July 26-27, 1999
Montreal, Canada

Threat to Internal Market in E Commerce by Adoption of Brussels Regulation

Mike Pullen, Associate
Dibb Lupton Alsop, Brussels

13 July 1999

To [ ]
Member of the European Commission
U R G E N T

Dear Commissioner

COMMISSION MEETING 14 JULY 1999
THREAT TO INTERNAL MARKET IN E COMMERCE BY ADOPTION OF BRUSSELS REGULATION

We understand that on the agenda for the next meeting of the Commission is the adoption of a regulation which incorporates the amended Brussels Convention into the Aquis Communitaire pursuant to new powers granted under Article 65 of the Amsterdam Treaty ("Regulation").

We set out our substantive objections to the adoption of the Regulation in a letter sent to you and your colleagues dated 6 July 1999 (attached). We have been asked to give further details of our arguments in relation to this issue, which you will find set out below. We trust you will find these considerations useful in your discussions in the Commission.

We understand that the Council decided on the organisation for the revision of the Brussels Convention and the Lugano Convention ("Convention") at its meeting on 4 and 5 December 1997. It established an ad hoc working party composed of representatives of the member states and the Lugano states (Norway, Iceland and Switzerland) set priorities for the working party and asked that preparations be made for the commencement of discussions in January 1998 with a view to concluding by the beginning of 1999.

The working party held nine meetings between January 1998 and 23 April 1999. It examined detailed proposals for amendments to the Convention submitted by the member states and the Commission. This resulted in a new amended draft of the Convention.

It is our understanding that on the 12 March 1999 the Council agreed to freeze work on the adoption and ratification of the Convention on the assumption that the Commission would put forward a proposal for the Regulation after the entry into force of the Amsterdam Treaty.

We believe that at no time during the course of the working party's meetings did it, the Council, the Commission or the member states undertake any form of consultation process with industry or consumers or undertake any type of economic impact analysis.

We think that if the member states had proceeded to ratify the amended Convention outside of the framework of the Aquis Communitaire, they would have been in breach of their obligations under Article 5 of the Treaty together with Article 49 (formerly Article 59). This is due to the fact that Article 15(c) together with Recital 13 of the Regulation completely undermines the freedom to provide services based on the principles of the country of origin control and mutual recognition. However, we note that now the Commission has proposed the Regulation, the member states are prevented from taking any individual or collective action to ratify the Convention. We believe that any moves to ratify the Convention by the member states outside the framework of the Aquis would leave them open to an action pursuant to Article 226 (formerly Article 169) of the Treaty.

The fact that the Commission is proposing to adopt the Regulation in a form which mirrors the substantive text agreed by the Council's working party does not absolve the Commission from its obligations under the Treaty. In particular, the Commission has an obligation to consult widely before proposing legislation pursuant to Article 9 of the Protocol on the Application of the Principle of Subsidiarity and Proportionality annexed to the Amsterdam Treaty ("Protocol").

We understand that there has been no formal or informal consultation by the Commission with industry and consumers on the necessity for the Regulation or its effect and impact on the internal market. Therefore, the procedure used for the adoption of the Regulation will be open to judicial review both directly to the European Court of Justice (ECJ) pursuant to Article 230 (formerly Article 173) of the Treaty and by references from the National Courts pursuant to Article 234 (formerly Article 177) of the Treaty. We note that in a press release dated 5 July UNICE stated that if necessary the Regulation would be challenged before the ECJ.

Furthermore, now that a proposal for the adoption of the Regulation and its detrimental impact on the internal market in E Commerce has become widely known by European industry, the debate is becoming very political in the member states. Therefore we do not believe that this issue should be dealt with by a "caretaker" Commission.

In light of the above, we urge you to remove the discussion of the Regulation from the agenda until the Commission has fulfilled its obligation to consult widely as required by the Protocol.

Kind regards.
Yours faithfully

DIBB LUPTON ALSOP