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European Union

Oral hearing on Green Paper on Vertical Restraints

In October the Commission held an oral hearing to discuss the way forward following the publication of its Green Paper on vertical restraints, referred to in the March 1997 issue of International Financial Law Review (see page 62).

The Commission's Directorate-General for Competition (DGIV) is now holding an internal debate on a number of options for reform of the system. The debate is expected to last until March, after which a draft policy paper will be submitted to the other Directorates-General for discussion and a Commission decision could be taken before the summer break.

The time-frame for implementation of any changes will depend on whether the Commission acts within the existing enabling legislation or has to seek the Council's approval for legislation extending those powers. At present, the enabling legislation provides that the Commission can approve block exemptions covering consumer goods, but not services. If the changes approved by the Commission require new legislation, significant delays could arise.

Simpler legislation for the banking sector

The Commission has unveiled proposals to simplify legislation in the banking sector by replacing the nineteen banking Directives with just one Directive. A so-called 'Banking Code' would be adopted, containing the Directives which establish the single market for banking services. The Banking Code would not change the substance of the various Directives.

The proposals form part of the Commission's efforts aimed at the simplification and transparency of Community law, in the context of the Simpler Legislation for the Single Market (SLIM) initiative.

Update on Emu

The European Council Meeting in Luxembourg on December 12 and 13 1997 officially launched the enlargement process, and reached an agreement on the operation of the so-called Euro-X group, consisting of the finance ministers of the member states participating in the single currency. The controversy centred around the question of whether the member states not joining the single currency would enjoy access to Euro-X group meetings.

The European Council, while confirming that the Ecofin Council (made up of all EU finance ministers) is the centre for the coordination of the member states' economic policies, agreed that the ministers of the states participating in the euro may get together informally to discuss issues connected with their shared responsibilities for the single currency. However, the European Council also decided that wherever 'matters of common interest' were discussed, access to the meetings would be guaranteed to all member states.

The compromise solution leaves open to interpretation the question of what constitutes 'matters of common interest' that necessitate discussion in the Ecofin Council.

The European Council also noted that the main arrangements necessary for the transition to the single currency are now in place. In particular:

  • the Stability and Growth Pact (designed to ensure participants in the single currency continue respecting the Maastricht convergence criteria) and the legislative texts concerning the legal status of the euro have been approved by the Council. In this context, the European Council decided that notes and coins in euros will be introduced from January 1 2002 and would not therefore be delayed by a month;
  • the Council has reached a common position on the unit values and the technical specifications of the euro coins;
  • the Council and the European parliament have agreed the timetable and practical arrangements for the decisions concerning which member states fulfil the necessary conditions, and for appointing the President, Vice-President and members of the Executive Board of the European Central Bank; and
  • The bilateral exchange rates used to determine the conversion between each of the currencies participating in the euro will be announced on May 3 1998 for those member states participating in the euro from its introduction. The rates will only apply from January 1 1999, when the single currency is expected to be launched.

Commission adopts Notice on voice telephony

At the end of extensive public consultation and in the wake of the full liberalization of the EU telecommunications market on January 1 1998, the European Commission has adopted a Notice defining its position on voice telephony on the Internet.

On the basis of the latest technological developments, the Notice distinguishes three different categories of voice services:

  • commercial services provided from PC to PC;
  • commercial services provided between PC and telephone handsets connected to the Public Switched Telecommunications Network (PSTN); and
  • the provision of calls between two telephone handsets connected to the PSTN.

The Commission concluded that only the last category of voice services constitutes voice telephony.

The Notice provides that telephony on the Internet is only subject to the regulation applying to voice telephony if the following conditions have been met:

  • the communications are the subject of a commercial offer;
  • the service is provided for the public;
  • the service is provided to and from public switched network termination points on the fixed telephony network; and
  • it involves direct transport and speech in real time.

As the service provided by Internet does not at present fulfil these conditions, the Commission will not consider it voice telephony for the time being, a result which appears to be endorsed by the public consultation exercise. However, once Internet providers are in a position to offer a quality of service equivalent to traditional voice telephony, they will qualify as providers of voice telephony, and be subject to the regime applicable to voice telephony.

Microsoft releases Santa Cruz from contractual restrictions

Microsoft waived its rights under certain contractual provisions after the European Commission objected to the US software company for preventing other software firms competing freely with it. Restrictions contained in a contract between Microsoft and The Santa Cruz Operation Inc required Santa Cruz to base its versions of the UNIX operating system on Microsoft's work at a set copy royalty. Under the contract, Santa Cruz was also required to make UNIX compatible with application programmes available in 1987.

In May 1997 the Commission issued a Statement of Objections indicating these obligations constituted a restriction of competition prohibited under Article 85 of Maastricht. An oral hearing before the Commission was scheduled for the parties, but on November 4 1997 Microsoft wrote to Santa Cruz waiving its rights under the contract and agreeing to remove all obligations on Santa Cruz about UNIX. Microsoft's waiver gives Santa Cruz the freedom to design its future UNIX products as it wishes and it will only pay a set royalty if it actually uses Microsoft's intellectual property.

Michael Reynolds
Allen & Overy

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