The ABL EU Update

International Network

EU Legal Developments this month...

Commission rules against MasterCard interchange fees

The European Commission decided that MasterCard's multilateral interchange fees (MIF) for cross-border payment card transactions with MasterCard and Maestro branded debit and consumer credit cards in the European Economic Area (EEA) violate EC competition rules.

MasterCard's MIF is a charge on each payment at a merchant outlet. This decision was taken on the basis that MasterCard's MIF, a charge levied on each payment at a retail outlet when the payment is processed, inflated the cost of card acceptance by retailers without leading to proven efficiencies. The Commission ordered the card company to remove its MIF in cross-border transactions within six months or it may face the possibility of daily penalties amounting to 3.5% of its global turnover. . In its response to the decision MasterCard stated that it will appeal against the Commission’s decision. This ruling will also affect other players in this market since it will serve as a benchmark, both for the credit card operators as well as national competition authorities in Europe and other countries investigating national fees.

New EU rules on VAT on services

The Council of the European Union finally agreed on three pieces of legislation which aim to ensure that VAT on services accrues to the country where consumption occurs, and to prevent distortions of competition between member states operating different VAT rates. The new rules will require taxation for VAT on business-to-business supplies of services at the place where the customer is situated, and no longer at the place where the supplier is located. The general rule will continue to apply for business-to-consumer supplies of services where the place of taxation will continue to be that where the supplier is established. However, certain exceptions will apply to this rule to reflect the principle of taxation at the place of consumption. Such exceptions will apply to certain business-to-consumer supplies particularly to telecommunications, broadcasting and electronic services. To simplify VAT arrangements in this regard, the system will be based on the creation of "one-stop shops" so that businesses only have to fulfill their tax obligations in the country where they are established. The agreement was reached on the basis that the new rules regarding business-to-consumer supplies of telecommunications, broadcasting and electronic services and the one-stop shop scheme will be deferred to 2015 rather than 2010 as in the case with the other rules and the member state of establishment will, until 1 January 2019, retain a proportion of VAT receipts collected through the one-stop scheme.

Press release - Economic and Financial Affairs Council

More protection for EU consumers

On 12 December 2007 new EU rules on misleading advertising and aggressive sales methods entered into force. Fake “free” offers, prizes which don’t exist as well as adverts ordering children to buy something now form part of an extensive “black list” of schemes which are banned by the new Unfair Commercial Practices Directive. This Directive aims to boost consumer and business confidence in the Single Market so people can fully benefit from shopping cross border. According to the EU’s Consumer Commissioner Meglena Kuneva, such rules are amongst the toughest on misleading and pressure selling in the world. However, only 14 of the 27 member states have implemented the EU rules within their national law. Yet to do so and facing EU legal action are Britain, Finland, France, Germany, Hungary, Lithuania, Luxembourg, Malta, the Netherlands, Portugal, Romania and Spain. The Commission stated that consumers in the above mentioned countries shall still be able to call on EU law and enforcement bodies while judges should make up for any regulatory gaps by interpreting and applying the existing laws in the light of the new standards. Failure to do so would lead to the EU intervening directly.

Read more: Press release on the black list

The word of the European Court

The ECJ rules upon the right to industrial action on foreign service providers. In the space of a week the ECJ delivered two landmark judgements concerning the right to industrial action.

The European Court of Justice asserts that the right to take collective action – including the right to strike – is a fundamental right which forms an integral part of community law.

The issue arose when Viking, a Finnish passenger shipping company decided to register one of its ferries as an Estonian ship. The Court held that industrial action which restricts the freedom of establishment or the freedom to provide services might be objectively justified. Such a justification must be based on the protection of workers, must be suitable for ensuring the achievement of the legitimate objective pursued and must not go beyond what is necessary to attain that objective. However, according to the court, a trade union’s threat to strike so as to force an employer to conclude a collective agreement does not fall into the remit of the protection of workers’ jobs or working conditions hence constituting an impediment to the freedom of establishment.

Read more: Judgment of the Court of Justice in Case C-438/05 - The International Transport Workers' Federation et The Finnish Seamen's Union

In a separate but related case, the Laval Case, the European Court of Justice reiterated that the right to industrial action can sometimes be justified under EU law, as long as these are motivated by public-interest objectives, such as the protection of workers and the prevention of social dumping. This case arose following action taken by Swedish Unions against Laval (a Latvian Construction company) over the working conditions of Latvian workers refurbishing a school in Sweden. In this judgement, the Court balances this fundamental right against the employers’ competing EU rights by stating that the exercise of such a right may be subject to certain restrictions. Hence, such action cannot be undertaken where the trade unions’ demands exceed the extent of the protection provided to workers under EU directives and clearly defined national legal requirements. The Directive in question involved the Posted Workers Directive (96/71/EC) which sets a minimum level of protection for workers posted to separate states. According to the court, any action taken to obtain terms which go beyond the minimum protection guaranteed by the are liable to make it less attractive and more difficult for a company to carry out construction work in Sweden, hence constituting a restriction on the freedom to provide services.

Read more: Press release on judgment the Laval case

Alert your clients on EU Funding Opportunities

Environment and sustainable management of natural resources, including energy.

The European Commission has launched a restricted call for proposals in the new Environmental and sustainable management of natural resources including energy in order to promote environmental governance as well as EU environmental and energy policies.

The specific objectives include:

- To assist developing countries in achieving the Millennium Development Goals

- To promote the management of natural resources

- To promote coherence in EU policies that affect the global environment.

Closing date: 21st February 2008

Investing in People - Access to local culture, protection and promotion of cultural diversity

The European Commission has, under the programme investing in People launched a call for proposals for cultural activities.

The main objective of the cultural component of the thematic programme "Investing in People" is to support activities aimed at promoting and protecting cultural diversity as well as to promote a better access to culture by strengthening local capacity.

Closing date: 12th February 2008

About the ABL EU UNIT...

The ABL EU Update is prepared for the ABL EU Unit by Ganado Sammut Advocates. The ABL EU Unit brings together members of the Alliance of Business Lawyers (ABL) to provide consultancy on EU law and EU funding opportunities.