# EUR-Lex - 52015PC0048 - EN

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# 52015PC0048

**Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL protecting against the effects of the extra-territorial application of legislation adopted by a third country and actions based thereon or resulting therefrom (recast) /* COM/2015/048 final - 2015/0027 (COD) */**

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EXPLANATORY MEMORANDUM

1.           In the context of a people’s
Europe, the Commission attaches great importance to simplifying and clarifying
the law of the Union so as to make it clearer and more accessible to citizens,
thus giving them new opportunities and the chance to make use of the specific
rights it gives them.

This aim cannot be achieved so long as numerous
provisions that have been amended several times, often quite substantially,
remain scattered, so that they must be sought partly in the original instrument
and partly in later amending ones. Considerable research work, comparing many
different instruments, is thus needed to identify the current rules.

For this reason a codification of rules that
have frequently been amended is also essential if the law is to be clear and
transparent.

2.           On 1 April 1987 the Commission
decided[1]
to instruct its staff that all acts should be codified after no more than ten
amendments, stressing that this is a minimum requirement and that departments
should endeavour to codify at even shorter intervals the texts for which they
are responsible, to ensure that their provisions are clear and readily
understandable.

3.           The Conclusions of the Presidency
of the Edinburgh European Council (December 1992) confirmed this[2], stressing the
importance of codification as it offers certainty as to the law applicable to a
given matter at a given time.

Codification must be undertaken in full
compliance with the normal procedure for the adoption of acts of the Union.

4.           The purpose of this proposal is
to undertake a codification of Council Regulation (EC)
No 2271/96 of 22 November 1996 protecting against the effects of the
extra-territorial application of legislation adopted by a third country, and
actions based thereon or resulting therefrom[3].
The new Regulation will supersede the various acts incorporated in it[4], fully preserving the
content of the acts being codified. At the same time, it is also appropriate to
make certain substantive amendments to Articles 5 and 12 of Regulation (EC) No 2271/96, with a view to delegating powers to the
Commission for establishing the criteria for the application of a provision
contained in the second paragraph of Article 5 of that Regulation. Therefore,
the proposal is being presented in the form of a recast.

5.           The recast proposal was drawn up on the basis of a
preliminary consolidation, in 22 official languages, of Regulation (EC) No 2271/96 and the
instruments amending it, carried out by the Publications Office of the European
Union, by means of a data-processing system. Where the Articles have been given
new numbers, the correlation between the old and the new numbers is shown in a
table set out in Annex III to the recast Regulation.

ê 2271/96
(adapted)

2015/0027 (COD)

Proposal for a

REGULATION OF THE EUROPEAN PARLIAMENT
AND OF THE COUNCIL

protecting against the effects of the
extra-territorial application of legislation adopted by a third country and
actions based thereon or resulting therefrom (recast)

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty Ö on the
Functioning of the European Union Õ , and in
particular Article Ö 64 Õ , Ö Article
207(2) Õ and Ö Article
352 Õ 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 Economic and Social Committee[5],

Acting in accordance with the ordinary
legislative procedure,

Whereas:

ò new

(1)       Council Regulation (EC) No 2271/96[6] has
been substantially amended
several times[7]. Since
further amendments are to be made, that Regulation should be recast in the interests of clarity.

ê 2271/96 recital
1 (adapted)

(2)       The
objectives of the Ö Union Õ include
contributing to the harmonious development of world trade and to the
progressive abolition of restrictions on international trade.

ê 2271/96
recital 2 (adapted)

(3)       The
Ö Union Õ endeavours to
achieve to the greatest extent possible the objective of free movement of
capital between Member States and third countries, including the removal of any
restrictions on direct investment — including investment in real estate — establishment, the provision of financial services or the admission
of securities to capital markets.

ê 2271/96 recital
3 (adapted)

(4)       A
third country has enacted certain laws, regulations and other legislative
instruments which purport to regulate activities of natural and legal persons
under the jurisdiction of the Member Ö States Õ.

ê 2271/96 recital
4

(5)       By
their extra-territorial application such laws, regulations and other
legislative instruments violate international law and impede the attainment of
the aforementioned objectives.

ê 2271/96 recital
5 (adapted)

(6)       Such
laws, regulations and other legislative instruments, and actions based thereon
or resulting therefrom affect or are likely to affect the established legal
order and have adverse effects on the interests of the Ö Union Õ and the
interests of natural and legal persons exercising rights under the Treaty Ö on the
Functioning of the European Union (TFEU) Õ.

