AEIP Newsletter • Week 18

03 – 07 May 2010

Table of Contents

EU FINANCIAL SERVICES............................................................................................................................... 2
I. RECOVERED SPOV GRANTS EXTRA INDEXATION ............................................................................................. 2
II. NPRF PROFITS FROM BANK BAIL-OUTS ........................................................................................................... 2
III. EP IDEAS ON NON-EU HEDGE FUNDS IS IN TUNE WITH COUNCIL OF MINISTERS' APPROACH, ACCORDING TO
GAUZÈS ............................................................................................................................................................... 3
IV. SOLVABILITY II DIRECTIVE WILL NOT COME INTO FORCE UNTIL JANUARY 2013........................................... 3
EU INTERNAL MARKET .................................................................................................................................. 4
I. EU TO END DOUBLE TAXATION FOR VENTURE CAPITAL .................................................................................... 4
II. MEPS WARN AGAINST CHANGES TO BANK CAPITAL REQUIREMENTS THAT WILL DAMAGE REAL ECONOMY .... 4
III. OBLIGATION TO PAY FOR DERIVATIVES WILL NOT APPLY TO NON-FINANCIAL COMPANIES ............................ 4
EU HEALTH ......................................................................................................................................................... 5
I. PATIENT RIGHTS: COMMISSION ACTS TO PROTECT PATIENTS' RIGHTS IN SPAIN, SLOVAKIA AND DENMARK ..... 5
EU SOCIAL AFFAIRS......................................................................................................................................... 5
I. THIRD OF EU WORKERS WOULD RETIRE EARLY FOR LESS ................................................................................ 5
II. CRISIS CAUSES DELAY FOR BIH SECOND PILLAR ............................................................................................. 6
III. NEW SOCIAL SECURITY COORDINATION RULES IN FORCE FROM 1 MAY ......................................................... 6
IV. MEMBER STATES MUST PROVIDE SOCIAL SECURITY COVERAGE TO SELF-EMPLOYED WORKERS AND
ASSISTING SPOUSES AND DECIDE WHETHER AFFILIATION IS COMPULSORY OR OPTIONAL .................................... 7
V. SWISS LAW PROTECTING PENSIONERS' BENEFITS SHOULD BE CHANGED - DEPREZ .......................................... 7
VI. FINNISH WORKING GROUP TO EXAMINE FUTURE PENSION REFORM ................................................................ 7
ECONOMY ........................................................................................................................................................... 8
I. JURI VOTES UNANIMOUSLY IN FAVOUR OF AIFM AMENDMENTS .................................................................... 8
II. PGGM TO INCREASE DIRECT ENGAGEMENT PROJECTS .................................................................................... 8
III. THREAT OF AIFM IMPASSE AS UK LOOKS TO HOLD FIRM.............................................................................. 9
IV. MEPS THINKING OF SETTING UP “GROUP OF WISE MEN” IN TANDEM TO ECONOMIC GOVERNANCE
TASKFORCE.......................................................................................................................................................... 9

EVENTS AND COURT CASES........................................................................................................................ 10

I. NO UPCOMING EVENTS .................................................................................................................................. 10
II. EUROPEAN COURT OF JUSTICE CALENDAR".................................................................................................. 10
IN DEPTH ANALYSIS ...................................................................................................................................... 11
I. EU TO END DOUBLE TAXATION FOR VENTURE CAPITAL .................................................................................. 11
II. NEW SOCIAL SECURITY COORDINATION RULES IN FORCE FROM 1 MAY ......................................................... 12
III. MEMBER STATES MUST PROVIDE SOCIAL SECURITY COVERAGE TO SELF-EMPLOYED WORKERS AND
ASSISTING SPOUSES AND DECIDE WHETHER AFFILIATION IS COMPULSORY OR OPTIONAL .................................. 13

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EU Financial Services

EU Financial Services

I. Recovered SPOV grants extra indexation

A total return of 14.3% in 2009 pushed the cover ratio of Stichting Pensioenfonds Openbaar Vervoer
(SPOV) to 118%, enabling it to grant more than a full indexation in 2010. The strong investment
performance, which included returns of 35.5% and 36.8%, respectively, from the pension fund’s equity
and tactical equity portfolios, prompted the €2.3bn public transport pension fund’s cover ratio to
recover quickly from its 105% level in March 2009. In addition to offering full compensation for
inflation, SPOV was also able to increase pension rights by one-third of the indexation that could not
be granted for 2008, as inflation has been low, according to the latest annual report. Almost all of
SPOV’s investment portfolios have outperformed their benchmarks, with commodities exceeding their
index by over 15 percentage points, returning 28%, The industry-wide scheme attributed this to high
oil prices. The scheme’s combined 36.9% allocation to fixed income returned 8.8% on average,
generating 5.6% on government bonds, and 23% on euro-zone corporate bonds. Emerging market
debt produced a return of 30.4%, while the mortgage portfolio delivered 16.3%. The pension fund’s
private equity portfolio produced a negative performance of -3.3%, placing it 33.5 percentage points
short of its benchmark. Officials attributed this significant underperformance to the index lagging
behind the developments on the equity markets. The scheme said it had decided to fully focus its
strategic equity portfolio on the long term and to concentrate risks by further spreading its investments.
In addition, the pension fund had raised the interest hedge on its liabilities to 60%, largely through
interest swaps and long-term European government bonds, and after merging its strategic and tactical
fixed income portfolios. SPOV said it had already fully hedged the risks on the most important
currencies, while it is managing its liquidity risk by focusing on investments that are easy to sell, such
as government bonds. The pension fund further indicated that it has extended its contract for pension
administration and asset management with provider SPF Beheer for another five years. (04/05/2010
IPE.com)

