EU’s Marshall Plan set to EUR 1 trillion investment initiative

The European Commission has announced its intention to launch a unique Recovery Plan in the history of the EU. This plan is already part of an unprecedented effort by the EU and Member States to support the economy. With the activation of the general safeguard clause of the Stability and Growth Pact in March and with the €500 billion coronavirus relief plan decided on April 9, more than EUR 3 trillion have already been invested to support the European economy. However, with this Recovery Plan, the Commission wishes to move to another level.

On 16 April, the President of the Commission Ursula von der Leyen, presented the basis of this “Marshall Plan” to the European Parliament. She called for innovative instruments to be introduced in the MFF in order to unlock massive investments of up to EUR 1 trillion. This new “Marshall Plan” will double the ambition of the sustainable investments foreseen by the Green Deal and the European Digital Agenda. Investments will be concentrated in particular in the technology and digital sector, in energy and in R&D. In addition, the Commission promises to invest massively in transport and in the agri-food sector.

In conclusion, the new “Marshall Plan” is set to at least double the EU’s ambition in terms of investment compared to the initial ambitions of the Green Deal and the Digital Agenda. Massive financing opportunities will start in the coming months. In view of these huge opportunities, it is crucial for all European economic actors to strengthen their presence in Brussels in order to make the most of this unprecedented EUR 1 trillion investment “Marshal Plan”.

EU’s New Circular Economy Action Plan

On 11 March 2020, the Commission published its New Circular Economy Action Plan. This document provides the basis for multi-sectoral regulatory work aimed at creating a circular economy by 2050. The plan foresees the introduction of new consumer rights, new ecodesign regulations and the mobilisation of several European research funds. Most impacted sectors are ICT and electronics, batteries and vehicles, packaging, building and construction, food, textiles, water and nutrients. The rules and regulations planned will have an impact on a global level, even for companies which are not present in the Single Market. Indeed, an important part of this plan focuses on the EU’s efforts to impose European standards at the international level.

In details, the Commission will propose a Sustainable Product Policy Initiative that will extend eco-design directives to the broadest possible range of products. The Sustainable principles will introduce new specific obligations to increase durability, reusability, the right for the consumer to upgradability of the products. In addition to these obligations, new consumer regulations will guarantee consumers a “right to reparation”. These regulations will also reinforce the obligations to inform the consumer about the lifespan of the product and the repair procedures. From 2020 to 2023, the Commission will adopt a number of regulations strengthening eco-design and waste reduction requirements. In addition, strategies on textiles and chemicals will soon be published.

In conclusion, this plan will have very important consequences on all sectors related to vehicles, food, electronics, plastics and textiles. Activities in the sectors concerned will be greatly influenced by these new regulations, from conception to sale. Consultations for several regulations have already begun. All companies concerned must therefore think about intervening in the decision-making process of the European institutions very quickly.

New EU Rules for Investment Firms

In February, the European Commission started a public consultation with a focus on reviewing the regulatory framework for investment firms and market operators. Through this process, the European Commission is looking to collect stakeholders’ views, in particular market participants, on a possible review of the Market in Financial Instruments Directive (MiFID II) and the Market in Financial Instruments Regulation (MiFIR).

As background, MiFID II and MiFIR constitute the EU legislative framework aimed at creating a single market for investment services across the European Union, by seeking to improve competitiveness and providing high-level protection for investors. More concretely, they set out organisation requirements for investment firms as well as impose transparency obligations for shares and reporting to avoid market abuse. MiFID II and MiFIR stipulate the rules on the admission of financial instruments to trading and impose authorization requirements.

The European Commission is now seeking to carry out an assessment of the overall regime. The input received will be included in the report that the European Commission will present the European Parliament and the Council. The report may well be accompanied with a concrete proposal to reform the current framework. Therefore, EU businesses, investment firms, asset managers, FinTech and trading venues should participate in this process to protect the current rules or suggest amendments.

EU Trade with Third Countries

On 11 March 2020, the European Commission launched a consultation to collect views from business, third countries, NGOs and associations over a possible revision of the EU’s Generalized Scheme of Preferences (GSP). The EU’s Generalized Scheme of Preferences provides one-way tariff preferences to developing countries. More concretely, the scheme allows developing countries to export their products into the EU with fewer duties, and in some cases, even duty free. The received feedback will be used by the European Commission to carry out an impact assessment on possible policy options to amend the existing rules.

To this end, the public consultation provides an opportunity for countries benefiting from the scheme, as well as those that wish to be included, to make their voice heard and shape the new rules. Low and lower middle-income countries have an opportunity to make contributions both in terms of coverage and benefits, across the three offerings of the scheme, namely: Standard GSP, GSP+ and Everything But Arms. In addition, there is also a chance to shape the conditions to be granted access to the scheme. Last, countries will also be able to take a position on the monitoring mechanisms of the EU.

While the existing Generalized Scheme of Preferences is not set to expire until 2023, the public consultation means that the process to determine its content for the future is already in full motion. In fact, all interested parties are encouraged to submit their feedback by June 3, 2020. Aside from the European Commission, other stakeholders will be involved, in particular the European Parliament and the Council’s Working Party for GSP.

