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I N S I G H T S B r u Ss e l s I N S I G H T S B r u Ss e l s I N S I G H T S B r u Ss e l s INSIGHTS BRUSSELS A regular update on key EU policy developments Issue 28 – September 2016 Brexit and beyond The legislative pipeline for financial services, energy and digital
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Insights Brussels - Brexit and Beyond

Apr 16, 2017

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    INSIGHTS BRUSSELSA regular update on key EU policy developmentsIssue 28 September 2016

    Brexit and beyondThe legislative pipeline for financial services, energy and digital

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    Brexit 3

    Where do we go from here? 3

    Financial Services 5

    A rich but shaky legislative pipeline 5

    Energy 10

    Towards a redesigned European energy framework 10

    Digital 15

    Towards a Digital Single Market by end of 2017 15

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  • Brexit

    Few material changes have taken place in Brussels or Lon-don since 52% of Brits voted to leave the European Union on 23 June. But behind the scenes, perceptions are shifting and a world of uncertainty lies ahead of us. It has become clear that the political leadership that raised the Brexit question did not plan for the eventuality of the vote to leave the EU. The complacency of David Camerons government is all the more surprising given that, in the informed judgement of the Eu-ropean Union Committee of the House of Lords, withdrawal from the EU is arguably the most complex, demanding and important administrative and diplomatic task that the Gov-ernment has undertaken since the Second World War. The select committee is now quite rightly pushing for Parliament to have the right to scrutinise the withdrawal negotiations and the future of the relationship between the UK and the EU.

    The most visible and remarkable post-Brexit changes regard the reshaping of the political power map. Firstly, the result was swiftly followed in Westminster by the replacement of UK Prime Minister David Cameron with Theresa May and a subsequent cabinet reshuffle which saw the PM appoint a brand new team, including new dedicated ministers for international trade and managing Brexit, arch-Eurosceptics David Davis MP and Dr Liam Fox MP. Prime Minister May is however expected to drive the Brexit process directly by chairing a special cabinet committee that brings together Davis, Fox and new Foreign Secretary Boris Johnson MP. Secondly, the UKs Commissioner for Financial Services Lord Hill resigned in the wake of the referendum result. Hill will be replaced, subject to European Parliament endorse-ment expected in September, by Sir Julian King, the former

    Where do we go from here?

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  • British Ambassador to France. Sir Julian will be in charge of the implementation of the European Agenda on Security. The decision to place King in this position has been well received as a move that plays to the UKs strengths and elevates the counter-terrorist agenda to a single Commissioners portfolio. Thirdly, the UK has withdrawn from its duty at the helm of the rotating presidency of the Council of the EU, which had been scheduled for the second half of 2017. This responsibility will now be taken on by Estonia. Finally, both the Council and the Commission, in a typical Brussels intra-institutional power struggle for leadership of the process, have each appointed a chief negotiator. Didier Seeuws, a respected Belgian diplo-mat and former Chief of Staff to previous Council President Hermann Van Rompuy, takes on the mantle for the Council, while the Commission has appointed Michel Barnier, a sea-soned pro-European French politician and former minister, who proved his capacity to negotiate with the British during his tenure as European Commissioner for the Internal Market and Financial Services.

    Even before the formal withdrawal process has begun, the less visible side of the Brexit story in Brussels is manifesting itself in the gradual marginalization of British influence on a number of pending policy decisions in the EU decision-mak-ing process.

    Before any action is taken, Mays government must first agree on how to face this withdrawal procedure; when to trigger the formal notification required by EU law, and indeed on which goals to strive for. Beyond the legal and institutional scrutiny of the decoupling process, different interpretations are being elaborated on the steps to be taken and on the substance of what the UK could and should put up for discussion as it tries to redefine the nature and scope of its relations with the EU. The creativity and skill of specialist EU lawyers will cer-tainly be able to find plausible legal answers on how best to frame any political decision that emerges, but legalism wont be a substitute for well-informed, thoughtful and transparent political choices, ideally preceded by thorough parliamentary scrutiny. The outcome of this process, whatever it may be, will have to be negotiated by the European Council with the material input of the Commission, be approved by a qualified majority of EU member states in the Council of Ministers and finally be backed by the European Parliament. Pre-existing scenarios for EU-third party bi-lateral cooperation range from the Swiss model, focusing on selected policy areas, to the Turkish custom-specific model or the more comprehensive free-trade Canadian model that has still to come into force. Ex-amples of a more multilateral cooperation framework include the case of EFTA countries within the European Economic Area, which extends the EU internal market and several other policy programmes to Norway, Iceland and Lichtenstein. The default option of market access to EU countries would be to fall back on World Trade Organisation rules. Some options, such as UK accession to the EFTA-EEA agreement may be

    less cumbersome to finalise, but all will come at a cost and none of them can replicate the more favourable pre-Brexit conditions.

    The EU leadership in Brussels may be willing to afford the UK some patience as the country gathers itself before launch-ing into the formal procedure of withdrawal, but Brussels is unlikely to accommodate a filibustering agenda that allows the UK to cherry-pick the most favourable mutual recognition rules and principles purely in its own interests, potentially jeopardising the EUs core principles.

    Commission President Junckers State of the Union speech on 14 September and the parliament debate that follows are likely to publicly uncover the first real insights into the lines that these two institutions intend to pursue going forward. Two days later, on 16 September, the meeting of the other 27 Heads of State and Government in Bratislava will complete the picture with preliminary national perspectives, and will hopefully see the beginnings of a sorely needed common di-rection on EU focus and approach.

    There is general consensus that the EU cannot continue busi-ness as usual by simply acknowledging the reduction of its members. That said, there is little appetite for upheaval after the clamour of recent months, and a busy agenda of national elections in 2017 precludes a Copernican revision of the EUs workings in the short term. Although the administration of Brexit will remain centre stage in Brussels for the foreseeable future, the UK remains in the EU with all rights and obliga-tions until the divorce is made official, at the current rate not earlier than 2019. Even so, the most resounding signal that the EU is continuing to fully apply its rule book, is given by the 13bn euro tax bill just adopted by the Commission de-claring unlawful the Irish sweetheart tax regime granted to Apple. The decision opens the way to further investigations on the alleged practices of Apple and other companies by Eu-ropean and US tax authorities, while reinforcing the principle that any national tax ruling allocating profits to an entity that exists only on paper is a form of illegal subsidy. Moreover, there are a number of new legislative proposals underway, many crucial regulatory decisions to be taken and several hundred executory acts to be finalised as part of the EUs day-to-day business. From energy to financial services and the digital world, in the following pages we provide an update on the most relevant legislative initiatives in the pipeline. We remain available to support organisations in understanding and navigating the Brussels arena and the interplay with rel-evant national policy landscapes.