II. NPRF profits from bank bail-outs

The National Pension Reserve Fund (NPRF) reported an overall return of 4.8% in the first quarter of
2009 as its direct investments in Bank of Ireland and AIB delivered 4.2%. At the end of March 2010,
the pension fund's discretionary portfolio – representing 70.2% of total investments held and excluding
the €7bn directed investment portfolio used to recapitalise two banks last year – produced a return of
5.1% driven by a strong equity performance. The NPRF noted performance was strongest among
investments in non-eurozone markets and boosted by the strengthening of the dollar against the euro.
But it warned that, due to equity markets having now priced in substantial earnings growth in 2010,
"any failure to deliver will disappoint". The value of the pension fund increased by more than €2bn to
€24.5bn, although this included the transfer of around €1bn in assets from three university pension
funds under the Financial Measures (Miscellaneous Provisions) Act 2009. At the end of the first three
months of 2010 the discretionary portfolio had increased in value from €15.3bn in December to
€17.2bn and the directed investments portfolio accounted for 29.8% of the fund with a value of €7.3bn.
This increase in the value of the directed investments was attributed to the payment of the first annual
dividend on the Bank of Ireland (BoI) preference shares owned by the NPRF in February. However,
because the European Commission had requested that discretionary coupon payments on tier 1 and
tier 2 capital instrument in BoI – including the NPRF's preference shares – are not paid while it
considers the bank's restructuring plan, the dividend comprised of €250.4m ordinary shares. The
NPRF revealed these shares had increased in value to €295m by the end of March 2010. This
confirmation of a 4.2% return on its directed investments follows an announcement earlier this week
that the NPRF's holdings in BoI could increase to 36% of the bank's ordinary share capital as it
participates in a capital raising for the bank. Despite converting some of its preference shares to
ordinary shares as part of the transaction, the NPRF will still retain approximately €1.7bn of preference
shares with a slightly higher coupon rate of 10.25%. The overall asset allocation of the NPRF's

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discretionary portfolio (excluding its directed bank holdings) at 31 March 2010 comprised: 32.3% in
large cap equity; 3.5% in small cap equity; 3.4% in emerging markets; 2.8% in private equity; 1.8% in
real estate; 0.7% in commodities; 5.4% in bonds; 0.8% in currency and asset allocation funds; 15.3%
in cash, and 4.2% in university pension fund assets. (30/04/2010) IPE.com)

III. EP ideas on non-EU hedge funds is in tune with Council of Ministers' approach, according
to Gauzès
Speaking on Monday 4 May, EP rapporteur on the draft directive on hedge funds and alternative
investment funds, Jean-Paul Gauzès (EPP, France), said that if the European Parliament had stuck
with the idea of equivalence mooted by the European Commission, it would have meant MEPs taking
a different approach from that of the member states. The draft directive will be voted upon at the EP's
financial and monetary affairs committee on Monday 10 May. The rapporteur set out his compromise
suggestion for the controversial issue of how hedge funds from outside the EU are to be treated (see
EUROPE 10124), whereby non-EU fund managers would have to sign a contract pledging to respect
all the rules in the EU directive, including the fact that any disputes would have to be settled by a court
within the EU and the EU financial supervisor would monitor operations. Rather than EU law applying
outside the EU, this would be the EU supervisor delegating monitoring and controls to the equivalent
body in the country in question, explained Gauzès. He gave the example of a deal between the United
States and Switzerland that gives the US SEC power to scrutinise two Swiss banks. Gauzès explained
the four requirements to be met by non-EU hedge funds wishing to operate in the EU. The Socialists
take a different line from Gauzès in that they want to add a fifth requirement on the application of the
New York Convention on mutual recognition of legal rulings. The rapporteur hopes the 70
amendments will be voted through by a significant majority in order to get the negotiations with the EU
Council of Ministers off to a good start. If the Tuesday 18 May ECOFIN Council does not reach
agreement in principle on the draft directive because of opposition from the United Kingdom (which
faces general elections on 6 May), then Gauzès would be prepared to postpone the EP's vote in
plenary until September with the hope of tying up all the ends in first reading. (04/05/2010 Agence
Europe)

IV. Solvability II Directive will not come into force until January 2013
Speaking on Tuesday 4 May at a hearing on the EU's Solvability II Directive (2009/138/EC) revising
the surveillance system for insurance and re-insurance (see EUROPE 9887), EU Internal Market
Commissioner Michel Barnier said that very few insurers' tax years end on 31 October and he
therefore wants the introduction date for the new directive to be put back from 31 October 2012 to 31
December 2012 in order to bring it into line with the end of most insurance companies' tax years (31
December). The review of the Solvability II Directive will be part of the draft “Omnibus II” legislation
expected to be unveiled in June 2010 to amend several pieces of financial services legislation to
incorporate changes set out in the EU financial supervision package. Barnier discussed the sensitive
issue of balance in the new measures to ensure that insurance companies' capital requirements match
the level of risk. After the summer break, the Commission will publish implementation measures to this
end. Barnier said the rules had not yet been decided upon but people tell him the current system is
imbalanced and the capital requirements are too great. He said the new rules should strike a balance
between stronger solidity on the one hand and international competitiveness on the other. He urged
insurance companies to take an active part in the consultation exercise on the fifth impact assessment
(QIS 5) from August to November 2010. Speaking on behalf of the European Insurance and Re-
insurance Federation (CEA), Michaela Koller warns in a press release against setting capital
requirements too high, arguing that the economic crisis must not be used to justify setting excessive
capital requirements on an industry that did not cause the crisis and which has survived it rather well.
The CEA is concerned about the coverage of risk in healthcare and non-life insurance, investing in
shares and insurance companies investing in banks, and how liquidity premiums and the
interchangeability of capital will be covered when calculating a company's solvability. (05/05/2010
Agence Europe)

