New EU Leadership and 2019 2024 Policy Priorities
Elements of a Discussion With Clients During a Workshop Held in London on 12 November 2019
2019 is a year of institutional change at the EU level. The May 2019 EU-wide elections to the European Parliament (Parliament) have resulted in an important shift in the relative balance of power among the large political groups, in comparison to the previous Parliament (see our May 2019 client alert for details).
Importantly, the two largest political families at the EU level (i.e. the On 17 July 2019, the Parliament endorsed the candidacy of VDL as
European People Party and the Socialists and Democrats Group) have the next European Commission president. Throughout the summer
lost their joint majority in the Parliament and now require the support time, EU member states submitted their commissioner nominees to
of at least one additional political group to form a majority. This means the president-elect. On 10 September 2019, VDL announced her team
that the liberal forces in the new EU (i.e. Renew Europe Party) and/or of commissioners and the attribution of portfolios, alongside their
the Green Party will have an important influence on the various legal mission letters also highlighting a better-than-ever gender balance
initiatives that the incoming European Commission (Commission) will in the new Commission.
put forward in the coming five-year legislative period.1
The hierarchical structure proposed by VDL differs from the structure
The new Parliament, comprising 751 elected representatives from the of the outgoing Jean-Claude Juncker Commission. New elements
28 member states (including from the UK), formally started its mandate include three executive vice presidents (EVPs) who hold a double
on 2 July 2019 and elected David Sassoli (Socialists and Democrats function as both coordinators of various policy areas and direct
Group, Italy) as its president for the first two and a half years.
responsibility for a specific policy via leading a dedicated directorate
In July 2019, disregarding the "Spitzenkandidaten" process favoured general (DG). In addition to the three EVPs, there will be five vice by the Parliament, the EU heads of state and government nominated presidents, four of which will only have coordinating roles and will the German Defence Minister Ursula von der Leyen (VDL) as the new not lead a dedicated directorate general, and the remaining 18 European Commission president-elect. For the first time in the history commissioners, all with at least one dedicated policy area for them of the EU, a female Commission president will be at the top of this to lead on.
crucially important EU institution. VDL is also the first president of The UK had not put forward a candidate for the incoming VDL
the Commission since Jacques Delors (1985 1995) not to have been commissioner in the anticipation that Brexit would occur on 31
drawn from among the members of the European council.
October 2019. Given that the UK has requested a delay of the Brexit
In sync with the nomination of VDL, the EU heads of state and
deadline, it will now be required to nominate a candidate for the new
government also decided upon the nominations for other key political EU Commission team, even if the tenure of the UK commissioner may
jobs vacant at the EU level:
come to an end as early as January 2020.3
Charles Michel As the new president of the European Council (former Prime Minister of Belgium), taking over on 1 December 2019 from Donald Tusk.
Josep Borrell As the new high representative of the Union
However, the UK announced that it would not be submitting a candidate before the UK elections, which take place on 12 December 2019. Taking into account that this decision constitutes a breach of a member state legal obligations, the EU launched, on 14 November 2019, an infringement proceeding against the UK for failing to name
for Foreign Affairs and Security Policy (former Spanish Minister a candidate for EU Commissioner.
of Foreign Affairs, EU and Cooperation), taking over from Federica Mogherini at the end of the current Commission term.
Christine Lagarde As the new president of the European
On the following page is the current structure of the new EU Commission team.4
Central Bank (former Managing Director of the International
Monetary Fund), taking over on 1 November 2019 from
1 The European Commission is the EU's executive body with the exclusive power to formally put forward new EU legislation.
2 Christine Lagarde has been succeed at the IMF by former EU Commissioner Kristalina Georgieva (Bulgaria).
3 Following the Brexit extension until 31 January 2020, the UK is now legally obliged under recital 11 of the European Council Decision 2019/1810 to appoint a commissioner as soon as possible.
