title: 2014/70/EU: Commission Recommendation of 22 January 2014 on minimum principles for the exploration and production of hydrocarbons (such as shale gas) using high-volume hydraulic fracturing

text:
               8.2.2014

               EN

               Official Journal of the European Union

               L 39/72

         COMMISSION RECOMMENDATION
   of 22 January 2014
   on minimum principles for the exploration and production of hydrocarbons (such as shale gas) using high-volume hydraulic fracturing
   (2014/70/EU)
   THE EUROPEAN COMMISSION,
   Having regard to the Treaty on the Functioning of the European Union, and in particular Article 292 thereof,
   Whereas:

               (1)

               Member States have the right to determine the conditions for exploiting their energy resources, as long as they respect the need to preserve, protect and improve the quality of the environment.

               (2)

               In the current state of technological development, the exploration and production of hydrocarbons, such as shale gas, requires the combined use of high-volume hydraulic fracturing and directional (especially horizontal) drilling at a scale and intensity for which there is very limited experience in the Union. This hydraulic fracturing technique raises specific challenges, in particular for health and environment.

               (3)

               In its resolutions of 21 November 2012 the European Parliament noted the significant potential benefits of producing shale gas and oil, and called on the Commission to introduce an Union-wide risk management framework for the exploration and extraction of unconventional fossil fuels, with a view to ensuring that harmonised provisions for the protection of human health and the environment apply across all Member States.

               (4)

               In its conclusions of 22 May 2013 the European Council stressed the need to diversify Europe’s energy supply and develop indigenous energy resources to ensure the security of supply, reduce the Union’s external energy dependency and stimulate economic growth. The Council acknowledged the Commission’s intention to assess a more systematic recourse to indigenous sources of energy with a view to their safe, sustainable and cost-effective exploitation while respecting Member States choices of energy mix.

               (5)

               In its Communication to the Council and the European Parliament on the exploration and production of hydrocarbons (such as shale gas) using high-volume hydraulic fracturing in the EU (1), the Commission outlined the potential new opportunities and challenges related to unconventional hydrocarbon extraction in the Union as well as the main elements deemed necessary to ensure the safety of this technique. The Communication concluded that there is a need for a Recommendation that lays down minimum principles that support Member States in the exploration and production of natural gas from shale formations and ensure that the climate and environment are safeguarded, resources are used efficiently, and the public is informed.

               (6)

               At international level, the International Energy Agency developed recommendations for the safe development of unconventional gas. These ‘Golden Rules’ call for robust and appropriate regulatory regimes, careful site selection, adequate project planning, underground risk characterisation, robust rules for well design, transparency on operations and monitoring of associated impacts, sound water and waste management and mitigation of air and greenhouse gas emissions.

               (7)

               Both general and environmental legislation of the Union apply to hydrocarbon exploration and production operations involving high-volume hydraulic fracturing. In particular, Council Directive 89/391/EEC (2) laying down provisions on health and safety of workers introduces measures to encourage improvements in the safety and health of workers at work; Council Directive 92/91/EEC (3) laying down provisions on the mineral extraction through drilling lays down minimum requirements for the safety and health protection of workers in the mineral-extracting industries through drilling; Directive 94/22/EC of the European Parliament and of the Council (4) on conditions for granting and using authorisations for the prospection, exploration and production of hydrocarbons requires to grant authorisations in a non-discriminatory manner; Directive 2000/60/EC of the European Parliament and of the Council (5) establishing the water framework requires the operator to obtain authorisation for water abstraction and prohibits the direct discharge of pollutants into groundwater; Directive 2001/42/EC of the European Parliament and of the Council (6) laying down provisions on strategic environmental assessment requires assessment of plans and programmes in the areas of energy, industry, waste management, water management, transport or land use; Directive 2004/35/EC of the European Parliament and of the Council (7) laying down provisions on the environmental liability applies to occupational activities encompassing activities such as the management of waste and water abstraction; Directive 2006/21/EC of the European Parliament and of the Council (8) laying down provisions on mining waste regulates the management of surface and underground wastes resulting from the exploration and production of hydrocarbons using high-volume hydraulic fracturing; Directive 2006/118/EC of the European Parliament and of the Council (9) laying down provisions on groundwater obliges Member States to put in place measures that prevent or limit the input of pollutants into groundwater; Regulation (EC) No 1907/2006 of the European Parliament and of the Council (10) on the registration, evaluation, authorisation and restriction of chemicals (REACH) and Regulation (EU) No 528/2012 of the European Parliament and of the Council (11) on the making available on the market and use of biocidal products apply to the use of chemicals and biocidal products that may be used for fracturing; Directive 2008/98/EC of the European Parliament and of the Council (12) laying down waste framework sets out the conditions applicable to the reusing the fluids that emerge at the surface following high-volume hydraulic fracturing and during production; Regulation (EU) No 525/2013 of the European Parliament and of the Council (13) on a mechanism for monitoring and reporting greenhouse gas emissions and Decision No 406/2009/EC of the European Parliament and of the Council (14) on the effort of Member States to reduce their greenhouse gas emissions up to 2020 apply to fugitive methane emissions; Directive 2010/75/EU of the European Parliament and of the Council (15) laying down provisions on industrial emissions applies to installations within which activities listed in Annex I to that Directive are operated; Directive 2011/92/EU of the European Parliament and of the Council (16) laying down provisions on environment impact assessment requires to conduct an environment impact assessment for projects involving the extraction of petroleum and natural gas for commercial purposes if the amount extracted exceeds 500 tonnes/day in the case of petroleum and 500 000 m3 per day in the case of gas and a screening for deep-drilling projects and surface installations for extracting oil and gas; Council Directive 96/82/EC (17) on the control of major-accident hazards involving dangerous substances and, as of 1 June 2015, Directive 2012/18/EU of the European Parliament and of the Council (18) oblige operators of establishments where dangerous substances are present above certain thresholds defined in Annex I to these Directives to take all necessary measures to prevent major accidents and to limit their consequences for human health and the environment. This applies, inter alia, to chemical and thermal processing operations and related storage in the framework of the exploitation of minerals in mines and quarries as well as to onshore underground gas storage.