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EU Internal Market

EU Internal Market

I. EU to end double taxation for venture capital

The EU plans to boost cross-border venture capital investment by preventing double taxation for funds
working in more than one European country.
In depth analysis page: 11

II. MEPs warn against changes to bank capital requirements that will damage real economy
Andreas Treichl, the director of Austrian bank Erste Bank, said at a public hearing organised by the
European Parliament's economic and monetary affairs committee on the increased capital
requirements for banks on Monday 3 May that he feared decision-makers were unaware of the
damage their reforms would do to the real economy. He said that the current rules did not differentiate
among different types of bank and did not fit retail banks. Unlike buildings societies, investment banks
will be helped by the new Basel III rules, he said. Speaking on behalf of Spanish banking giant
Santander, Barbara Frohn called for a macroeconomic assessment, rather than a case-by-case
assessment, of the impact of the capital requirements changes on the real economy. Stefan Walter,
the secretary general of the Basel Committee (of major banking regulators and central bankers from
around the world, a committee responsible for making recommendations on bank regulations), said
that after causing the crisis, banks had now returned to pre-crisis levels of profitability thanks to
massive bailouts and injections of public sector cash. He said that the banks must now set up their
own safety nets ahead of any further crisis rather than be bailed out by taxpayers and using that
money to pay bonuses or get greater leverage, he said. The increased capital requirements for banks
will aim to reduce leverage ratios, improve the quality of bank capital, force banks to set aside enough
cash and improve risk management. Aware that the worst crises were those where banks are unable
to lend on to the real economy, Walter said that the Basel Committee, in cooperation with the IMF and
the BIS, would make an in-depth assessment of the impact of the current reforms on individual banks
and on banking as a whole, to ensure that the transition to the new rules does not undermine growth.
Dynamic provisioning. Frohn described dynamic provisioning, a mechanism that has been shown to
work by Spain, as being like a squirrel, setting aside stores to prepare for the winter, making provision
in fat years to prepare for the lean (see EUROPE 9949). She said there was confusion about the
reasoning behind such a measure (preparing for future crises or providing greater funds to be lent on
to customers), which should be added by the European Commission to its draft Basel IV Directive,
expected to be published at the end of the year. She said that Santander did not want a “dual system”.
(03/05/2010 Agence Europe)

III. Obligation to pay for derivatives will not apply to non-financial companies
Commenting on 4 May 2010 on the preliminary outcome of the consultation with stakeholders on the
new EU rules for derivatives, EU Internal Market Commissioner Michel Barnier said that the obligation
to pay for derivatives should not apply to non-financial companies. He added that under the draft
legislation the European Commission will be unveiling next month, non-financial companies will be
required to manage the risk of derivatives that have not yet been paid for, and that in the event of risk
to financial stability, the duty to pay up would apply. He said the Commission would be monitoring the
situation to ensure this decision was not sidelined by the financial industry and ensure it does not pave
the way for regulatory tourism. He said the EU's approach was generally in line with discussions under
way in the United States. In line with G20 guidelines, the draft EU directive would require the finance
industry to pay for standard derivatives using centralised clearing houses (CCP) and for all derivatives
to be registered in trade repositories. In response to a question from MEP Pascal Canfin (Greens/EFA,
France) on having a CCP in a eurozone country for all transactions in euros and on the interoperability

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of CCPs, the commissioner said the issue was highly sensitive but the EU had to have resources to
match its sovereignty and he was setting two objectives for properly supervised and properly financed
CCPs, namely boosting security and increasing competition on the markets. 04/05/2010 Agence
Europe)

EU Health

EU Health

I. Patient rights: Commission acts to protect patients' rights in Spain, Slovakia and Denmark
The European Commission has decided to refer Spain to the Court of Justice, and to send Slovakia a
formal request to comply with its obligations, over their rules on reimbursement of medical expenses
incurred in another Member State. Patients from Spain and Slovakia are being wrongly denied
reimbursement claims following medical treatment elsewhere within the EU. They are then faced with
medical bills that, according to EU rules, should be paid by their own Member State. Also, Denmark
will be sent a formal request regarding its refusal to recognise medical prescriptions issued by doctors
in Member States other than Sweden or Finland. The Commission's requests to Slovakia and
Denmark take the form of so-called reasoned opinions under EU infringement procedures. What is the
aim of the EU rules in question? Reimbursement of medical expenses - Under EU rules on freedom to
provide services, patients as recipients of services have a general right to be reimbursed for medical
treatment received in another Member State. The rights differ according to whether the treatment
involves non-hospital care – such as dental treatment or consultation at a doctor's practice – or
hospitalisation – such as cancer treatment. For non-hospital care, patients have the right to be
reimbursed, without prior authorisation, for treatment received in another Member State – provided the
treatment would be paid for in their own Member State. In contrast, for hospital treatment, Member
States may require prior authorisation for treatment as long as a clear and transparent system is in
place for issuing the authorisations. However, an authorisation can only be refused if the same or
equally effective treatment can be obtained without undue delay in the patient's own Member State.
Recognition of prescriptions issued in other Member States Again under EU rules on freedom to
provide services, Member States should recognise medical prescriptions issued by doctors from other
Member States. The requirements for admission to the profession of doctor have been harmonised
and have to be recognised in other Member States. As a result, the prescribing of a medicinal product
by a doctor established in another Member State offers the same guarantee for the patient as a
prescription issued by a doctor in the Member State where the pharmacy in question is located.
EU Social Affairs

