AEIP Newsletter • Week 12

22 – 26 March 2010

Table of Contents

EU FINANCIAL SERVICES ............................................................................................................................. 2

I. EC SEEKS CHANGES TO BELGIAN AND FRENCH TAX RULES .............................................................................. 2
II. EUROPEAN SOCIAL PARTNERS MEET EU TO DEBATE EXIT FROM THE CRISIS AND EUROPE 2020 STRATEGY .... 2
III. NEW BLOCK EXEMPTION REGULATION IN FAVOUR OF INSURANCE SECTOR ................................................. 3
IV. DC PLANS SHOULD REVIEW FIDUCIARY RESPONSIBILITIES STATE STREET .................................................... 3
EU INTERNAL MARKET................................................................................................................................. 3
I. IMMINENT EC CORPORATE GOVERNANCE CODE RAISES PENSION HACKLES ..................................................... 3
II. COMMISSION LAUNCHES CONSULTATION ON HOW EUROPEAN COMPANY STATUTE (SE) WORKS ................... 3
III. INNOVATION HAMPERED BY 'RISK AVERSE' PUBLIC AUTHORITIES .................................................................. 4
EU HEALTH........................................................................................................................................................ 4
I. EU-JAPAN SYMPOSIUM .................................................................................................................................... 4
II. COMMISSION LAUNCHES THE SECOND EU HEALTH PRIZE FOR JOURNALISTS ................................................. 4
EU SOCIAL AFFAIRS ....................................................................................................................................... 5
I. SWISS PENSION FUNDS TO NAME MANAGERS UNDER TIGHTER DISCLOSURE...................................................... 5
II. MINIMUM WAGE NEEDED............................................................................................................................... 5
III. EUROPEAN COMMISSION LAUNCHES FIRST STEP TOWARDS REVIEW OF WORKING TIME RULES ...................... 5
IV. POLICY MUST REMAIN PREROGATIVE OF A SCHEME’S BOARD - ABP ............................................................. 6
V. FRENCH PENSION CONTRIBUTION PERIOD EXPECTED TO RISE.......................................................................... 6
VI. DUTCH ASSOCIATIONS WANT ONE-STEP RETIREMENT AGE JUMP ................................................................... 7
ECONOMY.......................................................................................................................................................... 7
I. BARROSO: ‘NO COUNTRY CAN BE EXPELLED FROM EURO ZONE’ ...................................................................... 7
II. IMPROVED ACCESS TO FINANCE, MORE FLEXICURITY AND CREDIBLE GOVERNANCE ..................................... 8
III. EUROPEAN SOCIAL PARTNERS COMMITMENT ON INCLUSIVE LABOUR MARKETS ......................................... 8
IV. MEPS PRESS ON WITH AIFM DESPITE EU POSTPONEMENT ........................................................................... 8
EVENTS AND COURT CASES ........................................................................................................................ 9
I. FIRST EUROPEAN CONFERENCE ON PROTECTION OF WORK-FREE SUNDAY ..................................................... 9
II. EUROPEAN COURT OF JUSTICE CALENDAR".................................................................................................... 9
IN DEPTH ANALYSIS..................................................................................................................................... 10
I. DC PLANS SHOULD REVIEW FIDUCIARY RESPONSIBILITIES STATE STREET ..................................................... 10
II. EUROPEAN COMMISSION LAUNCHES FIRST STEP TOWARDS REVIEW OF WORKING TIME RULES ..................... 11

