening the quality of covered bonds eligible for favourable capital treatment as provided for in Article 129 of that Regulation.

(4)  Pursuant to the third subparagraph of Article 129(1) of Regulation (EU) No 575/2013, competent authorities may partially waive the application of the requirement for exposures to qualify for credit quality step 1, as laid down in point (c) of the first subparagraph of Article 129(1), and allow an exposure which qualifies for credit quality step 2 up to a maximum of 10% of the total exposure of the nominal amount of outstanding covered bonds of the issuing institution. Such a partial waiver however applies only after prior consultation with EBA and only provided that significant potential concentration problems in the Member States concerned can be documented as a result of the application of the credit quality step 1 requirement. As the requirements for exposures to qualify for credit quality step 1 as made available by External Credit Assessment Institutions have become increasingly difficult to comply with in most Member States both within and outside the euro zone, the application of that waiver was considered necessary by those Member States which host the largest covered bonds markets. To simplify the use of exposures to credit institutions as collateral for covered bonds and in order to address that difficulty, it is necessary to amend ▌Regulation (EU) No 575/2013. Instead of a possibility for the competent authorities to waive the requirements, it is appropriate to establish a rule allowing exposures to credit institutions which qualify for credit quality step 2 up to a maximum of 10% of the total exposure of the nominal amount of outstanding covered bonds of the issuing institution without the need to consult EBA. It is necessary to allow for the use of credit quality step 3 for short-term deposits, and for derivatives in specific Member States in cases where complying with the requirement for credit quality step 1 or 2 would be too difficult. Competent authorities designated pursuant to Article 18(2) of Directive (EU) 2019/…(12) should be able, after having consulted EBA, to allow the use of credit quality step 3 for derivative contracts in order to address potential concentration problems.

(5)  In accordance with points (d)(ii) and (f)(ii) of the first subparagraph of Article 129(1) of Regulation (EU) No 575/2013, loans secured by senior units issued by French Fonds Communs de Titrisation or by equivalent securitisation entities securitising residential or commercial property exposures are eligible assets which can be used as collateral for covered bonds up to a maximum of 10 % of the nominal amount of the outstanding issue of covered bonds (the '10 % threshold'). However, Article 496 of that Regulation allows competent authorities to waive the 10% threshold. Furthermore, Article 503(4) of the same Regulation requires the Commission to review the appropriateness of the derogation that allows competent authorities to waive the 10 % threshold. On 22 December 2013, the Commission requested EBA to provide an opinion in that regard. In its opinion dated 1 July 2014, EBA stated that the use of senior units issued by French Fonds Communs de Titrisation or by equivalent securitisation entities securitising residential or commercial property exposures as collateral would cause prudential concerns due to the double layer structure of a covered bond programme backed by securitisation units and thereby would lead to insufficient transparency regarding the credit quality of the cover pool. Consequently, EBA recommended that the derogation from the 10 % threshold for senior securitisation units currently laid down in Article 496 of Regulation (EU) No 575/2013 be removed after 31 December 2017(13).

(6)  Only a limited number of national covered bond frameworks allow the inclusion of residential or commercial mortgage-backed securities. The use of such structures is decreasing and is considered to add unnecessary complexity to the covered bond programmes. It is thus appropriate to eliminate the use of such structures as eligible assets altogether. Therefore points (d)(ii) and (f)(ii) of the first subparagraph of Article 129(1) of Regulation (EU) No 575/2013, as well as Article 496 of that Regulation should be deleted.

(7)  Intragroup pooled covered bond structures which comply with Regulation (EU) No 575/2013, have also been used as eligible collateral in accordance with points (d)(ii) and (f)(ii) of the first subparagraph of Article 129(1) of that Regulation. Intragroup pooled covered bond structures do not pose additional risks from a prudential perspective because they are not raising the same complexity issues as the use of loans secured by senior units issued by French Fonds Communs de Titrisation or equivalent securitisation entities securitising residential or commercial property exposures. According to EBA, collateralisation of covered bonds by pooled covered bond structures should be allowed without limits related to the amount of outstanding covered bonds of the issuing credit institution(14). Accordingly, point (c) of the first subparagraph of Article 129(1) should be amended to remove the requirement to apply the limit of 15 % or 10 % in relation to exposures to credit institutions in intragroup pooled covered bond structures. Those intragroup pooled covered bond structures are regulated by Article 8 of Directive (EU) 2019/….(15).

(8)  Article 129(3) of Regulation (EU) No 575/2013 requires that the valuation principles for immovable property collateralising covered bonds, set out in Article 229(1) of that Regulation, be applied to covered bonds in order for those bonds to meet the requirements for preferential treatment. The requirements for the eligibility of assets serving as collateral for covered bonds relate to the general quality features ensuring the robustness of the cover pool and should therefore be subject to Directive (EU) 20../…(16). Accordingly, the provisions on valuation methodology should also be subject to that Directive. The regulatory technical standards mandated by Article 124(4)(a) of Regulation (EU) No 575/2013 should therefore not apply in respect of the eligibility criteria for covered bonds as set out in Article 129 of that Regulation. It is therefore necessary to amend Article 129(3) of that Regulation to that effect.

(9)  Limits for Loan-To-Value ('LTV') are a necessary part of ensuring the credit quality of the covered bonds. Article 129(1) of Regulation (EU) No 575/2013 establishes ▌LTV limits for mortgages and maritime liens on ships but does not specify how those limits are to be applied which may lead to uncertainty. ▌ LTV limits should be applied as soft coverage limits, meaning that while there are no limits to the size of an underlying loan, such a loan can only act as collateral within the LTV limits imposed on the assets. ▌LTV limits determine the percentage portion of the loan that contributes to the coverage requirement for liabilities. It is therefore appropriate to specify that ▌ LTV limits determine the portion of the loan contributing to the coverage of the covered bond.

(10)  To ensure greater clarity, it should also be specified that the LTV limits are applicable throughout the entire maturity of the loan. The actual LTV should not change but remain at the limit of 80% of the value of the property for residential loans, and at the limit of 60% or 70% of the value of the property for commercial loans and ships. Commercial immovable property should be understood in line with the general understanding of this type of property being ‘non-residential’ immovable property, also when held by non-profit organisations.

(11)  In order to further enhance the quality of the covered bonds that receive the preferential capital treatment as provided for in Article 129 of Regulation (EU) No 575/2013, that preferential treatment should be subject to a minimum level of overcollateralisation, meaning a level of collateral exceeding the coverage requirements as referred to in Article 15 of Directive (EU) 2019/…(17). Such a requirement would mitigate the most relevant risks arising in case of the issuer’s insolvency or resolution. Where Member States decide to apply a higher minimum level of overcollateralisation to covered bonds issued by credit institutions located in their territory, that should not prevent credit institutions from investing in other covered bonds with a lower minimum level of overcollateralisation that comply with this Regulation and from benefitting from its provisions.

(12)  One of the requirements laid down in Article 129(7) of Regulation (EU) No 575/2013 is that the credit institution investing in covered bonds receives certain information on the covered bonds on at least a semi-annual basis. Transparency requirements are an indispensable part of covered bonds ensuring a uniform disclosure level and allowing investors to perform the necessary risk assessment, enhancing comparability, transparency and market stability. Therefore, it is appropriate to ensure that transparency requirements apply to all covered bonds which can be achieved by laying down those requirements in Directive (EU) 2019/…(18) as common structural feature of covered bonds. Accordingly, Article 129(7) of Regulation (EU) No 575/2013 should be deleted.

(13)  Covered bonds are long term funding instruments and therefore issued with a scheduled maturity of several years. It is therefore necessary to ensure that covered bonds issued before 31 December 2007 or before ... [OP: Please insert the date of application of this Regulation] are not disrupted. In order to achieve that objective, covered bonds issued before 31 December 2007 should remain exempted from the requirements set out in Regulation (EU) No 575/2013 with respect to eligible assets, overcollateralisation and substitution assets. In addition, other covered bonds complying with ▌ Regulation (EU) No 575/2013 and issued before ... [OP: Please insert the date of application of this Regulation] should be exempted from the requirements on overcollateralisation and substitution assets and should continue to be eligible for the preferential treatment as set out in that Regulation until their maturity.

