Council of the European Union Brussels, 16 December 2014 (OR. en)

Transcription

1 Conseil UE Council of the European Union Brussels, 16 December 2014 (OR. en) Interinstitutional File: 2014/0121 (COD) 16979/14 LIMITE OPINION OF THE LEGAL SERVICE 1 From: To: Subject: Legal Service Working Party on Company Law PUBLIC JUR 964 DRS 175 CODEC 2528 Proposal for a Directive of the European Parliament and of the Council amending Directive 2007/36/EC as regards the encouragement of longterm shareholder engagement and Directive 2013/34/EU as regards certain elements of the corporate governance statement - Extension of the territorial scope of the proposed Directive to third-country intermediaries and to third-country proxy advisors I. INTRODUCTION 1. On 9 April 2014, the Commission presented a proposal for a Directive of the European Parliament and the Council amending Directive 2007/36/EC as regards the encouragement of long-term shareholder engagement and Directive 2013/34/EU as regards certain elements of the 1 This document contains legal advice protected under Article 4(2) of Regulation (EC) No 1049/2001 of the European Parliament and of the Council of 30 May 2001 regarding public access to European Parliament, Council and Commission documents, and not released by the Council of the European Union to the public. The Council reserves all its rights in law as regards any unauthorised publication /14 NR 1

2 corporate governance statement 2. On 5 December 2014, the Presidency presented a new compromise text The proposed Directive aims to contribute to the long-term sustainability of EU companies 4, to create an attractive environment for shareholders and to enhance cross-border voting by improving the efficiency of the equity investment chain in order to contribute to growth, jobs creation and EU competitiveness 5. More specifically, it aims to facilitate the exercise of shareholders' rights and engagement between EU companies and shareholders In order to achieve these objectives, the proposed Directive provides that EU companies should have the possibility to have their shareholders identified and to directly communicate with them Nevertheless, the effective exercise of their rights by shareholders and the effective transmission of information between the shareholders and the company depend to a large extent on the efficiency of the chain of intermediaries providing services of safekeeping and administration of securities for shareholders Therefore, the proposed Directive imposes on intermediaries the obligation (i) to communicate to the company, on the request of this latter, information regarding the identity of the shareholders, (ii) to transmit to the shareholders information provided by the company 2 COM(2014) 213 final, doc. 8847/14; the proposal amends in particular Directive 2007/36/EC by supplementing it; this proposed Directive is also the subject of opinion n Doc /14 of the Council Legal Service of 16 December 2014 on the protection of personal data. 3 Doc /14 4 I.e. companies which have their registered office in a Member State and whose shares are admitted to trading on a regulated market situated or operating within a Member State. 5 See the explanatory memorandum of the proposal 6 See recital 4 to the proposed Directive 7 See recital 4 to the proposed Directive and the proposed Articles 3a to 3d 8 See recital 5 to the proposed Directive 16979/14 NR 2

3 and (iii) to transmit to the company the information received from shareholders necessary to exercise the rights flowing from their shares 9. The proposed Directive also imposes additional obligations on intermediaries to ensure that they facilitate the exercise of the shareholders' rights. In particular, where the intermediary casts the vote on behalf of the shareholder, it must transmit the voting confirmation to the shareholder 10. The proposed Directive provides that, where there is more than one intermediary in a holding chain, either information must be transmitted between intermediaries throughout the holding chain (unless the information can be directly transmitted to the company by one of the intermediaries) or the company must be able to obtain information from any intermediary in the holding chain In order to improve the information in the equity investment chain and to ensure that proxy advisors adopt and implement adequate measures to guarantee that their voting recommendations are accurate and reliable, are based on a thorough analysis of all available information and are not affected by any conflict of interest or business relationship, the proposed Directive requires proxy advisors to disclose certain key information related to the preparation of their voting recommendations and any actual or potential conflict of interest or business relationships that may influence the preparation of the voting recommendations In the context of the Working Party on Company Law of 9 October 2014, the Council Legal Service (hereinafter the "CLS") was asked to give its opinion on the territorial scope of the proposed Directive. 8. A number of delegations wondered whether, and to what extent, the scope of the proposed Directive could be extended to intermediaries that have their registered office, central administration or principal place of business outside the EU (hereinafter "third-country 9 See the proposed Articles 3a and 3b 10 See the proposed Article 3c 11 See the proposed Articles 3a to 3c 12 See recital 14 to the proposed Directive and the proposed Article 3i 16979/14 NR 3

