Index 
Texts adopted
Wednesday, 3 July 2013 - Strasbourg
Election of the Ombudsman
 Political agreement on the MFF
 Wheeled vehicles (Amendment of Decision 97/836/EC ('revised 1958 Agreement')) ***
 Wheeled vehicles (Amendment of Council Decision 2000/125/EC ('parallel agreement')) ***
 Mobilisation of the European Globalisation Adjustment Fund: application EGF/2013/000 TA 2013 - technical assistance at the initiative of the Commission
 Investigations conducted by the European Anti Fraud Office (OLAF) ***II
 Coordination of laws, regulations and administrative provisions relating to undertakings for collective securities ***I
 Timing of auctions of greenhouse gas allowances ***I
 Serious cross-border threats to health ***I
 Implementing enhanced cooperation in the area of financial transaction tax *
 Adoption by Latvia of the euro on 1 January 2014 *
 Road safety
 Situation of fundamental rights: standards and practices in Hungary
 Recent floods in Europe
 Reforming the structure of the EU banking sector
 Protection of the EU's financial interests - fight against fraud
 Integrated internal control framework

Election of the Ombudsman
PDF 107kWORD 19k
Decision
Annex
European Parliament decision of 3 July 2013 electing the European Ombudsman

The European Parliament,

–  having regard to the Treaty on the Functioning of the European Union, and in particular the third paragraph of Article 24 and Article 228 thereof,

–  having regard to the Treaty establishing the European Atomic Energy Community, and in particular Article 106a thereof,

–  having regard to its Decision 94/262/ECSC, EC, Euratom of 9 March 1994 on the regulations and general conditions governing the performance of the Ombudsman's duties(1),

–  having regard to Rule 204 of its Rules of Procedure,

–  having regard to the call for nominations(2),

–  having regard to its vote of 3 July 2013,

1.  Elects Emily O'REILLY to exercise the function of European Ombudsman from 1 October 2013 until the end of the parliamentary term;

2.  Requests Emily O'REILLY to take an oath before the Court of Justice;

3.  Instructs its President to have the annexed decision published in the Official Journal of the European Union;

4.  Instructs its President to forward this Decision to the Council, the Commission and the Court of Justice.

ANNEX

DECISION OF THE EUROPEAN PARLIAMENT

of 3 July 2013

electing the European Ombudsman

(The text of this annex is not reproduced here since it corresponds to the final act, Decision 2013/377/EU, Euratom.)

(1) OJ L 113, 4.5.1994, p. 15.
(2) OJ C 96, 4.4.2013, p. 24.


Political agreement on the MFF
PDF 121kWORD 23k
European Parliament resolution of 3 July 2013 on the political agreement on the Multiannual Financial Framework 2014-2020 (2012/2799(RSP))
P7_TA(2013)0304RC-B7-0334/2013

The European Parliament,

–  having regard to Articles 310, 311, 312 and 323 of the Treaty on the Functioning of the European Union (TFEU),

–  having regard to its resolution of 23 October 2012 in the interests of achieving a positive outcome of the Multiannual Financial Framework 2014-2020 approval procedure(1),

–  having regard to its resolution of 13 March 2013 on the European Council conclusions of 7-8 February 2013 concerning the Multiannual Financial Framework(2),

–  having regard to the conclusions of the European Council adopted on 8 February 2013,

–  having regard to the conclusions of the European Council adopted on 28 June 2013,

–  having regard to Rule 110(2) and (4) of its Rules of Procedure,

1.  Welcomes the political agreement reached on 27 June 2013 at the highest political level between Parliament, the Council Presidency and the Commission on the Multiannual Financial Framework (MFF) 2014-2020, following long and strenuous negotiations; acknowledges the significant efforts of the Irish Presidency in reaching this agreement;

2.  Stresses that – thanks to Parliament’s persistence in the negotiations – a number of provisions have been adopted for the first time which will be instrumental in making the new financial framework operational, consistent, transparent and more responsive to the needs of EU citizens; highlights, in particular, the new arrangements relating to revision of the MFF, flexibility, own resources and the unity and transparency of the budget, which were key priorities for Parliament in the negotiations;

3.  Is ready to put the MFF Regulation and the new Interinstitutional Agreement to the vote in the early autumn, as soon as the necessary technical and legal conditions for the finalisation of the relevant texts are fulfilled, so that the latter reflect the overall agreement reached between the Council and Parliament;

4.  Reiterates, however, its position, as set out in its aforementioned resolution on the MFF of 13 March 2013, that the consent vote on the MFF Regulation cannot be granted unless there is an absolute guarantee that the outstanding payment claims for 2013 will be covered in full; expects the Council, therefore, to take a formal decision on Draft Amending Budget 2/2013 for an amount of EUR 7,3 billion, no later than the Ecofin Council to be held on 9 July 2013; insists that the Council stick to its political commitment to adopt without delay a further amending budget to avoid any shortfall in payment appropriations that could lead to a structural deficit in the EU budget at the end of 2013; states that Parliament will not give its consent to the MFF Regulation or will not adopt the Budget 2014 until this new amending budget, covering the remaining deficit as identified by the Commission, has been adopted by the Council;

5.  Stresses, moreover, that the MFF Regulation cannot be legally adopted unless there is a political agreement on the relevant legal bases, especially on points that are also reflected in the MFF Regulation; expresses its willingness to conclude the negotiations on the legal bases for all multiannual programmes as soon as possible and reconfirms its adherence to the principle that ‘nothing is agreed until everything is agreed’; insists on full respect for Parliament’s legislative powers, as granted by the Treaty of Lisbon, and calls on the Council to negotiate properly all the so-called ’MFF-related’ parts of the legal bases; welcomes the political agreements reached so far on several new EU multiannual programmes;

6.  Acknowledges the fiscal consolidation that Member States are facing; considers, however, that the overall level of the next MFF, as decided by the European Council, falls short of EU political goals and the need to ensure the successful implementation of the Europe 2020 strategy; is concerned that this level of resources might not be sufficient to endow the EU with the necessary means to recover from the current crisis in a coordinated way and to come out stronger; regrets the fact that Member States continue to underestimate the role of the EU budget in, and its contribution to, strengthening economic governance and fiscal coordination across the EU; fears, moreover, that such low MFF ceilings will significantly reduce any room for manoeuvre for Parliament in the annual budgetary procedures;

7.  Stresses the importance of a compulsory review and subsequent revision of the next MFF by the end of 2016, in order to allow the next Commission and Parliament to reassess the EU’s political priorities, to adapt the MFF to new challenges and needs and to take full account of the latest macroeconomic projections; insists that the compulsory review to be conducted by the Commission of both the expenditure and the revenue sides of the EU budget be accompanied by a legislative proposal for a revision of the MFF Regulation, as stated in the Commission declaration annexed to that regulation; intends to make this compulsory MFF revision a key demand in the investiture of the new Commission President;

8.  Reiterates the crucial importance of the enhanced flexibility in the MFF 2014-2020 with a view to making full use of the respective MFF ceilings for commitments (EUR 960 billion) and payments (EUR 908.4 billion), as imposed by the European Council; welcomes, therefore, the Council’s approval of two key proposals put forward by Parliament, namely the creation of a Global Margin in Payments and a Global Margin in Commitments, which will allow the automatic carry-over of unused appropriations from one financial year to the next; views as regrettable, however, the limitations imposed by the Council (in terms of time or amount) which may prevent the full use of these instruments; considers that improving these mechanisms should be an integral part of the post-electoral revision of the MFF to be proposed by the Commission;

9.  Emphasises that the new flexibility rules on commitments should lead, in the course of the MFF 2014-2020, to additional appropriations for programmes linked to growth and employment, and in particular the Youth Employment Initiative, in order to ensure continuous funding and maximise the efficient use of the agreed ceilings;

10.  Welcomes the 2014 and 2015 frontloading of appropriations for the Youth Employment Initiative and insists that extra appropriations will be needed as of 2016 to ensure the sustainability and effectiveness of this programme;

11.  Stresses that, as a result of Parliament’s insistence, funding for Horizon 2020, Erasmus and COSME will also be frontloaded in 2014 and 2015 in order to decrease the funding gap between the relevant appropriations in the 2013 and 2014 Budgets; insists, in addition, that it is essential that further funding also be made available for the Digital Agenda;

12.  Welcomes the fact that provision has been made for an additional increase of up to EUR 1 billion for the food distribution scheme for those Member States wishing to use this increase to assist the most deprived persons in the Union; expects the Council and Parliament to agree as soon as possible on the concrete modalities for the implementation of this commitment in the context of the current negotiations on the legal basis for the scheme in question;

13.  Deplores the fact that the Council has not been able to make any progress on the reform of the own-resources system on the basis of the legislative proposals put forward by the Commission; emphasises that the EU budget should be financed by genuine own resources, as provided for in the Treaty, and states its commitment to a reform that reduces the share of GNI-based contributions to the EU budget to a maximum of 40 %; expects, therefore, the Joint Declaration on Own Resources agreed between the three EU institutions to allow tangible progress to be achieved, especially in view of the mid-term review/revision of the MFF; calls, therefore, for the high-level group on own resources to be convened at the time of the formal adoption of the MFF Regulation with a mandate to examine all aspects of the reform of the own-resources system;

14.  Welcomes the outcome of the negotiations on the unity and transparency of the EU budget; considers that any possible ‘eurozone budget’ that may be envisaged in the future should be either integrated into, or annexed to, the EU budget;

15.  Views as deeply regrettable the procedure that led to this agreement on the MFF 2014-2020, which in reality has had the effect of depriving Parliament of its true budgetary powers as provided for in the TFEU; considers that the numerous meetings held over the past few years between its delegation and the successive Council presidencies on the margins of the relevant General Affairs Council meetings, as well as its participation in informal Council meetings dealing with the MFF, served no clear purpose, as they had no impact on the spirit, calendar or content of the negotiations or on the Council’s position, including the need to distinguish the legislative from the budgetary aspects of the MFF agreement;

16.  Calls, therefore, on its Committee on Budgets, in cooperation with its Committee on Constitutional Affairs, to draw the necessary conclusions and to come forward with new proposals on the modalities of such negotiations, in order to ensure the democratic and transparent nature of the whole budgetary procedure;

17.  Instructs its President to forward this resolution to the European Council, the Council, the Commission, the governments and parliaments of the Member States, and the other institutions and bodies concerned.

(1) Texts adopted, P7_TA(2012)0360.
(2) Texts adopted, P7_TA(2013)0078.


Wheeled vehicles (Amendment of Decision 97/836/EC ('revised 1958 Agreement')) ***
PDF 191kWORD 19k
European Parliament legislative resolution of 3 July 2013 on the draft Council decision amending Decision 97/836/EC with a view to accession by the European Community to the Agreement of the United Nations Economic Commission for Europe concerning the adoption of uniform technical prescriptions for wheeled vehicles, equipment and parts which can be fitted to and/or be used on wheeled vehicles and the conditions for reciprocal recognition of approvals granted on the basis of these prescriptions ('Revised 1958 Agreement') (05978/2013 – C7-0069/2013 – 2012/0099(NLE))
P7_TA(2013)0305A7-0192/2013

(Consent)

The European Parliament,

–  having regard to the draft Council decision (05978/2013),

–  having regard to the request for consent submitted by the Council in accordance with Article 207(4) and Article 218(6), second subparagraph, point (a), of the Treaty on the Functioning of the European Union (C7-0069/2013),

–  having regard to Rules 81 and 90(7) of its Rules of Procedure,

–  having regard to the recommendation of the Committee on International Trade (A7-0192/2013),

1.  Consents to the draft Council decision;

2.  Instructs its President to forward its position to the Council, the Commission and the governments and parliaments of the Member States.


Wheeled vehicles (Amendment of Council Decision 2000/125/EC ('parallel agreement')) ***
PDF 190kWORD 19k
European Parliament legislative resolution of 3 July 2013 on the draft Council decision amending Decision 2000/125/EC of 31 January 2000 concerning the conclusion of the Agreement concerning the establishing of global technical regulations for wheeled vehicles, equipment and parts which can be fitted and/or be used on wheeled vehicles (‘Parallel Agreement’) (05975/2013 – C7-0071/2013 – 2012/0098(NLE))
P7_TA(2013)0306A7-0194/2013

(Consent)

The European Parliament,

–  having regard to the draft Council decision (05975/2013),

–  having regard to the request for consent submitted by the Council in accordance with Article 207(4) and Article 218(6), second subparagraph, point (a), of the Treaty on the Functioning of the European Union (C7-0071/2013),

–  having regard to Rules 81 and 90(7) of its Rules of Procedure,

–  having regard to the recommendation of the Committee on International Trade (A7-0194/2013),

1.  Consents to the draft Council decision;

2.  Instructs its President to forward its position to the Council, the Commission and the governments and parliaments of the Member States.


Mobilisation of the European Globalisation Adjustment Fund: application EGF/2013/000 TA 2013 - technical assistance at the initiative of the Commission
PDF 214kWORD 28k
Resolution
Annex
European Parliament resolution of 3 July 2013 on the proposal for a decision of the European Parliament and of the Council on the mobilisation of the European Globalisation Adjustment Fund, in accordance with point 28 of the Interinstitutional Agreement of 17 May 2006 between the European Parliament, the Council and the Commission on budgetary discipline and sound financial management (application EGF/2013/000 TA 2013 - Technical assistance at the initiative of the Commission) (COM(2013)0291 – C7-0126/2013 – 2013/2087(BUD))
P7_TA(2013)0307A7-0243/2013

The European Parliament,

–  having regard to the Commission proposal to the European Parliament and the Council (COM(2013)0291 – C7-0126/2013),

–  having regard to the Interinstitutional Agreement of 17 May 2006 between the European Parliament, the Council and the Commission on budgetary discipline and sound financial management(1) (IIA of 17 May 2006), and in particular point 28 thereof,

–  having regard to Regulation (EC) No 1927/2006 of the European Parliament and of the Council of 20 December 2006 on establishing the European Globalisation Adjustment Fund(2) (EGF Regulation),

–  having regard to the trilogue procedure provided for in point 28 of the IIA of 17 May 2006,

–  having regard to the European Council conclusions on a Compact for Growth and Jobs of 28-29th June 2012,

–  having regard to the European Council conclusions of 7-8th February 2013,

–  having regard to the letter of the Committee on Employment and Social Affairs,

–  having regard to the report of the Committee on Budgets (A7-0243/2013),

A.  whereas the European Union with its European Globalisation Adjustment Fund (EGF) has set up legislative and budgetary instruments to provide additional support to workers who are suffering from the consequences of major structural changes in world trade patterns, aggravated by the economic, financial and social crisis, and to assist their reintegration into the labour market;

B.  whereas the Commission implements the EGF in accordance with the general rules laid down by Regulation (EU, Euratom) No 966/2012 of 25 October 2012 on the financial rules applicable to the general budget(3) and the implementing rules applicable to this form of implementation of the Union budget;

C.  whereas the Union's financial assistance to workers made redundant should be adequate and made available as quickly and efficiently as possible, in accordance with the Joint Declaration of the European Parliament, the Council and the Commission adopted during the conciliation meeting on 17 July 2008, and having due regard for the Interinstitutional Agreement of 17 May 2006 in respect of the adoption of decisions to mobilise the EGF;

D.  whereas up to 0,35 % of the annual EGF amount can be made available each year for technical assistance at the initiative of the Commission, in order to finance monitoring, information, administrative and technical support, as well as audit, control and evaluation activities necessary to implement the EGF Regulation, as laid down in Article 8(1) of that Regulation, including the provision of information and guidance for the Member States in using, monitoring and evaluating the EGF and providing information on using the EGF to the European and national social partners (Article 8(4) of the EGF Regulation);

E.  whereas, in accordance with Article 9(2) of the EGF Regulation, the Commission is obliged to set up an internet site, available in all Union languages, to provide and disseminate information on applications and highlighting the role of the budgetary authority;

F.  whereas, on the basis of those articles, the Commission requested that the EGF be mobilised to cover expenditures in relation to technical assistance in order to monitor applications received and paid and measures proposed and implemented, to expand the website, produce publications and audio-visual tools, to create a knowledge base, to provide administrative and technical support to Member States, and to prepare for the final evaluation of the EGF (2007-2013);

G.  whereas the application fulfils the eligibility criteria laid down by the EGF Regulation;

1.  Agrees with the measures proposed by the Commission to be financed as technical assistance in accordance with Article 8(1) and (4) as well as with Article 9(2) of the EGF Regulation;

2.  Deeply regrets that the results of the final ex-post evaluation of EGF will arrive too late to feed into the discussion on the new regulation on the EGF for 2014-2020, especially regarding the effectiveness of the use of the crisis derogation criterion, since the concerned EGF cases were not analysed in the EGF mid-term evaluation report.

3.  Notes that the Commission has already started to work in 2011 on the electronic application form and on the standardised procedures for simplified applications, faster processing of the applications and better reporting; asks the Commission to present the progress made following the use of technical assistance in 2011 and in 2012.

4.  Recalls the importance of networking and exchange of information on the EGF; supports, therefore, the funding of the Expert Group of Contact Persons of the EGF as well as other networking activities among the Member States including this years' seminar for practitioners on the implementation of the EGF; underlines the need to further enhance the liaising between all those involved in EGF applications, including namely the social partners, to create as many synergies as possible;

5.  Calls on the Commission to invite the Parliament to the seminars and meetings of the Expert Group of Contact Persons organised by means of technical assistance, by using the relevant provisions of the Framework Agreement on relations between the European Parliament and the European Commission(4);

6.  Encourages the Member States to profit from the exchange of best practices and to learn particularly from those Member States that have already put in place national information networks on the EGF involving the social partners and stakeholders at local level with a view to having a good structure for assistance in place once any situation which falls under the scope of the EGF might occur;

7.  Calls on the Commission to invite the social partners to the seminars for practitioners organised by means of technical assistance;

8.  Requests the Member States and all the institutions involved to make the necessary efforts to improve procedural and budgetary arrangements in order to accelerate the mobilisation of the EGF; notes in this sense, the improved procedure put in place by the Commission, following Parliament's request to accelerate the release of grants, aimed at presenting to the budgetary authority with the Commission's assessment on the eligibility of an EGF application together with the proposal to mobilise the EGF; expects that further improvements in the procedure will be made within the framework of the upcoming review of the EGF and that greater efficiency, transparency, accountability and visibility of the EGF will be achieved;

9.  Is concerned about the possible adverse impact which reducing the staffing level may have on the swift, regular and effective evaluation of incoming applications and implementation of the EGF technical assistance; considers that any short-term or long-term revision in staff should be based on a prior impact assessment and should take full account, inter alia, of the Union's legal obligations and the institutions' new competences and increased tasks arising from the Treaties;

10.  Regrets that the Commission does not envisage any particular awareness-raising activities for 2013 given that some Member States, including users of the EGF, question the utility and advantages of the EGF;

11.  Notes the fact that following repeated requests from Parliament, the 2013 budget shows payment appropriations of EUR 50 million on the EGF budget line 04 05 01; recalls that the EGF was created as a separate specific instrument with its own objectives and deadlines and therefore deserves a dedicated allocation, which would avoid unnecessary delays, due to the fact that now its financing is made through transfers from other budget lines, which may be detrimental to the achievement of the social, economic and policy objectives of the EGF;

12.  Hopes that the actions taken by the Commission in the area of technical assistance will help to raise the added value of the EGF and will lead to more targeted and long term support for and reintegration of redundant workers;

13.  Deeply regrets the decision of the Council to block the extension of the 'crisis derogation' which allows for the provision of financial assistance to workers made redundant as a result of the current social, financial and economic crisis, in addition to those losing their job because of changes in global trade patterns, and which allows an increase in the rate of Union co-financing to 65 % of the programme costs for applications submitted after the 31 December 2011 deadline; calls on the Council to reintroduce this measure without delay, especially in the context of the rapidly deteriorating social situation in several Member States following the expansion and deepening of the recession;

14.  Approves the decision annexed to this resolution;

15.  Instructs its President to sign the decision with the President of the Council and to arrange for its publication in the Official Journal of the European Union;

16.  Instructs its President to forward this resolution, including its annex, to the Council and the Commission.

ANNEX

DECISION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

on the mobilisation of the European Globalisation Adjustment Fund, in accordance with point 28 of the Interinstitutional Agreement of 17 May 2006 between the European Parliament, the Council and the Commission on budgetary discipline and sound financial management (EGF/2013/000 TA 2013 - Technical assistance at the initiative of the Commission)

(The text of this annex is not reproduced here since it corresponds to the final act, Decision 2013/420/EU.)

(1) OJ C 139, 14.6.2006, p. 1.
(2) OJ L 406, 30.12.2006, p. 1.
(3) OJ L 298, 26.10 2012, p. 1.
(4) OJ L 304, 20.11.2010, p. 47.


Investigations conducted by the European Anti Fraud Office (OLAF) ***II
PDF 216kWORD 21k
Resolution
Annex
European Parliament legislative resolution of 3 July 2013 on the position of the Council at first reading with a view to the adoption of a regulation of the European Parliament and of the Council 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 (17427/1/2012 – C7-0051/2013– 2006/0084(COD))
P7_TA(2013)0308A7-0225/2013

(Ordinary legislative procedure: second reading)

The European Parliament,

–  having regard to the Council position at first reading (17427/1/2012 –C7-0051/2013),

–  having regard to the opinion of the Court of Auditors of 12 July 2011(1),

–  having regard to its position at first reading(2) on the Commission proposal to Parliament and the Council (COM(2006)0244),

–  having regard to the amended Commission proposal (COM(2011)0135),

–  having regard to Article 294(7) of the Treaty on the Functioning of the European Union,

–  having regard to Rule 72 of its Rules of Procedure,

–  having regard to the recommendation for second reading of the Committee on Budgetary Control (A7-0225/2013),

1.  Approves the Council position at first reading;

2.  Approves the joint statement by Parliament, the Council and the Commission annexed to this resolution;

3.  Takes note of the Commission statements annexed to this resolution;

4.  Notes that the act is adopted in accordance with the Council position;

5.  Instructs its President to sign the act with the President of the Council, in accordance with Article 297(1) of the Treaty on the Functioning of the European Union;

6.  Instructs its Secretary-General to sign the act, once it has been verified that all the procedures have been duly completed, and, in agreement with the Secretary-General of the Council, to arrange for its publication in the Official Journal of the European Union;

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

ANNEX TO THE LEGISLATIVE RESOLUTION

Statement by the European Parliament, the Council and the Commission

‘Each time the European Parliament, the Council and the Commission appoint new members of the new Supervisory Committee they should also appoint those members to take office at the next partial replacement.’

Commission statement

‘The Commission confirms that the Office has declared that it will at all times act in compliance with the Protocol No 7 on the Privileges and Immunities of the European Union and the Statute for Members of the European Parliament, fully respecting the freedom and independence of Members as provided for in Article 2 of the Statute.’

Commission statement

‘The Commission intends to maintain the current powers of the Director-General of the European Anti-fraud Office to lay down the conditions and detailed arrangements for recruiting at the Office, in particular as to the length of contracts and their renewals.’

(1) OJ C 254, 30.8.2011, p. 1.
(2) OJ C 16 E, 22.1.2010, p. 201.


Coordination of laws, regulations and administrative provisions relating to undertakings for collective securities ***I
PDF 477kWORD 57k
Text
Consolidated text
Amendments adopted by the European Parliament on 3 July 2013 on the proposal for a directive of the European Parliament and of the Council amending Directive 2009/65/EC on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) as regards depositary functions, remuneration policies and sanctions (COM(2012)0350 – C7-0178/2012 – 2012/0168(COD))(1)
P7_TA(2013)0309A7-0125/2013

(Ordinary legislative procedure: first reading)

[Amendment No 1 unless otherwise stated]

AMENDMENTS BY THE EUROPEAN PARLIAMENT(2)
P7_TA(2013)0309A7-0125/2013
to the Commission proposal
P7_TA(2013)0309A7-0125/2013
_________________________________________
P7_TA(2013)0309A7-0125/2013

DIRECTIVE 2013/.../EU OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL
amending Directive 2009/65/EC on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) as regards depositary functions, remuneration policies and sanctions
(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 53(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 Central Bank(3),

Acting in accordance with the ordinary legislative procedure,

Whereas:

(1)  Directive 2009/65/EC of the European Parliament and of the Council(4) should be amended in order to take into account market developments and the experiences of market participants and supervisors gathered so far, in particular to address discrepancies between national provisions in respect of depositaries' duties and liability, remuneration policy and sanctions.

(2)  In order to address the potentially detrimental effect of poorly designed remuneration structures on the sound management of risks and control of risk-taking behaviour by individuals, there should be an express obligation for undertakings of collective investment in transferable securities (UCITS) management companies to establish and maintain, for those categories of staff whose professional activities have a material impact on the risk profiles of the UCITS they manage, remuneration policies and practices that are consistent with sound and effective risk management. Those categories of staff should include any employee and any other member of staff at fund or sub-fund level who are decision takers, fund managers and persons who take real investment decisions, persons who have the power to exercise influence on such employees or members of staff, including investment policy advisors and analysts, senior management and any employees receiving total remuneration that takes them into the same remuneration bracket as senior management and decision takers. Those rules should also apply to UCITS investment companies that do not designate a management company.

(3)  The principles governing remuneration policies should recognise that UCITS management companies are able to apply those policies in different ways according to their size and the size of the UCITS they manage, their internal organisation and the nature, scope and complexity of their activities. However, UCITS management companies should, in any event, ensure that they apply all those principles simultaneously.

(4)  The principles regarding sound remuneration policies established in this Directive should be consistent with and be complemented by the principles set out in the Commission Recommendation 2009/384/EC of 30 April 2009 on remuneration policies in the financial services sector(5) and by the work of the Financial Stability Board and G-20 commitments to mitigate risk in the financial services sector.

(4a)   Guaranteed variable remuneration should be exceptional because it is not consistent with sound risk management or the pay-for-performance principle and should not be a part of prospective compensation plans.

(4b)   Remuneration paid from the fund to management companies should, like the remuneration paid by management companies to their staff, be consistent with sound and effective risk management and with the interests of investors.

(4c)   In addition to pro rata remuneration, it should be possible for costs and expenses directly linked to the maintenance and safeguarding of investments, such as those for legal action, protection or enforcement of the rights of the unit-holder or for retrieval of or compensation for lost assets, to be charged to the fund by the management company. The Commission should assess which are the common product related costs and expenses in the Member States for retail investment products. The Commission should conduct a consultation exercise and an impact assessment, and should put forward a legislative proposal if there is a need for further harmonisation.

(5)  In order to promote supervisory convergence in the assessment of remuneration policies and practices, the European Securities and Markets Authority (ESMA), established by Regulation (EU) No 1095/2010 of the European Parliament and of the Council(6) should ensure the existence of guidelines on sound remuneration policies in the asset management sector. The European Banking Authority (EBA) established by Regulation (EU) No 1093/2010 of the European Parliament and of the Council(7) should assist ESMA in the elaboration of such guidelines. Those guidelines should, in particular, provide further instructions on partial neutralisation of the remuneration principles reconcilable with the risk profile, risk appetite and the strategy of the management company and the UCITS it manages. ESMA's guidelines on remuneration policies should, where appropriate, be aligned, to the extent possible, with those for funds regulated under Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative Investment Fund Managers(8). Furthermore, ESMA should supervise the adequate enforcement of those guidelines by competent authorities. Deficiencies should be addressed promptly with supervisory action in order to safeguard the level playing field across the internal market.

(6)  The provisions on remuneration should be without prejudice to the full exercise of fundamental rights guaranteed by the Treaties, to general principles of national contract and labour law, applicable legislation regarding shareholders’ rights and involvement and the general responsibilities of the administrative and supervisory bodies of the institution concerned, as well as the right, where applicable, of social partners to conclude and enforce collective agreements, in accordance with national laws and custom.

(7)  In order to ensure the necessary level of harmonisation of the relevant regulatory requirements in different Member States, additional rules should be adopted defining the tasks and duties of depositaries, designating the legal entities that may be appointed as depositaries and clarifying the liability of depositaries in cases UCITS assets are lost in custody or in the case of depositaries' improper performance of their oversight duties. Such improper performance may result in the loss of assets but also in the loss of the value of assets, if, for example, a depositary tolerated investments that were not compliant with fund rules, while exposing the investor to unexpected or anticipated risks. Additional rules should also clarify the conditions under which depositary functions may be delegated.

(8)  It is necessary to clarify that a UCITS should appoint a single depositary having general oversight over the UCITS's assets. Requiring that there be a single depositary should ensure that the depositary has a view over all the assets of the UCITS and both fund managers and investors have a single point of reference in the event that problems occur in relation to the safekeeping of the assets or the performance of oversight functions. The safekeeping of assets includes holding assets in custody or, where assets are of such a nature that they cannot be held in custody, verification of the ownership of those assets as well as record-keeping for those assets.

(9)  In performing its tasks, a depositary should act honestly, fairly, professionally, independently and in the interest of the UCITS or of the investors of the UCITS.

(10)  In order to ensure a harmonised approach to the performance of depositaries duties in all Member States irrespective of the legal form taken by the UCITS, it is necessary to introduce a uniform list of oversight duties that are incumbent on both a UCITS with a corporate form (an investment company) and a UCITS in a contractual form.

(11)  The depositary should be responsible for the proper monitoring of the UCITS' cash flows, and, in particular, for ensuring that investor money and cash belonging to the UCITS is booked correctly on accounts opened in the name of the UCITS, or in the name of the management company acting on behalf of the UCITS, or in the name of the depositary acting on behalf of the UCITS. Therefore detailed provisions should be adopted on cash monitoring so as to ensure effective and consistent levels of investor protection. When ensuring investor money is booked in cash accounts, the depositary should take into account the principles set out in Article 16 of Commission Directive 2006/73/EC of 10 August 2006 implementing Directive 2004/39/EC of the European Parliament and of the Council as regards organisational requirements and operating conditions for investment firms and defined terms for the purposes of that Directive(9).

(12)  In order to prevent fraudulent cash transfers, it should be required that no cash account associated with the funds' transactions be opened without the depositary's knowledge.

(13)  Any financial instrument held in custody for a UCITS should be distinguished from the depositary's own assets, and at all times be identified as belonging to that UCITS; such a requirement should confer an additional layer of protection for investors should the depositary default.

(14)  In addition to the existing duty to safe keep assets belonging to a UCITS, assets should be differentiated between those that are capable of being held in custody and those that are not, where a record-keeping and ownership verification requirement applies instead. The group of assets that can be held in custody should be clearly differentiated, since the duty to return lost assets should only apply to that specific category of financial assets.

(14a)   The financial instruments held in custody by the depositary should not be reused by the depositary or by any third party to whom the custody function has been delegated for their own account.

(15)  It is necessary to define the conditions for the delegation of the depositary's safe-keeping duties to a third party. Delegation and sub-delegation should be objectively justified and subject to strict requirements in relation to the suitability of the third party entrusted with the delegated function, and in relation to the due skill, care and diligence that the depositary should employ to select, appoint and review that third party. For the purpose of achieving uniform market conditions and an equally high level of investor protection, such conditions should be aligned with those applicable under Directive 2011/61/EU, Regulation (EC) No 1060/2009 of the European Parliament and of the Council of 16 September 2009 on credit rating agencies(10) and Regulation (EU) No 1095/2010. Provisions should be adopted to ensure that third parties have the necessary means to perform their duties and that they segregate UCITS' assets.

(16)  Entrusting the custody of assets to the operator of a securities settlement system as provided for in Directive 98/26/EC of the European Parliament and of the Council of 19 May 1998 on settlement finality in payment and securities settlement systems(11) or entrusting the provision of similar services to third-country securities settlement systems should not be considered a delegation of custody functions.

(17)  A third party to whom the safe-keeping of assets is delegated should be able to maintain an omnibus account, as a common segregated account for multiple UCITS.

(18)  Where custody is delegated to a third party, it is also necessary to ensure that the third party is subject to specific requirements on effective prudential regulation and supervision. In addition, in order to ensure that the financial instruments are in the possession of the third party to whom custody was delegated, periodic external audits should be performed.

(19)  In order to ensure consistently high levels of investor protection, provisions on conduct and on the management of conflicts of interest should be adopted and they should apply in all situations, including in case of delegation of safe-keeping duties. Those rules should in particular ensure a clear separation of tasks and functions between the depositary, the UCITS and the management company.

(20)  In order to ensure a high level of investor protection and to guarantee an appropriate level of prudential regulation and on-going control, it is necessary to establish an exhaustive list of entities that are eligible to act as depositaries, such that only credit institutions and investment firms are permitted to act as UCITS depositaries. In order to allow other entities that may have previously been eligible to act as depositaries for UCITS funds to convert themselves into eligible entities, transitional provisions should be provided for those entities.

(21)  It is necessary to specify and clarify the UCITS depositary's liability in case of the loss of a financial instrument that is held in custody. The depositary should be liable, where a financial instrument held in custody has been lost, to return a financial instrument of the identical type or of the corresponding amount to the UCITS. No further discharge of liability in case of loss of assets should be envisaged, except where the depositary is able to prove that the loss is due to an 'external event beyond its reasonable control, the consequences of which would have been unavoidable despite all reasonable efforts to the contrary'. In this context, a depositary should not be able to rely on internal situations such as a fraudulent act by an employee to discharge itself of liability.

(22)  Where the depositary delegates custody tasks and the financial instruments held in custody by a third party are lost, the depositary should be liable. It should also be established that in case of loss of an instrument held in custody, a depositary is bound to return a financial instrument of identical type or the corresponding amount, even if the loss occurred with a sub-custodian. The depositary should only discharge that liability where it can prove that the loss resulted from an external event beyond its reasonable control and with consequences that were unavoidable despite all reasonable efforts to the contrary. In this context, a depositary should not be able to rely on internal situations such as a fraudulent act by an employee to discharge itself of liability. No discharge of liability either regulatory or contractual should be possible in case of loss of assets by a depository or its sub-custodian.

(23)  Every investor in a UCITS fund should be able to invoke claims relating to the liability of its depositary, either directly or indirectly, through the management company. Redress against the depositary should not depend on the legal form that a UCITS fund takes (corporate or contractual form) or the legal nature of the relationship between the depositary, the management company and the unit-holders.

(24)  On 12 July 2010 the Commission proposed amendments to Directive 97/9/EC of the European Parliament and of the Council of 3 March 1997 on investor-compensation schemes(12). It is essential that that the proposal of 12 July 2010 be complemented by clarifying the obligations and the scope of the liability of the depositary and the sub-custodians of UCITS with a view to provide a high level of protection for UCITS investors where a depositary cannot meet its obligations set out in this Directive.

(24a)   In the light of the provisions laid down in this Directive determining the scope of the functions and liabilities of depositaries, the Commission should analyse in which situations the failure of a UCITS depositary or a sub-custodian could lead to losses to UCITS unit holders, whether through the loss of net asset value of their units or other causes, which are not recoverable under those provisions and which, therefore, could require an extension of existing investor-compensation schemes to cover insurance or some kind of compensation which covers the custodian against the failure of a sub-custodian. The analysis should further investigate how to ensure that, in such situations, protection of investors or transparency is equivalent, whatever the chain of intermediation between the investor and the transferable securities affected by the failure. That analysis should be submitted to the European Parliament and to the Council, together with legislative proposals if necessary.

