Out-Law Analysis

PODCAST What the European election results mean for the EU Commission's policy programme

Protesters demonstrate in Paris

Protesters demonstrate in Paris. Photo by Ibrahim Ezzat/NurPhoto via Getty Images

Mainstream centrists parties held their ground, but victories for right wing parties will give them influence over the EU's policy direction, spelling trouble for green policies and an increase in protectionist trade policy, says Mark Ferguson.

Europe has voted, and the impact of right wing victories will be felt in climate and trade policy, affecting companies in and outside the EU


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  • Transcript

    Hello and welcome again to The Pinsent Masons Podcast where we bring you up to date with the most important developments in global business law every second Tuesday. This week we have our European Parliament election special, where we hear from a public policy expert on what the policy implications are of the success of far right parties and about the mechanisms by which the European Parliament will exert influence over the European Commission's agenda, but first, some business law news from around the world.

    Singapore announces gas power plant plans Ireland implements mass actions law UK tax authority ‘particularly vigilant’ on transfer pricing

    Singapore’s Energy Market Authority (EMA) has announced plans to build two more natural gas, hydrogen-compatible power plants by 2030 to help energy security and reliability amid growing electricity needs. The EMA is inviting the private sector to build, own and operate two new hydrogen-ready combined cycle gas turbine generating units. It is the second set of proposals released by the EMA to guide and facilitate the development of new generation capacity to meet growing electricity demands. Singapore’s electricity demand has been increasing, driven largely by electricity-intensive sectors including manufacturing, the digital economy, and transport. Bryan Chapman of Pinsent Masons MPillay in Singapore said that the announcement reflects the continued reliance Singapore has on gas to meet most of its energy needs albeit, he said, with the expectation that as hydrogen production develops, it can be imported and used by such plants to help reduce carbon emissions and meet net zero targets.”

    Ireland has enacted a law allowing for mass actions by people against organisations for the first time. Ireland’s Representative Actions Act is, according to one expert, a significant development in Irish consumer protection law, as previously no overarching mass action procedure was available to consumers. Zara West said that “Following this significant development, we expect that there may be a substantial increase in the number of mass actions in Ireland.” The Act gives effect to the EU Representative Actions Directive and allows a collective of consumers to bring ‘representative claims’ against ‘traders’ in the High Court of Ireland through a ‘qualified entity’. A representative action can be raised where consumers claim to have been harmed by a trader through breaches of EU consumer laws.

    New figures emphasise that UK tax authority HM Revenue and Customs (HMRC) is now particularly vigilant in testing the transfer pricing models adopted by multinational businesses, an expert has said. HMRC collected an extra £1.6 billion in tax through investigations into multinational businesses allocating profits to overseas ventures in the year ending March 2023. This is an increase from £1.5 billion in the previous year. Tax expert Steven Porter said: “Multinationals shifting profits overseas have long been seen by HMRC as an area where billions of pounds in underpaid tax could be recovered. These latest figures show it is succeeding.”

    In the past few days, the elections have taken place to the European Parliament. It's one of the biggest exercises in democracy in the world, with 373,000,000 potential voters in 27 countries choosing the politicians who will scrutinise the actions of the powerful. European Commission. Mainstream centre right and centre left parties largely held their ground, but the European Parliament can only function through coalitions, both formal and informal, and so minority parties can become kingmakers. Green parties lost out this time, especially in Germany and France, and far right politicians picked up lots of votes and seats. These results will have a profound impact on policies that will affect businesses in and outside the EU. Green and climate mitigation policies will come under pressure; trade policy will take an increasingly protectionist turn under the guise of a competitiveness agenda. Since it's the Commission that's actually in charge of the policy agenda, the impact will be indirect rather than direct, but it will still be significant. We’ll start, though, with an outline of what has happened as results have become clear over the last 48 hours. Edinburgh based public policy expert Mark Ferguson outlined the changes to Europe’s electoral map.

    Mark Ferguson: The centre parties broadly held the European People's Party, the centre right grouping within Parliament and the Socialist and Democrats, the centre left grouping in parliament, remained the two biggest parties, the two biggest blocs in the European Parliament. There was no real surprise there. Where the change happened is in making these smaller groupings of parties, so previously the liberal centrist Renew party held quite a significant number of seats, along with the Greens. However, both those parties lost out quite significantly and seeing their number of seats in Parliament dropped by, I think a little over 20 for Renew and around about 20 for the Greens. The beneficiaries of that where the right wing ECR, the European Conservatives and Reformists and the Identity and Democracy Party, this really changed the shape of the Parliament going forward because what it does is change where the potential president, the Commission President looks for votes when they try to get their election confirmed.

    Matthew Magee: In practical, pragmatic terms the European Parliament’s authority is indirect, compared to most national parliaments. It can approve or reject legislation, but it is the powerful executive branch of government – the Commission – which proposes legislation in line with its broad policy agenda. The parliament votes on who gets to be the president of the European Commission, and that president appoints the commissioners, effectively ministers with defined policy areas. Current president Ursula von der Leyen wants another term and while there are no clear front runners to oppose her, she still needs to secure support from the new parliament. So the moment of the parliament’s greatest power is now, when it can influence the next commission’s policy agenda in return for its support for a presidential candidate.

