REPORT on the proposal for a regulation of the European Parliament and of the Council amending Regulation (EU, Euratom) 2018/1046 on the financial rules applicable to the general budget of the Union

8.9.2022 - (COM(2022)0184 – C9‑0154/2022 – 2022/0125(COD)) - ***I

Committee on Budgets
Committee on Budgetary Control
Rapporteur: Nils Ušakovs, Monika Hohlmeier
(Joint committee procedure – Rule 58 of the Rules of Procedure)

DRAFT EUROPEAN PARLIAMENT LEGISLATIVE RESOLUTION

on the proposal for a regulation of the European Parliament and of the Council amending Regulation (EU, Euratom) 2018/1046 on the financial rules applicable to the general budget of the Union

(COM(2022)0184 – C9‑0154/2022 – 2022/0125(COD))

(Ordinary legislative procedure: first reading)

The European Parliament,

 having regard to the Commission proposal to Parliament and the Council (COM(2022)0184),

 having regard to Article 294(2) and Article 322(1) of the Treaty on the Functioning of the European Union, pursuant to which the Commission submitted the proposal to Parliament (C9-0154/2022),

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

 having regard to the opinion of the Court of Auditors of 28 June 2022[1],

 having regard to Rule 59 of its Rules of Procedure,

 having regard to the joint deliberations of the Committee on Budgets and the Committee on Budgetary Control under Rule 58 of the Rules of Procedure,

 having regard to the report of the Committee on Budgets and the Committee on Budgetary Control (A9-0230/2022),

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.

Amendment  1

Proposal for a regulation

Article 1 – paragraph 1 – point 4 – point b – point i

Regulation (EU, Euratom) 2018/1046

Article 108 – paragraph 4 – subparagraph 1 a (new)

 

Text proposed by the Commission

Amendment

 

Repayments under point (a) of the first subparagraph of this paragraph shall be made within 60 days of the cancellation or reduction of the fine, other penalty or sanction. Upon the expiry of that time limit, the creditor shall be entitled to interest in accordance with the conditions laid down in Article 116(5).

Justification

In its opinion 02/2022 on the Commission proposal, the European Court of Auditors suggested that it should be clarified that, where the Commission does not repay by a specified deadline the relevant part of the provisionally collected amounts for a reduced or annulled fine, the conditions on late payments laid down in Article 116(5) of the Regulation should apply, with an interest rate set at the ECB refinancing rate plus 3,5 percentage points.


EXPLANATORY STATEMENT

The Commission proposes to revise the Financial Regulation to address the consequences on the EU budget of recent judgments by the Court of Justice of the European Union that reduce or cancel competition fines.

In particular, in its ruling of 20 January 2021 in case C-301/19 P, Commission v Printeos, the Court held that, when the Court reduces or cancels a competition fine provisionally paid by an undertaking, the Commission is obliged to pay default interest for late repayment of the fine from the date on which the undertaking provisionally paid the fine until the date of repayment. In the absence of a rate set in legislation, the recent case law set the interest rate to the rate applied by the European Central Bank to its principal refinancing operations (ECB REFI) increased by 3,5 percentage points.

In the context of its appeal in case C-221/22 P, Commission v Deutsche Telekom, the Commission requested the Court to review its judgment in Printeos to clarify the obligations incumbent on the Commission in case of reduced or cancelled fines. However, pending the clarifications by the Court, the Commission is faced with unprecedented interest claims, far exceeding the interest earned on the amounts provisionally paid. EUR 85 million might become due in 2022/23. In addition, more than EUR 593 million might become due in 2024 because of the Intel case, where the General Court cancelled the total amount of the fine after legal proceedings lasting more than a decade.

Under the current financial rules, those payments would have to come from the expenditure side of the EU budget, notably MFF Heading 7 (European Public Administration). This would in turn require an amending budget and the mobilisation of special instruments already in 2023, as the sub-ceiling for administrative expenditure is already stretched because of the current high inflation. In the estimates for the draft budget 2023, the Commission is already highlighting that the prevailing high inflation and rising energy prices have a very direct impact on the costs of administration, and heading 7 will be under particular pressure in both 2022 and 2023. Despite very strict reprioritisation, in order to respect all legal obligations, the Commission underlines that the margin under the sub-ceiling will be fully exhausted, and recourse to special instruments is necessary in 2023 for an amount of EUR 62,5 million.

The Commission proposal intends to address the situation essentially as follows:

 interest and compensation due where a fine is reduced or cancelled would be deducted from the revenue side of the budget (‘negative revenue’) instead of impacting on the expenditure side; this would be a limited derogation from the rule against negative revenue laid down in Article 48(1) of the Financial Regulation;

 the interest rate on the amount repaid to an undertaking in case a fine is reduced or cancelled would be specifically set in legislation to the ECB REFI rate increased by 1,5 percentage points.

The rapporteurs support the approach of the Commission proposal as the only sensible way forward given the circumstances, and recommend that it be taken over by Parliament.

