EUROPEAN COMMISSION Brussels, 2.7.2015 COM(2015) 315 final REPORT FROM THE COMMISSION ANNUAL REPORT 2014

ON SUBSIDIARITY AND PROPORTIONALITY



REPORT FROM THE COMMISSION ANNUAL REPORT 2014 ON SUBSIDIARITY AND PROPORTIONALITY 1.Introduction This is the 22nd annual report on the application of the principles of subsidiarity and proportionality in EU law-making. The report is submitted in accordance with Article 9 of Protocol No 2 on the application of the principles of subsidiarity and proportionality (hereinafter ‘Protocol No 2’) to the Treaty on the Functioning of the European Union (TFEU). The report looks at how the EU institutions and bodies have implemented these two principles and how the practice has evolved in comparison with previous years. It also provides an analysis of several Commission proposals which were the subject of reasoned opinions in 2014. Given the close links between the subsidiarity control mechanism and the political dialogue between national Parliaments and the Commission, this report should be seen as complementary to the Commission’s Annual Report 2014 on relations with national Parliaments. 2.Application of the principles by the institutions 2.1.The Commission Over the years, the Commission has introduced procedures to assess compliance with the principles of subsidiarity and proportionality at different stages of the decision-making process in line with better regulation principles. President Juncker has emphasised that respect for the principles of subsidiarity and proportionality will be at the heart of the work of the new Commission. Before proposing new initiatives, the Commission checks that EU-level action is legitimate and justified. Roadmaps are published for all major new initiatives. They provide, at an early stage, a preliminary description of the potential initiative and existing evaluation work and outline the Commission’s plans for carrying out an impact assessment and consultation. The roadmaps also include an initial justification for action in the light of subsidiarity and proportionality. When an impact assessment needs to be carried out, i.e. whenever significant impact is envisaged, stakeholders are invited, through a public consultation, to comment on the need to act and on possible solutions to problems identified. Based on responses to this consultation and other relevant input, impact assessments analyse, inter alia, subsidiarity and assess the proportionality of the options examined. On 19 May 2015, the Commission adopted – in line with President Juncker's political priorities – a package of better regulation measures with new integrated Better Regulation Guidelines, including updated guidance for assessing subsidiarity and proportionality in the context of impact assessment of new initiatives. In 2014, 25 impact assessments were conducted. After scrutiny by the independent quality control body, the Impact Assesment Board, eight of these impact assessments were judged to be in need of improvements as regards subsidiarity or proportionality, or both. This rate of 32% is similar to that of previous years. For example, in the case of a proposal for a Decision on enhancing EU cooperation in the prevention and deterrence of undeclared work, the Impact Assessment Board considered that the impact assessment should provide further evidence underpinning the reasons why demand-driven cooperation among Member States would fail to tackle the relevant issues. Moreover, it was recommended to present more clearly the legal basis for the initiative. Further details were also requested on the proportionality of the preferred option, in order to demonstrate why closer forms of cooperation across all 28 Member States would be required given the preference of employers and Member States for other options. The final report was modified in line with the Board's recommendations. For instance, the legal basis was presented more clearly and the proportionality aspects were better explained (p. 43). In the case of the Impact Assessment of the harmonisation of radio spectrum bands for wireless audio programme making and special events equipment, the Impact Assessment Board asked for a better justification of the proportionality of the initiative by comparing estimated costs to the identified benefits and also sought to clarify the added value and necessity of action at EU level as opposed to Member State level. Following these comments from the Board, the analytical sections placed more emphasis on the impact on the different categories of users (smaller vs. bigger users). The report also made it clear that a large proportion of the costs would necessarily be incurred under the baseline scenario, thus putting the comparison of costs and benefits into a clearer context. Through its recommendations, the Impact Assessment Board contributed to improving the analysis of compliance with the principles of subsidiarity and proportionality, providing critical information for the Commission’s political decision-making process. The explanatory memorandum accompanying a legislative proposal also sets out how the proposal complies with the principles of subsidiarity and proportionality. Subsidiarity and proportionality are also key considerations in the context of retrospective evaluations, which assess whether EU actions are actually delivering the expected results in terms of efficiency, effectiveness, coherence, relevance and EU added value. Such evaluations examine whether EU actions remain necessary, or whether the objectives could be better achieved in other ways. The Commission is committed to 'evaluate first', analysing past performance before considering potential legislative changes. By gathering evidence and identifying lessons which can feed into decision-making, the EU is making evaluation an integral and permanent part of its policy-making along with assessments of subsidiarity and proportionality. 2.2.Follow-up to reasoned opinions from national Parliaments

