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Brussels, 16.10.2009

COM(2009) 572 final

2009/0159 (CNB)

Recommendation for a

COUNCIL DECISION

on the position to be taken by the European Community regarding the renegotiation of the Monetary Agreement with the Republic of San Marino

EXPLANATORY MEMORANDUM

The Monetary Agreements were concluded between the European Community and Monaco, San Marino and Vatican in order to give legal continuity to the arrangements which existed between these countries on the one hand and France and Italy on the other before the introduction of the euro.

Ten years after the euro replaced the legacy currencies of Italy and France used by Monaco, San Marino and Vatican, the Council invited the Commission to review the functioning of the Monetary Agreements[1]. The results of the assessment were adopted in the 'Commission Communication on the functioning of the Monetary Agreements with Monaco, San Marino and Vatican'[2]. The Commission concluded that the Monetary Agreements in their present form need to be amended with a view to ensuring a more consistent approach in the relations between the Community and the countries having signed the Agreements. The present draft Recommendation for a Council Decision defines the position to be taken by the Community in the renegotiation of the Agreement with the Republic of San Marino.

The Commission proposes to renegotiate and amend the following provisions:

- Transposition of relevant EC legislation

The obligations of Monaco, San Marino and Vatican stemming from their respective Monetary Agreements with the Community are very unequal.

The Monetary Agreement with the Principality of Monaco comprises the biggest number of obligations. Contrary to the Agreement with Monaco, the Agreements with San Marino and Vatican do not entail any specific obligation to transpose EU legislation in the domain of protection of euro cash against counterfeiting and the ways of cooperation with the Community in this area. In order to create a level playing field and ensure appropriate protection of euro banknotes and coins against counterfeiting San Marino, together with Vatican, shall apply the relevant Community legislation.

The financial institutions carrying out their activities in the countries having signed the Monetary Agreements may have access to interbank settlement and payments and securities settlement system in the European Union. The Principality of Monaco is effectively using this possibility and for this purpose it has to apply the relevant Community financial and banking legislation. Given the size of the banking sector in San Marino and its close interaction with the banks active in the euro area (i.e. the financial institutions of San Marino are accessing the payment systems via Italy's banks), the Republic of San Marino should also align its banking and financial sector legislation with that applicable in the Community . Due to the volume of the Community legislation and limited administrative capacities of San Marino, the transitional period of 5 years should be granted to San Marino.

- Follow-up mechanisms

In contrast with the procedure envisaged for the Agreement with Monaco, no provision was made for a follow-up procedure in the Agreements signed with San Marino and Vatican. In the absence of regular formal follow-up, San Marino and Vatican do not regularly report on the implementation of the Agreements and they are not properly informed of legislative developments in the fields covered by the Agreements. The Commission therefore proposes creating two new joint committees - similar to the one existing with the Principality of Monaco - with the Republic of San Marino and the Vatican City State.

The Joint Committee with the Republic of San Marino would be composed of representatives of San Marino, Italy, the European Commission and the European Central Bank. The Committee would be in charge of facilitating the implementation of the Agreement and discussing possible amendments to the list of the Community legislation to be applied by San Marino. It would also have a decision making power with regard to a limited number of issues conferred to it by the Monetary Agreement (e.g. approving the change of a Mint producing San Marino euro coins).

- Ceiling for the issuance of euro coins

For historical reasons, the ceilings for maximum yearly issuance of Monaco, San Marino and Vatican were fixed in two different ways (Monaco is currently authorised to issue a maximum of 1/500th of the quantity of coins minted in France while San Marino and Vatican have fixed quotas) leading to very different results.

With a view to ensuring fair treatment to all countries with the Monetary Agreements, the Commission proposes to introduce a new uniform method for calculating the ceilings of euro coins issuance (i.e. to be also used in all future Agreements).

The new ceilings would be composed of a fixed and a variable part:

1. The fixed part should aim at covering the demand of coin collectors. According to common estimates, a total value of around €2 100 000 should be sufficient to cover the demand of the collectors' market.[3]

2. The variable part would be based, in the case of San Marino, on the average per capita issuance of Italy. The average number of coins per capita issued in Italy in (n-1) would be multiplied by the number of inhabitants of San Marino.

3. Rules for minting euro coins

The current Monetary Agreements reserve the right to produce the euro coins of San Marino and Vatican to the national Mint of Italy. This rule was introduced for historical reasons, at a time when euro cash was not yet in circulation and nearly all the euro-area countries were minting euro coins only for their own needs. The situation has now evolved, with a number of euro-area countries today having their coins minted in another euro-area country.

The Commission therefore proposes to open the possibility for San Marino and Vatican to order their euro coins in another EU Mint experienced in producing euro coins . The change of Mint would however have to be approved by the Joint Committee.

- Election of jurisdiction

The present Monetary Agreements have not given the Community any leverage in the event that the countries having signed the Monetary Agreements do not fulfil their obligations (e.g. do not transpose the relevant Community legislation in due time), apart from the ultimate – and therefore unlikely - possibility to withdraw unilaterally from the Agreement. The Commission therefore proposes to elect the European Court of Justice as the jurisdiction responsible for settling disputes which may arise from the application of the Monetary Agreements.