(25)  It is necessary to ensure that the same requirements apply to depositaries irrespective of the legal form a UCITS takes. Consistency of requirements should enhance legal certainty, increase investor protection and contribute to creating uniform market conditions. The Commission has not received any notification that the derogation from the general obligation to entrust assets to a depositary has been used by an investment company. Therefore, the requirements of Directive 2009/65/EC regarding the depositary of an investment company should be considered redundant.

(26)  In line with the Commission Communication of 8 December 2010 on reinforcing sanctioning regimes in the financial services sector, competent authorities should be empowered to impose pecuniary sanctions which are sufficiently high so as to be effective, dissuasive and proportionate, so as to offset expected benefits from behaviours which breach requirements.

(27)  In order to ensure a consistent application across Member States, when determining the type of administrative sanctions or measures and the level of administrative pecuniary sanctions, Member States should be required to ensure that their competent authorities take into account all relevant circumstances.

(28)  In order to strengthen the dissuasive effect on the public at large and to inform them about breaches of rules which may be detrimental to investors' protection, sanctions should be published, save in certain well-defined circumstances. In order to ensure compliance with the principle of proportionality, sanctions should be published on an anonymous basis where publication would cause a disproportionate damage to the parties involved.

(29)  In order to detect potential breaches, competent authorities should be entrusted with the necessary investigatory powers, and should establish effective mechanisms to encourage reporting of potential or actual breaches.

(30)  This Directive should be without prejudice to any provisions in the law of Member States relating to criminal offences and sanctions.

(31)  This Directive respects the fundamental rights and observes the principles recognised in the Charter of Fundamental Rights of the European Union as enshrined in the Treaty on the Functioning of the European Union.

(32)  In order to ensure that the objectives of this Directive are attained, the Commission should be empowered to adopt delegated acts in accordance with Article 290 of the Treaty on the Functioning of the European Union. In particular, the Commission should be empowered to adopt delegated acts to specify the particulars that need to be included in the standard agreement between the depositary and the management company or the investment company, the conditions for performing depositary functions, including the type of financial instruments that should be included in the scope of the depositary's custody duties, the conditions subject to which the depositary may exercise its custody duties over financial instruments registered with a central depositary and the conditions subject to which the depositary should safe keep the financial instruments issued in a nominative form and registered with an issuer or a registrar, the due diligence duties of depositaries, the segregation obligation, the conditions subject to and circumstances in which financial instruments held in custody should be considered as lost, what is to be understood by external events beyond reasonable control, the consequences of which would have been unavoidable despite all reasonable efforts to the contrary. The level of investor protection provided by those delegated acts should be at least as high as that provided by delegated acts adopted under Directive 2011/61/EU. It is of particular importance that the Commission carry out appropriate consultations during its preparatory work, including at expert level. The Commission, when preparing and drawing-up delegated acts, should ensure simultaneous, timely and appropriate transmission of relevant documents to the European Parliament and to the Council.

(33)  In accordance with the Joint Political Declaration ▌of Member States and the Commission on explanatory documents of 28 September 2011(13), 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.

(34)  Since the objectives of this Directive, namely to improve investors' confidence in UCITS, by enhancing requirements concerning the duties and the liability of depositaries, the remuneration policies of management companies and investment companies, and by introducing common standards for the sanctions applying to the main breaches of the provisions of this Directive, cannot be sufficiently achieved by Member States acting independently of one another, and can therefore, by reason of its scale and effects, be better achieved at Union level, the Union may adopt the ▌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.

(34a)  The European Data Protection Supervisor has been consulted in accordance with 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.

(35)  Directive 2009/65/EC should therefore be amended accordingly,

HAVE ADOPTED THIS DIRECTIVE:

Article 1

Directive 2009/65/EC is amended as follows:

(1)  The following Articles ▌are inserted:"

"Article 14a

1.  Member States shall require management companies to establish and apply remuneration policies and practices that are consistent with and promote sound and effective risk management and do not encourage risk-taking which is inconsistent with the risk profiles, rules or instruments of incorporation of the UCITS they manage.

2.  The remuneration policies and practices shall cover fixed and variable components of salaries and discretionary pension benefits.

3.  The remuneration policies and practices shall apply to those categories of staff, including employees and other members of staff such as, but not limited to, temporary or contractual staff, at fund or subfund level who are:

(a)   fund managers

(b)   persons other than fund managers, who take investment decisions that affect the risk position of the fund;

(c)   persons other than fund managers, who have the power to exercise influence on staff, including investment policy advisors and analysts;

(d)   senior management, risk takers, personnel in control functions; or

(e)   any other employee or member of staff such as, but not limited to, temporary or contractual staff receiving total remuneration that falls within the remuneration bracket of senior management and decision takers and whose professional activities have a material impact on the risk profiles of the management companies or of UCITS they manage.

4.  In accordance with Article 16 of Regulation (EU) No 1095/2010 ▌, ESMA shall issue guidelines addressed to competent authorities which comply with Article 14b. Those guidelines shall take into account the principles on sound remuneration policies set out in ▌ Recommendation 2009/384/EC, the size of the management company and the size of UCITS they manage, their internal organisation and the nature, the scope and the complexity of their activities. In the process of development of the guidelines ESMA shall cooperate closely with the ▌EBA in order to ensure consistency with requirements developed for other sectors of financial services, in particular credit institutions and investment firms.

Article 14b

1.  When establishing and applying the remuneration policies referred to in Article 14a, management companies shall comply with the following principles in a way and to the extent that is appropriate to their size, internal organisation and the nature, scope and complexity of their activities:

(a)  the remuneration policy is consistent with and promotes sound and effective risk management and does not encourage risk-taking which is inconsistent with the risk profiles, rules or instruments of incorporation of the UCITS they manage;

(b)  the remuneration policy is in line with the business strategy, objectives, values and interests of the management company and the UCITS it manages and the investors of such UCITS, and includes measures to avoid conflicts of interest;

(c)  the management body of the management company, in its supervisory function, adopts and periodically reviews the general principles of the remuneration policy and is responsible for and oversees its implementation. The remuneration system shall not be primarily controlled by the chief executive officer and the management team. Relevant body members and employees involved in setting the remuneration policy and its implementation shall be independent and shall have expertise in risk management and remuneration. Details of those remuneration policies and the basis on which they have been decided shall be included in the Key Investor Information Document, including demonstrating adherence to the principles set out in Article 14a; [Am. 2 - part 1]

(d)  the implementation of the remuneration policy is, at least annually, subject to central and independent internal review for compliance with policies and procedures for remuneration adopted by the management body in its supervisory function;

(da)   comprehensive, accurate and timely information about remuneration practices is disclosed to all stakeholders in a durable medium or by means of a website and a paper copy is delivered free of charge upon request;

(e)  staff engaged in control functions are compensated in accordance with the achievement of the objectives linked to their functions, independent of the performance of the business areas they control;

(f)  the remuneration of the senior officers in the risk management and compliance functions is directly overseen by the remuneration committee;

(g)  where remuneration is performance related, the total amount of remuneration is based on a combination of the assessment of the risk-adjusted performance of the individual and of the business unit or UCITS concerned and of the risk-adjusted overall results of the management company, and when assessing individual performance, financial as well as non-financial criteria are taken into account;

(h)  the assessment of performance is set in a multi-year framework appropriate to the life-cycle of the UCITS managed by the management company in order to ensure that the assessment process is based on longer term performance and that the actual payment of performance-based components of remuneration is spread over a period which takes account of the redemption policy of the UCITS it manages, the long-term performance of the UCITS and their investment risks; [Am. 2 - part 2]

(i)  guaranteed variable remuneration is exceptional, occurs only in the context of hiring new staff and is limited to the first year;

(j)  fixed and variable components of total remuneration are appropriately balanced and the fixed component represents a sufficiently high proportion of the total remuneration to allow the operation of a fully flexible policy on variable remuneration components, including the possibility to pay no variable remuneration component;

(ja)   the variable remuneration component is subject to the conditions set out in point (o), which provides that the variable remuneration shall be considerably contracted where subdued or negative financial performance of the management company or of the UCITS concerned occurs, taking into account both current compensation and reductions in payouts of amounts previously earned, including through malus or clawback arrangements. 'Malus' and 'clawback' mean malus and clawback as defined in ESMA Guidelines 2013/201; [Am. 2 - part 3]

(k)  payments related to the early termination of a contract reflect performance achieved over time and are designed in a way that does not reward failure;

(l)  the measurement of performance used to calculate variable remuneration components or pools of variable remuneration components includes a comprehensive adjustment mechanism to integrate all relevant types of current and future risks;

(m)  subject to the legal structure of the UCITS and its fund rules or instruments of incorporation, a substantial portion, and in any event at least 50% of any variable remuneration consists of units of the UCITS concerned, or equivalent ownership interests, or share-linked instruments or equivalent non-cash instruments, unless the management of UCITS accounts for less than 50% of the total portfolio managed by the management company, in which case the minimum of 50% does not apply.

The instruments referred to in this point shall be subject to an appropriate retention policy designed to align incentives with the interests of the management company and the UCITS it manages and the investors of such UCITS. Member States or their competent authorities may place restrictions on the types and designs of those instruments or ban certain instruments as appropriate. This point shall be applied to both the portion of the variable remuneration component deferred in line with point (n) and the portion of the variable remuneration component not deferred;

(n)  a substantial portion, and in any event at least 25 %, of the variable remuneration component, is deferred over a period which is appropriate in view of the life cycle and redemption policy of the UCITS concerned and is correctly aligned with the nature of the risks of the UCITS in question.

The period referred to in this point shall be at least three to five years unless the life cycle of the UCITS concerned is shorter; remuneration payable under deferral arrangements vests no faster than on a pro-rata basis; in the case of a variable remuneration component of a particularly high amount, at least 60% of the amount shall be deferred;

(o)  the variable remuneration, including the deferred portion, is paid or vests only if it is sustainable according to the financial situation of the management company as a whole, and justified according to the performance of the business unit, the UCITS and the individual concerned.

The total variable remuneration shall generally be considerably contracted where subdued or negative financial performance of the management company or of the UCITS concerned occurs, taking into account both current compensation and reductions in payouts of amounts previously earned, including through malus or clawback arrangements;

(p)  the pension policy is in line with the business strategy, objectives, values and long-term interests of the management company and the UCITS it manages.

If the employee leaves the management company before retirement, discretionary pension benefits shall be held by the management company for a period of five years in the form of instruments referred to in point (m). In the case of an employee reaching retirement, discretionary pension benefits shall be paid to the employee in the form of instruments referred to in point (m), subject to a five year retention period;

(q)  staff are required to undertake not to use personal hedging strategies or remuneration- and liability-related insurance to undermine the risk alignment effects embedded in their remuneration arrangements;

(r)  variable remuneration is not paid through vehicles or methods that facilitate the avoidance of the requirements of this Directive.

1a.  ESMA shall, in cooperation with the competent authorities, monitor the remuneration policies referred to in Article 14a. In the case of a breach of Article 14a and of this Article, ESMA may act in accordance with its powers under Article 17 of Regulation (EU) No 1095/2010, in particular by addressing recommendations to the competent authorities to prohibit temporarily, or restrict, the application of particular remuneration policies.

1b.  The [UCITS/management company/remuneration committee] shall provide the investors with information in a durable medium on an annual basis setting out the remuneration policy of the UCITS for staff within the scope of Article 14a and describing how the remuneration has been calculated.

1c.  Notwithstanding paragraph 1, Member States shall ensure that the competent authority may require the [UCITS/management company/remuneration committee] to explain in writing how any variable remuneration package is consistent with its obligation to adopt a remuneration policy that:

(a)  promotes sound and effective risk management;

(b)  does not encourage risk taking that is inconsistent with the rules or instruments of incorporation of the UCITS that they manage and/or the risk profile of each such UCITS.

Cooperating closely with EBA, ESMA shall include in its Guidance on remuneration policies how different sectoral remuneration principles, such as those in Directive 2011/61/EU and Directive 2013/36/EU, are to be applied where employees or other categories of personnel perform services subject to different sectoral remuneration principles. [Am. 3]

2.  The principles set out in paragraph 1 shall apply to remuneration of any type paid by the management companies and to any transfer of units or shares of the UCITS, made to the benefits of those categories of staff, including senior management, risk takers, control functions and any employee receiving total remuneration that falls into the remuneration bracket of senior management and risk takers, whose professional activities have a material impact on the risk profile or the risk profiles of the UCITS that they manage.

3.  Management companies that are significant in terms of their size or the size of the UCITS they manage, their internal organisation and the nature, the scope and the complexity of their activities shall establish a remuneration committee. The remuneration committee shall be constituted in a way that enables it to exercise competent and independent judgment on remuneration policies and practices and the incentives created for managing risk.

The remuneration committee set up, where appropriate, in accordance with ESMA guidelines shall be responsible for the preparation of decisions regarding remuneration, including those which have implications for the risk and risk management of the management company or the UCITS concerned and which are to be taken by the management body in its supervisory function. The remuneration committee shall be chaired by a member of the management body who does not perform any executive functions in the management company concerned. The members of the remuneration committee shall be members of the management body who do not perform any executive functions in the management company concerned. The remuneration committee shall include employee representatives and shall ensure that its rules enable shareholders to act in concert. When preparing its decisions, the remuneration committee shall take into account the long-term interest of stakeholders, investors and the public interest."

"

(2)  In Article 20(1), point (a) is replaced by the following:"

"(a) the written contract with the depositary referred to in Article 22(2); "

"

(3)  Article 22 is replaced by the following:"

"Article 22

1.  An investment company and, for each of the common funds it manages, a management company shall ensure that a single depositary is appointed in accordance with the provisions of this Chapter.

2.  The appointment of the depositary shall take the form of a written contract.

That contract shall comprise rules establishing the flow of information deemed necessary to allow the depositary to perform its functions in respect of the UCITS for which it has been appointed as depositary, as set out in this Directive and in other laws, regulations and administrative provisions which are relevant for depositaries in the UCITS home Member State.

3.  The depositary shall:

(a)  ensure that the sale, issue, re-purchase, redemption and cancellation of units of the UCITS are carried out in accordance with the applicable national laws and the fund rules or instruments of incorporation;

(b)  ensure that the value of the units of the UCITS is calculated in accordance with the applicable national laws and the fund rules or the instruments of incorporation;

(c)  carry out the instructions of the management company or an investment company, unless they conflict with the applicable national laws or the fund rules or the instruments of incorporation;

(d)  ensure that in transactions involving the assets of the UCITS any consideration is remitted to the UCITS within the usual time limits;

(e)  ensure that the income of the UCITS is applied in accordance with the applicable national laws and the fund rules or the instruments of incorporation.

4.  The depositary shall ensure that the cash flows of the UCITS are properly monitored, and shall in particular ensure that all payments made by or on behalf of investors upon the subscription of units of the UCITS have been received, and that all cash of the UCITS has been booked in cash accounts that meet the following conditions:

(a)  they are opened in the name of the UCITS or in the name of the management company acting on behalf of the UCITS, or in the name of the depositary acting on behalf of the UCITS;

(b)  they are opened at an entity referred to in points (a), (b) and (c) of Article 18(1) of Commission Directive 2006/73/EC(*) and

(c)  they are maintained in accordance with the principles set out in Article 16 of Directive 2006/73/EC.

Where the cash accounts are opened in the name of the depositary acting on behalf of the UCITS, no cash of the entity referred to in point (b) of the first subparagraph and none of the own cash of the depositary shall be booked on such accounts.

5.  The assets of the UCITS shall be entrusted to the depositary for safe-keeping as follows:

(a)  for financial instruments as defined in Regulation (EU) No .../2013 of the European Parliament and of the Council of ... [on markets in financial instruments (MIFIR)] that may be held in custody, the depositary shall:

(i)  hold in custody all financial instruments that may be registered in a financial instruments account opened in the depositary's books and all financial instruments that can be physically delivered to the depositary;

(ii)  ensure that all those financial instruments that can be registered in a financial instruments account opened in the depositary's books are registered in the depositary's books within segregated accounts in accordance with the principles set out in Article 16 of Directive 2006/73/EC, opened in the name of the UCITS or the management company acting on behalf of the UCITS, so that they can be clearly identified as belonging to the UCITS in accordance with the applicable law at all times;

(b)  for other assets the depositary shall:

(i)  verify the ownership of the UCITS or the management company acting on behalf of the UCITS of such assets by assessing whether the UCITS or the management company acting on behalf of the UCITS holds the ownership based on information or documents provided by the UCITS or the management company and, where available, on external evidence;

(ii)  maintain a record of those assets for which it is satisfied that the UCITS or the management company acting on behalf of the UCITS holds the ownership and keep that record up-to-date.

5a.  The depositary shall provide the management company, on a regular basis, with a comprehensive inventory of all of the assets held in the name of the UCITS.

5b.  The financial instruments held in custody by the depositary shall not be reused by the depositary or by any third party to whom the custody function has been delegated for their own account.

For the purposes of this Article, reuse means any use of financial instruments delivered in one transaction in order to collateralise another transaction including, but not limited to, transferring, pledging, selling and lending.

6.  Member States shall ensure that in the event of insolvency of the depositary or of any regulated entity which holds in custody financial instruments belonging to a UCITS, financial instruments of a UCITS held ▐ in custody are unavailable for distribution among or realisation for the benefit of creditors of the depositary or of the regulated entity.

7.  The depositary shall not delegate to third parties its functions as referred to in paragraphs 3 and 4.

The depositary may delegate to third parties the functions referred to in paragraph 5 only where:

(a)  the tasks are not delegated with the intention of avoiding the requirements of this Directive;

(b)  the depositary can demonstrate that there is an objective reason for the delegation;

(c)  the depositary has exercised all due skill, care and diligence in the selection and the appointment of any third party to whom it wants to delegate parts of its tasks, and keeps exercising all due skill, care and diligence in the periodic review and ongoing monitoring of any third party to whom it has delegated parts of its tasks and of the arrangements of the third party in respect of the matters delegated to it.

The functions referred to in paragraph 5 may be delegated by the depositary only to a third party which at all time during the performance of the tasks delegated to it:

(a)  has structures and expertise that are adequate and proportionate to the nature and complexity of the assets of the UCITS or the management company acting on behalf of the UCITS which have been entrusted to it;

(b)  for custody tasks referred to in point (a) of paragraph 5, is subject to effective prudential regulation, including minimum capital requirements, and supervision in the jurisdiction concerned;

(c)  for custody tasks referred to in ▐ paragraph 5, is subject to an external periodic audit to ensure that the financial instruments are in its possession;

(d)  segregates the assets of the clients of the depositary from its own assets and from the assets of the depositary in such a way that they can at any time be clearly identified as belonging to clients of a particular depositary;

(e)   makes adequate arrangements based on ESMA guidelines so that in the event of insolvency of the third party, assets of a UCITS held by the third party in custody are unavailable for distribution among or realisation for the benefit of creditors of the third party;

(f)  complies with the general obligations and prohibitions set out in paragraph 5 of this Article and in Article 25.

For the purposes of point (e), ESMA shall issue guidelines addressed to competent authorities, in accordance with Article 16 of Regulation (EU) No 1095/2010, concerning adequate arrangements in the event of insolvency of the third party.

Notwithstanding point (b) of the third subparagraph, where the law of a third country requires that certain financial instruments be held in custody by a local entity and no local entities satisfy the delegation requirements laid down in points (a) to (f) of the third subparagraph, the depositary may delegate its functions to such a local entity only to the extent required by the law of the third country and only for as long as there are no local entities that satisfy the delegation requirements, and only where:

(i)   the investors of the relevant UCITS are duly informed that such delegation is required due to legal constraints in the law of the third country, of the circumstances justifying the delegation and of the risks involved in such delegation, prior to their investment;

(ii)  the UCITS, or the management company on behalf of the UCITS, have instructed the depositary to delegate the custody of such financial instruments to such a local entity.

The third party may, in turn, sub-delegate those functions, subject to the same requirements. In such a case, Article 24(2) shall apply mutatis mutandis to the relevant parties.

For the purposes of this paragraph, the provision of services by securities settlement systems as designated by Directive 98/26/EC ▌ or the provision of similar services by third-country securities settlement systems shall not be considered a delegation of its custody functions."

"

(4)  Article 23 is amended as follows:

(a)  paragraphs 2 and 3 are replaced by the following:"

"2. The depositary shall be:

(a)  a credit institution authorised in accordance with Directive 2006/48/EC;

(b)  an investment firm, subject to capital adequacy requirements in accordance with Article 20 ▌of Directive 2006/49/EC including capital requirements for operational risks, authorised in accordance with Directive 2004/39/EC, and which also provides the ancillary service of safe-keeping and administration of financial instruments for the account of clients in accordance with point (1) of Section B of Annex I to Directive 2004/39/EC; such investment firms shall in any case have own funds not less than the amount of initial capital referred to in Article 9 of Directive 2006/49/EC;

(ba)   national central banks and any other category of institution that is subject to prudential regulation and ongoing supervision provided that it is subject to capital requirements as well as to prudential and organisational requirements of the same effect as entities under points (a) and (b).

Investment companies or management companies acting on behalf of the UCITS they manage, that, before [date: transposition deadline set out in Article 2(1) first subparagraph], appointed as a depositary an institution that does not meet the requirements set out in this paragraph, shall appoint a depositary that meets those requirements before [date: 1 year after a deadline set out in Article 2(1) first subparagraph.

3.  Member States shall determine which of the categories of institutions referred to in paragraph 2(ba) is eligible to be depositaries.";

"

(b)   paragraphs 4, 5 and 6 are deleted.

(5)  Article 24 is replaced by the following:"

"Article 24

1.  Member States shall ensure that the depositary shall be liable to the UCITS and to the unit holders of the UCITS for the loss by the depositary or a third party to whom the custody of financial instruments held in custody in accordance with ▐ Article 22(5) has been delegated.

In case of a loss of a financial instrument held in custody, Member States shall ensure that the depositary shall return a financial instrument of identical type or the corresponding amount to the UCITS or the management company acting on behalf of the UCITS without undue delay. The depositary shall not be liable if it can prove that the loss has arisen as a result of an external event beyond its reasonable control, the consequences of which would have been unavoidable despite all reasonable efforts to the contrary.

Member States shall ensure that the depositary shall also be liable to the UCITS, and to the investors of the UCITS, for all other losses suffered as a result of the depositary’s negligent or intentional failure to properly fulfil its obligations pursuant to this Directive.

2.  The liability of the depositary shall not be affected by any delegation referred to in Article 22(7).

3.  The liability of the depositary referred to in paragraph 1 shall not be excluded or limited by agreement.

4.  Any agreement that contravenes the provision of paragraph 3 shall be void.

5.  Unit holders in the UCITS may invoke the liability of the depositary directly or indirectly through the management company.

5a.  Nothing in this Article shall preclude a depositary from making arrangements for the purposes of meeting its liabilities under paragraph 1, provided that such arrangements do not limit or reduce those liabilities or result in a delay in the fulfilment of the depositary's obligations.";

"

(6)  In Article 25, paragraph 2 is replaced by the following:"

"2. In carrying out their respective functions, the management company and the depositary shall act honestly, fairly, professionally, independently and in the interest of the UCITS and the investors of the UCITS.

Neither the depositary nor any of its delegates shall ▐ carry out activities with regard to the UCITS or the management company on behalf of the UCITS that may create conflicts of interest between the UCITS, the investors in the UCITS, the management company and itself, unless the depositary has ensured that there is functional and hierarchical separation of the performance of potentially conflicting tasks, and the potential conflicts of interest are properly identified, managed, monitored and disclosed to the investors of the UCITS."

"

(7)  Article 26 is replaced by the following:"

"Article 26

1.  The law or the fund rules of the common fund shall lay down the conditions for the replacement of the management company and of the depositary and rules to ensure the protection of unit-holders in the event of such replacement.

2.  The law or the instruments of incorporation of the investment company shall lay down the conditions for the replacement of the management company and of the depositary and rules to ensure the protection of unit-holders in the event of such replacement."

"

(8)  The following Articles ▌are inserted:"

"Article 26a

The depositary shall make available to its competent authorities, on request, all information which it has obtained while performing its duties and that may be necessary for the competent authorities of the UCITS or the UCITS management company. If the competent authorities of the UCITS or the management company are different from those of the depositary, the competent authorities of the depositary shall share the information received without delay with the competent authorities of the UCITS and the management company.

Article 26b

1.  The Commission shall be empowered to adopt ▌ delegated acts in accordance with Article 112 ▌ specifying:

(a)  the particulars in relation to this Directive that need to be included in the written contract referred to in Article 22(2);

(b)  the conditions for performing the depositary functions pursuant to Articles 22(3), (4) and (5), including:

(i)  the type of financial instruments to be included in the scope of the custody duties of the depositary in accordance with point (a) of Article 22(5);

(ii)  the conditions subject to which the depositary is able to exercise its custody duties over financial instruments registered with a central depositary;

(iii)  the conditions subject to which the depositary is to safekeep the financial instruments issued in a nominative form and registered with an issuer or a registrar, in accordance with point (b) of Article 22(5);

(c)  the due diligence duties of depositaries pursuant to point (c) of second subparagraph of Article 22(7);

(d)  the segregation obligation pursuant to point (d) of third subparagraph of Article 22(7);

(e)  the conditions subject to which and circumstances in which financial instruments held in custody are to be considered as lost for the purpose of Article 24;

(f)  what is to be understood by external events beyond reasonable control, the consequences of which would have been unavoidable despite all reasonable efforts to the contrary pursuant to the first subparagraph of Article 24(1).

(fa)  the conditions for fulfilling the independence requirement.";

"

(9)  In Article 30, the first paragraph is replaced by the following:"

"Articles 13, 14, 14a and 14b shall apply mutatis mutandis to investment companies that have not designated a management company authorised pursuant to this Directive."

"

(10)  Section 3 of Chapter V is deleted.

(11)  In Article 69(3) the following ▌ subparagraph is added:"

"The annual report shall also contain:

(a)   the total amount of remuneration for the financial year, split into fixed and variable remuneration paid by the management company and by the investment company to its staff, and the number of beneficiaries, and where relevant, the carried interest paid by the UCITS;

(b)   the aggregate amount of remuneration broken down by categories of employees or other members of staff as referred to in Article 14a(3) of the financial group, the management company and, where relevant, of the investment company, whose actions have a material impact on the risk profile of the UCITS."

"

(11a)  in Article 78(3), point (a) is replaced by the following:"

"(a) identification of the UCITS and the competent authority;";

"

(12)  Article 98 is amended as follows:

(a)  In paragraph 2, point (d) is replaced by the following:"

"(d) require existing telephone records, and traffic data as defined in Article 2 second paragraph point (b) of Directive 2002/58/EC of the European Parliament and of the Council 12 July 2002 concerning the processing of personal data and the protection of privacy in the electronic communications sector*, that are held by UCITS, management companies, investment companies or depositories, where a serious suspicion exists that such records related to the subject-matter of the inspection may be relevant to prove a breach by the UCITS, management companies, investment companies or depositories of their obligations under this Directive; these records shall however not concern the content of the communication to which they relate.

___________________

* OJ L 201, 31.7.2002, p. 37. "

"

(b)  The following paragraph ▌is added:"

"3. If a request for records of telephone or data traffic referred to in point (d) of paragraph 2 requires authorisation from a judicial authority according to national rules such authorisation shall be applied for. Such authorisation may also be applied for as a precautionary measure."

"

(13)  Article 99 is replaced by the following:"

"Article 99

1.  Without prejudice to the supervisory powers of competent authorities under Article 98 and without prejudice to the right for Member States to provide for and impose criminal penalties, Member States shall lay down rules on administrative penalties and other measures where the national provisions adopted in the implementation of this Directive have not been complied with, and shall ensure that those measures are applied. The sanctions and measures shall be effective, proportionate and dissuasive.

2.  Member States shall ensure that where obligations apply to UCITS, management companies, investment companies or depositaries, in case of a breach, sanctions or measures may be applied to the members of the management body, and to any other individuals who under national law are responsible for the breach.

3.  Competent authorities shall be given all investigatory powers that are necessary for the exercise of their functions. In the exercise of their powers, competent authorities shall cooperate closely to ensure that sanctions or measures produce the desired results and coordinate their action when dealing with cross border cases."

"

(14)  The following articles ▌are inserted:"

"Article 99a

1.  Member States shall ensure that their laws, regulations or administrative provisions provide for penalties in respect of:

(a)  the activities of UCITS are pursued without obtaining authorisation in breach of Article 5;

(b)  the business of a management company is carried on without obtaining prior authorisation in breach of Article 6;

(c)  the business of an investment company is carried on without obtaining prior authorisation in breach of Article 27;

(d)  a qualifying holding in a management company is acquired, directly or indirectly, or such a qualifying holding in a management company is further increased so that the proportion of the voting rights or of the capital held would reach or exceed 20%, 30% or 50% or so that the management company would become its subsidiary (hereinafter referred to as the proposed acquisition), without notifying in writing the competent authorities of the management company in which the acquirer is seeking to acquire or increase a qualifying holding in breach of Article 11(1);

(e)  a qualifying holding in a management company is disposed of, directly or indirectly, or reduced so that the proportion of the voting rights or of the capital held would fall below 20%, 30% or 50% or so that the management company would cease to be a subsidiary, without notifying in writing the competent authorities, in breach of Article 11(1);

(f)  a management company has obtained an authorisation through false statements or any other irregular means in breach of Article 7(5)(b);

(g)  an investment company has obtained an authorisation through false statements or any other irregular means in breach of Article 29(4)(b);

(h)  a management company, on becoming aware of any acquisition or disposal of holdings in their capital that cause holdings to exceed or fall below one of the thresholds referred to in Article 11(10) of Directive 2004/39/EC, fails to inform the competent authorities of those acquisitions or disposals in breach of Article 11(1);

(i)  a management company fails to, at least once a year, inform the competent authority of the names of shareholders and members possessing qualifying holdings and the sizes of such holdings in breach of Article 11(1);

(j)  a management company fails to comply with procedures and arrangements imposed in accordance with the national provisions implementing Article 12(1)(a);

(k)  a management company fails to comply with structural and organisational requirements imposed in accordance with the national provisions implementing Article 12(1)(b);

(l)  an investment company fails to comply with procedures and arrangements imposed in accordance with the national provisions implementing Article 31;

(m)  a management company or an investment company fails to comply with requirements related to delegation of its functions to third parties imposed in accordance with the national provisions implementing Articles 13 and 30;

(n)  a management company or an investment company fails to comply with rules of conduct imposed in accordance with the national provisions implementing Articles 14 and 30;

(o)  a depositary fails to perform its tasks in accordance with national provisions implementing paragraphs (3) to (7) of Article 22;

(p)  an investment company and, for each of the common fund it manages, a management company repeatedly fails to comply with obligations concerning the investment policies of UCITS set out by national provisions implementing Chapter VII;

(q)  a management company or an investment company fails to employ a risk management process and a process for accurate and independent assessment of the value of OTC derivatives as set out in national provisions implementing Article 51(1);

(r)  an investment company and, for each of the common fund it manages, a management company repeatedly fails to comply with obligations concerning information to be provided to investors imposed in accordance with the national provisions implementing Articles 68 to 82;

(s)  a management company or an investment company marketing units of UCITS it manages in a Member State other than the UCITS home Member State fails to comply with the notification requirement set out in Article 93(1).

2.  Member States shall ensure that in all cases referred to in paragraph 1, the administrative sanctions and measures that may be applied include at least the following:

(a)  a public warning or statement which indicates the natural or legal person and the nature of the breach;

(b)  issuing an order requiring the natural or legal person to cease the conduct and to desist from a repetition of that conduct;

(c)  in case of a management company or a UCITS, withdrawal of the authorisation of the management company or the UCITS;

(d)  imposing a temporary or permanent ban against any member of the management company's or the investment company's management body or any other natural person, who is held responsible, to exercise functions in those or in other companies;

(e)  in case of a legal person, imposing effective, proportionate and dissuasive administrative pecuniary sanctions ▌;

(f)  in case of a natural person, imposing effective, proportionate and dissuasive administrative pecuniary sanctions ▌;

(g)  imposing administrative pecuniary sanctions of up to ten times the amount of the profits gained or losses avoided because of the breach where those can be determined.

Article 99b

Member States shall ensure that the competent authorities publish any sanction or measure imposed for breach of the national provisions adopted for the transposition of this Directive without undue delay, including information on the type and nature of the breach and the identity of persons responsible for it, unless such publication would seriously jeopardise the stability of financial markets. Where publication would cause a disproportionate damage to the parties involved, competent authorities shall publish the sanction or measure imposed on an anonymous basis.

Article 99c

1.  Member States shall ensure that when determining the type of administrative sanctions or measures and the level of administrative pecuniary sanctions, the competent authorities ensure that they are effective, proportionate and dissuasive and take into account all relevant circumstances, including:

(a)  the gravity and the duration of the breach;

(b)  the degree of responsibility of the responsible natural or legal person;

(c)  the financial strength of the responsible natural or legal person, as indicated by the total turnover of the responsible legal person or the annual income of the responsible natural person;

(d)  the importance of profits gained or losses avoided by the responsible natural or legal person, the damage to other persons and, where applicable, the damage to the functioning of markets or the wider economy insofar as they can be determined;

(e)  the level of cooperation of the responsible natural or legal person with the competent authority;

(f)  previous breaches by the responsible natural or legal person.

2.  ESMA shall issue guidelines addressed to competent authorities in accordance with Article 16 of Regulation (EU) No 1093/2010 on types of administrative measures and sanctions and level of administrative pecuniary sanctions.

Article 99d

1.  Member States shall ensure that competent authorities establish effective mechanisms to encourage reporting of breaches of the national provisions transposing this Directive to competent authorities and that the competent authorities provide one or more secure communication channels for persons to provide notification of such breaches. Member States shall ensure that the identity of the persons making such notifications by way of those channels is known only to the competent authority.

2.  The mechanisms referred to in paragraph 1 shall include at least:

(a)  specific procedures for the receipt of reports on breaches and their follow-up;

(b)  appropriate protection for employees of investment companies and management companies who report breaches committed within the company;

(c)  protection of personal data concerning both the person who reports the breaches and the natural person who is allegedly responsible for a breach, in compliance with the principles laid down in Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data*.

2a.  ESMA shall provide one or more secure communication channels for the notification of breaches of the national provisions transposing this Directive. Member States shall ensure that the identity of the persons making such notification by way of those channels is known only to ESMA.

2b.  The notification in good faith to ESMA or to the competent authority of a breach of the national provisions transposing this Directive pursuant to paragraph 2a shall not constitute a breach of any restriction on disclosure of information imposed by contract or by any law, regulation or administrative provision, and shall not involve the person making that notification in liability of any kind relating to such notification.

3.  Member states shall require institutions to have in place appropriate procedures for their employees to report breaches internally through a specific channel.

Article 99e

1.  Member States shall provide ESMA annually with aggregated information regarding all measures or sanctions imposed in accordance with Article 99. ESMA shall publish this information in an annual report.