    Leonardo SforzaManaging Director, Head of EU Affairs

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  • Financial Services

    The policy area for which Brexit presents the greatest chal-lenges is Financial Services, where Londons 106tn volume of business in trading and clearing euros only takes place due to the City being in the EU. This will be one of the most controversial elements of the negotiations between the EU and the UK. The City is unlikely to safeguard its current status without the UK making concessions in other areas of interest for the EU such as the maintenance of the freedom of movement and establishment for EU citizens.

    The Capital Markets Union (CMU) Action Plan, presented last year by the European Commission, outlines 33 new measures deemed necessary to establish the building blocks for an integrated capital market across the European Union by 2019. The first progress report on CMU released earlier this year does not take account of the new situation emerging following the UK referendum and will require re-assessment by the Commission.

    A rich but shaky legislative pipeline

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  • 1 Hill, J., 2016. Speech by Commissioner Jonathan Hill at the European Parliament on the Capital Markets Union. European Commission. Available at: http://europa.eu/rapid/press-release_speech-16-2529_en.htm

    2 See the remarks by Vice-President Dombrovskis at the Atlantic Council. Available at: http://europa.eu/rapid/press-release_speech-16-2574_en.htm

    Ongoing consultations

    Capital Markets Union: action on a potential

    EU personal pension framework

    27 July - 31 October

    The consultation invites interested parties to provide information on their experience using personal pen-sion schemes and seeks the views of professionals working in the pensions industry on the possibility of offering more simple, affordable and transparent personal pension products. The consultation will enable the Commission to get a better view on what can be done at EU level to support a wider choice of personal benefit tools at retirement across borders. Review of the EU macro-prudential framework

    1 August-24 October

    The framework under consultation consists of the European Systemic Risk Board (ESRB) Regulations, the Capital Requirements Directive IV (CRD IV), the Capital Requirements Regulation (CRR) and the Single Supervisory Mechanism (SSM). The consultation focuses on refining the scope of existing macro-prudential instruments (such as capital buffers) and making the rules more consistent with one another, as well as examining the role and organisational structure of the ESRB and its relationship with the European Central Bank.

    Main barriers to the cross-borders distribution

    of investment funds across the EU

    2 June-2 October

    The aim of the consultation is to define how best to strengthen the single market passport for cross-bor-der investment funds. The consultation seeks feed-back from the public, including fund managers, in-vestors and consumer groups, as well as from those who market and sell these funds, in order to gain a fuller picture of the remaining barriers to cross-bor-der distribution (such as marketing rules, administra-tive arrangements by host countries, regulatory fees and notification rules).

    Evaluation of the financial conglomerate

    directive

    9 June - 20 September

    The consultation will gather evidence on whether the Directive on the supplementary supervision of credit institutions, insurance undertakings and investment firms in a financial conglomerate, known as FICOD, first adopted in 2002, is proportionate and fit for pur-pose in its current form and delivering as expected.

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    There has been much speculation about how Brexit affects Financial Services legislation for the EU, and specifically the future of the Capital Markets Union, a pet project of the for-mer British Commissioner Jonathan Hill. In his final speech, however, Lord Hill was resolute, Its absolutely essential for the European Union to continue diversifying the funding sources for its economy, particularly with London outside the EU, urging the EU to stick with it, to keep hammering away at the barriers to free movement of capital for the years ahead.1

    Despite the new challenging situation surrounding Brex-it and the diverging views of other key Member States on several technical aspects of CMU priorities, Commission Vice-President Valdis Dombrovkis2, who has taken over re-sponsibility for the Financial Services portfolio seems com-mitted to pursuing the work initiated by Lord Hill in this area, but the pace and scope of future work is unlikely to remain as initially planned.

    The launch of four new public consultations presents a good opportunity for business and stakeholders to make known their views and perspectives on future EU initiatives in financial services, as outlined in the box to the right.

    Proposals to be Adopted > Revised directive on Institutions for Occupational Retirement Provision (IORP II)The proposed revision of the IORP II directive was presented by the European Commission in March 2014, mainly focus-ing on the governance and transparency of the activities of occupational pension institutions.

    According to the rapporteur in the European Parliament, Brian Hayes (EPP, Ireland), the final text will be voted on at the plenary session in October 2016. EU member states will have 24 months after the entry into force of the Directive to transpose it into national legislation.

    TimelineMarch 2014: Commission proposal

    30 June 2016: Council Agreement

    October 2016: Adoption in EP Plenary

    2018: Deadline for transposition in national law

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  • > Regulation on a European framework for Simple, Transparent and Standardised (STS) Securitisation and a revision of the capital calibrations for banksWith a view to opening up investment opportunities to a wider set of non-bank investors, the Commission in Septem-ber 2015 presented a proposal for the creation of a new regu-latory framework to relaunch markets for STS securitisations and for the revision of capital calibration for banks. The pro-posals were agreed by the Council in December 2015 and are currently awaiting the opinion of the European Parliament.

    Following a Public Hearing on the regulation in the European Parliament on 13 June, the rapporteur Paul Tang, (S&D, Neth-erlands) expressed his concern that the examination of the proposal by the Council was being rushed. In his draft report he follows the proposal of NGO Finance Watch that at least 20% of the risk should be kept on the balance sheet of the is-suer (the Commission proposal foresees only 5%). This pro-posed higher threshold clearly divides the political groups, with rapporteurs from GUE/NGL and Greens/EFA supporting the proposal, while ECR and ALDE clearly oppose it.

    Both pieces of legislation are provisionally scheduled to be debated in ECON Committee on 9 November and in plenary on 13 December for 1st reading/single reading.

    Once a political agreement is reached between the co-legis-lators, the Commission has announced its intention to also revise capital charges for investments in STS securitisations under Solvency II.