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EU Financial Services

EU Financial Services

I. EC seeks changes to Belgian and French tax rules

The European Commission has begun the first stage of proceedings against the Belgian and French
governments to try and reform their tax terms on pensions. At this stage, the EC is only requesting,
under Reasoned Opinion, that authorities alter the rules considered to be discriminatory against
investors in other member states and against protectionist business practices. France has been
asked to change withholding tax rules which discriminate against foreign pension and investment
funds seeking to in French companies, even though France’s Supreme Court, Conseil d’Etat, last
year ruled in favour of Dutch pension fund PfZW and said it would rebate tax on dividends to Dutch
pension funds. Despite the earlier ruling in favour of Dutch pension funds, French law still imposes a
25% withholding tax on dividends paid to overseas pension funds, albeit this is reduced if there is a
bilateral agreement with the member state of the fund. The EC therefore deems this to be an
infringement of the free movement of capital, in much the same way as it has imposed similar
decisions on other countries, such as Germany. At the same time, Belgium has been asked to
change an income tax rule which only provides tax relief on pensions savings to Belgian institutions
which invest in Belgian funds, as this is considered to be an infringement of the Third Life
Directive.Discussions appear to have already taken place as Belgian authorities claim, according to
the EC, it applies this rule to “safeguard the security of monies invested by pension savers”.
However, the EC has found an alternative route and argues Belgium could use the Mutual Assistance
Directive to check the information provided by foreign providers or funds. (19/03/2010 IPE.com)

II. European social partners meet EU to debate exit from the crisis and Europe 2020
strategy
Today, President of the European Commission José Manuel Barroso, President of the European
Council Herman Van Rompuy and Spanish Prime Minister José Luis Rodriguez Zapatero
representing the Presidency of the Council met the European social partners to look at how Europe
can exit the current economic and financial crisis. Discussions also focused on the Commission’s
proposal for a new ten-year integrated economic and social strategy: Europe 2020. This Tripartite
Social Summit has demonstrated the broad consensus on the need to combine a successful exit
strategy with an ambitious structural reform agenda. László Andor, EU Commissioner for
Employment, Social Affairs and Inclusion along with representatives of the future Belgian and
Hungarian Presidencies also participated actively in the discussions. "Europe 2020 must generate
commitment. I firmly believe that this strategy combines long and short term measures to respond to
the crisis and will bring real benefits.” underlined President Barroso. He added: “We must focus on
working together as European institutions, Member States, social partners, regions and all other
stakeholders in the best possible way so as to build our common future: a smart, sustainable and
inclusive economy with high levels of employment."Addressing workers’ and employers’'
representatives, László Andor, EU Commissioner for Employment, Social Affairs and Inclusion said:
"With 23 million Europeans out of work – 7 million more than before the crisis – we need those
closest to the workplace to be with us in the fight against unemployment and social exclusion. The
entry into force of the Treaty of Lisbon will help this effort, anchoring the important role of the social
partners and the Tripartite Social Summit, reinforcing our partnerships further”. He stressed: “If we
want robust governance and greater ownership, it is imperative that workers and employers are
involved in shaping Europe 2020 and making it happen on the ground.” The European social partners
(ETUC, BUSINESSEUROPE, CEEP and UEAPME) expressed their view on the need for a well-
defined exit strategy and a smart combination of short-term and long-term measures. The Social
partners ask to be fully involved in the implementation of the Europe 2020 strategy and are working
on a joint contribution to this strategy. (25/03/2010, europa.eu/rapid)

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III. New Block Exemption Regulation in Favour of Insurance Sector

On 24 March, the European Commission adopted a new regulation which exempts certain categories
of agreement made in the insurance sector from the general ban set in place by the EU regarding
practices which distort competition. This Block Exemption Regulation (BER), which will enter into
force on 1 April, renews and makes certain changes to the block exemptions for two of the categories
of agreement currently exempted, namely joint compilations, tables and studies (exchanges of
information) and co-insurance and co-reinsurance groups. (24/03/2010, Agence Europe)

IV. DC plans should review fiduciary responsibilities State Street

Fiduciary roles in defined contribution (DC) schemes need to be "viewed in a new light" with a
possible move from an advisory approach to adopting comprehensive best practices, according to
findings from State Street's latest Vision report on pensions.
In Depth Analysis page: 10