In 2014, the Commission received 21 reasoned opinions from national Parliaments regarding the principle of subsidiarity, which represented a decrease of 76 % compared to the number of reasoned opinions received in the previous year (88 in 2013). The reasoned opinions received in 2014 accounted for a considerably lower proportion (4 %) of the overall number of opinions received by the Commission in the same year in the context of the political dialogue (506). In 2013, reasoned opinions accounted for 14 % of the overall number of opinions, whereas in 2012 and 2011 slightly more than 10 % of opinions were reasoned opinions. While no new yellow card procedure was triggered in 2014, the yellow card procedure triggered in 2013 in respect of the proposal on the European Public Prosecutor's Office (COM(2013) 534 final) continued to fuel discussions within the political dialogue. For more details, see the report on relations with national Parliaments. The considerably lower number of reasoned opinions should be seen in the context of a decrease in the overall number of proposals made by the Commission towards the end of its term of office. It should be noted that in 2013 the total number of opinions submitted by the national Parliaments in the framework of political dialogue also decreased, but to a lesser extent than the decrease in the number of reasoned opinions. Reasoned opinions continued to vary in form and the arguments put forward by national Parliaments in support of their conclusions regarding alleged breach of the principle of subsidiarity also differed. As in previous years, national Parliaments issued reasoned opinions on various proposals adopted in 2014. The 21 reasoned opinions issued in 2014 covered 15 Commission proposals. The proposals that gave rise to the most reasoned opinions however only generated three reasoned opinions, namely the proposal for a Directive on the Union legal framework for customs infringements and sanctions and the proposal for a review of waste policy and legislation. Two reasoned opinions were issued regarding the proposal for a Regulation on organic production and labelling of organic products, the proposal for a Regulation on novel food and the proposal for a Directive on single-member private limited liability companies. For more details, see the Annex to this report. The significant decrease in the overall number of reasoned opinions issued in 2014 translated into a substantial decrease in the number of reasoned opinions issued per chamber. Only 15 out of 41 chambers issued reasoned opinions in 2014 (compared to 34 chambers in 2013). The Austrian Bundesrat and the UK House of Commons issued three reasoned opinions each (compared to, respectively, six and five reasoned opinions in 2013). The Swedish Riksdag and the French Sénat issued two reasoned opinions each (in comparison, in 2013, nine reasoned opinions were issued by the Riksdag and four by the Sénat). The majority of chambers issued one or no reasoned opinions. Although national Parliaments were less active in terms of issuing reasoned opinions in 2014, a number of chambers called for strengthening of the subsidiarity control procedure. Between January and May 2014 the Danish Folketing, Dutch Tweede Kamer and UK House of Lords submitted reports with detailed proposals on how to strengthen the role of national Parliaments in the decision-making process. These reports contained, inter alia, ideas on how to extend the scope of subsidiarity control. They suggested that reasoned opinions should not only concern compliance with the principle of subsidiarity, but also compliance with the principle of proportionality or the legal basis for the proposal. The reports also advocated an extension of the deadline for submitting reasoned opinions and proposed that when a yellow card is triggered, the Commission should be bound to withdraw or amend its proposal. Discussions between national Parliaments on these subjects are continuing in different fora. 2.3.The European Parliament and the Council a) The European Parliament Since the entry into force of the TFEU and in the framework of Protocol No 2, the European Parliament has taken a series of measures to fulfil its legal obligations in this area. With particular reference to the reasoned opinions of national Parliaments, the procedure described below is currently in place. National Parliaments’ opinions are transmitted to the parliamentary committee responsible for the subject matter and to the Committee on Legal Affairs, for distribution to all committee members and inclusion in the meeting file. National Parliaments’ opinions are systematically translated into all EU official languages and mentioned in the preamble to legislative resolutions. In principle, the parliamentary committee responsible for the subject matter is obliged not to proceed to its final vote before the expiry of the stipulated eight-week deadline. In 2014, the European Parliament formally received 287 submissions from national Parliaments. 