    > Regulation on the modernisation of the Prospectus DirectiveIn November 2015, the European Commission issued a pro-posal to modernise the Prospectus Directive, aiming to reduce the costs for smaller companies accessing the capital mar-kets. The European Parliaments Committee on Economic and Monetary Affairs (ECON) published its draft report in March 2016. Rapporteur Petr Jezek (ALDE, CZ) and the ECON com-mittee endorsed its draft negotiating position on 13 July, to be submitted to plenary. The Member States agreed on their general approach in the ECOFIN council meeting on 17 June.

    TimelineSeptember 2015: Commission proposal

    December 2015: Council agreement

    November 2016: Adoption in EP Committee

    December 2016: EP Plenary Meeting for 1st/single reading

    Under the new regulations proposed by the Commission, issuers would no longer be obliged to create prospectuses for issuances of less than 500.000, a threshold that Mem-ber states could raise to 10 million. Where the Commission want to limit this possibility purely to national issuances, the Councils proposal does not foresee this restriction, whereas the European Parliament wants to limit it to 5 million.

    In addition, the Commissions proposal and the positions of the European Parliament and the Council are still divergent on the exact definition of who can make use of a lighter ver-sion of prospectus, the EU Growth Prospectus and on the exact qualification of risk factors.

    After a formal approval of the negotiating mandate in EP ple-nary, scheduled for 13 September 2016, the interinstitutional negotiations can start. The Slovak Presidency aims to reach a political agreement between the institutions before the end of the 2016.

    > Regulation on the Reform of Money Market FundsThe commission adopted a proposal for a regulatory frame-work for Money Market Funds (MMFs) in September 2013. These funds serve as an important source of short-term fi-nancing for financial institutions, business and governments, but are also vulnerable to investor runs on redemptions and have given rise to the misperception that their returns are guaranteed. The proposed regulatory framework should allow them to better withstand redemption pressures in stressed market conditions, while ensuring that they remain a secure tool for European companies to manage their finances.

    After years of discussion, on 17 June 2016 the EU finance

    TimelineNovember 2015: Commission proposal

    17 June 2016 : negotiating mandate agreed at ECO FIN Council

    13 September 2016: negotiating mandate agreed in EP plenary

    Autumn 2016: start of inter-institutional negotiations

    End 2016: target date from Slovak Presidency for Political agreement

    2017: Entry into force of Regulation

    2018: Application of Regulation and dead line for transposition of elements in national law

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  • TimelineSeptember 2013: Legislative Proposal published

    April 2015: negotiating mandate agreed in EP plenary

    May 2015: Opening inter-institutional negotiations

    June 2016: Council position

    Autumn 2016 : expected start of the Trilogue negotiations

    End 2016: target Slovak Presidency for political agreement Council European Parliament

    ministers reached an agreement on the negotiating mandate for the Council, paving the way for trilogues with the Europe-an Parliament to start shortly. The European Parliament has been ready for talks since April 2015.

    The discussions between the three institutions centre around the issues of Constant Net Asset Value funds (CNAVs) and the creation of a new type of money market fund, the Low Volatility Net Asset Value Money Market Fund (LVNAV).

    For CNAVs, the Commission wants to introduce a minimum reserve of 3% of total assets in own funds. Both the Euro-pean Parliament and the Council disagree with this, favour-ing instead liquidity fees or redemption gates to be applied only in times of stress. The Council is pushing in favour of CNAVs which invest 99.5% of their assets in public securi-ties, whereas MEPs are pushing for 80% of CNAVs assets to be invested in public securities of EU countries.

    With regard to LVNAVs, the EP wants to introduce a sunset clause thereby forcing LVNAVs to be converted into Variable Net Asset Value Funds (VNAVs) after five years.

    After lengthy internal discussions whereby the UK, Ireland and Luxembourg argued for less restrictive liquidity require-ments on one side and France and Germany argued for more regulation, the Council reached a compromise on a weekly liquidity requirement of 30% for CNAVs and LVNAVs and of 15% for VNAVs, of which 15% may be made up of public se-curities, going further than the original Commission proposal which foresaw 20%.

    The Slovak presidency aims to reach a political agreement between the European Parliament and the Council before the end of the year.

    > Delegated Act on Key Information Documents (KID) on Investment ProductsOn 30 June 2016, the Commission adopted a delegated act with new rules specifying regulatory technical standards on the content of methodology of the KID which must be supplied, from 2017 onwards, to consumers wishing to in-vest in a retail financial products. This delegated legislation follows from the regulation adopted in November 2014 on Packaged Retail and Insurance-based Investment Products (PRIIPs). The Council and the European Parliament have two months to object. Ten member states (including Germa-ny and France) had asked for a longer implementation time for industry and also inside the European Parliament there is strong resistance to the current provisions of the delegat-ed act, with the EPP, ALDE, ECR and Greens/EFA groups threathening to table a motion of objection in the Septem-ber plenary, which, if adopted, would even threaten the entry into force by with the EPP, ALDE, ECR and Greens/EFA groups having tabled a motion of objection, which, if adopted in the September plenary, would even threaten the entry into force of the PRIIPs regulation by January 2017.

    > Enhanced Cooperation on a Financial Transaction Tax (FTT)Negotiations between the finance ministers of the 10 coun-tries participating in the enhanced cooperation, are making very slow progress. On 16 June 2016, the ministers decided to set up two task forces to look into two controversial issues still open in preparation of their next September meeting. The first task force, which will be presided by Italy will look into the possible impact of the tax on derivative products of sovereign financing, a main concern of Belgium. The sec-ond task force, led by Germany, will look at the implemen-tation costs versus the anticipated revenue from the future tax, which in particular Slovakia and Slovenia are sensitive to. This new delay means that the self-imposed deadline for political agreement by June 2016 was missed once again.

    > Proposal on a Common Consolidated Corporate Tax BaseOn the basis of the public consultation in January 2016 on the relaunch of the Common Consolidated Corporate Tax Base, the Commission is expected to outline its legislative proposal in the fourth quarter of 2016.

