COMMUNICATION FROM THE COMMISSION TO THE COUNCIL - THE UNIVERSAL POSTAL UNION CONGRESS 2004

1. Introduction

1.1. Brief description of the Universal Postal Union (UPU) and its role in the provision of international postal services

1. The Universal Postal Union, (UPU), is one of the oldest international organisations in the world. It has 189 Member countries, including all the EU Member States. Since 1948 it has been a specialized agency of the United Nations.

2. The aim of the UPU is to secure the organization and improvement of the postal services and to promote the development of international collaboration in this sphere. The UPU takes part in postal technical assistance sought by its member countries and is founded upon the principle of a single postal territory amongst its member countries, where freedom of transit for postal items shall be guaranteed.

3. In application of its aim, the UPU has developed a detailed set of rules, namely the Universal Postal Convention, as well as special Agreements to regulate international mail exchanges and aiming to standardise and facilitate the relevant procedures and charges incurred in this transit.

4. Some of the main provisions included in the Universal Postal Convention are:

- The right for all users and customers to receive a defined universal postal service, as well as the detail of the services that all countries must or may provide for this purpose (e.g. letters, parcels, postcards, newspapers, insured and recorded services, etc),

- An obligation to ensure quality of service targets for postal services,

- The obligation to ensure the freedom of transit of postal items, defined as an obligation of treating items forwarded by another postal administration in a non discriminatory manner compared to the way their own items are treated,

- Rules concerning the ownership of the postal items,

- Rules on the issue of postal stamps, charges applied to postal services and exemptions to it,

- Rules on customs control,

- Rules on the redirection of undeliverable items,

- Rules regarding handling of inquiries and complaints procedures between postal administrations in respect of undelivered items,

- Rules regarding liability of the postal administrations and payment of indemnity,

- Rules regarding transit charges and terminal dues, (I.e. payment of the costs incurred in handling international postal items received from another postal administration to a third administration -transit- or final delivery of the item in its own country -terminal dues-),

- Rules intended to prevent the circumvention of charges with the object of profiting from most favourable rate conditions offered in a third country (so called anti-remail provisions).

5. Two Regulations (the Letter Post Regulations and the Parcel Post Regulations) provide the regulatory, technical and operational details for the application of the Postal Convention.

6. Other than the Universal Postal Convention, the UPU has developed the Postal Payment Service Agreement, as drawn by the 1999 Beijing UPU Congress. The Agreement regulates the international provision of financial services by Postal Administrations.

1.2. Organisation of the UPU

7. The main bodies of the UPU are the Congress, the Council of Administration, the Postal Operations Council and the International Bureau.

8. The Congress of the UPU is the supreme authority of the Union and consists of plenipotentiary representatives of its member countries. It meets, in principle, every five years. The Congress exercises all the powers coming within the scope of the UPU which have not been expressly entrusted to another body by the Acts of the Union. These include the power to amend the Constitution of the UPU, the Universal Postal Convention and the Special agreements. The Congress can also adopt resolutions, decisions recommendations and formal opinions, which together make the Decisions of Congress.

9. Congress also elects the Director General and the Deputy Director General of the UPU, as well as the members of the Council of Administration and of the Postal Operations Council and it sets the budget ceiling for the following five years.

10. The Council of Administration and of the Postal Operations Council develop the decisions adopted by Congress in their field of competence and can adopt decisions in the periods between Congresses.

11. The next UPU Congress will take place from September 15 to October 5, 2004 in Bucharest, Romania.

1.3. Status of the European Community and Member States in the UPU system

12. All Member States are members of the UPU and its main legal instrument, the Universal Postal Convention. They all are also members of the Postal Payment Agreement, with the exception of Estonia and Lithuania.

13. The European Community is not a party to the UPU or any of its Conventions. However, the European Commission, has a "de facto" observer status in most of the UPU's important bodies and meetings in the Congress, the Council of Administration and the Postal Operations Council and it maintains relations with the International Bureau and its Director General on a permanent basis, in application of Article 302 of the EC Treaty.

2. Basis for Community involvement

14. Several areas of Community activity are or may be concerned with the activities developed by the UPU. The EU, therefore, "needs to ensure that measures taken at European level are consistent with, and where necessary complemented by, measures adopted at the global level". It is furthermore "important to ensure that the Commission participates to the fullest extent possible in work in the UN system which concerns issues for which it is responsible within the Union" [1].