               (8)

               However, the Union’s environmental legislation was developed at a time when high-volume hydraulic fracturing was not used in Europe. Therefore, certain environmental aspects associated with the exploration and production of hydrocarbons involving this practice are not comprehensively addressed in current Union legislation, in particular on strategic planning, underground risk assessment, well integrity, baseline and operational monitoring, capturing methane emissions and disclosure of information on chemicals used on a well by well basis.

               (9)

               Therefore, there is a need to lay down minimum principles which should be taken into account by the Member States when applying or adapting their regulation related to activities involving high-volume hydraulic fracturing. A set of rules would level the playing field for operators, and improve investors’ confidence and the functioning of the single energy market. Clear and transparent rules would also help alleviate public concerns, and possibly opposition to shale gas development. This set of rules neither implies that Member States are under any obligation to pursue the exploration or exploitation of activities using high-volume hydraulic fracturing if they choose not to nor that Member States are prevented from maintaining or introducing more detailed measures matching the specific national, regional or local conditions.

               (10)

               There is no experience with the permitting of production of hydrocarbons using high-volume hydraulic fracturing and limited experience with the permitting of exploration in the Union. Therefore, it is necessary to monitor the application of Union legislation and of this Recommendation in Member States. An updating of this Recommendation or the development of legally binding provisions may be necessary in view of technical progress, the need to address risks and impacts of exploration and production of hydrocarbons using techniques other than high-volume hydraulic fracturing, unexpected challenges in the application of Union legislation or exploration and production of hydrocarbons using high-volume hydraulic fracturing in offshore operations.

               (11)

               Therefore, this Recommendation laying down minimum principles to be applied as a common basis for the exploration or production of hydrocarbons with high-volume hydraulic fracturing is necessary at this point of time. It is complementary to existing Union legislation applicable to projects involving high-volume hydraulic fracturing and should be implemented by Member States within 6 months.

               (12)

               This recommendation respects the rights and observes the principles recognised by the Charter of Fundamental Rights of the European Union, and notably the right to life and the right to the integrity of the person, the freedom of expression and information, the right to conduct a business, the right to property, and the high-level of health and environmental protection. This recommendation has to be implemented in accordance with these rights and principles,

         HAS ADOPTED THIS RECOMMENDATION:
   1.   PURPOSE AND SUBJECT MATTER

               1.1.

               This Recommendation lays down the minimum principles needed to support Member States who wish to carry out exploration and production of hydrocarbons using high-volume hydraulic fracturing, while ensuring that the public health, climate and environment are safeguarded, resources are used efficiently, and the public is informed.

               1.2.

               In applying or adapting their existing provisions implementing relevant Union legislation to the needs and specificities of exploration and production of hydrocarbons using high-volume hydraulic fracturing, Member States are encouraged to apply these principles, which concern planning, installation assessment, permits, operational and environmental performance and closure, and public participation and dissemination of information.

         2.   DEFINITIONS

   For the purpose of this Recommendation:

               (a)

               ‘high-volume hydraulic fracturing’ means injecting 1 000 m3 or more of water per fracturing stage or 10 000 m3 or more of water during the entire fracturing process into a well;

               (b)

               an ‘installation’ includes any related underground structures designated for the exploration or production of hydrocarbons using high-volume hydraulic fracturing.

         3.   STRATEGIC PLANNING AND ENVIRONMENTAL IMPACT ASSESSMENT

               3.1.

               Before granting licenses for exploration and/or production of hydrocarbons which may lead to the use of high-volume hydraulic fracturing, Member States should prepare a strategic environmental assessment to prevent, manage and reduce the impacts on, and risks for, human health and the environment. This assessment should be carried out on the basis of the requirements of Directive 2001/42/EC.

               3.2.

               Member States should provide clear rules on possible restrictions of activities, for example in protected, flood-prone or seismic-prone areas, and on minimum distances between authorised operations and residential and water-protection areas. They should also establish minimum depth limitations between the area to be fractured and groundwater.

               3.3.

               Member States should take the necessary measures to ensure that an environmental impact assessment is carried out on the basis of the requirements of Directive 2011/92/EU.

               3.4.

               Member States should provide the public concerned with early and effective opportunities to participate in developing the strategy referred to in point 3.1 and the impact assessment referred to in point 3.3.

         4.   EXPLORATION AND PRODUCTION PERMITS

   Member States should ensure that the conditions and the procedures for obtaining permits in accordance with applicable Union legislation are fully coordinated if:

               (a)

               more than one competent authority is responsible for the permit(s) needed;

               (b)

               more than one operator is involved;

               (c)

               more than one permit is needed for a specific project phase;

               (d)

               more than one permit is needed under national or Union legislation.

         5.   SELECTION OF THE EXPLORATION AND PRODUCTION SITE

               5.1.

               Member States should take the necessary measures to ensure that the geological formation of a site is suitable for the exploration or production of hydrocarbons using high-volume hydraulic fracturing. They should ensure that operators carry out a characterisation and risk assessment of the potential site and surrounding surface and underground area.