EU Internal Market

EU Internal Market

I. Imminent EC corporate governance code raises pension hackles

The European Commission is understood to be preparing a green paper on corporate governance in
the wake of the financial crisis, but pension fund bodies are concerned that investors will be subject to
onerous legislation. Concerns about the quality of corporate governance during the financial crisis –
leading to legal action against some companies – has prompted the EC to follow up on work started
in 2003 to modernise company law and enhance corporate governance. Michel Barnier, the new
commissioner for the internal market and services, has mentioned corporate governance standards
three times in speeches since the new year, most recently on 2 March. "Too often, shareholders have
been too absent or inactive," the commissioner said. "Sir David Walker described this problem well in
his recent report on corporate governance in UK banks. We need shareholders to assume their
responsibilities. And not only to look at making quick, short-term returns on their investment." There
are some concerns that any changes could affect long-term institutional investors, such as pension
funds, which have been under attack about their role in engaging with companies over active
ownership. (22/03/2010 IPE.com)

II. Commission launches consultation on how European Company Statute (SE) works
The European Company Statute (SE) gives companies operating in more than one Member State the
possibility to reorganise their cross-border business under one European label. This enables them to
work within a stable legal framework, reduce the internal costs of operating in several countries and
hence be more competitive in the Internal Market. The SE has proved to be very popular in some
Member States but it has not taken off in others. In order to determine whether changes are needed
to make the SE Statute work better, the European Commission has launched a public consultation.
With the review of the SE Statute, the Commission is aiming to increase the use of the SE across the
European Union. Internal Market and Services Commissioner Michel Barnier said: "This is a great
opportunity to see how the European Company Statute (SE) is working on the ground, five years on. I
believe that the SE can substantially reduce costs for businesses operating across borders. However,
it's clear that it has had much more success in some countries than others. I want to find out why and

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determine whether we need to make improvements to the existing rules. I encourage all interested
parties to give us their views." Under the SE Regulation, the Commission is required to report on its
practical application five years after its entry into force and to put forward amendments where
appropriate. To provide a solid factual basis for the report, the Commission launched an external
study in December 2008, on which the views of interested stakeholders are now sought. Responses
will be taken into account in the Commission's forthcoming report on the SE, which will also be
complemented by a high-level conference on 26 May 2010. The deadline for responses to the
consultation is 23 May 2010. The consultation aims to test the findings of the external study and to
provide the Commission with input on issues relevant for the assessment of the SE. The questions
concern: positive and negative drivers for setting up an SE; main trends in distribution of SEs across
the EU/EEA Member States; practical problems encountered by companies in the course of setting
up or running an SE; and possible improvements of the current legislative framework. (23/03/2010
europa.eu/rapid)

III. Innovation hampered by 'risk averse' public authorities

Tapping into Europe's multi-billion euro public procurement market will be a central component of the
EU's forthcoming research and innovation plan, but risk aversion in the public sector remains a major
barrier to change. The construction, healthcare and communication technology sectors are among
the areas where public authorities can have a major influence on market developments because they
are often the largest single purchaser. Experts and policymakers at a conference in Brussels agreed
that public procurement should be used to promote innovation, but there were concerns that the
culture in the public sector is not well suited to commissioning innovative projects. (24/03/2010
Eutactiv)

EU Health

EU Health

I. EU-Japan Symposium
AEIP has published a press release on the EU-Japan Symposium which was held Monday and
Tuesday in Brussels. The topic was Heath and Safety in the Workplace. On the Japanese panel
Speakers included members of the Ministry of Health, Labour, and Welfare of Japan and a
representative from the Japanese Trade Union Confederation. On the European side there were
representatives from the French Ministry of Labour and BusinessEurope just to highlight a few. The
AEIP press release is available upon request.

II. Commission launches the second EU Health Prize for Journalists

Today, the European Commission launches the second EU health prize for journalists in print and on-
line articles. The prize is part of the 'Europe for Patients' campaign launched in September 2008. It
aims to stimulate and reward high-quality journalism that raises awareness of healthcare and patients'
rights issues. This year's prize follows on from the first health prize for journalists which attracted over
460 articles from journalists from all across the European Union.

