We propose that I speak on the first item, the unfair business to consumer proposal, and my colleague, Mary Barrett, will deal with second item, which deals with enforcement co-operations. We circulated a short list of headings on which we propose to speak, and I start with some procedural points about what is called the UCP proposal - unfair commercial practices.
This is a proposal of the European Commission for a directive, which means that there is some discretion for member states as to how they transpose it. However, as committee members will see, the proposal is actually quite detailed. It is fairly precise so we will not have very much discretion in how we transpose this measure.
Its legal basis is Article 95 of the treaty, meaning that it falls under qualified majority voting. The decision-making procedure is co-decision, meaning that it must be, agreed by both the Council and the European Parliament. Our focus is primarily on the Council framework in Brussels but the European Parliament will certainly have a significant say in both of these proposals and we may expect significant input from it.
Regarding the timing of UCP, it came out in June or July 2004, during the Italian Presidency. We now have the Irish Presidency and substantial progress is being made. We are aiming for fairly significant progress by the May Competitiveness Council. We aim to get political agreement there on the main policy issues, the big issues, and we are on track for that. Ireland is represented in Brussels by our permanent representative, Eddie Feehan, who is chairing the working group, and by ourselves within our Department, supported by the Office of the Director of Consumer Affairs.
Turning to the substantive aspects of the paper, I will stick broadly to the proposal itself, COM (2003) 356. It is accompanied by a very good explanatory memorandum which explains the background and main elements of the proposal, and then there is the actual proposal itself. The background and purpose essentially revolve around two things - the single market and consumer protection. It is believed that the tremendous variety of consumer protection arrangements throughout Europe is having an adverse effect on the willingness of consumers throughout Europe to engage in cross-border transactions or shopping.
The basic idea is that this would level the playing pitch in terms of consumer protection arrangements in the area being co-ordinated. The purpose of the proposal is to achieve two things - a more complete single market and, at the same time, high levels of consumer protection.
A central concept of this proposal is unfair commercial practice. Basically, it is a way of regulating negatively. The directive does not say what constitutes a fair commercial practice, but it states what it is unfair and prohibits it. That is the basic idea. Various articles, including Articles 6 and 7, go into this is some detail and distinguish between misleading practices and aggressive practices. Annex 1 contains a blacklist of practices, which are banned in all circumstances. That is a crucial building block of the whole proposal.
Another important element is the so-called internal market clause in Article 4. We would draw attention to that because it is one of the central features of the proposal. Bearing in mind the internal market motivation of this, this clause basically means that if a trader is doing business anywhere in Europe, instead of having to reckon with 15, as it is now, or 25 different consumer protection regimes he or she will, after this directive, only have to deal with one. The regime that will apply is the one where the trader is based. Therefore, traders will only have to comply with the rules of the country in which they reside or their business is established. If they comply with those rules they are free to proceed throughout the rest of the European Community. That is a very important clause, and we have to ensure that the playing pitch is genuinely level for all, 25 member states.
There are different types of harmonisation. One can have minimum or maximum harmonisation. Minimum harmonisation involves a minimum level of harmonisation, but member states can add to that over time. This proposal, however, is for maximum harmonisation, which means that member states are not free to add on bits and pieces to suit themselves. There is a bit of an exception to that which I will come to later, but that is the basic principle and one can see the reason for it. If businesses are to be free to comply with one set of rules it is very important that those rules are genuinely equivalent to the rules of all the other countries, otherwise consumers will be disadvantaged in certain places.
Since this proposal emerged in the summer of 2003 there have been many meetings of the Council working group under the Italian Presidency and now under the Irish Presidency, in the course of which much detailed work on the text is occurring. By and large the changes are of a technical nature, and I suggest that the committee should retain the focus on the original proposal.
We have copies of a paper that was discussed at a working group last week but that in turn will be changed also so it is a bit of a moving target. However, there was one notable development, and this is an exception to the maximum harmonisation idea. There was concern about how this directive would impact on consumer protection in regard to financial products, and a number of countries including ourselves had some anxieties about that.
There is now on the table the idea - and this is a Presidency compromise - that member states should be permitted to add to the maximum level of harmonisation. This is a significant change and one that we welcome. That occurred only last week and we have copies of the latest text if the committee wishes to see it.
We can be fairly clear about the Irish position. We welcome the proposal. Obviously that welcome is subject to ongoing detailed scrutiny. One issue has arisen where we have taken a very definite position. Some member states have asked that the proposal should apply, not only to business-to-consumer transactions but to business-to-business transactions. We feel that brings one into the area of competition policy and we think that is not appropriate for this consumer protection measure. We feel that, if it is mixed in with competition, we could be at this for years. We are in the majority on that point. The number of countries still seeking extension of this to business-to-business is very much in the minority and we expect that our view will prevail in that regard.
I mentioned particularly the importance of clarity. It is said that the devil is in the detail and that is certainly the case with this. Even though it is several months since this came out, we are still examining this carefully. We are getting legal advice and going through it case by case. That will continue right along the process. Our welcome is clearly tempered by that.
I would add that we have an extensive domestic consultation process under way that goes back to last summer. We held a big event in Government Buildings in December. We are preparing a further paper, which hopefully will be sent out during the next week and which we will obviously also make available to the committee. We are keen to get views on this from all interested economic and social groups so that the Irish position reflects all Irish interests.
Generally we are happy with the way it is going and we welcome it. There is still a fair bit of work to be done but that is the present position. I will now hand over to my colleague, Ms Mary Barrett.