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Legal Practice Briefing

Number 17

7 April 1995

EUROPEAN UNION DEVELOPMENTS

In this issue

How does the EU work?

This issue covers the main developments in the EU over the last six months. To assist readers there is an outline of the most important EU agencies and how to deal with them. Following a description of the EU law-making process, there is a brief introduction to the functions and powers of the European Commission and the possibilities for taking action in the European Court of Justice.

What significant events have occurred in the EU in the last six months?

Specific events include EU enlargement, integration with Eastern Europe, employment rules, tax incentives, advertising rules, broadcasting, postal rates, travel agent commissions, prohibiting information exchange between competitors, and EU energy market liberalisation.

Why are EU competition (trade practices) rules so important?

An overview is given of the impact of competition rules on government and cross-border business. Tougher restrictions on grants of Government aid which distort competition are of considerable concern. Recent decisions show how important the competition rules have become.

What is the impact of EU development on trade and technology transfers?

The EU is imposing new controls on dual-use (military and civilian) products and counterfeit goods, and is negotiating special arrangements with Switzerland. Restrictions on biotechnology inventions will probably be relaxed. De facto compulsory licensing of intellectual property in the telecommunications sector has been removed.

Dealing With European Union Authorities

To put into context recent developments in the European Union (EU) it is necessary to know how EU institutions work and how EU law is made and administered.

The five main institutions of the EU are the European Commission, the Council, the European Court of Justice, the Court of Auditors and the European Parliament. Two other institutions referred to in the law-making process, but with limited powers, are the Economic and Social Committee and the Committee of the Regions. There are also about twenty agencies which have a separate legal status (for example, the European Monetary Institute, Europol and the Environment Agency).

In general, EU laws are made in the following way: The Commission sends a proposal to the Council, Parliament, Economic and Social Committee, and the Committee of the Regions. The last two give their opinions to the Council, then their job is largely over, unless the Council seeks further consultations. The Parliament however, can block certain proposals and can delay many, depending on the issue concerned. When the Parliament gives its opinion to the Council on a Commission proposal, the Council may accept, amend or reject the proposal. If Parliament and Council disagree, representatives meet in a conciliation committee to agree a common position. The Council then introduces the agreed proposal into EU law by way of a Decision, Regulation or Directive. It is the Council which ultimately has the power to make EU laws.

The Council is made up of EU government Ministers from each of the Member States. The Council does not always have the same members for example, if a matter concerns trade the Council will be made up of the Ministers responsible for trade from each Member State. In many cases, the Council delegates legislative power to the Commission. This is done, for example, in agriculture, competition matters and external trade. It is the Commission which makes many of the laws which implement Directives or Regulations made by the Council. The Commission does this generally by Decision or Regulation, and sometimes by way of a Directive.

The Commission

For Australian individuals and companies, probably the most important EU institution is the European Commission in Brussels. It is responsible for proposing new measures and ensuring that EU Treaties and laws are applied throughout the EU. The Commission is a valuable source of information, has wide regulatory power, and considerable powers of persuasion over the national administrations. (Many officials in the Commission were formerly officials in the EU national administrations.) Generally, Commission officials are helpful but are increasingly under pressure to perform with fewer resources.

Formal complaints can be made to the Commission through the division in the Commission which is responsible for the sector concerned. If the problem concerns a special agency of the EU such as the Trade Mark Office or the European Monetary Institute, inquiries should be made directly to that agency. The Commission has regular meetings in committees made up of representatives of each of the Member States. Often a complaint will be considered in the context of the responsible committee and a solution found. In some instances the committee or the Commission itself can make a decision on the complaint or issue.

Appeal to the European Court of Justice

An appeal on virtually all decisions can be made to the European Court of Justice in Luxembourg. A complainant can only go directly to the Court of Justice when either an EU rule, or a decision or law of one of the EU institutions is concerned, and the decision is addressed specifically to the complainant or to a definable and restricted class which includes the complainant.

If the problem is more general, action must first be taken in a national EU Member State Court which then refers the question to the Court of Justice. An alternative is to convince the Commission to take up the case and bring an action before the Court for infringement of EU Treaties. In certain circumstances the Court can now fine an EU country which fails, within a certain time limit, to comply with the Court's judgment.

Important Recent Events:

General

Compensation for Australia?

Sweden, Austria, and Finland became members of the EU on 1 January 1995, increasing membership to 15. Norway, in a referendum on 28 November 1994, decided against membership.