               5.2.

               The risk assessment should be based on sufficient data to make it possible to characterise the potential exploration and production area and identify all potential exposure pathways. This would make it possible to assess the risk of leakage or migration of drilling fluids, hydraulic fracturing fluids, naturally occurring material, hydrocarbons and gases from the well or target formation as well as of induced seismicity.

               5.3.

               The risk assessment should:

                           (a)

                           be based on the best available techniques and take into account the relevant results of the information exchange between Member States, industries concerned and non-governmental organisations promoting environmental protection organised by the Commission;

                           (b)

                           anticipate the changing behaviour of the target formation, geological layers separating the reservoir from groundwater and existing wells or other manmade structures exposed to the high injection pressures used in high-volume hydraulic fracturing and the volumes of fluids injected;

                           (c)

                           respect a minimum vertical separation distance between the zone to be fractured and groundwater;

                           (d)

                           be updated during operations whenever new data are collected.

               5.4.

               A site should only be selected if the risk assessment conducted under points 5.1, 5.2 and 5.3 shows that the high-volume hydraulic fracturing will not result in a direct discharge of pollutants into groundwater and that no damage is caused to other activities around the installation.

         6.   BASELINE STUDY

               6.1.

               Before high-volume hydraulic fracturing operations start, Member States should ensure that:

                           (a)

                           the operator determines the environmental status (baseline) of the installation site and its surrounding surface and underground area potentially affected by the activities;

                           (b)

                           the baseline is appropriately described and reported to the competent authority before operations begin.

               6.2.

               A baseline should be determined for:

                           (a)

                           quality and flow characteristics of surface and ground water;

                           (b)

                           water quality at drinking water abstraction points;

                           (c)

                           air quality;

                           (d)

                           soil condition;

                           (e)

                           presence of methane and other volatile organic compounds in water;

                           (f)

                           seismicity;

                           (g)

                           land use;

                           (h)

                           biodiversity;

                           (i)

                           status of infrastructure and buildings;

                           (j)

                           existing wells and abandoned structures.

         7.   INSTALLATION DESIGN AND CONSTRUCTION

   Member States should ensure that the installation is constructed in a way that prevents possible surface leaks and spills to soil, water or air.
   8.   INFRASTRUCTURE OF A PRODUCTION AREA

   Member States should ensure that:

               (a)

               operators or groups of operators apply an integrated approach to the development of a production area with the objective of preventing and reducing environmental and health impacts and risks, both for workers and the general public;

               (b)

               adequate infrastructure requirements for servicing the installation are established before production begins. If an installation’s primary purpose is producing oil using high-volume hydraulic fracturing, specific infrastructure that captures and transports associated natural gas should be installed.

         9.   OPERATIONAL REQUIREMENTS

               9.1.

               Member States should ensure that operators use best available techniques taking into account the relevant results of the information exchange between Member States, industries concerned and non-governmental organisations promoting environmental protection organised by the Commission, as well as good industry practice to prevent, manage and reduce the impacts and risks associated with projects of exploration and production of hydrocarbons.

               9.2.

               Member States should ensure that operators:

                           (a)

                           develop project-specific water-management plans to ensure that water is used efficiently during the entire project. Operators should ensure the traceability of water flows. The water management plan should take into account seasonal variations in water availability and avoid using water sources under stress;

                           (b)

                           develop transport management plans to minimise air emissions in general and the impacts on local communities and biodiversity in particular;

                           (c)

                           capture gases for subsequent use, minimise flaring and avoid venting. In particular, operators should put in place measures to ensure that air emissions at the exploration and production stage are mitigated by capturing gas and its subsequent use. Venting of methane and other air pollutants should be limited to the most exceptional operational circumstances for safety reasons;

                           (d)

                           carry out the high-volume fracturing process in a controlled manner and with appropriate pressure management with the objective to contain fractures within the reservoir and to avoid induced seismicity;

                           (e)

                           ensure well integrity through well design, construction and integrity tests. The results of integrity tests should be reviewed by an independent and qualified third party to ensure the well’s operational performance, and its environmental and health safety at all stages of project development and after well closure;

                           (f)

                           develop risk management plans and the measures necessary to prevent and/or mitigate the impacts, and the measures necessary for response;

                           (g)

                           stop operations and urgently take any necessary remedial action if there is a loss of well integrity or if pollutants are accidentally discharged into groundwater;

                           (h)

                           immediately report to the competent authority in the event of any incident or accident affecting public health or the environment. The report should include the causes of the incident or accident, its consequences and remedial steps taken. The baseline study required under points 6.1 and 6.2 should be used as a reference.

               9.3.

               Member States should promote the responsible use of water resources in high-volume hydraulic fracturing.

         10.   USE OF CHEMICAL SUBSTANCES AND WATER IN HIGH-VOLUME HYDRAULIC FRACTURING

               10.1.

               Member States should ensure that:

                           (a)

                           manufacturers, importers and downstream users of chemical substances used in hydraulic fracturing refer to ‘hydraulic fracturing’ when complying with their obligations under Regulation (EC) No 1907/2006;

                           (b)

                           using chemical substances in high-volume hydraulic fracturing is minimised;

                           (c)

                           the ability to treat fluids that emerge at the surface after high-volume hydraulic fracturing is considered during the selection of the chemical substances to be used.

               10.2.

               Member States should encourage operators to use fracturing techniques that minimise water consumption and waste streams and do not use hazardous chemical substances, wherever technically feasible and sound from a human health, environment and climate perspective.