4 intermediaries"). In its proposal of 9 April 2014, the Commission proposed to extend the scope of the Directive to third-country intermediaries having a branch in the EU. Nevertheless, delegations wondered whether this scope could be extended to any third-country intermediary carrying out securities accounts maintenance activities with respect to shares held in EU companies (hereinafter "EU shares"), regardless of whether the intermediary has an establishment in the EU or provides services within the EU. 9. Moreover, a number of delegations asked the CLS whether the scope of the proposed Directive could be extended to proxy advisors that have their registered office, central administration or principal place of business outside the EU (hereinafter "third-country proxy advisors"), but that have a branch in the EU. 10. This opinion constitutes the response to that request and presents in more detail the oral statement made by the representative of the CLS on 12 November II. LEGAL BACKGROUND 11. Under customary international law, which in accordance with Article 3(5) TEU is to be respected by the EU 13, jurisdiction is based on the existence of a relevant link between the State (or an international organization such as the EU) that exercises jurisdiction and the person or situation over which jurisdiction is exercised. Customary international law recognises two classic titles of competence for a State to act: territorial competence, by virtue of which a State 13 See case Air Transport Association of America and others, C-366/10, EU:C:2011:864, paragraph /14 NR 4

5 has the power to act over persons (regardless of their nationality), acts and things located within its territory; and personal competence, by virtue of which a State has the power to act in respect of its nationals (individuals or legal entities), regardless of the place where they are located (within its territory or abroad) Therefore an act adopted by the EU can apply to persons outside the EU or to activities taking place outside the EU only if there is sufficient nexus to justify the exercise of the EU jurisdiction. This is to be determined also in the light of the objectives pursued by the act adopted or envisaged 15. III. LEGAL ANALYSIS A. The extension of the scope of the proposed Directive to third-country intermediaries 1) Extension of the scope of the proposed Directive to any third-country intermediary dealing with EU shares 14 See opinion of the CLS of 17 February 2014, on the Proposal for a Regulation of the European Parliament and the Council amending Regulation (EC) N 261/2004 establishing common rules on compensation and assistance to passengers in the event of denied boarding and of cancellation or long delay of flights and Regulation (EC) N 2027/97 on air carrier liability in respect of the carriage of passengers and their baggage by air (doc. 6596/14 JUR 93 AVIATION 48 RELEX 130 CONSOM 57), paragraph 27; see also opinion of Advocate general Kokott in the above-mentioned case Air Transport Association of America and others, paragraph See opinion of the CLS of 6 September 2013, concerning the Proposal for a Directive of the Council implementing enhanced cooperation in the area of financial transaction tax (doc /13 JUR 448 FISC 163 ECOFIN 771), paragraph /14 NR 5

6 13. The scope of the proposed Directive could be extended to any third-country intermediary providing services of safekeeping and administration of securities for shareholders with respect to EU shares, whether or not it has an establishment in the EU or it provides services within the EU The necessary nexus is established by the fact that the intermediary provides services of safekeeping and administration of securities for clients with respect to EU shares: while the intermediary may be established in a third-country, it still provides services of safekeeping and administration of securities for a client with respect to shares held in an EU company, creating a sufficient territorial connection for EU law to apply to this intermediary wherever located. 15. The necessary nexus is also established by the effects which the activities of intermediaries may have on the internal market of the EU. In this respect, it should be recalled that the Court has previously held that the Union's rules on unlawful competition are to be applied to agreements having a restrictive effect in the internal market, irrespective of where an agreement was reached 17. In the same vein, as indicated in paragraph 2 of this opinion, the rules laid down in 16 As it is proposed in the Presidency compromise presented on 5 December 2014, abovementioned: in this compromise, intermediaries are defined as "legal person[s] providing services for safekeeping and administration of securities for clients [ ], in so far as they provide services with respect to shares of companies which have their registered office in a Member State". Nevertheless, it should be made explicit, either in this definition, or in the proposed Chapter IA, that the proposed Directive also applies to third-country intermediaries, in so far as they provide services with respect to EU shares. Moreover, in so far as it refers to "companies", the definition of intermediaries should be aligned with Article 1(1) of Directive 2007/36/EC, which provides that this Directive applies to "companies which have their registered office in a Member State and whose shares are admitted to trading on a regulated market situated or operating within a Member State" (emphasis added). 17 The so-called "effect theory" developed by the Court in joined cases Ahlström Osakeyhtiö and others v. Commission, 89, 104, 114, 116, 117 and 125 to 129/85, EU:C:1988:447, (Wood pulp), paragraphs 15 to /14 NR 6