Australia, Japan, New Zealand, Indonesia, Canada, Thailand and other countries are expected to seek compensation for the higher customs duties that will now be applied to some of their exports to the three new Member States. (GATT Article XXIV.6 allows for such compensation to be agreed when a new customs union raises applicable tariffs.)

The USA already has an interim compensation agreement in force which follows enlargement of the EU. At the last enlargement, when Spain and Portugal joined, compensation for lower USA sorghum and maize exports was agreed in the form of reduced EU tariffs for a wide range of unrelated agricultural, chemical and industrial products.

Integration of Eastern European Countries

The Council has issued a report which provides guidelines for Central and Eastern European countries as they prepare for accession to the EU. This is likely to mean that many EU policies and laws will be incorporated more quickly into the laws of the Central and Eastern European countries.

The EU strategy includes the development of infrastructure, cooperation in transport, telecommunications and energy, the environment, common foreign and security policy, judicial and home affairs, culture, education and training. The integration process will be supported by economic assistance from the EU's PHARE program.

Access to Documents

A 'user's guide', part of the new policy on access to Commission documents, has been published. It states that individuals may request access to any document, in particular those relating to policy initiatives.

The guide includes a description of how to submit access requests, which documents are covered by the new policy and the procedures to follow when access has been refused. The Commission stresses that it is not under any obligation to make available documents which have not yet been adopted by the Commission.

European Lawyers to Practice Anywhere in EU

The Commission has proposed a new Directive which would permit a lawyer qualified in one Member State to practice in another Member State for five years. During that period, the lawyer would be able to give advice and appear in the courts of the host Member State, possibly along with a locally admitted lawyer. Registration with the relevant authority of the host state and observance of local ethical rules would be required.

Automatic access to the legal profession in the host Member State would be possible upon proof of three years' continuous practice in the law of that Member State and European Union law. No aptitude test would be required.

Employment

Part-Time Workers

The Commission has announced that it will put forward a proposal on part-time and fixed-term employment relations. This announcement follows the UK decision to veto the existing EU draft Directive on part-time employment which had been watered down considerably following objections.

In the meantime the European Court of Justice has ruled that part-time workers are not entitled to an increased rate of pay for overtime work if such work is performed during the normal working day fixed by law for full-time workers. The Court found that part-time workers were entitled to an increased rate when working outside normal hours and that part-time workers must receive the same overall pay for the same number of hours as their full-time colleagues. The ruling affirms the view that increased rates would dissuade employers from recruiting part-time workers.

A parallel decision by the UK House of Lords requires the UK Government to change its legislation so that part-time workers are treated in the same way as full-time workers.

Protection of Young People at Work

The EU Council has introduced new rules designed to protect young people at work. A new Directive requires Member States to take the necessary measures to prohibit work by children and to ensure that work by adolescents is strictly regulated and protected.

New Agency for Safety and Health At Work

This new EU Agency has just started operations in Bilbao in the north-west of Spain. The Agency is required to collect, exchange and publicise widely all the available technical, scientific and economic information on health and safety at work. Particular attention will be paid by the Agency to the prevention of accidents in small and medium-sized enterprises (SMEs). The Agency will also manage an information network in cooperation with all the EU countries and will keep European institutions, national authorities and other bodies fully informed on issues concerning health and safety at work. The agency seems likely to become a valuable source of information and informal advice.

Money and Finance

Wide Currency Band Normalised

EU Finance Ministers have decided that the wide (15%) currency fluctuation band in the European Monetary System (EMS), introduced after the currency crisis of August 1993, will remain in operation and will become the 'normal' band.

The EU Treaty requires currencies seeking to become part of a single European currency to have been within the 'normal' EMS band for at least two years. The European Ministers seem to have decided that the wide band will be the point of reference for the purposes of the Treaty. The decision means that most EU currencies should be able to meet the monetary stability criterion in the event of monetary union proceeding in 1997.

Irish Tax Incentives

Ireland has been given approval by the EU to extend for six years its favourable tax regime for foreign financial services businesses. Companies set up in the international financial services centre in Dublin before 2000 will be liable to company tax of ten per cent until 2005. This compares with the UK rate of 33 per cent.

Trade In Goods and Services

Europe-Wide Rules of Origin

The Commission has approved a Communication to the Council on the future harmonisation of the rules of origin of the EU, European Free Trade Agreement (EFTA) and Central and Eastern European Countries. In many cases this will enable businesses to reduce their customs duty payments and will clarify the rules on products produced from components made in different European countries.