         11.   MONITORING REQUIREMENTS

               11.1.

               Member States should ensure that the operator regularly monitors the installation and the surrounding surface and underground area potentially affected by the operations during the exploration and production phase and in particular before, during and after high-volume hydraulic fracturing.

               11.2.

               The baseline study required under points 6.1 and 6.2 should be used as a reference for subsequent monitoring.

               11.3.

               In addition to environmental parameters determined in the baseline study, Member States should ensure that the operator monitors the following operational parameters:

                           (a)

                           the precise composition of the fracturing fluid used for each well;

                           (b)

                           the volume of water used for the fracturing of each well;

                           (c)

                           the pressure applied during high-volume fracturing;

                           (d)

                           the fluids that emerge at the surface following high-volume hydraulic fracturing: return rate, volumes, characteristics, quantities reused and/or treated for each well;

                           (e)

                           air emissions of methane, other volatile organic compounds and other gases that are likely to have harmful effects on human health and/or the environment.

               11.4.

               Member States should ensure that operators monitor the impacts of high-volume hydraulic fracturing on the integrity of wells and other manmade structures located in the surrounding surface and underground area potentially affected by the operations.

               11.5.

               Member States should ensure that the monitoring results are reported to the competent authorities.

         12.   ENVIRONMENTAL LIABILITY AND FINANCIAL GUARANTEE

               12.1.

               Member States should apply the provisions on environmental liability to all activities taking place at an installation site including those that currently do not fall under the scope of Directive 2004/35/EC.

               12.2.

               Member States should ensure that the operator provides a financial guarantee or equivalent covering the permit provisions and potential liabilities for environmental damage prior to the start of operations involving high-volume hydraulic fracturing.

         13.   ADMINISTRATIVE CAPACITY

               13.1.

               Member States should ensure that the competent authorities have adequate human, technical and financial resources to carry out their duties.

               13.2.

               Member States should prevent conflicts of interest between the regulatory function of competent authorities and their function relating to the economic development of the resources.

         14.   CLOSURE OBLIGATIONS

   Member States should ensure that a survey is carried out after each installation’s closure to compare the environmental status of the installation site and its surrounding surface and underground area potentially affected by the activities with the status prior to the start of operations as defined in the baseline study.
   15.   DISSEMINATION OF INFORMATION

   Member States should ensure that:

               (a)

               the operator publicly disseminates information on the chemical substances and volumes of water that are intended to be used and are finally used for the high-volume hydraulic fracturing of each well. This information should list the names and Chemical Abstracts Service (CAS) numbers of all substances and include a safety data sheet, if available, and the substance’s maximum concentration in the fracturing fluid;

               (b)

               the competent authorities should publish the following information on a publicly-accessible internet site within 6 months of this Recommendation’s publication and in intervals of no longer than 12 months:

                           (i)

                           the number of wells completed and planned projects involving high-volume hydraulic fracturing;

                           (ii)

                           the number of permits granted, the names of operators involved and the permit conditions;

                           (iii)

                           the baseline study produced under points 6.1 and 6.2 and the monitoring results produced under points 11.1, 11.2 and 11.3(b) to (e);

               (c)

               the competent authorities should also inform the public of the following without undue delay.

                           (i)

                           incidents and accidents under point 9.2(f);

                           (ii)

                           the results of inspections, non-compliance and sanctions.

         16.   REVIEW

               16.1.

               Member States having chosen to explore or exploit hydrocarbons using high-volume hydraulic fracturing are invited to give effect to the minimum principles set out in this Recommendation by 28 July 2014 and to annually inform the Commission about the measures they put in place in response to this Recommendation, and for the first time, by December 2014.

               16.2.

               The Commission will closely monitor the Recommendation’s application by comparing the situation in Member States in a publicly available scoreboard.

               16.3.

               The Commission will review the Recommendation’s effectiveness 18 months after its publication.

               16.4.

               The review will include an assessment of the Recommendation’s application, will consider the progress of the best available techniques information exchange and the application of the relevant BAT reference documents, as well as any need for updating the Recommendation’s provisions. The Commission will decide whether it is necessary to put forward legislative proposals with legally-binding provisions on the exploration and production of hydrocarbons using high-volume hydraulic fracturing.

      Done at Brussels, 22 January 2014.

            For the Commission

         Janez POTOČNIK

            Member of the Commission

      (1)  COM(2014) 23.

      (2)  Council Directive 89/391/EEC of 12 June 1989 on the introduction of measures to encourage improvements in the safety and health of workers at work (OJ L 183, 29.6.1989, p. 1).

      (3)  Council Directive 92/91/EEC of 3 November 1992 concerning the minimum requirements for improving the safety and health protection of workers in the mineral- extracting industries through drilling (eleventh individual Directive within the meaning of Article 16(1) of Directive 89/391/EEC) (OJ L 348, 28.11.1992, p. 9).

      (4)  Directive 94/22/EC of the European Parliament and of the Council of 30 May 1994 on the conditions for granting and using authorisations for the prospection, exploration and production of hydrocarbons (OJ L 164, 30.6.1994, p. 3).

      (5)  Directive 2000/60/EC of the European Parliament and of the Council of 23 October 2000 establishing a framework for Community action in the field of water policy (OJ L 327, 22.12.2000, p. 1).

      (6)  Directive 2001/42/EC of the European Parliament and of the Council of 27 June 2001 on the assessment of the effects of certain plans and programmes on the environment (OJ L 197, 21.7.2001, p. 30).