(14)  This Regulation should be applied in conjunction with Directive (EU) 2019/…(19). In order to ensure the consistent application of the new framework establishing the structural features of the issue of covered bonds and the amended requirements for preferential treatment, the application of this Regulation should be deferred to coincide with the date from which Member States are to apply the provisions transposing that Directive.

(15)  Regulation (EU) No 575/2013 should therefore be amended accordingly,

HAVE ADOPTED THIS REGULATION:

Article 1

Amendments to Regulation (EU) No 575/2013

Regulation (EU) No 575/2013 is amended as follows:

(1)   Article 129 is amended as follows:

(a)  paragraph 1 is amended as follows:(20)

(i)  the first subparagraph is amended as follows:

–  the introductory phrase is replaced by the following:"

"To be eligible for the preferential treatment set out in paragraphs 4 and 5, covered bonds, as referred to in Article 2 of Directive (EU) 2019/xxxx of the European Parliament and of the Council,(21)* shall meet the requirements set out in paragraphs 3, 3a and 3b of this Article and shall be collateralised by any of the following eligible assets:

______________________________

* Directive (EU) 2019/... of the European Parliament and of the Council on the issue of covered bonds and covered bond public supervision and amending Directive 2009/65/EU and Directive 2014/59/EU (OJ C […], […], p. […])].";

"

–  point (c) is replaced by the following:"

"(c) exposures to credit institutions that qualify for ▌ credit quality step 1,▌ credit quality step 2 or exposures in the form of short-term deposits with a maturity not exceeding 100 days where used to fulfil the cover pool liquidity buffer requirement in Article 16 and derivative contracts in accordance with Article 11 of Directive (EU) 2019./…(22) to credit institutions that qualify for credit quality step 3, where exposures in the form of derivative contracts are permitted by the competent authorities, as set out in this Chapter.";

"

–  in point (d), point (ii) is deleted;

–  in point (f), point (ii) is deleted;

(ii)  the second subparagraph is replaced by the following:"

"For the purposes of paragraph 1a, exposures caused by transmission and management of payments of the obligors of, or liquidation proceeds in respect of, loans secured by pledged properties of ▌debt securities shall not be comprised in calculating the limits referred to in that paragraph.";

"

(iii)  the third subparagraph is deleted;

(b)  the following paragraphs ▌ are inserted:"

"1a. For the purposes of point (c) of the first subparagraph of paragraph 1, the following shall apply:

   (a) for exposures to credit institutions that qualify for ▌ credit quality step 1, the exposure shall not exceed 15 % of the nominal amount of outstanding covered bonds of the issuing credit institution;
   (b) for exposures to credit institutions that qualify for ▌ credit quality step 2, the exposure shall not exceed 10 % of the total exposure of the nominal amount of outstanding covered bonds of the issuing credit institution;
   (c) for exposures in the form of short-term deposits with a maturity not exceeding 100 days and derivative contracts to credit institutions that qualify for credit quality step 3, the exposures shall not exceed 8 % of the total exposure of the nominal amount of outstanding covered bonds of the issuing credit institution;

The competent authorities designated pursuant to Article 18(2) of Directive (EU) 2019/…(23) may, after having consulted EBA, allow exposures in the form of derivative contracts to credit institutions that qualify for credit quality step 3 only where significant potential concentration problems in the Member States concerned due to the application of credit quality step 1 and 2 requirements referred to in this paragraph can be documented;

   (d) the total exposure to credit institutions that qualify for ▌ credit quality step 1, 2 or 3 shall not exceed 15 % of the total exposure of the nominal amount of outstanding covered bonds of the issuing credit institution. The total exposure to credit institutions that qualify for credit quality step 2 or credit quality step 3 shall not exceed 10% of the total exposure of the nominal amount of outstanding covered bonds of the issuing credit institution.

1b.   ▌Paragraph 1a shall not apply to the use of covered bonds as eligible collateral as permitted pursuant to Article 8 of Directive (EU) 2019/...+.

1c.  For the purposes of point (d)(i) of the first subparagraph of paragraph 1, the limit of 80 % shall apply on a loan by loan basis and shall determine the portion of the loan contributing to the coverage of liabilities attached to the covered bond and be applicable throughout the entire maturity of the loan.

1d.  For the purposes of points (f)(i) and (g) of the first subparagraph of paragraph 1, the limit of 60 % or 70 % shall apply on a loan by loan basis and shall determine the portion of the loan contributing to the coverage of liabilities attached to the covered bond and be applicable throughout the entire maturity of the loan.";

"

(c)  paragraph 3 is replaced by the following:"

"3. For immovable property and ships collateralising covered bonds compliant with this Regulation, the requirements set out in Article 208 shall be met. The requirements for the monitoring of property values laid down in point (a) of paragraph 3 of Article 208 shall be met on a frequent basis and at a minimum once every year for all immovable property and ships.";

"

(d)  the following paragraphs ▌are inserted:"

"3a. In addition to being collateralised by the eligible assets listed in paragraph 1, covered bonds shall be subject to a minimum level of 5 % of overcollateralisation as defined in Article 3(12) of Directive (EU) 2019/...(24).

For the purposes of the first subparagraph, the total nominal amount of all cover assets shall be at least of the same value as the total nominal amount of outstanding covered bonds ('nominal principle') and consist of eligible assets as set out in paragraph 1.

The assets contributing to a minimum level of overcollateralisation shall not be subject to the limits on exposure size as set out in ▌ paragraph 1a and shall not count towards those limits.

Member States may apply a lower minimum level of overcollateralisation to covered bonds or may authorise their competent authorities to regulate such level, provided that the following conditions are met:

   (a) the calculation of overcollateralisation is based either on a formal approach which takes into account the underlying risk ▌of the assets or on a formal approach where the valuation of the assets is subject to mortgage lending value as defined in Article 4(1)(74);
   (b) the minimum level of overcollateralisation cannot be lower than 2 % based on the nominal principle.

The assets contributing to a minimum level of overcollateralisation shall not be subject to the limits on exposure size as set out in ▌paragraph 1a and shall not count towards those limits.

3b.  Eligible assets referred to in paragraph 1 may be included in the cover pool as substitution assets as defined in Article 3(11) of Directive (EU) 2019/...(25) for the primary assets as defined in Article 3(10) of that Directive, subject to the limits on credit quality and exposure size as set out in paragraphs 1 and 1a of this Article.";

"

(e)  paragraphs 6 and 7 are replaced by the following:"

"6. Covered bonds issued before 31 December 2007 shall not be subject to the requirements of paragraphs 1, 1a, 3, 3a and 3b. They shall be eligible for the preferential treatment under paragraphs 4 and 5 until their maturity.

7.  Covered bonds issued before ... [OP please insert the date of application of this amending Regulation] that comply with the requirements laid down in this Regulation, in the version applicable on the date of their issue, shall not be subject to the requirements laid down in paragraphs 3a and 3b. They shall be eligible for the preferential treatment under paragraphs 4 and 5 until their maturity."

"

(2)  in point (a) of Article 416(2), point (ii) is replaced by the following:"

"(ii) they are bonds as referred to in Article 2 of Directive (EU) 2019/...(26) other than those referred to in point (i) of this point;";

"

(3)  in Article 425, paragraph 1 is replaced by the following:"

"1. Institutions shall report their liquidity inflows. Capped liquidity inflows shall be the liquidity inflows limited to 75 % of liquidity outflows. Institutions may exempt liquidity inflows from deposits placed with other institutions and qualifying for the treatments set out in Article 113(6) or (7) from this limit. Institutions may exempt liquidity inflows from monies due from borrowers and bond investors related to mortgage lending funded by bonds eligible for the treatment set out in Article 129(4), (5) or (6) or by covered bonds as referred to in Article 2 of Directive (EU) 2019/...+

from this limit. Institutions may exempt inflows from promotional loans that the institutions have passed through. Subject to the prior approval of the competent authority responsible for supervision on an individual basis, the institution may fully or partially exempt inflows where the provider is a parent or a subsidiary institution of the institution or another subsidiary of the same parent institution or linked to the institution by a relationship within the meaning of Article 12(1) of Directive 83/349/EEC.";

"

(4)  in point (b) of Article 427(1), point (x) is replaced by the following:"

"(x) liabilities resulting from securities issued qualifying for the treatment set out in Article 129(4) or (5) or as referred to in Article 2 of Directive (EU) 2019/...(27);";

"

(5)  in point (h) of Article 428(1), point (iii) is replaced by the following:"

"(iii) match funded (pass-through) via bonds eligible for the treatment set out in Article 129(4) or (5) or via bonds as referred to in Article 2 of Directive (EU) 2019/...+;";

"

(6)  Article 496 is deleted;

(7)  in point 6 of Annex III, point (c) is replaced by the following:"

"(c) they are covered bonds as referred to in Article 2 of Directive (EU) 2019/...(28) other than those referred to in point (b) of this point.".