2.  Where the competent authority has published a measure or sanction, it shall also report the measures or sanctions to ESMA. Where a published measure or sanction relates to a management company, ESMA shall add a reference to the published measure or sanction in the list of management companies published under Article 6(1).

3.  ESMA shall develop draft implementing technical standards concerning the procedures and forms for submitting information as referred to in this Article.

ESMA shall submit those draft implementing technical standards to the Commission by ...

Power is conferred on the Commission to adopt the implementing technical standards referred to in the first subparagraph in accordance with Article 15 of Regulation (EU) No 1095/2010.

_________________________

* OJ L 281, 23.11.1995, p. 31.";

"

(15)  The following Article is inserted:"

"Article 104a

1.  Member State shall apply Directive 95/46/EC to the processing of personal data carried out in the Member State pursuant to this Directive.

2.  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* shall apply to the processing of personal data carried out by ESMA pursuant to this Directive.

_________________________

* OJ L 8, 12.1.2001, p. 1."

"

(16)  In Article 112, paragraph 2 is replaced by the following:"

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

The power to adopt delegated acts referred to in Articles 12, 14, 43, 51, 60, 61, 62, 64, 75, 78, 81, 90, 95 and 111 shall be conferred on the Commission for a period of four years from 4 January 2011.

The power to adopt the delegated acts referred to in Article 50a shall be conferred on the Commission for a period of four years from 21 July 2011.

The power to adopt the delegated acts referred to in Articles 22 and 24 shall be conferred on the Commission for a period of four years from […]. The Commission shall draw up a report in respect of delegated powers not later than six months before the end of the four-year period. The delegation of power shall be automatically extended for periods of an identical duration, unless the European Parliament or the Council revokes them in accordance with Article 112a."

"

(17)  In Article 112a, paragraph 1 is replaced by the following:"

"1. The delegation of power referred to in Articles 12, 14, 22, 24, 43, 50a, 51, 60, 61, 62, 64, 75, 78, 81, 90, 95 and 111 may be revoked at any time by the European Parliament or by the Council."

"

(18)  Annex I is amended as set out in the Annex to this Directive

Article 2

1.  Member States shall adopt and publish, by […] at the latest, the laws, regulations and administrative provisions necessary to comply with this Directive. They shall forthwith communicate to the Commission the text of those provisions.

They shall apply the laws, regulations and administrative provisions referred to in paragraph 1 from […].

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.

Where the documents accompanying notification of transposition measures by the Member States are not sufficient to assess fully the compliance of those measures with certain provisions of this Directive, the Commission may, upon a request by ESMA in view to carrying out its tasks under Regulation (EU) No 1095/2010, or on its own initiative, require Member States to provide more detailed information regarding the transposition of this Directive and implementation of those measures.

Article 3

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

This Directive is addressed to the Member States.

Done at ...,

For the European Parliament For the Council

The President The President

ANNEX

In Annex I, point 2 of the Schedule A is replaced by the following;

"2. Information concerning the depositary:

2.1.  The identity of the depositary of the UCITS and a description of its duties;

2.2.  A description of any safe-keeping functions delegated by the depositary, and any conflicts of interest that may arise from such delegation.

Information on all entities involved in providing custody of the fund's assets, together with conflicts of interest that may arise, is available on request from the depositary."

(1) The matter was referred back to the committee responsible for reconsideration pursuant to Rule 57(2), second subparagraph (A7-0125/2013).
(2)*Amendments: new or amended text is highlighted in bold italics; deletions are indicated by the symbol ▌.
(3)OJ C 96, 4.4.2013, p. 18.
(4)OJ L 302, 17.11.2009, p. 32.
(5)OJ L 120, 15.5.2009, p. 22.
(6)OJ L 331, 15.12.2010, p. 84.
(7)OJ L 331, 15.12.2010, p. 12.
(8)OJ L 174, 1.7.2011, p. 1.
(9)OJ L 241, 2.9.2006, p. 26.
(10)OJ L 302, 17.11.2009, p. 1.
(11)OJ L 166, 11.6.1998, p. 45.
(12)OJ L 84, 26.3.1997, p. 22.
(13)OJ C 369, 17.12.2011, p. 14.


Timing of auctions of greenhouse gas allowances ***I
PDF 189kWORD 20k
Amendment adopted by the European Parliament on 3 July 2013 on the proposal for a decision of the European Parliament and of the Council amending Directive 2003/87/EC clarifying provisions on the timing of auctions of greenhouse gas allowances (COM(2012)0416 – C7-0203/2012 – 2012/0202(COD))(1)
P7_TA(2013)0310A7-0046/2013

(Ordinary legislative procedure: first reading)

Text proposed by the Commission   Amendment
Amendment 21
Proposal for a decision
Article 1
Directive 2003/87/EC
Article 10 – paragraph 4 – subparagraph 1 – last sentence
The Commission shall, where appropriate, adapt the timetable for each period so as to ensure an orderly functioning of the market.
Where an assessment shows for the individual industrial sectors that no significant impact on sectors or subsectors exposed to a significant risk of carbon leakage is to be expected, the Commission may, in exceptional circumstances, adapt the timetable for the period referred to in Article 13(1) beginning on 1 January 2013 so as to ensure an orderly functioning of the market. The Commission shall make no more than one such adaptation for a maximum number of 900 million allowances.

(1) The matter was referred back to the committee responsible for reconsideration pursuant to Rule 57(2), second subparagraph (A7-0046/2013).


Serious cross-border threats to health ***I
PDF 196kWORD 22k
Resolution
Text
European Parliament legislative resolution of 3 July 2013 on the proposal for a decision of the European Parliament and of the Council on serious cross-border threats to health (COM(2011)0866 – C7-0488/2011 – 2011/0421(COD))
P7_TA(2013)0311A7-0337/2012

(Ordinary legislative procedure: first reading)

The European Parliament,

–  having regard to the Commission proposal to Parliament and the Council (COM(2011)0866),

–  having regard to Article 294(2) and Article 168(4)(c) and 168(5) of the Treaty on the Functioning of the European Union, pursuant to which the Commission submitted the proposal to Parliament (C7–0488/2011),

–  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 28 March 2012(1),

–  after consulting the Committee of the Regions,

–  having regard to the undertaking given by the Council representative by letter of 28 May 2013 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 55 of its Rules of Procedure,

–  having regard to the report of the Committee on the Environment, Public Health and Food Safety (A7-0337/2012),

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

2.  Calls on the Commission to refer the matter to Parliament again if it intends to amend its proposal substantially or replace it with another text;

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 3 July 2013 with a view to the adoption of Decision No .../2013/EU of the European Parliament and of the Council on serious cross-border threats to health and repealing Decision No 2119/98/EC

P7_TC1-COD(2011)0421


(As an agreement was reached between Parliament and Council, Parliament's position corresponds to the final legislative act, Decision No 1082/2013/EU.)

(1) OJ C 181, 21.6.2012, p. 160.


Implementing enhanced cooperation in the area of financial transaction tax *
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European Parliament legislative resolution of 3 July 2013 on the proposal for a Council directive implementing enhanced cooperation in the area of financial transaction tax (COM(2013)0071 – C7-0049/2013 – 2013/0045(CNS))
P7_TA(2013)0312A7-0230/2013

(Special legislative procedure – consultation)

The European Parliament,

–  having regard to the Commission proposal to the Council (COM(2013)0071),

–  having regard to Article 113 of the Treaty on the Functioning of the European Union , pursuant to which the Council consulted Parliament (C7-0049/2013),

–  having regard to Rule 55 of its Rules of Procedure,

–  having regard to the report of the Committee on Economic and Monetary Affairs and the opinion of the Committee on Budgets (A7-0230/2013),

1.  Approves the Commission proposal as amended;

2.  Calls on the Commission to demonstrate, in a comprehensive impact assessment and cost-benefit analysis, that any enhanced cooperation will respect the competences, rights and obligations of non-participating Member States;

3.  Calls on the Commission to alter its proposal accordingly, in accordance with Article 293(2) of the Treaty on the Functioning of the European Union;

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

5.  Asks the Council to consult Parliament again if it intends to substantially amend the Commission proposal;

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

Text proposed by the Commission   Amendment
Amendment 1
Proposal for a directive
Recital 1
(1)  In 2011, the Commission took note of a debate on-going at all levels on additional taxation of the financial sector. The debate originates from the desire to ensure that the financial sector fairly and substantially contributes to the costs of the crisis and that it is taxed in a fair way vis-à-vis other sectors for the future, to dis-incentivise excessively risky activities by financial institutions, to complement regulatory measures aimed at avoiding future crises and to generate additional revenue for general budgets or specific policy purposes.
(1)  In 2011, the Commission took note of a debate on-going at all levels on additional taxation of the financial sector. The debate originates from the desire to ensure that the financial sector fairly and substantially contributes to the costs of the crisis and that it is taxed in a fair way vis-à-vis other sectors for the future, to dis-incentivise excessively risky activities by financial institutions, to complement regulatory measures aimed at avoiding future crises and reducing speculation, and to generate additional revenue for general budgets, inter alia as a contribution to fiscal consolidation or specific policy purposes towards sustainability and the stimulation of growth, education and employment with particular focus on youth employment. The introduction of a financial transaction tax (FTT) thus shows a positive distribution and steering capacity by appropriately supplementing existing regulatory reform initiatives.
Amendment 2
Proposal for a directive
Recital 1 a (new)
(1a)  According to the European Council's conclusions of 8 February 2013 on the Multiannual Financial Framework 2014-2020, part of the revenues from FTT should be allocated to the Union budget as genuine own resources. The use of FTT revenue as Union own resources is possible under the enhanced cooperation procedure only if national contributions of participating Member States to the Union budget would be reduced by the same amount and would avoid the disproportionate contribution by participating Member States compared to non-participating Member States. Once FTT is implemented at Union level, all or part of the amount of the own resources originating from FTT should be added to the national contributions of the Member States in order to gather new funding sources for European investment without a reduction of the national contributions of the participating Member States to the Union budget..
Amendment 3
Proposal for a directive
Recital 1 b (new)
(1b)  Prior to the introduction of FTT the Commission should demonstrate that enhanced cooperation will not undermine the internal market or economic, social and territorial cohesion. It should also demonstrate that it neither constitutes a barrier to, or discrimination in relation to, trade between Member States, nor distorts competition between them. The Commission should present a new robust analysis and impact assessment, of the consequences the proposal for a common FTT on participating and non-participating Member States and on the internal market as a whole.
Amendment 4
Proposal for a directive
Recital 2 a (new)
(2a)  FTT will truly achieve its objectives only if it is introduced at global level. The enhanced cooperation of 11 Member States therefore constitutes a first step towards FTT at Union-level and, ultimately, at a global level. The Union will continuously advocate the global introduction of FTT and will urge for FTT to be put on the agenda of G-20 and G-8 summits.
Amendment 5
Proposal for a directive
Recital 3
(3)  In order to prevent distortions through measures taken unilaterally by the participating Member States, bearing in mind the extremely high mobility of most of the relevant financial transactions, and thus to improve the proper functioning of the internal market, it is important that the basic features of a FTT in the participating Member States are harmonised at Union level. Incentives for tax arbitrage between the participating Member States and allocation distortions between financial markets in those States, as well as possibilities for double or non-taxation should thereby be avoided.
(3)   Several of the 11 participating Member States have already established, or are in the process of establishing, a form of FTT. In order to prevent distortions through measures taken unilaterally by the participating Member States, bearing in mind the extremely high mobility of most of the relevant financial transactions, and thus to improve the proper functioning of the internal market, it is important that the basic features of a FTT in the participating Member States are harmonised at Union level. Incentives for tax arbitrage between the participating Member States and allocation distortions between financial markets in those States, as well as possibilities for double or non-taxation should thereby be avoided.
Amendment 6
Proposal for a directive
Recital 3 a (new)
(3a)  In light of the substantial progress with regard to European financial market regulation, such as 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 648/20122, Directive 2013/36/EU and this Directive, participating Member States that have introduced banking levies in light of the recent financial crisis should review the necessity of such taxes and their compatibility with the rules and the aims of Union law and the internal market.
2. OJ L 176, 27.6.2013, p. 1.
Amendment 7
Proposal for a directive
Recital 3 b (new)
(3b)  Any harmonisation of FTT amongst participating Member States should not result in extra-territorial taxation infringing the potential tax base of non-participating Member States.
Amendment 8
Proposal for a directive
Recital 4
(4)  The improvement of the operation of the internal market, in particular the avoidance of distortions between the participating Member States requires that a FTT applies to a broadly determined range of financial institutions and transactions, to trade in a wide range of financial instruments, including structured products, both in the organised markets and over-the-counter, as well as to the conclusion of all derivative contracts and to material modifications of the operations concerned.
(4)  The improvement of the operation of the internal market, in particular the avoidance of distortions between the participating Member States, the reduction of the possibility for tax fraud, tax evasion and aggressive tax planning, the risk of relocation of risk and regulatory arbitrage, requires that FTT should apply to a broadly determined range of financial institutions and transactions, to trade in a wide range of financial instruments, including structured products, both in the organised markets and over-the-counter, as well as to the conclusion of all derivative contracts, including contracts for difference, currency spot exchange markets and speculative forward transactions, and to material modifications of the operations concerned.
Amendment 9
Proposal for a directive
Recital 8
(8)  With the exception of the conclusion or material modification of derivative contracts, the trade on primary markets and transactions relevant for citizens and businesses such as conclusion of insurance contracts, mortgage lending, consumer credits or payment services should be excluded from the scope of FTT, so as not to undermine the raising of capital by companies and governments and to avoid impact on households.
(8)  With the exception of the conclusion or material modification of derivative contracts, the trade on primary markets and transactions relevant for citizens and businesses such as conclusion of insurance contracts, mortgage lending, consumer credits or payment services should be excluded from the scope of FTT, so as not to undermine the raising of capital by companies and governments and to avoid a negative impact on households and the real economy.
Amendment 10
Proposal for a directive
Recital 13 a (new)
(13a)  With a view to strengthening the position of regulated markets, and in particular of stock exchange trading, which is strictly regulated, controlled and transparent, as opposed to unregulated, less controlled and less transparent over-the-counter (OTC) trading, Member States should apply higher tax rates to OTC transactions. This will make it possible to effect a shift in trading from markets with little or no regulation to regulated markets. The higher rates should not apply to financial transactions of OTC derivatives where they objectively reduce risks and therefore serve the real economy.
Amendment 11
Proposal for a directive
Recital 15 a (new)
(15a)  Non-financial enterprises execute significant transactions on financial markets in order to reduce risks directly associated with their commercial business. FTT should not apply to those institutions when they execute such transactions. However, where non-financial enterprises engage in speculative transactions that are not associated with the reduction of risk in their commercial activities, they should be treated as financial institutions and FTT should apply to them.
Amendment 12
Proposal for a directive
Recital 15 b (new)
(15b)  In order to make tax avoidance a high-cost and low-profit venture and to ensure better enforcement, the residence and issuance principle should be complemented by the ‘transfer of legal title principle’.
Amendment 13
Proposal for a directive
Recital 15 c (new)
(15c)  Where appropriate, the Commission should enter into negotiations with third countries in order to facilitate the collection of FTT. The Commission should also revise its definition of uncooperative jurisdictions and should update its action plan against tax fraud, tax evasion and aggressive tax planning accordingly.
Amendment 14
Proposal for a directive
Recital 16
(16)  The minimum tax rates should be set at a level sufficiently high for the harmonisation objective of a common FTT to be achieved. At the same time, they have to be low enough so that delocalisation risks are minimised.
deleted
Amendment 15
Proposal for a directive
Recital 19
(19)  In order to prevent tax fraud and evasion the participating Member States should be obliged to adopt appropriate measures.
(19)  In order to prevent tax fraud, tax evasion and aggressive tax planning, such as substitution, the participating Member States should be obliged to adopt appropriate measures.
Amendment 16
Proposal for a directive
Recital 19 a (new)
(19a)  The Commission should establish an expert working group (FTT Committee) comprising representatives from all Member States, the Commission, the European Central Bank (ECB) and the European Supervisory Authority (European Securities and Markets Authority) (ESMA) to assess the effective implementation of this Directive and prevent tax fraud, tax evasion and aggressive tax planning and to preserve the integrity of the internal market. The FTT Committee should supervise financial transactions in order to detect abusive arrangements as defined in Article 14, to propose countermeasures in a duly manner and to coordinate the implementation of those countermeasures at national level if required. It should make full use of Union law in the field of taxation and financial services regulation and of the instruments for cooperation on tax matters established by international organisations including the OECD and the Council of Europe. Where appropriate, the representatives of the participating Member States should be able to form a sub-group in order to address matters that do not affect the non-participating Member States regarding implementation of FTT.
Amendment 17
Proposal for a directive
Recital 19 b (new)
(19b)  Member States have an obligation to cooperate at administrative level in the field of taxation pursuant to Directive 2011/16/EU and to give each other mutual assistance for the recovery of claims relating to taxes, duties and other measures pursuant to Directive 2010/24/EU.
Amendment 18
Proposal for a directive
Recital 21
(21)  In order to allow the adoption of more detailed rules in certain technical areas, regarding registration, accounting, reporting obligations and other obligations intended to ensure that FTT due to the tax authorities is effectively paid to the tax authorities, and their timely adaptation as appropriate, 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 in respect of specifying the measures necessary to this effect. It is of particular importance that the Commission carries out appropriate consultations during its preparatory work, including at expert level. The Commission, when preparing and drawing-up delegated acts, should ensure a timely and appropriate transmission of relevant documents to the Council.
(21)  In order to allow the adoption of more detailed rules in certain technical areas, regarding registration, accounting, reporting obligations and other obligations intended to ensure that FTT due to the tax authorities is effectively paid to the tax authorities, and their timely adaptation as appropriate, 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 in respect of specifying the measures necessary to this effect. It is of particular importance that the Commission carries out appropriate consultations during its preparatory work, including at expert level. The Commission, when preparing and drawing-up delegated acts, should ensure a simultaneous, timely and appropriate transmission of relevant documents to the European Parliament and to the Council.
Amendment 19
Proposal for a directive
Article 2 – paragraph 1 – point 2 – point c
(c) the conclusion of derivatives contracts before netting or settlement;
(c) the conclusion of derivatives contracts, including contracts for difference and speculative forward transactions, before netting or settlement;
Amendment 20
Proposal for a directive
Article 2 – paragraph 1 – point 2 – point c a (new)
(ca) currency spots on the foreign exchange markets;
Amendment 21
Proposal for a directive
Article 2 – paragraph 1 – point 2 – point e
(e) a repurchase agreement, a reverse repurchase agreement, a securities lending and borrowing agreement;
(e) a repurchase agreement, a reverse repurchase agreement, a securities lending and borrowing agreement, including cancelled orders made when engaging in high-frequency trading;
Amendment 22
Proposal for a directive
Article 2 – paragraph 1 – point 3 a (new)
(3a) ‘sovereign issuer’ means a sovereign issuer as defined in point (d) of Article 2(1) of Regulation (EU) No 236/2012;
Amendment 23
Proposal for a directive
Article 2 – paragraph 1 – point 3 b (new)
(3b) ‘sovereign debt’ means a sovereign debt as defined in point (f) Article 2(1) of Regulation (EU) No 236/2012;
Amendment 24
Proposal for a directive
Article 2 – paragraph 1 – point 7 a (new)
(7a) 'SME growth market' means a multi-trading facility that is registered as an SME growth market in accordance with Article 35 of Directive [MiFID];
Amendment 25
Proposal for a directive
Article 2 – paragraph 1 – point 12 a (new)
(12a) 'high-frequency trading' means algorithmic trading in financial instruments at speeds where the physical latency of the mechanism for transmitting, cancelling or modifying orders becomes the determining factor in the time taken to communicate the instruction to a trading venue or to execute a transaction;
Amendment 26
Proposal for a directive
Article 2 – paragraph 1 – point 12 b (new)
(12b) 'high-frequency trading strategy' means a trading strategy for dealing on own account in a financial instrument which involves high-frequency trading and has at least two of the following characteristics:
(i) it uses co-location facilities, direct market access or proximity hosting;
(ii) it relates to a daily portfolio turnover of at least 50 %;
(iii) the proportion of orders cancelled (including partial cancellations) exceeds 20 %;
(iv) the majority of positions taken are unwound within the same day;
(v) over 50 % of the orders or transactions made on trading venues offering discounts or rebates to orders which provide liquidity are eligible for such rebates.
Amendment 27
Proposal for a directive
Article 2 – paragraph 2
2.  Each of the operations referred to in points (a), (b), (c) and (e) of paragraph 1(2) shall be considered to give rise to a single financial transaction. Each exchange as referred to in point (d) thereof shall be considered to give rise to two financial transactions. Each material modification of an operation as referred to in points (a) to (e) of paragraph 1(2) shall be considered to be a new operation of the same type as the original operation. A modification is considered to be material in particular where it involves a substitution of at least one party, in case the object or scope of the operation, including its temporal scope, or the consideration agreed upon is altered, or where the original operation would have attracted a higher tax had it been concluded as modified.
2.  Each of the operations referred to in points (a), (b), (c) and (e) of paragraph 1(2) shall be considered to give rise to a single financial transaction. Each exchange as referred to in point (d) thereof shall be considered to give rise to two financial transactions. Each material modification of an operation as referred to in points (a) to (e) of paragraph 1(2) shall be considered to be a new operation of the same type as the original operation. A modification is considered to be material in particular where it involves a substitution of at least one party, in case the object or scope of the operation, including its temporal scope, or the consideration agreed upon is altered, or where the original operation would have attracted a higher tax had it been concluded as modified. Any novation of transactions carried out for the purposes of clearing or settlement by a CCP or by another clearing house or settlement system operator or interoperable systems as defined in Directive 98/26/EC shall not constitute a material modification under this paragraph.
Amendment 28
Proposal for a directive
Article 2 – paragraph 3 – point d
(d) where the average annual value of financial transactions in two consecutive calendar years does not exceed fifty per cent of the overall average net annual turnover, as defined in Article 28 of Directive 78/660/EEC, the undertaking, institution, body or person concerned shall be entitled, upon request, to be considered as not being or no longer being a financial institution.
(d) where the average annual value of financial transactions in two consecutive calendar years does not exceed 20 % of the overall average net annual turnover, as defined in Article 28 of Directive 78/660/EEC, the undertaking, institution, body or person concerned shall be entitled, upon request, to be considered as not being or no longer being a financial institution.
Amendment 29
Proposal for a directive
Article 2 – paragraph 3 – point d a (new)
(da) the calculation of the average annual value of financial transactions referred to in that point shall not take account of financial transactions concerning non-OTC derivative contracts which meet one of the criteria referred to in Article 10 of Commission Delegated Regulation (EU) No 149/2013 of 19 December 2012 supplementing Regulation (EU) No 648/2012 of the European Parliament and of the Council with regard to regulatory technical standards on indirect clearing arrangements, the clearing obligation, the public register, access to a trading venue, non-financial counterparties, and risk mitigation techniques for OTC derivatives contracts not cleared by a CCP1.
1OJ L 52, 23.2.2013, p. 11.
Amendment 30
Proposal for a directive
Article 3 – paragraph 1 a (new)
1a.  In the event of the implementation of FTT in Member States other than the 11 participating Member States, it will be extended to those other Member States on mutual terms.
Amendment 31
Proposal for a directive
Article 3 – paragraph 2 – point a
(a)  Central Counter Parties (CCPs) where exercising the function of a CCP;
(a)  Central Counter Parties (CCPs) where exercising the function of a CCP, or other clearing houses, settlement agents or systems, as defined in Directive 98/26/EC, where exercising their function of clearing, including any possible novation, or settlement;
Amendment 32
Proposal for a directive
Article 3 – paragraph 2 – point c a (new)
(ca)  SME growth markets;
Amendment 33
Proposal for a directive
Article 3 – paragraph 2 – point cb (new)
(cb)  A person who holds himself out on the financial markets on a continuous basis as being willing to deal on own account by buying and selling financial instruments against his proprietary capital (market maker),when performing an essential function with regard to illiquid bonds and shares in his role of liquidity provider, as provided for in the agreement between the market maker and the organised venue where the financial transaction is carried out, where that transaction is not part of a high-frequency trading strategy.
Amendment 34
Proposal for a directive
Article 3 – paragraph 2 – subparagraph 1 a (new)
The Commission shall adopt, in accordance with Article 16, delegated acts specifying the conditions under which a financial instrument will be deemed to be illiquid for the purposes of this Directive.

Amendment 35
Proposal for a directive
Article 3 – paragraph 4 – point g a (new)
(ga) the transfer of the right to dispose of a financial instrument as owner and any equivalent operation implying the transfer of the risk associated with the financial instrument between entities of a group or between entities of a network of decentralised banks, where these transfers are carried out in order to fulfil a legal or prudential liquidity requirement that is set by national or Union law.
Amendment 36
Proposal for a directive
Article 4 – paragraph 1 – point e a (new)
(ea) it is a branch of an institution established in a participating Member State pursuant to point (c);
Amendment 37
Proposal for a directive
Article 4 – paragraph 1 – point g
(g) it is party, acting either for its own account or for the account of another person, or is acting in the name of a party to the transaction, to a financial transaction in a structured product or one of the financial instruments referred to in Section C of Annex I of Directive 2004/39/EC issued within the territory of that Member State, with the exception of instruments referred to in points (4) to (10) of that Section which are not traded on an organised platform.
(g) it is party, acting either for its own account or for the account of another person, or is acting in the name of a party to the transaction, to a financial transaction in a structured product or one of the financial instruments referred to in Section C of Annex I of Directive 2004/39/EC issued within the territory of that Member State.
Amendment 38
Proposal for a directive
Article 4 – paragraph 2 a (new)
2a.  For the purposes of this Directive, a financial instrument shall be deemed to be issued within the territory of a participating Member State where any of the following conditions is fulfilled:
(a) it is a security or a derivative relating to such security and the registered office of the issuer of the security is located in that Member State;
(b) it is a derivative other than one referred to in point (a) and is admitted to trading in an organised platform and the public law governing the trading conducted under the systems of the platform is the law of that Member State;
(c) it is a financial instrument other than one referred to in point (a) or (b), which is cleared by a CCP or other clearing houses or settlement agents or systems as defined by Directive 98/26/EC where the law governing the CCP or the system concerned is the law of that Member State;
(d) it is a financial instrument other than one referred to in point (a), (b) or (c), and the applicable law relating to the agreement under which the transaction in the relevant financial instrument has been carried out is the law of that Member State;
(e) it is a structured instrument and at least 50% of the value of assets backing the structured instrument are referring to financial instruments issued by a legal person that is registered in a participating Member State.
Amendment 39
Proposal for a directive
Article 4 a (new)
Article 4a

Transfer of legal title

1.  A financial transaction in relation to which no FTT has been levied shall be deemed legally unenforceable and shall not result in a transfer of legal title of the underlying instrument.
2.  A financial transaction in relation to which no FTT has been levied shall be deemed not to fulfil the requirements for central clearing under Regulation (EU) No 648/2012 of the European Parliament and the Council of 4 July 2012 on OTC derivatives, central counterparties and trade repositories1 or the own funds requirements under Regulation (EU) No 575/2013 of the European Parliament and the Council of 27 June 2013 on prudential requirements for credit institutions and investment firms.
3.  In the event of automatic electronic payment schemes with or without the participation of payment settlement agents, revenue authorities of a Member State may establish a system of automatic electronic collection of FTT and certificates for transferring legal title.
1. OJ L 201, 27.7.2012, p. 1.
Amendment 40
Proposal for a directive
Article 9 – paragraph 2 – subparagraph 2
Those rates shall not be lower than:

Those rates shall be:

(a) 0.1% in respect of the financial transactions referred to in Article 6;
(a) 0.1% in respect of the financial transactions referred to in Article 6 except for those referred to in point (5) of Article 2(1). with a maturity of up to three months;
(b) 0.01% in respect of financial transactions referred to in Article 7.
(b) 0.01% in respect of financial transactions referred to in Article 7;
(ba) 0,01% in respect of the financial transactions referred to in point (5) of Article 2(1) with a maturity of up to three months.
Amendment 41
Proposal for a directive
Article 9 – paragraph 3 a (new)
3a.  Notwithstanding paragraph 3, participating Member States shall apply a higher rate than those specified in paragraph 2 to OTC financial transactions referred to in Articles 6 and 7. Financial transactions of OTC derivatives which are objectively measurable as reducing risks as defined by Article 10 of Commission Delegated Regulation (EU) No 149/2013 shall not be subject to that higher rate.
Amendment 42
Proposal for a directive
Article 11 – paragraph 2
2.  The Commission may, in accordance with Article 16 adopt delegated acts specifying the measures to be taken pursuant to paragraph 1 by the participating Member States.
2.  The Commission shall, in accordance with Article 16 adopt delegated acts specifying the measures to be taken pursuant to paragraph 1 by the participating Member States.
Amendment 43
Proposal for a directive
Article 11 – paragraph 5 – subparagraph 2
The Commission may adopt implementing acts providing for uniform methods of collection of the FTT due. Those implementing acts shall be adopted in accordance with the examination procedure referred to in Article 18(2).

The Commission shall adopt implementing acts providing for uniform methods of collection of the FTT due and prevention of tax fraud, tax evasion and aggressive tax planning. Member States may adopt additional measures. Those implementing acts shall be adopted in accordance with the examination procedure referred to in Article 18(2).

Amendment 44
Proposal for a directive
Article 11 – paragraph 6 a (new)
6a.  The administrative burden imposed on tax authorities through the introduction of FTT shall be kept to a minimum. To that end, the Commission shall encourage cooperation between national tax authorities.
Amendment 45
Proposal for a directive
Article 11 – paragraph 6 b (new)
6b.  Member States shall, on an annual basis, submit to the Commission and to Eurostat transaction volumes against which revenues have been collected by type of institution. They shall make that information public.
Amendment 46
Proposal for a directive
Article 12
The participating Member States shall adopt measures to prevent tax fraud and evasion.

The participating Member States shall adopt measures to prevent tax fraud, tax evasion and aggressive tax planning.

Amendment 47
Proposal for a directive
Article 15 a (new)
1.  The Commission shall establish an expert working group (the FTT Committee) comprising representatives from all Member States, the Commission, the ECB, and ESMA, to assist participating Member States in the effective implementation of this Directive and prevent tax fraud, tax evasion and aggressive tax planning and to preserve the integrity of the internal market.
2.  The FTT Committee shall assess the effective implementation of this Directive, assess the effects on the internal market and detect avoidance schemes including abusive arrangements as defined in Article 14 in order to propose countermeasures, where appropriate, making full use of Union law in the field of taxation and financial services regulation and of the instruments for cooperation on tax matters established by international organisations.
3.  In order to assess matters with regard to the effective execution of FTT the participating Member States may form a sub-committee of the FTT Committee, comprising representatives of the participating Member States. The sub-committee shall only be in charge of matters that do not affect the non-participating Member States regarding the effective execution of FTT.
Amendment 48
Proposal for a directive
Article 16 – paragraph 2
2.  The delegation of powers referred to in Article 11(2) shall be conferred for an indeterminate period of time from the date referred to in Article 19.
2.  The delegation of powers referred to in Article 11(2) shall be conferred for an indeterminate period of time from the date referred to in Article 21.
Amendment 49
Proposal for a directive
Article 16 – paragraph 3
3.  The delegation of power referred to in Article 11(2) may be revoked at any time by the Council. A decision of revocation 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 the delegated acts already in force.
3.  The delegation of power referred to in Article 11(2) may be revoked at any time by the European Parliament or by the Council. A decision of revocation 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.
Amendment 50
Proposal for a directive
Article 16 – paragraph 4
4.  As soon as it adopts a delegated act, the Commission shall notify it to the Council.
4.  As soon as it adopts a delegated act, the Commission shall notify it simultaneously to the European Parliament and to the Council.
Amendment 51
Proposal for a directive
Article 16 – paragraph 5
5.  A delegated act adopted pursuant to Article 11(2) shall enter into force only if no objection has been expressed by the Council within a period of 2 months of notification of that act to the Council or if, before the expiry of that period, the Council has informed the Commission that it will not object. That period shall be extended by 2 months at the initiative of the Council.
5.  A delegated act adopted pursuant to Article 11(2) shall enter into force only if no objection has been expressed either by the European Parliament or the Council within a period of 2 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 2 months at the initiative of the European Parliament or of the Council.
Amendment 52
Proposal for a directive
Article 19 – paragraph 1
1.  Every five years and for the first time by 31 December 2016, the Commission shall submit to the Council a report on the application of this Directive, and, where appropriate, a proposal.
1.  Every three years and for the first time by 31 December 2016, the Commission shall submit to the European Parliament and the Council a report on the application of this Directive, and, where appropriate, a proposal.
Amendment 53
Proposal for a directive
Article 19 – paragraph 2
In that report the Commission shall, at least, examine the impact of the FTT on the proper functioning of the internal market, the financial markets and the real economy and it shall take into account the progress on taxation of the financial sector in the international context.

In that report the Commission shall, at least, examine the impact of the FTT on the proper functioning of the internal market, the financial markets and the real economy and it shall take into account the progress on taxation of the financial sector in the international context. Based on the results of that examination, necessary adjustments shall be undertaken.

Amendment 54
Proposal for a directive
Article 19 – paragraph 2 a (new)
In addition, the Commission shall assess the impact of certain provisions, such as the appropriate scope of FTT and the rate of taxation with regards to pension funds, taking due account of the diverse risk profiles and business models.

Amendment 55
Proposal for a directive
Article 20 – paragraph 1 – subparagraph 2 a (new)
For instruments referred to in point 3a of Article 2(1) the rate referred to in point (a) of Article 9(2) shall be 0,05% until 1 January 2017.

For institutions referred to in point (8)(f) of Article 2(1) , the rate referred to in point (a) of Article 9(2) shall be 0,05% and the rate referred to in point (b) of Article 9(2) shall be 0,005% until 1 January 2017.