      (7)  Directive 2004/35/EC of the European Parliament and of the Council of 21 April 2004 on environmental liability with regard to the prevention and remedying of environmental damage (OJ L 143, 30.4.2004, p. 56).

      (8)  Directive 2006/21/EC of the European Parliament and of the Council of 15 March 2006 on the management of waste from extractive industries and amending Directive 2004/35/EC (OJ L 102, 11.4.2006, p. 15).

      (9)  Directive 2006/118/EC of the European Parliament and of the Council of 12 December 2006 on the protection of groundwater against pollution and deterioration (OJ L 372, 27.12.2006, p. 19).

      (10)  Regulation (EC) No 1907/2006 of the European Parliament and of the Council of 18 December 2006 concerning the Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH), establishing a European Chemicals Agency, amending Directive 1999/45/EC and repealing Council Regulation (EEC) No 793/93 and Commission Regulation (EC) No 1488/94 as well as Council Directive 76/769/EEC and Commission Directives 91/155/EEC, 93/67/EEC, 93/105/EC and 2000/21/EC (OJ L 396, 30.12.2006, p. 1).

      (11)  Regulation (EU) No 528/2012 of the European Parliament and of the Council of 22 May 2012 concerning the making available on the market and use of biocidal products (OJ L 167, 27.6.2012, p. 1).

      (12)  Directive 2008/98/EC of the European Parliament and of the Council of 19 November 2008 on waste and repealing certain Directives (OJ L 312, 22.11.2008, p. 3).

      (13)  Regulation (EU) No 525/2013 of the European Parliament and of the Council of 21 May 2013 on a mechanism for monitoring and reporting greenhouse gas emissions and for reporting other information at national and Union level relevant to climate change and repealing Decision No 280/2004/EC (OJ L 165, 18.6.2013, p. 13).

      (14)  Decision No 406/2009/EC of the European Parliament and of the Council of 23 April 2009 on the effort of Member States to reduce their greenhouse gas emissions to meet the Community’s greenhouse gas emission reduction commitments up to 2020 (OJ L 140, 5.6.2009, p. 136).

      (15)  Directive 2010/75/EU of the European Parliament and of the Council of 24 November 2010 on industrial emissions (integrated pollution prevention and control) (OJ L 334, 17.12.2010, p. 17).

      (16)  Directive 2011/92/EU of the European Parliament and of the Council of 13 December 2011 on the assessment of the effects of certain public and private projects on the environment (OJ L 26, 28.1.2012, p. 1).

      (17)  Council Directive 96/82/EC of 9 December 1996 on the control of major-accident hazards involving dangerous substances (OJ L 10, 14.1.1997, p. 13).

      (18)  Directive 2012/18/EU of the European Parliament and of the Council of 4 July 2012 on the control of major-accident hazards involving dangerous substances, amending and subsequently repealing Council Directive 96/82/EC (OJ L 197, 24.7.2012, p. 1).