"

Article 2

Entry into force and application

This Regulation shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union.

It shall apply from ... [OP: please insert the date laid down in the second subparagraph of Article 32(1) of Directive (EU) 2019/...+]

This Regulation shall be binding in its entirety and directly applicable in all Member States.

Done at …,

For the European Parliament For the Council

The President The President

(1) OJ C 382, 23.10.2018, p. 2.
(2) OJ C 367, 10.10.2018, p. 56.
(3)* TEXT HAS NOT YET UNDERGONE LEGAL-LINGUISTIC FINALISATION.
(4)OJ C 382, 23.10.2018, p. 2.
(5)OJ C 367, 10.10.2018, p. 56.
(6) Position of the European Parliament of 18 April 2019.
(7)Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012 (OJ L 176, 27.6.2013, p. 1).
(8)+ OP: Please insert the number of the Directive (EU) 20xx/xx on the issue of covered bonds and covered bond public supervision and amending Directive 2009/65/EU and Directive 2014/59/EU and complete footnote 5.
(9) Directive (EU) 2019/... on the issue of covered bonds and covered bond public supervision and amending Directive 2009/65/EU and Directive 2014/59/EU (OJ L, ..., p. ...).
(10)Opinion of the European Banking Authority on the preferential capital treatment of covered bonds, EBA/Op/2014/04.
(11)Recommendations EU COM 1-A to 1-D set out in Opinion EBA/Op/2014/04.
(12)+ OP: Please insert the number of Directive (EU) on the issue of covered bonds and covered bond public supervision and amending Directive 2009/65/EC and Directive 2014/59/EU.
(13)Recommendation EU COM 2 set out in Opinion EBA/Op/2014/04.
(14)Ibid.
(15)+ OP: Please insert the number of Directive (EU) on the issue of covered bonds and covered bond public supervision and amending Directive 2009/65/EC and Directive 2014/59/EU.
(16)+ OP: Please insert the number of Directive (EU) on the issue of covered bonds and covered bond public supervision and amending Directive 2009/65/EC and Directive 2014/59/EU.
(17)+ OP: Please insert the number of Directive (EU) on the issue of covered bonds and covered bond public supervision and amending Directive 2009/65/EC and Directive 2014/59/EU.
(18)+ OP: Please insert the number of Directive (EU) on the issue of covered bonds and covered bond public supervision and amending Directive 2009/65/EC and Directive 2014/59/EU.
(19)+ OP: Please insert the number of Directive (EU) on the issue of covered bonds and covered bond public supervision and amending Directive 2009/65/EC and Directive 2014/59/EU.
(20)
(21)+ OJ: Please insert reference to Directive (EU) on the issue of covered bonds and covered bond public supervision and amending Directive 2009/65/EC and Directive 2014/59/EU]
(22)+ OP: Please insert the number of the Directive (EU) on the issue of covered bonds and covered bond public supervision and amending Directive 2009/65/EC and Directive 2014/59/EU
(23)+ OP: Please insert the number of the Directive (EU) on the issue of covered bonds and covered bond public supervision and amending Directive 2009/65/EC and Directive 2014/59/EU.
(24)+ OP: Please insert the number of the Directive (EU) on the issue of covered bonds and covered bond public supervision and amending Directive 2009/65/EC and Directive 2014/59/EU.
(25)+ OP: Please insert the number of the Directive (EU) on the issue of covered bonds and covered bond public supervision and amending Directive 2009/65/EC and Directive 2014/59/EU.
(26)+ OP: Please insert the number of the Directive (EU) on the issue of covered bonds and covered bond public supervision and amending Directive 2009/65/EU and Directive 2014/59/EU.
(27)+OP: Please insert the number of the Directive (EU) on the issue of covered bonds and covered bond public supervision and amending Directive 2009/65/EU and Directive 2014/59/EU.
(28)+OP: Please insert the number of the Directive (EU) on the issue of covered bonds and covered bond public supervision and amending Directive 2009/65/EU and Directive 2014/59/EU.


Covered bonds and covered bond public supervision ***I
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Resolution
Consolidated text
European Parliament legislative resolution of 18 April 2019 on the proposal for a directive of the European Parliament and of the Council on the issue of covered bonds and covered bond public supervision and amending Directive 2009/65/EC and Directive 2014/59/EU (COM(2018)0094 – C8-0113/2018 – 2018/0043(COD))
P8_TA-PROV(2019)0432A8-0390/2018

(Ordinary legislative procedure: first reading)

The European Parliament,

–  having regard to the Commission proposal to Parliament and the Council (COM(2018)0094),

–  having regard to Article 294(2) and Articles 53 and 114 of the Treaty on the Functioning of the European Union, pursuant to which the Commission submitted the proposal to Parliament (C8-0113/2018),

–  having regard to the opinion of the Committee on Legal Affairs on the proposed legal basis,

–  having regard to Article 294(3) and Article 114 of the Treaty on the Functioning of the European Union,

–  having regard to the opinion of the European Economic and Social Committee of 11 July 2018(1),

–  having regard to the provisional agreement approved by the committee responsible under Rule 69f(4) of its Rules of Procedure and the undertaking given by the Council representative by letter of 20 March 2019 to approve Parliament’s position, in accordance with Article 294(4) of the Treaty on the Functioning of the European Union,

–  having regard to Rules 59 and 39 of its Rules of Procedure,

–  having regard to the report of the Committee on Economic and Monetary Affairs (A8-0390/2018),

1.  Adopts its position at first reading hereinafter set out;

2.  Takes note of the statement by the Commission annexed to this resolution;

3.  Calls on the Commission to refer the matter to Parliament again if it replaces, substantially amends or intends to substantially amend its proposal;

4.  Instructs its President to forward its position to the Council, the Commission and the national parliaments.

Position of the European Parliament adopted at first reading on 18 April 2019 with a view to the adoption of Directive (EU) 2019/… of the European Parliament and of the Council on the issue of covered bonds and covered bond public supervision and amending Directive 2009/65/EC and Directive 2014/59/EU(2)

P8_TC1-COD(2018)0043


(Text with EEA relevance)

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the Functioning of the European Union, and in particular Article ▌ 114 thereof,

Having regard to the proposal from the European Commission,

After transmission of the draft legislative act to the national parliaments,

Having regard to the opinion of the European Economic and Social Committee(3),

Acting in accordance with the ordinary legislative procedure(4),

Whereas:

(1)  Article 52(4) of Directive 2009/65/EC of the European Parliament and of the Council(5) provides for very general requirements relating to the structural elements of covered bonds. Those requirements are limited to the need for covered bonds to be issued by a credit institution which has its registered office in a Member State and to be subject to a special public supervision as well as a dual recourse mechanism. National covered bond frameworks address these issues while regulating them in much greater detail. Those national frameworks also contain other structural provisions, in particular rules regarding the composition of the cover pool, the eligibility criteria of assets, the possibility to pool assets, the transparency and reporting obligations, and the rules on liquidity risk mitigation. Member State approaches to regulation also differ on substance. In several Member States, there is no dedicated national framework for covered bonds. As a consequence, the key structural elements that covered bonds issued in the Union are to comply with are not yet set out in Union law.