EU Social Affairs

I. Third of EU workers would retire early for less

A third of workers in Europe would rather retire early and receive less income than continue working
past the existing national retirement age, according to research by Aon Consulting. The firm's survey
of 7,279 workers in nine EU countries, including Denmark, Germany, Ireland, Netherlands and the UK,
also found that a quarter of respondents were willing to supplement their pensions by paying for
additional financial products. The research also showed that 34% of individuals accepted that the
minimum retirement age for the state pension would need to be raised beyond 65. Irish workers were
the most accepting of the need to retire later, with 46% stating they were "okay" with retiring later.
Meanwhile 45% of employees in the UK and Denmark said they expected an increase in the

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retirement age. The survey, which forms part of Aon's European Employee Benefits Benchmark, also
highlighted that only 18% of Spanish workers were willing to retire later, with 33% of these preferring
to retire early on less money, a sentiment shared by 42% of Dutch workers and 38% of Belgian
employees. German workers seemrd the most likely to make an effort to supplement their pension
income with 49% intending to buy additional cover such as an annuity at their own expense. This
contrasts with an average of 26% across the nine countries, although 43% of Spaniards and 38% of
French workers plan to follow their German counterparts. Employees in the UK and Ireland, however,
were less likely to take responsibility, with the number planning to buy additional financial tools
reaching 15% and 13%, respectively. Oliver Rowlands, head of retirement EMEA at Aon, said: "The
turbulent economic environment of the past few years has really forced people and governments to
take stock, look at their and their nation's retirement plans and evaluate whether they will be ready for
an ageing population." He said Europeans are living longer, more productive lives than previous
generations so there is no longer a specific need to retire in their early sixties. And in some cases
workers may be forced to work longer for other reasons. He cited the UK as an example, where
fluctuations in the equity markets mean workers with defined contribution (DC) pensions "are still not
back to the same levels of saving before the financial crisis began". Rowlands added: "European
employers should be aware that older workers bring a wealth of experience and may want to adopt a
strategy for accommodating part-time working or job-sharing." (30/04/2010 IPE.com)

II. Crisis causes delay for BiH second pillar

Plans for the creation of a second pillar in Bosnia-Herzegovina (BiH) have been drawn up but the
current economic situation will delay its implementation until at least 2011. Belma Hadžiomerović,
head of marketing and PR at the BiH subsidiary of Austrian banking group Raiffeisen, told IPE there
was uncertainty over when the reform would be delivered. “As far as we know the process has been
slowed down due to the current economic situation,” she said. Last year the Balkan republic
comprised of the Federation of Bosnia and Herzegovina and the Republika Srpska laid out plans for a
major pension reform, including the introduction of occupational pension funds and a voluntary third
pillar together with the World Bank. “Raiffeisen is interested in running one of the future second pillar
funds, but that depends on the ultimate structure - that is, how the system will be set up in the end,”
Hadžiomerović said. According to the preliminary draft, the second pillar will contain an obligation for
employers to pay into a pension fund once they have reached an agreement with employees on
setting up an occupational pension provision. The employer will then be able to pay up to 40 euros per
worker every month on a tax free basis into one of the pension funds. These pension funds are
expected to be run by the local banking, insurance and investment fund industries. “It is expected that
initially only large enterprises and public services would establish such pension plans,” the
International Labor organisation pointed out in a report on the reform progress. A mandatory pillar is
not suggested because the transition costs might be too high. Eventually, the second pillar funds
might also have to take on some of the so-called 'privileged pensioners', people who have been
granted more favourable retirement conditions and pension benefits for various reasons (mostly
former military personell). This is the only area in which the International Monetary Fund and the World
Bank will be pushing for reform this year, Hadžiomerović said. But Hadžiomerović warned: “the
Pension Reform is one of the most important structural reforms needed to be implemented in BiH for
further enhancement of the economic growth and private sector development”. (30/04/2010 IPE.com)

III. New social security coordination rules in force from 1 May

New regulations on social security coordination come into force on 1 May 2010. These new rules will
facilitate intra-EU mobility for workers, and also for young people and retired people, job seekers, etc.
This chimes with the objectives of the EU 2020 strategy: employment and mobility, Cristina Arigho,
spokeswoman for Employment, Social Affairs and Inclusion Commissioner László Andor, told press.
The new rules will also allow those who move to another country to retain all their benefits. There will
be no new entitlements, Arigho said, but existing employment, pensions and other allowances will be
retained and guaranteed. In depth analysis page: 12

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IV. Member states must provide social security coverage to self-employed workers and
assisting spouses and decide whether affiliation is compulsory or optional
Meeting on Tuesday 4 May in Brussels, the women's rights committee of the European Parliament
adopted at second reading, by 29 votes for, one against and one abstention, the report by Astrid
Lulling (EPP, Luxembourg) on equal treatment between men and women exercising a self-employed
activity. According to the text adopted, member states must take the measures necessary for
organising social protection in line with their national legislation. It is, however, up to them to decide
whether this social protection must be implemented in a compulsory or voluntary way.
In depth analysis page: 13