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EU Social Affairs

EU Social Affairs

I. Swiss pension funds to name managers under tighter disclosure

Pension funds will in future be required to name their asset managers and advisers in their annual
reports, as part of a range of structural governance reforms of the mandatory Swiss second pillar
pensions regime.The requirement has now been passed as part of reforms by parliament on
pensions supervision and governance, and implementation will happen “as quickly as possible”, the
Swiss government promised in a statement today.A first step, delivering incentives to employers for
keeping older employees on, will come into effect in January 2011. Yet new governance regulations
will have to wait until July 2011 and the creation of the new Oberaufsichtskommission, or super-
regional commission, which will take until January 2012 to be set up. One of the disputed reforms
was a proposal requiring pension funds to name experts, advisers and asset managers in their
annual reports, but this has now been agreed by both houses of parliament. Another sensitive issue
now approved is a requirement on auditors to make sure the pension fund has made all necessary
statements and reports to the supervisory commission.The parliament has also followed the advice of
a commission of experts and ensured the new super-regional supervisory body will be completely
independent and will not be bound by any directives.All other points, including the creation of the new
supervisory structure, had already been agreed upon in earlier sessions. (19/03/2010 IPE.com)

II. Minimum Wage Needed

As part of preparations for an own-initiative report, the MEPs of the committee on employment and
social affairs of the European Parliament held a debate, in Brussels on Thursday 18 March, with the
European social partners and representatives of civil society, on employment, the role of the
minimum wage and the issue of a framework directive at EU level, in order to break the cycle of
poverty, according to an EP press release. The vote in the parliamentary committee will take place on
24 June 2010. During the debate, the president of the parliamentary committee, Pervenche Berès
(S&D, France), stressed the "political importance" of the report being prepared, "given that the latest
Ecofin Council had announced its intention to withdraw non-standard measures to support
employment and prolong unemployment benefit mechanisms". This means, Berès added, that "the
finance ministers are thus aggravating the social situation and undermining the aim, proposed in the
2020 strategy, of reducing poverty". The representative of BusinessEurope, Rebekah Smith¸ stressed
that "if we boosted growth in the EU by 1 to 2%, 6.5 million jobs would be created". On behalf of the
unions (ETUC), Henri Lourdelle noted that "a job is no longer a guarantee against poverty. Precarity
has generated poor workers, and hence poor retirees". Speaking for the European Anti-Poverty
Network, Fintan Farrell called for a framework directive on the minimum wage systems within the EU.
Roshan Di Puppo of SocialNetwork pointed out that "in the EU, 24 out of 27 countries have a
minimum income system. Only Bulgaria, Greece and Italy have nothing". MEP Elisabeth Lynne
(ADLE, United Kingdom) warned that a directive of this kind could end up being blocked at the
Council. (22/03/2010 Agence Europe)

III. European Commission launches first step towards review of working time rules
On 24 March, the European Commission requested the views of workers' and employers'
representatives on the options for reviewing EU rules on working time.
In Depth Analysis page: 11

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IV. Policy must remain prerogative of a scheme’s board - ABP

The €208bn civil service scheme ABP says it is essential that a pension fund’s board keeps its
discretionary competence for decisions about policy on contributions, indexation and investment. An
extended pension contract should largely focus on the moment a board must take action when the
cover ratio reaches a set level, as well as on the transparency of the steering instruments, ABP stated
in a position paper on the sustainability of the pension system. “However, an extended contract
doesn’t mean that the instruments that must be deployed under given circumstances can be indicated
in advance,” stressed ABP, “The present crisis has shown that the right combination of instruments is
difficult to establish.” Although decisions on risks should be well-communicated to participants, they
should be based on expertise and on the interests of the different groups of pensioners, rather than
on the willingness to risk-taking of individual participants, the pension fund made clear. ABP further
underlined that the social partners of employers and employees must keep their responsibility in the
board. “A board’s composition based on part interests of participants, will put pressure on the
solidarity and decisiveness of schemes,” it argued. “To ensure a proper balance between a board and
stakeholders, the participants council and accountability body should be merged and be given
increased competence, comparable to the say of a shareholders meeting,” continued the civil service
scheme. Referring to pending new parameters for the financial assessment framework (FTK), ABP
warned against too many rules for prudence, “as this might cause loss of oversight of the securities
within the system”. ABP also indicated it prefers wage inflation rather than the consumer index as
benchmark for indexation decisions, because a pension is considered as postponed salary. That said,
it noted that the salary index and the consumer index within the civil service sector have developed
evenly between 1973 and 2007, indicating that an index switch within this period would not have lead
to any cost-cutting. In the opinion of ABP, a pension fund’s long-term focus requires cushioning the
volatility of the cover ratio, for example through averaging the market interest rates for accounting
liabilities. Although the pension sector widely agrees on switching from nominal to real cover ratio as
guiding principle for pension policy, ABP said it wants to stick with the nominal cover figures in its
communication to its participants, “as publishing both ratios will cause confusion” (23/03/2010
IPE.com)