ê 2271/96 recital
6 (adapted)

(7)       Under
those exceptional circumstances, it is necessary to protect the established
legal order, the interests of the Ö Union Õ and the
interests of the said natural and legal persons Ö at Union
level Õ, in particular
by removing, neutralising, blocking or otherwise countering the effects of the
foreign legislation concerned.

ê 2271/96 recital
7

(8)       The
request to supply information under this Regulation does not preclude a Member State from requiring information of the same kind to be provided to the authorities
of that State.

ê 2271/96 recital
8

(9)       The
Council has adopted the Joint Action 96/668/CFSP[8]
in order to ensure that the Member States take the necessary measures to
protect those natural and legal persons whose interests are affected by the
aforementioned laws and actions based thereon, insofar as those interests are
not protected by this Regulation.

ê 37/2014 Art. 1
and Annex .6 (adapted)

ð new

(10)     The Commission should be empowered to adopt delegated acts in
accordance with Article 290 TFEU for the purpose of amending Annex I to Ö this Õ Regulation ð as well as for establishing criteria for the
authorisation of persons to comply fully or partially with any requirement or
prohibition, including requests of foreign courts, in cases where
non-compliance would seriously damage their interests or those of the Union ï. 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 a simultaneous, timely and appropriate
transmission of relevant documents to the European Parliament and to the
Council.

(11)     Ö In order
to ensure uniform conditions for Õ the
implementation of Ö this Õ Regulation, Ö implementing
powers should be conferred on the Commission Õ. Those Ö powers Õ should be Ö exercised Õ in accordance
with Regulation (EU) No 182/2011 of the European Parliament and of the Council[9].

ê 2271/96 recital
11 (adapted)

(12)     For
the adoption of certain provisions of this Regulation the Ö TFEU Õ does not provide powers other than those of Article Ö 352 Õ,

ê 2271/96 (adapted)

HAVE ADOPTED THIS REGULATION:

Article 1

This Regulation provides protection against
and counteracts the effects of the extra-territorial application of the laws,
regulations and other legislative instruments Ö specified in Annex I Õ , and of actions based thereon or resulting therefrom, where such
application affects the interests of persons, referred to in Article 11,
engaging in international trade and/or the movement of capital and related
commercial activities between the Ö Union Õ and third
countries.

ê 37/2014
Art. 1 and Annex .6(1) (adapted)

The Commission shall be empowered to adopt
delegated acts in accordance with Article 12 to add to Annex I laws,
regulations or other legislative instruments of third countries having
extraterritorial application and causing adverse effects on the interests of
the Union and the interests of natural and legal persons exercising rights
under the Ö TFEU Õ, and to delete
laws, regulations or other legislative instruments when they no longer have
such effects.

ê 2271/96 (adapted)

Article 2

Where the economic and/or financial
interests of any person referred to in Article 11 are affected, directly or
indirectly, by the laws specified in Annex I or by actions based thereon or
resulting therefrom, that person shall inform the Commission accordingly
within 30 days from the date on which it obtained such information. Insofar
as the interests of a legal person are affected, Ö the Õ obligation Ö to inform the Commission Õ applies to the
directors, managers and other persons with management responsibilities.

At the request of the Commission, such
person shall provide all information relevant for the purposes of this Regulation
in accordance with the request from the Commission within 30 days
from the date of the request.

All information shall be submitted to the
Commission either directly or through the competent authorities of the Member
States. Should the information be submitted directly to the Commission, the
Commission will inform immediately the competent authorities of the Member
States in which the person who gave the information is resident or
incorporated.

Article 3

All information supplied in accordance with
Article 2 shall only be used for the purposes for which it was provided.

Information which is by nature confidential
or which is provided on a confidential basis shall be covered by the obligation
of professional secrecy. It shall not be disclosed by the Commission without
the express permission of the person providing it.

Communication of such information shall be
permitted where the Commission is obliged or authorised to do so, in particular
in connection with legal proceedings. Such communication must take into account
the legitimate interests of the person concerned that his or her business
secrets should not be divulged.

This Article shall not preclude the
disclosure of general information by the Commission. Such disclosure shall not
be permitted if Ö it Õ is incompatible with the original purpose of such information.

In the event of a breach of
confidentiality, the originator of the information shall be entitled to obtain
that it be deleted, disregarded or rectified, as the case may be.