V. Swiss law protecting pensioners' benefits should be changed - Deprez

The inclusion of pensioner benefits in recovery measures for underfunded pension funds was the
subject of intense debate at an industry conference today. A survey of 76 trustees, conducted at the
Fachmesse zweite Saüle conference, showed that 60% of funds had to implement recovery
measures, including contribution increases, as well as possible cuts in the pension promises or hikes
in the retirement age. Under current Swiss regulations, pension benefits in payment cannot be altered.
But the survey showed that many trustees were concerned about the potential inter-generational
injustice this could cause, with the issue being raised in 84% of discussions concerning recovery
measures. “Legal changes are necessary and certain parameters should be defined under which
contributions by pensioners should be made possible,” said Olivier Deprez, actuary and member of the
Swiss commission for the review of the second pillar. Brigitte Schmid, head of the Swiss Re
Pensionskasse, said she wanted pensioner participation in recovery measures in schemes of
companies that only pay the legal minimum into their pension funds, and which therefore have less
leeway than more generous plans. Deprez suggested allowing pension cuts of 1% per year over a
certain period, although he admitted that this might not be appropriate for smaller funds. “This would
amount to the same as several years ago when Switzerland was still generating inflation as
pensioners do not have a legal claim to indexation,” he said. According to the poll, 65% of
Pensionskassen have not indexed their pension payments in the last five years. “We should stabilise
the second pillar for the long-term and not just introduce short-term recovery measures,” Deprez
added. However, Jürg Brechbühl, a lawyer, argued that the inclusion of pensioners in recovery
measures would have a domino effect on many other regulations, such as the appointment of a
pensioner representative to trustee boards, compulsory indexation and reducing the discount rate from
the current 3.5-4%. Othmar Simeon, managing director at Swisscanto, said he would like to see a
complete overhaul of the system, whereby only a minimum level of pension guaranteed and the rest
flexible according to the financial situation of a fund. “A 'flexibilisation' of pensions seems a good idea
but the transition phase will be difficult to manage,” noted Christoph Ryter, head of Swiss pension fund
association ASIP. Union representative Rita Schiavi demanded something similar but wanted the
guaranteed pension to come fully from the pay-as-you-go first pillar and the rest from the second pillar.
All participants in the discussions noted they were against creating special funds for pensioners only.
(05/05/2010 IPE.com)Economy

VI. Finnish working group to examine future pension reform

The Finnish government and representatives from labour market organisations have agreed to extend
the remit of the working group on the extension of working lives. In a meeting earlier this week,
participants accepted that the increase of life expectancy has been more rapid than previously
projected, which could lead to a situation where pensions will be significantly lower than planned when
the 2005 pension reforms were drafted. Representatives from the government and labour market
organisations also recognised that unless working lives are extended, the reduction in pensions would
have a negative impact on both purchasing power and the tax revenue. The findings of one of the two
working groups established in March 2009 was presented to the government in February on improving
wellbeing at work and reducing disability pensions, while the second group was unable to agree on
increases to retirement ages. Now representatives have agreed working life issues are also important

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in stabilising the economy and making public finances sustainable. Therefore the mandate for the
working group now has a focus on three objectives related to the reform of the earnings-related
pension scheme, including making pensions sustainable without affecting economic stability. They are:
A sufficient level of earnings-related pension benefits needs to be secured in circumstances where life
expectancy coefficients result in future pensions being considerably lower than projected;
Sustainability of earnings-related pension scheme financing needs to be secured by safeguarding the
development of pension insurance contributions in a way that does not weaken employment and
economic growth; The average retirement age needs to be raised sufficiently so that the above two
objectives can be met. The government added in a statement that the purpose of the working lives
group would be to "outline new minimum objectives and map out different possibilities to develop the
earnings-related pension scheme in order to meet the objectives, without taking any position on any
single alternative". (06/05/2010 IPE.com)

Economy

Economy

I. JURI votes unanimously in favour of AIFM amendments

The European Parliament’s Legal Affairs Committee, otherwise known as JURI, has voted
unanimously in favour of proposed amendments to the EU’s controversial Alternative Investment
Fund Managers (AIFM) Directive. All 23 members of the JURI committee voted in favour of
amendments to strengthen the European Commission’s proposed legislation to regulate alternative
investment funds, such as hedge fund and private equity managers The amendments had been
presented earlier by Austrian social democrat MEP Evelyn Regner, the JURI committee’s rapporteur,
who complained during the vote that hedge funds were continuing to operate “blithely” as thought the
financial crisis has not taken place. She said the legislative package proposed by the European
Commission was too weak and advocated the creation of a “tight corset to control the activities of fund
managers”. She said that the possibility of passing on liability positions encourages “the construction
of opaque investment carousels.” The proposal included a number of amendments from Sharon
Bowles, liberal democrat MEP for the South East of England, shadow reporter on the Juri Committee
and chair of the EU’s Economic and Monetary Affairs Committee (ECON). The ECON Committee was
due to discuss the AIFM Directive in relation to pensions and insurance last week, but its meeting has
been postponed until May 11, due to recent air travel disruption caused by volcanic ash from Iceland.
Business groups MEDEF and BusinessEurope have written to committee members of both JURI and
ECON to vote against the amendments, which they believe will harm European small and medium
enterprises (SMEs). “They would impose significant burdens on companies, including a large number
of small innovative companies given the low threshold,” wrote Phillipe de Buck of BusinessEurope.
Javier Ecchari, secretary general of the European Private Equity & Venture Capital Association
(ECVA), complained that JURI members considered a company with more than 50 employees not to
be an SME. “They would therefore oblige such companies to disclose board-level, commercially-
sensitive information on activities and financial affairs without any reference to a level playing field or
company law,” he said. Ecchari added: "JURI's failure to exempt private equity and venture capital
funds from requirements designed for hedge fund trading risks would, if adopted, have a ruinous effect
on the financing market for European innovation and SMEs. A venture capital fund investing in early-
stage businesses would face major outlay for entirely useless advisory services such as independent
evaluation and depositary.” (30/04/2010 IPE.com)