    > Regulation amending European venture capital funds (EuVECA) and European Social Entrepreneurship Funds (EuSEF) regulationsFollowing the public consultation that closed in January 2016, the European Commission on 14 July 2016 published a proposal for a Regulation amending the existing Regulations on EuVECA and EuSEF, dating from 2013. The purpose is to respond to problems encountered by the industry through the application of the existing Regulations. The new Regulation

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  • seeks to abolish the practice of member states levying charg-es when a fund is registered. Also the definition of SME in which a fund must invest 70% of the capital subscribed in order to obtain the European Passport is relaxed. The pro-posal will now be submitted to the European Parliament and the Council. The first meeting of the Member States on the topic of tax incentives for venture capital and business angels is scheduled for Autumn 2016, to allow for an exchange of views on best practices, on the basis of a study launched by the Commission in January.

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    Financial ServicesTimeline

    2016 2017

    Q3 Q4 Q1 Q2 Q3 Q4

    PROPOSAL ON REDUCTION OF FINANCIAL RISKS *

    DIRECTIVE ON IORP II

    REGULATION ON REFORM OF MONEY MARKET FUNDS

    REGULATION ON PROSPECTUS

    REGULATION ON STS SECURISATION FRAMEWORK

    PROPOSAL ON COMMON CONSOLIDATED TAX BASE*

    REGULATION amending EuVECA and EuSEF REGULATIONS

    PROPOSAL ONEU MACRO PRUDENTIAL FRAMEWORK *

    PROPOSAL ON EU PERSONAL PENSION FRAMEWORK *

    PROPOSAL ON CROSS BORDER DISTRIBUTION OF INVESTMENT FUNDS *

    EVALUATION FINANCIAL CONGLOMERATE DIRECTIVE

    * Nature of exact act not yet determined

    REGULATION ON EUROPEAN DEPOSIT INSURANCE SCHEME (EDIS)

    Commissionproposal

    Council agreement

    EP Committee

    Position

    EP Plenary Position

    EP Committee

    Position

    Adoption

    Adoption

    Trilogue negotations

    Council exploring possible use of

    Intergovernmental Agreement

    Council Position

    EP Plenary Position

    Implementation

    Implementation

    Council Position

    Council Position

    EP Position

    Adoption

    Adoption

    Trilogue negotations

    Trilogue negotations

    Implementation

    Implementation

    Results Public Consultation

    EP Committee

    Position

    EP Committee

    Position

    Potential Commission

    proposal

    Potential Commission

    proposal

    Potential Commission

    proposal

    Potential Commission

    proposal

    Commissionproposal

    Commissionproposal

    Public consultation

    Public consultation

    Public consultation

    Public consultation

    Council Position

    Council Position

    Results

    Results

    Results

    Results

    EP Plenary Position

    Trilogue negotations

    EP Plenary Position

    FT

    T FINANCIAL TRANSACTION TAX (enhanced cooperation)

    Setting up 2 Ministrial Working

    Groups

    Possible Agreement

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  • In the coming months, the European Commission will pres-ent several major legislative proposals for the energy sector, in order to give life to its five-pillar energy strategy present-ed in 2015: realize an integrated internal energy market, reduce Europes climate impact, improve energy efficiency, strengthen security of supply and support innovation. To fulfil these goals, the EU institutions will work on revising the Emission Trading System, as well as the existing energy efficiency and renewable energy directives. The EU legisla-tors will also focus on a new set of measures for Europes se-curity of supply, focusing on intergovernmental agreements for gas companies and on a heating and cooling strategy, as well as on liquefied natural gas. Key future policy develop-ments are outlined below.

    The uncertainty thrown up by Brexit is reflected in the fact that private investors will likely hold back on large energy projects until they have assurances about the environment they will be operating in. By way of example, the UK has

    Energy

    already seen a 20% decline in value of infrastructure con-tracts for July compared with the previous month. Leaving the single market could also open the UK to new import taxes, adding cost to equipment such as foundations for offshore wind farms or parts for nuclear plants. There are some silver linings for the UK energy sector though. Brex-it would eliminate the EUs trade duties on Chinese solar equipment imports, making cheap panels more accessible to UK users. The UK unshackling itself from Brussels might also mean companies and investors are granted more free-dom to access local public subsidies, or pursue energy pro-jects such as for shale gas which are currently submitted to EU environmental assessment. Meanwhile, in the legisla-tive landscape, the Commissions climate policy - the blue-print for sharing out the 40% by 2030 greenhouse gas target among the 28 member states is now likely to be postponed, along with inter-institutional negotiations on the emissions trading system.

    Towards a redesigned European energy

    framework

    10

  • An integrated internal energy market> Directive on an Electricity Market Design In the second half of 2016 the European Commission is expected to present a draft directive on Electricity Market design to improve the full integration of new market players, focusing particularly on renewables. The aim is to allow the electricity market to manage large-scale cross-border flows and greater volumes of intermittent electricity from renew-able sources.

    Ahead of the formal presentation by the Commission, the Energy Ministers within the Council of the EU and the Eu-ropean Parliament have already shared their preliminary views. The Ministers indicated in April that a stronger con-nection with neighbouring countries would allow Member States to better share capacities in renewable energies, while increasing the security of supply and ensuring a sit-uation of fair competition for all producers. The European Parliament presented an own-initiative report on this issue in June, the adoption of which is expected in September. MEPs indicate that the redesign must be guided by mar-ket-oriented and long-term measures to ensure that the supply of electricity is balanced against distortions and to better integrate renewables in the market.

    > Proposals for a new Renewable Energy Package Building on the agreed target of 27% renewable energy in the EU energy mix by 2030, the European Commission in-tends in 2016 to put forward a new renewable energy pack-age, comprising a new renewable energy directive for 2030 and a proposal on bioenergy sustainability. The package is expected to progressively harmonise national support schemes for renewables, with the objective of addressing market distortions and avoid overcompensation.

    Stakeholders and citizens were consulted in the first months of 2016 on an updated EU policy on sustainable bioener-gy for the period 2020-2030. Concerns among respondents were raised regarding the sustainability impacts and com-petition for resources caused by the increasing reliance on bioenergy production and use. According to the items put forward in this consultation, the Commissions upcoming

    proposal may address several sustainability risks, including lifecycle greenhouse gas emissions from bioenergy produc-tion and use, impacts on the carbon stock of forests and other ecosystems, impacts on biodiversity, soil, water and emissions to the air, as well as impacts on competition for the use of biomass between different sectors (energy, indus-trial uses, food). The full results of the consultation are ex-pected to be published soon.