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****( 1 ) OJ NO L 114 , 5 . 5 . 1977 , P . 6 .  ( 2 ) OJ NO L 352 , 31 . 12 . 1977 , P . 13 .  ( 3 ) OJ NO C 19 , 24 . 1 . 1978 , P . 7 .  ( 4 ) OJ NO L 19 , 24 . 1 . 1978 , P . 9 AND OJ NO L 23 , 28 . 1 . 1978 , P . 33 .  ( 5 ) COMMUNICATION FROM THE COMMISSION OF 31 DECEMBER 1977 CONCERNING THE BASIC PRICES OF CERTAIN STEEL PRODUCTS ( OJ NO L 353 , 31 . 12 . 1977 , P . 1 ).  ( 1 ) OJ NO L 114 , 5 . 5 . 1977 , P . 1 , OJ NO C 174 , 22 . 7 . 1977 AND OJ NO L 352 , 31 . 12 . 1977 , P . 17 .    COMMISSION RECOMMENDATION NO 811/78/ECSC   OF 21 APRIL 1978   IMPOSING A DEFINITIVE ANTI-DUMPING DUTY ON CERTAIN SHEETS AND PLATES , OF IRON OR STEEL , ORIGINATING IN BULGARIA , THE GERMAN DEMOCRATIC REPUBLIC AND ROMANIA   THE COMMISSION OF THE EUROPEAN   COMMUNITIES ,   HAVING REGARD TO THE TREATY ESTABLISHING THE EUROPEAN COAL AND STEEL COMMUNITY , AND IN PARTICULAR ARTICLES 74 AND 86 THEREOF ,   HAVING REGARD TO COMMISSION RECOMMENDATION 77/329/ECSC OF 15 APRIL 1977 ON PROTECTION AGAINST DUMPING OR THE GRANTING OF BOUNTIES OR SUBSIDIES BY COUNTRIES WHICH ARE NOT MEMBERS OF THE EUROPEAN COAL AND STEEL COMMUNITY ( 1 ), AS AMENDED BY RECOMMENDATION NO 3004/77/ECSC ( 2 ), AND IN PARTICULAR ARTICLES 17 AND 19 THEREOF ,   HAVING HEARD THE OPINIONS EXPRESSED WITHIN THE ADVISORY COMMITTEE PROVIDED FOR BY RECOMMENDATION 77/329/ECSC ,   WHEREAS THE COMMISSION HAS RECEIVED A COMPLAINT , SUBMITTED IN THE NAME OF THE RELEVANT COMMUNITY INDUSTRY , SETTING OUT EVIDENCE AS TO THE EXISTENCE OF DUMPING OF CERTAIN SHEETS AND PLATES , OF IRON OR STEEL , ORIGINATING IN BULGARIA , THE GERMAN DEMOCRATIC REPUBLIC , ROMANIA AND CERTAIN OTHER COUNTRIES , AND MATERIAL INJURY RESULTING THEREFROM ;   WHEREAS , SINCE THE INFORMATION RECEIVED INDICATED THAT THE COMPLAINT WAS ADMISSIBLE AND THAT DEFENSIVE MEASURES MIGHT BE NECESSARY , THE COMMISSION OFFICIALLY INFORMED THE IMPORTERS AND EXPORTERS KNOWN TO BE CONCERNED , PUBLISHED IN THE OFFICIAL JOURNAL OF THE EUROPEAN COMMUNITIES , A NOTICE OF THE INITIATION OF AN INQUIRY CONCERNING THE IMPORTS IN QUESTION ( 3 ) AND COMMENCED AN EXAMINATION OF THE MATTER IN COOPERATION WITH THE MEMBER STATES ;   WHEREAS , SINCE PRELIMINARY EXAMINATION OF THE MATTER SHOWED THAT THERE WAS DUMPING AND SUFFICIENT EVIDENCE OF INJURY AND THE INTERESTS OF THE COMMUNITY CALLED FOR IMMEDIATE INTERVENTION , THE COMMISSION , BY RECOMMENDATIONS NO 121/78/ECSC AND NO 160/78/ECSC ( 4 ), IMPOSED PROVISIONAL ANTI-DUMPING DUTIES ON THE IMPORTS IN QUESTION ;   WHEREAS , IN THE COURSE OF THE EXAMINATION OF THE MATTER , COMPLETED AFTER THE IMPOSITION OF THE PROVISIONAL ANTI-DUMPING DUTIES , THE COMMISSION GAVE INTERESTED PARTIES THE OPPORTUNITY TO MAKE KNOWN THEIR VIEWS IN WRITING AND GAVE TO THE PARTIES DIRECTLY CONCERNED WHO SO REQUESTED THE OPPORTUNITY ORALLY TO DEVELOP THEIR VIEWS ;   WHEREAS , HOWEVER , IN SO FAR AS INTERESTED PARTIES DID NOT AVAIL THEMSELVES OF THE OPPORTUNITY TO MAKE KNOWN THEIR VIEWS OR PRESENT THEIR ARGUMENTS , THE COMMISSION HAD TO BASE ITS FINDINGS ON THE FACTS AVAILABLE ;   WHEREAS WHEN DETERMINING DUMPING ON THE ABOVEMENTIONED IMPORTS , THE COMMISSION HAD TO TAKE ACCOUNT OF THE FACT THAT TRADE IS ON A BASIS OF NEAR OR TOTAL MONOPOLY AND THAT PRICES ARE FIXED BY THE STATE AND THAT , THEREFORE , AN EXACT COMPARISON BETWEEN THE EXPORT PRICE OF THE PRODUCT TO THE COMMUNITY AND ITS DOMESTIC PRICE IS NOT APPROPRIATE ;   WHEREAS , FOR ALL THESE REASONS , THE COMMISSION HAS DECIDED TO BASE ITS DUMPING CALCULATIONS ON THE COST OF PRODUCTION IN A COUNTRY CONSIDERED TO BE ONE OF THE MOST EFFICIENT PRODUCERS OF THE PRODUCT IN QUESTION , AS ESTABLISHED BY MEANS OF THE LATEST PUBLICLY AVAILABLE DATA ;   WHEREAS SUCH COST OF PRODUCTION HAS BEEN CALCULATED TAKING INTO CONSIDERATION INTER ALIA THE FOLLOWING ELEMENTS : RAW MATERIALS ( COVERING IRON ORE , SINTER , PELLETS , SCRAP , FERRO ALLOYS AND OTHER IRON-BEARING MATERIALS AND FLUXES ), ENERGY COSTS ( COKE , FUEL OIL , ELECTRICITY ), LABOUR COSTS INCLUDING SOCIAL COSTS , OTHER OPERATING COSTS ( INCLUDING MAINTENANCE COSTS AND TRANSPORT COSTS ) AND CAPITAL COSTS , TO WHICH WAS ADDED A REASONABLE AMOUNT FOR ADMINISTRATION , SELLING AND ANY OTHER COSTS AND FOR PROFITS ;   WHEREAS THE AFOREMENTIONED CALCULATION HAS CONFIRMED THE REASONABLENESS OF THE BASIC PRICES AS PUBLISHED BY THE COMMISSION ( 5 );   WHEREAS THE PRICES OF IMPORTS INTO THE COMMUNITY OF THE PRODUCTS WHICH ARE THE SUBJECT OF THE COMPLAINT HAVE BEEN COMPARED WITH THESE BASIC PRICES ;   WHEREAS THIS PRICE COMPARISON WAS MADE ON A FREE COMMUNITY FRONTIER DUTY-PAID BASIS ;   WHEREAS THIS EXAMINATION OF THE MATTER HAS SHOWN THAT THE PRODUCTS IN QUESTION WERE OFFERED FOR IMPORT WITHIN THE COMMUNITY AT PRICES LOWER THAN THE BASIC PRICES AND THAT DUMPING HAS TAKEN PLACE , THE MARGIN OF WHICH IS CONSTITUTED BY THIS UNDERCUTTING ;   WHEREAS , WITH REGARD TO INJURY TO THE INDUSTRY CONCERNED , THE EVIDENCE AVAILABLE TO THE COMMISSION SHOWS THAT IMPORTS INTO THE COMMUNITY OF THE PRODUCTS INCREASED