[1] Communication from the Commission to the Council and the European Parliament "The European Union and the United Nations: The choice of multilateralism" 10.9.2003, COM (2003) 526 final, page 22.

15. The Community competence affected by the UPU may vary between areas of exclusive competence (e.g. in case trade in services could be affected), to shared competence (e.g. in some of the areas covered by the Directive 97/67/EC). The legal basis for Community involvement may differ accordingly.

16. Article 19 of the EU Treaty establishes that Member States shall coordinate their action in international organisations and at international conferences, and uphold the common positions in such forums.

17. Article 133 of the EC treaty establishes Community competence in the field of trade in services, which includes postal services.

18. Article 307 of the EC Treaty establishes a duty on Member States to take all appropriate steps to eliminate the incompatibilities between Treaties adopted before their accession to the Community. They shall, where necessary, assist each other to this end and shall, where appropriate, adopt a common attitude.

19. Furthermore, as explained by the European Court of Justice, "When it appears that the subject-matter of an agreement or contract falls within the competence of the Community and in part within that of the Member States, it is important to ensure that there is a close association between the institutions of the Community and the Member States both in the process of negotiation and conclusion and in the fulfilment of the obligations entered into. This duty of co-operation, to which attention was drawn in the context of the EAEC Treaty, must also apply in the context of the EEC Treaty since it results form the requirement of unity in the international representation of the Community" (Opinion of the Court of 19 March 1993. Page I-1601. Point 36).

20. Even if a number of EC polices may be affected by UPU activities in areas such as customs policy, development co-operation, transport policy or consumer protection, the following policy areas have been identified as being of more direct relevance for UPU activities in view of the coming Congress.

2.1. Internal market

21. The main internal market provisions in this area can be found in Directive 97/67/EC of the European Parliament and of the Council of 15 December 1997 on common rules for the development of the internal market of Community postal services and the improvement of quality of service (the "Postal Directive").

22. On 10 June 2002, the European Parliament and the Council formally adopted the Directive 2002/39/EC, which amends the initial Postal Directive by defining further steps in the process of gradual and controlled market opening and further limiting the scope of reservable services.

23. The purpose of the Postal Directive is to complete the internal market for postal services and to ensure, through an appropriate regulatory framework, that efficient, reliable and good-quality postal services are available throughout the European Union to all its citizens at affordable prices.

24. As explained by its recital, number 10, in accordance with the principle of subsidiarity, the Directive has established a set of "general principles" that leave Member States the choice of the exact procedures "which should be free to choose the system best adapted to their own circumstances".

25. These principles and rules are:

- To ensure a minimum harmonised universal postal service in the EU. The universal service covers national and cross-border services, the latter including mail from or to another Member States or a third country. The minimum and maximum dimensions of the items included in these services are those adopted by the UPU.

- To introduce gradual and controlled market opening to competition within the postal sector, while giving the Member States means to ensure that the provision of universal service is guaranteed on a lasting basis.

- To improve the quality of postal services by setting at Community level common quality of service objectives for intra-Community cross-border mail and ensuring that objectives for national mail are set and publicised (in line with those intra-Community standards), and that performance results are published

- To establish the principle that tariffs should be related to costs and to ensure that the financing of the provision of universal service is carried out in a transparent manner compatible with Community law

- To encourage harmonisation of technical standards, taking users' interests into account and the harmonisation measures adopted within the UPU.

- To ensure that fair conditions of competition exist outside the reserved sector, in particular through the creation of national regulatory authorities which are legally separate and independent of the postal operators.

- To encourage and assist the postal sector to adapt rapidly and effectively to technological progress and changes in demand.

- To ensure that the needs of users, the interests of employees and the general importance of the postal sector for the economic, cultural and social development and cohesion of the Community (including the special difficulties encountered by remote regions) are taken into account when regulating the sector.

2.2. Competition policy

26. The maintenance of effective and not distorted competition is laid down in the Treaty as one of the cornerstones of the Community. Community rules on competition prohibit restrictive agreements, the abuse of a dominant position or the creation or strengthening of any such position by mergers, as well as distorting forms of support granted by Member States, to the extent that they affect trade between Member States. Fair conditions of competition ensure that companies and consumers benefit from an efficient provision of postal services.