7 the proposed Directive serve to enhance corporate governance in the EU, to contribute to the long-term sustainability of EU companies and to create an attractive environment for shareholders. The activities carried out by third-country intermediaries could have effects on the long-term sustainability of EU companies and on corporate governance in the EU: if EU companies cannot communicate with their shareholders because third-country intermediaries do not transmit information between the companies and their shareholders, good governance of EU companies might be hampered. 16. Finally, the extension of the scope of the proposed Directive to any third-country intermediary dealing with EU shares is justified by the objectives pursued by this Directive, i.e. to facilitate the exercise of shareholders' rights and engagement between listed companies and shareholders and, in fine, to contribute to the long-term sustainability of EU companies, to enhance transparency between EU companies and investors and to create an attractive environment for shareholders. Such an extension would indeed be necessary to ensure that the flow of information in the holding chain is not interrupted and that the objectives pursued by the proposed Directive are achieved. 17. However, it should be stressed that the extension of the scope of the Directive to any thirdcountry intermediary providing services of safekeeping and administration of securities with respect to EU shares, whether or not it has an establishment in the EU or it provides services within the EU, might lead to enforcement difficulties. 18. Moreover, it should be noted that the transfer of personal data concerning the shareholders to third-country intermediaries should comply with the stringent requirements laid down by Articles 25 and 26 of Directive 95/46/EC of the European Parliament and the Council of 24 October 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data, which could make such a transfer difficult OJ L 281, , p /14 NR 7

8 2) Alternative options: extension of the scope of the proposed Directive to third-country intermediaries that are under the dominant control of an EU parent company, that carry out their activities through an establishment in the EU or that provide services within the EU 19. If, given the difficulties mentioned in paragraphs 17 and 18 of this opinion, or for any other reason, the EU legislator decided not to extend the scope of the proposed Directive to all thirdcountry intermediaries carrying out securities accounts maintenance activities with respect to EU shares, the scope of the proposed Directive could still be extended (i) to third-country intermediaries whose parent company is established in the EU where the intermediary is under the dominant control of its parent company, (ii) to third-country intermediaries that carry out securities accounts maintenance activities through an establishment in the EU and/or (iii) to third-country intermediaries that provide services within the EU. 20. First, the scope of the proposed Directive could be extended to third-country intermediaries whose parent company is established in the EU where the intermediary is under the dominant control of its parent company: while the subsidiary is established in a third-country, the dominant control wielded over it still emanates from within the EU, creating a strong personal connection for EU law to apply to the subsidiary. 21. Secondly, the scope of the proposed Directive could be extended to third-country intermediaries that carry out securities accounts maintenance activities through an establishment in the EU. 22. Such an extension of the scope of the proposed Directive would be based on the existence of a territorial link: while the intermediary is registered in a third-country, it carries out its activities within the EU territory through an establishment located in the EU, creating a territorial connection for EU law to apply to the intermediary /14 NR 8