(2)  Article 129 of Regulation (EU) No 575/2013 of the European Parliament and of the Council(6) adds further conditions to those referred to in Article 52(4) of Directive 2009/65/EC for obtaining preferential prudential treatment as regards capital requirements which allow credit institutions investing in covered bonds to hold less capital than when investing in other assets. Whereas those additional requirements increase the level of harmonisation of covered bonds within the Union, they serve the specific purpose of defining the conditions for receiving such preferential treatment for covered bond investors, and are not applicable outside the framework of Regulation (EU) No 575/2013.

(3)  Other acts of Union law, such as Commission Delegated Regulation (EU) 2015/61(7), Commission Delegated Regulation (EU) 2015/35(8) and Directive 2014/59/EU of the European Parliament and of the Council(9), also refer to the definition set out in Directive 2009/65/EC as a reference for identifying the covered bonds that may benefit from the preferential treatment which those acts grant for covered bond investors. However, the wording of those acts differs according to their purpose and subject-matter, so there is no consistent use of the term 'covered bonds'.

(4)  The treatment of covered bonds can be considered ▌ overall harmonised regarding the conditions for investing in covered bonds. There is however a lack of harmonisation across the Union regarding the conditions for the issue of covered bonds and this has several consequences. Firstly, preferential treatment is granted equally to instruments which can differ in nature as well as in their level of risk and investor protection. Secondly, differences between national frameworks or the absence of such a framework, together with the lack of a commonly agreed definition of covered bonds, could create obstacles to the development of a truly integrated single market for covered bonds ▌. Thirdly, the differences in ▌ safeguards provided by national rules can create risks to ▌ financial stability where covered bonds with different levels of investor protection can be purchased under that designation across the Union and might benefit from preferential prudential treatment under Regulation (EU) No 575/2013 and other Union legislation.

(5)  Harmonising certain aspects of national regimes alongside identified best practices should therefore ensure a smooth and continuous development of well-functioning covered bond markets in the Union and ▌ limit potential risks and vulnerabilities to financial stability. Such principle-based harmonisation should establish a common baseline for the issue of all covered bonds in the Union. Harmonisation requires all Member States to establish covered bond frameworks, which should also help facilitate the development of covered bonds markets in those Member States where currently there is none. Such a market would provide a stable funding source for credit institutions that would on that basis be better placed to provide affordable mortgages for consumers and businesses and would make safer investments available to investors.

(6)  The European Systemic Risk Board ('ESRB') issued a recommendation(10) inviting national competent authorities and the European Banking Authority ('EBA') to identify best practices regarding covered bonds and to encourage harmonisation of national frameworks. It also recommends that EBA coordinates actions taken by national supervisory authorities, particularly in relation to the quality and segregation of cover pools, bankruptcy remoteness of covered bonds, the asset and liability risks affecting cover pools and disclosure of the composition of cover pools. The recommendation further calls on EBA to monitor the functioning of the market for covered bonds by reference to the best practices as identified by EBA for a period of two years, in order to assess the need for legislative action and to report such need to the ESRB and to the Commission.

(7)  The Commission requested advice from EBA in accordance with Article 503(1) of Regulation (EU) No 575/2013 in December 2013.

(8)  In response to both the ESRB recommendation of 20 December 2012 and the Commission's request for advice of December 2013, EBA issued a report on 1 July 2014(11). That report recommends greater convergence of national legal, regulatory and supervisory covered bond frameworks, so as to further support ▌ a single preferential risk weight treatment of covered bonds in the Union.

(9)  As envisaged by the ESRB, EBA further monitored the functioning of the market for covered bonds by reference to the best practices set out in that recommendation for two years. On that basis, EBA delivered a second report on covered bonds to the ESRB, to the Council and to the Commission on 20 December 2016(12). That report concluded that further harmonisation is necessary to ensure more consistent definitions and regulatory treatment of covered bonds in the Union. The report further concluded that harmonisation should build on the existing well-functioning markets in some Member States.

(10)  Covered bonds are traditionally issued by credit institutions. The inherent nature of the instrument is to provide funding for loans, and one of the core activities of credit institutions is to grant loans on a large scale. Accordingly, Union legislation granting preferential treatment to covered bonds requires them to be issued by credit institutions.

(11)  Reserving the issue of covered bonds to credit institutions ensures that the issuer has the necessary knowledge to manage the credit risk relating to the loans in the cover pool. It further ensures that the issuer is subject to capital requirements underpinning the investor protection of the dual recourse mechanism, which grants the investor and the counterparty of a derivative contract a claim on both the covered bond issuer and the cover assets. Restricting the issue of covered bonds to credit institutions therefore ensures that covered bonds remain a safe and efficient funding tool, thereby contributing to investor protection and financial stability, which are important public policy objectives in the general interest. It would also be in line with the approach of well-functioning national markets in which only credit institutions are permitted to issue covered bonds.

(12)  It is therefore appropriate that only credit institutions as defined in Article 4(1)(1) of Regulation (EU) No 575/2013 should be permitted to issue covered bonds under Union law. Specialised mortgage credit institutions are characterised by not taking deposits but rather other repayable funds from the public, and as such they comply with that definition. Without prejudice to ancillary activities permitted under applicable national law, specialised mortgage credit institutions are institutions that only carry out mortgage and public sector lending, including funding loans purchased from other credit institutions. The main purpose of this Directive is to regulate the conditions under which those credit institutions can issue covered bonds as a financing tool by laying down the product requirements and establishing specific product supervision to which they are subject, in order to ensure a high level of investor protection.

(13)  The existence of a dual recourse mechanism is an essential concept and element of many existing national covered bonds frameworks and is also a core element of covered bonds as referred to in Article 52(4) of Directive 2009/65/EC. It is therefore necessary to specify that concept so as to ensure that investors and counterparties of derivative contracts across the Union have a claim on both the covered bond issuer and the cover assets under harmonised conditions.

(14)  Bankruptcy remoteness should also be an essential feature of covered bonds to ensure that ▌covered bonds investors are repaid on the maturity of the bond. Automatic acceleration of repayment upon default of the issuer may disturb the ranking of those who have invested in covered bonds. It is therefore ▌important to ensure that covered bonds investors be repaid in accordance with the contractual schedule, even in case of default. Bankruptcy remoteness is accordingly directly linked to the dual recourse mechanism and should therefore also be a core feature of the covered bond framework.

(15)  Another core feature of existing national covered bond frameworks is the requirement that cover assets should be of very high quality in order to ensure the robustness of the cover pool. Those cover assets are characterised by specific features relating to the claims for payment and the collateral assets securing those cover assets. It is therefore appropriate to set out the general quality features that assets should respect in order to be eligible cover assets. Assets listed in points (a) to (g) of Article 129(1) of Regulation (EU) No 575/2013 should be considered eligible cover assets within a covered bond framework. This includes the case where such cover assets no longer comply with any of the requirements set out in those points, but are considered eligible cover assets under point (b) of paragraph 1, as long as they fulfil the requirements of this Directive. Loans to or guaranteed by public undertakings as defined in Article 2(b) of Commission Directive 2006/111/EC might be considered eligible cover assets provided that the public undertakings provide essential public services for the maintenance of critical societal activities. In addition, public undertakings should provide their services under a concession or authorisation from a public authority, should be subject to public supervision and should have sufficient revenue generating powers to ensure their solvability. Where Member States decide to allow assets in the form of loans to or guaranteed by public undertakings in their national framework, they should duly consider the possible impact on competition in relation to those assets. Independently of their ownership, credit institutions or insurance companies should not be considered public undertakings. Therefore, exposures to credit institutions should be considered eligible cover assets under Article 6(1)(a) or (b) of this Directive, depending on whether they comply or not with the requirements of Article 129 of the Regulation (EU) No 575/2013. Exposures to insurance companies should also be considered eligible cover assets under Article 6(1)(b) of this Directive. Other cover assets of a similar high quality might also be considered eligible under the Directive, provided that such cover assets comply with the requirements of this Directive, including those in relation to the collateral assets securing the claim for payment. For physical collateral assets, ownership should be recorded in a public register to ensure enforceability. Where no public register exists, it should be possible for Member States to provide for an alternative form of certification of ownership and claims that is comparable to that provided by public registration of the encumbered physical asset. Where Member States make use of such alternative form of certification, they should also provide for a procedure for introducing changes to the recording of ownership and claims. Member States should ▌be free to exclude certain assets in their national frameworks. To enable covered bond investors to better assess the risk of a covered bond programme, Member States should also provide for rules on risk diversification in relation to granularity and material concentration on the number of loans or exposures in the cover pool and the number of counterparties. Member States should be able to decide on the appropriate level of granularity and material concentration requested under their national law.