II. PGGM to increase direct engagement projects

PGGM, the €90.8bn pension asset manager for the care and welfare sector, intends to increase its
direct engagement with companies despite initiating more than 80 direct engagement projects on

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environmental, social and governance (ESG) factors in 2009. Details from its Responsible Investment
Annual Report 2009 revealed the company voted on over 40,000 agenda items at the meetings of 99%
of the 4,200 companies held in its investment portfolio. This is in addition to dialogues held with more
than 500 companies that led to 320 successful engagement results. PGGM carried out 81 direct
engagement projects in 2009, with the remainder carried out on its behalf by F&C. The direct
engagement approach led to 17 successes, while F&C's activities produced 317 successful outcomes
from 1,528 projects targeted at 495 companies. The asset manager said it paid particular attention to
resolutions submitted by shareholders and ESG aspects such as better company reporting on climate
change policy and activities. F&C also highlighted its involvement in "intensive discussions" with
members of the European Parliament on the need for a strong climate policy ahead of the UN climate
discussions in Copenhagen last December. Other issues that triggered engagement work over the
year included human rights issues in Burma and/or Sudan, other environmental issues such as the Tar
Sands projects in Canada, which is the subject of a number of shareholder resolutions at oil company
AGMs in 2010, and corporate governance relating to remuneration policies. Despite the current
progress and continued integration of the organisation's ESG policy across existing investment
processes, PGGM said further targets for 2010 included a 100% survey of ESG factors across all
investment activities – the second stage of its integration process – and a continued high percentage
of voting. It also confirmed it was aiming for "further growth in the number of self-initiated engagement
projects", alongside continued attention on transparency with regard to its responsible investment
policy and the results it achieves. During the launch of the report in the Netherlands earlier this month,
PGGM confirmed that it was looking at the possibility of scaling back investments in equities or
adopting an exclusion policy for the 'worst-in-class' in an effort to better understand its portfolio and
implement an active engagement policy. The alternatives will be presented to members in June, with
any changes to the investment structure expected to be in place by January 2011. (30/04/2010
IPE.com)

III. Threat of AIFM impasse as UK looks to hold firm

The European Parliament is facing an impasse over its proposed Alternative Investment Fund
Managers (AIFM) Directive due to UK resistance, according to the rapporteur for the Economic and
Monetary Affairs Committee (ECON). During a technical briefing on Tuesday, MEP Jean-Paul Gauzès
revealed that 25 EU member states had come to a relatively firm agreement over the directive, but he
said the UK was opposing the consensus “very determinedly”. The Czech Republic also has some
outstanding concerns with the current draft over depository issues, but Gauzès said this was quite
minor in comparison. The major obstacle to pushing the AIFM Directive through concerned third
country issues, notably clearance of their conformity with EU regulatory standards, Gauzès said. If
conditions were not met, he explained, the EU would not permit investment from the EU into third
countries, and any member state that broke a set number of conditions would face sanctions. “We
can’t allow a system that does not concur,” he said. “That is the opinion of the [great majority] of
European Parliament.” But the position of the Council of Ministers, the meeting place of the EU’s
finance ministries, was not so certain Gauzès said. The Parliament and the Council are working
together, on a “co-decision basis”, but this will be made impossible if the UK continues to oppose the
third country proposals. Gauzès expected the Council to settle its position at its meeting on 18 May,
but this date was not certain, he said. (04/05/2010 IPE.com)

IV. MEPS thinking of setting up “group of wise men” in tandem to economic governance
taskforce
Elena Salgado, the Spanish finance minister, was unable to attend the European Parliament's
economic and monetary affairs committee on Tuesday 4 May to discuss financial issues. Several
MEPs regretted the fact that the acting president of the Ecofin Council had been unable to attend and
also pointed out that this signified a lack of consideration for the Parliament. Sharon Bowles, the
president of the parliamentary committee, criticised the fact that MEPs had to consult the press if they
wanted to be informed about support for Greece. Expectations, however, are greater with regard to the
debate on the future economic governance of the EU. Although the first meeting of the task force