18 of these were reasoned opinions whilst the other 269 were contributions (i.e. submissions not raising issues related to compliance with the principle of subsidiarity). In 2013, 86 reasoned opinions and 206 contributions were officially transmitted to the European Parliament. The Committee on Legal Affairs is the parliamentary committee which has overall responsibility for dealing with the principle of subsidiarity. A member of the committee is appointed as ‘standing rapporteur’ for subsidiarity for a period of six months on the basis of rotation among the political groups. The rapporteur monitors the reasoned opinions received and can take up issues raised in reasoned opinions for debate in the committee and for possible recommendations to other relevant committees. A report is also regularly drawn up by the Committee on Legal Affairs on the Annual Report by the Commission on subsidiarity and proportionality. On the basis of a report drawn up by Mr Sajjad Karim (ECR/UK), a resolution was adopted by the European Parliament on 4 February 2014 on the 19th report from the Commission on subsidiarity and proportionality. Despite the break in parliamentary activity in 2014, an election year, the European Parliament produced 32 initial appraisals and two detailed appraisals of Commission impact assessments, three complementary impact assessments, one impact assessment of substantive parliamentary amendments and one ex-post impact assessment in 2014. In addition, five reports on the cost of non-Europe were completed. The European Parliament has also initiated a new, more general approach to assessing the added value of action at EU level, by drawing up a Cost of Non-Europe report, mapping the gains obtainable from actions proposed by the European Parliament, and a report on the economic growth potential of the 10 priorities set out in President Juncker’s political guidelines. b) The Council The Council’s obligations regarding national Parliaments’ right to monitor subsidiarity are set out in Protocols No 1 and 2. The responsibilities of the Council mainly consist in forwarding to national Parliaments draft legislative acts which do not originate from the Commission. Under Article 4 of Protocol No 2, the Council has to forward to national Parliaments all draft legislative acts originating from a group of Member States, the Court of Justice, the European Central Bank and the European Investment Bank. However, in 2014, no such acts were received by the Council and thus none were forwarded to national Parliaments. As a corollary to the above obligation, under Article 6 of Protocol No 2, the Council must forward any national Parliament opinion on a legislative proposal originating from a group of Member States to the proposing Member States. Similarly, the Council will forward national Parliaments’ opinions on legislative proposals coming from the Court of Justice, the European Central Bank and the European Investment Bank to the institution concerned. However, no such acts were received by the Council during the course of 2014.

In addition to its Treaty requirements, the Council also keeps Member States informed of national Parliament opinions on Commission legislative proposals. Hence, in 2014, the Council Secretariat distributed to delegations over 250 reasoned opinions and opinions issued within the framework of the political dialogue, relating to Commission legislative proposals. Lastly, as part of its legislative work, the Council checks compliance with the principles of subsidiarity and proportionality when it reviews the impact assessments which accompany Commission proposals. 2.4.The Committee of the Regions In 2014, the Committee of the Regions adopted and implemented its second Subsidiarity Work Programme, which included the following three initiatives selected from the Commission Work Programme according to specific criteria: (i) the Clean Air policy package; (ii) The proposal on organic production; (iii) The waste legislation in the framework of the Circular Economy package. Particular attention was given to the use of delegated acts in the monitored legislative proposals. In implementing the Subsidiarity Work Programme, the Committee of the Regions analysed the EU’s Clean Air policy package. Following consultation of the Subsidiarity Expert Group, the Committee of the Regions concluded in its opinion that the proposal complied with the principles of subsidiarity and proportionality, and agreed that air pollution was a transnational phenomenon that had to be tackled at European level. Regarding the proposal for a Regulation on organic production and labelling of organic products, consultation of the Subsidiarity Expert Group and the Subsidiarity Monitoring Network took place during the eight-week period allowed for subsidiarity control by national Parliaments. Most respondents were opposed to removing the possibility for Member States to grant exceptions to the rules governing organic production and raised concerns from a subsidiarity point of view. With regard to proportionality, they considered that the proposal went too far, as the intended objectives could be achieved in other less restrictive ways. These concerns were reflected in the Committee of the Regions’ opinion. The proposal for a Directive amending Directives 2008/98/EC on waste, 94/62/EC on packaging and packaging waste, 1999/31/EC on the landfill of waste, 2000/53/EC on end-of-life vehicles, 2006/66/EC on batteries and accumulators and waste batteries and accumulators, and 2012/19/EU on waste electrical and electronic equipment was of particular interest to the Committee of the Regions since, in most Member States, local and regional authorities are responsible for the implementation of EU waste legislation. Consultation of the Subsidiarity Expert Group and the Subsidiarity Monitoring Network took place during the eight-week period allowed for subsidiarity control by national Parliaments. It showed that most respondents saw no subsidiarity problems resulting from the new EU waste targets. However, several respondents raised concerns about proportionality, questioning the feasibility of the new waste targets, and highlighting the different approaches to the current waste targets throughout the EU. The Committee of the Regions organised a territorial impact assessment workshop, which showed that certain regions face limitations in achieving the targets proposed by the Directive. The main results of the consultation and the territorial impact assessment exercise are reflected in the Committee of the Regions’ opinion. Several additional opinions adopted by the Committee of the Regions in 2014 raised concerns in terms of compliance of Commission proposals with the principles of subsidiarity and