2009/0159 (CNB)

Recommendation for a

COUNCIL DECISION

on the position to be taken by the European Community regarding the renegotiation of the Monetary Agreement with the Republic of San Marino

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community, and in particular Article 111.3 thereof,

Having regard to the recommendation from the Commission[4],

Having regard to the opinion of the European Central Bank[5],

Whereas:

4. The Community has the competence for monetary and exchange rate matters as of the date of the introduction of the euro;

5. The Council is to determine the arrangements for the negotiation and conclusion of agreements concerning monetary or foreign exchange regime matter;

6. The Italian Republic, on behalf of the Community, concluded on 29 November 2000 a Monetary Agreement with the Republic of San Marino

7. The Council concluded on 10 February 2009 that the Commission should review the functioning of the existing agreements and consider possible increases in the ceilings for coin issuance;

8. The Commission concluded in the 'Communication on the functioning of the Monetary Agreements with Monaco, San Marino and Vatican'[6] that the Monetary Agreement with the Republic of san Marino in its present form needs to be amended with a view to ensuring a more consistent approach in the relations between the Community and the Countries having signed a monetary agreement;

9. The Monetary Agreement with San Marino should therefore be renegotiated as soon as possible so that the new regime enters into force on 1st January 2010, together with the new rules on the modalities of introduction of euro coins set by the Commission Recommendation of 19 December 2008 on common guidelines for the national side and the issuance of euro coins intended for circulation, endorsed by the Council in its conclusions of 10 February 2009.

HAS ADOPTED THIS DECISION:

Article 1

The Italian Republic shall notify the Republic of San Marino of the need to amend the existing Monetary Agreement between the Italian Republic, on behalf of the European Community, and the Republic of San Marino at the earliest possible date and offer renegotiation on the relevant provisions of the Agreement.

Article 2

The Community shall seek the following changes in the renegotiation of the Agreement with the Republic of San Marino:

10. The Agreement shall be concluded between the Community and the Republic of San Marino. The text of the agreement shall be a codified text of the current agreement with the amendments.

11. The Republic of San Marino shall undertake to adopt all appropriate measures, through direct transpositions or possibly equivalent actions :

12. for the application of all relevant Community banking and financial legislation, in particular legislation relating to the activity and supervision of the institutions concerned;

13. for the application of all relevant Community legislation on the prevention of money laundering, on the prevention of fraud and counterfeiting of cash and non-cash means of payment, on medals and tokens and on statistical reporting requirements.

The Republic of San Marino shall ensure that all relevant Community banking and financial legislation is implemented in its territory before 1st January 2015. The Agreement shall contain an annex detailing the deadlines for the adoption of the measures above mentioned.

14. The method for determining the ceiling of issuance of San Marino euro coins shall be revised. The new ceiling shall be calculated using a method which will combine a fixed part aimed at avoiding excessive numismatic speculation on San Marino coins by satisfying the demand of the collector coin market and a variable part, calculated as the average per capita coin issuance of Italy in the year n-1 multiplied by the number of inhabitants of San Marino.

15. A Joint Committee shall be established in order to monitor the progress in the implementation of the Agreement. It shall be composed of representatives of the Republic of San Marino, the Republic of Italy, the Commission and the ECB. It shall have the possibility to revise each year the fixed part with a view to taking into account inflation and the evolution of the collector market. It shall adopt decisions unanimously. The Joint Committee shall adopt its own rules of procedure.

16. The euro coins of the Republic of San Marino shall be minted by the Instituto Poligrafico e Zecca dello Stato. The Republic of San Marino shall however have the possibility to take another contractor among the EU Mints striking euro coins, with the agreement of the Joint Committee. The volume of coins issued by the Republic of San Marino shall be added to the volume of coins issued by the home country of the producing mint for the purpose of the ECB approval of the total volume of the issuance.

17. The Court of Justice of the European Communities shall be elected as the body in charge of settling disputes which may arise from the application of the Agreement.

If the Community or San Marino consider that the other Party has not fulfilled an obligation under the Monetary Agreement, it may bring the matter before the Court of Justice. The judgment of the Court shall be binding on the Parties, which will take the necessary measures to comply with the judgment within a period to be decided by the Court in its judgment. In case the Community or San Marino fail to take the necessary measures to comply with the judgment within the period, the other Party can terminate immediately the Agreement.

Article 3

The negotiations with the Republic of San Marino shall be conducted by the Italian Republic and the Commission on behalf of the Community. The European Central Bank shall be fully associated with the negotiations in its field of competence. The Italian Republic and the Commission shall submit the draft agreement to the Economic and Financial Committee for opinion.

Article 4

The Council shall conclude the agreement.

This Decision is addressed to the Italian Republic and the Commission.

Done at Brussels,

For the Council

The President

[1] Council Conclusions on 'Common guidelines for the national sides and the issuance of euro coins intended for circulation', 2922nd ECOFIN Council meeting of 10 February 2009.

[2] COM (2009)359 of 14 July 2009

[3] San Marino has for instance concentrated on striking selected euro denomination coins with some success: these coins are now used at face value for transactions.

[4] OJ C , , p. .

[5] OJ C , , p. .

[6] COM(2009)359