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03 – 07 May 2010

created by the European Council in March 2010 to carry out a rethink on future economic governance
will take place on 21 May (in Brussels) and although eurozone leaders will be meeting on Friday 7
May to draw the initial conclusions from the crisis in the eurozone, the role of the EP has still not been
clarified and despite repeated demands, the Council is continuing to ignore MEPs, pointed out Bowles.
Pervenche Berès, the rapporteur for the special committee on the financial, economic and social crisis,
wanted figures in the taskforce to have a more varied profile in order to help create discussion.
According to the French socialist, the creation of the workgroup is “very good news” as is the fact that
“President Van Rompuy has demonstrated both ambition and vision on what economic governance
should be”. Although the French MEP considered that this Commission group was snatched away at
the last moment by the European Council president, she also sought to explain “what does this mean
for the EP?” Parliament's request to participate in this group constitutes a minimum benchmark but it
should go beyond this approach and allow EP representation “among the EU27 finance ministers and
the ECB”. Berès is also proposing that the EP creates a “group of wise men” made up of legal experts,
academics and social partners etc whose mandate is to elaborate proposals on this theme. She also
said that they should avoid retreating into an overly inter-governmental approach during the exercise
being prepared by the European Council. The S&D might be producing a proposal in this connection
at the next conference of presidents of political groups, indicated sources close to Berès. (04/05/2010
Agence Europe)
Events and Court Cases

Events and Court Cases

I. No Upcoming Events

II. European Court of Justice Calendar"

Date Case Language Courtroom

Opinion Santos Palhota and Others - Freedom NL New Great

C-515/08 to provide services Courtroom
Wednesday Court of Justice - Second Chamber
05/05/2010
09:30 Reference for a preliminary ruling – Rechtbank van eerste aanleg te Antwerpen –
Interpretation of Articles 49 EC and 50 EC – National legislation requiring
construction sector undertakings carrying out works in a Member State on a
temporary basis to provide a declaration of posting to the authorities in the host
country Advocate General : Cruz Villalón

Opinion Andersen - Social policy DA New Great

C-499/08 Court of Justice - Grand Chamber Courtroom
Thursday
06/05/2010 Reference for a preliminary ruling - Vestre Landsret - Interpretation of Arts 2 and 6 of
09:30 Council Directive 2000/78/EC establishing a general framework for equal treatment in
employment and occupation (OJ 2000 L 303, p. 16) – National legislation providing
for the payment of a severance allowance for dismissed employees who have been
employed for a certain number of consecutive years with the same employer, except
where they have reached an age where they are entitled to an old-age pension to
which the employer has contributed – Direct or indirect discrimination on grounds of

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 AEIP Newsletter • Week 18

03 – 07 May 2010

age Advocate General : Kokott

Hearing Deutsche Lufthansa - Social policy DE Courtroom III -

C-109/09 Court of Justice - Second Chambe Level 6

Reference for a preliminary ruling - Bundesarbeitsgericht - Interpretation, first, of

Thursday Articles 1, 2(1) and 6(1) of Council Directive 2000/78/EC of 27 November 2000
06/05/2010 establishing a general framework for equal treatment in employment and occupation
09:30 (OJ 2000 L 303, p. 16) and, second, of Clause 5(1) of the Annex to Council Directive
1999/70/EC of 28 June 1999 concerning the framework agreement on fixed-term
work concluded by ETUC, UNICE and CEEP (OJ 1999 L 175, p. 43) - Prohibition on
age discrimination - National legislation allowing fixed-term employment contracts on
the sole condition that the worker has reached the age of 58 - Compatibility of that
legislation with the above-cited provisions - Legal consequences of any
incompatibility

Hearing Albron Catering - Social policy NL Courtroom I -

C-242/09 Court of Justice - Third Chamber Level 8

Thursday Reference for a preliminary ruling – Gerechtshof te Amsterdam – Interpretation of

06/05/2010 Article 3(1) of Council Directive 2001/23/EC of 12 March 2001 on the approximation
15:00 of the laws of the Member States relating to the safeguarding of employees’ rights in
the event of transfers of undertakings, businesses or parts of undertakings or
businesses (OJ 2001 L 82, p.16) – Company with all the personnel of a group of
companies which makes it available to operating companies of the group according
to their needs – Transfer of the activity of an operating company outside the group –
Classification

In Depth Analysis

In Depth Analysis

I. EU to end double taxation for venture capital

The EU plans to boost cross-border venture capital investment by preventing double taxation for funds
working in more than one European country.

In an expert report published on Friday (30 April), the European Commission said it was committed to
removing obstacles to the flow of investment across borders, amid ongoing concerns that small firms
are struggling to access capital.

The Commission is likely to incorporate the findings of the report, compiled by an independent group
of EU tax experts, into the 'Research and Innovation Plan' to be published in the autumn.

The group proposes that venture capital fund managers should not be treated as a taxable entity for
the fund or investors in the member state where the investment is made.

"This would reduce double tax problems for cross-border venture capital investment," the group said.

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 AEIP Newsletter • Week 18

03 – 07 May 2010

Secondly, it was found that venture capital funds may currently be treated in very different ways for tax
purposes by the different member states.

A fund may, for example, be treated as transparent in one state and non-transparent in another.
Again, this can lead to cases of double taxation.

The experts therefore suggest that EU member states should agree on a mutual recognition of the tax
classification of venture capital funds.

Algirdas Šemeta, the EU's commissioner for taxation, customs, audit and anti-fraud, said venture
capital is the lifeblood for many SMEs.

"As recognised in the EU's 2020 goals, improving the business environment for SMEs is crucial if we
are to build a stronger, sustainable economy. Therefore, we must make an efficient European venture
capital market a reality, and this means eliminating any tax obstacles that still stand in its way."

The report was welcomed by the venture capital industry, which urged policymakers to integrate its
proposals into the implementation of the Europe 2020 strategy.