V. French pension contribution period expected to rise

France’s leading pension advisory body is expected to recommend increasing the country’s pension
contribution period in an effort to tackle its increasing pension deficit. The Conseil d'orientation des
retraites (COR) will shortly publish a paper, which according to French reports will suggest a
staggered increase in the contribution period by three years, to 43.5 years, for those wishing to draw
the maximum pension. Following earlier reforms in 2003, the contribution period for those wishing to
draw the highest pension is already set to increase to 41.5 from 40 years by 2020. The COR
document, scheduled for release in a couple of weeks, is expected to say that if this trend continues
beyond 2020, a contribution period of 43.5 years will be required by 2050. The paper, while not
binding, is expected to influence President Sarkozy’s government as it prepares to announce pension
reforms later this year. Last month, Sarkozy already stated that any increase would affect both the
public and the private sector, as France attempts to prevent its deficit reaching €50bn by the end of
the decade. Other commentators, including Arnaud Chéron of the EDHEC Business School, have
previously said that an increase in retirement age as well as a lengthening of the contribution period
should be implemented as part of any reforms. “From negotiations between Government and unions,
we can expect a limited increase in the contribution periods of between one to three years,” Chéron
toldIPE.com in February, adding “It is obvious that the effective retirement age should increase in
France.” 24/03/2010, IPE.com)

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VI. Dutch associations want one-step retirement age jump

If the tax-facilitated retirement age is to be raised it should be carried out in a single step, rather than
as a gradual rise, the Dutch pension fund organisations VB, OPF and UvB have argued together with
the insurers representative body, VvV . A step-by-step rise for second and third pillar pensions will
cause enormous implementation costs as well as huge problems in communication with participants,
the four organisations stated in a joint position paper ahead of parliamentary elections on 9 June. A
majority of members of the outgoing parliament has already indicated it agrees with a gradual rise of
the retirement age for the state pension AOW from 65 to 67, but has not yet discussed yet the future
of the second and third pillar pensions. Since the collapse of the governing coalition, both issues have
been declared controversial, and any further discussions have been postponed until after the
elections. A gradual rise of the tax-facilitated retirement age over several years, means that pension
arrangements will need to be split. Implementation will be highly complex, which will also to be very
difficult to explain to the participants, according to the associations. The organisations also stressed
the need for sufficient time for implementation in the case of a statutory rise in the pensionable age.
“As the impact is large and will affect all pension plans, all players involved need to agree on how to
adjust their pension arrangements,” the organisations explained. “The parties involved need not only
to take into account current adjustments following legislation, but also possible proposals resulting
from the cabinet’s position on the integral discussions about the future of the pension system,” they
continued. The representative organisations further underlined that, from the viewpoint of
communication and implementation, a rise of the pensionable age should not take effect before 2015,
when transitional arrangements for early retirement finish. (25/03/2010, IPE.com)