(16)  Covered bonds have specific structural features that aim to protect investors at all times. Those features include the requirement that investors in covered bonds have a claim not only on the issuer but also on assets in a dedicated cover pool. ▌Those structural product-related requirements differ from the prudential requirements applicable to a credit institution issuing covered bonds. The former should not focus on ensuring the prudential health of the issuing institution, but rather aim at protecting investors by imposing specific requirements on the covered bond itself. In addition to the specific requirement to use high quality cover assets, it is also appropriate to regulate the general requirements of the features of the cover pool to further strengthen investor protection. Those requirements should include specific rules aimed at protecting the cover pool, such as rules on the segregation of the cover assets. Segregation can be achieved in different ways, such as on balance sheet, by means of a Special Purpose Vehicle (SPV) or other means. Nonetheless, the purpose of the segregation of assets is to put them beyond the legal reach of creditors other than covered bond holders. The location of the cover assets should also be regulated to ensure the fulfilment of the investor's rights ▌. It is also important for Member States to lay down rules on the composition of the cover pool ▌. Furthermore, coverage requirements should be defined in this Directive, without prejudice to the right of Member States to allow different means of mitigating, for instance, currency and interest rate risks. The calculation of the coverage and the conditions under which derivative contracts can be included in the cover pool should also be defined to ensure that cover pools are subject to common high quality standards across the Union. The calculation of coverage should follow the nominal principle for the principal. Member States should be able to use another method of calculation than the nominal principle provided that it is more prudent, that is, it does not result in a higher coverage ratio, where the cover assets as calculated are the numerator and the covered bond liabilities as calculated are the denominator. Member States should be able to require a level of overcollateralisation to covered bonds issued by credit institutions located in the Member State concerned that is higher than the coverage requirement in Article 15.

(17)  A number of Member States already require that a cover pool monitor performs specific tasks regarding the quality of eligible assets and ensures compliance with national coverage requirements. It is therefore important, in order to harmonise the treatment of covered bonds across the Union, that the tasks and responsibilities of the cover pool monitor, where one is required by the national framework, are clearly defined. The existence of a cover pool monitor does not obviate the responsibilities of national competent authorities as regards covered bond public supervision, particularly as regards compliance with the requirements in Articles 6 to 12 and 14 to 17 of this Directive.

(17a)  Article 129 of Regulation (EU) No 575/2013 sets out a number of conditions for covered bonds collateralised by securitisation entities. One of those conditions concerns the extent to which that type of collateral asset can be used and limits the use of such structures to 10% or 15% of the amount of the outstanding covered bonds. That condition can be waived by competent authorities in accordance with Regulation (EU) No 575/2013. The Commission's review of the appropriateness of this waiver concluded that the possibility to use securitisation instruments or covered bonds as collateral assets for issuing covered bonds should only be allowed for other covered bonds ('intragroup pooled covered bond structures'), and should be allowed without limits by reference to the amount of outstanding covered bonds. To guarantee an optimum level of transparency, cover pools for externally issued covered bonds should not contain internally issued covered bonds from different credit institutions within the group. Also, as the use of intragroup pooled covered bond structures provides an exemption from the limits on credit institution exposures pursuant to Article 129 of Regulation (EU) No 575/2013, it should be required that the externally and internally issued covered bonds qualify for credit quality step 1 at the moment of issue or, in the event of a subsequent change in credit quality step and subject to the approval of the competent authorities, credit quality step 2. Where the externally or internally issued covered bonds cease to meet that requirement, the internally issued covered bonds will no longer qualify as eligible assets under Article 129 of Regulation (EU) No 575/2013 and, as a consequence, the externally issued covered bonds from the relevant cover pool will not benefit from the exemption in Article 129(1aa) of that Regulation. Where those internally issued covered bonds no longer comply with the relevant credit quality step requirement, they should however be eligible cover assets for the purpose of this Directive provided that they comply with all requirements in this Directive, and the externally issued covered bonds collateralised by those internally issued covered bonds or other assets compliant with this Directive should therefore also be able to use the label European Covered Bonds. Allowing the use of such structures is envisaged as a Member State option. It follows that, for this option to be effectively available to credit institutions belonging to a group located in different Member States, all relevant Member States should have exercised this option and transposed that provision into their legislation.

(18)  Small credit institutions face difficulties when issuing covered bonds as the establishment of covered bond programmes often entails high upfront costs. Liquidity is also particularly important in covered bond markets and is largely determined by the volume of outstanding bonds. It is therefore appropriate to allow for joint funding by two or more credit institutions in order to enable the issue of covered bonds by smaller credit institutions. This would provide for the pooling of cover assets by several credit institutions as collateral assets for covered bonds issued by a single credit institution and would facilitate the issue of covered bonds in those Member States where there currently is no well-developed market. The requirements for the use of joint funding agreements should ensure that cover assets that are sold or, where a Member State has allowed for that option, transferred by way of financial collateral arrangement pursuant to Directive 2002/47/EC to the issuing credit institutions meet the ▌eligibility ▌and segregation requirements for cover assets under Union law.

(20)  Transparency of the cover pool securing the covered bond is an essential part of this type of financial instrument as it enhances comparability and allows investors to perform the necessary risk evaluation. Directive 2003/71/EC(13) of the European Parliament and of the Council includes rules on the drawing up, the approval and the distribution of the prospectus to be published when securities are offered to the public or admitted for trading on a regulated market situated or operating within a Member State. Several initiatives regarding the information to be disclosed to covered bond investors supplementary to Directive 2003/71/EC have been developed over time by national legislators and market participants. It is however necessary to specify in Union law the minimum common level of information investors should have access to prior to or at the time of purchase of covered bonds. Member States should be allowed to supplement these minimum requirements with additional provisions.

(21)  A core element of ensuring the protection of covered bond investors is mitigating the instrument’s liquidity risk. That is crucial for ensuring the timely repayment of liabilities attached to the covered bond. Therefore, it is appropriate to introduce a cover pool liquidity buffer to address risks of liquidity shortage, such as mismatches in maturities and interest rates, payment interruptions, commingling risks, derivatives and other operational liabilities falling due within the covered bond programme. The credit institution may experience situations where it becomes difficult to comply with the cover pool liquidity buffer requirement, for example in times of stress where the buffer is used to cover outflows. The competent authorities designated pursuant to Article 18(2) should monitor the compliance with the cover pool liquidity buffer, and, if needed, take measures to require the credit institution to reinstate it. The liquidity buffer for the cover pool differs from the general liquidity requirements imposed on credit institutions in accordance with other acts of Union law as the former is directly related to the cover pool and seeks to mitigate liquidity risks specific to it. To minimise regulatory burdens, Member States should be able to allow an appropriate interaction with liquidity requirements established by other acts of Union ▌ law and serving different purposes than the cover pool liquidity buffer. Member States should therefore be able to decide that, until the date on which those acts of Union law are amended, the cover pool liquidity buffer requirement is only applicable if no other liquidity requirement is imposed on the credit institution under Union ▌ law during the period covered by such other requirements. Such decision should avoid credit institutions being subject to an obligation to cover the same outflows with different liquid assets for the same period. This provision implies, however, that the possibility for Member States to decide for the cover pool liquidity buffer not to apply be reassessed in the context of future changes to the liquidity requirements for credit institutions under Union law, including the delegated regulation adopted pursuant to Article 460 of Regulation (EU) 575/2013. Liquidity risks could be addressed by other means than providing liquid assets, for example by issuing covered bonds subject to extendable maturity structures where the triggers address liquidity shortage or stress. In that case, Member States should be able to allow for the calculation of the liquidity buffer to be based on the final maturity date of the covered bond, taking into consideration possible maturity extensions, where the triggers address liquidity risks. Furthermore, Member States should be able to allow that the cover pool liquidity requirements do not apply to covered bonds that are subject to match funding requirements where incoming payments contractually fall due before outgoing payments and are placed in highly liquid assets in the meantime.

