The 468th Plenary Session of the European Economic and Social Committee

With the guests Neelie Kroes, EC, and Zsolt Beesey, HU PRES
Retail market monitoring, European contract law and pensions on its agenda

The 468th EESC Plenary Session was held in Brussels on 19 and 20 January 2011. The guests were Ms Neelie Kroes, vice-president of the European Commission with responsibility for the Digital Agenda, and  Mr Zsolt Becsey, Hungarian Government Minister with responsibility for the National Economy, representing the Hungarian EU Council Presidency.

The Plenary Session discussed and adopted the following opinions relevant for the employers´and business community:

INT/531 Retail market monitoring report

Based on an in-depth analysis, the report and the accompanying Commission staff working document present a first assessment of the issues affecting – or likely to affect – from an internal market perspective the economic, social and environmental performance of companies active in the retail sector. The identification of the issues raised in this report is based on the various economic principles and public interest objectives that are at the heart of the internal market in order to contribute to smart, sustainable and inclusive growth in the Union.

The EESC acknowledges the importance of the retail sector in the Single Market as well as its contribution to the overall European economy. The EESC welcomes the holistic approach developed by the European Commission in the Retail Market Monitoring Report and concurs with the need to avoid focusing on individual sub-sectors. Furthermore, the EESC

- regrets that too little attention is paid to SMEs who play a fundamental role in terms of employment, value creation as well as in the life of rural areas and city centres;
- is concerned with measures in some countries aimed at controlling price levels or margins, which is in opposition with the principles of free competition and a functioning single market and recommends that any study on prices focuses on the transmission of prices and margins throughout the entire supply chain;
- calls that manifestly unfair practices occurring in the entire food supply chain be analysed and addressed appropriately;
- calls on the Commission to study how "unfair contractual relations" are dealt with at national level, including enforcement;
- calls on the Commission to support the promotion of self employment, entrepreneurship and skills development;
- calls for a timely adoption of proposals, and urges the European Commission to speed up its decision-making in an area that requires urgent, practical and tangible action;
- calls on the Commission to study the implementation of the services directive and take appropriate measures with the Member States concerned and also urges the Commission to take action on interchange fees which act as a hidden tax on consumers.

INT/527 Corporate governance in financial institutions and remuneration policies

In its Communication of 4 March 2009, COM(2009) 114 final, effectively a programme for reforming the regulatory and supervisory framework for financial markets based on the conclusions of the Larosière report, the European Commission announced that it would (i) examine corporate governance rules and practice within financial institutions, particularly banks, in the light of the financial crisis, and (ii) where appropriate, make recommendations, or even propose regulatory measures, in order to remedy any weaknesses in the corporate governance system in this key sector of the economy. Strengthening corporate governance is at the heart of the Commission's programme of financial market reform and crisis prevention. Sustainable growth cannot exist without awareness and healthy management of risks within a company.

In this opinion the EESC sets out its considered responses to the lengthy list of questions posed in the Commission's Green Paper. The questions deal with eight key aspects of the governance of financial institutions ranging from the performance of boards of directors, the performance of supervisory authorities, through the management of risk, conflicts of interest, the role of shareholders through to the vexed question of the remuneration of directors.

The EESC welcomes the intent behind the Commission's Green Paper but notes some definitional shortcomings in its content, particularly on the precise definition of corporate governance which the Committee believes should be more robust, and on the differences in board structures between the Anglo Saxon and Continental systems.

The Green paper is also relatively parsimonious in its treatment of the needs of consumers. Consumers of financial services have also been hit very hard by the effects of poor governance across the financial system.

INT/524 The European contract law – Green Paper

The internal market is built on a multitude of contracts governed by different national contract laws. Yet, differences between national contract laws may entail additional transaction costs and legal uncertainty for businesses and lead to a lack of consumer confidence in the internal market. Divergences in contract law rules may require businesses to adapt their contractual terms. Furthermore, national laws are rarely available in other European languages, which imply that market actors need to take advice from a lawyer who knows the laws of the legal system that they are proposing to choose.

An instrument of European Contract Law could help the EU to meet its economic goals and recover from the economic crisis. The Union could fill contract law gaps by adopting effective tools for the removal of market barriers relating to diverging contract laws.

The purpose of the Green Paper is to set out the options on how to strengthen the internal market by making progress in the area of European Contract Law, and launch a public consultation on them. Depending on the evaluation of the results of the consultation, the Commission could propose further action by 2012. Any legislative proposal will be accompanied by an appropriate impact assessment.

Of the various options proposed by the Commission, the EESC favours a hybrid option which takes account of the need to reduce costs and provide legally certain solutions by means of:

• a "toolbox" serving as a common frame of reference available to parties drawing up cross-border contracts, accompanied by,
• an optional regulatory regime establishing an "optional advanced new regime" (by means of an EU regulation) which could be used by the parties as a more favourable basis when entering into cross-border contracts. Such regulation shall not prevent any Member State from maintaining or introducing more stringent protective measures for consumers.

The Committee believes that the scope of the legal instruments should encompass cross-border commercial sale-of-goods contracts, along the lines of a European Lex Mercatoria, and exclude other more specific types. It also recommends making a clear distinction between the measures applicable to Business to Business contracts and those applicable to Business to Consumer contracts, securing maximum effective protection for the latter and for SMEs.

INT/542 Short selling of securities

The current fragmented approach to short selling and credit default swaps limits the effectiveness of supervision and the measures imposed and results in regulatory arbitrage. It may also create confusion in markets and costs and difficulties for market participants.

Short selling of securities is a practice where a natural or legal person sells a security he does not own with the intention of buying back an identical security at a later point in time. It is an established and common practice in most financial markets.

A credit default swap is a derivative which provides a form of insurance against the risk of credit default of a corporate or government bond. In return for an annual premium, the buyer of the credit default swap is protected against the risk of default of the reference entity (stated in the contract) by the seller.

The proposal covers all financial instruments but provides for a proportionate response to the risks that that short selling of different instruments may represent. For instruments such as shares and derivatives relating to shares, sovereign bonds and derivatives relating to sovereign bonds and credit default swaps relating to sovereign issuers where taking short positions is more common and there are clearly identifiable risks or concerns, transparency requirements and requirements relating to uncovered short selling are applied. In exceptional situations where there is a serious threat to financial stability or market confidence, the proposal provides for the possibility to impose further transparency measures on a temporary basis for other financial instruments.

The EESC welcomes the proposal for a regulatory framework that will give competent authorities powers to require additional transparency for the instruments covered by the regulation. On a day to day basis, this will benefit regulators, investors and markets. Should any future intervention be considered, we can expect the regulators to be better informed than heretofore.

SOC/386 Green Paper on Pension

An adequate and sustainable retirement income for EU citizens now and in the future is a priority for the European Union. Achieving these objectives in an ageing Europe is a major challenge. Most Member States have sought to prepare for this through pension reforms. The recent financial and economic crisis has aggravated and amplified the impact of the severe trend in demographic ageing on pensions and has revealed that more must be done to improve the efficiency and safety of pension schemes.

This Green Paper takes an integrated approach across economic, social and financial market policies and recognises the links and synergies between pensions and the overall Europe 2020 strategy for smart, sustainable and inclusive growth. The goal of generating adequate and sustainable retirement incomes through pension reforms and the goals of Europe 2020 are mutually reinforcing.

The Member States are free to define and fully responsible for defining their social security systems. However, the EESC believes that a coordinated EU-level approach to pensions can contribute to coherence and ensure that national pension systems are in line with the social and employment pillars of the Europe 2020 strategy.

Vladimíra Drbalová
International Organisations and EU
Member of the EESC