GLOBALLY FROM 1 155 000 TONNES IN 1974 TO 903 000 TONNES IN THE FIRST SIX MONTHS OF 1977 , IMPORTS ORIGINATING IN BULGARIA , THE GERMAN DEMOCRATIC REPUBLIC AND ROMANIA HAVING RISEN FROM 167 000 TO 108 000 TONNES IN THE SAME PERIOD , AND THAT , AS A RESULT , THEY HAVE BEEN ABLE TO ACQUIRE A COMMUNITY MARKET SHARE OF 19 % IN TOTAL AND 12 % FOR IMPORTS ORIGINATING IN BULGARIA , THE GERMAN DEMOCRATIC REPUBLIC AND ROMANIA TOGETHER WITH THOSE FROM AUSTRIA , CZECHOSLOVAKIA , FINLAND , JAPAN , POLAND , SPAIN AND SWEDEN , WHICH ARE ALSO SUBJECT TO DEFENSIVE MEASURES IN THE COMMUNITY OR TO STEEL ARRANGEMENTS CONCLUDED WITH THE ECSC ;   WHEREAS , ON THE OTHER HAND , THE COMMUNITY STEEL INDUSTRY IS IN A CRISIS SITUATION CHARACTERIZED BY A REDUCTION OF ABOUT 40 % IN THE PRODUCTION OF THE PRODUCTS CONCERNED BETWEEN 1974 AND 1977 IN THE COMMUNITY AND BY A REDUCTION IN THE NUMBER EMPLOYED FROM 780 000 TO 720 000 BETWEEN 1974 AND 1977 AND BY SHORT-TIME WORKING AND THAT , AS A RESULT , THE COMMUNITY STEEL INDUSTRY RECORDED A REDUCTION IN PROFITS OR THE APPEARANCE OF SERIOUS LOSSES IN MOST OF THE FIRMS CONCERNED ;   WHEREAS , IN ORDER TO REMEDY THIS SITUATION , THE COMMISSION HAS INTRODUCED A SYSTEM OF GUIDANCE PRICES ( 1 ) FOR SALES WITHIN THE COMMUNITY OF CERTAIN STEEL PRODUCTS PRODUCED BY THE EUROPEAN STEEL INDUSTRY ;   WHEREAS THE IMPORT PRICES INTO THE COMMUNITY OF PRODUCTS ORIGINATING IN BULGARIA , THE GERMAN DEMOCRATIC REPUBLIC AND ROMANIA ARE CONSIDERABLY LOWER THAN THESE GUIDANCE PRICES AND SUCH UNDERCUTTING PREVENTS THE EUROPEAN PRODUCERS FROM ACHIEVING THE GUIDANCE PRICES AND JEOPARDIZES THE EQUILIBRIUM OF THE ENTIRE PRICING SYSTEM AND CAUSES OR THREATENS TO CAUSE MATERIAL INJURY TO THE COMMUNITY INDUSTRY OR TO A MAJOR PART OF IT ;   WHEREAS THE IMPORT PRICES OF DELIVERIES ORIGINATING IN BULGARIA , THE GERMAN DEMOCRATIC REPUBLIC AND ROMANIA ARE CONSIDERABLY LOWER THAN THE ALREADY LOW PRICES OF THE COMMUNITY PRODUCERS AND THUS ACCENTUATE THE DEPRESSION OF COMMUNITY PRICES ;   WHEREAS , THEREFORE , THE FACTS AS FINALLY ESTABLISHED SHOW THAT MATERIAL INJURY HAS BEEN CAUSED TO THE COMMUNITY INDUSTRY OR THAT SUCH INJURY WOULD HAVE BEEN CAUSED IF PROVISIONAL ACTION HAD NOT BEEN TAKEN , BY IMPORTS ORIGINATING IN BULGARIA , THE GERMAN DEMOCRATIC REPUBLIC AND ROMANIA TOGETHER WITH THOSE FROM AUSTRIA , CZECHOSLOVAKIA , FINLAND , JAPAN , POLAND , SPAIN AND SWEDEN , WHICH ARE ALSO SUBJECT TO DEFENSIVE MEASURES OR COVERED BY STEEL ARRANGEMENTS CONCLUDED WITH THE COMMUNITY ;   WHEREAS , IN THE SERIOUS CONDITIONS BEING EXPERIENCED BY THE COMMUNITY STEEL INDUSTRY , THE INTERESTS OF THE COMMUNITY REQUIRE THE IMPOSITION OF A DEFINITIVE ANTI-DUMPING DUTY AND THE DEFINITIVE COLLECTION OF THE AMOUNT SECURED BY WAY OF PROVISIONAL DUTY ;   WHEREAS THE AMOUNT OF SUCH DEFINITIVE DUTY SHOULD CORRESPOND TO THE DIFFERENCE BETWEEN THE BASIC PRICE PUBLISHED BY THE COMMISSION FOR THE PRODUCTS IN QUESTION AND ITS PRICE ON IMPORTATION INTO THE COMMUNITY , DUE CONSIDERATION BEING GIVEN TO ANY DIMINUTION IN VALUE CLAIMED BY THE IMPORTERS AND ESTABLISHED TO THE SATISFACTION OF THE COMPETENT NATIONAL AUTHORITIES ,   HAS ADOPTED THIS RECOMMENDATION :   ARTICLE 1   1 .  A DEFINITIVE ANTI-DUMPING DUTY IS HEREBY IMPOSED ON THE FOLLOWING PRODUCTS ORIGINATING IN BULGARIA , THE GERMAN DEMOCRATIC REPUBLIC AND ROMANIA :   -  SHEETS AND PLATES , OF IRON OR STEEL , OTHER THAN ELECTRICAL , NOT FURTHER WORKED THAN HOT-ROLLED , OF A THICKNESS OF 2 MM OR MORE ,   -  COMMON CUSTOMS TARIFF SUBHEADING 73.13 B I A ),   -  NIMEXE CODE 73.13-17 , 19 , 21 , 23 AND 26 .   2 .  THE AMOUNT OF THIS DUTY SHALL BE EQUAL TO THE AMOUNT BY WHICH THE EFFECTIVE PRICE ( BASIC PRICE PLUS EXTRAS ) ESTABLISHED BY CONTRACT , FREE FRONTIER DUTY-PAID , IS LOWER THAN THE EFFECTIVE PRICE ( BASIC PRICE PLUS EXTRAS ) LAST PUBLISHED BY THE COMMISSION FOR THIS PRODUCT AT THE TIME OF ITS ENTRY FOR COMMUNITY CONSUMPTION .   3 .  THE AMOUNT OF THE DUTY SHALL HOWEVER BE REDUCED TO THE EXTENT THAT THE IMPORTER ESTABLISHES TO THE SATISFACTION OF THE COMPETENT NATIONAL AUTHORITIES THAT THE PRICE DIFFERENTIAL REFERRED TO IN PARAGRAPH 2 ABOVE IS DUE TO A DIMINUTION IN VALUE RESULTING FROM THE QUALITY OF THE GOODS BEING INFERIOR TO THE LOWEST QUALITY DESCRIBED IN THE LAST PUBLICATION OF BASIC PRICES BY THE COMMISSION .   4 .  THIS DUTY SHALL BE COLLECTED ON THE SAME BASIS AS CUSTOMS DUTIES .   ARTICLE 2   THE AMOUNTS SECURED BY WAY OF PROVISIONAL DUTY UNDER THE PROVISIONS OF RECOMMENDATIONS NO 121/78/ECSC AND NO 160/78/ECSC , IN RESPECT OF PRODUCTS ORIGINATING IN BULGARIA , THE GERMAN DEMOCRATIC REPUBLIC AND ROMANIA , SHALL BE DEFINITIVELY COLLECTED TO THE EXTENT THAT THEY DO NOT EXCEED THE RATE OF DUTY FIXED IN THIS RECOMMENDATION .   ARTICLE 3   THIS RECOMMENDATION SHALL BE NOTIFIED TO THE MEMBER STATES .   IT SHALL ENTER INTO FORCE FOR EACH MEMBER STATE ON THE DATE OF ITS PUBLICATION IN THE OFFICIAL JOURNAL OF THE EUROPEAN COMMUNITIES .   DONE AT BRUSSELS , 21 APRIL 1978 .   FOR THE COMMISSION   ANTONIO GIOLITTI   MEMBER OF THE COMMISSION