Adoption by Latvia of the euro on 1 January 2014 *
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European Parliament legislative resolution of 3 July 2013 on the proposal for a Council decision on the adoption by Latvia of the euro on 1 January 2014 (COM(2013)0345 – C7-0183/2013 – 2013/0190(NLE))
P7_TA(2013)0313A7-0237/2013

(Consultation)

The European Parliament,

–  having regard to the Commission proposal to the Council (COM(2013)0345),

–  having regard to the Commission Convergence Report 2013 (COM(2013)0341) and the European Central Bank Convergence Report of June 2013 as regards Latvia,

–  having regard to the Commission Staff Working Document accompanying the Commission Convergence report 2013 on Latvia (SWD(2013)0196),

–  having regard to its resolution of 1 June 2006 on the enlargement of the euro zone(1),

–  having regard to its resolution of 20 June 2007 on improving the method for consulting Parliament in procedures relating to enlargement of the euro area(2),

–  having regard to Article 140(2) of the Treaty on the Functioning of the European Union, pursuant to which the Council consulted Parliament (C7-0183/2013),

–  having regard to Rule 83 of its Rules of Procedure,

–  having regard to the report of the Committee on Economic and Monetary Affairs (A7-0237/2013),

A.  whereas Article 140 of the Treaty on the Functioning of the European Union (TFEU) provides for the achievement of a high degree of sustainable convergence by reference to the fulfilment by each Member State of the following criteria: the achievement of a high degree of price stability; the sustainability of the government's financial position; the observance of the normal fluctuation margins provided for by the exchange-rate mechanism; and the durability of convergence achieved by the Member State and of its participation in the exchange-rate mechanism of the European Monetary System being reflected in the long-term interest rate levels (the Maastricht criteria);

B.  whereas Latvia has complied with the Maastricht criteria in accordance with Article 140 TFEU and Protocol No 13 on the convergence criteria annexed to the Treaty on European Union and to the TFEU;

C.  whereas the Rapporteur visited Latvia to assess the readiness of that country to enter the euro area;

D.  whereas the people of Latvia have taken extraordinary efforts to overcome the financial crisis and have returned to the path of competitiveness and growth;

1.  Approves the Commission proposal;

2.  Favours the adoption of the euro by Latvia on 1 January 2014;

3.  Notes that the assessment of the Commission and the European Central Bank (ECB) has taken place against the background of the global financial crisis which has affected the prospects for nominal convergence of many other Member States and has in particular triggered a significant cyclical downward shift of inflation rates;

4.  Notes, in particular, that the global financial crisis has hit Latvia hard in terms of poverty, unemployment and demographic developments; urges Latvia and its partners in the Union to implement stringent macroprudential standards aiming at avoiding unsustainable capital flows and credit growth trends experienced ahead of the crisis;

5.  Notes that Latvia fulfils the criteria as a result of determined, credible and sustainable efforts by the Latvian Government and the Latvian people; points out that the overall sustainability of the macroeconomic and financial situation will depend on the implementation of balanced and far reaching reforms aiming at combining discipline with solidarity and long term sustainable investments not only in Latvia but also in the economic and monetary union as a whole;

6.  Notes that in its 2013 Convergence Report the ECB expressed some concerns with regard to the long-term sustainability of Latvia's economic convergence; stresses in particular the following statements and recommendations contained therein:

   joining a currency union entails foregoing monetary and exchange rate instruments and implies an increased importance of internal flexibility and resilience; the authorities should, therefore, consider avenues to further strengthen the alternative counter-cyclical policy instruments at their disposal, in addition to what has been done since 2009;
   Latvia needs to continue along a path of comprehensive fiscal consolidation in line with the requirements of the Stability and Growth Pact, and to implement and to comply with a fiscal framework that helps to avoid a return to pro-cyclical policies in the future;
   both the need for a stronger institutional environment and the fact that the shadow economy, although declining, is estimated to still be relatively large are not only entailing public revenue losses but also distort competition, harm Latvia’s competitiveness and reduce the country’s attractiveness as a destination for foreign direct investment, thus hampering longer-term investment and productivity; considers that those concerns need to be taken seriously especially if the current trends regarding inflation and financial flows are reversed; deems however that these concerns do not change the overall positive assessment on the adoption of the euro by Latvia;

7.  Calls on the Latvian Government to maintain its prudent fiscal policy stance, together with its overall stability-oriented policies, anticipating potential future macroeconomic imbalances and risks to price stability as well as correcting the imbalances indentified by the Commission in the framework of the alert mechanism report; notes that price stability in Latvia is very dependent on the dynamics of commodity prices due to low energy efficiency and high level of energy imports from a single source in the composition of its consumer basket; calls on the Latvian Government to make improvements in this regard and to enhance its general efforts to reach all EU 2020 national targets;

8.  Is concerned by the current low support of the Latvian citizens for the adoption of the euro; calls on the Latvian Government and authorities to communicate more actively with the Latvian citizens in order to ensure more public support for the adoption of the euro; calls on the Latvian Government and authorities to continue their information and communication campaign with the aim of reaching all Latvian citizens;

9.  Calls on the Latvian Government to address structural deficiencies in the labour market by appropriate structural and educational reforms; calls, in particular, on the Latvian Government to address the level of poverty and the widening gap of income inequality;

10.  Acknowledges the stability of the Latvian banking sector during the last three years; points out, however, that the banking business model was seriously challenged during the first stage of the global financial crisis; underlines that a meltdown of the Latvian financial system was only avoided at that time by an EU-IMF bail-out; welcomes recent reforms aiming at reinforcing the regulation of Latvian banks active in the non-resident deposits (NRD) business; calls on the Latvian authorities to ensure that a strict supervision of those banks is observed and adequate additional risk management measures are implemented; further calls on the Latvian authorities to remain cautious about possible mismatches between banks' asset-liability maturity structures that can be considered a danger to financial stability;

11.  Calls on the Latvian authorities to maintain the present course of practical preparations to ensure a smooth changeover process; calls on the Latvian Government to establish appropriate control mechanisms to ensure that the introduction of the euro is not used for hidden price increases;

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

13.  Deplores the extremely narrow timeline within which Parliament has been asked to provide its opinion in accordance with Article 140 TFEU; asks the Commission and Member States planning to adopt the euro to provide for an appropriate timeline in order to allow Parliament to deliver an opinion on the basis of a more comprehensive and inclusive debate;

14.  Asks the Council to consult Parliament again if it intends to amend the Commission proposal substantially;

15.  Instructs its President to forward its position to the Council, the Commission, the European Central Bank, the Eurogroup and the governments of the Member States.

(1) OJ C 298 E, 8.12.2006, p. 249.
(2) OJ C 146 E, 12.6.2008, p. 251.


Road safety
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European Parliament resolution of 3 July 2013 on Road safety 2011-2020 – First milestones towards an injury strategy (2013/2670(RSP))
P7_TA(2013)0314B7-0318/2013

The European Parliament,

–  having regard to its resolution on European road safety 2011-2020 of 27 September 2011(1),

–  having regard to its resolution of 15 December 2011 on the Roadmap to a single European Transport Area – Towards a competitive and resource efficient transport system(2),

–  having regard to the Commission Communication ‘Towards a European road safety area: policy orientations on road safety 2011-2020’ (COM(2010)0389),

–  having regard to the Commission Staff Working Document ‘On the Implementation of objective 6 of the European Commission’s policy orientations on road safety 2011-2020 – First milestone towards an injury strategy’ (SDW(2013)0094),

–  having regard to the opinion of the Committee of the Regions entitled ‘Policy orientations on road safety 2011-2020’(3),

–  having regard to the ‘World report on road traffic injury prevention’, published jointly in 2004 by the World Bank and the WHO,

–  having regard to its report of 3 July 2012 on eCall: a new 112 service for citizens(4),

–  having regard to the question to the Commission on ‘Road safety 2011-2020 – First milestones towards an injury strategy’ (O-000061/2013 – B7-0211/2013),

–  having regard to Rules 115(5) and 110(2) of its Rules of Procedure,

A.  whereas in 2011 more than 30 000 people were killed and almost 1 500 000 were reported injured (more than 250 000 of them seriously injured) in road accidents in the European Union;

B.  whereas for every fatal accident, a further four accidents lead to permanent disabilities, 40 cause slight injuries and 10 cause serious injuries;

C.  whereas more than half of all serious injuries occur inside urban areas, especially affecting pedestrians, motorcyclists, cyclists (including pedelec users) and other vulnerable road users;

D.  whereas the major causes of road casualties and serious injuries are equipment failure, road design, poor road maintenance and driver behaviour including speed skills; whereas speed is directly related to the seriousness of injury, and whereas some Member States are considering raising their motorway speed limits;

E.  whereas involvement in road accidents is one of the leading causes of hospital admission for EU citizens aged under 45, and many serious injuries result in lifelong suffering or permanent disabilities;

F.  whereas emergency services’ response time (the ‘golden hour’ principle ), including providing life-saving first aid, as well as quality of care, play an important role in surviving accidents;

G.  whereas the socio-economic cost of road traffic injuries is estimated at 2 % of GDP, or approximately EUR 250 billion for 2012(5);

H.  whereas European actions in this regard are showing positive results;

1.  Supports the Commission’s initiative to give high priority to serious injury in road safety work;

2.  Welcomes the adoption by the Commission of a common EU definition of serious injuries, based on the globally accepted trauma classification known as the Maximum Abbreviated Injury Scale;

3.  Calls on the Member States to rapidly implement the common EU definition of serious road traffic injury and, on that basis, to collect and report statistics per transport mode, including vulnerable road users, as well as per type of road infrastructure for 2014;

4.  Urges the Commission, on the basis of the data collected, to set an ambitious target of reducing road injuries by 40 % over the period 2014-2020, and to keep the global idea of ‘Vision Zero’ as a long-term goal;

5.  Believes that the development of a common mechanism for data gathering and reporting should not prevent urgent actions being taken at EU level to reduce the number of people seriously injured on the roads;

6.  Welcomes the priorities set by the Commission for developing its global strategy, i.e. to address collision impact, accident management strategy, first aid and emergency services and long-term rehabilitation processes, and calls for the swift implementation of these priorities;

Reducing serious injuries on European roads without delay

7.  Stresses that a whole range of existing legislation and measures must be better implemented without delay in order to reduce collision impacts, increase safety for road users and reduce serious injuries;

8.  Calls on the Commission to review its legislation on passive and active vehicle safety so as to adapt it to the most recent technical progress, and to support the implementation of in-car enforcement technologies;

9.  Asks the Commission to support the development of safe and intelligent road infrastructure;

10.  Calls on the Commission to provide detailed information on how Member States are transposing Directive 2011/82/EU on facilitating the cross-border exchange of information on road safety related traffic offences;

11.  Urges the Member States to continue their efforts in fighting drink- and drug-driving and exchanging best practice for the assessment and rehabilitation of traffic offenders;

Protecting vulnerable road users

12.  Notes that pedestrians and cyclists together account for 50 % of all urban road fatalities and a large share of serious injuries;

13.  Supports the monitoring and further development of technical standards and policies for the protection of the most vulnerable road users – the elderly, young children, disabled persons and cyclists, as part of a concerted effort to promote the ‘rights of vulnerable road users’ in EU legislation and transport policy;

14.  Calls on the Commission to provide an overview of urban areas with a 30 km/h speed limit and the effects of that limit on reducing fatalities and serious injuries;

15.  Calls on the Member States to stress the importance of information and training campaigns related to safer cycling and walking and of policies aimed at promoting cycling and walking, as the safety of cyclists and pedestrians in urban areas is strongly correlated with the prevalence of cycling and walking as transport modes, where appropriate in combination with public and collective mobility;

16.  Calls on the Commission to develop urban road safety guidelines that could be included in Sustainable Urban Mobility Plans (SUMPs), and to consider linking EU cofinancing of urban transport projects to SUMPs that include EU reduction targets for road fatalities and serious injuries;

Improving first aid and emergency services

17.  Urges the Member States to support the European Emergency Number 112 and to comply with the requirements of making the Public Safety Answering Points fully operational by 2015 and implementing, as quickly as possible, an awareness campaign for their introduction;

18.  Welcomes the Commission’s proposal to ensure the mandatory deployment by 2015, in all Member States, of a public 112-based eCall system in all new type-approved cars, whilst observing data protection rules;

19.  Calls on the Commission, via the consideration of best practice in the Member States, to consider the introduction of ‘accompanied driving’ for older minors;

20.  Calls on the Member States systematically to promote first aid training as a way of increasing the reactivity of bystanders to an accident helping victims prior to the arrival of the emergency services;

21.  Calls on the Member States to encourage collaboration between emergency services and vehicle designers and manufacturers in order to ensure effective intervention and safety for the rescuer and the injured;

22.  Calls on the Member States to encourage the implementation of the e-Health systems, and especially the use of Intelligent Transport Communication systems by emergency teams, including in emergency vehicles;

Post-accident care and long-term rehabilitation

23.  Encourages the Member States to emphasise the importance of post-accident care in their health sector policies and to further improve longer-term hospital care, post-hospital care and rehabilitation, including trauma and psychological care for the survivors and witnesses of a road accident by, for example, providing assistance points to help them improve their quality of life;

24.  Calls on the Member States to improve awareness of the impact of serious injuries by developing closer links with other measures having a social impact, such as levels of impairment, disability and functional incapacity, and to develop educational programmes on road safety;

o
o   o

25.  Instructs its President to forward this resolution to the Commission and the governments and parliaments of the Member States.

(1) OJ C 56 E, 26.2.2013, p. 54.
(2) OJ C 168 E, 14.6.2013, p. 72.
(3) OJ C 166, 7.6.2011, p. 30.
(4) Texts adopted, P7_TA(2012)0274.
(5) Commission staff working document ‘On the implementation of objective 6 of the European Commission’s policy orientations on road safety 2011-2020 – First milestone towards an injury strategy’.


Situation of fundamental rights: standards and practices in Hungary
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European Parliament resolution of 3 July 2013 on the situation of fundamental rights: standards and practices in Hungary (pursuant to the European Parliament resolution of 16 February 2012) (2012/2130(INI))
P7_TA(2013)0315A7-0229/2013

The European Parliament,

–  having regard to Article 2 of the Treaty on European Union (TEU), setting out the values upon which the Union is founded,

–  having regard to Articles 3, 4, 6 and 7 of the Treaty on European Union (TEU), Articles 49, 56, 114, 167 and 258 of the Treaty on the Functioning of the European Union (TFEU), the Charter of Fundamental Rights of the European Union and the European Convention on Human Rights (ECHR),

–  having regard to its resolution of 16 February 2012 on the recent political developments in Hungary(1) instructing the Committee on Civil Liberties, Justice and Home Affairs, in cooperation with the European Commission, the Council of Europe and the Venice Commission, to follow up the issue of whether and how the recommendations set out in that resolution have been implemented, and to present its findings in a report,

–  having regard to its resolutions of 10 March 2011 on the media law in Hungary(2) and of 5 July 2011 on the Revised Hungarian Constitution(3),

–  having regard to its resolution of 15 December 2010 on the situation of fundamental rights in the European Union (2009) – effective implementation after the entry into force of the Treaty of Lisbon(4),

–  having regard to its resolution of 12 December 2012 on the situation of fundamental rights in the European Union (2010-2011)(5),

–  having regard to the Commission Communication on Article 7 of the Treaty on European Union – Respect for and promotion of the values on which the Union is based (COM(2003)0606),

–  having regard to the Council and Commission statements presented at the plenary debate held in the European Parliament on 18 January 2012 on the recent political developments in Hungary,

–  having regard to the statements of the Hungarian Prime Minister, Viktor Orbán, who addressed the European Parliament on 18 January 2012 in the plenary debate on the recent political developments in Hungary,

–  having regard to the hearing held on 9 February 2012 by the Committee on Civil Liberties, Justice and Home Affairs,

–  having regard to the report of a delegation of Members of the European Parliament on their visit to Budapest from 24 to 26 September 2012,

–  having regard to the working documents on the situation of fundamental rights: standards and practices in Hungary (pursuant to the European Parliament resolution of 16 February 2012) comprising working documents No 1 – Independence of the Judiciary, No 2 – Fundamental principles and Fundamental Rights, No 3 – Media legislation, No 4 – Principles of democracy and the rule of law, and No 5 – Concluding Remarks by the Rapporteur, which were discussed in the Committee on Civil Liberties, Justice and Home Affairs on 10 July 2012, 20 September 2012, 22 January 2013, 7 March 2013 and 8 April 2013 respectively, as well as the comments of the Hungarian Government thereon,

–  having regard to the Fundamental Law of Hungary, adopted on 18 April 2011 by the National Assembly of the Hungarian Republic, which entered into force on 1 January 2012 (hereinafter referred to as ‘the Fundamental Law’), and the Transitional Provisions of the Fundamental Law of Hungary, adopted on 30 December 2011 by the National Assembly, which also entered into force on 1 January 2012 (hereinafter referred to as ’the Transitional Provisions’),

–  having regard to the First Amendment to the Fundamental Law, tabled by the Minister for National Economy on 17 April 2012 and adopted by the Hungarian Parliament on 4 June 2012, establishing that the Transitional Provisions are part of the Fundamental Law,

–  having regard to the Second Amendment to the Fundamental Law, tabled on 18 September 2012 in the form of an individual member's bill and adopted by the Hungarian Parliament on 29 October 2012, introducing the requirement of voter registration into the Transitional Provisions,

–  having regard to the Third Amendment to the Fundamental Law, tabled on 7 December 2012, adopted by the Hungarian Parliament on 21 December 2012 and establishing that the limits and conditions for acquisition of ownership and for use of arable land and forests and the rules concerning the organisation of integrated agricultural production are to be laid down by cardinal law,

–  having regard to the Fourth Amendment of the Fundamental Law, tabled on 8 February 2013 in the form of an individual member's bill and adopted by the Hungarian Parliament on 11 March 2013, which, among other provisions, integrates into the text of the Fundamental Law the Transitional Provisions (with some exceptions including the provision requiring voter registration) annulled by the Constitutional Court of Hungary on 28 December 2012 on procedural grounds (Decision No 45/2012), and remaining provisions of a genuinely transitional nature in this document,

–  having regard to Act CXI of 2012 on the Amendment of Act CLXI of 2011 on the organisation and administration of courts and Act CLXII of 2011 on the legal status and remuneration of judges in Hungary,

–  having regard to Act XX of 2013 on the legislative amendments relating to the upper age limit applicable in certain judicial legal relations,,

–  having regard to Act CCVI of 2011 on the right to freedom of conscience and religion and the legal status of churches, denominations and religious communities of Hungary (the Act on Churches), which was adopted on 30 December 2011 and entered into force on 1 January 2012,

–  having regard to Opinions Nos CDL(2011)016, CDL(2011)001, CDL-AD(2012)001, CDL-AD(2012)009, CDL-AD(2012)020 and CDL-AD(2012)004 of the European Commission for Democracy through Law (Venice Commission) on the new Constitution of Hungary, on the three legal questions arising from the process of drafting the new Constitution of Hungary, on Act CLXII of 2011 on the legal status and remuneration of judges of Hungary and Act CLXI of 2011 on the organisation and administration of courts of Hungary, on Act CLI of 2011 on the Constitutional Court of Hungary, on the cardinal acts on the judiciary that were amended following the adoption of opinion CDL-AD(2012)001 on Hungary, and on the Act on the right to freedom of conscience and religion and the legal status of churches, denominations and religious communities of Hungary,

–  having regard to Joint Opinion No CDL-AD(2012)012 of the Venice Commission and the OSCE/ODIHR on the Act on the elections of Members of Parliament of Hungary,

–  having regard to the Hungarian Government’s comments Nos CDL(2012)072, CDL(2012)046 and CDL(2012)045 on the draft opinion of the Venice Commission on the cardinal acts on the judiciary that were amended following the adoption of opinion CDL-AD(2012)001, on the draft joint opinion on the Act on the elections of Members of Parliament of Hungary and on the draft opinion on Act CLI of 2011 on the Constitutional Court of Hungary,

–  having regard to the initiatives undertaken by the Secretary General of the Council of Europe, Thorbjørn Jagland, including the recommendations on the judiciary laid down in his letter of 24 April 2012 addressed to the Hungarian Deputy Prime Minister, Tibor Navracsics,

–  having regard to the letters of reply of 10 May 2012 and of 7 June 2012 from Mr Navracsics declaring the intention of the Hungarian authorities to address the recommendations by Mr Jagland,

–  having regard to the letter of 6 March 2013 sent by the Secretary General of the Council of Europe, Mr Jagland, to Mr Navracsics expressing his concerns about the proposal for the Fourth Amendment to the Fundamental Law and calling for the postponement of the final vote, and the letter of reply of 7 March 2013 from Mr Navracsics,

–  having regard to the letter of 6 March 2013 sent by the Ministers of Foreign Affairs of Germany, the Netherlands, Denmark and Finland to the Commission President, José Manuel Barroso, calling for a mechanism to foster compliance with fundamental values in the Member States,

–  having regard to the letter of 8 March 2013 sent by the Hungarian Minister of Foreign Affairs, Mr János Martonyi, to all his counterparts in the Member States of the EU explaining the purpose of the Fourth Amendment,

–  having regard to the letter of 8 March 2013 sent by Mr Barroso to Mr Orbán on the concerns of the European Commission regarding the Fourth Amendment to the Fundamental Law and the letter of reply from Mr Orbán to the Commission President, copies of which were sent to both the President of the European Council, Herman Van Rompuy, and the President of the European Parliament, Martin Schulz,

–  having regard to the joint statement of 11 March 2013 by President Barroso and Secretary General Jagland recalling their concerns regarding the Fourth Amendment to the Fundamental Law with respect to the principle of the rule of law; and having regard to the confirmation made by Prime Minister Orbán, in his letter addressed to President Barroso on 8 March 2013, of the full commitment of the Hungarian Government and Parliament to the European norms and values,

–  having regard to the request for an opinion of the Venice Commission on the Fourth Amendment to the Fundamental Law of Hungary, sent on 13 March 2013 by Mr Martonyi to Mr Jagland,

–  having regard to the Council and Commission statements on the constitutional situation in Hungary presented at the plenary debate held in the European Parliament on 17 April 2013,

–  having regard to the letter of 16 December 2011 from the Commissioner for Human Rights of the Council of Europe, Thomas Hammarberg, to Mr Martonyi, raising concerns on the subject of the new Hungarian law on the Right to Freedom of Conscience and Religion and on the Legal Status of Churches, religious denominations and religious communities, and having regard to Mr Martonyi’s reply of 12 January 2012,

–  having regard to Opinion No CommDH(2011)10 of 25 February 2011 of the Commissioner for Human Rights on Hungary’s media legislation in light of the Council of Europe’s standards on freedom of the media, as well as to the annotations to that opinion of 30 May 2011 from the Hungarian Minister of State for Government Communication,

–  having regard to the statements by the Office of the UN High Commissioner for Human Rights (OHCHR) of 15 February 2012 and 11 December 2012 calling respectively on Hungary to reconsider legislation allowing local authorities to punish homelessness and to uphold the Constitutional Court’s decision decriminalising homelessness,

–  having regard to the statements by the OHCHR of 15 March 2013 voicing concerns over the adoption of the Fourth Amendment to the Fundamental Law,

–  having regard to the ongoing infringement proceedings in Case C-288/12 brought by the European Commission against Hungary over the legality of the termination of the mandate of the former Commissioner for Data Protection still pending before the European Court of Justice,

–  having regard to the Decision of the Court of Justice of the European Union of 6 November 2012 on the radical lowering of the retirement age for Hungarian judges, and having regard to the subsequent adoption of Act No XX of 2013 amending Act CLXII of 2011 – adopted by the Hungarian Parliament on 11 March 2013 – following the decision of the European Court of Justice,

–  having regard to the Decisions of the Constitutional Court of Hungary of 16 July 2012 (No 33/2012) on the lowering of the retirement age of judges in Hungary, of 28 December 2012 (No 45/2012) on the Transitional Provisions of the Fundamental Law, of 4 January 2013 (No 1/2013) on the Act on the electoral procedure and of 26 February 2013 (No 6/2013) on the Act on freedom of religion and the legal status of churches,

–  having regard to the report by the Monitoring Committee of the Parliamentary Assembly of the Council of Europe,

–  having regard to Law LXXII of 2013 on the creation of new rules and regulations relating to the oversight of national security; having regard to the letter of 27 May 2013 from Dr András Zs. Varga addressed to Dr András Cser-Palkovics, Chair of the Hungarian Parliament’s Committee on Constitutional, Legal and Procedural Affairs, raising concerns over the legislation adopted on the creation of new rules and regulations relating to the oversight of national security,

–  having regard to the upcoming assessment of the Fourth Amendment to the Fundamental Law by the European Commission,

–  having regard to Rule 48 of its Rules of Procedure,

–  having regard to the report of the Committee on Civil Liberties, Justice and Home Affairs (A7-0229/2013),

I - Background and main issues at stake
European common values

A.  whereas the European Union is founded on the values of respect for human dignity, freedom, democracy, equality, the rule of law and respect for human rights, including the rights of persons belonging to minorities, as set out in Article 2 TEU, on unequivocal respect for fundamental rights and freedoms as enshrined in the Charter of Fundamental Rights and in the ECHR, and on the recognition of the legal value of such rights, freedoms and principles, as is further demonstrated by the EU’s forthcoming accession to the ECHR pursuant to Article 6(2) TEU;

B.  whereas the common values enshrined in Article 2 TEU constitute the core of the rights enjoyed by persons living within the EU and especially by EU citizens, irrespective of their nationality and no matter where they might consider themselves to belong in cultural or religious terms, and whereas such persons can fully enjoy those rights only if the EU’s fundamental values and principles are upheld;

C.  whereas the values set out in Article 2 TEU have to be addressed politically and legally, this being an indispensable foundation of our democratic society, and whereas, therefore, Member States, as well as all the EU institutions, must commit themselves to them, clearly and unambiguously;

D.  whereas respecting and promoting such common values is not only an essential element of the European Union’s identity but also an explicit obligation deriving from Article 3(1) and (5) TEU, and therefore a sine qua non for becoming an EU Member State as well as for fully preserving membership prerogatives;

E.  whereas the obligations incumbent on candidate countries under the Copenhagen criteria continue to apply to the Member States after joining the EU by virtue of Article 2 TEU and the principle of sincere cooperation, and whereas all Member States should therefore be assessed on a regular basis in order to verify their continued compliance with the EU's common values;

F.  whereas Article 6(3) TEU underscores the fact that fundamental rights, as guaranteed by the ECHR and as arising from the constitutional traditions common to the Member States, constitute general principles of Union law, and whereas such rights are a common heritage and strength of democratic European states;

G.  whereas, with the entry into force of the Treaty of Lisbon and pursuant to Article 6 TEU, the Charter has the same legal value as the Treaties, hence transforming values and principles into tangible and enforceable rights;

H.  whereas Article 7(1) TEU, by a defined procedure, grants the EU institutions the power to assess whether there is a clear risk of a serious breach of the common values referred to in Article 2 by a Member State, and to engage politically with the country concerned in order to prevent and redress violations; whereas before making such a determination, the Council shall hear the Member State in question, acting in accordance with the same procedure;

I.  whereas the scope of Article 2 TEU is not restricted by the limitation of Article 51(1) of the Charter, whereas the scope of Article 7 TEU is not limited to the policy areas covered by EU law, and whereas as a consequence the EU can also act in the event of a breach of, or a clear risk of a breach of, the common values in areas falling under Member States’ competences;

J.  whereas, pursuant to the principle of sincere cooperation laid down in Article 4(3) TEU, Member States are to facilitate the achievement of the Union’s tasks and refrain from any measures which could jeopardise the attainment of the Union’s objectives, including the objective of respecting and promoting the Union’s common values;

K.  whereas respect for the Union's common values goes hand in hand with the EU's commitment to diversity, translated into the obligation for the Union to respect ‘the equality of Member States before the Treaties as well as their national identities, inherent in their fundamental structures, political and constitutional’, as stated in Article 4(2) TEU; whereas the European core values set out in Article 2 TEU result from the constitutional traditions common to the Members States and cannot therefore be played off against the obligation under Article 4 TEU, but make up the basic framework within which Member States can preserve and develop their national identity;

L.  whereas, in the framework of the Treaties, respect for ‘national identities’ (Article 4(2) TEU) and for ’different legal systems and traditions of the Member States’ (Article 67 TFEU) are intrinsically associated with the principles of sincere cooperation (Article 4(3) TEU), mutual recognition (Articles 81 and 82 TFEU) and thus mutual trust, as well as with respect for cultural and linguistic diversity (Article 3(3) TEU);

M.  whereas a violation of the Union’s common principles and values by a Member State cannot be justified by national traditions nor by the expression of a national identity when such a violation results in the deterioration of the principles which are at the heart of European integration, such as democratic values, the rule of law or the principle of mutual recognition, with the consequence that a referral to Article 4(2) TEU is applicable only in so far as a Member State respects the values enshrined in Article 2 TEU;

N.  whereas the Union’s objective of upholding and promoting its values in its relations with the wider world, as set out in Article 3(4) TEU, is further reinforced by the specific obligation for the Union’s action on the international scene to be guided by the principles which inspired its creation, development and enlargement: democracy, the rule of law and the universality and indivisibility of human rights and fundamental freedoms (21(1) TEU);

O.  whereas, therefore, not only the credibility of the Member States and of the EU on the international scene, but also the Union’s objectives in its external action, would be undermined if Member States were not able or willing to live up to the standards to which they have agreed and bound themselves by signing the Treaties;

P.  whereas respect by the Member States for the same set of fundamental values is an indispensable condition for ensuring mutual trust and, consequently, the proper functioning of mutual recognition, which is at the heart of the creation and development of the internal market as well as of the European area of freedom, security and justice, and whereas, therefore, any attempt to disrespect or weaken those common values adversely affects the whole construction of the European process of economic, social and political integration;

Q.  whereas the common values set out in Article 2 TEU and proclaimed in the Preambles to the Treaties and the Charter of Fundamental Rights and referred to in the Preamble to the ECHR and in Article 3 of the Statute of the Council of Europe require a separation of powers between independent institutions based on a properly functioning system of checks and balances, and whereas core features of these principles include: respect for legality, including a transparent, accountable and democratic process of enacting laws; legal certainty; a strong system of representative democracy based on free elections and respecting the rights of opposition; effective control of the conformity of legislation with the constitution; an effective, transparent, participatory and accountable government and administration; an independent and impartial judiciary; independent media; and respect for fundamental rights;

R.  whereas the Commission, under Article 17 TEU, ‘ensure[s] the application of the Treaties ... [and] oversee[s] the application of Union law under the control of the Court of Justice of the European Union’;

Reforms in Hungary

S.  whereas Hungary was the first former Communist country to accede to the ECHR, and as an EU Member State was the first to ratify the Treaty of Lisbon on 17 December 2007, and whereas Hungary played an active part in the work of the Convention and the Intergovernmental Conference in 2003 and 2004 in, among other issues, the drafting of Article 2 TEU, and took the initiative which resulted in the inclusion of the rights of persons belonging to minorities;

T.  whereas over the course of Hungary’s centuries-long history, the peaceful coexistence of nationalities and ethnic groups has enhanced the nation’s cultural richness and its prosperity; and whereas Hungary should be called upon to continue that tradition and to take resolute steps to curb any attempts to discriminate against individual groups;

U.  whereas Hungary is also a party to the International Covenant on Civil and Political Rights and other international legal instruments obliging it to respect and implement international democratic principles;

V.  whereas following the 2010 general elections in Hungary, the governing majority gained more than two thirds of the seats in parliament, enabling it to rapidly initiate intense legislative activity to reshape the whole constitutional order of the country (the former Constitution has been amended twelve times and the Fundamental Law four times so far) and thus substantially to modify the institutional and legal framework, as well as a number of fundamental aspects of not only public but also private life;

W.  whereas any Member State of the European Union is absolutely free to review its constitution and whereas the very meaning of democratic alternation is that it enables a new government to enact legislation reflecting the will of the people, its values and its political commitments, provided that, in so doing, it does not breach the values and principles of democracy and the rule of law prevailing in the European Union; whereas in all Member States special constitutional procedures render constitutional amendment more difficult compared with procedures governing ordinary legislation, namely through the use of a qualified majority, additional decisional processes, time delays and referenda;

X.  whereas the history of democratic traditions in Europe shows that reforming a constitution requires the utmost care and due consideration of procedures and guarantees aimed at preserving, among other things, the rule of law, the separation of powers and the hierarchy of legal norms – the constitution being the supreme law of the land;

Y.  whereas the scale of the comprehensive and systematic constitutional and institutional reforms which the new Hungarian Government and Parliament have carried out in an exceptionally short time frame is unprecedented, and explains why so many European institutions and organisations (the European Union, the Council of Europe, the OSCE) have deemed it necessary to assess the impact of some reforms; whereas there should be no double standards in the treatment of Member States, meaning that the situation in other Member States should also be monitored, while enforcing the principle of equality of the Member States before the Treaties;

Z.  whereas a dialogue based on openness, inclusiveness, solidarity and mutual respect between the European institutions and the Hungarian authorities is necessary in the framework of the abovementioned community of democratic values;

AA.  whereas the Commission, in the exercise of its responsibility for overseeing the application of Union law, has to show the utmost skill, respect the independence of others and act diligently, swiftly and without delay, especially when it is called upon to deal with a case in which a Member State may have committed a serious breach of Union values;

The Fundamental Law and its Transitional Provisions

AB.  whereas the adoption of the Fundamental Law of Hungary – which was passed on 18 April 2011, exclusively with the votes of the members of the governing coalition and on the basis of a draft text prepared by the representatives of the governing coalition – was conducted in the short time frame of 35 calendar days calculated from the presentation of proposal (T/2627) to the parliament, thus restricting the possibilities for a thorough and substantial debate with the opposition parties and civil society on the draft text;

AC.  whereas the draft constitutional text submitted to the Hungarian Parliament on 14 March 2011 was the one produced by the elected representatives of the Fidesz-KDNP coalition and not the working document based on the discussions within the ad hoc parliamentary committee, even though that committee had been set up expressly for the purpose of drafting the new Fundamental Law; whereas this situation exacerbated the failure to consult the opposition;

AD.  whereas the 'national consultation' on constitution making consisted of a list of twelve questions on very specific issues drafted by the governing party in a way that could have led to self-evident replies, and whereas the consultation did not include the text of the draft Fundamental Law;

AE.  Whereas on 28 December 2012, following a constitutional petition by the Hungarian Commissioner for Fundamental Rights, the Constitutional Court of Hungary annulled (Decision No 45/2012) more than two thirds of the Transitional Provisions on the grounds that they were not of a transitional nature;

AF.  whereas the Fourth Amendment to the Fundamental Law, adopted on 11 March 2013, integrates into the text of the Fundamental Law most of the Transitional Provisions annulled by the Constitutional Court, as well as other provisions previously found unconstitutional;

Extensive use of cardinal laws

AG.  whereas the Fundamental Law of Hungary refers to 26 subject matters to be defined by cardinal laws (that is laws the adoption of which requires a two-thirds majority), which cover a wide range of issues relating to Hungary’s institutional system, the exercise of fundamental rights and important arrangements in society;

AH.  whereas since the adoption of the Fundamental Law the parliament has enacted 49 cardinal laws(6) (in one and a half years);

AI.  whereas a number of issues, such as specific aspects of family law and the tax and pension systems, which usually fall under the ordinary decision-making powers of a legislature, are regulated by cardinal laws;

Accelerated legislative procedures, practice of individual members' bills, parliamentary debate

AJ.  whereas important legislation, including the Fundamental Law, the second and fourth amendments thereto, the Transitional Provisions of the Fundamental Law and a number of cardinal laws, were enacted on the basis of individual members’ bills, to which the rules set out in Act CXXXI of 2010 on the participation of civil society in the preparation of legislation and in Decree 24/2011 of the Minister of Public Administration and Justice on preliminary and ex-post impact assessment do not apply, with the consequence that legislation adopted through this streamlined procedure is subject to a restricted public debate;

