The Weekly Vulcan View For March 11th – March 15th 2019 Featuring Analysis Of The Latest EU Developments

Key Events This Week:

Third time lucky for the PM’s deal?

In what was another dramatic week in the House of Commons MPs decisively rejected the Prime Minister’s deal and on Wednesday moved to rule out a No Deal scenario in all eventualities. However, the latter was non-binding as the legal default remains that a No Deal outcome can only be removed by Westminster either voting for a Withdrawal Agreement, choosing to unilaterally revoke Article 50 or extending the negotiating period by agreement with the E.U. On Thursday night the House of Commons voted to request an extension to Article 50.

On Thursday European Council President Donald Tusk encouraged EU Heads of State and Prime Ministers to carefully consider such a request from the British government. However, he emphasised that such an extension would need to be “long” which is likely to clash with Prime Minister May’s goal of a “short” and “temporary” extension until the end of June. EU leaders will meet on 21-22 March where they are likely to consider the British request and crucially, agree on a timeline for any extension.

In the meantime the British Prime Minister intends to bring a third meaningful vote on her deal to the House of Commons next week. The Prime Minister is hopeful that the possibility of the EU insisting on a lengthy extension could persuade hard-line Brexiteers to vote in favour of a deal. At the same time the U.K. Government is today embroiled in discussions with the DUP to try to persuade them to support the deal. Legal assurances about the constitutional position of Northern Ireland in relation to the wider Union will be essential to winning over the DUP, but appear difficult to deliver on, given the legally binding nature of the backstop within the Withdrawal Agreement.

 

Better protection for whistle-blowers in Europe

After tense negotiations, the European Parliament and member states reached a provisional agreement on creating an EU wide legal basis for the protection of whistle-blowers. Currently regulatory frameworks are implemented on a national basis, which oftentimes hinders whistle-blowers from reporting breaches in areas governed by EU law such as anti-money laundering and environmental protection.

The European Commission had first proposed setting EU-wide standards in April 2018 in the aftermath of the Panama Papers and the LuxLeaks scandals. The agreement is based on the principles of clear reporting procedures and obligations for employers, safe reporting channels and the prevention of retaliation by employers.

Resistance came from Germany and France who were advocating for the law to include whistle-blowers having to first report breaches internally. In the end the EU Parliament settled on encouraging such a step but this would not be made mandatory. The agreement now needs to be formally approved by the EU Parliament and the EU Council.

 

EU Scraps Common Digital Tax Proposal

Efforts by the EU to introduce a common digital tax have been scrapped due to resistance from Ireland and a number of Nordic countries. The proposal, initially introduced by the European Commission last year, aimed to tax digital firms such as Google and Facebook based not on the current practice of profits, but on their overall revenues. Such tech giants would have seen additional tax exposure on their turnover from online advertising, the sale of data as well as digital intermediary services such as social platforms or e-commerce. The European Commission as well as an alliance of member states led by Germany and France had hoped the 3% levy would yield €5 billion a year.

In December, Berlin and Paris agreed to narrow the scope of the proposal which would only apply to online advertising. This revised plan was rejected by Ireland, Denmark and Sweden with opposition centred around the issue of double taxation conventions and the fear of retaliation from other countries, mainly the US. A number of member states including France, Spain, Italy and Britain have announced their own national plans to introduce such a tax. The issue will now be dealt with at OECD level with the global organisation having recently closed its public consultation on how to best address taxation in the digital age. The OECD has set a goal of 2020 to reach a consensus.

 

EU takes steps to address cybersecurity concerns

This week the EU Parliament adopted a Cybersecurity Act, which will create an EU wide certification scheme for products, processes and services to ensure they meet European cybersecurity standards. Additionally, critical infrastructure such as energy grids, water energy supply services and banking systems will fall under the scheme.

The act, which had already been informally agreed on by member states, is part of a larger effort by the European Union to address cybersecurity. With the formal adoption of the act, the European Agency for Network and Information Security (ENISA) will be officially turned into a permanent EU Agency for Cybersecurity. The agency will be supported in its efforts by the establishment of research centres which will pool resources and create innovative solutions. The EU Council, currently under the Romanian presidency, has started talks with the EU Parliament on this matter.

The Parliament also adopted a resolution calling for action at EU level against threats from China’s growing technology presence in Europe. The implementation of 5G infrastructure equipment, which is mainly facilitated by Huawei, a Chinese company, has caused particular concern. The European Parliament is asking the Commission and member states for guidance on the issue as well as ENISA to work on a certification scheme for the technology to ensure it possesses the highest security standards.

DATES AHEAD: Monday 18th – Sunday 24th March
Monday 18th: Foreign Affairs Council
Wednesday 20th: College of Commissioners
Thurs 21st – Fri 22nd: European Council
Thursday 21st: EPP Summit (Brussels)

AND BEYOND
Mon 25th – Wed 27th: European Parliament Plenary Session (Strasbourg)
Tuesday 26th: College of Commissioners

Compliments of Vulcan Consulting, a member of the EACCNY