The Commission proposes a three-stage strategy to unify rules of origin and to extend possibilities of cumulation of origin across the three regions. At the end of the process the three regions will be treated as one for the purposes of the rules of origin. The document also contains an analysis of the impact this will have on three sensitive sectors: textiles, cars and consumer electronics.

The European Court of Justice has held that EU institutions have exclusive competence to conclude multilateral agreements on trade in products, and mixed competence with the Member States to conclude the Uruguay Round GATS agreement (on services) and the TRIPS agreement (on intellectual property).

The World Trade Organisation

The European Court of Justice held that cross-border delivery of services (that is, not entailing establishment or movement of persons) had similar characteristics to trade in goods. Such trade should therefore be deemed a common commercial policy issue, falling within the exclusive competence of the EU institutions.

However, competence for the conclusion of international agreements regarding other modes of delivery of services is shared between the Member States and the Union. The underlying reasoning of the Court was that other modes of service delivery involved (1) rights of establishment, and (2) policy issues such as personal taxation or immigration, both of which are not entirely within the scope of the European Union Treaties.

Agreements with Switzerland

Following the Swiss 'no'-vote against European Economic Area (EEA) membership in December 1992, the EU and Switzerland have decided to continue negotiations on a bilateral basis. Mandates have now been adopted by the Council of the EU enabling the Commission to conclude sectoral agreements on: free movement of people, public procurement, agricultural products, RD and mutual recognition in conformity of products. Negotiations in the more controversial sectors of air and road transport are expected to follow soon.

Protection Against Counterfeit Goods

The Council has adopted a Regulation strengthening EU protection against counterfeit and pirated goods. The system will now cover not only trade marks but also copyright and neighbouring rights such as the rights of performers. Customs authorities will be permitted to delay customs clearance of suspicious goods.

Where goods are found to be counterfeit or pirated, they may, upon application by the holder of the right in question, destroy or dispose of those goods, and will take measures to ensure that the wrongdoer receives no economic benefit from the goods. The Regulation will come into effect on 1 July 1995.

Exports of Dual-Use Goods

The Council has adopted a harmonised licensing regime for the control of exports of 'dual-use' (civilian and military) goods. A Joint Action, adopted under the common foreign and security policy, lists the products subject to the licensing regime, which is set out in a separate Regulation. Exporters must also keep detailed records. Member States retain responsibility for exports of dual-use goods not listed in the Joint Action, but are committed to cooperating whenever necessary. For a transitional period, authorisation must also be sought for the movement of certain dual-use goods within the EU.

Energy

Energy Liberalisation

The Council has reached agreement on several aspects of proposals for the liberalisation of the EU electricity supply industry. The key issues outstanding relate to how liberalisation should take place. The Commission and Member States will now be studying different approaches of 'third party access' by utilities to grids in other Member States, and the new concept of a 'single purchaser' system.

Charter Open for Signature

Following lengthy negotiations which included Australia, the European Energy Charter was finalised at the end of 1994. Focusing on Central and Eastern Europe, the aim is to make available technology, know-how and capital to explore, develop and exploit oil and gas resources while minimising the environmental impact in over 50 European countries. Objectives of the Charter include improvements in the supply, production, safety, transport, distribution and uses of energy.

High Technology

New Intellectual Property Policy

The European standardisation body in the field of telecommunications, ETSI, appears to have solved a difficult issue in intellectual property rights. In 1994 some ETSI members rejected ETSI's policy of limiting the freedom of members to refuse the licensing of their intellectual property. Companies with a large portfolio of intellectual property rights filed a complaint with the Commission arguing that this policy leads to de facto mandatory licensing and would infringe EU competition rules. The new policy will place the onus on ETSI to approach a company and request permission to use its proprietary technology. The complaint has now been withdrawn.

Biotechnological Inventions

The European Parliament and the EU Council have reached agreement on a proposed Directive on biotechnological inventions. The proposal seeks to reconcile ethical concerns with the need of the biotech industry to protect its inventions. The proposal now provides that elements of the human body may not be patented unless they form part of an industrial invention and are modified in such a way that they are no longer directly linked to a specific individual. Genetically produced animals may not be patented if their suffering is considered disproportionate to the potential benefit.

The EU Council, through changes in the current Directive on genetically modified organisms, has also simplified procedures for the deliberate release into the environment for genetically modified plants. Measures which the EU Council has introduced include:

  • reduction of administrative requirements without reducing safety
  • avoidance of duplication and multiple testing
  • greater encouragement of development of small and medium-sized biotechnology businesses.