"These proposals would represent a major step forward in facilitating venture capital investment
across Europe, as well as a sensible structure for cross-border private equity activity more generally,"
said Fabio Brunelli, chairman of European Venture Capital Association's tax and legal committee.
(03/05/2010 Euractiv.com)

II. New social security coordination rules in force from 1 May

New regulations on social security coordination come into force on 1 May 2010. These new rules will
facilitate intra-EU mobility for workers, and also for young people and retired people, job seekers, etc.
This chimes with the objectives of the EU 2020 strategy: employment and mobility, Cristina Arigho,
spokeswoman for Employment, Social Affairs and Inclusion Commissioner László Andor, told press.
The new rules will also allow those who move to another country to retain all their benefits. There will
be no new entitlements, Arigho said, but existing employment, pensions and other allowances will be
retained and guaranteed.

Above all, the reform will bring about substantial changes to the way coordination works in the future.
Member states will also have to develop an Electronic Exchange of Social Security Information
(EESSI) system) over the next two years. This will allow social security information to be exchanged
between countries. The new regulations will not bring in new rights and that will mean that rules can
be simplified. By 1 May 2012, all EU member states should be using the EESSI to exchange
information between social security institutions and for all areas covered by the coordination. Training
is being carried out in all member states. The Commission is lending its support to these activities. It is
preparing easily accessible information for users, for example, the on-going information campaign on
the European Health Insurance Card.

An explanatory brochure, “The EU provisions on social security - Your rights when moving within the
European Union” (2010; 57pp, ISBN 978-92-79-14197-3) is available in all official EU languages from
the EU Publications Office in Luxembourg (http: //ec.europa.eu/social).

In statistics published on Friday 30 April, Eurostat reveals that EU unemployment stands at 9.6%. With
this coordination, would for example, an unemployed Irish national receive his/her unemployment
benefit if he/she tried to find work in another country? Arigho said that this was already the case: “If
you are an unemployed Irish person, you get unemployment benefit. In the past, if you decided to go
to Paris, you could get your benefit for a period of three months under the French system. But for this,

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 AEIP Newsletter • Week 18

03 – 07 May 2010

you had to register with the relevant French authorities within seven days, assuming they knew you
were in Paris. Now it's six months. So you can get your benefits from Ireland for six months”.

According to Eurostat, in 2008, some 11.3 million EU citizens, or 2.3% of the overall EU population,
lived in a member state other than the one of which they were a national. So far around 190 million
European Health Insurance Cards have been issued (38% of the population). 10% of Europeans say
they have lived and worked in another country (inside or outside the EU) at some point in their past.
3% have lived in another country but did not work there. 17% of Europeans are considering working
abroad at some time in the future: 12% of these are considering doing so in the next year, 47% in the
next five years. A majority of Europeans (60%) think that people moving within the EU is a good thing
for European integration, 50% think it is a good thing for the labour market, and 47% think it is a good
thing for the economy. (30/04/2010 Agence Europe)

III. Member states must provide social security coverage to self-employed workers and
assisting spouses and decide whether affiliation is compulsory or optional
Meeting on Tuesday 4 May in Brussels, the women's rights committee of the European Parliament
adopted at second reading, by 29 votes for, one against and one abstention, the report by Astrid
Lulling (EPP, Luxembourg) on equal treatment between men and women exercising a self-employed
activity. According to the text adopted, member states must take the measures necessary
fororganising social protection in line with their national legislation. It is, however, up to them to decide
whether this social protection must be implemented in a compulsory or voluntary way.

“This is a great step forward because, in most member states, there is no social security coverage for
self-employed workers and certainly not for their assisting spouses!”, Lulling was pleased to tell the
press. “The compromise reached with Council is that, now, all member states must provide social
security for self-employed workers and their assisting spouses, and decide whether affiliation to the
social security system is compulsory or optional. Some member states do not want this to be
compulsory”, the rapporteur commented.

“It took from May 2009 to March 2010 to have a Council and Commission common position on the text
adopted by the European Parliament at first reading”, said Lulling, pointing out that the EP had, in May
2009, and by a very large majority (552 votes for, 14 against and 57 abstentions), adopted its proposal
to make affiliation of social security schemes mandatory for self-employed workers and their assisting
spouses, as is the case in most member states for employees. The Council did not follow the
Parliament but agreed to say that social security, when it exists for self-employed workers, must also
be available for assisting spouses and recognised life partners (see EUROPE 9897 and 10093).

As far as maternity protection is concerned, the text adopted states that each member state must
provide independent workers and their spouses and - when the latter are recognised by national law -
life partners of self-employed workers, maternity leave of 14 weeks, i.e. the system currently in force
and which is the same for employees. “This must also be either compulsory or optional depending on
what member states decide”, commented Lulling. Also, when businesses are created, there must no
longer be discrimination between spouses, she added.

Lulling congratulated the Spanish EU Presidency for having made such a great effort so that the
Council would adopt certain European Parliament amendments. She announced that the result of the
vote would be presented to Coreper on 12 May and put to the plenary vote on 18 May. The Spanish
Presidency trusts the text will be formally adopted during the Employment and Social Policy Council
(EPSCO) on 7 June in Luxembourg. “The whole thing could then be tied up under Spanish EU
Presidency”, Lulling said, concluding: “This is a fantastic jump forward as everyone will benefit from
social security and maternity leave, whether compulsory or optional, including the assisting spouses!
Otherwise, if there is no social security for the spouse and there is a divorce, then the spouse is left
with nothing! (04/05/2010 Agence Europe)

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