Economy

Economy

I. Barroso: ‘No country can be expelled from euro zone’

In an interview broadcasted ahead of an EU summit, European Commission President José Manuel
Barroso says expelling a country from the euro zone, as suggested by German Chancellor Merkel,
would be against EU treaty rules. In the short run, the Commission president insisted that surveillance
of eurozone countries should be strengthened. "This is what we are going to put forward next month:
some mechanism […] that will guarantee that a country can in fact respect the fundamental principle"
of fiscal stability. "Solidarity is a two-way street," Barroso explained. "When a member state is a
member of the euro, it also has obligations towards the others. It is not only to receive some support:
it is also to respect the rules that have been commonly agreed." Barroso refused to elaborate on what
might happen if Greece were to snub the Europeans and turn to the IMF if it does not receive
financial assistance from the EU. "What I want to remind people is that Greece and all the member
states of the EU are members of the IMF. In fact the EU member states are by far the biggest source
of revenue for the IMF. So it's not a question of prestige, it's a question of seeing what is the best way
to respond to the situation." He also said, stressing that Athens had not yet asked for financial
support. "Just this week I received [Greek] Prime Minister Papandreou. He did not make any request
for financial support. What we believe we should have now is as soon as possible some kind if
mechanism prepared just in case." (20/03/2010 Euractiv.com)

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II. Improved Access to Finance, more Flexicurity and Credible Governance

On the eve of the European summit, the confederation of European business, BusinessEurope, once
again, argues that growth must be the overarching priority of the EU 2020 strategy. Following in the
wake of the Commission, BusinessEurope says that Europe can only succeed if it fosters innovation,
improves education, defends open markets and puts in place an integrated industrial policy. However,
the sense of urgency and focus needs to be reinforced in order to transform the Commission
document into a real action plan. (23/03/2010 Agence Europe)

III. European Social Partners Commitment on Inclusive Labour Markets

On 25 March 2010, ETUC, BUSINESSEUROPE, UEAPME and CEEP presented their European
agreement on inclusive labour markets at the Tripartite Social Summit in Brussels. With the EU
unemployment rate currently at 9.5%, urgent and determined action is needed. Europe cannot afford
such a waste of talent. Europe must make full use of its labour force potential, improve job quality and
increase employment rates in the face of demographic ageing. Labour market inclusion is a key
concern for European social partners and is essential to foster economic development and social
cohesion. With this agreement, they commit to take concrete actions to help disadvantaged people to
enter, remain and develop in the labour market. Examples of areas in which measures can be taken
include vocational training, apprenticeships, recruitment, transparency and information regarding
competences, available jobs and training programmes. National social partners have three years to
implement the agreement and will report on their activities annually. A final implementation report will
be drawn up on this basis in 2014. Implementation of this framework agreement will contribute to the
Commission’s objective of achieving inclusive growth as part of a renewed Europe 2020 strategy.
(25/03/2010 ETUC

IV. MEPs press on with AIFM despite EU postponement

MEPs on the European Parliament's Economic and Monetary Affairs (ECON) Committee have
continued discussions on a set of draft compromise amendments to the AIFM Directive, despite the
issue being postponed by the Spanish Presidency of the European Union earlier in the week. The set
of amendments presented by Jean-Paul Gauzès, Rapporteur of the committee, cover the
controversial issues relating to the Directive, including scope, funds and fund managers based in
third-party countries and how to deal with private equity funds. However, while the compromise
proposals are expected to reduce the large number of amendments initially put forward on the
Directive – estimated at more than 1,000 – to make the discussions and vote more manageable, the
European Parliament said there is still no definitive agreement as yet. Instead, it suggested this set of
compromise amendments will be superseded by other agreements before the vote in ECON on 12
April 2010, because discussions on the proposal are ongoing between the political parties.
Meanwhile, the draft proposals suggest the scope of the Directive should include all non-UCITS
funds, although there will be distinctions between the types of funds with some regulated more lightly.
The current proposals suggest that if there is no equivalent regime, investors can still invest in non-
EU funds on their own initiative, and those created before January 2010 would be allowed to be
marketed in the EU through the private placement regime. It is suggested, however, that fund
managers whose country has no equivalent regulatory regime will be barred from EU marketing, and
EU investors will be "forbidden" from investing in funds under these managers. (19/03/2010,
IPE.com)