AK.  whereas the adoption of a large number of cardinal laws in a very short time frame, including the acts on the legal status and remuneration of judges of Hungary and on the organisation and administration of courts of Hungary, as well as the acts on the freedom of religion or belief and on the National Bank of Hungary, inevitably restricted the possibilities for an adequate consultation of the opposition parties and civil society, including, when relevant, employers' organisations, trade unions and interest groups;

AL.  whereas Act XXXVI of 2012 on the National Assembly has vested the Speaker of the Parliament with extensive discretionary power to limit MPs' free expression in the parliament;

Weakening of checks and balances: Constitutional Court, Parliament, Data Protection Authority

AM.  whereas, under the Fundamental Law, the possibility for two new kinds of constitutional complaint to the Constitutional Court has been introduced, while the actio popularis for ex post review has been abolished;

AN.   whereas Law LXXII of 2013 on the creation of new rules and regulations relating to the oversight of national security was published on 3 June 2013; whereas this law has raised concerns, expressed notably by Hungary’s Deputy Attorney-General, with regard to respect for the principle of the separation of powers, the independence of the judiciary, respect for private and family life and the right to an effective remedy;

AO.  whereas under the Fundamental Law the Constitutional Court’s powers of ex post review of the constitutionality of budget-related laws from a substantive point of view have been substantially limited to violations of an exhaustive list of rights, thus obstructing the review of constitutionality in cases of breaches of other fundamental rights such as the right to property, the right to a fair trial and the right not to be discriminated against;

AP.  whereas the Fourth Amendment to the Fundamental Law left untouched the already existing right of the Constitutional Court to review amendments to the Fundamental Law on procedural grounds, and whereas it excludes the Court being able in the future to review constitutional amendments on substantive grounds;

AQ.  whereas the Constitutional Court, in its abovementioned Decision 45/2012, held that ‘Constitutional legality has not only procedural, formal and public law validity requirements, but also substantial ones. The constitutional criteria of a democratic State under the rule of law are at the same time constitutional values, principles and fundamental democratic freedoms enshrined in international treaties and accepted and acknowledged by communities of democratic States under the rule of law, as well as the ius cogens, which is partly the same as the foregoing. As appropriate, the Constitutional Court may even examine the free enforcement and the constitutionalisation of the substantial requirements, guarantees and values of democratic States under the rule of law.’ (Point IV.7 of the Decision);

AR.  whereas the Fourth Amendment to the Fundamental Law further stipulates that the rulings of the Constitutional Court adopted before the entry into force of the Fundamental Law shall be repealed, and by doing so explicitly contradicts the Constitutional Court's Decision No 22/2012 in which the Court established that its statements made on fundamental values, human rights and freedoms and on the constitutional institutions that have not been changed fundamentally by the Fundamental Law remain valid; whereas the Fourth Amendment reintroduced into the Fundamental Law a number of provisions previously declared unconstitutional by the Constitutional Court;

AS.  whereas a non-parliamentary body, the Budget Council, with limited democratic legitimacy, has been granted the power to veto the adoption of the general budget, thus restricting the scope for action of the democratically elected legislature and allowing the President of the Republic to dissolve the parliament;

AT.  whereas the new Freedom of Information Act, adopted in July 2011, abolished the institution of the Commissioner on Data Protection and Freedom of Information, thus prematurely terminating the six-year-long mandate of the Commissioner and transferring its powers to the newly established National Authority for Data Protection; whereas such changes are currently under review by the Court of Justice of the European Union;

AU.  whereas the Commission initiated an infringement procedure against Hungary on 8 June 2012, declaring that Hungary had failed to fulfil its obligations under Directive 95/46/EC by removing the data protection supervisor from office before the end of the mandate, thus putting at risk the independence of the office;

Independence of the judiciary

AV.  whereas, according to the Fundamental Law and its Transitional Provisions, the six-year-long mandate of the former President of the Supreme Court (renamed the ‘Kúria’) was prematurely ended after two years;

AW.  whereas on 2 July 2012 Hungary amended the cardinal laws on the judiciary (Act CLXI of 2011 on the Organisation and Administration of Courts and Act CLXII of 2011 on the Legal Status and Remuneration of Judges), partly implementing the recommendations of the Venice Commission;

AX.  whereas key safeguards for judicial independence, such as irremovability, guaranteed term of office and the structure and composition of the governing bodies, are not regulated by the Fundamental Law but are – together with detailed rules on the organisation and administration of the judiciary – still set out in the amended cardinal laws,

AY.  whereas the independence of the Constitutional Court is not set forth in the Fundamental Law of Hungary and neither is the independence of the administration of the judiciary;

AZ.  whereas the amendment of the cardinal laws on the judiciary as regards the power of the President of the National Judicial Office to transfer cases from the presiding court to another court to ensure the adjudication of cases within a reasonable period of time fails to lay down objective normative criteria for the selection of the cases to be transferred;

BA.  whereas, following the entry into force of the Fundamental Law, its Transitional Provisions and cardinal Act No CLXII of 2011 on the legal status and remuneration of judges, the mandatory retirement age for judges was reduced from 70 to 62 years of age;

BB.  whereas the Decision of the Court of Justice of the European Union, adopted on 6 November 2012, states that the radical lowering of the retirement age for Hungarian judges, as well as prosecutors and notaries, from 70 to 62 constitutes unjustified discrimination on grounds of age, and whereas two complaints were submitted by two groups of Hungarian judges to the ECtHR on 20 June 2012 seeking a ruling to establish that Hungary's legislation on lowering the retirement age for judges violates the ECHR;

BC.  whereas on 11 March 2013 the Hungarian Parliament adopted Act No XX of 2013 amending the upper age limits with a view to partly complying with the rulings of the Hungarian Constitutional Court of 16 July 2012 and of the Court of Justice of the European Union of 6 November 2012;

The electoral reform

BD.  whereas the governing majority in parliament reformed the election system in a unilateral manner without striving for consensus with the opposition,

BE.  whereas as part of the recent electoral reform the Hungarian Parliament passed, on 26 November 2012, on the basis of an individual member’s bill, the Act on the election procedure, which aimed to replace the previous automatic voter registration of all citizens resident in Hungary by a system of voluntary registration as a condition for exercising the individual’s right to vote,

BF.  whereas the Second Amendment to the Fundamental Law enshrining the requirement of voter registration was tabled as an individual member’s bill on the same day as the draft law on the election procedure, namely on 18 September 2012, and was adopted on 29 October 2012,

BG.  whereas the Venice Commission and the OSCE/ODIHR prepared a joint opinion on the Act on the Election of Members of Parliament of Hungary on 15 and 16 June 2012,

BH.  whereas, following the petition of the President of the Republic of 6 December 2012, the Constitutional Court established that the registration requirement represents an undue restriction on the voting rights of Hungarian residents, and is therefore unconstitutional,

BI.  whereas, while considering voter registration for citizens residing abroad as justified, the Constitutional Court in its decision of 4 January 2013 further held that exclusion of the possibility of personal registration of voters without an address living in Hungary is discriminatory and that the provisions allowing the publication of political advertisements only in the public media service during the electoral campaign, and the rules banning the publication of public opinion polls within six days of the elections, disproportionally limit freedom of expression and freedom of the press,

Media legislation

BJ.  whereas the European Union is founded on the values of democracy and the rule of law, and consequently guarantees and promotes freedom of expression and information as enshrined in Article 11 of the Charter and Article 10 of the ECHR, and whereas these rights include the freedom to express opinions and the freedom to receive and communicate information without control, interference or pressure from public authorities;

BK.  whereas the ECtHR has ruled that there is a positive obligation on Member States to ensure media pluralism, arising from Article 10 ECHR, and whereas the Convention’s provisions are similar to those contained in Article 11 of the Charter as part of the acquis communautaire;

BL.  whereas an autonomous and strong public sphere, based on independent and pluralistic media, constitutes the necessary environment in which the collective freedoms of civil society – such as the right of assembly and association – as well as individual freedoms – such as the right to freedom of expression and the right of access to information – can thrive, and whereas journalists should be free from the pressure of owners, managers and governments, as well as from financial threats;

BM.  whereas the Council of Europe and the OSCE, through declarations, resolutions, recommendations, opinions and reports on the subjects of media freedom, pluralism and concentration, have created a significant body of common pan-European minimum standards in this field;

BN.  whereas Member States have a duty constantly to promote and protect freedom of opinion, expression, information and the media, and whereas, should these freedoms be placed at serious risk or violated in a Member State, the Union is obliged to intervene in a timely and effective fashion, on the basis of its competences as enshrined in the Treaties and in the Charter, to protect the European democratic and pluralistic order and fundamental rights;

BO.  whereas Parliament has repeatedly expressed its concerns about media freedom, pluralism and concentration in the EU and its Member States;

BP.  whereas criticism of a number of provisions of Hungarian media legislation has been voiced by Parliament and the Commission, the OSCE Representative on Freedom of the Media and the Council of Europe Commissioner for Human Rights, as well as by the Secretary General of the Council of Europe, the UN Special Rapporteur on the promotion of right to freedom of opinion and expression, and by a large number of international and national journalists’ organisations, editors and publishers, NGOs active in the area of human rights and civil liberties, and Member States;

BQ.  whereas criticism has been levelled which relates mainly to the adoption of legislation under the parliamentary procedure of individual members’ bills, the highly hierarchical structure of media supervision, the managerial authority of the Chairperson of the Regulatory Authority, the lack of provisions ensuring the independence of the Authority, the extensive supervisory and sanctioning power of the Authority, the considerable impact of certain provisions on the content of programming, the lack of media-specific regulation, the lack of transparency in the bidding process for licences, and the vagueness of norms potentially conducive to arbitrary application and enforcement;

BR.  whereas in its resolution of 10 March 2011 on media law in Hungary Parliament stressed that the Hungarian media law should be suspended as a matter of urgency and reviewed on the basis of the comments and proposals of the Commission, the OSCE and the Council of Europe, and whereas Parliament urged the Commission to continue the close monitoring and assessment of the conformity of the Hungarian media law, as amended, with European legislation, and particularly with the Charter;

BS.  whereas the Commissioner for Human Rights of the Council of Europe has stressed the need to amend the legislation in order to tackle encroachments on the freedom of the media such as prescriptions as to what information and coverage must emanate from all media providers, the imposition of penalties on the media, pre-emptive restraints on press freedom in the form of registration requirements and exceptions to the protection of journalists’ sources, and whereas, regarding the independence and pluralism of the media, he has expressed the need to address issues such as weakened constitutional guarantees of pluralism, lack of independence in media regulatory bodies, lack of safeguards for the independence of public service broadcasting and the absence of an effective domestic remedy for media actors subject to decisions of the Media Council;

BT.  whereas the Commission has raised concerns regarding the conformity of the Hungarian media law with the Audiovisual Media Services Directive and the acquis communautaire in general, notably in relation to the obligation to offer balanced coverage applicable to all audiovisual media service providers, and has also questioned whether that law complies with the principle of proportionality and respects the fundamental right to freedom of expression and information enshrined in Article 11 of the Charter, the country of origin principle and registration requirements, and whereas, in March 2011, following negotiations with the Commission, the Hungarian Parliament amended the law to address the points raised by the Commission;

BU.  whereas the OSCE has expressed serious reservations regarding the material and territorial scope of Hungarian legislation, the politically homogeneous composition of the Media Authority and Media Council, the disproportionate penalties imposed, the lack of an automatic procedure for suspending penalties in the event of an appeal to the courts against a Media Authority ruling, the violation of the principle of the confidentiality of journalistic sources and the protection of family values;

BV.  whereas the OSCE recommendations(7) included deleting the legal requirements on balanced coverage and other content prescriptions from the laws, safeguarding editorial independence, ensuring that different rules regulate different forms of media – print, broadcast and online –, deleting registration requirements deemed excessive, ensuring that the regulatory body is independent and competent, ensuring objectivity and plurality in the process of appointment of organs governing the media sector, refraining from placing print media under the jurisdiction of the regulatory body and effectively encouraging self-regulation;

BW.  whereas, despite the fact that the laws were amended in 2011 following negotiations with the European Commission and in May 2012 further to the decision of the Constitutional Court of December 2011 overturning several provisions as unconstitutional regarding the content regulation of the printed press, the protection of the sources of journalists, the requirement of data provision, and the institution of the Media and Telecommunications Commissioner, the OSCE Representative on freedom of the Media has deplored the fact that several amendments were introduced and adopted at short notice without consulting stakeholders and that fundamental elements in the legislation have not been improved, notably the appointment of the president and members of the Media Authority and Media Council, their power over content in the broadcast media, the imposition of high fines and the lack of safeguards on the financial and editorial independence of public broadcasters;

BX.  Whereas, while welcoming the amendments to the media legislation adopted in March 2011, the UN Special Rapporteur on the promotion and protection of the right to freedom of opinion and expression has highlighted the need to address remaining concerns pertaining to regulation of media content, insufficient guarantees to ensure the independence and impartiality of the Media Authority, excessive fines and other administrative sanctions, applicability of the media legislation to all types of media, including the press and the internet, registration requirements, and lack of sufficient protection of journalistic sources;

BY.  whereas an analysis by Council of Europe experts(8) (which assessed compliance of the Media Acts as proposed for amendment in 2012 with Council of Europe standard-setting texts in the field of media and freedom of expression) recommended that specific provisions on registration and transparency, content regulation, obligations on news coverage, protection of sources, public service media and regulatory bodies be thoroughly revised, clarified or in some cases eliminated;

BZ.  whereas, further to the dialogue conducted with the EU and the Secretary General of the Council of Europe through an exchange of letters and expert meetings, further legal amendments were tabled in February 2013 in order to strengthen and guarantee the independence of the media regulatory bodies, notably in respect of the rules relating to the conditions of the appointment and election of the President of the National Media and Infocommunications Authority and the Media Council and concerning, respectively, the nomination procedure, the person making the appointment and repeated appointment;

CA.  whereas the Hungarian Authorities have stated their intention of reviewing the rules on the restrictions in political advertising during electoral campaigns; whereas the Hungarian Government is in consultation with the European Commission on the issue of political advertising; whereas, however, the Fourth Amendment imposes a broad and potentially vague prohibition on speech aimed at violating the dignity of groups, including the Hungarian nation, that may be used to arbitrarily interfere with freedom of expression and may have a chilling effect on journalists, and also on artists and others;

CB.  whereas the National Media and Infocommunications Authority and the Media Council have not conducted assessments of the effects of the legislation on the quality of journalism, the degrees of editorial freedom and the quality of working conditions for journalists;

Respect of the rights of persons belonging to minorities

CC.  whereas respect for the rights of persons belonging to minorities is explicitly recognised among the values referred to in Article 2 TEU and whereas the Union is committed to promoting these values and combating social exclusion, racism, anti-Semitism and discrimination;

CD.  whereas the right not to suffer discrimination is a fundamental right enshrined in Article 21 of the Charter of Fundamental Rights;

CE.  whereas the responsibility of Member States to ensure that the fundamental rights of all are respected, irrespective of their ethnicity or belief, covers all levels of public administration as well as the law-enforcement authorities, and also implies actively promoting tolerance and firmly condemning phenomena such as racial violence and anti-Semitic and anti-Roma hate speech, particularly when it is expressed in official or public forums, including the Hungarian Parliament;

CF.  whereas the lack of reaction by the law-enforcement authorities in cases of racially motivated crime(9) has resulted in mistrust of the police forces;

CG.  whereas it is noteworthy that the Hungarian Parliament has enacted legislation in criminal and civil areas to combat racial incitement and hate speech;

CH.  whereas, although intolerance against the members of Roma and Jewish communities is not a problem solely associated with Hungary, and whereas other Member States are faced with the same issue, recent events have raised concerns as to the increase in anti-Roma and anti-Semitic hate speech in Hungary;

CI.  whereas the imposition of retroactive tax and pensions legislation has increased social vulnerability and poverty on a massive scale, a fact which is not only causing great uncertainty among the people, but also constitutes a violation of private ownership rights and undermines fundamental civil liberties;

Freedom of religion or belief and recognition of churches

CJ.  whereas freedom of thought, conscience and religion as enshrined in Article 9 of the ECHR and Article 10 of the Charter is one of the foundations of a democratic society, and whereas the role of the State in this area should be that of a neutral and impartial guarantor of the right to exercise different religions, faiths and beliefs;

CK.  whereas the Act on Churches established a new legal regime for the regulation of religious associations and churches in Hungary, which imposed a set of requirements for the recognition of churches and made such recognition conditional on prior approval by the parliament by a two-thirds majority;

CL.  whereas the obligation set out in the Act on Churches to obtain recognition by the parliament as a condition for the establishment of a church was deemed by the Venice Commission(10) to be a restriction of the freedom of religion;

CM.  whereas as a result of the entry into force of retroactive provisions of the Act on Churches more than 300 registered churches lost their legal status of church;

CN.  whereas, at the request of several religious communities and the Hungarian Commissioner for Fundamental Rights, the Constitutional Court examined the constitutionality of the provisions of the Act on Churches and in its Decision 6/2013 of 26 February 2013 declared some of them unconstitutional and annulled them with retroactive effect;

CO.  whereas in that Decision the Constitutional Court, while not questioning the right of the parliament to specify the substantive conditions for recognition as a church, considered that the recognition of church status by a vote in parliament might result in politically biased decisions, and whereas the Constitutional Court declared that the Act did not contain any obligation to provide detailed reasons for a decision which refuses recognition of church status, that no deadlines were specified for the parliament's actions and that the Act did not provide the possibility of effective legal remedy in cases of refusal or lack of a decision;

CP.  whereas the Fourth Amendment to the Fundamental Law, adopted two weeks after the decision of the Constitutional Court, amended Article VII of the Fundamental Law and elevated to the level of the constitution the power of the parliament to pass cardinal laws in order to recognise certain organisations engaged in religious activities as churches, thus overruling the Constitutional Court’s decision;

II- Assessment
The Fundamental Law of Hungary and its implementation

1.  Recalls that respect for legality, including a transparent, accountable and democratic process of enacting laws, including when adopting a Fundamental Law, and for a strong system of representative democracy based on free elections and respecting the rights of the opposition are key elements of the concepts of democracy and the rule of law as enshrined in Article 2 TEU, which provides that 'the Union is founded on the values of respect for human dignity, freedom, democracy, equality, the rule of law and respect for human rights, including the rights of persons belonging to minorities. These values are common to the Member States in a society in which pluralism, non-discrimination, tolerance, justice, solidarity and equality between women and men prevail', and as proclaimed in the Preambles to both the Treaty on the European Union and the Charter; regrets that, from the point of view of protecting European core values, the EU institutions have not always managed in the past to live up to their own standards; maintains, therefore, that it falls to them in particular to take a stand in order to safeguard European fundamental rights as referred to in Article 2 TEU, both at Union level and in the Member States;

2.  Firmly reiterates that, while the drafting and adoption of a new constitution fall within the scope of Member States’ competences, the Member States and the EU have a responsibility to ensure that the constitutional processes and the content of constitutions comply with the commitments entered into by every Member State under the EU Accession Treaties, that is to say, with the common values of the Union, the Charter and the ECHR;

3.  Regrets the fact that the process of drafting and adopting the Fundamental Law of Hungary lacked the transparency, openness, inclusiveness and, ultimately, the consensual basis that could be expected in a modern democratic constituent process, thus weakening the legitimacy of the Fundamental Law itself,

4.  Takes note of the abovementioned Decision of 28 December 2012 of the Constitutional Court declaring that the Hungarian Parliament exceeded its legislative authority when it enacted a number of permanent and general rules in the Transitional Provisions of the Fundamental Law, inter alia, that 'it is the task and the responsibility of the constituent power to clear up the situation after the partial annulment. The Parliament shall make an evident and clear legal situation', while adding the requirement that this shall not mean the automatic insertion of the annulled provisions into the Fundamental Law without any distinction, because the parliament 'must review the regulatory subjects of the annulled non-transitional provisions, and it has to decide about which ones need repeated regulation, on what level of the sources of law. It is also the duty of the Parliament to select the provisions – to be regulated repeatedly – that need to be placed in the Fundamental Law, and the ones that require regulation in an Act of Parliament';

5.  Strongly criticises the provisions of the Fourth Amendment to the Fundamental Law, which undermine the supremacy of the Fundamental Law by reintroducing into its text a number of rules previously declared unconstitutional – i.e. incompatible on procedural or substantive grounds with the Fundamental Law – by the Constitutional Court;

6.  Recalls that in its abovementioned Decision of 28 December 2012, the Constitutional Court gave a clear ruling on standards of constitutionality by declaring that 'in democratic States under the rule of law, constitutions have constant substantial and procedural standards and requirements. The substantial and procedural constitutional requirements shall not be set lower in the era of the Fundamental Law than they were at the time of the Constitution (Act). The requirements of a constitutional State under the rule of law continue to be constantly enforced requirements in the present and they are programmes for the future. The constitutional State under the rule of law is a system of constant values, principles and guarantees'; considers this clear-cut, dignified statement to be applicable to the European Union and all its Member States;

7.  Recalls that the common Union values of democracy and the rule of law require a strong system of representative democracy based on free elections and respecting the rights of the opposition, and that, according to Article 3 of Protocol 1 to the ECHR, elections should guarantee the ‘expression of the opinion of the people in the choice of the legislator’;

8.  Considers that while the use of two-third majority laws is common in other Member States and has been a feature of the Hungarian constitutional and legal order since 1989, the extensive use of cardinal laws to set forth very specific and detailed rules undermines the principles of democracy and the rule of law, as it has enabled the current government, which enjoys the support of a qualified majority, to set in stone political choices with the consequence of making it more difficult for any new future government having only a simple majority in the parliament to respond to social changes, and thus of potentially diminishing the importance of new elections; considers that such use should be re-evaluated, in order to ensure that future governments and parliamentary majorities are allowed to legislate in a meaningful and comprehensive manner;

9.  Considers that use of the individual members' bills procedure to implement the constitution (through cardinal laws) does not constitute a transparent, accountable and democratic legislative process, as it lacks the guarantees of ensuring meaningful social debate and consultation, and that it could run counter to Fundamental Law itself, which makes it an obligation for the government (and not individual members) to submit to the parliament the bills necessary for the implementation of the Fundamental Law;

10.  Takes note of the opinion of the Venice Commission (No CDL-AD(2011)016) which 'welcomes the fact that this new Constitution establishes a constitutional order based on democracy, the rule of law and the protection of fundamental rights as underlying principles'; further takes note of the opinion of the Venice Commission (No CDL-AD(2012)001) according to which the adoption of a large amount of legislation in a very short time frame could explain why some of the new provisions do not comply with European standards; further takes note of the opinion of the Venice Commission on the Fourth Amendment to the Hungarian Fundamental Law (No CDL-AD(2013)012) stating that 'the Fourth Amendment itself brings about or perpetuates shortcomings in the constitutional system of Hungary';

11.  Welcomes the fact that the Fundamental Law of Hungary reiterates and reaffirms the articles of the Charter of the Fundamental Rights of the European Union, and that Hungary, as the fourth country in the EU, in Article H recognises Hungarian sign language (HSL) as a fully fledged language and defends HSL as part of Hungarian culture;

12.  Welcomes the fact that, in its Article XV, the Fundamental Law of Hungary specifically prohibits discrimination on the grounds of race, colour, gender, disability, language, religion, political or other views, national or social origin, or financial, birth or other circumstances, and stipulates that Hungary will adopt special measures to protect children, women, the elderly and persons living with disabilities, in accordance with Articles 20 to 26 of the Charter of Fundamental Rights of the European Union;

Democratic system of checks and balances

13.  Recalls that democracy and the rule of law require a separation of powers among independent institutions based on a properly functioning system of checks and balances and effective control of the conformity of legislation with the constitution;

14.  Recalls that the constitutional majority raised the number of constitutional judges from 11 to 15 and abolished the requirement to reach agreement with the opposition regarding the election of constitutional judges; is concerned that as a result of these measures eight out of the current 15 constitutional judges were elected exclusively by the two-thirds majority (with one exception), including two new members who were appointed directly from their position as members of parliament.

15.  Welcomes the introduction of a possibility for two new types of constitutional complaint to the Constitutional Court and understands that a democratic system that is founded on the rule of law does not necessarily need a constitutional court in order to function properly; recalls, however, Opinion No CDL-AD (2011)016 of the Venice Commission, which notes that in states that have opted for a constitutional court, this court should be entitled to assess the compliance of all laws with the human rights guaranteed in the constitution; considers, therefore, that the limitation of constitutional jurisdiction relating to the laws on the central budget and taxes weakens the institutional and procedural guarantees for the protection of a number of constitutional rights and for the control of the parliament's and the government's powers in the budgetary field;

16.  Recalls that, as declared by the Constitutional Court in its Decision No 45/2012, ‘Constitutional legality has not only procedural, formal and public law validity requirements, but also substantial ones [...]. As appropriate, the Constitutional Court may even examine the free enforcement and the constitutionalisation of the substantial requirements, guarantees and values of democratic States under the rule of law’;

17.  Considers that, in light of the systematic amending of the Fundamental Law at political will, the Constitutional Court can no longer fulfil its role as the supreme body of constitutional protection, especially since the Fourth Amendment explicitly prohibits the Court from reviewing constitutional amendments that contradict other constitutional requirements and principles;

18.  Taking account of the right of a democratically elected parliament to adopt law in line with fundamental rights, with respect for political minorities, and with a democratically adequate and transparent procedure, and of the duty courts, both ordinary and constitutional, to safeguard the compatibility of the laws with the constitution, underlines the importance of the principle of separation of powers and a properly functioning system of checks and balances; is concerned in this connection about the shift of powers in constitutional matters to the advantage of the parliament and to the detriment of the Constitutional Court, which undermines severely the principle of separation of powers and a properly functioning system of checks and balances, which are key corollaries of the rule of law; welcomes in this regard the Eger joint statement of 16 May 2013 by the Presidents of the Hungarian and Romanian Constitutional Courts, Péter Paczolay and Augustin Zegrean, stressing that constitutional courts bear a special responsibility in countries ruled by a two-thirds majority;

19.  Is also extremely concerned about those provisions of the Fourth Amendment which repeal 20 years of constitutional jurisprudence, containing an entire system of founding principles and constitutional requirements, including any potential case law affecting the application of EU law and of European human rights law; notes that the Court already used its previous decisions as a source of interpretation; is concerned, however, at the fact that other courts may not be able to base their decisions upon the previous case law of the Constitutional Court;

20.  Is also concerned about the conformity with EU law of the provision of the Fourth Amendment which enables the Hungarian Government to impose a special tax in order to implement EU Court of Justice judgments entailing payment obligations when the state budget does not have sufficient funding available and when the public debt exceeds half of the gross domestic product; takes note of the ongoing dialogue between the Hungarian Government and the European Commission on the issue;

21.  Criticises the accelerated process for enacting important laws, as it undermines the rights of the opposition parties to be effectively involved in the legislative process, thus limiting their scrutiny of the majority’s and the government’s action and, ultimately, negatively affecting the system of checks and balances;

22.  Is concerned about several provisions of Law LXXII of 2013 on the creation of new rules and regulations relating to the oversight of national security, as they could potentially have a negative effect on the separation of powers, the independence of the judiciary, respect for private and family life and the right to an effective remedy;

23.  Recalls that the independence of data protection authorities is guaranteed by Article 16 TFEU and Article 8 of the EU Charter of Fundamental Rights;

24.  Stresses that protection against removal from office during the term of office is an essential element of the requirement for independence of national data protection authorities under EU law;

25.  Points out that the Commission has launched an infringement procedure against Hungary over the legality of the termination of the mandate of the former Commissioner for Data Protection, as regards the adequate independence of such body, which case is currently pending before the European Court of Justice;

26.  Deplores the fact that the abovementioned institutional changes resulted in a clear weakening of the systems of checks and balances required by the rule of law and the democratic principle of the separation of powers;

Independence of the judiciary

27.  Recalls that independence of the judiciary is required by Article 47 of the Charter of Fundamental Rights and Article 6 of the European Convention on Human Rights and is an essential requirement of the democratic principle of the separation of powers derived from Article 2 TEU;

28.  Recalls that the Constitutional Court, in its abovementioned Decision 33/2012, described the independence of the judiciary and judges as an achievement of the historical constitution of Hungary, when it declared that the ‘principle of judicial independence, with all of its elements, is an achievement beyond doubt. Therefore the Constitutional Court establishes that judicial independence, and the resulting principle of irremovability, is not only a normative rule of the Fundamental Law, but also an achievement of the historical constitution. Thus it is an interpreting principle obligatory to everybody, based on the provisions of the Fundamental Law, and which is to be applied also in the course of exploring other potential contents of the Fundamental Law’(11);

29.  Stresses that the effective safeguarding of the independence of the judiciary forms the basis of democracy in Europe and is a prerequisite for consolidating mutual trust between the judicial authorities of the various Member States and, in consequence, smooth cross-border cooperation in the common area of justice, based on the principle of mutual recognition as enshrined in Articles 81 TFEU (civil matters) and 82 TFEU (criminal matters);

30.  Regrets the fact that the numerous measures adopted – as well as some ongoing reforms – do not provide sufficient assurances of constitutional safeguards as to the independence of the judiciary and the independence of the Constitutional Court of Hungary;

31.  Considers that the premature termination of the term of office of the Supreme Court’s President violates the guarantee of security of tenure, which is a key element of the independence of the judiciary;

32.  Welcomes the abovementioned Decision 33/2012 of the Constitutional Court declaring the compulsory termination of the service of judges at the age of 62 unconstitutional, as well as the abovementioned decision of the Court of Justice of the EU of 6 November 2012, which held that the radical lowering of the retirement age of judges in Hungary constitutes unjustified discrimination on grounds of age and is therefore in breach of Council Directive 2000/78/EC;

33.  Welcomes the amendments to Act CLXI of 2011 on the organisation and administration of courts of Hungary and Act CLXII of 2011 on the legal status and remuneration of judges of Hungary, adopted by the Hungarian Parliament on 2 July 2012, which address many of the concerns expressed in the European Parliament’s resolution of 16 February 2012 and by the Venice Commission in its opinion;

34.  Regrets, however, that not all the recommendations of the Venice Commission have been implemented, in particular as regards the need to limit discretionary powers of the President of the National Judicial Office in the context of the transfer of cases, which potentially affect the right to a fair trial and the right of a lawful judge; takes note of the expression of intent by the Hungarian Government to review the system of transfer of cases; believes that the recommendations of the Venice Commission in this regard should be implemented;

35.  Welcomes the adoption of Act XX of 2013 on the legislative amendments relating to the upper age limit applicable in certain judicial legal relations, which sets the retirement age of judges at 65 at the end of a transitional period of 10 years, and arranges for the reinstatement of those judges unlawfully dismissed;

36.  Regrets, however, that in the case of presiding judges, Act XX of 2013 provides for their reinstatement in their original executive posts only if these judicial positions are still vacant, with the consequence that only a few unlawfully dismissed judges are guaranteed to be reinstated in exactly the same position with the same duties and responsibilities they held before their dismissal;

37.  Welcomes the Commission's proposal for a permanent scoreboard on justice in all 27 EU Member States as put forward by Vice-President Reding, which shows that safeguarding the independence of the judiciary is a general concern of the EU; underlines the fact that in some Member States serious concerns might be raised on these issues; calls for an enlargement of the justice scoreboard also to cover criminal justice, fundamental rights, the rule of law and democracy, as already requested;

38.  Acknowledges the professionalism and dedication of the Hungarian judicial community and its commitment to the rule of law, and recalls that since the start of the democratic process in Hungary the Constitutional Court has been recognised as an outstanding constitutional body throughout Europe and the world;

The electoral reform

39.  Recalls that the redrawing of electoral districts, the adoption of the Act on the election of members of parliament of Hungary and the electoral procedural law considerably change the legal and institutional framework for the next elections due in 2014, and therefore regrets that these laws were adopted unilaterally by the ruling parties, with no broad consultation of the opposition.

40.  Is concerned that in the present political environment the current provisions for the procedure to appoint the members of the National Election Committee do not adequately guarantee balanced representation and the committee’s independence;

41.  Welcomes the fact that the Hungarian authorities requested the opinion of the Venice Commission on the Act on the Election of Members of Parliament of Hungary on 20 January 2012; considers however that a comprehensive analysis is needed in order to evaluate the fundamentally changed electoral landscape.