The objective is to reinforce the EU's competitiveness on the world market for biotechnology products, as well as increase public understanding of modern biotechnology.

In a related development, the EU Council has now established a sole and exclusive EU industrial property right for plant varieties. The new rights will be administered by the Community Plant Variety Office.

Commercial Transactions

Payment Delays

The Commission has adopted a non-binding Recommendation, aimed especially at helping SMEs, on measures to reduce payment delays in business transactions. The Commission recommends that contracts should deal specifically with delays in payments, that in public procurement contracts the maximum payment delay should be 60 days, that procedures for enforcement should be more effective and that any Value Added Tax (VAT) should only be due when payment is received.

The Commission will review the situation within three years and may then propose making these recommendations binding.

Government Procurement: Utilities Contracts

The Commission has decided to adopt a more robust approach with Member States which fail to ensure equal opportunities for foreign companies bidding for public sector contracts. The Commission is threatening to seek an injunction to prevent work starting on a DM 400m German power station contract following complaints by a German subsidiary of a US company that it was unfairly excluded from the final round of price negotiations.

The Commission wants the recently privatised East German electricity company to reopen bidding for the contract. In addition to the threat of legal proceedings, the Commission is warning EU governments that, if proper procedures are ignored, EU loans and grants from the Structural Funds may not be available for public works..

Environment

Eco-Labels

In 1993 the EU ECO-labelling scheme was introduced. However difficulties have arisen since then. The scheme is operating extremely slowly, mainly because the Commission does not have the structure and expertise to contribute to, or to supervise, the scientific work necessary to establish the criteria required.

This is defeating one of the purposes of the scheme, to prevent proliferation of national schemes (such as the German 'green dot' scheme). EU Member State bodies are being consulted on ways to speed up the establishment of ECO-label criteria for dozens of product groups. Because of delays, it is expected that future criteria in this area will be developed by the European Environment Agency.

Nevertheless, in November 1994, the Commission adopted the final criteria for the European Union's ECO-label for kitchen and toilet paper. A system of points is linked to the use of recycled or renewable resources and lack of polluting emissions. In respect of virgin fibre, the criteria specify that the wood must come from sustainable managed forests..

Marketing and Broadcasting

Broadcasting Rules

The Commission has presented an amended version of the 1989 'Television without Frontiers' Directive. The new version would impose stricter rules on viewing time dedicated to European audio-visual works and would limit the definition of the term 'audio-visual work' to films, series and documentaries. It would also recommend that these European-produced works must form a majority of all TV broadcasts. The proposal would also introduce a certain level of deregulation of the rules on advertising.

German Pharmaceutical Advertising Ban

The European Court of Justice has upheld Germany's ban on advertising of pharmaceuticals from other Member States. Although it restricted the free movement of goods, it was justified on the grounds of public health.

German law requires prior national approval of all pharmaceuticals, including those from other Member States. Certain products, authorised in other Member States can be marketed without authorisation when ordered in limited quantities for prescriptions, however, such imports may not be advertised. The Court found that, since there is no EU harmonising legislation, Member States are free to decide the degree of health protection they wish to maintain. The advertising ban was intended to uphold the exceptional character of the exemption from the normal rules (the normal rules allow only German authorised pharmaceuticals to be marketed and advertised in Germany.) The Court accepted that without the advertising ban there could be a systematic evasion of the German national authorisation regime.

Competition

Competition Rules

The competition rules set out in EU Treaties are powerful tools used to ensure full and free competition in the EU. An infringement of the EU competition rules can lead to an agreement being void and unenforceable, fines of up to 10% of the worldwide turnover of an enterprise, damages payments to competitors or third parties, and/or compulsory repayment of subsidies or aid granted by an EU Member State authority.

Competition law in the EU provides that an agreement or concerted practice is illegal if it has as its object or effect the prevention, restriction, or distortion of competition in trade between the Member States. The agreement or practice is void if found to be illegal, and the participants are subject to fines imposed by the Commission. A third party can also claim damages for illegal conduct in the national courts of the EU. If one or more enterprises abuses its dominant position in the market, fines can also be imposed and damages claimed by injured parties.

Exemptions from Competition Rules

When an anti-competitive agreement or business practice has economic, technical and/or consumer benefits which outweigh the competitive detriment, the Commission can exempt such an agreement or practice from the competition rules. Because of the administrative impossibility of considering each of many thousands of such agreements and practices, the Commission has introduced a number of block exemptions from the competition rules.