27. Community law, whether directly enforceable before national courts or whether enforced by the Commission or National Competition Authorities prevents Member States from adopting national or international measures incompatible with EC competition rules. Commission notices or individual decisions on competition offer guidance to postal operators and to Member States as to their conduct in the market and rules or acts incompatible therewith. For instance, in parallel with the harmonisation measures introduced by the Postal Directive, the Commission issued in 1998 a Notice "on the application of the competition rules to the postal sector and on the assessment of certain State measures relating to postal services" [2].

[2] OJ C 39 of 6.2.98, p.2

28. This notice sets out the Commission's interpretation of the relevant Treaty provisions and the guiding principles according to which the Commission intends to apply the competition rules of the Treaty to the postal sector in individual cases, while maintaining the necessary safeguards for the provision of a universal service, and gives to enterprises and Member States clear guidelines so as to avoid infringements of the Treaty.

29. Moreover, rulings from the European Court of Justice also clarify the obligations incumbent upon Member States and/or postal operators. For instance, the European Court of Justice has had already the opportunity to clarify the extent of compatibility of some of the provisions of the UPU Convention (in particular, its anti-remail provisions) with the EC Treaty competition provisions (Judgement of the ECJ of 10.2.2000)

2.3. Trade policy. WTO activities and rules in the postal services area

30. The WTO applicable rules to this area comprise essentially of the General Agreement on Tariff and Trade (GATT) and the General Agreement on Trade in Services (GATS).

31. The GATS aims for the progressive liberalisation of trade in services. Article I of the GATS defines four modes of such trade:

(a) from the territory of one Member into the territory of any other Member;

(b) in the territory of one Member to the service consumer of any other Member;

(c) by a service supplier of one Member, through commercial presence in the territory of any other Member;

(d) by a service supplier of one Member, through [temporary] presence of natural persons of a Member in the territory of any other Member.

31.1. Article II of the GATS establishes the principle of the 'Most Favoured-Nation Treatment': 'each Member shall accord immediately and unconditionally to services and suppliers of any other Member treatment no less favourable than that it accords to like services and service suppliers of any other country.'

32. The GATT's basic principles are tariff disciplines, the prohibition of non-tariff restrictions (ArticleXI.I), the most favoured nation obligation, (Article I) and national treatment (Article III).

33. All Member States of the European Union are signatories of the WTO, the GATT and the GATS.

34. In the GATS negotiations undertaken in the framework of the Doha Round, the Commission has made a conditional initial offer in market access and national treatment on postal and courier services and is working with partners at the WTO towards increasing the number of commitments in the sector. Other areas of discussion include a new classification for postal and courier services and possible additional commitments (reference paper).

3. Implications for the coming UPU Congress in Bucharest

35. The last UPU Congress was held in Beijing in 1999. At that time the Postal Directive had just entered into force and its principles inspired some of the rules introduced in the decisions that were adopted in Congress (e.g. the definition of the universal service). To some extent, Member States coordinated their positions with the assistance of the European Commission during Congress.

36. At the Beijing Conference a Declaration (Declaration VIII) on signature of the Acts was made by the delegations of the member countries of the European Union, declaring that their countries "will apply the Acts adopted by this Congress in accordance with their obligations pursuant to the Treaty establishing the European Union and the General Agreement on Trade in Services (GATS) of the World Trade Organization".

37. Since the last Congress the Postal Directive has been transposed in all Member States and has been, or currently is being transposed by the new EU Members.

38. The Postal Directive introduced a set of general and minimum rules some of which fall within the scope of the existing provisions established in the UPU Constitution and the Universal Postal Convention. Examples include the definition of universal postal service, (which includes both domestic and international services), tariff and terminal dues principles, quality of services objectives, complaint procedures for users, technical standardisation, and independent regulation.

39. Further, the Directive has introduced a regulatory model that creates a balance between the long-term safeguarding of the universal postal service and the provision of postal services, including universal services, in a competitive market. This model is explained in the Directive's recitals and in some of its provisions.