4 The College of Commissioners is still pending a formal endorsement by the Parliament.
European Commission 2019 2024 Mandate Commissioner-Designates
Executive Vice Presidents
Ursula von der Leyen European Commission President Elect
Frans Timmermans Executive Vice President
European Green Deal (Commissioner for Climate Action)
Margrethe Vestager Executive Vice President
A Europe fit for the Digital Age (Commissioner for Competition)
Josep Borrell High Representative of the Union for Foreign Affairs and Security Policy/ Vice President
Stronger Europe in the World
Maros Sefcovic Vice President
Interinstitutional Relations and Foresight
Valdis Dombrovskis Executive Vice President An Economy That Works for Europe (Commissioner for Financial Services)
Vra Jourov Vice President Values and Transparency
Dubravka Suica Vice President
Democracy and Demography
Margaritis Schinas Vice President
Protecting our European Way of Life
Johannes Hahn Budget and Administration
Phil Hogan Trade
Mariya Gabriel Innovation and Youth
Nicolas Schmit Jobs
Paolo Gentiloni Economy
Janusz Wojciechowski Agriculture
Elisa Ferreira Cohesion and Reforms
Olivr Vrhelyi* Neighborhood and Enlargement
Stella Kyriakides Health
Didier Reynders Justice
Adina Vlean Transport
Helena Dalli Equality
Thierry Breton Internal Market
Ylva Johansson Home Affairs
Janez Lenarcic Crisis Management
Jutta Urpilainen International Partnerships
Kadri Simson Energy
Virginijus Sinkevicius Environment and Oceans
The UK announced it will submit a candidate after the UK elections. The delay is, nevertheless, constituting a breach of member state legal obligations. Consequently, an infringement proceeding against the UK was launched.
* Pending approval by the European Parliament
It has to be noted that the initial team composition of the VDL Commission looked slightly different. In early October 2019, the Parliament rejected for the first time a French commissioner nominee, Mrs. Sylvie Goulard, after holding two parliamentary hearings. The rejection took place mainly due to concerns resulting from ongoing investigations in France and the potential impact on her reputation as a future commissioner. Earlier, the Legal Affairs Committee of the Parliament had already ruled out the proposed Romanian (Rovana Plumb) and Hungarian (Lszl Trcsnyi) nominees prior to their parliamentary hearings due to apparent conflict of interests.
In early November 2019, VDL approved the new nominees by the French, Hungarian and Romanian governments: Thierry Breton (former CEO of tech company ATOS), Oliver Varhelyi (former permanent representative of Hungary to the EU) and Adina Valean (the chair of the Industry, Research and Energy Committee of the Parliament), respectively.
The Legal Affairs Committee approved their candidacies on 12 November. The respective committees hosting the Parliamentary Hearings approved Thierry Breton and Adina Valean on 14 November 2019. The three designates had to respond to a series of parliamentary questions on their competences and approach to the policy areas entrusted to them. The Hungarian commissionerdesignate was not yet approved by the Foreign Affairs Committee and was asked to submit additional clarifications to parliamentary questions by 18 November. With the Hungarian and the UK commissioner candidates currently outstanding, it remains uncertain whether the entire new team of commissioners can be approved at the Parliament's plenary vote scheduled on 27 November 2019, or whether an ad hoc legal solution needs to be found to allow the new EU Commission to start is work by 1 December 2019.
VDL recently presented a first glance of her political guidelines for the next five years, which were clearly inspired by the priorities of the European Council's Strategic Agenda 2019 2024. The VDL Commission intends to be a "geopolitical Commission", building on the work of the previous "political" Commission led by Jean-Claude Juncker. The geostrategic focus of the incoming EU Commission underlines the desire to increase Europe's assertiveness at the global level, and is visible in many elements of the priorities and suggested new measures of the VDL team.
The political guidelines are focusing on six main ambitions for Europe for the coming five years:
1. A European Green Deal
2. An economy that works for people
3. A Europe fit for the digital age
4. Protecting our European way of life
5. A stronger Europe in the world
6. A new push for European democracy
The listed ambitions capture policy areas that VDL believes are necessary to address the needs and concerns of European citizens, and are also reflective of the challenging external operating environment. To support each strategic ambition, the Commission services are contemplating a range of specific measures, which the Commission may put forward as legislative or non-legislative measures in the near future.
Trade is sure to be an early high-profile issue for the Commission, given the approach of the Trump Administration and the aspiration to extend the EU's network of Free Trade Agreements. The Commission's focus on the environment opens the way for the EU to try to achieve global leadership on climate change. The digital ambitions look more challenging, partly because the EU has just agreed a package of measures that took reform as far as the member states and Parliament would accept. In other areas, the expectation may be more continuity than radical change.