Article 4

No judgment of a court or tribunal and no
decision of an administrative authority located outside the Ö Union Õ giving effect,
directly or indirectly, to the laws specified in Annex I or to actions based
thereon or resulting therefrom, shall be recognised or be enforceable in any
manner.

Article 5

No person referred to in Article 11 shall
comply, whether directly or through a subsidiary or other intermediary person,
actively or by deliberate omission, with any requirement or prohibition,
including requests of foreign courts, based on or resulting, directly or
indirectly, from the laws specified in Annex I or from actions based thereon or
resulting therefrom.

Persons may be authorised, in accordance
with Article 7(b) and Ö the procedure referred to in Article Õ 8, to comply
fully or partially to the extent that non-compliance would seriously damage
their interests or those of the Ö Union Õ. The criteria for the application
of this provision shall be established in accordance with the procedure set out
in Article 8. When there is sufficient evidence that non‑compliance
would cause serious damage to a natural or legal person, the Commission shall
expeditiously submit to the committee referred to in Article 8 (1) a draft of the appropriate
measures to be taken under the terms of Ö this Õ Regulation.

ò new

The Commission
shall be empowered to adopt delegated acts in accordance with Article 12 to
establish the criteria for the application of the second paragraph of this
Article.

ê 2271/96 (adapted)

Article 6

Any person referred to in Article 11 who is
engaging in an activity referred to in Article 1 shall be entitled to recover
any damages, including legal costs, caused to that person by the application of
the laws specified in Annex I or by actions based thereon or resulting
therefrom.

Such recovery may be obtained from the
natural or legal person or any other entity causing the damages or from any
person acting on its behalf or intermediary.

Regulation (EU) No 1215/2012 of the European Parliament and of the Council[10] shall apply to
proceedings brought and judgments given under this Article. Recovery may be
obtained on the basis of the provisions of Sections 2, 3, 4, 6 and 7 of Chapter
II of that Regulation , as well as in accordance with Article 67 of that Regulation
, through judicial proceedings instituted in the Courts of any Member State
where that person, entity, person acting on its behalf or intermediary holds
assets.

Without prejudice to other means available
and in accordance with applicable law, the recovery could take the form of
seizure and sale of assets held by those persons, entities, persons acting on
their behalf or intermediaries within the Ö Union Õ, including
shares held in a legal person incorporated within the Ö Union Õ.

Article 7

For the implementation of this Regulation
the Commission shall:

(a)          inform the European Parliament
and the Council immediately and fully of the effects of the laws, regulations
and other legislative instruments and ensuing actions mentioned in Article 1,
on the basis of the information obtained under this Regulation, and make
regularly a full public report thereon;

(b)          grant authorisation under the
conditions Ö referred to Õ in Article 5 and, when laying down the time limits with regard to
the delivery by the Committee of its opinion, take fully into account the time
limits which have to be complied with by the persons which are to be subject of
an authorisation;

(c)          publish a notice in the Official
Journal of the European Ö Union Õ on the
judgments and decisions to which Articles 4 and 6 apply;

(d)          publish in the Official
Journal of the European Ö Union Õ the names and
addresses of the competent authorities of the Member States referred to in Ö the third paragraph of Õ Article 2.

ê 37/2014
Art. 1 and Annex .6(3) (adapted)

Article 8

1. For the purpose of implementing Article
7(b), the Commission shall be assisted by the Committee on Extra-territorial
Legislation. Implementing acts shall be adopted in accordance with the
examination procedure referred to in paragraph 2 of this Article. That
Committee shall be a committee within the meaning of Regulation (EU)
No 182/2011.

2. Where reference is made to this
paragraph, Article 5 of Regulation (EU) No 182/2011 shall apply.

ê 2271/96 (adapted)

Article 9

Each Member State shall determine the
sanctions to be imposed in the event of breach of any relevant provisions of
this Regulation. Such sanctions must be effective, proportional and dissuasive.

Article 10

The Commission and the Member States shall inform each other of the measures taken under this Regulation and of all
other relevant information pertaining to this Regulation.

Article 11

1. This Regulation shall apply to:

a)           any natural person being a
resident in the Ö Union Õ and a national
of a Member State;

b)           any legal person incorporated
within the Ö Union; Õ

c)           any natural or legal person
referred to in Article 1 (2) of Council Regulation (EEC) No 4055/86[11];

d)           any other natural person being a
resident in the Ö Union Õ, unless that
person is in the country of which he is a national;

e)           any other natural person within
the Ö Union Õ, including its
territorial waters and air space and in any aircraft or on any vessel under the
jurisdiction or control of a Member State, acting in a professional capacity.