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Events and Court Cases

Events and Court Cases

I. First European Conference on Protection of Work-Free Sunday

MEPs from the EPP and S&D groups have organized the first European conference on the
“Protection of a Work-free Sunday” in Brussels on Wednesday 24 March. The conference will adopt a
call on the European working time directive, and all that surrounds it, including the need to keep
Sunday as a day of rest for workers' health. This call will be submitted to heads of state and
government on Thursday 25 March, at the summit in Brussels, by deputy chairman of the EP
employment and social affairs committee Thomas Mann (EPP, Germany). Among those taking part in
the conference, in addition to Mann, are Employment, Social Affairs and Inclusion Commissioner
László Andor, Vice-President of the Confederation of German Trade Unions (DGB) Ingrid Sehrbrock,
Bishop Dr Ludwig Schwarz SDB (Diocese of Linz), and MEPs Csaba Öry (EPP, Hungary), Richard
Falbr (S&D, Czech Republic), Nathalie Griesbeck (ALDE, France), Philippe Lamberts (Greens,
Belgium) and Ilda Figueireido (GUE/NGL, Portugal), and representatives of several national trade
unions. (22/03/2010 Agence Europe)

II. European Court of Justice Calendar"

Date Case Language Courtroom

Hearing Commission v Italy - Freedom to provide IT New Great

C-565/08 services Courtroom
Wednesday Court of Justice - Grand Chamber
24/03/2010
09:30 Failure of a Member State to fulfil its obligations – Infringement of Articles 43 EC and
49 EC – Lawyers – Obligation to comply with compulsory fee ceilings

Opinion Commission v Portugal - Freedom to PT New Great

C-105/08 provide services Courtroom
Court of Justice - First Chamber
Thursday
25/03/2010 Failure of a Member State to fulfil its obligations – Infringement of Articles 49 EC and
09:30 56 EC – Difference in treatment of taxation of interest paid to financial institutions
depending on whether they are resident or not in Portuguese territory Advocate
General : Kokott

Opinion VEBIC – Competition NL New Great

C-439/08 Court of Justice - Grand Chamber Courtroom
Thursday
25/03/2010 Interpretation of Articles 2, 5, 15(1) and 35(3) of Council Regulation (EC) No 1/2003 of
09:30 16 December 2002 on the implementation of the competition rules laid down in
Articles 81 and 82 of the Treaty (OJ 2003 L1, p.1) – Submission by national
competition authorities of written observations and arguments of fact and of law in the
course of an appeal against their decision – Plurality of authorities in a Member
State Advocate General : Mengozzi

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In Depth Analysis

In Depth Analysis

I. DC plans should review fiduciary responsibilities State Street

Fiduciary roles in defined contribution (DC) schemes need to be "viewed in a new light" with a
possible move from an advisory approach to adopting comprehensive best practices, according to
findings from State Street's latest Vision report on pensions.

The research into 'Strengthening the DC Model for the Future' encompasses a range of issues including
the implications of a shift from defined benefit (DB) to DC, regulatory developments and the structure
of new DC plan models.

On the issue of future DC models, the report highlighted the need for incentives to encourage people
to save, such as auto-enrolment and tax relief, while the design of the default fund and investment
strategy is equally important in both encouraging participation and building up savings.

That said, State Street claimed default funds with "too conservative a strategy early on has a negative
impact on achieving retirement income goals". This is in comparison to comments by the Personal
Accounts Delivery Authority (PADA) at the NAPF conference where they claimed a conservative start
could encourage persistency as it reduces volatility.

The report also discussed the role of target date funds and lifestyling as investment strategies for DC,
and argued there are some concerns with target date funds - after some investors in the US reported
losses of more than 30% in 2008 - and a potential need for benchmarks, it believes "time will show
that, for most people, target date funds are the future".

State Street argued these types of funds are heavily passive, very transparent and comparatively low-
cost. So by using target date funds to act as an effective default investment option they "help address
one of the major challenges facing DC plans: the huge number of people who currently have
inappropriate asset allocations".

The latest Vision report noted that "good governance is the starting point for strengthening the DC
model", and said this includes more focus on the role of the fiduciary committee and risk controls.

It suggested DC plans require the same level of focus on governance issues as DB schemes, with
plan design and member education considered to be some of the most effective strategies for these
types of schemes.