9 23. Moreover, such an extension would be justified by the objective pursued by the proposed Directive, i.e. to facilitate the exercise of shareholders' rights by ensuring the transmission of information between the company and the shareholders by the intermediaries and, in fine, to contribute to the long-term sustainability of EU companies, to enhance transparency between companies and investors and to create an attractive environment for shareholders: these purposes require that the proposed Directive applies to intermediaries which carry out their activity on the EU territory even though they are registered in a third-country Therefore, the scope of the proposed Directive could be extended to third-country intermediaries that carry out securities accounts maintenance activities through an establishment in the EU. 25. The form of the establishment should not be a determining factor in this respect, provided that there is effective and real exercise of activity through stable arrangements. It could consist of a branch in the EU or of a mere stable presence in the EU. 26. Moreover, the proposed Directive could provide that a third-country intermediary should be deemed to carry out securities accounts maintenance activities through an establishment in the EU (i) where the securities accounts maintenance activities are carried out by the EU establishment itself or (ii) where the securities accounts maintenance activities are carried out in the context of the activities of the EU establishment, i.e. where the activities carried out by the EU establishment are inextricably linked to the securities accounts maintenance activities carried out by the third-country intermediary See, to that effect, case Ingmar GB, C-381/98, EU:C:2000:605, paragraphs 21 to See, to that effect, case Google Spain and Google, C-131/12, EU:C:2014:317, paragraphs 50 to /14 NR 9

10 27. Thirdly, the scope of the proposed Directive might also be extended to third-country intermediaries that provide services within the EU, whether or not they have an establishment in the EU. The EU should have the right to require all undertakings wishing to provide services within its territory to comply with rules laid down by EU law. Moreover, the extension of the scope of the proposed Directive would once more be justified by the objective pursued by this Directive 21. B. The extension of the scope of the proposed Directive to third-country proxy advisors 28. In the light of paragraphs 21 to 26 of this opinion, nothing precludes the EU legislator from extending the scope of the proposed Directive to third-country proxy advisors carrying out their activity through an establishment in the EU, regardless of the form of the establishment Nevertheless, the EU legislator might consider that there should be an exclusion from the scope of the proposed Directive for third-country intermediaries that provide services to EU shareholders where the service is provided at the exclusive initiative of the shareholder receiving the service, which means that the intermediary providing the service does not solicit clients or potential clients in the EU or promote or advertise its services in the EU (see, similarly, recital 43 and Article 46(5) of Regulation (EU) N 600/2014 of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Regulation (EU) No 648/2012). 22 As it is proposed in the Presidency compromise presented on 5 December 2014, abovementioned: Article 1(1)(aa)(ii) of this compromise provides that "[for] the purpose of application [of] Chapter IB, the competent Member State shall be defined as follows: [ ] for proxy advisors, the Member State in which the proxy advisor has a registered office or a head office, or where the proxy advisor has no registered office or head office in a Member State, the Member State in which the proxy advisor has an establishment". Nevertheless, the extension of the scope of the proposed Directive to third-country proxy advisors that have an establishment in the EU should be provided explicitly, either in Article 1(2) of the proposed Directive, or in the proposed Article 3i, and not only in a provision defining the competent Member State /14 NR 10

11 IV. CONCLUSION 29. The scope of the proposed Directive could be extended to any third-country intermediary carrying out securities accounts maintenance activities with respect to EU shares, whether or not it has an establishment in the EU or it provides services within the EU. Nevertheless, such an extension of the scope of the proposed Directive might lead to enforcement difficulties. Moreover, the transfer of personal data concerning the shareholders to third-country intermediaries should comply with the stringent requirements laid down by Articles 25 and 26 of Directive 95/46/EC. 30. In the alternative, if the EU legislator decided not to extend the scope of the proposed Directive to all third-country intermediaries carrying out securities accounts maintenance activities with respect to EU shares, the scope of the proposed Directive could still be extended (i) to thirdcountry intermediaries whose parent company is established in the EU where the intermediary is under the dominant control of its parent company, (ii) to third-country intermediaries that carry out securities accounts maintenance activities through an establishment in the EU and/or (iii) to third-country intermediaries that provide services within the EU. 31. The scope of the proposed Directive could be extended to third-country proxy advisors carrying out their activity through an establishment in the EU /14 NR 11