42.  Welcomes the fact that Act XXXVI of 2013 on the election procedure in Hungary, specifically Article 42, prescribes that, upon request, people with disabilities must be provided with instructions in braille, relevant information in easy-to-read form, voting samples in braille at polls, full accessibility of polls, including particular attention to the needs of the wheelchair users; in addition, on the basis of Article 50 of the abovementioned Act, disabled voters can ask to be registered at another, more accessible, polling station in order to cast their votes in the given constituency, in accordance with the obligation to provide at least one fully accessible polling station in every constituency laid down in Article 81;

Media pluralism

43.  Acknowledges the efforts of the Hungarian authorities that led to legislative changes aimed at addressing a number of the shortcomings identified in order to improve media legislation and bring it into line with EU and Council of Europe standards;

44.  Welcomes the continuing constructive dialogue with international actors, and stresses that the cooperation between the Council of Europe and the Hungarian Government has borne tangible results, as reflected in Act XXXIII of 2013, which addresses some of the concerns previously highlighted in the legal assessments of media legislation, notably in relation to the appointment and election procedures of the presidents of the Media Authority and the Media Council; recalls, however, that there are still concerns regarding the independence of the media authority;

45.  Expresses concern at the effects of the provision of the Fourth Amendment banning political advertising in the commercial media since, although the stated aim of this provision is to reduce political campaign costs and create equal opportunities for the parties, it jeopardises the provision of balanced information; takes note that the Hungarian Government is in consultation with the European Commission on the issue of the rules on political advertising; takes note that restrictions also exist in other European countries; takes note of the opinion of the Venice Commission on the Fourth amendment to the Hungarian Fundamental Law (No CDL-AD(2013) 012), which states that ‘limits on political advertising have to be seen against the legal background of the particular Member State’ and that ‘the prohibition of any political advertising in commercial media services, which are more widely used in Hungary than the public service media, will deprive the opposition of an important chance to air their views effectively and thus to counterweigh the dominant position of the government in the media coverage’;

46.  Reiterates its call on the Hungarian authorities to take action in order to make or commission regular proactive assessments of the impact of legislation on the media environment (reduction in the quality of journalism, instances of self-censorship, restriction of editorial freedom and erosion of the quality of working conditions and job security for journalists);

47.  Deplores the fact that the creation of the state-owned Hungarian News Agency (MTI) as the single news provider for public service broadcasters, while all major private broadcasters are expected to have their own news service, has meant it has a virtual monopoly on the market, as most of its news items are freely available; recalls the recommendation of the Council of Europe to eliminate the obligation on public broadcasters to use the national news agency, as it constitutes an unreasonable and unfair restriction on the plurality of news provision;

48.  Notes that the national competition authority needs to make regular assessments of the media environments and markets, highlighting potential threats to pluralism;

49.  Stresses that measures to regulate the access of media outlets to the market through broadcast licensing and authorising procedures, rules on the protection of state, national or military security and public order and rules on public morality should not be abused for purposes of imposing political or partisan control or censorship on the media, and underlines the fact that a proper balance needs to be ensured in this respect;

50.  Is concerned that public service broadcasting is controlled by an extremely centralised institutional system, which takes the real operational decisions without public scrutiny; stresses that biased and opaque tendering practices and the biased information put out by the public-service broadcasting that reaches a wide audience distort the media market; underlines the fact that, in line with Protocol No 29 to the Lisbon Treaty (on the System of the Public Broadcasting in the Members States), the system of public broadcasting in the Member States is directly related to the democratic, social and cultural needs of each society and to the need to preserve media pluralism;

51.  Recalls that content regulations should be clear, allowing citizens and media companies to foresee in which cases they will be infringing the law and to determine the legal consequences of possible violations; notes with concern that, in spite of such detailed content regulations, recent public anti-Roma stances have so far gone unpunished by Hungary’s Media Authority, and calls for balanced application of the law;

Rights of persons belonging to minorities

52.  Notes that the Hungarian Parliament has enacted legislation in criminal and civil areas to combat racial incitement and hate speech; considers that legislative measures are an important starting point to achieve the goal of creating a society free from intolerance and discrimination throughout Europe, as concrete measures can only be built upon firm legislation; points out, however, that legislation needs to be actively implemented;

53.  Underlines the fact that the authorities in all Member States have a positive obligation to act to avoid violation of the rights of persons belonging to minorities, cannot remain neutral, and should take the necessary legal, educational and political measures when faced with such violations; notes the 2011 amendment to the Penal Code to prevent campaigns by extremist groups to intimidate Roma communities, threatening with up to three years’ imprisonment the 'provocative unsocial behaviour' which induces fear in a member of a national, ethnic, racial or religious community; acknowledges the role of the Hungarian Government in launching the European Framework of National Roma Inclusion Strategy during its EU presidency in 2011;

54.  Notes with concern repeated changes to the legal order restricting the rights of lesbian, gay, bisexual and transgender (LGBT) people, for instance by seeking to exclude same-sex couples and their children, as well as other varied family structures, from the definition of 'family' in the Fundamental Law; stresses that this runs counter to recent European Court of Human Rights jurisprudence and fuels a climate of intolerance vis-à-vis LGBT people;

55.  Welcomes the insertion of provisions in the Hungarian Constitution by the Fourth Amendment stating that ‘Hungary shall strive to provide every person with decent housing and access to public services’ and that the ‘State and local governments shall also contribute to creating the conditions of decent housing by striving to provide accommodation to all homeless people’; expresses concern, however, at the fact that ‘in order to protect public order, public security, public health and cultural values, an Act of Parliament or a local ordinance may declare illegal staying in a public area as a permanent abode with respect to a specific part of such public area’, which could lead to homelessness being addressed through the criminal law; recalls that the Hungarian Constitutional Court had judged that similar measures contained in the Petty Offences Act were unconstitutional as contrary to human dignity;

Freedom of religion or belief and recognition of churches

56.  Notes with concern that the changes made to the Fundamental Law by the Fourth Amendment give the parliament the power to recognise, by way of cardinal laws and without a constitutional duty to justify a refusal of recognition, certain organisations engaged in religious activities as churches, which might negatively affect the duty of the state to remain neutral and impartial in its relations with the various religions and beliefs;

Conclusion

57.  Reaffirms that it attaches the utmost importance to respect of the principle of equality between all Member States and refuses the application of double standards in the treatment of Member States; stresses that similar situations or legal frameworks and provisions should be assessed in the same way; takes the view that the pure fact of changing and adopting laws cannot be considered incompatible with the values of the Treaties; calls on the Commission to identify instances of incompatibility with EU law and for the European Court of Justice to adjudicate any such case;

58.  Concludes – for the reasons explained above – that the systemic and general trend of repeatedly modifying the constitutional and legal framework in very short time frames, and the content of such modifications, are incompatible with the values referred to in Article 2 TEU, Article 3, paragraph 1, and Article 6 TEU, and deviate from the principles referred to in Article 4, paragraph 3, TEU; considers that – unless corrected in a timely and adequate manner – this trend will result in a clear risk of a serious breach of the values referred to in Article 2 TEU;

III- Recommendations
Preamble

59.  Reaffirms that its present resolution is not only about Hungary, but inseparably about the European Union as a whole, and its democratic reconstruction and development after the fall of the 20th century totalitarianisms. It is about the European family, its common values and standards, its inclusiveness and its capacity to engage in dialogue. It is about the need to implement Treaties which all Member States have voluntarily acceded to. It is about the mutual help and mutual trust that the Union, its citizens and its Member States need to have if these Treaties are to be not just words on paper, but the legal basis for a true, just and open Europe respecting fundamental rights;

60.  Shares the idea of a Union which is not only a ‘union of democracies’ but also a ’Union of Democracy’, based upon pluralistic societies where respect for human rights and the rule of law prevail;

61.  Reaffirms that while in times of economic and social crisis one may yield to the temptation to disregard constitutional principles, the credibility and robustness of constitutional institutions plays a pivotal role in underpinning economic, fiscal and social policies and social cohesion;

Appeal to all Member States

62.  Calls on the Member States to comply without delay with their Treaty obligations to respect, guarantee, protect and promote the Union’s common values, which is an indispensable condition for respecting democracy, and thus the substance of Union citizenship, and for building a culture of mutual trust enabling effective cross-border cooperation and a genuine area of freedom, security and justice;

63.  Considers that it is the moral and legal duty of all Members States, as well as of the Union institutions, to defend the European values enshrined in the Treaties and the Charter of Fundamental Rights, and in the European Convention on Human Rights to which every Member State is a signatory and to which the EU will soon accede;

64.  Calls on the national parliaments to enhance their role in monitoring compliance with fundamental values and to denounce any risks of deterioration of these values that may occur within the EU borders, with a view to maintaining the credibility of the Union vis-à-vis third countries, which is based on the seriousness with which the Union and its Member States take the values they have chosen as foundations;

65.  Expects all Member States to take the necessary steps, particularly within the Council of the European Union, to contribute loyally to the promotion of the Union’s values and to cooperate with Parliament and the Commission in monitoring their observance, especially in the framework of the ‘Article 2 Trilogue’ referred to in paragraph 85;

Appeal to the European Council

66.  Reminds the European Council of its responsibilities within the framework of the area of freedom, liberty, security and justice;

67.  Notes with disappointment that the European Council is the only EU political institution that has remained silent, while the Commission, Parliament, the Council of Europe, the OSCE and even the US Administration have voiced concerns over the situation in Hungary;

68.  Considers that the European Council cannot remain inactive in cases where one of the Member States breaches fundamental rights or implements changes that may negatively affect the rule of law in that country, and therefore the rule of law in the European Union at large, in particular when mutual trust in the legal system and judicial cooperation may be put at risk, as this has a negative impact on the Union itself;

69.  Invites the President of the European Council to inform Parliament of his assessment of the situation;

Recommendations to the Commission

70.  Calls on the Commission as the guardian of the Treaties and as the body responsible for ensuring that Union law is correctly applied, under the supervision of the Court of Justice of the European Union:

   to inform Parliament of its assessment of the Fourth Amendment to the Fundamental Law and its impact on cooperation within the EU;
   to be determined in ensuring full compliance with the common fundamental values and rights set out in Article 2 TEU, as violations thereof undermine the very foundations of the Union and mutual trust among Member States;
   to launch objective investigation and start infringement proceedings whenever it considers that a Member State has failed to fulfil an obligation under the Treaties and, in particular, is violating the rights enshrined in the Charter of Fundamental Rights of the EU;
   to avoid any double standards in the treatment of Member States, making sure that, in similar situations, all Member States are treated in a similar manner, thus fully respecting the principle of equality of the Member States before the Treaties;
   to focus not only on specific infringements of EU law, to be remedied notably through Article 258 TFEU, but to respond appropriately to a systemic change in the constitutional and legal system and practice of a Member State where multiple and recurrent infringements unfortunately result in a state of legal uncertainty, which no longer meets the requirements of Article 2 TEU;
   to adopt a more comprehensive approach to addressing any potential risks of serious breaching of fundamental values in a given Member State at an early stage and immediately to engage in a structured political dialogue with the relevant Member State and the other EU institutions ; this structured political dialogue should be coordinated at the highest political level of the Commission and have a clear impact on the full spectrum of negotiations between the Commission and the Member State concerned in the various EU fields;
   to create – as soon as risks of violations of Article 2 TEU are identified – an Article 2 TEU/ Alarm Agenda, i.e. a Union values monitoring mechanism, to be dealt with by the Commission with exclusive priority and urgency, coordinated at the highest political level and taken fully into account in the various EU sectoral policies, until full compliance with Article 2 TEU is restored and any risks of violation thereof are defused, as also envisaged in the letter of the Foreign Affairs Ministers of four Member States raising with the President of the Commission the need to develop a new and more effective method of safeguarding fundamental values in order to place greater emphasis on promoting a culture of respect for the rule of law, taken into account by the Council conclusions on fundamental rights and rule of law and on the Commission 2012 Report on the Application of the Charter of Fundamental Rights of the European Union of 6 and 7 June 2013;
   to hold meetings at technical level with the services of the Member State concerned but not to conclude any negotiations in policy fields other than Article-2-TEU-related ones until full compliance with Article 2 TEU has been ensured;
   to apply a horizontal approach involving all the Commission services concerned in order to ensure respect for the rule of law in all fields, including the economic and social sector ;
   to implement and if necessary update its 2003 communication on Article 7 of the Treaty on European Union (COM(2003)0606) and to draw up a detailed proposal for a swift and independent monitoring mechanism and an early-warning system;
   to regularly monitor the correct functioning of the European area of justice and to take action when the independence of the judiciary is put at risk in any Member State, with a view to avoiding the weakening of mutual trust among national judicial authorities, which would inevitably create obstacles to the correct application of the EU instruments on mutual recognition and cross-border cooperation;
   to ensure that Member States guarantee correct implementation of the Charter of Fundamental Rights with respect to media pluralism and equal access to information;
   to monitor the effective implementation of rules ensuring transparent and fair procedures for media funding and state advertising and sponsoring allocation, so as to guarantee that these do not cause interference with freedom of information and expression, pluralism or editorial lines taken by the media;
   to take appropriate, timely, proportionate and progressive measures where concerns arise in relation to freedom of expression, information, media freedom and pluralism in the EU and the Member States on the basis of a detailed and careful analysis of the situation and of the problems to be solved and the best ways to address them;
   to address these issues in the framework of the implementation of the Audiovisual Media Services Directive in order to improve cooperation between regulatory bodies of the Member States and the Commission, bringing forward as soon as possible a revision and amendment of the directive, and notably of its Articles 29 and 30;
   to continue the dialogue with the Hungarian Government on the conformity with EU law of the new provision of the Fourth Amendment enabling the Hungarian Government to impose a special tax in order to implement EU Court of Justice judgments entailing payment obligations when the state budget does not have sufficient funding available and when the public debt exceeds half of the gross domestic product, and to suggest adequate measures to prevent what may result in a breach of sincere cooperation as enshrined in Article 4(3) TEU;

71.  Reminds the Commission that the Charter of Fundamental Rights of the European Union, and the European Union’s forthcoming accession to the European Convention on Human Rights, reaffirm a new architecture for European Union law, a structure with human rights more than ever at its heart, thus conferring on the Commission, as guardian of the Treaties, greater responsibilities in this area;

Recommendations to the Hungarian Authorities

72.  Urges the Hungarian authorities to implement as swiftly as possible all the measures the European Commission as the guardian of the treaties deems necessary in order to fully comply with EU law, fully comply with the decisions of the Hungarian Constitutional Court and implement as swiftly as possible the following recommendations, in line with the recommendations of the Venice Commission, the Council of Europe and other international bodies for the protection of the rule of law and fundamental rights, with a view to fully complying with the rule of law and its key requirements on the constitutional setting, the system of checks and balances and the independence of the judiciary, as well as on strong safeguards for fundamental rights, including freedom of expression, the media and religion or belief, protection of minorities, action to combat discrimination, and the right to property:

On the Fundamental Law:

On checks and balances:

On the independence of the judiciary:

On the electoral reform:

On the media and pluralism:

On respect for fundamental rights, including the rights of persons belonging to minorities:

On freedom of religion or belief and recognition of churches:

   to fully restore the supremacy of the Fundamental Law by removing from it those provisions previously declared unconstitutional by the Constitutional Court;
   to reduce the recurrent use of cardinal laws in order to leave policy areas such as family, social, fiscal and budget matters to ordinary legislation and majorities;
   to implement the recommendations of the Venice Commission and, in particular, to revise the list of policy areas requiring a qualified majority with a view to ensuring meaningful future elections;
   to secure a lively parliamentary system which also respects opposition forces by allowing a reasonable time for a genuine debate between the majority and the opposition and for participation by the wider public in the legislative procedure;
   to ensure the widest possible participation by all parliamentary parties in the constitutional process, even though the relevant special majority is held by the governing coalition alone;
   to fully restore the prerogatives of the Constitutional Court as the supreme body of constitutional protection, and thus the primacy of the Fundamental Law, by removing from its text the limitations on the Constitutional Court’s power to review the constitutionality of any changes to the Fundamental Law, as well as the abolition of two decades of constitutional case law; to restore the right of the Constitutional Court to review all legislation without exception, with a view to counterbalancing parliamentary and executive actions and ensuring full judicial review; such a judicial and constitutional review may be exerted in different ways in different Member States, depending on the specificities of each national constitutional history, but once established, a Constitutional Court – like the Hungarian one, which after the fall of the communist regime has rapidly built a reputation among Supreme Courts in Europe – should not be subject to measures aimed at reducing its competences and thus undermining the rule of law;
   to restore the possibility for the judicial system to refer to the case law issued before the entry into force of the Fundamental Law, in particular in the field of fundamental rights(12);
   to strive for consensus when electing the members of the Constitutional Court, with meaningful involvement of the opposition, and to ensure that the members of the court are free from political influence;
   to restore the prerogatives of the parliament in the budgetary field and thus secure the full democratic legitimacy of budgetary decisions by removing the restriction of parliamentary powers by the non-parliamentary Budget Council;
   to cooperate with the European institutions in order to ensure that the provisions of the new National Security Law comply with the fundamental principles of the separation of powers, the independence of the judiciary, respect for private and family life and the right to an effective remedy;
   to provide clarifications on how the Hungarian authorities intend to remedy the premature termination of the term of office of senior officials with a view to securing the institutional independence of the data protection authority;
   to fully guarantee the independence of the judiciary by ensuring that the principles of irremovability and guaranteed term of office of judges, the rules governing the structure and composition of the governing bodies of the judiciary and the safeguards on the independence of the Constitutional Court are enshrined in the Fundamental Law;
   to promptly and correctly implement the abovementioned decisions of the Court of Justice of the European Union of 6 November 2012 and of the Hungarian Constitutional Court, by enabling the dismissed judges who so wish to be reinstated in their previous positions, including those presiding judges whose original executive posts are no longer vacant;
   to establish objective selection criteria, or to mandate the National Judicial Council to establish such criteria, with a view to ensuring that the rules on the transfer of cases respect the right to a fair trial and the principle of a lawful judge;
   to implement the remaining recommendations laid down in the Venice Commission’s Opinion No CDL-AD(2012)020 on the cardinal acts on the judiciary that were amended following the adoption of Opinion CDL-AD(2012)001;
   to invite the Venice Commission and the OSCE/ ODIHR to carry out a joint analysis of the comprehensively changed legal and institutional framework of the elections and to invite the ODIHR for a Needs Assessment Mission and a long and short term election observation.
   to ensure balanced representation within the National Election Committee;
   to fulfil the commitment to further discuss cooperation activities at expert level on the more long-term perspective of the freedom of the media, building on the most important remaining recommendations of the 2012 legal expertise of the Council of Europe;
   to ensure timely and close involvement of all relevant stakeholders, including media professionals, opposition parties and civil society, in any further review of this legislation, which regulates such a fundamental aspect of the functioning of a democratic society, and in the process of implementation;
   to observe the positive obligation arising from European Court of Human Rights jurisprudence under Article 10 ECHR to protect freedom of expression as one of the preconditions for a functioning democracy;
   to respect, guarantee, protect and promote the fundamental right to freedom of expression and information, as well as media freedom and pluralism, and to refrain from developing or supporting mechanisms that threaten media freedom and journalistic and editorial independence;
   to make sure that objective, legally binding procedures and mechanisms are in place for the selection and appointment of heads of public media, management boards, media councils and regulatory bodies, in line with the principles of independence, integrity, experience and professionalism, representation of the entire political and social spectrum, legal certainty and continuity;
   to provide legal guarantees regarding full protection of the confidentiality-of-sources principle and to strictly apply related European Court of Human Rights case law;
   to ensure that rules relating to political information throughout the audiovisual media sector guarantee fair access to different political competitors, opinions and viewpoints, in particular on the occasion of elections and referendums, allowing citizens to form their own opinions without undue influence from one dominant opinion-forming power;
   to take, and continue with, positive actions and effective measures to ensure that the fundamental rights of all persons, including persons belonging to minorities and homeless persons, are respected and to ensure their implementation by all competent public authorities; when reviewing the definition of 'family', to take into account the legislative trend in Europe to broaden the scope of the definition of family and the negative impact of a restricted definition of family on the fundamental rights of those who will be excluded by the new and more restrictive definition;
   to take a new approach, finally assuming its responsibilities towards homeless – and therefore vulnerable – people, as set out in the international treaties on human rights to which Hungary is a signatory, such as the European Convention on Human Rights and the Charter of Fundamental Rights of the European Union, and thus to promote fundamental rights rather than violating them by including in its Fundamental Law provisions that criminalise homeless people;
   calls on the Hungarian Government to do all in its power to strengthen the mechanism for social dialogue and comprehensive consultation and to guarantee the rights associated with this;
   calls on the Hungarian Government to increase its efforts to integrate the Roma and to lay down targeted measures to ensure their protection. Racist threats directed at the Roma must be unequivocally and resolutely repelled;
   to establish clear, neutral and impartial requirements and institutional procedures for the recognition of religious organisations as churches, which respect the duty of the State to remain neutral and impartial in its relations with the various religions and beliefs and to provide effective means of redress in cases of non-recognition or lack of a decision, in line with the constitutional requirements set out in the abovementioned Decision 6/2013 of the Constitutional Court;

Recommendations to the EU institutions on setting up a new mechanism to enforce Article 2 TEU effectively

73.  Reiterates the urgent need to tackle the so-called ‘Copenhagen dilemma’, whereby the EU remains very strict with regard to compliance with the common values and standards on the part of candidate countries but lacks effective monitoring and sanctioning tools once they have joined the EU;

74.  Firmly requests that Member States be regularly assessed on their continued compliance with the fundamental values of the Union and the requirements of democracy and the rule of law, avoiding any double standards and bearing in mind that such an assessment must be founded on a commonly accepted European understanding of constitutional and legal standards; firmly requests, furthermore, that similar situations in Member States should be monitored in accordance with the same pattern, since otherwise the principle of equality of the Member States before the Treaties is not respected;

75.  Calls for closer cooperation between Union institutions and other international bodies, particularly the Council of Europe and the Venice Commission, and for use to be made of their expertise in upholding the principles of democracy, human rights and the rule of law;

76.  Acknowledges and welcomes the initiatives undertaken, the analysis conducted and the recommendations issued by the Council of Europe, in particular its Secretary General, Parliamentary Assembly, Commissioner for Human Rights and the Venice Commission;

77.  Calls on all the EU institutions to launch a joint reflection and debate – as also requested by the Ministers of Foreign Affairs of Germany, the Netherlands, Denmark and Finland in their abovementioned letter to the Commission President – on how to equip the Union with the necessary tools to fulfil its Treaty obligations on democracy, the rule of law and fundamental rights, while avoiding any risks of applying double standards among its Member States;

78.  Considers that a future revision of the Treaties should lead to a better distinction between an initial phase, aimed at assessing any risks of a serious breach of the values referred in Article 2 TEU, and a more efficient procedure in a subsequent phase, where action would need to be taken to address actual serious and persistent violation of those values;

79.  Given the current institutional mechanism laid down in Article 7 TEU, reiterates the calls it made, in its resolution of 12 December 2012 on the situation of fundamental rights in the European Union (2010-2011), for the establishment of a new mechanism to ensure compliance by all Member States with the common values enshrined in Article 2 TEU, and the continuity of the 'Copenhagen criteria'; this mechanism could assume the form of a 'Copenhagen Commission' or high-level group, a 'group of wise men’ or an Article 70 TFEU evaluation, and build up on the reforming and strengthening of the mandate of the European Union Agency for Fundamental Rights, and on the framework of a strengthened Commission-Council-European Parliament-Member States dialogue on measures to be taken;

80.  Reiterates that the setting up of such a mechanism could involve a rethinking of the mandate of the European Union Agency for Fundamental Rights, which should be enhanced to include regular monitoring of Member States’ compliance with Article 2 TEU; recommends that such a ‘Copenhagen high-level group’ or any such mechanism should build on and cooperate with existing mechanisms and structures; recalls the role of the European Union Agency for Fundamental Rights, which could bring together the highly valuable work of the various existing Council of Europe monitoring bodies and the Agency’s own data and analysis in order to carry out independent, comparative and regular assessments of the EU Member States’ compliance with Article 2 TEU.

81.  Recommends that this mechanism should:

   be independent from political influence, as all European Union mechanisms which relate to monitoring Member States should be, as well as swift and effective;
   operate in full cooperation with other international bodies as regards the protection of fundamental rights and the rule of law;
   regularly monitor respect for fundamental rights, the state of democracy and the rule of law in all Member States, while fully respecting national constitutional traditions;
   conduct such monitoring uniformly in all Member States to avoid any risks of double standards among its Member States;
   warn the EU at an early stage about any risks of deterioration of the values enshrined in Article 2 TEU;
   issue recommendations to the EU institutions and Member States on how to respond and remedy any deterioration of the values enshrined in Article 2 TEU;

82.  Instructs its committee responsible for the protection within the territory of the Union of citizens’ rights, human rights and fundamental rights, and for determining clear risks of a serious breach by a Member State of the common principles, to submit a detailed proposal in the form of a report to the Conference of Presidents and to the Plenary;

83.  Instructs its committee responsible for the protection within the territory of the Union of citizens' rights, human rights and fundamental rights, and for determining clear risks of a serious breach by a Member State of the common principles, as well as its committee responsible for the determination of the existence of a serious and persistent breach by a Member State of the principles common to the Member States, to follow the development of the situation in Hungary;

84.  Intends to convene a Conference on this issue before the end of 2013 that will bring together representatives from the Member States, the European institutions, the Council of Europe, national Constitutional and Supreme Courts, the Court of Justice of the European Union and the European Court of Human Rights;

IV- Follow-up

85.  Calls on the Hungarian authorities to inform Parliament, the Commission, the Presidencies of the Council and of the European Council, and the Council of Europe regarding implementation of the measures requested in paragraph 72;

86.  Invites the Commission and the Council to each designate a representative who, together with Parliament's rapporteur and shadow rapporteurs (‘Article 2 Trilogue’), will carry out an assessment of the information sent by the Hungarian authorities on implementation of the recommendations contained in paragraph 72, as well as follow-up on future possible modifications to ensure compliance with Article 2 TEU;

87.  Asks the Conference of Presidents to assess the opportuneness of resorting to mechanisms foreseen by the Treaty, including Article 7(1) TEU, in case the replies from the Hungarian authorities appear not to comply with the requirements of Article 2 TEU;

o
o   o

88.  Instructs its President to forward this resolution to the Parliament, President and Government of Hungary, to the Presidents of the Constitutional Court and the Kúria, to the Council, the Commission, the governments and parliaments of the Member States and the candidate countries, the Fundamental Rights Agency, the Council of Europe and the OSCE.

(1) Texts adopted, P7_TA(2012)0053.
(2) OJ C 199 E, 7.7.2012, p. 154.
(3) OJ C 33 E, 5.2.2013, p. 17.
(4) OJ C 169 E, 15.6.2012, p. 49.
(5) Texts adopted, P7_TA(2012)0500.
(6) These laws include cardinal laws all provisions of which require a two-thirds majority, cardinal laws specific provisions of which have to be adopted by simple majority and acts the specific provisions of which require a two-thirds majority of the Members of Parliament present.
(7) Legal analysis sent to the Hungarian Government on 28 February 2011 http://www.osce.org/fom/75990See also the analysis and assessment of September 2010: http://www.osce.org/fom/71218
(8) Expertise by Council of Europe experts on Hungarian media legislation: ACT CIV of 2010 on the freedom of the press and the fundamental rules on media content and ACT CLXXXV of 2010 on media services and mass media, 11 May 2012.
(9) Report of the UN Special Rapporteur on contemporary forms of racism, racial discrimination, xenophobia and related intolerance (A/HRC/20/33/Add. 1)
(10) Venice Commission Opinion 664/2012 of 19 March 2012 on Act CCVI of 2011 on the right to freedom of conscience and religion and the legal status of churches, denominations and religious communities of Hungary (CDL-AD(2012)004).
(11) Point (80) of the decision.
(12) See Working Document No 5.


Recent floods in Europe
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European Parliament resolution of 3 July 2013 on the floods in Europe (2013/2683(RSP))
P7_TA(2013)0316RC-B7-0319/2013

The European Parliament,

–  having regard to Article 3 of the Treaty on European Union and Articles 191 and 196(1) of the Treaty on the Functioning of the European Union,

–  having regard to Council Regulation (EC) No 2012/2002 of 11 November 2002 establishing the European Union Solidarity Fund, to the Commission Communication on the future of the European Union Solidarity Fund (COM(2011)0613), and to its resolution of 15 January 2013 on the European Solidarity Fund, implementation and application(1),

–  having regard to its resolutions of 5 September 2002 on floods in Europe(2), of 8 September 2005 on natural disasters (fires and floods) in Europe(3), of 18 May 2006 on natural disasters (forest fires, droughts and floods) – agricultural aspects(4), regional development aspects(5) and environmental aspects(6), of 7 September 2006 on forest fires and floods(7), of 17 June 2010 on the floods in central European countries, in particular Poland, the Czech Republic, Slovakia and Hungary(8), and of 11 March 2010 on the major natural disasters in the autonomous region of Madeira and the effects of the storm ‘Xynthia’ in Europe(9),

–  having regard to the Commission White Paper entitled ‘Adapting to climate change: Towards a European framework for action’ (COM(2009)0147), to the Commission Communication on a Community approach on the prevention of natural and man-made disasters (COM(2009)0082), and to the Commission Communication entitled ’Towards a stronger European disaster response: the role of civil protection and humanitarian assistance’ (COM(2010)0600),

–  having regard to the Commission Staff Working Document entitled ‘Regions 2020 – an assessment of future challenges for EU regions’ (SEC(2008)2868),

–  having regard to Rule 110(2) and (4) of its Rules of Procedure,

A.  whereas a major natural disaster has recently occurred in the form of floods in many European countries including Austria, the Czech Republic, Germany, Hungary, Poland, Slovakia, France and Spain;

B.  whereas the frequency, severity, complexity and impact of natural and man-made disasters across Europe has increased rapidly in recent years;

C.  whereas the floods caused serious damage to cities, towns and municipalities, to infrastructure and businesses, and to agriculture and rural areas, and whereas they destroyed elements of natural and cultural heritage, as well as causing death and injury and forcing thousands of people to leave their homes;

D.  whereas the European Union Solidarity Fund (EUSF) was established in order to deal with major national disasters and to provide financial assistance to disaster-stricken states;

E.  whereas sustainable reconstruction of the areas destroyed or damaged by the disasters must be undertaken in order to remedy their economic, social and environmental losses;

F.  whereas the European Union’s prevention capacity to tackle all types of natural disaster needs to be enhanced, and whereas the operability of and coordination between the various Union instruments needs to be improved in order to achieve sustainable disaster prevention;

G.  whereas some mountainous areas, and areas along rivers and valleys, have lost part of their water-absorption capacity as a result of unsustainable deforestation, intensive agriculture, large infrastructure construction projects, urbanisation and soil sealing along these rivers and valleys;

1.  Expresses its empathy and solidarity with the inhabitants of the Member States, regions and municipalities affected by the disaster; takes into consideration their serious economic effects and pays its respects and condolences to the families of the victims;

2.  Appreciates the relentless efforts made by the safety and civil protection units, rescue teams and volunteers to save lives and minimise damage in the areas affected;

3.  Applauds the actions of the Member States that provided assistance to the areas affected, as European solidarity is exemplified by mutual assistance in adverse situations;

4.  Stresses that soil degradation, driven or exacerbated by human activity, such as inappropriate agricultural and forestry practices, damages the capacity of soil to continue to perform in full its crucial function of preventing natural disasters;

5.  Calls on the Commission and the Member States to pay particular attention to planning and reviewing sustainable land use policies, ecosystem absorption capacities and best practices and to increasing the capacity of flood-control and drainage systems;

6.  Stresses that effective flood prevention must be targeted at interregional and cross-border risk management strategies, where there is great potential for coordination and for implementing an enhanced joint emergency response;

7.  Acknowledges that the European Union Civil Protection Mechanism helped Member States to cooperate and minimise the effects of the emergency; calls on the Commission and the Member States to simplify the rules and procedures for activation of the Mechanism;

8.  Highlights the opportunity under the European Territorial Cooperation objective for Member States and the regions concerned to target risk management as an investment priority for the forthcoming programming period currently under negotiation, and calls on them to do so;

9.  Stresses that flood prevention programmes need to be implemented by the Member States through comprehensive and preventive strategies; emphasises that emergency policy, including emergency prevention and emergency response, requires the closer involvement of regions, cities and local communities, which should be encouraged to include emergency policy in their strategies;

10.  Calls on the Council and the Commission – as soon as they receive all the necessary applications from the Member States – to take all the necessary steps to ensure that rapid, adequate financial assistance is provided from the EUSF; stresses how urgent it is for financial assistance to be released through the EUSF to the countries affected by this natural disaster;

11.  Calls on the Commission to draft a new, simplified EUSF regulation which would, inter alia, enable the Commission to make down-payments as soon as the affected Member State has applied for assistance;

12.  Highlights the fact that investment in flood prevention under the relevant programmes requires adequate financial resources, as it is an important tool in enabling the governments of the Member States to develop and implement flood prevention policies; stresses that investment in support of disaster prevention should follow an eco-system-based approach;

13.  Expresses its view that the consequences of disasters have a negative impact on the drawing-down of EU funds; calls for the necessary flexibility to be brought to bear as regards re-programming in the Member States in support of the reconstruction of deprived areas and the selection of the most suitable projects;

14.  Instructs its President to forward this resolution to the Council, the Commission, the governments of the Member States, and regional and local authorities in the affected areas.

(1) Texts adopted, P7_TA(2013)0003.
(2) OJ C 272 E, 13.11.2003, p. 471.
(3) OJ C 193 E, 17.8.2006, p. 322.
(4) OJ C 297 E, 7.12.2006, p. 363.
(5) OJ C 297 E, 7.12.2006, p. 369.
(6) OJ C 297 E, 7.12.2006, p. 375.
(7) OJ C 305 E, 14.12.2006, p. 240.
(8) OJ C 236 E, 12.8.2011, p. 128.
(9) OJ C 349 E, 22.12.2010, p. 88.


Reforming the structure of the EU banking sector
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European Parliament resolution of 3 July 2013 on reforming the structure of the EU banking sector (2013/2021(INI))
P7_TA(2013)0317A7-0231/2013

The European Parliament,

–  having regard to Rule 120 of its Rules of Procedure,

–  having regard to Directive 2010/76/EU of the European Parliament and of the Council of 24 November 2010 amending Directives 2006/48/EC and 2006/49/EC as regards capital requirements for the trading book and for re-securitisations, and the supervisory review of remuneration policies,

–  having regard to the report of 2 October 2012 of the High-level Expert Group on Reforming the Structure of the EU Banking Sector (HLEG)(1),

–  having regard to the conclusions of the G20 meetings held in London in 2009, in Cannes in 2011 and in Moscow in 2013,

–  having regard to Directive 2009/111/EC of the European Parliament and of the Council of 16 September 2009 amending Directives 2006/48/EC, 2006/49/EC and 2007/64/EC as regards banks affiliated to central institutions, certain own funds items, large exposures, supervisory arrangements, and crisis management, and to the proposals of 20 July 2011 for a directive of the European Parliament and of the Council on the access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms (COM(2011)0453) and for a regulation of the European Parliament and of the Council on prudential requirements for credit institutions and investment firms (COM(2011)0452), respectively,

–  having regard to the proposal of 6 June 2012 for a directive of the European Parliament and of the Council establishing a framework for the recovery and resolution of credit institutions and investment firms and amending Council Directives 77/91/EEC and 82/891/EEC, Directives 2001/24/EC, 2002/47/EC, 2004/25/EC, 2005/56/EC, 2007/36/EC and 2011/35/EU and Regulation (EU) No 1093/2010 (COM(2012)0280),

–  having regard to the European Council conclusions of 13 and 14 December 2012,

–  having regard to the Financial Stability Board recommendations of October 2011 on ‘Key Attributes of Effective Resolution Regimes for Financial Institutions’ and of November 2010 on ’Intensity and Effectiveness of SIFI Supervision’,

–  having regard to the consultative document of the Basel Committee on Banking Supervision of November 2011 entitled ‘Global systemically important Banks: assessment methodology and the additional loss absorbency requirement’,

–  having regard to Member State and international initiatives for structural reform of the banking sector, including the French Loi de séparation et de régulation des activités bancaires, the German Trennbankengesetz, the report of the Independent Commission on Banking and the Vickers reforms in the UK, and the Volcker rules in the United States,

–  having regard to the 2012 report of the Organisation for Economic Cooperation and Development (OECD) entitled ‘Implicit Guarantees for Bank Debt: Where Do We Stand?’(2) and to the 2009 report of the OECD entitled ’The Elephant in the Room: The Need to Deal with What Banks Do‘(3);

–  having regard to its resolution of 20 November 2012 on Shadow Banking(4),

–  having regard to the Eurogroup Statement of 25 March 2013 regarding the crisis in Cyprus(5),

–  having regard to Rule 48 of its Rules of Procedure,

–  having regard to the report of the Committee on Economic and Monetary Affairs (A7-0231/2013),

A.  whereas, since the beginning of the crisis, state aid of more than EUR 1.6 trillion (12.8 % of EU GDP) was granted to the financial sector between 2008 and the end of 2011 (including the recapitalisation of Northern Rock in 2007), some EUR 1 080 billion of which went on guarantees, EUR 320 billion on recapitalisation measures, EUR 120 billion on impaired assets and EUR 90 billion on liquidity measures(6); whereas the Commission required substantial restructuring of banks receiving aid, including cutting of certain activities, to ensure their future viability without further public support and to offset distortions of competition caused by the subsidies received;

B.  whereas these state financed bailouts has led to a massive increase of public indebtedness in the Member States;

C.  whereas in the five years since the 2008 global economic and financial crisis, the EU economy has remained in a state of recession, with Member States providing subsidies and implicit guarantees to banks, in part owing to inadequate implementation of the economic and fiscal framework;

D.  whereas the OECD in its 2012 report estimates the value of implicit state guarantees in 2012, in terms of cost savings to EU banks, at around USD 100 billion, with wide variations between banks and Member States and the greatest benefit accruing to the banks of greatest size, particularly if they are perceived to be weak, and to banks based in the Member States with the highest sovereign credit rating; whereas the report finds that such guarantees extend beyond those banks classified as SIFIs (‘systemically important financial institution’) under the Financial Stability Board’s methodology;

E.  whereas a weak European regulatory framework with excessive risk-taking, excessive leverage, inadequate equity capital and liquidity requirements, excessive complexity in the overall banking system, excessively-large banking sectors in small economies, a lack of checks and supervision, excessive expansion of trading in derivatives, incorrect rating assessments, excessive bonus systems and inadequate risk management were at the root of the financial crisis, which had largely been fuelled by excessive real-estate exposures, rather than capital market activities, and by insufficient supervision;

F.  whereas the loss of prudence in accounting standards as a consequence of the adoption of international financial reporting standards played, and continues to play, a central role in allowing banks to give a view of their accounts that was not, and is not, always true and fair, with particular reference to IAS 39 on loan loss provisioning;

G.  whereas in Europe, risks were also accumulated by commercial banks, which issued loans in the real-estate sector on the basis of short-sighted, defective risk management;

H.  whereas, as highlighted in the HLEG's analysis, no particular business model did particularly well or particularly poorly during the financial crisis;

I.  whereas profits in the financial sector were often privatised while risks and losses were nationalised; whereas in a social market economy, risk and liability must go hand in hand;

J.  whereas the current post-crisis weakness of the European banking system demonstrates the need for reinforcing the architecture of European financial supervision and crisis management, including structural reforms for certain banks in order to serve the wider needs of the economy;

K.  whereas banks should not be sovereign over public interest;

L.  whereas the 1933 US Glass-Steagall Act on banking separation helped to provide a way out of the worst global financial crisis to have occurred before the present crisis, and whereas there has been a considerable increase in speculative bank investment and financial failures since the Act was repealed in 1999;

M.  whereas a number of important EU initiatives have been taken to prevent a new banking crisis, increase protection of taxpayers and retail clients and create robust and sustainable payment systems.