EU to enforce rules on online payments

The European Payments Service Directive II (PSD2), in force since January 2018, is currently stirring debate among Member States regarding the process of its implementation. The Directive is designed to harmonize and simplify money transfers inside the EU, decrease fraud in online payments, and inform consumers about the rights and obligations.

The revised PSD2 extends several obligations concerning data protection and information to and from international payments. It mandates stronger security requirements for online transactions and obliges providers to request customer authentication and demands they register. While the PSD2 compliance date was set for September 2019, the European Banking Authority unconditionally extended the implementation period in order to allow for full application of the new requirements. Nevertheless, a fixed common EU-wide transition period, agreed upon by Member States, is anticipated by the European Commission in order to ensure state-wide compliance.

Enforcement of PSD2 will allow consumers and merchants to increasingly benefit from the internal market and e-commerce. Its efficient integration will increase competitiveness and cost-efficiency for consumers and service providers. PSD2 will allow companies, other than banks, to offer new financial services to the public with consumers’ consent.

EU to review European Financial Benchmarks

As a result of the manipulation of two prominent benchmarks – the London Interbank Offered Rate (LIBOR) and the Euro Interbank Offered Rate (EURIBOR) – the EU adopted the Benchmark Regulation (BMR) on indices used in financial instruments and contracts or to measure the performance of investment funds in January 2018. The European Commission has initiated a consultation on the review of the BMR, two years after its entry into force to collect stakeholders’ opinions on benchmarks’ efficiency.

The European Commission will review the regime for critical benchmarks and the effectiveness of the mechanism for authorisation and registration of administrators. It will equally evaluate the categorisation of benchmarks and the rules for third countries. The review of the EU Benchmark Regulation will reinforce the accuracy and integrity of indices, which will determine the strength of market confidence. The review of the BMR may introduce new compliance requirements for benchmark administrators, contributors and users with regard to interest rate, foreign exchange, and commodity.

EU guidelines on International Procurement Instrument

The European Commission released a new communication, guiding the participation of third country bidders and goods in the EU procurement market. The document aims to foment competition in public tenders and provide information to public buyers in Member States. The document advises on quality standards, how to assess abnormally low-priced offers and compliance with social and environmental obligations.

The EU’s open procurement market is the largest in the world, with an estimated value of €2 trillion yearly. However, many EU trading partners apply restrictive practices in their markets against EU companies; with more than half of the worldwide procurement market (totalling €8 trillion), closed to European businesses. These restrictions affect competitive EU sectors such as construction, transport, medical devices and pharmaceuticals. The Commission’s recent communication coupled with the sustained asymmetric market access has reignited the call for the adoption of the International Procurement Instrument (IPI) before the end of 2019.

The Commission is expected to call on the Parliament and Council to approve the IPI by 2020. The IPI will promote reciprocity, tackle protectionism and open up procurement opportunities for EU companies in third countries.

EU to cut steel import quotas

The European Commission released a statement in August 2019, affirming that while steel safeguard measures have overall been successful during the first year of implementation, they require further adjustments.

The safeguard measures were initially introduced provisionally in July 2018, to prevent harm to the EU steel industry, which was being affected by US tariffs. The EU steel industry was hit by a 12% increase in imports of finished steel products in 2018. As a result, the measures were later definitively introduced in February 2019.

The European Commission outlined three proposals in the communication, cutting an increase in import quotas to 3% from 5%, adjusting the functioning of the quota for some products, and updating the list of exclusions for developing countries. The proposal is expected to be discussed with affected World Trade Organization members and be submitted to EU Member States for approval ahead of the October implementation. The measures are expected to become effective by October 1, 2019.

Renewed EU focus on anti-money laundering rules

The European Commission adopted a Communication and four reports addressing money laundering and terrorist financing risks in July 2019. The reports stress the need for the full implementation of the fifth anti-money laundering directive and reinforce the supervisory role of the European Banking Authority. The communication addressed the persistent shortfalls in anti-money laundering and terrorist financing efforts. The reports will feed future national and EU policies.

Member States are to transpose the fifth anti-money laundering directive into national law by January 2020, as well as a second directive on combating money laundering by criminal law by December 2020. A new EU AML blacklist is expected to be published in October, after Member States rejected a former list in January.

The European Commission is to discuss the harmonization of anti-money laundering rules and a single EU authority tasked with enforcing these rules, in the upcoming months.

New Energy Charter Treaty

The European Commission has recently published a recommendation for a Council Decision authorising the entering into negotiations on the modernisation of the Energy Charter Treaty (ECT).

The ECT, signed in Lisbon in 1994, is an international agreement that regulates cross-border cooperation in the energy industry. It covers all aspects of commercial energy activities, including trade, investments and energy efficiency. The EU aims at amending the treaty provisions by negotiating innovative rules on investment protection, which would guarantee greater legal certainty to investors in the sector. Furthermore, the EU will call for the inclusion of provisions on sustainable development, climate change and corporate social responsibility.

Given the relevance of the ECT for the energy industry, it will be necessary to monitor the negotiations which are set to start in the following months.