Governments make progress on single market but significant gaps remain

Date: 17/12/1998

By Renée Cordes and Peter Chapman

EU GOVERNMENTS can celebrate the Christmas holidays with a relatively clear conscience after receiving largely glowing end-of-year reports for putting Union laws on to their national statute books.

However, graduation day for both member states and the European Commission is still a long way off, with several lessons left to be learned before a true single market emerges.

While the Commission made some strides this year towards removing barriers to a single market in advertising and other commercial communications, it has taken no more than baby steps in establishing a single market for financial services and public contracts.

As part of their efforts to live up to the EU treaty's commitment to ensure the free movement of goods, services, people and capital, Union leaders agreed an action plan in 1997 designed to ensure that the internal market would be completed in time for the launch of the euro in January 1999.

There has been significant progress with regard to its implementation in member states, with just 13.2% of EU laws not yet transposed across the entire Union.

But gaps remain. Among the largest is a patchwork of conflicting rules and regulations which makes it difficult for companies to launch Union-wide advertising campaigns.

Internal Market Commissioner Mario Monti has set up a committee of national experts to probe areas where member states have conflicting regulations. But it has been a decidedly mixed year for industry groups which have been pleading for the Commission to take legal action against member states for single-market breaches in this area.

The institution has sent warning letters to Germany over its restrictions of 'two for the price of one offers' and on the air miles awards granted to credit card holders.

But there was widespread anger over the Commission's failure to take legal action against France over its Loi Evin, which has even been applied outside the country to block advertising of alcoholic drinks at televised sports events.

It has also refused to take Greece to task for its controversial ban on toy advertising which industry insiders see as one of the most blatant breaches ever of the EU's single market rules.

Copyright also hit the headlines this year as the European Parliament began to debate the Commission's proposals for setting a legal framework for the online age.

The battle over where to grant exemptions to the right of reproduction enjoyed by record companies and other 'content providers' has raged all year, and is set to simmer on until next summer.

Monti's officials topped up their copyright efforts with a proposed new directive aimed at applying single market principles to electronic commerce.

They resisted intense lobbying from consumer groups and approved the principle that firms should, in general, only have to meet the legal requirements in their home state, and not in the country of residence of the customer.

In the financial services sector, the European Court of Justice tried to bring some order to the mixed bag of tax law throughout the Union. In the oft-cited Safir case, the Court ruled that a law obliging Swedish residents to pay 15% tax on contributions to savings schemes provided by foreign-based companies violated the Treaty of Rome's guarantee of freedom for the provision of services across Union borders.

Last month, Monti outlined a plan to remove restrictions on private pension funds' investments across the Union.

Under one of the detailed proposals to be unveiled next year, private pension funds would be able to invest freely anywhere in the Union and use the services of any EU-approved asset manager.

The Commission nevertheless came under heavy fire from a group of pension fund managers led by London law firm Eversheds, which is considering launching a test case to try to force the Union to establish a uniform tax system for pensions.

In the public procurement sector, the Commission did not quite meet its promise to update the existing utilities legislation - which governs the allocation of public contracts in the gas, water, electricity and telecoms sectors - to take account of increasing competition in these industries.

Although it will announce plans for removing some telecoms kit from the scope of the rules by Christmas, the Commission will not launch proposals to take out some of the remaining utilities until Easter 1999.

Feature forms part of the European Voice 'Review of the Year'.