(22)  In a number of Member States, innovative structures for maturity profiles have been developed in order to address potential liquidity risks, including maturity mismatches. Those structures include the possibility to extend the scheduled maturity of the covered bond for a certain period of time or to allow the cash flows from the cover assets ▌to pass directly to the covered bond holders. In order to harmonise extendable maturity structures across the Union it is important to define the conditions under which Member States may allow these structures ▌ to ensure that they are not too complex or expose investors to increased risks. An important element thereof is to ensure that the credit institution cannot extend the maturity at its discretion. The maturity should only be allowed to be extended where objective and clearly defined trigger events established under national law have occurred or are expected to occur within the near future. Such triggers should aim to prevent default, for example by addressing liquidity shortage, market failure or market disturbance. Extensions could also facilitate the orderly wind-down of credit institutions issuing covered bonds, allowing for extensions in the case of insolvency or resolution to avoid a firesale of assets.

(23)  The existence of a special public supervision framework is an element defining covered bonds according to Article 52(4) of Directive 2009/65/EC. However, that Directive does not define the nature, content and authorities that should be responsible for performing such supervision. It is therefore essential that the constitutive elements of such covered bond public supervision are harmonised and that the tasks and responsibilities of the national competent authorities performing it are clearly set out.

(24)  As the covered bond public supervision is distinct from the supervision of credit institutions in the Union, Member States should be able to appoint different national competent authorities to perform these different supervisory roles than the one performing the general supervision of the credit institution. However in order to ensure consistency in the application of covered bond public supervision across the Union it is necessary to require that the competent authorities performing the covered bond public supervision cooperate closely with the competent authorities performing the general supervision of credit institutions.

(25)  Covered bond public supervision should entail ▌ granting ▌ credit institutions permission to issue covered bonds. As only credit institutions should be permitted to issue covered bonds, authorisation as a credit institution should be a prerequisite for that permission. Whereas in Member States participating in the Single Supervisory Mechanism, the European Central Bank is tasked with the authorisation of credit institutions in accordance with point (a) of Article 4 (1) of Council Regulation (EU) No. 1024/2013, only the authorities designated pursuant to this Directive should be competent to grant permission to issue covered bonds and exercise covered bond public supervision. In addition, this Directive should include provisions governing the conditions under which credit institutions authorised under Union law can obtain permission to pursue the activity of issuing covered bonds ▌.

(26)  The scope of permission should relate to the covered bond programme ▌. Such a programme should be subject to supervision under this Directive. A credit institution can have more than one covered bond programme. In that case, a separate permission for each programme should be required. A covered bond programme can include one or more cover pools ▌. Multiple cover pools or different issues (different International Securities Identification Numbers (ISINs)) under the same covered bond programme do not necessarily constitute separate covered bond programmes.

(26a)  Existing covered bond programmes are not required to obtain a new permission once the new rules of national law transposing this Directive become applicable. The credit institution issuing covered bonds should however comply with all requirements of this Directive. That compliance should be supervised by the competent authorities designated under this Directive as part of the covered bond public supervision. Member States could give guidance under national law on how to procedurally conduct the compliance assessment after the date from which Member States are to apply the provisions transposing this Directive. The competent authorities should be able to review a covered bond programme and assess the need for a change to the permission for that programme. Such a need to change could be due to substantial changes in the business model of the credit institution issuing covered bonds, for example following a change of the national covered bond framework or decisions made by the credit institution. Such changes could be considered substantial where they require a reassessment of the conditions under which permission to issue cover bonds was granted.

(26b)  Where a Member State provides for the appointment of a special administrator, it should be able to lay down rules on the competences and operational requirements for such a special administrator. Those rules could exclude the possibility for the special administrator to collect deposits or other repayable funds from consumers and retail investors, but allow the collection of deposits or other repayable funds only from professional investors.

(27)  In order to ensure compliance with the obligations imposed on credit institutions issuing covered bonds and in order to ensure similar treatment and compliance across the Union, Member States should be required to provide for administrative penalties and other administrative measures which are effective, proportionate and dissuasive. Member States should also be able to provide for criminal penalties. Member States that choose to provide for criminal instead of administrative penalties should notify the relevant criminal law provisions to the Commission.

(28)  Those administrative penalties and other administrative measures laid down by Member States should satisfy certain essential requirements in relation to the addressees of those penalties or measures, the criteria to be taken into account in their application, the publication obligations of competent authorities performing the covered bond public supervision, the power to impose penalties and the level of administrative pecuniary penalties that may be imposed. Before any decision imposing administrative penalties or other administrative measures is taken, the addressee should be given the opportunity to be heard. However, Member States should be able to provide for exceptions to the right to be heard in respect of other administrative measures. Any such exception should be limited to cases of imminent danger in which urgent action is needed in order to prevent significant losses to third parties such as covered bond investors or to prevent or remedy significant damage to the financial system. In such cases, the addressee should be given the opportunity to be heard after the measure has been imposed.

(29)  Member States should be required to ensure that the competent authorities performing the covered bond public supervision take into account all relevant circumstances in order to ensure a consistent application of administrative penalties or other administrative measures across Member States, when determining the type of administrative penalties or other administrative measures and the level of those penalties. Member States could include administrative measures in relation to the extension of maturity under extendable maturity structures. Where Member States provide for such measures, those measures could enable competent authorities to invalidate a maturity extension and could lay down conditions for such invalidation to address the situation where a credit institution extends the maturity in breach of the objective triggers laid down in national law, or in order to ensure financial stability and investor protection.

(30)  In order to detect potential breaches of the requirements for issuing and marketing ▌ covered bonds, competent authorities performing the covered bond public supervision should have the necessary investigatory powers and effective mechanisms to encourage the reporting of potential or actual breaches. Those mechanisms should be without prejudice to the rights of defence of any person or entity adversely affected by the exercise of those powers and mechanisms.

(31)  Competent authorities performing the covered bond public supervision should also have the power to impose administrative penalties and adopt other administrative measures in order to ensure the greatest possible scope for action following a breach and to help prevent further breaches, irrespective of whether such measures are qualified as an administrative penalty or other administrative measure under national law. Member States should be able to provide for additional penalties to, and higher levels of administrative pecuniary penalties than those provided for in this Directive.

(32)  Existing national laws on covered bonds are characterised by the fact that they are subject to detailed regulation on national level and a supervision of the covered bonds issues and programmes to ensure that the rights of ▌ investors are upheld at all times in relation to the issue of covered bonds. That supervision includes the ongoing monitoring of the features of the programme, the coverage requirements and of the quality of the cover pool. An adequate level of investor information about the regulatory framework governing the issue of covered bonds is an essential element of investor protection. It is therefore appropriate to ensure that competent authorities publish regular information concerning their national measures transposing this Directive and on the manner in which they perform their covered bond public supervision.

(33)  Covered bonds are currently marketed in the Union under national denominations and labels, some of which are well-established while others are not.▌ It seems therefore sensible to allow credit institutions which issue covered bonds in the Union to use a specific 'European Covered Bonds' label when selling covered bonds to both Union and third countries' investors under the condition that those covered bonds comply with the requirements set out in this Directive. If covered bonds also comply with the requirements set out in Article 129 of Regulation (EU) No 575/2013, credit institutions should be allowed to use the label ‘European Covered Bonds (Premium)’. That label, indicating that specific additional requirements have been met resulting in a strengthened and well-understood quality, might be attractive even in Member States with well-established national labels. The aim of the two labels ‘European Covered Bond’ and ‘European Covered Bond (Premium)’ is to make it easier for ▌ investors to assess the quality of the covered bonds and hence make them more attractive as an investment vehicle both inside and outside the Union. The use of those labels should however be facultative and Member States should be able to maintain their own national denominations and labelling framework ▌ in parallel to the 'European Covered Bonds' labels.