    Mark: European Parliament will come together and it will either support a candidate for presidency of the Commission and the next step in that would be the President then seeking to appoint their commissioners and that's effectively your executive of the European Union being formed. We have the European Parliament, which is finalised now in the political makeup of that is known. We then have the Commission candidate looking to secure the support of Parliament and then after that we will then have the Commission being formed, so we're looking at a process that begins just now and will probably end potentially late autumn. So previously, in the previous Parliament, the European People's Party, the Socialist and Democrats, Renew and the Greens held a significant bloc and it was through them that the current European Commission President Ursula von der Leyen, relied on to one secure her candidacy in 2019 and two to get the legislative agenda through. As it stands, the coalition that held in the 2019 to 2024 Parliament still has enough seats for von der Leyen to secure a second candidacy, a second presidency. However, there is generally an attrition rate amongst those blocs where you will have members of the European People's Party, which is her political grouping, members of Social Democrats won't support her candidacy for president. So that creates a challenge for von der Leyen where she seeks support. Does she look to the right, which is where I think a lot of her European People's Party supporters would like her to go, and that means do you deal with the European conservative reformers or the right identity Democracy Party, or does she turn her back on her natural political allies and upset those in her own political bloc, the European People's Party, and look to the left and look very strongly to renew and Greens to prop up her vote in Parliament.

    Matthew: Those far right parties will use their moment of power to influence the policy agenda of the next Commission, but Mark says that this is likely not to mean a total change in direction, but to take policy further in a direction it was already going in.

    Mark: The European Commission, will obviously set it's policy agenda later this year. But what we had begun to see in the end of the last Parliament was almost a push back against the continued progress over pieces of legislation like elements of the Green Deal, where the centre right and right wing parties in particular, they were beginning to criticise the Green Deal for going too far, suggest that there have been enough regulation and legislation brought forward and what should be done as more to help businesses and help communities rather than more legislation because that right wing bloc has got bigger, there's probably going to be more of this push back against climate legislation.

    Matthew: As Mark has said, climate policy is likely to be a casualty if von der Leyen has to rely on right wing votes, even though many large businesses are investing in climate mitigating behaviour and are largely supportive of green policies.

    Mark: So the threat is potentially substantial but I think it's substantial in the context of what might come in the future, rather than rolling back significantly what has happened. There doesn't seem to be a huge appetite amongst all policymakers to roll back on the Green Deal legislation that has been introduced and published. The criticism of the Green Deal amongst MEPs and policymakers, particularly during the European election campaign, was that there has been enough legislation in the climate space and we do not need any more. So the threat is more about what we won't see in terms of legislation going forward rather than what we have seen and what is implemented just now and what is beginning to be embedded at member state level.

    Matthew: Right wing influence is likely to push EU policy further than before in what the Commission calls its competitiveness agenda but is actually a kind of deglobalising protectionist instinct to make economies more self-sufficient and less reliant on frictionless global supply networks. The war in Ukraine, supply shocks during the covid 19 pandemic and a defensive reaction to trade barriers erected by the US and China have driven right wing politicians to demand ever-more protectionist policies in what could become a widespread trend of deglobalisation.

    Mark: The competitiveness agenda is in part, I think, a reaction to political developments around the world, obviously looking ahead to later this year, there will be an election in the United States and the Presidency there going to be President Biden or President Trump. A lot of the potential consequences of that are shaping The European Union's thinking on policy development just now and that ties back to making the European Union a more competitive business environment compared to its geopolitical competitors. It ties back to the European Union's ambition to have more onshoring of key industries. So in policy terms, the competitor in this agenda will likely mean looking at policies through a more business focused lens. European Commission will want to see its businesses and the European Union's economy grow stronger. That could lead to more protectionist policy. However, what will be critical to that debate is the voice of business, because in the European Union you have businesses that operate across a global scale and they won't want to see markets closed off or made more difficult to do business in markets and in different jurisdictions across the world.

    Matthew: We might think that big businesses would welcome a move to the right, which traditionally has been more business-friendly. But what the far right parties who won big this week think of as business-friendly doesn’t always match with what companies actually want. So business needs to be informed and be engaged, says Mark, to plan ahead based on the policies parties are advocating for, and to seek to steer policy where it can. He says, companies should act now.

    Mark: Businesses have a really key role to play in the policy development with the new European Union, and they can do a lot of work just now to get themselves ready for the months and years ahead as the legislative agenda evolves. Firstly, they really need to get on top of the horizon scanning. This provides businesses with a good solid basis to understand not only policy developments, but political developments as well, and both of which are informative for our business when it's looking out to the objectives that it is trying to achieve in the European Union over the next four to five years. Second thing we really want to focus on is an understanding who their stakeholders are. Obviously this has been a time of change within the European Parliament and it will be in the European Commission later this year and change brings about new people to engage with and build relationships with and businesses really want to understand who they're going to be talking to over the coming years. The third area is really understanding where the policy agenda when it is confirmed, overlaps with your business objectives and this can help you in your policy engagement to really clearly define policy asks and what you're going to policymakers with is really informed contributions to the policy debate, which will be then impactful on how legislation is developed and you should be looking at doing this across multiple levels of European Union engagement. Firstly, and obviously, the European Commission and the departments are in charge, directors are in charge of policy development in your area. Secondly, the European Parliament and when legislation is scrutinising there, you've got a broad base of stakeholders that you can engage with and thirdly, within the European Council as well, and that can filter down to Member States, so in particular jurisdictions that you are active as a business.

    Matthew: Well, thank you very much for joining us again on the Pinsent Masons podcast. It is always wonderful to have you. We know there's lots out there to listen to, to watch and to read, and we appreciate any time that you spend with us. If you found it useful, do share it with colleagues, with friends and consider reviewing it wherever you get your podcasts. If this is your first time listening, please do subscribe for more every second Tuesday. And remember, we've got a team of reporters bringing you the latest in business law news and analysis from all over the world. You can get a personalised digest every week by signing up at www.pinsentmasons.com/newsletter. But for now thank you for listening and see you next time. The Pinsent Masons podcast was produced and presented by Matthew Magee for international professional services firm, Pinsent Masons.

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