The report added that fiduciary roles for DC schemes also "need to be viewed in a new light",
because while many countries have taken a purely advisory approach until now, "recent events
suggest that it is time for a more comprehensive adoption of best practices".
It warned that while the trend towards DC schemes has "eased the future burden of pension liabilities
on corporate balance sheets, it has not erased the notion of fiduciary responsibility. However, the
commonly understood meaning of the fiduciary role has blurred to some degree".

Some actions highlighted by the report for DC schemes to consider when reviewing governance
strategies include:
• Reviewing board membership qualifications;
• Considering fiduciary committee unities;
• Outlining governance processes;

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• The Investment Committee: back to basics, and
• Stepped-up risk management.

The report stated: "Recent events strongly suggest DC plans may find it useful to leverage the
accumulated experience of DB plans. Moreover, as witnessed by the interdependence of pension
funds’ performance in an increasingly globalised financial framework, the crisis also raises the
question of whether it is time to consider globalised institutional approaches [pension pooling
vehicles] to manage DC plans. This may include a more global approach to governance standards."

James Phalen, executive vice president of State Street, added: "Because DC represents the future of
retirement plan models in many markets, the financial services industry should continue to work

creatively and collaboratively with other stakeholders — including policymakers — to solve one of the
most compelling social challenges of our time: ensuring sufficient funding to support a decent quality
of life in retirement for an ageing population." (19/03/2010 IPE.com)

II. European Commission launches first step towards review of working time rules
On the 24 March the European Commission requested the views of workers' and employers'
representatives on the options for reviewing EU rules on working time. The first stage consultation
asks the European social partners at whether action is needed at EU level on the Working Time
Directive (2003/88/EC) and what scope it should take. This represents the first step towards a
comprehensive review of the Directive and comes after previous the attempts to revisit the existing
legislation reached an impasse in April 2009.

László Andor, EU Commissioner for Employment, Social Affairs and Inclusion said: "The failure to
reach an agreement on revising the working time legislation last year does not mean the problems
around the existing rules have gone away. We still need to find a balanced solution that addresses
the real needs of workers, businesses and consumers in the 21st century." He underlined: "We need
a comprehensive review of the rules based on a thorough impact assessment with a strong social
dimension. Today we invite the social partners to reflect broadly on this crucial issue and to come
forward with innovative proposals that move beyond unsuccessful debates of the past."

In 2004, the Commission put forward a proposal to amend Directive 2003/88/EC, following wide
consultations. The proposal aimed to tackle a series of problems left unsolved by the existing
legislation and case law of the Court of Justice, namely to clarify the Directive's application to on-call
time in certain sectors of work; to give more flexibility in calculating weekly working time; and to
review the individual opt-out from the 48-hour limit. However, in April 2009, government
representatives and the European Parliament concluded they could not reach agreement on the
proposal, despite lengthy negotiations.

In the meantime, other issues have been added to the debate, reflecting fundamental changes in the
world of work over the past twenty years. For example, average weekly working hours in the EU have
fallen from 39 hours in 1990 to 37.8 hours in 2006 and the share of part-time workers in the workforce
increased from 14% in 1992 to 18.8% in 2009. There is also more and more variation in individuals'
working time over the year and over working life, reflecting more emphasis on work-life balance
measures such as flexitime and time credit systems, as well as increasing workers' autonomy in
parallel with the expansion of the knowledge-based economy.

As a result, the Commission is planning a comprehensive review of the existing working time rules,
starting with a thorough evaluation of the current provisions and issues in their application, before
considering the different options to address these issues.

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 AEIP Newsletter • Week 12

22 – 26 March 2010

The review will be shaped by a set of policy objectives, including protecting workers' health and
safety, improving balance between work and private life, giving businesses and workers flexibility
without adding unnecessary administrative burdens for enterprises, especially SMEs.

The first stage consultation of social partners is an important first step towards such a comprehensive
review of the Working Time Directive. The social partners have six weeks to make their views known
to the Commission. In parallel to the consultations, the Commission will carry out an extensive impact
assessment, including an examination of the legal application of the Directive in the Member States
and a study of the social and economic aspects that are pertinent to a comprehensive review of the
Directive. (24/03/2010, europa.eu/rapid)

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