    The results of the complementary consultation on a renewa-ble energy directive for the period after 2020 show that there is a need for a stable and predictable EU legal framework for renewable energy policies, as well as strong support for ad-ditional EU action on empowering energy consumers, by al-lowing them to produce and store their own renewable heat and electricity and participate in all relevant energy markets and projects in a non-discriminatory and simple way. Final-ly, there is a broad consensus on the need to decarbonise the heating and cooling sector, as well as to increase renew-able energy use in the transport sector.

    Furthermore, on 23 June, the Parliament maintained high ambitions on renewable energy goals by adopting a resolu-tion which plans to set the goal of 30% of renewable con-sumption in the energy mix as the minimum objective for 2030.

    Both consultations and this resolution will feed the decision- making process which will result in the presentation of the package by the end of 2016.

    Climate action > Directive on EU Emissions Trading System The European Parliament and the Council of the EU are cur-rently discussing a proposal presented in July 2015 by the Commission to revise the EU Emissions Trading system for the period after 2020. The proposal intends to increase the pace of emissions cuts after 2020 by reducing the overall number of emission allowances at an annual rate of 2.2% from 2021 onwards, instead of 1.74% currently. This shall result in an automatic increase of carbon costs, impacting energy intensive industries in particular.

    TimelineSeptember: adoption of the EP own-initiative report

    End 2016 : Directive proposal by the Commission

    Early 2017: Expected EP Committee position

    Mid 2017: Expected Council position

    End 2017: Expected formal adoption

    TimelineSeptember: Publication of the results of the renewable energy directive consultation.

    End 2016 : Renewable Energy Package proposal by the Commission

    Early 2017: Expected EP Committee position

    Mid 2017: Expected Council position

    End 2017: Expected adoption of package

    11

  • In the Council, the proposal was addressed at working party level under the Dutch Presidency (from January to July), and Environment Ministers held a policy debate on the proposal on 20 June 2016. They underlined the impor-tance of flexibility so that the EU can adapt its level of am-bition under the dynamic ambition mechanisms of the Paris Agreement. Discussions will continue under the Slovak Presidency which started on 1 July. Within the Parliament, the draft report of the environment committee (ENVI) was presented at the end of May. In line with the dynamic nature of the Paris Agreement, the draft report proposes a review clause for the linear reduction factor, which could lead to a revision following the first global stocktake in 2023. It calls on the Commission to consider the impact of overlapping EU climate and energy policies, and proposes to place al-lowances in the Market Stability Reserve (MSR) in case of the closure of power plants.

    The Environment (ENVI) and Industry, Research and Ener-gy (ITRE) committees, both in charge of this dossier, will discuss the amendments on the draft report from September for a vote expected in October (ITRE) and December 2016 (ENVI).

    Energy efficiency> Directive on Energy Efficiency In 2016 the Commission intends to reap the full potential of energy efficiency by putting forward a new energy efficien-cy directive. The proposal, to be presented at the end of the year, will align the regulatory framework to the indicative EU-level target of at least 27% energy efficiency by 2030. It will also include provisions for large companies to carry out regular energy audits. Without waiting for the propos-al to be presented, the European Commission has already announced that it will be reviewed a second time by 2020 with the objective of upping the EU target to 30% energy efficiency by 2030.

    The results of a public consultation on this issue held by the Commission at the beginning of 2016 show that stake-holders agree that the energy efficiency directive of 2012 established a comprehensive framework for the EU. The majority also believes that the Energy Efficiency Obligation Schemes set by the directive are an effective instrument

    to achieve energy savings. However, participants indicat-ed that the present framework remains complex, and that Member States require additional guidance.

    On 23 June, the Parliament adopted a resolution on energy efficiency. It stresses the need for the full implementation of the existing EU legislation for the EU to meet its energy efficiency target by 2020 (an increase of 20% by 2020), while calling for a binding target of at least 30% of renewables in the EU energy mix by 2030. This recommendation will feed into the legislative proposal that the Commission is expect-ed to present this autumn.

    > Directive on Energy Labelling In July 2015, the European Commission proposed a revi-sion of the energy labelling directive, including provisions for a single energy labelling scale from A to G and a digital database for new energy efficient products. For producers, the new measures imply that they will have to sell their new products with the new scale and register their products in a database accessible to Member State authorities to facilitate compliance checks.

    The legislative work is now ongoing under the co-decision procedure between the European Parliament and the Coun-cil of the European Union. In plenary session on 6 July, the European Parliament adopted its report with amendments to the draft Regulation setting a revised framework for the energy efficiency labelling system introduced in 1995. The Parliament backs the reintroduction, in the course of the next five years, of the system labelling energy efficiency from A to G to replace the current A+, A++, A+++ etc. sys-tem. These rescaled labels should be introduced within a timescale of between 21 months and 6 years, depending on product type, following entry into force of the new Regu-lation. Negotiations within the Council of the EU will take place in the coming months under the Slovak Presidency, with adoption expected in 2017.

    Timeline

    September: Consideration of amendments in the environment and industry committees of the Parliament.

    October : ITRE Committee position

    December: ENVI Committee position

    Early 2017: Trilogue negotiations

    End 2017: Expected adoption

    TimelineAutumn: Commission directive proposal

    Early 2017 : Expected EP committee position

    Mid 2017: Expected Council position

    End 2017: Vote in plenary session and expected adoption

    TimelineEnd 2016: Council position

    Early 2017: Trilogue negotiations

    2017: Expected formal adoption

    2018: Deadline for transposition

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  • Security of Supply On the 16 of February, the European Commission presented its Winter Package, also known as the Security of Gas Supply Package. It contains several measures aimed at im-proving the resilience of the EU to breaks in gas supply, as certain countries and regions of the European neighbour-hood remain instable, for example Ukraine. Two legislative proposals, as well as two strategies for Liquefied Natural Gas (LNG) and for heating and cooling, are part of this strat-egy.

    > Regulation on Security of Gas supply With its Security of Gas Supply Package presented last winter, the Commissions goal is to lessen Europes vulnera-bility and dependence on its neighbours by diversifying its sources of supply. To this end, it includes two legislative proposals: a revision of the Regulation on the security of gas supply, and a decision on Intergovernmental Agree-ments (IGAs) in energy.