N.  whereas the eighth edition of the Commission’s Consumer Markets Scoreboard (from December 2012) clearly indicates that consumer trust in the EU in banking services is at an all-time low;

O.  whereas the recent bailout package in Cyprus originally included a tax on all bank deposits, thereby undermining confidence in the deposit guarantee scheme of that country;

P.  whereas a study by the Bank of International Settlements (BIS) suggests that once the volume of private sector loans exceeds a country’s GDP as a measure of the size of the financial sector, and relative employment in that sector rises rapidly, an excessively large financial sector can have a negative effect on the increase in productivity, as human and financial resources are drained from other areas of economic activity(7);

Q.  whereas, in relation to the crisis in Cyprus, the Eurogroup has confirmed the principle that the size of the banking sector relative to a Member State‘s GDP should be limited in order to address banking sector imbalances and promote financial stability, from which it follows that, in the absence of substantial EU-level funds for resolution, limits on the size, complexity and interconnectedness of banks will be beneficial to systemic stability;

R.  whereas the pure separation of financial institutions into investment- and retail branches does not address the problem concerning SIFIs and the relation between the volume of the recovery and resolution fund, on the one hand, and the balance of institutions systemically relevant for credit, payment and deposit, on the other;

S.  whereas the transformation process towards a more sustainable, less systemic and viable banking sector seems to differ between Members States.

T.  whereas the HLEG concludes that the financial crisis has demonstrated that no particular business model fared particularly well, or particularly poorly in the European banking sector; whereas the HLEG analysis revealed excessive risk-taking, often in trading highly complex instruments or in real-estate related lending not matched with adequate capital protection, and excessive reliance on short-term funding and strong linkages between financial institutions, causing a high level of systemic risk in the run-up to the financial crisis;

U.  whereas the HLEG underlines that simple labels, such as ‘retail bank’ or ’investment bank’, do not adequately describe the business model of a bank and its performance and propensity to take risk; whereas business models are diverse along different key dimensions, such as size, activities, income model, capital and funding structure, ownership, corporate structure, and geographic scope, and have evolved substantially over time;

V.  whereas it has become clear that risks can originate in the retail as well as in the investment part of the bank;

W.  whereas the Commission proposal should provide for a principles-based approach to structural reforms of the European banking sector that is consistent with, and complementary to, already existing and forthcoming Union legislation for financial services; whereas the European Banking Authority (EBA) should play a key role by developing relevant technical standards to ensure consistent application and enforcement by the competent authorities, including the European Central Bank (ECB), across the Union;

X.  whereas decentralised local and regional institutions within the banking sector in the Member States have shown themselves to be stable and beneficial in terms of financing the real economy;

Y.  whereas it is necessary that banks hold higher levels and better quality of capital, and have greater liquidity buffers and longer-term funding.

Z.  whereas, since it is neither feasible nor desirable to effect a bank separation post-failure, an effective recovery and resolution regime is needed in order to provide authorities with a credible set of tools, including a bridge bank, so that they can intervene sufficiently early and quickly in an unsound or failing bank to enable its essential financial and economic functions to continue, while minimising the impact on financial stability and ensuring that appropriate losses are imposed on the shareholders and creditors who bore the risk of investing in the institution in question, and not by taxpayers or depositors; whereas such recovery and resolution plans are not necessary for other types of private company, suggesting that there is a specific problem with the market in financial services; whereas if the market were functioning properly, financial institutions would be able to fail without any need for a recovery and resolution plan, signifying that the problem lies within the structures of, and the interconnections between, financial institutions;

AA.  whereas supervisory and resolution authorities must be given the requisite authority to be able effectively to remove impediments to the resolvability of credit institutions, and whereas the banks must be forced to prove their resolvability; whereas the introduction of compulsory recovery and resolutions regimes provides an opportunity to influence the banking structure, reduce the complexity of institutions and restrict or terminate business sectors and products;

AB.  whereas, with regard to ending the implicit guarantee that many banks enjoy, one of the most important tools in the recovery and resolution regime proposed by the Commission is the power for authorities to intervene early, well before the point of non-viability, to require banks to change their business strategy, size or risk profile so that they can be resolved without recourse to extraordinary public financial support;

AC.  whereas banks should never again be allowed to become so large that their failure causes systemic risks for the entire economy, obliging the government and the taxpayers to rescue them, and whereas the too-big-to-fail problem should thereby be brought to an end;

AD.  whereas banks must no longer reach such a size – even in a single Member State – that they constitute a systemic risk in a nation state, with taxpayers having to bear the cost of losses;

AE.  whereas the EU banking sector remains highly concentrated: 14 European banking groups are SIFIs, and 15 European banks own 43 % of the market (in terms of asset size) and represent 150 % of EU-27 GDP, with individual Member States citing even higher ratios; whereas the ratio of bank size to GDP has tripled since 2000; whereas the ratio of bank size to GDP has quadrupled in Luxembourg, Ireland, Cyprus, Malta and Great Britain; whereas there is a huge degree of diversity in the European banking sector, both in terms of size and business model;

AF.  whereas there is no evidence from the past that a separation model could contribute in a positive way to avoiding a future financial crisis or to diminishing the risk of it;

AG.  whereas currently the state guarantees and implicitly subsidises the whole financial system via liquidity support, deposit guarantee schemes and nationalisation programmes; whereas it is only appropriate for the state to guarantee essential services that ensure the smooth running of the real economy, such as payment systems and overdraft facilities; whereas structural reform is simply about ensuring that the state only guarantees essential services and that non-essential services are priced by the market;

AH.  whereas capital markets need to be able to meet European financial needs at a time of very constrained bank lending; whereas there is a need in Europe to increase the availability of alternative financing sources, in particular through the development of capital market alternatives, in order to decrease the dependency on bank funding, as identified in the Commission‘s green paper on Long-Term Financing of the European Economy;

AI.  whereas the funding of the real economy by banks is significantly higher in most of the Member States than it is in the UK or the USA;

AJ.  whereas enhanced competition in the European banking industry is highly desirable; whereas the aggregated amount of legislative and regulatory requirements on banks, although indeed warranted for many reasons, risks creating barriers to entry and, in so doing, facilitates the cementation of the current banking groups‘ dominant positions;

AK.  whereas the EU banking sector faces far-reaching structural changes resulting from changes in the market situation and comprehensive regulatory reforms such as implementation of the Basel III rules;

AL.  whereas the report of the Independent Commission on Banking and the Vickers reforms in the UK state several times that its recommendations are a policy approach for UK banks;

1.  Welcomes the HLEG's analysis and recommendations on banking reform and considers them a useful contribution to initiate reforms;

2.  Welcomes the Commission‘s Consultation on Structural reform of the EU Banking Sector of 16 May 2013;

3.  Takes the view that national initiatives for structural reform require an EU framework to preserve and prevent the fragmentation of the EU’s single market, while respecting the diversity of national banking models;

4.  Takes the view that existing reforms of the EU banking sector (including the Capital Requirements Directives and Regulation, the Recovery and Resolution Directive, the Single Supervisory Mechanism, the Deposit Guarantee Schemes, the Markets in Financial Instruments Directive and Regulation, and shadow banking initiatives) are vital; welcomes the Commission‘s intention to bring forward a directive for structural reform of the EU banking sector in order to tackle problems arising from banks being ’too big to fail‘, and underlines that it must be complementary to the aforementioned reforms;

5.  Insists that the Commission’s impact assessment include assessments of the HLEG, Volker, Vickers, French and German proposals for structural reform, that it list the costs, both to public finances and to financial stability, incurred by the failure of an EU-based bank during the current crisis, as well as the potential costs to the EU banking sector and the possible positive and negative consequences for the real economy, and that it provides information on the nature of the EU’s current universal banking model, including the size and balance sheets of the retail and investment activities of relevant universal banks operating in the EU and on possible implicit guarantees provided by Member States to banks; insists that the Commission should supplement its assessment with quantitative analysis where possible, taking into account the diversity of national banking systems.

6.  Reminds the Commission of the warning issued by the EBA and the ECB that financial innovation can undermine the objectives of structural reforms, and insists that structural reforms be subject to periodic review(8);

7.  Urges the Commission to bring forward a legislative proposal on the regulation of the shadow banking sector that takes into account the principles of the ongoing banking structure reform;

8.  Considers that the objective of all banking structure reform must be to deliver a safe, stable, effective and efficient banking system that operates in a competitive market economy and serves the needs of the real economy, and of customers and consumers through the economic cycle; takes the view that structural reform must stimulate economic growth by supporting the provision of credit to the economy, in particular to SMEs and start-ups, provide greater resilience against potential financial crises, restore trust and confidence in banks, remove risks to public finances and deliver a change in banking culture;

A.Principles for structural reform

9.  Considers that structural reform must be based on the following principles:

   excessive risks must be reduced, competition ensured, complexity reduced and interconnectedness limited by providing for the separate operation of essential activities, including credit, payment, deposit and other customer-related activities and non-essential risky activities;
   corporate governance must be improved and incentives created for banks to establish transparent organisational structures, increase accountability and reinforce a responsible and sustainable remuneration system;
   effective bank resolution and recovery must be enabled by ensuring that when banks become untenable they can be allowed to fail and/or resolved in an orderly manner without the need for taxpayer bailouts.
   delivery of essential credit, deposit and payment services must be ensured in a manner unaffected by operational problems, financial losses, funding shortages or reputational damage resulting from the resolution or insolvency;
   the rules of a competitive market economy must be respected such that risky trading and investment activities do not benefit from implicit guarantees or subsidies, the use of insured deposits or tax payer bailouts, and that the trading and investment activities, not the credit and deposit activities, bear the risks and costs associated with those activities;
   adequate capital, leverage and liquidity must be available for all banking activities;
   the separated entities must have different sources of funding, with no undue or unnecessary shifting of capital and liquidity between these activities; the provision of adequate capital, leverage and liquidity rules must be calibrated to the business models of the activities, including separate balance sheets, and provide limits on the exposure of essential credit and deposit activities to non-essential trading and investment activities, in or outside a banking group;

10.  Urges the Commission to take into account the ECB’s proposal to establish clear and enforceable criteria for separation; stresses that separation should preserve the EU‘s single market and prevent its fragmentation, while respecting the diversity of national banking models(9).

11.  Underlines the necessity of assessing the systemic risk presented both by the separated entities and by the group as a whole, taking off-balance sheet exposures fully into account;

12.  Urges the Commission and the Member States to make sure that the Recovery and Resolution Directive is fully implemented; urges the Commission, the EBA and the Member States to ascertain that banks have in place clear and credible crisis management frameworks that include sufficient capital for credit, payment and deposit activities, bail-in-able liabilities and liquid assets to enable them, in the event of failure, to maintain depositors‘ access to funds, protect essential services – in particular credit, payment and deposit activities – from the risk of disorderly failure, pay out depositors in a timely fashion and avoid adverse effects on financial stability;

13.  Urges the Commission, the EBA and the competent authorities, on the basis of the Capital Requirements and Recovery and Resolution legislative framework to ensure that adequate differentiation exists – in terms of capital, leverage, bail-in-able liabilities, appropriate capital buffers and liquidity requirements – between the separated entities, with an emphasis on higher capital requirements for non-essential risky activities;

B.Corporate governance

14.  Calls on the Commission to consider, in its thorough impact assessment of the potential separation of banks and alternatives, the proposals set out in the HLEG‘s report in the area of corporate governance, including a) governance and control mechanisms, b) risk management, c) incentive schemes, d) risk disclosure and e) sanctions;

15.  Calls on the Commission to implement the proposals and recommendations set out in Parliament’s resolution of 11 May 2011 on corporate governance in financial institutions(10);

16.  Is of the opinion that the recently adopted directive on prudential supervision of credit institutions and investment firms contains an appropriate framework of requirements on the governance of banks, including their executive and non-executive board members;

17.  Urges the Commission to assist in reaching an agreement on the proposed Deposit Guarantee Scheme Directive and to increase consumer protection by introducing depositor preference;

18.  Calls on the Commission to include provisions establishing an obligation for all executive board members in an entity of a bank to have responsibility as executive board members only for this entity of the bank;

19.  Urges the Commission to include provisions to strengthen personal accountability and liability for board members; suggests that in this context the Commission should explore how to encourage a return to the partnership model of company management, in particular for investment banking;

20.  Urges the Commission and the EBA to ensure full and comprehensive implementation of the Capital Requirements legislative framework, with particular regard to the provisions on compensation and remuneration; calls on the EBA and the Commission to present an annual report to Parliament and the Council on the implementation and enforcement of the relevant provisions by the Member States; urges the Commission to continue the reform of banks’ compensation and remuneration culture by prioritising long-term incentives for variable remuneration with larger deferral periods up to retirement, and to promote transparency of remuneration policies including, but not limited to, explanations and assessments on internal remuneration spreads, relevant changes and comparative sectoral deviations;

21.  Urges the Commission, the EBA and the competent authorities to ensure that remuneration systems prioritise the use of instruments such as bonds subject to bail-in, and shares, rather than cash, commissions or value-based items in line with the provisions of the Capital Requirements Directive;

22.  Urges the Commission, the EBA and the competent authorities to ensure that compensation and remuneration systems at all levels of a bank reflect its overall performance and are focused on quality customer service and long-term financial stability rather than short-term profits, in line with the provisions of the Capital Requirements legislative framework;

23.  Urges the Commission to make provision for effective, dissuasive and proportionate sanctioning regimes for legal and natural persons, and for the publication of sanction levels and of information on those in breach of the rules;

24.  Urges the Commission to make provision for competent authorities, and as applicable the single supervisory mechanism (SSM), to comply with the principles of structural reform.

25.  Asks the Commission to propose that adequate resources and powers be allocated to competent supervisory authorities, including SSMs;

26.  Urges the Commission to conduct a study to ensure that accounting standards used by financial institutions give a genuinely true and fair view of banks’ financial health; points out that accounts are the main source of information for an investor to understand whether or not a company is a going concern or not; notes that auditors can only sign off accounts if they are true and fair, independent of the financial standards used by preparers of financial statements; believes that if auditors are unsure that a company is a going concern they should not sign off the company’s accounts, even if they have been drawn up in line with accounting standards; point out that this should, however, be a driver of better management of the company in question; suggests that international financial reporting standards do not necessarily give a true and fair view of accounts, as shown by numerous examples of banks collapsing despite their accounts having been signed off by auditors;

C.Enhancing fair and sustainable competition

27.  Stresses that effective, fair and sustainable competition is necessary for maintaining a well-functioning and efficient banking sector that facilitates funding to the real economy by ensuring universal access to, and reducing the cost of, banking services; stresses, in this context, that supervisory rules, among other provisions, should take into account the risk profile, the regional scope and the business model of the respective institutions;

28.  Urges the Commission and the Member States to work together to promote greater diversification of the EU’s banking sector by encouraging and facilitating more consumer-oriented banking, for example through cooperatives and building societies, and through peer-to-peer lending, crowd funding and saving-bank models, taking note that the different levels of risk that consumers are exposed to are disclosed in a transparent manner;

29.  Notes that, in order to boost the competitiveness and stability of the European banking system, it is vital to address in an effective way the issue of SIFIs (i.e. banks that are too big to fail), the problems of which resulted in an escalation of the adverse effects of the financial crisis, by rationalising the scale of the activities of banking groups and by reducing interdependencies within groups;

30.  Urges the Commission to find ways to encourage and promote ‘relationship lending’ or ’knowledge-based lending’ in legislative initiatives. These should aim to avoid a ‘tick box’ approach and focus instead on promoting vocational and ethical training for those who mediate and lend capital to businesses;

31.  Urges the Member States, the Commission and the competent authorities to make it their clear objective to promote and ensure effective competition, and to encourage greater diversity and customer-orientation, in the EU banking sector;

32.  Asks the Commission to bring forward measures to introduce account portability and to promote accessible websites that allow consumers to compare the prices and financial strengths of banks, which would encourage discipline as informed consumer switch between banks, and to assist in improving consumer choice in the banking sector by reducing barriers to entry and exit and by applying proportionate rules to new entrants to the market;

33.  Calls on the Commission to bring forward the necessary structural reforms outlined in this report, which, while maintaining the integrity of the internal market, respect the diversity of national banking systems and maintain a strong role for the EBA in ensuring correct application across the Union;

o
o   o

34.  Instructs its President to forward this resolution to the Council and the Commission.

(1) http://ec.europa.eu/internal_market/bank/docs/high-level_expert_group/report_en.pdf
(2) http://www.oecd.org/finance/financial-markets/Implicit-Guarantees-for-bank-debt.pdf
(3) http://www.oecd.org/daf/fin/financial-markets/44357464.pdf
(4) Texts adopted, P7_TA(2012)0427.
(5) http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ecofin/136487.pdf
(6) COM(2012)0778.
(7) ‘Reassessing the impact of finance on growth’, by Stephen G. Cecchetti and Enisse Kharroubi, Monetary and Economic Department of the Bank of International Settlements, July 2012: http://www.bis.org/publ/work381.pdf
(8) http://www.eba.europa.eu/cebs/media/Publications/Other%20Publications/Opinions/EBA-BS-2012-219--opinion-on-HLG-Liikanen-report---2-.pdf and http://www.ecb.int/pub/pdf/other/120128_eurosystem_contributionen.pdf
(9) http://www.ecb.int/pub/pdf/other/120128_eurosystem_contributionen.pdf
(10) OJ C 377 E, 7.12.2012, p. 7.


Protection of the EU's financial interests - fight against fraud
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European Parliament resolution of 3 July 2013 on the Annual Report 2011 on the protection of the EU’s Financial Interests - Fight against fraud (2012/2285(INI))
P7_TA(2013)0318A7-0197/2013

The European Parliament,

–  having regard to its resolutions on previous annual reports of the Commission and the European Anti-Fraud Office (OLAF),

–  having regard to the report from the Commission to the Council and the European Parliament entitled ‘Protection of the European Union’s financial interests – Fight against fraud – Annual Report 2011’ (COM(2012)0408) and its accompanying documents (SWD(2012)0227, SWD(2012)0228, SWD(2012)0229 and SWD(2012)0230)(1),

–  having regard to OLAF’s Report – Annual Report 2011(2),

–  having regard to the Annual Report of the Court of Auditors on the implementation of the budget concerning the financial year 2011, together with the institutions’ replies(3),

–  having regard to the communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee, the Committee of the Regions and the Court of Auditors on the Commission Anti-Fraud Strategy (COM(2011)0376),

–  having regard to the Commission’s proposal for a directive of the European Parliament and of the Council on the fight against fraud to the Union’s financial interests by means of criminal law (COM(2012)0363),

–  having regard to the proposal for a regulation of the European Parliament and of the Council on the Hercule III programme to promote activities in the field of the protection of the European Union’s financial interests (COM(2011)0914),

–  having regard to Article 325(5) of the Treaty on the Functioning of the European Union,

–  having regard to Regulation (EU, Euratom) No 966/2012 of the European Parliament and of the Council of 25 October 2012 on the financial rules applicable to the general budget of the Union(4),

–  having regard to Council Regulation (EC, Euratom) No 2988/95 of 18 December 1995 on the protection of the European Communities’ financial interests(5),

–  having regard to its resolution of 10 May 2012 on the protection of the European Union’s financial interests – Fight against fraud – Annual Report 2010(6),

–  having regard to its resolution of 15 September 2011 on the EU’s efforts to combat corruption(7), its declaration of 18 May 2010 on the Union’s efforts in combating corruption(8), and the communication from the Commission to the European Parliament, the Council and the European Economic and Social Committee entitled ‘Fighting corruption in the EU’ (COM(2011)0308),

–   having regard to OLAF’s annual report for 2012 and to the report of the OLAF Supervisory Committee for the same year,

–  having regard to Rule 48 of its Rules of Procedure,

–  having regard to the report of the Committee on Budgetary Control and the opinions of the Committee on Foreign Affairs and the Committee on Agriculture and Rural Development (A7-0197/2013),

A.  whereas the EU and the Member States share responsibility for the protection of the Union’s financial interests and the fight against fraud, and whereas close cooperation between the Commission and the Member States is essential;

B.  whereas the Member States have the primary responsibility for implementing some 80 % of the Union budget, as well as for the collection of own resources, inter alia in the form of VAT and customs duties;

C.  whereas the Commission has recently undertaken a number of important initiatives on anti-fraud policy measures;

General comments

1.  Stresses that countering fraud and any other illegal activities affecting the financial interests of the Union is the obligation of the Commission and the Member States, enshrined in the Treaty on the Functioning of the European Union;

2.  Recalls that it is equally important to ensure the protection of those financial interests both at the level of collection of the EU’s resources and at the level of expenditure;

3.  Welcomes the report from the Commission to the European Parliament and the Council on the Protection of the European Union’s financial interests - Fight against fraud - Annual Report 2011 (‘the Commission’s annual report’); regrets, however, that the report is limited to the data reported by the Member States; points out that Member States use different definitions for similar types of offence and do not all collect similar and detailed statistical data following common criteria, which makes it difficult to collect reliable and comparable statistics at EU level; regrets, therefore, that it is not possible to evaluate the actual overall scale of irregularities and fraud in individual Member States or to identify and discipline those Member States with the highest level of irregularities and fraud as has been repeatedly requested by Parliament; urges, therefore, that standard evaluation criteria for irregularities and fraud be laid down in all Member States and combined with appropriate penalties for those guilty of infringement;

4.  Stresses that fraud is an example of purposeful wrongdoing and is a criminal offence, and that an irregularity is a failure to comply with a rule, and regrets that the Commission’s report fails to consider fraud in detail and deals with irregularities very broadly; points out that Article 325 of the Treaty on the Functioning of the European Union (TFEU) relates to fraud, not irregularities, and calls for a distinction to be made between fraud and errors or irregularities;

5.  Notes that, according to the Commission’s annual report, in 2011 1 230 irregularities were reported as fraudulent and that their financial impact decreased by 37 % in comparison with 2010 and amounted to EUR 404 million; acknowledges that cohesion policy and agriculture remain the two main areas suffering from the highest level of fraud with a respective estimated financial impact of EUR 204 million and EUR 77 million; questions, however, whether this decrease reflects the actual state of affairs in terms of fraudulent activities or is, rather, a sign that the supervisory and control systems in the Member States are deficient;

6.  Calls on the Commission to closely monitor the effectiveness of supervisory and control systems in the Member States and to ensure that the information provided on the level of irregularities in the Member States reflects the true situation;

7.  Stresses that the situation of Member States not transmitting data in a timely manner or providing inaccurate data has been recurring for many years; emphasises that it is impossible to make comparisons and an objective assessment of the scale of fraud in the Member States of the European Union; points out that the European Parliament, the Commission and OLAF are unable to perform their functions properly regarding assessment of the situation and the submission of proposals and repeats that such a situation cannot be tolerated; calls on the Commission to assume full responsibility for recovering unduly paid funds for the EU budget; encourages the Commission to establish uniform reporting principles in all Member States and to ensure the collection of comparable, reliable and adequate data;

8.  Stresses that the European Union needs to step up efforts to strengthen the principles of eGovernment which would set the conditions for greater transparency in public finances; draws attention to the fact that electronic transactions, unlike cash transactions, are referenced and it therefore becomes more difficult to commit fraud and easier to identify suspected cases of fraud; encourages Member States to lower their thresholds for mandatory payments other than cash;

9.  Calls on the Commission to consider the link between Member State reporting on fraud and the lack of a harmonised criminal law setting out a common definition of fraudulent behaviour and offences in the field of protecting the Union’s financial interests; points out that the criminal law systems of the Member States have been harmonised to only a limited extent;

10.  Emphasises that 233 investigative reports have been published on cases of fraud related to the misuse of EU funds over a period of 5 years within the 27 Member States, with the UK, Slovakia, Germany, Bulgaria, Spain Romania and Estonia being the Member States with the most active reporting(9); is of the opinion that investigative journalism has played a major role in exposing fraud that affects the Union’s financial interests and represents a valuable source of information to be considered by OLAF and law enforcement or other relevant authorities in Member States;

11.  Recalls that in its resolution of 6 April 2011 on the protection of the Communities’ financial interests – Fight against fraud – Annual report 2009(10), Parliament called for the introduction of mandatory national management declarations duly audited by the national audit office and consolidated by the Court of Auditors; regrets that no further steps have been taken in that direction;

12.  Deems it of utmost importance that fraudulent behaviour is followed up properly on a European level; is astounded by the fact that the Director-General of OLAF has introduced sector-specific thresholds regarding the likely financial impact in the Investigation Policy Priorities for 2012 and 2013 so that cases in which the likely financial impact lies below the threshold are treated as subordinate and are unlikely to be opened at all; notes that the threshold in the customs sector is EUR 1 000 000, for SAPARD funds it is EUR 100 000, for agricultural funds it is EUR 250 000, for the structural funds it is EUR 500 000, for the ERDF it is EUR 1 000 000, for centralised expenditure and external aid it is EUR 50 000, and in the EU staff sector it is EUR 10 000; is of the opinion that this is unacceptable; urges the Director-General to change the current practice and abandon the threshold approach for prioritising the workload immediately;

13.  Calls for corruption with an impact on the financial interests of the European Union to be considered as fraud as regards the application of Article 325(5) TFEU and to be included in the Commission’s annual report on the protection of the European Union’s financial interests - Fight against fraud;

14.  Points out that the conviction rate in cases involving offences against the Union’s budget varies considerably across the European Union from one Member State to another, ranging from 14 % to 80 %; underlines that harmonisation of the Member States’ criminal law systems remains limited, while judicial cooperation needs reinforcement; calls for ambitious European legislation and improved cooperation and coordination between all Member States in order to ensure that severe sanctions are imposed on fraudsters and to deter fraudulent behaviour;

15.  Acknowledges that the amount to be recovered following irregularities detected in 2011 reached EUR 321 million, of which EUR 166 million has already been recovered by the Member States; notes in this respect that in 2011 the recovery rate for Traditional Own Resources (TOR) improved to 52 % in comparison with 46 % in 2010;

16.  Takes into consideration the OLAF report 2011 and its overview of progress on judicial actions in actions created between 2006-2011, according to which more than half of actions are pending a judicial decision(11); is of the opinion that special attention should be paid to cases related to fraud in customs, which is among the areas with the highest rates of systemic corruption in Europe;

17.  Notes with concern that, owing to the ongoing economic crisis, the Commission does not envisage an increase in EU funding for law enforcement authorities in Member States, with a view to better protection of EU financial interests, as part of its new comprehensive EU strategy; considers that this strategy should be a coherent and comprehensive response aimed at decreasing smuggling, increasing the revenue collected and thus ensuring that such investment pays off in the future;

Revenue – own resources

18.  Recalls that the proper collection of VAT and customs duties directly influences both the economies of the Member States and the EU budget, and that improving the systems for collecting revenue and ensuring that all transactions are formally recorded and brought out of the shadow economy should be given the highest priority by all Member States;

19.  Emphasises in this context that tax evasion and avoidance represent a major risk for the EU public finances; stresses that an estimated EUR 1 trillion in public money is lost due to tax fraud and tax avoidance every year in the EU, which represents a rough yearly cost of EUR 2 000 for every European citizen; points out that the average amount of tax lost in Europe today exceeds the total amount that Member States spend on healthcare, and it amounts to more than four times the amount spent on education in the EU;

20.  Stresses that, owing to the mechanism of balancing the EU budget with GNI-based revenue, every euro lost to customs and VAT fraud has to be paid for by the EU’s citizens; finds it unacceptable that those economic operators who engage in fraudulent activities are, in fact, subsidised by the EU taxpayer; emphasises that fighting tax evasion should be given the highest priority by both the Commission and the Member States; calls on the Member States to make their tax systems simpler and more transparent because tax fraud is too often facilitated by complex and opaque tax systems;

21.  Calls on the Commission to strengthen its coordination with the Member States in order to collect reliable data on the customs and VAT gap in the respective countries and to report on a regular basis to Parliament in that regard;

22.  Welcomes the fact that that 98 % under TOR is recovered without particular problems, but notes variations in Member States’ performance in recovery of the remaining 2 %(12);

Customs

23.  Emphasises that, as far as TOR are concerned, proceeds from customs duties are an important source of income for Member State governments, which keep 25 % to cover the cost of collection; reiterates that the efficient prevention of irregularities and fraud in this field protects the Union’s financial interests and has important consequences for the internal market, eliminating the unfair advantage enjoyed by economic operators who avoid duties over those who comply with their obligations in this respect; stresses that the heart of the problem lies in the undeclared imports or those that have escaped customs surveillance;

24.  Is deeply concerned at the Court of Auditors’ conclusion that there are serious deficiencies in national customs supervision(13);

25.  Stresses that the Customs Union is an area of exclusive competence of the EU and that it is therefore the Commission’s obligation to put in place all measures necessary to ensure that the customs authorities in the Member States act as if they were one, and to monitor their implementation;

26.  Proposes to look into the possibility of setting up a team of European customs officials who specialise in combating fraud, which would work alongside national customs authorities;

27.  Recalls that 70 % of customs procedures in the EU are simplified; is deeply worried by the findings of the Court of Auditors in its Special Report No 1/2010, which revealed serious deficiencies in that area, pointing to poor or poorly documented audits, little use of automated data-processing techniques, excessive use of simplification practices and ex post audits of poor quality;

28.  Emphasises that modern IT solutions and direct access to data are crucial for the effective functioning of the Customs Union; finds the existing solutions unsatisfactory; is seriously concerned, in particular, by the finding in the First Eurofisc(14) Activity Report for 2011, published in May 2012, that in most Member States tax administrations have no direct access to customs data and that automated cross-checking with tax data is therefore not possible;

29.  Deplores the fact that the Commission and the Member States have been unable to ensure timely implementation of the Modernised Customs Code (MCC); stresses that the financial benefits estimated to have been forgone owing to the delay in implementing the new customs code amount to some EUR 2,5 billion in annual operational savings in compliance costs at full regime, and to as much as EUR 50 billion in the expanded international trade market(15); calls on the Commission to make an evaluation of the cost of postponing full application of the MCC, quantifying the budgetary consequences of such postponement;

30.  Stresses the need further to intensify the fight against customs-related fraud and welcomes the creation of the Anti-Fraud Transit Information System (ATIS), a central repository designed to keep all the relevant authorities informed of movements of goods in transit within the EU;

31.  Given the success of the joint customs operations carried out in 2011 between the EU and its Member States and some non-EU countries, encourages the regular conduct of such operations to target the smuggling of sensitive goods and fraud in certain high-risk sectors; points out that joint customs operations conducted in 2011 resulted in the seizure of 1,2 million cigarettes and the detection of tax and customs fraud worth over EUR 1,7 million;

VAT

32.  Recalls that the correct operation of customs procedures has direct consequences for the calculation of VAT; deplores the deficiencies in this area which have been found by the Court of Auditors; is deeply worried, in particular, by the Court’s finding in its Special Report No 13/2011 that the application of customs procedure 42(16) alone accounted in 2009 for extrapolated losses of approximately EUR 2 200 million(17) with regard to the seven Member States which were audited, representing 29 % of the VAT theoretically applicable on the taxable amount of all imports made under customs procedure 42 in 2009 in those seven Member States;

33.  Is deeply concerned that VAT fraud is widespread; points out that, since its introduction, the VAT collection model has remained unchanged; stresses that it is outdated, given the many changes to the technological and economic environment that have taken place; stresses that initiatives in the field of direct taxation require a unanimous decision of the Council; deplores the fact that two important initiatives aimed at combating VAT fraud, i.e. the proposal for a Council Directive amending Directive 2006/112/EC on the common system of value added tax as regards a quick reaction mechanism against VAT fraud (COM(2012)0428) and the proposal for a Council Directive amending Directive 2006/112/EC as regards an optional and temporary application of the reverse charge mechanism in relation to supplies of certain goods and services susceptible to fraud (COM(2009)0511), are currently blocked in Council(18);

34.  Points out the need for real-time connection of business transactions with the tax authorities in order to combat tax evasion;

35.  Believes that the elimination of unrecorded transactions can contribute to reducing the amounts of VAT that go uncollected;

Cigarette smuggling

36.  Recognises that the smuggling of highly taxed goods causes significant losses of revenue to the budgets of the EU and its Member States, and that direct loss in customs revenue as a result of cigarette smuggling alone is estimated to amount to more than EUR 10 billion a year;

37.  Emphasises that cigarette smuggling serves as an important source of financing for internationally structured criminal organisations, and highlights, therefore, the importance of strengthening the external dimension of the Commission’s action plan to fight against the smuggling of cigarettes and alcohol along the EU Eastern border, which provides support for enforcement capacity in neighbouring countries, offering technical assistance and training, raising awareness, stepping up operational cooperation such as Joint Customs Operations, sharing intelligence and enhancing international cooperation; stresses, in particular, the importance of collaboration between the Member States, Russia and the Eastern Partnership countries (Armenia, Azerbaijan, Belarus, Georgia, Moldova and Ukraine) for the implementation of the targeted actions proposed in the action plan;