(34)  In order to assess the application of this Directive, the Commission should in close cooperation with EBA monitor the development of covered bonds in the Union and report to the European Parliament and the Council on the level of investor protection and the development of the covered bond markets. The report should also focus on the developments regarding the assets collateralising the issue of covered bonds ▌. The use of extendable maturity structures has been increasing. The Commission should therefore report to the European Parliament and to the Council on the functioning and the risks and benefits deriving from the issue of covered bonds with extendable maturities. A new class of financial instruments under the name of European Secured Notes (ESNs), covered by assets that are riskier than public exposures and mortgages and that are not eligible cover assets under this Directive, has been proposed by market participants and others as an additional instrument for banks to finance the real economy. The Commission consulted EBA on 3 October 2017 for an assessment of the extent to which ESNs could use the ‘best practices’ defined by EBA for traditional covered bonds, the appropriate risk treatment of ESNs and the possible effect of ESN issues on bank balance sheet encumbrance levels. In response to this, EBA issued a report on 24 July 2018. In parallel to EBA's report, the Commission published a study on 12 October 2018. The Commission study and EBA report concluded that further assessment was required on, for example, regulatory treatment. The Commission should therefore continue to assess whether a legislative framework for ESNs would be appropriate and report to the European Parliament and to the Council on its findings, together with a legislative proposal, if appropriate.

(35)  There is currently no equivalence regime for the recognition by the Union of covered bonds issued by credit institutions in third countries ▌ except in a prudential context where preferential treatment regarding liquidity is granted to some third-country bonds under certain conditions. The Commission should therefore in close cooperation with EBA assess the need and relevance for an equivalence regime to be introduced for third-country issuers of and investors in covered bonds. The Commission should, no more than two years after the date from which Member States are to apply the provisions transposing this Directive, submit a report to the European Parliament and to the Council, together with a legislative proposal, if appropriate, on this issue.

(36)  Covered bonds are characterised as having a scheduled maturity of several years. It is therefore necessary to include transitional measures to ensure that covered bonds ▌ issued before ... [OP: Please insert the date laid down in the second subparagraph of Article 32(1) of this Directive] are not affected. Covered bonds issued before that date should therefore comply with the requirements laid down in Article 52(4) of Directive 2009/65/EC on an on-going basis and should be exempted from most of the new requirements laid down in this Directive. Such covered bonds should be able to continue to be referred to as covered bonds provided that their compliance with Article 52(4) of Directive 2009/65/EC, as applicable on the date of their issue, and with the requirements of this Directive that are applicable to them, is subject to supervision by the competent authorities designated pursuant to this Directive. Such supervision should not extend to the requirements of this Directive from which such covered bonds are exempt. In some Member States, ISINs are open for a longer period allowing for covered bonds to be issued continuously under that code with the purpose of increasing the volume (issue size) of that covered bond (tap issues). The transitional measures should cover tap issues of covered bonds under ISINs opened before … [OP: please insert the date laid down in the second subparagraph of Article 32(1) of this Directive + 1 day] subject to a number of limitations.

(37)  As a consequence of laying down a uniform framework for covered bonds, the description of covered bonds in Article 52(4) of Directive 2009/65/EC should be amended. Directive 2014/59/EU defines covered bonds by referring to Article 52(4) of Directive 2009/65/EC and given that this description should be amended, Directive 2014/59/EU should be amended as well. Furthermore, to avoid affecting covered bonds issued in accordance with Article 52(4) of Directive 2009/65/EC before [OP: Please insert the date laid down in the second subparagraph of Article 32(1) of this Directive], those covered bonds should continue to be referred to or defined as covered bonds until their maturity. Directive 2009/65/EC and 2014/59/EU should therefore be amended accordingly.

(38)  In accordance with the Joint Political Declaration of 28 September 2011 of Member States and the Commission on explanatory documents(14), Member States have undertaken to accompany, in justified cases, the notification of their transposition measures with one or more documents explaining the relationship between the components of a directive and the corresponding parts of national transposition instruments. With regard to this Directive, the legislator considers the transmission of such documents to be justified.

(39)  Since the objectives of this Directive, of establishing a common framework for covered bonds to ensure that the structural characteristics of covered bonds across the Union correspond to the lower risk profile justifying Union preferential treatment, cannot be sufficiently achieved by the Member States, but can rather, by reason of the need to further develop the covered bond market and support cross-border investments in the Union, be better achieved at Union level, the Union may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on European Union. In accordance with the principle of proportionality, as set out in that Article, this Directive does not go beyond what is necessary in order to achieve those objectives.

(39a)  The European Central Bank was consulted and delivered its opinion on 22 August 2018.

(40)  The European Data Protection Supervisor was consulted in accordance with Article 28(2) of Regulation (EC) No 45/2001 of the European Parliament and of the Council(15) and delivered an opinion on …(16). Credit institutions issuing covered bonds process significant amounts of personal data. Such processing should at all times comply with Regulation (EU) 2016/679 of the European Parliament and of the Council (General Data Protection Regulation). Likewise, the processing of personal data by the European Banking Authority when, as required by the Directive, it maintains a central database of administrative sanctions and other administrative measures that are communicated to it by the national competent authorities, should be carried out in compliance with Regulation (EC) No 45/2001.

HAVE ADOPTED THIS DIRECTIVE:

TITLE I

SUBJECT MATTER, SCOPE AND DEFINITIONS

Article 1

Subject matter

This Directive lays down the following investor protection rules concerning:

(1)  requirements for issuing covered bonds;

(2)  the structural features of covered bonds;

(3)  covered bond public supervision;

(4)  publication requirements ▌in relation to covered bonds.

Article 2

Scope

This Directive applies to covered bonds issued by credit institutions established in the Union.

Article 3

Definitions

For the purposes of this Directive, the following definitions shall apply:

(1)  'covered bond' means a debt obligation issued by a credit institution in accordance with the provisions of national law transposing the mandatory requirements of this Directive and secured by cover assets to which covered bond investors have direct recourse ▌as preferred creditors;

(2)  ‘covered bond programme’ means the structural features of a covered bonds issue determined by statutory rules, contractual terms and conditions, in accordance with the permission granted to the credit institution issuing covered bonds;

(3)  'cover pool' means a clearly defined set of assets securing the payment obligations attached to the covered bonds and that are segregated from other assets held by the credit institution issuing covered bonds;

(3a)  'cover assets' means assets included in a cover pool;

(3b)  'collateral assets' means the physical assets and assets in the form of exposures securing the cover assets;

(3c)  ‘segregation’ means the actions performed by the credit institution issuing covered bonds of identifying cover assets and of putting them beyond the legal reach of creditors other than covered bond investors and counterparties of derivative contracts;

(4)  'credit institution' means a credit institution as defined in point (1) of Article 4(1) of Regulation (EU) No 575/2013;

(5)  'specialised mortgage credit institution' means a credit institution which funds loans solely or mainly through the issue of covered bonds, which is permitted by law to carry out mortgage and public sector lending only and which is not permitted to take deposits but takes other repayable funds from the public;

(6)  'automatic acceleration' means a situation in which a covered bond automatically becomes immediately due and payable upon insolvency or resolution of the issuer and in respect of which the ▌ covered bond investors have an enforceable claim for repayment at a time earlier than the original maturity date;

(7)  'market value' means, for the purposes of immovable property, market value as defined in point (76) of Article 4(1) of Regulation (EU) No 575/2013;

(8)  'mortgage lending value' means, for the purposes of immovable property, the mortgage lending value as defined in point (74) of Article 4(1) of Regulation (EU) No 575/2013;

(10)  'primary assets' means ▌ dominant cover assets that determine the nature of the cover pool;

(11)  'substitution assets' means cover assets that contribute to the coverage requirements, other than the primary assets;

(12)  'overcollateralisation' means the entirety of the statutory, contractual or voluntary level of collateral that exceeds the coverage requirement ▌ set out in Article 15;