If an agreement falls within the detailed provisions of any particular block exemption, the agreement is automatically exempt from the competition rules and thus is enforceable (that is, not void). Block exemptions from the competition rules exist in respect of:

  • exclusive purchasing, supply, and distribution agreements including special provisions for the beer, motor vehicle and service-station sectors
  • patent and know-how (technology) licences
  • specialisation and R D agreements
  • franchise agreements
  • certain agreements in the maritime and air transport sectors (for example, reservation systems and ground-handling services).

There are also Commission competition guidelines on commercial agents, on cooperation and subcontracting agreements, as well as on agreements of minor importance.

In general, if an agreement might infringe the competition rules, an attempt should be made to draft the agreement so that it falls within one of the block exemptions and hence is automatically exempted from the rules. If this is not possible an individual exemption must be sought from the Commission. This involves filing with the Commission detailed information on the market and the effect of the agreement.

While awaiting a response from the Commission, conduct executed pursuant to the terms of the filed agreement is immune from fines. If an exemption is granted, it is normally granted from the date of original filing with the Commission.

Large Mergers and Takeovers

As well as rules prohibiting anti-competitive conduct there is a Regulation which requires prior notification of all of the largest mergers, acquisitions and certain joint ventures, formed between companies active in the EU.

The Commission has the power to block completion of these large transactions but has done so only on two occasions. A number of notifications have however, been withdrawn or the terms of the transaction have been amended so as to avoid objections of the Commission. Only a few very large Australian companies have been required to file such notifications (eg TNT, Brambles, TELSTRA). It should be noted that even if a merger or takeover involves companies which are all based outside the EU, notification may still be necessary. An example is Trans-Natal Coal Corporation's takeover of Randcoal, both of which are South African companies and mainly mine coal in South Africa.

Government Assistance and Competition

If an EU Member State authority gives subsidies or other assistance or aid to an enterprise, the Commission can force the repayment of the aid or withdrawal of the assistance if the aid prevents or distorts competition in trade between the Member States.

All state aid of the Member States is kept under review by the Commission which may approve the aid following an investigation. Certain types of aid is exempt from notification while other aid is automatically approved if it falls within certain detailed criteria. Special rules apply to state guarantees, and the textile, motor vehicle, shipbuilding, transport, fisheries, coal and steel sectors. The restrictions on state aid are relaxed in less-developed regions, for environmental reasons and for research and development activities, but only if strict conditions are satisfied.

Enterprises which are disadvantaged by state aid granted by EU Member State authorities can complain to the Commission which has the power to intervene and has done so on many occasions.

Possible New Anti-Trust Agreement

The EU Council has given the Commission a mandate to begin negotiations with Canada for an agreement on cooperation in anti-trust matters. The agreement would set up mechanisms for consultation between the respective competition authorities and would undoubtedly build on experience from a similar agreement with the United States. The US agreement is currently in the form of a proposal since the formal agreement concluded in 1991 had been annulled by the European Court on procedural grounds. However, a new US-EU Agreement is expected to be finalised soon.

Information Exchange Between Competitors

The European Court of First Instance rejected an appeal by tractor manufacturers against a 1992 Commission Decision prohibiting an information exchange agreement between tractor manufacturers in the UK. The agreement made available to manufacturers up-to-date detailed information on sales by geographic area, product and manufacturer. In effect, the Court held that in an oligopolistic market an agreement to exchange confidential information of this nature, even without any evidence of anti-competitive conduct following from that exchange, was enough to diminish competition between the parties to the agreement and to create a barrier to new entrants, thereby restricting competition.

Record Fines Imposed

Fines totalling ECU 248 million (A$385 million) have been imposed by the Commission on 33 cement producers and 9 cement trade associations, variously located in the EU, Norway and Switzerland. The companies and associations were found by the Commission to have colluded to reduce price differences between EU countries so as to remove any reason to export. The level of the fines was justified by the Commission on the basis of the extended period of the violations (over 10 years), the seriousness of the infringements, the size of the cartel and the size of the market.

Proposed Block Exemption Regulation Criticised

Following the proposed prolongation of the exclusive distribution agreements block exemption for automobiles, the EFTA Competition Surveillance Authority has voiced its disapproval of a Commission proposal for the first time. The Authority calls for an opening-up of the national automobile markets to create an EU-wide market. The Authority is willing to grant a maximum of five years' grace to the automobile producers to enable them to adjust to the idea of EU competitive forces taking over national car markets.