    These proposals aim to increase solidarity between Mem-ber States in case of serious crises, by guaranteeing that they provide energy for homes and essential services, such as health care. They also seek to move from a national to a regional approach for the design of security of supply measures, while improving transparency of gas markets, especially regarding the conclusion of relevant contracts between gas companies. According to Energy Commis-sioner Miguel Arias Canete, the Commission and Member States will have to be notified of any trade contract of more than one years duration and involving a market share that is significant to security of supply. Indeed, the Commission is proposing to create a mechanism for obligatory pre-con-sultation by Member States before such agreements are signed. In June, the European energy ministers reached a compromise on this mechanism, agreeing that the ex-ante assessment by the Commission of IGAs will apply only to gas agreements and will take no more than between six and twelve weeks. This agreement on the general approach will allow the Council to start negotiations with the European

    Parliament with a view to the final adoption of the proposal in 2017. Within the Parliament, the industry and research committee is expected to present its draft report on the Reg-ulation concerning measures to safeguard the security of gas supply in the coming months.

    > Strategy for Liquefied Natural Gas and Gas Storage (LNG) A strategy on improving access to Liquefied Natural Gas (LNG) and the use of gas storage is also part of the Security of Gas Supply Package. The strategy seeks to present how the EU should exploit the LNG global market and reduce regional disparities in terms of access to this alternative source, notably by reducing the dependency of the Baltic states on Russia. Strategic infrastructure will be built in var-ious regions, such as South-Eastern Europe and the Baltic Sea area. On 13 July, the European energy ministers reached a consensus on the future key role of LNG, agreeing that the EU must continue with the construction of infrastructure and interconnections, particularly the north-south link and the development of several LNG terminals in Greece and Croatia, as well as the development of links between LNG capacity in Spain and the main energy corridors.

    > Strategy for heating and cooling Heating and cooling accounts for around half of the EUs energy use and is expected to remain the largest energy de-mand driver in the long term. While uncertainties remain as regards the role of heating and cooling in meeting the 2030 targets, the heating or cooling market is also fragmented and no single market has so far emerged either nationally or EU-wide. Instead, heat markets are local and are composed of many different technologies and economic players.

    In this context, the European Commission released in early 2016 a Strategy for heating and cooling (within its Winter Package for the security of supply) to drive the transforma-tion of the sector, maximise the use of potentials and de-ploy solutions for demand reduction. It gives guidance to allow driving actions by stakeholders and Member States on areas where better synergies between current EU instru-ments could be exploited or where EU and national regula-tory frameworks would need to be complemented.

    On the 12 July 2016, the European Parliament adopted a resolution in which it states that heating and cooling sys-tems must be modernised to make more use of renewable energy and new technologies. The Parliament calls on the Commission to do more to raise awareness among consum-ers of the often low performance of their installed heating systems and to increase the modernisation rate of existing heating and cooling systems. MEPs also encourage mem-ber states to put in place tax and financial mechanisms for the development and use of urban heating and cooling sys-tems. The Commission should also better integrate smart

    Timeline

    End 2016: Slovak presidency to encourage preliminary Trilogue negotiations.

    Early 2017: Expected EP position

    Mid 2017: Expected Council position

    End 2017: Expected adoption of both legislative proposals.

    13

  • Ongoing consultations

    Consultation regarding the 2009 Directive imposing an obligation on Member States to maintain minimum stocks of crude oil and/or petroleum products.

    27 July - 31 October

    The 2009 directive imposes an obligation on Member States to maintain stocks of crude oil and/or petro-leum products. With this consultation, the European Commission is collecting views and suggestions from stakeholders and citizens in the context of the current evaluation of the directive. The general ob-jectives of the evaluation are to assess how the Oil Stocks Directive has been implemented in the Mem-ber States and how it is functioning in practice, and to identify possible problems and areas for improve-ment or simplification.

    Consultation on the development of network codes and guidelines for 2017 and beyond.

    18 July 14 October

    The objective of this consultation is to consult stakeholders on the priorities for the development of network codes and guidelines for 2017 and beyond. The European Commission has to establish in accordance with its Electricity Regulation and its Gas Regulation an annual priority list identifying the areas to be included in the development of network codes.

    >

    >

    technologies in relevant energy union initiatives to ensure real interconnectivity of smart appliances, connected homes and smart buildings with smart grids, MEPs say. Although the strategy does not announce any new legislative propos-als, it presents some steps that the European Commission may consider in the process of revising existing energy leg-islation.

    Research and Innovation> Strategy on research, innovation and competitiveness The European Commission is planning to develop a com-prehensive research, innovation and competitiveness strat-egy for the Energy Union, as the fifth pillar of the Energy Union. It held a public consultation from March to May in order to gather stakeholders views on how to achieve the EUs energy and climate targets, as well as sector-specific research, development and innovation goals needed for the EU transformation. The findings, scheduled to be released by 30 September, will feed into the integrated Research, In-novation and Competitiveness strategy to be presented at the end of 2016. This strategy will provide recommenda-tions on how to reduce EUs emissions and use of energy, while maintaining the competitiveness of economic sectors including energy and transport but also industry, agricul-ture, bioeconomy and construction.

    The European Commission has also launched two public consultations regarding energy issues, allowing the stake-holders to make their voice heard.

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    DIRECTIVE FOR AN ELECTRICITY MARKET DESIGN

    DIRECTIVE FOR A REVISED EU EMISSION TRADING SYSTEM

    LEGISLATIVE PROPOSAL ON BIOENERGY SUSTAINABILITY

    DIRECTIVE ON ENERGY LABELLING

    DECISION ON IGAS

    DIRECTIVE ON RENEWABLE ENERGY

    DIRECTIVE FOR ENERGY EFFICIENCY

    REGULATION ON SECURITY OF GAS SUPPLY

    EP Committee preliminary position

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    14

  • In the second half of 2016, the European institutions will enter the final stretch; releasing, adopting or making signifi-cant progress in the negotiations over the remaining legisla-tive proposals completing the Digital Single Market. While some major proposals, such as the Regulation on geoblock-ing or the cross-border portability of online content, are about to enter the decisive phase of trilogue negotiations,

    Digital

    the European Commission will also present its long-await-ed proposal on copyright reform in September, adapting intellectual property rules to the ever-evolving online en-vironment. European stakeholders are expected to actively contribute to the debate given the many financial, legal and cultural interests at stake.