We next examine a range of key policy areas in order to distil the general direction of travel in terms of new EU policy priorities.
One of the most important and horizontal policy areas under the VDL Commission will be the broader area of sustainability under a hallmark initiative: the European Green Deal, to be coordinated by EVP Frans Timmermans,
Specific policy initiatives in this key focus area could include:
Increasing the EU's emission reduction targets for 2030 progressively from 40% to 55%
Introducing within the first 100 days a European Climate Law, which would enshrine the 2050 climate-neutrality target into legislation
Creating a new biodiversity strategy for 2030 that would tackle issues linked to deforestation and sustainable seas and oceans, among others
Working towards a new Circular Economy Action Plan 2.0 with a strong focus on sustainability: increased requirements regarding recycling/recyclability (including voluntary measures, such as the Circular Plastics Alliance), and also (plastic) waste prevention
Developing a "Farm to Fork" strategy for sustainable food production
Introducing measures towards a zero-pollution policy at the EU level; such cross-sectorial measures are expected for the transport, agriculture, chemical and other sectors
Reinforcing efforts towards reducing marine litter towards plasticfree oceans; a crucial issue that would continue to be addressed is the issue of microplastics
Putting forward a Sustainable Europe Investment Plan, expected to unlock 1 trillion of climate-related investments
EVP Margrethe Vestager is considered to be one of the "heavyweights"' in the new Commission and will have an important dual role, both as top EU competition law enforcer and digital policy setter. She will drive forward the key new priority to make Europe fit for the digital age. EVP Vestager will be leading on various digital files, along with the French commissioner-designate, Thierry Breton.
The new EU umbrella strategy, "A Europe fit for the digital age", will include a broad range of measures, such as:
Coordinating the work on artificial intelligence (AI), including possibly introducing a light-touch regulatory regime regarding the human and ethical implications of AI within the first 100 days of the VDL Commission
Introducing a new Digital Services Act, which is anticipated to inter alia revise the liability and safety rules for digital platforms (expected by the end of 2020)
Initiatives towards enhancing Europe's technological sovereignty, particularly on technologies such as blockchain, high-performance computing, algorithms, data-sharing and data-usage tools
Recommending standards for the 5G network deployment and security
Ensuring the full implementation of the General Data Protection Regulation (GDPR), which is due to be reviewed in May 2020
Advancing the work on cybersecurity issues, especially on certification and implementing rules on security and information systems, among others
Reinforcing the modernisation of key transport systems (in close collaboration with the transport commissioner), in particular by ensuring digital innovation within connected and automated mobility (e.g. in connected cars)
Tax matters have been gaining more and more political relevance and interest over the past few years. As such, we expect a few new policy initiatives under the VDL Commission, including:
The deliberations at the OECD level on a tax regime for the digital economy are ongoing, with the aim to agree on a global approach by the end of 2020; VDL has made it clear that, should the OECD process fail to deliver by that deadline, EVP Vestager, along with Economy Commissioner Paolo Gentiloni, will put forward a revised EU digital tax proposal
Reviewing of the European Energy Tax Directive towards promoting environmentally sustainable technologies; the transport and maritime sectors are very likely to be impacted by this initiative; there are also indications that the Commission services are considering a kerosene tax
Proposing a World Trade Organization (WTO)-compatible Carbon Border Tax is another top priority for the VDL Commission as part of the broader climate goals; the aim here would be to create a level playing field EU operators and importers (addressing carbon leakage)
Continuing ongoing initiatives, such as the proposed directive on a common consolidated corporate tax base, the proposal to introduce qualified majority voting rules on taxation matters (that would dramatically speed up the adoption process on taxation and VAT-related initiatives) and the blacklist of non-cooperative tax jurisdictions
Industry and Competition
The Vestager role is a particularly interesting development. EVP Vestager was one of the undoubted stars of the Jean-Claude Juncker Commission and retains her competition portfolio. The competition commissioner has always been distinct from other commissioners in having direct investigation and enforcement powers. EVP Vestager now sees this role combined with the oversight of the "fit for the digital age" priority, on which she will work closely with Commissioner Breton. This mix of enforcement and policy roles is perhaps recognition that the digital economy has given rise to some questions about the way in which competition law applies (a subject about which EVP Vestager commissioned a report earlier this year). It is worth noting the great breadth of Commissioner Breton's portfolio, combining digital, internal market and defence, the first two of which have traditionally had individual commissioners assigned to them.