First of all, independently of the current economic circumstances, the amounts agreed under the MFF for Heading 7 of the EU budget were intended to ensure the proper functioning of EU institutions and are clearly inadequate to finance costs resulting from cancelled or reduced competition fines. On top of that, current high inflation results in the sub-ceiling for administrative expenditure being already exhausted, so that the amounts that might become due in 2022/23 would already require the further mobilisation of special instruments. This would in turn limit the ability of the budgetary authority to decide during the annual budgetary procedure on the possible use of those special instruments to finance actual policy priorities of the Union.

Moreover, revenues from confirmed fines are inserted into the general budget and all else being equal reduce the GNI-based own resource: they do not bring revenue for the administrative budget under Heading 7. It is therefore difficult to see any reason why, when the Commission has to reimburse a provisionally paid amount together with interest following the reduction or annulment of a fine, such interest should be paid from the administrative budget.

From a practical point of view, the proposed amendment of the Financial Regulation makes it possible to enter amounts received by way of fines in the budget by the end of the following financial year, and the Commission explained that part of the revenue from confirmed fines will indeed be kept on the accounts as a “reserve” whose amount would depend on the estimated needs for the compensations to be paid. So, in principle, confirmed fines can be used in the future to pay for cancelled or reduced fines.

Secondly, it makes sense for the legislator to establish an appropriate compensatory payment in case of reimbursement of a fine that is annulled or reduced by the Court. The proposal sets such compensatory rate at the ECB REFI rate + 1,5 %. The new rate is not retroactive and would not apply to the pending cases, but would provide a legislative reference for the future so that the Court does not need to come up with an arbitrary interest rate as in the recent judgments.

The rate of ECB REFI rate + 1,5 % is introduced by analogy to the interest rate currently foreseen in the Financial Regulation in case a debtor choses to cover a payment obligation by providing a financial guarantee but defers the payment to the date of the final judgment. This is welcome, as it makes it more “attractive” for companies to lodge a financial guarantee to cover a fine rather than making a provisional payment, as opposed to the current situation where the interest rate applied by the recent case law in the case of a provisional payment is noticeably higher.

On this issue, it has to be noted that the Commission cannot refrain from asking the companies to pay the provisional amounts or to cover the amounts by way of a financial guarantee, because the actions brought before the Court do not have suspensory effect.

In conclusion, the rapporteurs believe that the approach proposed by the Commission is the best possible one given the circumstances and should therefore be supported. At the same time, the rapporteurs cannot avoid noting that several recent Commission decisions in high-profile competition cases have been annulled by the General Court and therefore call on the Commission, in line with recent Parliament resolutions, to draw the necessary lessons from the judgments with a view to minimising the risks of annulment or reduction of provisionally paid fines in future cases, which may bear significant impact on the EU budget.


PROCEDURE – COMMITTEE RESPONSIBLE

Title

Amending Regulation (EU, Euratom) 2018/1046 on the financial rules applicable to the general budget of the Union

References

COM(2022)0184 – C9-0154/2022 – 2022/0125(COD)

Date submitted to Parliament

22.4.2022

 

 

 

Committees responsible

 Date announced in plenary

BUDG

2.5.2022

CONT

2.5.2022

 

 

Rapporteurs

 Date appointed

Nils Ušakovs

1.7.2022

Monika Hohlmeier

1.7.2022

 

 

Rule 58 – Joint committee procedure

 Date announced in plenary

 

7.7.2022

Date adopted

5.9.2022

 

 

 

Result of final vote

+:

–:

0:

39

1

0

Date tabled

8.9.2022

 


FINAL VOTE BY ROLL CALL IN COMMITTEE RESPONSIBLE

39

+

ID

Jean-François Jalkh

NI

Andor Deli, Sabrina Pignedoli

PPE

Anna-Michelle Asimakopoulou, Franc Bogovič, Maria da Graça Carvalho, Lefteris Christoforou, José Manuel Fernandes, Niclas Herbst, Monika Hohlmeier, Andrey Kovatchev, Jeroen Lenaers, Janusz Lewandowski, Siegfried Mureşan, Jan Olbrycht, Karlo Ressler, Simone Schmiedtbauer, Christine Schneider, Tomáš Zdechovský

RENEW

Gilles Boyer, Olivier Chastel, Vlad Gheorghe, Ramona Strugariu, Nils Torvalds

S&D

Carmen Avram, Ilan De Basso, Paolo De Castro, Isabel García Muñoz, Eider Gardiazabal Rubial, Maria Grapini, Hannes Heide, Pierre Larrouturou, Margarida Marques, Tsvetelina Penkova, Nils Ušakovs

THE LEFT

Silvia Modig

VERTS/ALE

David Cormand, Daniel Freund, Francisco Guerreiro

 

1

-

ID

Joachim Kuhs

 

0

0

 

 

 

Key to symbols:

+ : in favour

- : against

0 : abstention

 

 

Last updated: 8 September 2022
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