    Towards a Digital Single Market by

    end of 2017

    15

  • E-Commerce and Online Services> Regulation on phasing out Geo-blockingAccording to the European Commission, only 37% of web-sites allow consumers to make online purchases in another Member State than their own. The European Commission considers this geo-blocking practice to be unjustified because it fragments the internal market, preventing con-sumers from buying products that are only available out-side of their own Member State. In an effort to address these shortcomings, the European Commission presented in May this year a proposal for a Regulation to phase out unfair geo-blocking, introducing the same place, same ser-vice, same conditions principle: it will oblige traders to sell under the same conditions as in their home countries, with-out discrimination on access to prices, sales or payment conditions. The new rules will apply to all European and foreign companies operating in the European market.

    The European Parliament is currently elaborating its po-sition on the dossier within its Internal Market Committee under the leadership of the rapporteur Ra Maria Grfin von Thun und Hohenstein (EPP, Poland). MEPs have al-ready said in a resolution that geo-blocking was unjustified and that the practice should stop. While the Parliament is likely to support the Commission pro-consumer approach, the Council of Ministers is expected to adopt a stronger pro-business stance on the dossier, as the sensitive issue of phasing out geo-blocking impacts the business model of many online service providers. The Slovak Presidency of the Council stated that it will try to reach a common posi-tion on the proposal by the end of the year before starting the negotiations with the Parliament. The adoption of the Regulation is therefore not expected before Spring 2017.

    > Regulation on Cross-border Portability of Online Content Services Films, music or e-books purchased in one EU country are not systematically accessible when people travel to other Member States, for example on holidays or a business trip. Considering this as an obstacle to free movement of goods, the European Commission presented a proposal for

    a Regulation to allow cross-border portability of online con-tent services in December last year. In practice, the Regu-lation will enable consumers with subscriptions to online content to access it when they are temporarily in another EU country.

    The European Parliament and the Council of Ministers al-ready adopted their position on the proposal and will start inter-institutional negotiations in September with a view to reaching an agreement by the end of the year. The ne-gotiations are not expected to be difficult, as the European Parliament and the Council share the same approach on the sensitive notion of temporary presence in another Mem-ber State. Some Members of the European Parliament advo-cated for a strict definition to a certain number of days, but both the Parliament and the Council agreed to not define the notion of temporary period abroad and call for compul-sory and effective controls. They also both propose a strict definition of the country of residence and call on service providers to carry out checks on the basis of a range of cri-teria, such as the invoice address, bank account, payment of local taxes or samples of the IP address. They eventually explain that the new obligations applicable to service pro-viders should not lead to increased administration costs and that the principle of territoriality must continue to prevail.

    > Proposal on copyright enforcement On 21 September, the Commission is expected to present a legislative proposal on the enforcement of the legal frame-work of intellectual property rights (IPR). The proposal in-tends to review the functioning of the previous Directive on the enforcement of intellectual property rights (IPRED), aiming to adapt its provisions to the ever-evolving online environment and to propose corrective measures. Among the concrete actions envisaged, the European Commission has already asserted that it will focus on commercial-scale infringements to strengthen the protection of all IPR. In this respect, the European Commission intends to adopt a fol low the money approach aimed at depriving infring-ers of revenue flows. In particular, it will suggest that all websites hosting videos such as YouTube, Dailymotion and Facebook, seek to conclude, in good faith, agreements with the rights holders that reflect the economic use value of the

    Timeline

    November: expected Council position on the proposal

    End 2016: expected Parliament position on the proposal

    Early 2017: expected start of the Trilogue negotiations

    Spring 2017: expected agreement on the regulation

    Mid 2017: expected formal adoption of the regulation

    July 2018: expected entry into force of the regulation

    Timeline

    September: start of the Trilogue negotiations

    End 2016 : expected agreement on the decision

    Early 2017: expected formal adoption of the decision

    Mid 2017: expected start for the implementation of the regulation

    16

  • protected work in question. According to preliminary drafts, the Commission will also put forward measures to strength-en the online rights of newspaper publishers by providing them with the possibility of seeking financial compensation from search engines and Internet Platforms such as Google News.

    The European Commission is close to releasing its propos-al. A public consultation on this issue was opened during the first half of 2016. On 21 June 2016, the Commission held a further Intellectual Property Rights Enforcement Conference where key European and international decision makers gathered to review the progress made in disrupting IP infringing activities at the source and ensuring supply chain integrity. All these inputs will help the European Commission complement its proposal before presenting it to the European Parliament and the Council of the European Union in a normal co-decision procedure which is expected to span the duration of 2017.

    > Directive on Audiovisual Media Services The European Commission in May proposed an update to EU audiovisual rules to make them more flexible on adver-tising time, to protect children and to subject subscription video services to demands on the promotion of European works. In terms of advertising, the Commission is propos-ing that programs can be interrupted by adverts every 20 minutes, instead of the current 30 minutes. It also allows TV chains to extend the length of advertising spots by applying the current 20% threshold from 7am to 11pm. Product place-ment and promotion will also be authorized, in an effort to create a level playing field with the US. As regards the promotion of European content, the Commissions proposal imposes video on demand services (VOD) such as Netflix or Amazon Prime to broadcast at least 20% of European con-tent. The Commission also empowers the Member States where such VOD services are available, to require such companies to make a financial contribution to local cinema.

    While the European Parliament is just starting to construct its position on the dossier, EU culture ministers held a first debate on the proposal where they mostly welcomed the

    Commissions approach on audiovisual media services. The main difficulties for the coming months are expected to be around quotas for European works. While Finland, Den-mark and Sweden wondered whether it was worth putting in place quotas for European works on video on demand services, France, which applies a 60% quota inside its bor-ders, took the view that the Commission proposal did not go far enough. This issue will have to be resolved before reach-ing a common position on the proposal either by the end of this year, or early 2017. Interinstitutional negotiations will then start thereafter for a potential final adoption in mid-2017.