(13)  'match funding requirements' means rules requiring that the cash flows between liabilities and assets falling due be matched by ensuring in contractual terms that payments from borrowers and counterparties of derivative contracts fall due before payments being made to covered bond investors and to the counterparties of derivative contracts, that those amounts ▌ are at least equal in value to the payments to be made to ▌ covered bond investors and to counterparties of derivative contracts, and that the amounts received from borrowers and counterparties of derivative contracts are included in the cover pool in accordance with Article 16(3) until the payments are due to the covered bond investors and counterparties of derivative contracts;

(14)  'net liquidity outflow' means all payment outflows falling due on one calendar day, including principal and interest payments and payments under derivative contracts of the covered bond programme, net of all payment inflows falling due on the same calendar day for claims related to the cover assets;

(15)  'extendable maturity structure' means a mechanism which provides for the possibility to extend the scheduled maturity of covered bonds for a pre-determined period of time and in the event that a specific trigger occurs;

(16)  'covered bond public supervision' means the supervision of covered bonds programmes ensuring compliance with and enforcement of the requirements applicable to the issue of covered bonds;

(17)  'special administrator' means the person or entity appointed to administrate a covered bond programme in the event of insolvency of a credit institution issuing covered bonds under that programme, or when such credit institution has been determined to be failing or likely to fail pursuant to Article 32(1) of Directive 2014/59/EU or, in exceptional circumstances, where the relevant competent authority determines that the proper functioning of that credit institution is seriously at risk;

(17a)  'resolution' means resolution as defined in point (1) of Article 2(1) of Directive 2014/59/EU;

(18)  ‘group’ means a ‘group’ as defined in point (137) of Article 4(1) of Regulation (EU) No 575/2013.

TITLE II

STRUCTURAL FEATURES OF COVERED BONDS

Chapter 1

Dual recourse and bankruptcy remoteness

Article 4

Dual recourse

1.  Member States shall lay down rules entitling the covered bonds investors and counterparties of derivative contracts that comply with Article 11 to the following claims:

(a)  a claim on the credit institution issuing covered bonds;

(b)  in case of insolvency or resolution of the credit institution issuing covered bonds, a priority claim on the principal and any accrued and future interest from cover assets;

(c)  in case of insolvency of the credit institution issuing covered bonds and in the event that the priority claim as referred to in point (b) cannot be fully satisfied, a claim on the insolvency estate of that credit institution, which ranks pari passu with the claims of the credit institution's ordinary unsecured creditors determined in accordance with the national laws governing the ranking in normal insolvency procedures.

2.  The claims referred to in paragraph 1 shall be limited to the full payment obligations attached to the covered bonds.

3.  For the purposes of point (c) of paragraph 1, in the case of insolvency of a specialised mortgage credit institution, Member States may lay down rules granting the covered bond investors and counterparties of derivative contracts that comply with Article 11 a claim that ranks senior to the claim of that specialised mortgage credit institution's ordinary unsecured creditors determined in accordance with the national laws governing the ranking of creditors in normal insolvency procedures, but junior to any other preferred creditors.

Article 5

Bankruptcy remoteness of the covered bonds

Member States shall ensure that the payment obligations attached to the covered bonds are not subject to automatic acceleration upon the insolvency or resolution of the credit institution issuing covered bonds.

Chapter 2

Cover pool and coverage

Section I

Eligible assets

Article 6

Eligible cover assets

1.  Member States shall require that covered bonds are at all times secured by:

(a)  assets referred to as eligible in points (a) to (g) of Article 129(1) of Regulation (EU) No 575/2013 and provided that the credit institution issuing covered bonds meets the requirements of paragraphs (1a) to (3) of Article 129 of that Regulation;

(b)  high quality cover assets that ensure that the credit institution issuing covered bonds has a claim for payment as set out in paragraph 2 and secured by collateral assets as set out in paragraph 3; or

(c)  assets in the form of loans to or guaranteed by public undertakings as defined in point (b) of Article 2 of Commission Directive 2006/111/EC, subject to paragraph 4.

2.  The claim for payment referred to in point (b) of paragraph 1 shall be subject to the following legal requirements:

(a)  the asset represents a claim for payment of monies that has a minimum value determinable at all times, that is legally valid and enforceable, that is not subject to conditions other than the condition that the claim matures at a future date and that the claim is secured by a mortgage, charge, lien or other guarantee;

(b)  the mortgage, charge, lien or other guarantee securing the claim for payment is enforceable;

(c)  all legal requirements for establishing the mortgage, charge, lien or guarantee securing the claim for payment have been fulfilled;

(d)  the mortgage, charge, lien or guarantee securing the claim for payment enables the credit institution issuing covered bonds to recover the value of the claim without undue delay.

▌ Member States shall require that credit institutions issuing covered bonds assess the enforceability of claims for payment and collateral assets before including them in the cover pool.

3.  The collateral assets referred to in point (b) of paragraph 1 shall meet one of the following requirements:

(a)  for physical assets, there exist valuation standards that are generally accepted among experts and that are appropriate for the physical asset concerned and there exists a public register that records ownership and claims on those physical assets;

(b)  for assets in the form of exposures, the safety and soundness of the exposure counterparty is implied by tax-raising powers or by being subject to ongoing public supervision of the counterparty's operational soundness and financial solvability.

Physical collateral assets referred to in point (a) of this paragraph shall contribute to coverage of liabilities attached to the covered bond up to the lesser of the principal amount of the liens that are combined with any prior liens and 70 % of the value of those physical collateral assets. Physical collateral assets referred to in point (a) of this paragraph which are eligible under point (a) of paragraph 1 do not have to comply with the limit of 70 % or with the limits in points (a) to (g) of Article 129(1) of Regulation (EU) No 575/2013.

Where, for the purposes of point (a) of this paragraph, there exists no public register for a particular physical asset, Member States may provide for an alternative form of certification of ownership and claims on that physical asset, insofar as it is comparable to the protection provided by a public register in the sense that it allows, in accordance with the law of the Member State concerned, interested third parties to access information in relation to the identification of the encumbered physical assets, to the attribution of ownership, to the documentation and attribution of encumbrances and to the enforceability of security interests.

4.  For the purposes of point (c) of paragraph 1, covered bonds secured by loans to or guaranteed by public undertakings as primary assets shall be subject to a minimum level of 10 % of overcollateralisation, as defined in Article 3(12), and to all of the following conditions:

(a)  the public undertakings provide essential public services on the basis of a licence, a concession contract or other form of entrustment granted by a public authority;

(b)  the public undertakings are subject to public supervision;

(c)  the public undertakings have sufficient revenue generating powers, which are ensured by such public undertakings:

(i)  having adequate flexibility to collect and to increase fees, charges and receivables for the service provided in order to ensure their financial soundness and solvability,

(ii)  receiving sufficient grants on a statutory basis in order to ensure their financial soundness and solvability in exchange for providing essential public services, or

(iii)  having entered into a profit and loss transfer agreement with a public authority.

5.  Member States shall lay down rules on the methodology and process for the valuation of physical assets used as collateral assets referred to in points (a) and (b) of paragraph 1. Those rules shall ensure at least the following:

(a)  for each physical collateral asset, that a current valuation at or at less than market value or mortgage lending value exists at the moment of inclusion of the cover asset in the cover pool;

(b)  that the valuation is carried out by a valuer who possesses the necessary qualifications, ability and experience; and

(c)  that the valuer is independent from the credit decision process, does not take into account speculative elements in the assessment of the value of the collateral asset and documents the value of the collateral asset in a transparent and clear manner.

6.   Member States shall require that credit institutions issuing covered bonds have in place procedures to monitor that physical assets used as collateral assets referred to in points (a) and (b) of paragraph 1 are adequately insured against the risk of damage and that the insurance claim is segregated in accordance with Article 12.

7.  ▌ Member States shall require credit institutions issuing covered bonds to document the cover assets ▌ as referred to in points (a) and (b) of paragraph 1 and the compliance of their lending policies ▌ with this Article.

8.  Member States shall lay down rules ensuring risk diversification in the cover pool in relation to granularity and material concentration for assets not referred to as eligible under point (a) of paragraph 1.

Article 7

Collateral assets located outside ▌ the Union<