Commission Blocks Multimedia Venture

The Commission has blocked a joint venture between state-owned Deutsche Telekom and two big German media companies notified under the rules of the Merger Control Regulation.

This is only the second time since the entry into force of the Merger Control Regulation that the Commission has blocked a transaction. The Commission considered that the dominant position of the two media companies in the pay television market would have been unacceptably reinforced by the almost total control of Deutsche Telekom over the German cable network. The Commission was concerned that this control might assist in preventing or delaying the emergence of competitors.

Exemptions for Small Agreements

The Commission is proposing to raise to ECU 300,000 (approximately A$470,000) the turnover threshold of enterprises entering into agreements not considered to have an appreciable effect on competition in the EU. The parties to such agreements must still satisfy the test of not having market share over 5 per cent.

Opposition to Price Increase by Post Cartel

At a meeting of the International Post Corporation (IPC) which groups together 25 EU and North-American postal administrations The Netherlands and Spain rejected the adoption of an agreement to increase terminal dues (cross-border charges) levied between postal authorities.

Should the increase go ahead, the Dutch PTT Post indicated that it will challenge the IPC cartel and file a complaint with the Commission on competition grounds. PTT Post argues that the increases will not be linked to improved quality of service. Any price increases will almost certainly have an impact on companies which channel their international post through low cost mailing centres such as The Netherlands.

Changes to Procedural Rules and Reforms

The Commission has adopted a number of measures mainly directed at clarifying the EU competition rules on mergers. These comprise a Regulation on notifications, time limits and hearings, and several Commission Notices. The main changes concern the distinction between concentrative and cooperative joint ventures (see Legal Practice Briefing No. 12, pp.1112), the calculation of turnover, and the notion of 'concentration' and 'undertakings'. As regards notification for clearance of agreements, the standard Form CO has been revised so that a new short-form notification procedure will now apply to concentrations which have little impact within the European Economic Area (that is, the EU plus Norway, Iceland and Liechtenstein).

New Block Exemption on Technology Tranfer Agreements

The Commission's proposed Regulation on technology transfer agreements, replacing the two block exemptions on patent and know-how licences, has raised considerable concern. Under the proposal, high market shares (as small as 10% in some cases) would deprive enterprises of the benefits of the block exemption. Opponents suggest that this would probably increase legal uncertainty and hence the number of agreements which would need to be notified individually in order to obtain clearance. In view of the controversy, the Commission has announced further consultations and a six-month extension to the block exemption regulation for patent licences which was to expire at the end of 1994.

Transport

Regulation of Flight Reservations

The Commission has indicated that it may propose rules aimed at charging travel agents for all reservations made by computer. These rules, intended to clarify the 1993 Computer Reservation Systems (CSR) code of conduct, would aim to reduce phantom reservations and subsequent over-booking problems. Travel agents argue, however, that such a system would threaten the future financial basis for this sector. They also claim that it would force them to use telephone services, thus lowering the quality of service offered to consumers. Some airlines may make up for the added costs by increasing the commission given to travel agents on tickets sold.

Challenge to Air France Aid Decision

The recent Commission decision authorising the French Government's FF.20billion aid to Air France is the object of applications for annulment before the EU Court of First Instance. The UK Government and a group of European air carriers claim that the aid is excessive, could hinder restructuring and may distort competition between carriers. The aid was approved by the Commission with conditions: the submission of a restructuring plan and a ban on acquiring stakes in other airlines or increasing capacity.

More Subsidies for Iberia

The Commission has adopted revised guidelines for its intended future treatment of government subsidies (known as state aids) to the air transport sector. The guidelines limit approvals of aid to exceptional and unforeseeable circumstances. Spain has since applied to the Commission for permission to inject another 130 billion pesetas (A$1.2 billion) into Iberian Airlines. This will probably be the first application to be considered under the new guidelines.

Shipping Cartel Prohibited

The Commission has prohibited an agreement between 15 shipping companies known as the Trans-Atlantic Agreement (TAA), although no fines have been imposed. The decision is in response to complaints from European-based exporters that the TAA had resulted in the freezing of approximately 20% of capacity, leading to price increases of 20%60% for 1993 and 15%20% for 1994. The decision coincides with the replacement of the TAA by a revised agreement known as the Trans-Atlantic Conference Agreement (TACA).

ISSN 1448-4803 (Print)
ISSN 2204-6283 (Online)

The material in this briefing is provided for general information only and should not be relied upon for the purpose of a particular matter. Please contact the Legal Practice before any action or decision is taken on the basis of any of the material in this briefing.

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