    Networks and Cybersecurity> Decision on the 700MHz BandBack in February 2016, the European Commission released a proposal for a decision to coordinate the so-called radio spectrum which allocates the use of the Ultra High Fre-quency (UHF) 700 MHz band. The band is currently used by terrestrial broadcasting and mobile networks, and will be fundamental in coming years for the development of many new technologies requiring radio spectrum allocation (such as the Internet of Things, the cloud systems, the digitali-sation of industrial sectors or e-government). However, the national management of the spectrum has resulted in very different conditions between individual Member States. In

    Timeline

    September: expected Commission proposal

    Mid 2017: expected Parliament and Council positions on the proposal

    Fall 2017: expected start of the Trilogue negotiations

    End 2017: expected agreement on the directive

    Timeline

    Early 2017 : expected Parliament and Council positions on the proposal

    Spring 2017: expected start of the Trilogue negotiations

    Mid 2017: expected agreement on the directive

    Fall 2017: expected formal adoption of the directive

    Fall 2018: deadline for the implementation of the directive

    Timeline

    September: start of the Trilogue negotiations

    End 2016 : expected agreement on the decision

    Early 2017: expected formal adoption of the decision

    2022: expected deadline for the allocation of 694-790 MHz to mobile services

    2030: expected deadline for the allocation of 470-694 MHz to TV broadcasters

    17

  • order to allocate the UHF band in a harmonised manner, the Commission proposed to reorganise its allocation by dividing it into two parts: the upper part of the spectrum (694-790 MHz) will be devoted from 2020 or 2022 exclusive-ly to mobile operators, including new technologies, while audiovisual services and TV broadcasters will be moved to the lower part (470-694 MHz) until 2030.

    In September, the draft decision will be subject to inter-in-stitutional negotiations between the European Parliament and the Council of Ministers. The European Parliament supports the proposal in a recent draft report prepared by Patrizia Toia (S&D, Italy), in which it suggests only minor changes to the timeline of implementation. The Council of Ministers also accepts the essence of the Commissions pro-posal but is vying for greater flexibility: the Member States will have a maximum of two years to allocate the upper part of the spectrum (694-790 MHz) to mobile services and they will have until 2018, rather than 2017, to adopt national roadmaps. The negotiations are expected to be completed by the end of year.

    > Regulation on cross-border Parcel Delivery In May, the European Commission presented a proposal for a Regulation to increase price transparency and regulato-ry oversight of cross-border parcel delivery services so that consumers and retailers can benefit from more affordable deliveries and convenient return options even to and from peripheral regions. The Commission justifies its proposal on the premise that almost 4 billion parcels are ordered on-line every year in the EU, but very few citizens order parcels from other Member States, as the costs are broadly consid-ered too expensive.

    The proposal intends to give national postal regulators the data they need to monitor cross-border markets and check the affordability and cost-orientation of prices. It will also encourage competition by requiring transparent and non-discriminatory third-party access to cross-border parcel delivery services and infrastructure. As part of the measures enclosed in its proposal, the Commission will also publish publicly listed prices of universal service pro-viders to increase peer competition and tariff transparency. The Commission plans to take stock of progress made in 2019 and assess if further measures are necessary.

    The European Parliament and the Council of the Europe-an Union are just starting to develop their internal position before entering into inter-institutional negotiations. Within the European Parliament, the file has been assigned to the Committee on Transport and Tourism (TRAN) and the ap-pointment of a rapporteur is pending. The 28 responsible EU Ministers will discuss the proposal at their next Telecom Council meeting on 2 December.

    > Directive on e-privacyFollowing the formal adoption of the Data Protection Reform in April, the Commission intends to present a proposal for directive to reform privacy rules online in November. Its aim will be to align with the recent data protection reform, and will focus more on enhancing security and confidentiality of electronic communications, in particular regarding cookies, traffic and location data.

    With a view to complement its legislative proposal before presenting it this autumn, the European Commission held a public consultation from April to July to seek stakeholders views on the possible changes to the existing legal frame-work to make sure it is up to date with the new challenges of the digital arena. Stakeholders and telecom groups have already expressed their concerns about the revision of the current directive, which could increase Regulation of their sector while not imposing similar rules on big internet com-panies.

    > Revision of the Telecoms PackageThe Commission announced it will present its proposals for a revision of the telecoms package in November this year. While provisions on roaming charges and net neutral-ity were set out in last years package, the European Com-mission plans to revise the telecom regulatory framework by tackling the issue of the wholesale market mechanism for roaming, introducing investment incentives in ultrafast broadband and ensuring openness of the telecom market to new market entrants.

    Timeline

    Early 2017: expected Parliament and Council positions on the proposal

    Spring 2017: expected start of the Trilogue negotiations

    Mid 2017: expected agreement on the regulation

    Fall 2017: expected formal adoption and entry into force of the regulation

    2019: progress report on the implementation of the regulation

    Timeline

    November: expected Commission proposal

    Mid 2017: expected Parliament and Council positions on the proposal

    Fall 2017: expected start of the Trilogue negotiations

    End 2017: expected agreement on the directive

    18

  • Timeline

    November: expected Commission proposal

    Mid 2017: expected Parliament and Council positions on the proposal

    Fall 2017: expected start of the Trilogue negotiations

    End 2017: expected agreement on the directive

    The European Commission completed two public consul-tations last year on broadband needs and the review of the current telecoms framework. It covered all three main pillars of the current framework, namely the network pillar, with the aim of ensuring a consistent regulatory framework that is supportive of infrastructure investments in both fixed and wireless networks; the service pillar, with the aim of ensur-ing a modernised regulatory regime for electronic commu-nication services and the governance pillar, with the aim of ensuring that markets are regulated in a consistent manner across the EU.

    The revision of the telecoms package may be the last leg-islative item out of an agenda of 16 identified actions in the Commission Digital Single Market strategy. Its adoption is not expected before the end of 2017.

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    REGULATION PHASING OUT GEO-BLOCKING

    DECISION ON THE 700MHZ BAND

    REGULATION ON CROSS-BORDER PORTABILITY OF ONLINE CONTENT

    PROPOSALS TO REVIEW THE TELECOM PACKAGE

    PROPOSAL TO REFORM THE COPYRIGHT REGIME

    REGULATION ON CROSS-BORDER PARCEL DELIVERY

    DIRECTIVE ON AUDIOVISUAL MEDIA SERVICES DIRECTIVE

    DIRECTIVE ON E-PRIVACY

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    Leonardo Sforza [email protected]

    Olivier Hinnekens [email protected]

    Romain Seignovert [email protected]

    Alastair Bealby [email protected]

    Franois Troussier [email protected]

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