38.  Recognises that the eastern border represents a particularly vulnerable geographical area in this context; welcomes the publication by the Commission of the action plan to fight against cigarette and alcohol smuggling along the EU’s eastern border;

39.  Welcomes OLAF’s activities in the implementation of the above action plan; welcomes, in particular, the successful outcome of ‘Operation Barrel’, which involved the cooperation of 24 Member States, Norway, Switzerland, Croatia, and Turkey, as well as the active support of the Taxation and Customs Union DG, Europol, Frontex and the World Customs Organisation, and which resulted in the seizure of 1,2 million cigarettes;

40.  Welcomes the adoption on 12 November 2012 of the Protocol on elimination of the illicit trade in tobacco products at the fifth session of the Conference of the Parties (COP) to the WHO Framework Convention on Tobacco Control;

Expenditure

41.  Recalls that 94 % of the EU budget is invested in the Member States, and that in these difficult economic times is it vitally important that all money is spent well; considers, therefore, that fighting fraud against the EU budget across all funding programmes in order to facilitate the recovery of lost funds must be a priority, so as to ensure that the EU budget is spent on its main objectives such as creating jobs and growth;

42.  Deplores that most irregularities in EU spending are committed at national level;

43.  Emphasises that greater transparency allowing for proper scrutiny is key in order to detect fraud; recalls that in previous years Parliament has urged the Commission to take action to ensure one-stop transparency as regards the beneficiaries of EU funds; regrets that this measure has not been implemented; therefore reiterates its call on the Commission to design measures to increase the transparency of legal arrangements and a system which lists all beneficiaries of EU funds on the same website, regardless of who administers the funds, and is based on standard categories of information to be provided by all Member States in at least one working language of the Union; calls on the Member States to cooperate with the Commission and provide it with full and reliable information regarding the beneficiaries of the EU funds managed by Member States; invites the Commission to evaluate the system of ‘shared management’ and provide Parliament with a report as a matter of priority;

Agriculture

44.  Welcomes the fact that the Netherlands, Poland and Finland have improved their compliance in terms of consistent reporting, and that the overall compliance rate for the EU-27 is around 93 %, representing an increase in comparison with the 2010 rate of 90 %;

45.  Stresses, however, that since at least 20 million cases of petty corruption have been reported in the public sector in the EU, it is obvious that the phenomenon also has a spillover effect in the areas of public administration in the Member States (and with regard to the corresponding politicians) that have responsibility over the management of EU funds and other financial interests(19); points out that the number of irregularities reported as fraudulent in agriculture in 2011 – 139 in total – does not reflect the actual situation; points out that the Commission, addressing the Member States, expressed its concern that the fraud figures reported might not be entirely reliable – something the Commission itself acknowledges by emphasising the low number of fraud cases reported in some Member States; calls for further cooperation and best-practice-sharing in the Member States in order to respond to and report cases of fraud to the Commission;

46.  Remains concerned by the suspiciously low fraud rates reported by France, Germany, Spain and the United Kingdom, especially considering their size and the amount of financial support received; regrets that in its annual report the Commission did not offer a definitive answer to the question of whether the low suspected fraud rates reported by France, Germany, Spain and the UK are the result of non-compliance with reporting principles or of the ability of the control systems put in place in these Member States to detect fraud; calls on the aforementioned Member States to provide detailed and thorough explanations of their low rates of reported suspected fraud as soon as possible;

47.  Notes that the low number of fraud cases reported in some Member States could be explained by the fact that cases recognised as fraud in one Member State may not necessarily be considered unlawful in another, and therefore urges the Commission to identify and provide clarification in such circumstances, standardising the criteria for defining fraud and forwarding them to all the Member States;

48.  Calls on the Commission to check the fraud reporting system and to harmonise the practices used in the Member States to respond to and report fraud to the Commission; takes the view that the aim is to make investigations more efficient, while at the same time helping to clarify the procedural rights of the persons concerned;

49.  Points out that in order to prevent the fraudulent use of CAP funds in future, not only should there be a statistical approach to the problem, but also an analysis of the mechanisms behind fraud, particularly in serious cases; likewise, considers that the Member States should report any irregularities they have detected to the Commission, and that irregularities reported as fraudulent should be the subject of stringent analysis;

50.  Points out that, under an amended Article 43 of the updated horizontal regulation, the Commission should be empowered to reduce or suspend the monthly or interim payments to a Member State if one or more of the key components of the national control system in question do not exist or are not effective owing to the gravity or persistence of the deficiencies found, or if irregular payments are not being recovered with the necessary diligence, and if:

   (a) either the deficiencies referred to above are of a continuous nature and have been the reason for at least two implementing acts pursuant to Article 54 of that regulation, excluding from Union financing the relevant expenditure of the Member State concerned; or
   (b) the Member State concerned is not in a position to implement the necessary remedial measures in the immediate future, in accordance with an action plan with clear progress indicators to be established in consultation with the Commission;

51.  Expresses concern that the outstanding accumulated EAGF amount still to be recovered from beneficiaries by the end of the 2011 financial year stood at EUR 1,2 billion;

52.  Calls on the Commission to take all necessary steps to put in place an effective system of recovery taking into account the developments under the current reform and, in next year’s report on the protection of the EU’s financial interests, to inform Parliament of the progress made;

53.  Emphasises that the reintroduction of a ‘petty offence’ procedure should go ahead, and that recovery under Article 56(3) of the updated horizontal regulation need not be pursued where the costs already incurred combined with the likely costs of recovery exceed the amount to be recovered; calls on the Commission, in the interests of administrative simplification at local level, to deem this condition to have been met if the amount to be recovered from the beneficiary in the context of a single payment does not exceed EUR 300; points out that reducing the administrative burden by not pursuing the recovery of small and very small amounts enables the national and regional authorities to investigate more serious irregularities more efficiently and to take appropriate action against them;

54.  Points out that, in response to audits performed on conformity clearance procedures in the area of agriculture, the Commission carried out financial corrections for a total of EUR 822 million; points out, furthermore, that the total value of corrections decided was EUR 1 068 million; notes with concern that in 2011 the recovery rate for Agriculture and Rural Development decreased to 77 % in comparison with 85 % in 2010;

55.  Emphasises that attention must be paid to ways of optimising reimbursement procedures, which are still relatively lengthy;

Cohesion policy

56.  Welcomes the fact that in 2011 the Commission completed financial corrections for EUR 624 million out of EUR 673 million and that the recovery rate for Cohesion Policy improved to 93 % in comparison with 69 % in 2010; emphasises, nevertheless, that the cumulative rate of implementation of financial corrections stands only at 72 % and that EUR 2,5 billion has still to be recovered;

57.  Calls on the Commission and the Member States to simplify the relevant rules on public procurement and the procedural rules for management of the Structural Funds;

58.  Notes that certain large Member States such as France have reported no irregularities as being fraudulent in the area of cohesion policy in 2011; calls on the Commission to investigate the reasons for this and to determine whether the supervisory and control systems in Member States reporting no fraud are functioning effectively;

59.  Welcomes the fact that France has been able to finalise the implementation of the Irregularity Management System (‘IMS’);

External relations, aid and enlargement

60.  Notes with concern that, in chapter 7 (‘External relations, aid and enlargement’) of the Annual Report of the European Court of Auditors on the implementation of the budget for the year 2011, the Court pointed to errors in final payments that had not been detected by Commission controls, and concluded that the controls applied by the Commission are not fully effective; calls on the Commission to follow the recommendations of the Court of Auditors and the discharge opinion with a view to improving its monitoring mechanisms in order to ensure the efficient and appropriate expenditure of funds;

61.  Suggests that the findings and recommendations of the Court of Auditors pertaining to EU external actions, and in particular to EU missions, be taken into account when reviewing their progress against the objectives set or considering the extension of their mandate, in order to ensure the effective and appropriate use of the resources provided; notes the observation concerning certain weaknesses relating to procurement procedures and tendering in European External Action Service (EEAS) actions and calls on the EEAS to correct them in due time;

62.  Welcomes anti-fraud policies at EU level that include a higher degree of cooperation with third countries, such as the Anti-Fraud Transit Information System (to which European Free Trade Association countries have access), Mutual Administrative Assistance (MAA) and related anti-fraud provisions involving third countries, and the Joint Customs Operations that took place in 2011, including Fireblade (with Croatia, Ukraine and Moldova) and Barrel (with Croatia, Turkey, Norway and Switzerland); welcomes the results of these actions and their financial impact;

63.  Bearing in mind that, in a globalised world, fraud is increasingly being committed across international borders, stresses the importance of having a strong legal framework with clear commitments from the partner countries, and welcomes the inclusion of anti-fraud provisions in new or renegotiated bilateral agreements, including the draft agreements with Afghanistan, Kazakhstan, Armenia, Azerbaijan and Georgia and, in a more streamlined version, with Australia, and calls on the Commission and the EEAS to develop a standard clause whereby these provisions are included in all new or renegotiated bilateral and multilateral agreements with third countries;

64.  Takes note of the decrease in the number and the financial impact of irregularities detected with regard to the pre-accession funds examined in the 2011 report; welcomes the fact that the rate of recovery of EU resources unduly paid as part of pre-accession assistance has improved significantly, but notes that it still reaches only 60 %; acknowledges, at the same time, that significant differences exist among beneficiaries in terms of the irregularities reported, being mainly a measure of the stage of adoption and implementation of the Irregularity Management System (IMS); calls, therefore, on the Commission to continue to monitor closely the implementation of the IMS in all countries benefiting from the instrument; supports the Commission’s call for Croatia, in particular, fully to implement the IMS system, a call that has yet to be acted upon even though training and support have been provided, and its call for the Former Yugoslav Republic of Macedonia to implement the system; Notes that EUR 26 million have been recovered from the cases reported in 2011;

65.  Welcomes the Commission’s objective of supporting Croatia and the Former Yugoslav Republic of Macedonia in their efforts to implement the IMS;

OLAF

66.  Reiterates that it is necessary to continue to strengthen the independence, effectiveness and efficiency of OLAF, including the independence and functioning of the OLAF Supervisory Committee; calls on OLAF and the Supervisory Committee to take steps with a view to improving their working relationship, which has been described in a report by the UK House of Lords’ EU Committee as one of open hostility, particularly due to the lack of agreement between those concerned over the precise nature of the Supervisory Committee’s role; calls on the Commission to explore ways to deliver a constructive contribution in respect of improving communication and working relations between OLAF and its Supervisory Committee;

67.  Welcomes the progress made in the negotiations on the proposal for a regulation of the European Parliament and of the Council amending Regulation (EC) No 1073/1999 concerning investigations conducted by the European Anti-Fraud Office (OLAF) and repealing Regulation (EURATOM) No 1074/1999 (COM(2011)0135); considers that this regulation should be adopted as soon as possible; is, however, convinced that in the light of the latest developments surrounding OLAF and the way its investigations were conducted, the recommendations of the Supervisory Committee set out in Annex 3 to its 2012 Annual Activity Report should be taken into consideration; finds it unacceptable that the Supervisory Committee, being the body that oversees the application of the procedural guarantees, respect for fundamental rights, and compliance by the OLAF staff with the internal rules on investigative procedures, has in a number of cases not been granted direct access to case files in closed investigations including the final investigation reports transmitted to the national judicial authorities;

68.  Notes that the future reform mentioned above will, inter alia, enable OLAF to conclude administrative arrangements with the relevant authorities in third countries and with international organisations, thereby strengthening its capacity to tackle fraud in areas pertaining to the EU’s external policy dimension; welcomes the anti-fraud strategy (COM(2011)0376), inter alia as regards the inclusion of improved anti-fraud provisions in spending programmes under the new multiannual financial framework for 2014-2020; notes with concern, however, the Commission’s conclusion that there are insufficient deterrents against criminal misuse of the EU budget in Member States; welcomes the Commission proposals to address this problem and recommends that beneficiary third countries should also be involved as fully as possible;

69.  Takes note of the concerns raised by the OLAF Supervisory Committee in its 2012 Activity Report, especially with regard to the case transmitted in October 2012 to the national judicial authorities and leading to the resignation of a member of the European Commission, as stated in paragraph 29 of the abovementioned report; is of the opinion that these concerns should be the subject of a thorough examination by the responsible judicial authorities; emphasises the principle of respect of confidentiality and the importance of political non-interference with any ongoing legal proceedings;

70.  Is deeply concerned about the reporting of the OLAF Supervisory Committee; finds it unacceptable that OLAF has undertaken investigative measures that go beyond those explicitly listed in Articles 3 and 4 of the OLAF Regulation ((EC) No 1073/1999) currently in force, and beyond those contained in the future text of the reform; notes that the aforementioned investigative measures include: preparing the content of a telephone conversation for a third party to have with a person subject to the investigation; being present during such a conversation and having it recorded; and requesting national administrative authorities to provide OLAF with information not directly held by those authorities and which could be considered to relate to the right to respect for private life and communications or to the subsequent use, collection and storage of such information by OLAF;

71.  Is shocked by such actions, given that, according to the jurisprudence of the European Court of Human Rights, the use of such methods can be seen as ‘interference by a public authority’ with the exercise of the right to respect for ’private life’, ‘correspondence’ and/or ’communications’, which is required to be ‘in accordance with the law’ (Article 7 of the Charter of Fundamental Rights of the European Union, which corresponds to Article 8 of the European Convention of Human Rights);

72.  Reiterates that no violation of fundamental rights by OLAF or any other Commission services can be accepted; refers in this respect to the OLAF Supervisory Committee’s view, as expressed in its 2012 Activity Report, Annex 3, that OLAF may have gone beyond the investigative measures explicitly listed in Articles 3 and 4 of the Regulation currently in force, inter alia, as regards the preparation of the content of a telephone conversation for a third party with a person subject to the investigation and being present during that conversation, which was recorded; expects OLAF to provide a satisfactory explanation of the legal basis for its investigative measures such as the recording of telephone conversations;

73.  Welcomes the statement made in the Supervisory Committee’s 2012 Activity Report (paragraph 53) that all actions for annulment of OLAF’s decisions were rejected as inadmissible by the Court of Justice, while the Ombudsman did not find any instance of maladministration; further points out that the European Data Protection Supervisor (EDPS) found that OLAF generally complied with the data protection rules, with the exception of one case where the EDPS considered that OLAF violated the right to protection of personal data by unnecessarily disclosing the identity of a whistleblower to his institution;

74.  Is deeply concerned about the findings of the Supervisory Committee that OLAF has not established a prior legality check for investigative measures other than those specifically listed in OLAF’s Instructions to Staff on Investigative Procedures (ISIP); notes that this endangers respect for the fundamental rights of, and procedural guarantees relating to, the people concerned;

75.  Asks OLAF to inform Parliament’s competent committee of the legal basis that authorises it to assist in and prepare the recording of telephone conversations of private persons without their prior consent and to use the contents for purposes of administrative investigations; reiterates its call on OLAF to provide Parliament – in line with a similar request by the Council – with a legal analysis of the legality of those records in the Member States;

76.  Notes that breaches of essential procedural requirements during preparatory investigations could affect the legality of the final decision taken on the basis of investigations by OLAF; assesses this as potentially high-risk, since breaches would thus incur the legal liability of the Commission; calls on OLAF to tackle this shortcoming immediately by assigning appropriately qualified judicial experts to the task of carrying out prior verifications within an appropriate timeframe;

77.  Deems the direct participation of OLAF’s Director-General in some investigative tasks, inter alia interviews of witnesses, as unacceptable; points out that the Director-General thereby enters a conflict of interest, since, under Article 90(a) of the Staff Regulations and Article 23(1) of the ISIP he is the authority who receives complaints against OLAF’s investigations and decides whether or not appropriate action is taken with regard to any failure to respect procedural guarantees; calls on OLAF’s Director-General to abstain from any direct involvement in investigative tasks in future;

78.  Is worried that OLAF has not always conducted a thorough assessment of incoming information in relation to the notion of sufficiently serious suspicion; considers such an assessment essential in order to safeguard and consolidate OLAF’s independence vis-à-vis institutions, bodies, offices and agencies and governments where one of these is at the origin of the referral;

79.  Is of the opinion that the Supervisory Committee should always be informed by OLAF when OLAF receives a complaint relating to fundamental rights and procedural guarantees;

80.  Expects further information to be provided on the points mentioned in the annual report of the Supervisory Committee; urges full transparency in relation to all the points mentioned;

81.  Regrets the fact that between 2006 and 2011 Member States took judicial action following OLAF investigations in only 46 % of cases; is of the opinion that this is insufficient and reiterates its call on the Commission and the Member States to ensure the effective and timely implementation of the recommendations made once cases have been investigated by OLAF;

82.  Considers that Member States should be obliged to report on an annual basis on the follow-up to cases referred by OLAF to their judicial authorities, including on the criminal and financial sanctions imposed in such cases;

83.  Is concerned about the remarks contained in the Supervisory Committee’s annual report stating that there are no data on the implementation of OLAF’s recommendations in the Member States; considers this situation to be unsatisfactory and calls on OLAF to ensure that Member States provide relevant and detailed data on the implementation of OLAF’s recommendations and that the European Parliament is kept informed;

84.  Acknowledges that, following OLAF’s investigations, EUR 691,4 million was recovered in 2011, of which EUR 389 million relates to a single case in the Calabria region of Italy involving structural funds programmes for the financing of roadworks;

85.  Calls for potential fraud or irregularities which have less financial impact – in areas such as customs (where the threshold below which OLAF does not take action is EUR 1 million) and the structural funds (where the threshold is EUR 500 000) – to be reported to the Member States and for the latter to be provided with information and given the opportunity to follow national anti-fraud procedures;

86.  Is deeply concerned about the effectiveness and internal functioning of OLAF, while considering that a strong and well-managed OLAF is essential in the fight against fraud and corruption where European taxpayers’ money is involved; urges the Commission, therefore, in cooperation with Parliament’s competent committee and when answering its questions, to analyse the legality of OLAF’s operations, to take all necessary measures to improve the management of OLAF, and to formulate practical solutions to remedy shortcomings before the end of 2013; calls on the Commission and the Council, in the meantime, to stall all discussions and decisions on the introduction of the European Public Prosecutor’s Office (EPPO);

The Commission’s initiatives in the area of anti-fraud activity

87.  Welcomes the fact that, in response to Parliament’s request, the Commission is currently developing a methodology to measure the costs of corruption in public procurement concerning EU funds;

88.  Welcomes the initiative in the Commission’s 2012 work programme to better protect the European Union’s financial interests and the communication to that effect on the protection of the European Union’s financial interests by criminal law and administrative investigations; stresses that this initiative aims to toughen sanctions against criminal activities, including corruption, and to strengthen the financial protection of the European Union;

89.  Welcomes the Commission’s new Anti-Fraud Strategy (COM(2011)0376) and the Internal Action Plan (SEC(2011)0787) for its implementation, adopted in June 2011, which aim at improving the prevention and detection of fraud at EU level; calls in this respect on the Commission to report on and evaluate the anti-fraud strategies established within each Directorate-General;

90.  Welcomes the Commission’s proposal for a directive of the European Parliament and of the Council on the fight against fraud to the Union’s financial interests by means of criminal law (COM(2012)0363) – the proposal for the PIF Directive), which is to replace the Convention on the Protection of the Financial Interests of the European Communities and its accompanying protocols;

91.  Welcomes, in particular, the fact that the definition of the Union’s financial interests in the proposal for the PIF Directive encompasses VAT, in accordance with the judgment of the European Court of Justice, which confirmed(20) that there is a direct link between, on the one hand, the collection of Value Added Tax revenue in compliance with the applicable Union law, and on the other, the availability to the Union budget of the corresponding Value Added Tax resources, since any lacuna in collection of the first potentially causes a reduction in the second;

92.  Welcomes the proposal for a regulation of the European Parliament and of the Council on the Hercule III programme to promote activities in the field of the protection of the European Union’s financial interests (COM(2011)0914), which will be the successor to the Hercule II programme, the mid-term evaluation of which proved its added value;

93.  Notes that although the Commission is taking all these positive initiatives, most policies currently being pursued against corruption are passive; calls on the directorates-general of the Commission to strengthen fraud prevention in their respective areas of responsibility;

94.  Looks forward to the submission by the Commission of the legislative proposal on the establishment of the European Public Prosecutor’s Office, which will be responsible for investigating, prosecuting and bringing to justice those who damage assets managed by or on behalf of the EU, as announced by the Commission for June 2013;

o
o   o

95.  Instructs its President to forward this resolution to the Council, the Commission, the Court of Justice of the European Union, the European Court of Auditors, the OLAF Supervisory Committee and OLAF.

(1) http://ec.europa.eu/anti_fraud/documents/reports-commission/2011/report_en.pdf
(2) http://ec.europa.eu/anti_fraud/documents/reports-olaf/2011/olaf_report_2011_en.pdf
(3) OJ C 344, 12.11.2012, p. 1.
(4) OJ L 298, 26.10.2012, p. 1.
(5) OJ L 312, 23.12.1995, p. 1.
(6) Texts adopted, P7_TA(2012)0196.
(7) OJ C 51 E, 22.2.2013, p. 121.
(8) OJ C 161 E, 31.5.2011, p. 62.
(9)1 European Parliament, Study on ‘Deterrence of fraud with EU funds through investigative journalism in EU-27’, 2012, p.71.
(10) OJ C 296 E, 2.10.2012, p. 40.
(11) The OLAF report 2011, table 6, p. 22.
(12) Study commissioned by Parliament on ‘Administrative performance differences between Member States recovering Traditional Own Resources of the European Union’.
(13) Annual Report of the Court of Auditors on the implementation of the budget concerning the financial year 2011, together with the institutions’ replies.
(14) Network for the swift exchange of targeted information between Member States established on the basis of Regulation (EU) No 904/2010.
(15) European Parliament study: ‘Roadmap to Digital Single Market’, available at: http://www.europarl.europa.eu/document/activities/cont/201209/20120914ATT51402/20120914ATT51402EN.pdf
(16) Regime used by an importer in order to obtain a VAT exemption where the imported goods are to be transported to another Member State and where VAT is due in the Member State of destination.
(17) Of which EUR 1 800 million were incurred in the seven selected Member States and EUR 400 million in the 21 Member States of destination of the imported goods in the sample.
(18) Answers from Commissioner Šemeta to the questionnaire submitted by the CONT committee - available at: http://www.europarl.europa.eu/committees/en/cont/publications.html?id=CONT00004#menuzone
(19) Special Committee on Organised Crime, Corruption and Money Laundering (CRIM) 2012-2013, Thematic Paper on Corruption, Areas of systemic corruption in the public administration of the Member States and measures in order to counter its negative effect for the EU, November 2012, p.2
(20) Judgment of 15 November 2011 in C-539/09, Commission v Germany (OJ C 25, 28.1.2012, p. 5).


Integrated internal control framework
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European Parliament resolution of 3 July 2013 on the Integrated Internal Control Framework (2012/2291(INI))
P7_TA(2013)0319A7-0189/2013

The European Parliament,

–  having regard to the Treaty on the Functioning of the European Union (TFEU),

–  having regard to Opinion No 2/2004 of the European Court of Auditors on the ‘single audit’ model (and a proposal for a Community internal control framework)(1),

–  having regard to the Commission communication on a roadmap to an integrated internal control framework (COM(2005)0252),

–  having regard to the Commission communication on the Commission action plan towards an integrated internal control framework (COM(2006)0009),

–  having regard to the first half-yearly report on the scoreboard for the application of the Commission action plan towards an integrated internal control framework published on 19 July 2006 (SEC(2006)1009), pursuant to Parliament’s request in its resolution on discharge in respect of the financial year 2004(2),

–  having regard to the interim progress report of the Commission published in March 2007 (COM(2007)0086), outlining progress and announcing some additional actions,

–  having regard to the Commission communication of February 2008 (COM(2008)0110) and the Commission staff working paper annexed thereto (SEC(2008)0259),

–  having regard to the Commission communication of February 2009 on the impact report on the Commission action plan towards an integrated internal control framework (COM(2009)0043),

–  having regard to Rule 48 of its Rules of Procedure,

–  having regard to the report of the Committee on Budgetary Control (A7-0189/2013),

A.  whereas under Article 317 TFEU the Commission implements the budget on its own responsibility, on the basis of the principles of sound financial management, in cooperation with the Member States;

B.  whereas according to the Treaty, the Commission bears the ultimate responsibility for the implementation of the Union budget, although a huge responsibility lies with the Member States, with 80 % of the Union budget spent under the system of shared management by Member States;

C.  whereas the principle of effective internal control is one of the budgetary principles set out in the Financial Regulation following its amendment by Regulation (EC, Euratom) No 1995/2006, as proposed by the Commission in the action plan referred to above;

D.  whereas the most effective means for the Commission to demonstrate that it is genuinely committed to ensuring transparency and sound financial management is to do all it can to support measures seeking to enhance the quality of financial management, with a view to obtaining a positive statement of assurance (DAS)(3) from the European Court of Auditors (ECA);

E.  whereas all the institutions and the Member States have to cooperate in order to restore European citizens’ trust in the financial performance of the Union;

F.  whereas in order to support the strategic objective of receiving a positive statement of assurance from the ECA, the Commission adopted in January 2006 the action plan towards an integrated internal control framework (the ‘Action Plan’), drawing on the recommendations of the ECA(4), Parliament’s resolution on discharge in respect of the financial year 2003(5) and the ECOFIN conclusions of 8 November 2005;

G.  whereas the Action Plan addressed ‘gaps’ in the Commission’s control structures at the time and identified 16 areas for action by the end of 2007, taking into account that improvement of financial management in the Union must be supported by close monitoring of controls in the Commission and the Member States;

Implementation of the Action Plan

1.  Points out that the progress made in achieving the objectives of the Action Plan has to be measured not only by the achieving of each action but also by its impact on reducing errors in the underlying transactions;

2.  Notes that the Commission itself stated that the Action Plan was fully completed at the beginning of 2009, although 3 of the 16 original actions could not be implemented or were being taken forward in other ways;

3.  Points out in particular that Article 32 of the new Financial Regulation establishes the principle of effective and efficient internal control, and that Article 33 of the same regulation stipulates that when presenting revised or new spending proposals the Commission shall estimate the costs and benefits of the control system as well as the risk of error;

4.  States also that, with regard to the concept of ‘tolerable level of risk’, a choice was made to complete this action by defining the concept of ’residual risk of errors’;

5.  Deplores the fact that the simplification of the 2007-2013 legislation has not been as extensive as hoped;

6.  Deplores the fact that the commitment made by the Commission to reach a fully positive DAS has not been fulfilled, and points out in particular that, in its 2011 statement of assurance report, the Court concluded that overall payments were materially affected by error and assessed that the supervisory and control systems were in general partially effective;

7.  Notes that the overall rate of error in underlying transactions increased from 3,3 % to 3,7 % in 2010, reaching 3,9 % in 2011; deplores the reversal of the positive trend that has occurred in recent years, and fears that the rate of error will grow in the coming years;

8.  Notes that the Commission has maintained its objective of obtaining a positive DAS, whilst Parliament deeply deplored, in its resolution on discharge for 2011, the fact that payments remain materially affected by error;

9.  Calls on the Commission to take the necessary steps to achieve a trend of a consistent decrease in the error rate;

What is wrong?

10.  Shares the views of the Court of Auditors and the Commission(6) as regards the fact that the single audit scheme does not work yet and that the control systems set up by the Member States are currently not functioning to their full potential;

11.  Makes reminder, in this regard, that in 2011, in the area of regional policy, for over 60 % of the errors identified by the Court of Auditors, Member State authorities had sufficient information to identify and correct some of the errors before asking for reimbursement from the Commission;

12.  Shares in this respect the Court of Auditor’s view that the first-level checks, namely the management and control systems in Member States, are insufficient; resulting in a considerably high burden to lower the error rate;

13.  Notes that complex and opaque rules hinder the implementation and auditing of programmes; is concerned that this may result in a large number of errors and provide an opportunity for fraud; is therefore concerned that an increasing complexity of rules at national or regional level (‘gold plating’) results in further problems for the legal implementation of the Union budget and in an unnecessary increase in the error rate;

14.  Notes that the Commission cannot fully rely on the findings of the national audit bodies of the Member States;

15.  Notes that there is a fundamental discrepancy between the Court of Auditors, which, in the DAS audits, applies an annual approach, and the Commission, which, in the implementation of the budget, applies a multiannual approach;

What is to be done?

16.  Calls on the Commission to strictly apply Article 32(5) of the new Financial Regulation if the level of error is persistently high, and consequently to identify the weaknesses in the control systems, analyse the costs and benefits of possible corrective measures and take or propose appropriate action in terms of simplification, improvement of control systems and redesign of programmes or delivery systems;

17.  Calls on the Member States to strengthen their supervisory and control systems and, in particular, to ensure the reliability of their indicators and statistics;

18.  Notes with concern that in 2010 and 2011, in regional policy, the Court of Auditors found that the Commission cannot fully rely on and draw assurance from the work of national audit authorities, and calls on the Member States to remedy that situation;

19.  Calls on the Member States to assume full responsibility for their accounts and to submit reliable data to the Commission using national management declarations signed at the appropriate political level;

20.  Calls on the Commission to motivate the Member States to cooperate with a view to ensuring that taxpayers’ funds are used in accordance with the principles of sound financial management, either through appropriate benefits or through strict sanctions or the suspension of the flow of funds; asserts that this would help to renew EU citizens’ trust in the EU and its institutions;

21.  Calls on the Commission to harmonise all control procedures within its departments;

22.  Notes with concern that the weaknesses in the work of national authorities revealed by the Court of Auditors could also be the result of ‘an inherent flaw and conflict of interest of the shared management system itself’(7)as in order to get single audit status from the Commission, national audit authorities are required to be effective whilst at the same time the reported error rate should be below 2 %, which could be an incentive to under-report the irregularities;

23.  Calls on the Commission, consequently, to be more rigorous when certifying the national management and audit authorities and to put in place the right incentives and an effective system of sanctions;

24.  Asks therefore, in accordance with Article 287(3) TFEU, that, in relation to the auditing of shared management, cooperation between national audit bodies and the European Court of Auditors be stepped up;

25.  Calls on the appropriate EU institutions to assess whether setting the error rate at 2 % is appropriate and attainable for all areas of EU policy;

26.  In this context, raises serious doubts about the usefulness of the statement of assurance, as, due to the complexity of the budget implementation in the area of shared management, there is also a shared responsibility for the legality and regularity of the budget administration between the Commission and the Member States, and between the Commission and regional administrations, whereas the political responsibility still lies only with the Commission;

27.  Is therefore of the opinion that, in the context of the future revision of the EU Treaty, the concept of the statement of assurance should be reconsidered;

Follow up on 2011 discharge to the Commission

28.  Reiterates its call to the Member States to issue national management declarations at the appropriate political level and asks the Commission to establish a template for such declarations;

29.  Considers that the principle of a compulsory national management declaration should be incorporated into the interinstitutional agreement accompanying the decision on the Multiannual Financial Framework;

30.  Points out that ‘the ongoing absence of a credible system of national declarations will keep haunting the confidence and trust that EU citizens can have in the macro and EU money and EU money managers’(8) ;

31.  Makes reminder that the three first priority actions required from the Commission by Parliament when granting discharge for the year 2011 aim to pave the way to further progress in the DAS question;

32.  Makes particular reminder that the Commission should annually adopt, for the first time in September 2013, a communication to the European Parliament, the Council and the Court of Auditors with a view to making public all the amounts in nominal terms recovered in the course of the preceding year through financial corrections and recoveries for all management modes at the level of the Union and the Member States(9);

33.  Insists that this communication should be presented in due time in order to be scrutinised by the ECA before publishing its annual report;

34.  Reiterates its encouragement to the Commission to make progress in disclosing more precise and reliable data concerning recoveries and financial corrections and to present information reconciling as far as possible the year in which payment is made, the year in which the related error is detected and the year in which recoveries or financial corrections are disclosed in the notes to the accounts;(10)

35.  Points out that all the actions taken in order to reduce the error rates should be complemented by a new culture of performance; the Commission services should define in their management plan a number of targets and indicators meeting the requirements of the Court of Auditors in terms of relevance, comparability and reliability; in their annual activity reports, the services should measure their performance in summarising the results achieved when contributing to the main policies pursued by the Commission; this ‘departmental’ performance will be complemented by a global evaluation of the performance of the Commission in the evaluation report provided for by Article 318 TFEU(11);

36.  Makes reminder that the Commission should modify the structure of the above-mentioned evaluation report, distinguishing internal policies from external ones and focusing, within the section relating to internal policies, on the Europe 2020 Strategy as being the economic and social policy of the Union; the Commission should place the emphasis on the progress made in the achievement of the flagship initiatives;

37.  Furthermore underlines that performance indicators should be fully integrated in all proposals for new policies and programmes;

38.  Requests that the guidance given by Parliament to the Commission in paragraph 1 of the resolution accompanying its decision on discharge for 2011 as regards how to draft the evaluation report provided for by Article 318 TFEU should be incorporated into the interinstitutional agreement accompanying the decision on the Multiannual Financial Framework;

Performance-based budget

39.  Shares the view expressed by the European Court of Auditors that it is not meaningful to attempt to measure performance without having budgeted on the basis of performance indicators(12), and calls for the establishment of a performance-based public budgeting model in which each budget line is accompanied by objectives and outputs to be measured by performance indicators;

40.  Asks the Commission to set up a working group composed of representatives of the Commission, the Parliament, the Council and the Court of Auditors with a view to considering the necessary measures to be taken in order to introduce such a performance-based budget and to draft a time-scheduled action plan in this regard;

Simplification

41.  Calls on all the parties involved in the decision-making process concerning the post-2013 legislation and programmes to bear in mind the need to respect the categorical imperative of simplification by reducing the number of programmes and defining proportionate and cost-effective controls and simplified eligibility rules and cost methods;

o
o   o

42.  Instructs its President to forward this resolution to the Council, the Commission, the European Court of Auditors and the governments and parliaments of the Member States.

(1) OJ C 107, 30.4.2004, p. 1.
(2) OJ L 340, 6.12.2006, p. 3.
(3) Abbreviation of the French term ‘Déclaration d’assurance’.
(4) Opinion No 2/2004 (the ’Single Audit’ Opinion).
(5) OJ L 196, 27.7.2005, p. 4.
(6) Contributions by Kersti Kaljulaid and Manfred Kraff at the hearing on the integrated internal control framework organised by CONT on 22 April 2013.
(7) Contribution by Kersti Kaljulaid at the hearing on the integrated internal control framework organised by CONT on 22 April 2013.
(8) Contribution by Jules Muis at the same hearing.
(9) Resolution accompanying the decision to grant the 2011 discharge to the Commission, paragraph 1(a) (OJ L 308, 16.11.2013, p. 27).
(10) Resolution accompanying the decision to grant the 2011 discharge to the Commission, paragraph 61.
(11) Resolution accompanying the decision to grant the 2011 discharge to the Commission, points (ab), (ae) and (af) of paragraph 1.
(12) Contribution of Kersti Kaljulaid at the hearing on the integrated internal control framework organised by CONT committee on 22 April 2013.

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