Ö 2. For
the purposes of paragraph 1, ‘being a resident in the Union’ means being
legally established in the Union for a period of at least six months within the
12-month period immediately prior to the date on which, under this Regulation,
an obligation arises or a right is exercised. Õ

ê 37/2014
Art. 1 and Annex .6(4)

ð new

Article 12

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

2. The power to adopt delegated acts
referred to in Article 1 ð and in Article 5 ï shall be conferred on the Commission for a period of five years
from 20 February 2014. The Commission shall draw up a report in respect of the
delegation of power not later than nine months before the end of the five-year
period. The delegation of power shall be tacitly extended for periods of an
identical duration, unless the European Parliament or the Council opposes such
extension not later than three months before the end of each period.

3. The delegation of power referred to in
Article 1 ð and in Article 5 ï may be revoked at any time by the European Parliament or by the
Council. A decision to revoke 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.

4. As soon as it adopts a delegated act,
the Commission shall notify it simultaneously to the European Parliament and to
the Council.

5. A delegated act adopted pursuant to
Article 1 ð and Article 5 ï shall enter into force only if no objection has been expressed either
by the European Parliament or the Council within a period of two months of
notification of that act to the European Parliament and to 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 four months at the initiative of the European Parliament or of the
Council.

ê

Article 13

Regulation (EC) No 2271/96 is repealed.

References to the repealed Regulation shall
be construed as references to this Regulation and shall be read in accordance
with the correlation table in Annex III.

ê 2271/96 (adapted)

Article 14

This Regulation shall enter into force on
the Ö twentieth Õ day Ö following
that Õ of its
publication in the Official Journal of the European Ö Union Õ.

This Regulation shall be binding in its entirety and
directly applicable in all Member States.

Done at Brussels,

For the European Parliament                        For
the Council

The President                                                 The
President

[1]               COM(87) 868 PV.

[2]               See Annex 3 to Part A of the Conclusions.

[3]               Entered in the legislative programme for 2014.

[4]               See Annex II to this proposal.

[5]               OJ C [...], [...], p. [...].

[6]               Council Regulation (EC)
No 2271/96 of 22 November 1996 protecting against the effects of the extra‑territorial
application of legislation adopted by a third country, and actions based
thereon or resulting therefrom (OJ L 309, 29.11.1996, p. 1).

[7]               See Annex II.

[8]               Joint Action of 22 November 1996 adopted by the Council on the basis of
Articles J.3 and K.3 of the Treaty on European Union concerning measures protecting against the effects of the extra-territorial application of legislation adopted by a third country, and actions based thereon or resulting therefrom (96/668/CFSP) (OJ L 309, 29.11.1996, p. 7).

[9]               Regulation (EU) No 182/2011 of the European
Parliament and of the Council of 16 February 2011 laying down the rules and
general principles concerning mechanisms for control by Member States of the
Commission's exercise of implementing powers (OJ L 55, 28.2.2011, p. 13).

[10]             Regulation (EU) No 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (OJ L 351, 20.12.2012, p. 1).

[11]             Council Regulation (EEC) No 4055/86 of 22 December
1986 applying the principle of freedom to provide services to maritime
transport between Member States and between Member States and third countries
(OJ L 378, 31.12.1986, p. 1).

ê 2271/96
(adapted)

è1 Corrigendum,
OJ L 179, 8.7.1997, p. 10

ANNEX I

LAWS, REGULATIONS AND OTHER
LEGISLATIVE INSTRUMENTS

referred
to in Article 1

COUNTRY: UNITED STATES OF AMERICA

ACTS

1.           ‘National Defense
Authorization Act for Fiscal Year 1993’, Title XVII ‘Cuban Democracy Act 1992’,
sections 1704 and 1706

Required compliance:

The requirements are consolidated in Title I of
the ‘Cuban Liberty and Democratic Solidarity Act of 1996’, see below.

Possible damages to EU interests:

The liabilities incurred are now incorporated
within the ‘Cuban Liberty and Democratic Solidarity Act of 1996’, see below.