40. In this respect, achieving a wider compatibility of the principles and practices that prevail in the rules and work of the UPU with the principles and practices that underpin the Community framework should be part of the Community's and Member State's negotiating positions. Moreover, the promotion of some of the principles of Community's model of regulation in the international regulatory model could eventually reinforce the effectiveness of international postal services throughout the world and help the Community's position in future GATS negotiations.

41. It is, therefore, necessary to ensure that the rules and the positions taken by Member States in the coming UPU Congress are compatible, complementary and coherent with EC Legislation in particular with that included in Directive 97/67/EC, as amended.

42. The UPU Convention is in principle not aimed at regulating the trade of postal services, the liberalization of the sector or competition policy. There are, however, a number of areas where an overlap may occur. It is, therefore, appropriate that UPU, on the one hand, and WTO/GATS and EC competition rules, on the other hand, remain compatible, as far as possible. Therefore, the principles of the WTO and GATS and EC competition policy should be also reflected during the negotiations in Congress in order to avoid contradictions between the two sets of rules.

4. Common EU position in view of the coming negotiations

43. An effective revision of the UPU Constitution and Universal Postal Convention will reinforce international co-operation in the field of international postal services and could be an occasion for the modernisation of that co-operation framework.

44. The 2004 UPU Congress is expected to aim at a major reform of the organisation. A list of main expected issues for discussion is attached in Annex.

45. It is in the interest of the Community and Member States that the negotiation process reflects their common views on the postal sector and, therefore, that the Member States and the Commission work in co-operation and co-ordination to that end, in particular in the areas covered by the Postal Directive and other EC Law provisions.

46. In this respect, the Commission believes that a number of principles should be actively maintained by Member States in the negotiations for the coming Congress of the Universal Postal Union in September 2004.

(1) The principle of independent regulation, which includes a separation between regulatory duties and postal operations in the state functions, both legal and operational. Furthermore, public ownership of an operator should not conflict with the State duty to regulate the provision of universal services and ensure fair competition in the market when this exists.

(2) The UPU framework should mention and incorporate in its operation the possibility for Members to open to competition the provision of postal services and universal postal services (including international services).

(3) The quality of postal services and its improvement, taking into account the needs of users and the economic provision of the services, should be fundamental to the regulation of international postal services.

(4) The UPU framework should reflect the market reality where postal services are increasingly being provided by organisations legally separate from the administration, sometimes on a commercial basis and through commercial organisations.

(5) The principle that domestic postal tariffs and terminal dues must reflect the cost of provision of the service and that the levels of remuneration are related to the quality of service achieved and are transparent and non-discriminatory. A reasonable and fixed transitory period, taking into account particular circumstances, may be introduced in the application of this principle.

(6) Users must be given an increasing role in the development of the regulatory framework to develop and ensure the quality provision of universal postal services.

(7) Standardisation work should accommodate the existence of multiple operators and the participation of these operators, users and customers in its development, whenever appropriate. Work in this area should continue to be coordinated with other standardisation bodies.

47. Furthermore, Member State's should ensure, in close cooperation with the Commission and in the most appropriate manner, that the obligations pursuant to the Treaty establishing the European Union and the General Agreement on Trade in Services (GATS) of the World Trade Organization are respected.

48. A number of preparatory measures have already been taken in order to co-ordinate the negotiating positions of Member States, at the coming Congress. These have originated in the European Committee for Postal Regulation (CERP) and the Association of European Public Postal Operators (Posteurop), with the participation of the European Commission. These initiatives should be welcomed as a first step on the coordination of a Community position.

5. Conclusion

6.

49. As some of the areas covered in the UPU framework fall within the scope of Community legislation, Member States must play an active and leading role in the revision process to obtain a conclusion in accordance with the Community acquis, in coordination with the Commission.

50. In particular, Member States should ensure, in close cooperation with the Commission that they do not undertake commitments which would be contrary to their obligations arising from trade agreements or from existing Community legislation on the free provision of postal services and competition.

51. Member States will coordinate among themselves and with the Commission so that the Community point of view is considered in the preliminary technical drafts, and its opinion is taken fully into account while agreeing the negotiating procedure of the Congress.

52. The Commission will pursue with Candidate and EEA countries a consistent and coherent approach in the negotiating process.