We expect the following measures to be addressed in this context:
A long-term industrial strategy that focuses on businesses of all sizes. Some of the dimensions of the new industrial strategy will include:
Investments in innovation and research and development
Considering competition aspects to ensure a level playing field that provides the right set of incentives to businesses to invest, innovate and grow
Developing tools and policies to tackle the effects of third country ownership and subsidies in the EU's internal market
Evaluation and review of the EU's competition rules, including the antitrust regulations, the merger control and the review of the state aid rules
A sectoral inquiry in the digital sector would be one of the priorities within the competition remit, which would support evidence-based policymaking
A new strategy for SMEs, with a focus to support small businesses, entrepreneurs and start-ups by reducing regulatory burdens
As part of the ambition to become a stronger Europe in the world, we will see trade matters remain an absolute priority for the incoming VDL Commission. A notable difference with the previous Commission is the intention to appoint a chief trade enforcement officer, who will be tasked with monitoring and ensuring compliance with existing trade agreements. The Irish commissioner-designate for trade, Phil Hogan, is expected to also consider measures related to:
Launching an initiative to reform the World Trade Organization WTO, especially on subsidy matters
Putting forward various third-country focused initiatives to ensure the:
Full reciprocity in public procurement
Strengthening EU's trade defence measures, especially in response to unfair trade practices
Full implementation of the EU's screening mechanism for foreign direct investments
Reinforcing Europe's leadership in trade remains a top priority. Specific priorities include:
Working towards a trading partnership with the US
Accelerating negotiations on a comprehensive agreement on investment with China
Prioritising a trade and investment partnership with Africa
Concluding ongoing trade negotiations (e.g. Australia and New Zealand)
EVP Valdis Dombrovskis will continue his work as commissioner in a new dual role as coordinator of the various economy-related portfolios (i.e. economy, taxation, jobs, trade, cohesion and reforms), as well as key policymaker for the financial services portfolio.
Some of the key policy initiatives in the financial services area will include:
Completing the work towards the banking union and speeding up the work towards the capital markets union
Rethinking the EU approach on the Anti-Money Laundering (AML) regime from a legislative and supervisory standpoint, and moving into the direction of a true single market, including on AML matters; a concrete idea is that an independent EU agency would be created (or an existing agency tasked) to supervise the enforcement of AML rules on an EU-wide basis
Developing a green financing strategy that would focus on investment towards transitioning to a climate-neutral economy
Putting forward a new strategy for the fintech sector and an EU response on cryptocurrencies (including a regulatory response to LIBRA)
Defence and Space
The VDL Commission elevates defence and space policy in terms of priority, including by creating a new directorate general on defence industry and space, which will be headed by the French commissioner-designate Thierry Breton, who will also be responsible for the important policy areas covered by DG GROW (Industry) and DG CNECT (ICT sector).
Some of the key initiatives in this policy area may include:
Managing the European Defence Fund for cross-border collaborative projects, which would incentivise SMEs participation
Leveraging the existing funds in the Connecting Europe Facility, as well as the dual-use infrastructure projects to improve military mobility; an action plan on military mobility is foreseen as a future initiative
Continuing the implementation of space programmes, such as Galileo and EGNOS, as well as satellite navigation systems and Copernicus
Ensuring the crucial link between space, defence and security is improved, especially on issues linked to emergency services, peacekeeping operations and crisis management
In principle, the Parliament is due to approve the entire College of Commissioners on 27 November 2019, before the VDL Commission can take office on 1 December. However, the outstanding Hungarian commissioner approval and UK commissioner candidate nomination puts this start date at risk. The Commission is now working on fallback scenarios in order to allow the new Commission to start its work on 1 December, regardless of the nomination of a new UK commissioner.
Once the new VDL Commission is in place, a detailed work programme determining how the political priorities will be turned into specific legislative or non-legislative initiatives will be published in Q1 2020.
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The contents of this update are not intended to serve as legal advice related to individual situations or as legal opinions concerning such situations, nor should they be considered a substitute for taking legal advice. Squire Patton Boggs. All Rights Reserved 2019