2.           ‘Cuban Liberty and Democratic
Solidarity Act of 1996’

Title I

Required compliance:

To comply with the economic and financial embargo
concerning Cuba by the US, by, inter alia, not exporting to the US
any goods or services of Cuban origin or containing materials or goods
originating in Cuba either directly or through third countries, dealing in
merchandise that is or has been located in or transported from or through Cuba,
re-exporting to the US sugar originating in Cuba without notification by the
competent national authority of the exporter or importing into the USA sugar
products without assurance that those products are not products of Cuba,
freezing Cuban assets, and financial dealings with Cuba.

Possible damages to EU interests:

Prohibition to load or unload freight from a
vessel in any place in the US or to enter a US port; refusal to import any
goods or services originating in Cuba and to import into Cuba goods or services
originating in the US, blocking of financial dealings involving Cuba.

Title III and
Title IV:

Required
compliance:

To terminate ‘trafficking’ in property formerly
owned by US persons (including Cubans who have obtained US citizenship) and expropriated by the Cuban regime. (Trafficking includes: use, sale,
transfer, control, management and other activities to the benefit of a person).

Possible damages to EU interests:

Legal proceedings in the US, based upon liability already accruing, against EU citizens or companies involved in
trafficking, leading to judgments/decisions to pay (multiple) compensation to
the US party. Refusal of entry into the US for persons involved in trafficking,
including the spouses, minor children and agents thereof.

3.           ‘Iran and Libya Sanctions Act of 1996’

Required compliance:

Not to invest in Iran or Libya any amount
greater than USD 40 million during a period of 12 months that
directly and significantly contributes to the enhancement of the Iranian or
Libyan ability to develop their petroleum resources (investment covering the
entering into a contract for the said development, or the guaranteeing of it,
or the profiting therefrom or the purchase of a share of ownership therein).

NB:   Investments under
contracts existing before 5 August 1996 are exempted.

Respect of embargo concerning Libya established by Resolutions 748 (1992) and 883 (1993) of the Security Council of
the United Nations.

Possible damages to EU interests:

Measures taken by the US President to limit
imports into US or procurement to US, prohibition of designation as primary
dealer or as repository of US Government funds, denial of access to loans
from US financial institutions, export restrictions by US, or refusal of assistance
by EXIM-Bank.

REGULATIONS

1.           è1 31 CFR ç
(Code of Federal Regulations) Ch. V (7-1-95 edition) Part 515 — Cuban Assets
Control Regulations, subpart B (Prohibitions), E (Licenses, Authorizations and
Statements of Licensing Policy) and G (Penalties)

Required compliance:

The prohibitions are consolidated in Title I of
the ‘Cuban Liberty and Democratic Solidarity Act of 1996’, see above.
Furthermore, requires the obtaining of licences and/or authorizations in
respect of economic activities concerning Cuba.

Possible damages to EU interests:

Fines, forfeiture, imprisonment in cases of
violation.

_____________

é

ANNEX II

Repealed
Regulation with list of its successive amendments

Council Regulation (EC) No 2271/96 (OJ L 309, 29.11.1996, p. 1) || ||

|| Council Regulation (EC) No 807/2003 (OJ L 122, 16.5.2003, p. 36) || Only point 50 of Annex III

|| Regulation (EU) No 37/2014 of the European Parliament and of the Council (OJ L 18, 21.1.2014, p. 1) || Only point 6 of the Annex

_____________

ANNEX III

Correlation Table

Regulation (EC) No 2271/96 || This Regulation

Articles 1 to 4 || Articles 1 to 4

Article 5 || Article 5, first and second paragraphs

- || Article 5, third paragraph

Article 6 || Article 6

Article 7, introductory wording || Article 7, introductory wording

Article 7, point (a) || Article 7, point (a)

Article 7, point (b) || Article 7, point (b)

Article 7, point (d) || Article 7, point (c)

Article 7, point (e) || Article 7, point (d)

Articles 8, 9 and 10 || Articles 8, 9 and 10

Article 11, introductory wording || Article 11(1), introductory wording

Article 11, point 1 || Article 11(1), point (a)

Article 11, point 2 || Article 11(1), point (b)

Article 11, point 3 || Article 11(1), point (c)

Article 11, point 4 || Article 11(1), point (d)

Article 11, point 5 || Article 11(1), point (e)

footnote to Article 11, point 1 || Article 11(2)

Article 11a || Article 12

- || Article 13

Article 12 || Article 14

Annex || Annex I

- || Annex II

- || Annex III

_____________