proportionality, such as the opinion on the proposal for a Regulation on the establishment of the European Public Prosecutor’s Office, the opinion on the proposal for a Decision establishing a European Platform to enhance cooperation in the prevention and deterrence of undeclared work, and the opinion on the proposal for a Regulation amending Regulation (EU) No 1308/2013 and Regulation (EU) No 1306/2013 as regards the aid scheme for the supply of fruit and vegetables, bananas and milk in educational establishments. In July 2014 the Committee of the Regions organised a subsidiarity workshop for stakeholders from the EU and from national and regional authorities. The workshop’s aim was to take stock of the 6th Subsidiarity Conference 2013 and to explore new approaches and solutions for effective subsidiarity monitoring. In addition, a conference on ‘the role of regional parliaments in EU affairs’ that was jointly organised by the Committee of the Regions and the University of Tübingen (Germany) aimed to raise awareness of the role of and challenges facing regional parliaments in the context of the subsidiarity control mechanism. Finally, a meeting of the REGPEX partners and a meeting of other Committee of the Regions’ internet platforms, both in December, concluded that it was necessary to raise regional parliaments’ awareness of subsidiarity issues, and to support them with tools for information exchange. Reference is also made to the Subsidiarity Annual Report 2014 to be issued by the Committee of the Regions in June 2015. 2.5.The Court of Justice In 2014, the Court of Justice did not render any significant judgment as regards the principles of subsidiarity and proportionality. 3.Key cases where subsidiarity and proportionality concerns were raised Proposal for a Directive on the Union legal framework for customs infringements and sanctions The Commission published a proposal on 13 December 2013 setting out acts which should be considered as infringements of the Union’s customs rules and establishing a framework for imposing sanctions when such acts occur. The proposal aims to harmonise the consequences of violating the common rules which vary across the customs union as they depend on the 28 different legal orders and administrative or judicial traditions of the Member States. It thus seeks to provide more uniformity in the way that breaches of EU customs law are treated across the Member States. National Parliaments issued three reasoned opinions on the proposal, representing six votes. Three other chambers of national Parliaments issued opinions on this proposal in the framework of the political dialogue. In their reasoned opinions, national Parliaments argued that it was questionable whether the Commission’s proposal complied with the principle of subsidiarity and expressed doubts as to whether the proposed measures would be better regulated at EU level rather than at Member State level. The Swedish Riksdag was not convinced that a common formulation should be established in the Directive concerning sanctions and their levels. It further stated that certain elements of the proposal which were normally found in acts based on Article 83 TFEU (minimum rules on the constituent elements of criminal acts and penalties) would be better regulated at Member State level and that the Commission had failed to show that the regulation of common scales of sanctions is necessary to achieve strengthened customs cooperation. The Danish Folketing regarded the proposal as a more extensive than necessary harmonisation of the rules on infringements of EU customs legislation and the related sanctions. The Lithuanian Seimas argued that the aim of the proposal (i.e. to achieve effective implementation and correct and uniform enforcement of Union customs legislation) would not be fulfilled, because the proposed Directive would not determine whether Member States should apply administrative or criminal law sanctions in respect of those customs infringements. In its replies to the reasoned opinions, the Commission emphasised that harmonised customs legislation could not be effectively enforced due to the current wide divergence of rules on customs infringements and sanctions in Member States. In the Commission’s view this divergence can be overcome by creating a common list of customs infringements and approximating relevant sanctions. Such measures could not be taken by individual Member States and therefore action at EU level was more appropriate in this area. The Commission further stated that approximation of customs infringements and sanctions would make cooperation between customs authorities more efficient and it underlined the fact that establishing a common list of customs infringements and the approximation of customs sanctions would create customs sanctioning systems which are more comparable. The proposal is still being examined by the co-legislators. Proposal for a Directive amending Directives 2008/98/EC on waste, 94/62/EC on packaging and packaging waste, 1999/31/EC on the landfill of waste, 2000/53/EC on end-of-life vehicles, 2006/66/EC on batteries and accumulators and waste batteries and accumulators, and 2012/19/EU on waste electrical and electronic equipment The Commission published a proposal on 2 July 2014 as part of a package to create a more circular economy with the objective of making Europe more competitive and reducing demand for costly scarce resources. The proposal suggests recycling 70 % of municipal waste and 80 % of packaging waste by 2030, and also suggests a ban on burying recyclable waste in landfill as of 2025. The proposal sets ambitious targets and adds key provisions on the instruments needed to achieve and to monitor them. National Parliaments issued three reasoned opinions on the proposal, representing four votes. Ten other chambers of national Parliaments issued opinions on this proposal in the political dialogue framework.