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Vulcan Insight | Analysis of the latest EU Developments 20-27 September 2019

Key Events This Week

Supreme Court rules on Boris Johnson’s suspension of Parliament
The Supreme Court has unanimously ruled that Boris Johnson’s prorogation of parliament was unlawful. The court ruled that the decision itself to prorogue parliament was unlawful as it had “the effect of frustrating or preventing the ability of parliament to carry out its constitutional functions without reasonable justification.” Notably, the court also asserted that the decision by the Privy Council to ask the Queen to suspend parliament was also “unlawful, void and of no effect and should be quashed”, effectively stating that the parliament had not been prorogued. Thus, the Speaker of the House of Commons was instructed to reconvene Parliament immediately.

Johnson had been attending the UN General Assembly in New York when the ruling was announced and expressed his displeasure at the judgement, and his concern that it would not make reaching a Brexit deal any easier. Leader of the opposition Jeremy Corbyn brought forward his party conference speech and led calls for Johnson to resign. Others, including Scottish leader Nicola Sturgeon, have called for a vote of no confidence. Parliament reconvened on Wednesday morning. On Johnson’s return to Parliament he made a series of questionable statements and used rhetoric for which he has received much criticism. The government’s motion calling for a three-day recess for the Conservative Party conference was defeated.

The historic ruling has reverberated not only throughout the UK, but across the EU. European officials have become accustomed to expecting the unexpected when it comes to Brexit. While the ruling is momentous in British constitutional history, it does little to solve the impasse that faces the British Parliament. Many think Johnson will now not risk breaking the law, brought by cross-party MPs, which forces the PM to ask Brussels for an extension to Article 50, should a deal not be reached by 19 October. It is by no means a given that the EU27 will grant such an extension, especially given France’s protestations at the last request: there is a reluctance to prolong the withdrawal procedures if this simply results in further intransigence in London. However, the EU will want no part in bringing about no-deal and if an extension facilitates a general election, it is most likely this will be granted. If a general election returns a Conservative government, most commentators expect that the Brexit deal will be centred around the Northern Ireland only backstop.

United Nations General Assembly in New York
The UN General Assembly took place in New York this week. Of particular focus was the Climate Action Summit, with around 60 UN members states presenting their concrete action plans and commitments to limit global warming. UN Secretary General, António Guterres addressed the assembly with calls for reform of the principles of multinationalism and international cooperation, calling nations to “restore trust, rebuild hope and move ahead, together.” He also stressed that “This is not a climate negotiating summit, this is a climate action summit.”

German Chancellor Angela Merkel said industrialized countries with their high emissions played the largest role in creating the climate crisis and therefore had the obligation to put their technology and finance into stopping global warming. Adding to this, Leo Varadkar announced that Ireland will stop exploration for oil, stating it is incompatible with a low carbon future.

In stark contrast to the speech given by Guterres, Donald Trump delivered a speech centered around nationalism and individual state sovereignty, adding that “the future belongs to sovereign and independent nations”. The same day saw the Democratic Party launch a formal impeachment inquiry into President Donald Trump over allegations that he pressured a foreign power to damage a political rival. This announcement by Nancy Pelosi gives the official go-ahead for lawmakers to investigate the US President’s phone call with the Ukrainian leader and determine whether he committed an impeachable offence.

Donald Tusk, in his last speech to the UN as European Council President was not light in his criticism of Trump. “To protect freedom, it is not enough to talk about it in speeches,” Tusk said, “You have to defend the rights of an individual everywhere and every day. You have to defend the freedom of speech and a free press. And you have to stop flirting with dictators and authoritarian regimes.” With changes in leadership at the EU level, and pressure building in the US in the run-up to the next election, we can expect the tensions to continue.

 

Vestager vs Multinational Corporations
The European Commission has lost its case against Starbucks. In 2015 Competition Commissioner Margrethe Vestager ordered the Netherlands to recoup millions in unpaid taxes from the multinational. This decision was one of the first from the European Commission against a company of such scale after the LuxLeaks in 2014. The court has maintained a second decision issued in 2015 that led to Luxembourg recovering €23.1 million from Fiat Chrysler. Both of these judgements can be appealed at the European Court of Justice.

Challenges have been piling up at the EU courts since state-aid investigators started work in 2013 to unearth what they deemed to be the most problematic examples of otherwise legal individual tax agreements, known as tax rulings, doled out to companies by member countries. Finding itself at the receiving end of most of the EU’s decisions since then, Luxembourg was ordered to recoup 250 million euros from Amazon in2017 and 120 million euros in back taxes from energy utility Engie SA, France’s former natural-gas monopoly, previously known as GDF Suez, last year.

As the incoming Vice-President of the European Commission with a portfolio covering the Digital Strategy of the European Union, Vestager must be careful not to multiply the number of defeats for the European Commission. To help her in this new role, she has appointed Kim Jørgensen, former Danish Ambassador to the EU as her head of Cabinet.

Another high-profile case on the table is the €13 billion back-tax bill Apple has to pay to Ireland. This case has been the highlight of antitrust chief Margrethe Vestager’s five-year crackdown on U.S. tech giants. Apple said it is the world’s biggest taxpayer, urging EU judges to overturn the 2016 order by the European Commission Apple, which made a reputation on smashing industry conventions, “follows the rules” and the EU was wrong to claim that profits should have been taxed in Ireland instead of the U.S. where Apple products are developed.

Key Dates
29 September: Austrian General Election
30 September: Hearing of European Commissioner for Trade, Phil Hogan
30 September: EU-Moldova Association Council
1 October: Hearing for European Commissioner for Agriculture, Janusz Wojciechowski
3 October: Hearing for European Commissioner for the Economy, Paolo Gentiloni
4 October: Environment Council
7-8 October: Justice and Home Affairs Council
8 October: Hearing for the Executive Vice President of the Commission for an Economy that Works for People, Valdis Dombrovskis
9 October: Eurogroup

Compliments of Vulcan Consulting, a member of the EACCNY