53. The Commission invites the Council to endorse these conclusions and support the Commission in their implementation in coordination with the Council and its Presidency. For this purpose a draft Council Resolution is attached.

ANNEX

MAIN ISSUES OF THE 23 rd Universal Postal Union Congress,

Bucharest 2004

Issue // Background

Regulatory duties // Clear separation between operators and regulators 'roles and powers should be ensured at the level of the UPU,

Wider representation of postal industry // To reflect the reality of today's postal market, the creation of a Consultative Committee should be approved at the Congress. A greater role and representation of this Committee should be the driving forces for defining its responsibilities

Terminal Dues Settlement system // Current system is to evolve through a "Convergence proposal" to have a cost based and quality linked terminal dues remuneration, based on a prior classification of countries (Industrialised or Developing Countries or not- IC/ DC). System should also be coherent with WTO rules, be transparent and non discriminatory. A transition period may be necessary.

(NB: part of payments from ICs to DCs are made in the form of specific quality of service improvement projects).

Relation to WTO/ GATS // Relation between certain aspects of UPU rules (terminal dues, extraterritorial offices of exchange, etc) and WTO rules.

Postal Security // The size and scope of the postal network makes it a prime target for criminal activities which could, if left unaddressed, negatively affect quality of postal service and users' trust

Postal Development Cooperation // Postal reform and quality developments are key issues to convert Posts from protected government organizations into competitive, customer-oriented businesses. The UPU supports this effort through Technical Cooperation policies and developing investor's awareness (World Bank...). The EU position in this area should take account of the Communication from the Commission to the Council and the European Parliament - "The Reform of State-Owned Enterprises in Developing Countries with focus on public utilities: the Need to Assess All the Options" [3]

[3] COM(2003) 326 final

Customs // Posts and customs authorities (WCO) cooperate at both national and international levels to implement an appropriate regulatory framework

Air Transport // Necessary cooperation with the airline industry (IATA) to ensure rapid and qualitative treatment of international mail

Financial Services // Promoting development of postal financial services

Parcels // Raising the image and profile of the international postal parcel

Express services (EMS) // The EMS Cooperative assists members to improve their EMS service

New technologies // The Telematics Cooperative with its operational body Postal Technology Centre (PTC) help Posts to keep on top of this technological change.

Environment // Promotion of environmental friendly processes for the postal industry

ANNEX II

DRAFT

COUNCIL RESOLUTION OF [....] 2004

on the Communication of the European Commission 'The Universal Postal Union Congress 2004'

THE COUNCIL OF THE EUROPEAN UNION

1. ACKNOWLEDGING the importance of Community and international postal services, as essential instruments of communication and trade, for economic and social cohesion.

2. RECALLING, the applicability of the EC Treaty to postal services and in particular of the rules and general principles contained in Directive 97/67/EC, as amended.

3. NOTING that the Universal Postal Union Congress will take place from September 15 to October 5, 2004 in Bucharest, Romania;

4. UNDERLINES that an effective revision of the Universal Postal Union Constitution and the Universal Postal Convention in the coming Congress will reinforce international co-operation in the field of international postal services and could be an occasion for the modernisation of that co-operation framework.

5. WELCOMES the Commission Communication on the Universal Postal Union Congress 2004;

EMPHASIZES the need to address questions raised in this document, so as to promote the long-term interests of the Union.

6. WELCOMES the on-going coordination process launched by the European Committee for Postal Regulation (CERP) and the Association of European Public Postal Operators (Posteurop) in order to take into consideration the different positions of Member States, Candidate and EEA countries and its public operators in view of the coming negotiations;

7. INVITES Member States to take part in the negotiations for its amendment, playing an active and leading role in the revision process to obtain a conclusion in accordance with the Community acquis, in close coordination with the Commission;

8. UNDERLINES that, in particular, Member States should ensure, in close coordination with the Commission, that they do not undertake commitments which would be contrary to their obligations arising from trade agreements or from existing Community legislation on the free provision of postal services and on competition.;

9. EMPHASISES that Member States should closely coordinate among themselves and the Commission so that the Community point of view is considered in the preliminary technical drafts, and its opinion is taken into account while agreeing the negotiating procedure of the Congress;

10. INVITES the Commission to pursue with Candidate and EEA countries a consistent and coherent approach in the negotiating process.