title: 2004/384/EC:Commission Recommendation of 27 April 2004 on some contents of the simplified prospectus as provided for in Schedule C of Annex I to Council Directive 85/611/EEC (Text with EEA relevance) (notified under document number C(2002) 1541/2)

text:
L 144/42           EN                  Official Journal of the European Union                      30.4.2004
                               COMMISSION RECOMMENDATION
                                                of 27 April 2004
  on some contents of the simplified prospectus as provided for in Schedule C of Annex I
                                    to Council Directive 85/611/EEC
                          (notified under document number C(2002) 1541/2)
                                        (Text with EEA relevance)
                                                  (2004/384/EC)
THE COMMISSION OF THE EUROPEAN COMMUNITIES,
Having regard to the Treaty establishing the European Community, and in particular Article
211, second indent, thereof,
Whereas:
(1)      In order to enhance effective investor information, provisions concerning the
         simplified prospectus were introduced in Council Directive 85/611/EEC of 20
         December 1985 on the coordination of laws, regulations, and administrative provisions
         relating to undertakings for collective investments in transferable securities (UCITS)1
         by Directive 2001/107/EC of the European Parliament and of the Council2. The
         simplified prospectus is designed to provide clear information about the essentials the
         investor should know before investing in a fund, and be easily understood by the
         average retail investor. The simplified prospectus is also designed to facilitate the
         cross-border marketing of units of UCITS, and be used as a single marketing tool
         throughout the Community. Those provisions themselves stress that host Member
         States are not permitted to ask for any additions or modifications except translation.
(2)      In order to ensure the effectiveness of this key element of investor protection, it is
         desirable to clarify the contents and presentation of some of the elements of
         information which have to be included into the simplified prospectus pursuant to
         Schedule C of Annex I to Directive 85/611/EEC. This is critical to ensuring a common
         reading of the contents of Schedule C, and has to be achieved in the most appropriate
         and timely way available, taking into account the recent transposition process in the
         Member States and the need for appropriate implementation.
(3)      For that purpose, the mere clarification of definitions relating to the contents of the
         relevant indents of Schedule C would not be sufficient to achieve the necessary level
         of harmonisation, which is, in particular, intrinsically linked to the choice and
1
   OJ L 375, 31.12.1985, p. 3; Directive as last amended by Directive 2001/108/EC of the European Parliament
         and of the Council ( OJ L 41, 13.2.2001, p. 35).
2
  OJ L 41, 13.2.2001, p. 20.
 ---pagebreak--- 30.4.2004        EN               Official Journal of the European Union                  L 144/43
        definition of some ratios relating to economic information (i.e. costs and portfolio
        turnover). Setting those ratios, which are critical to investor information, does not fall
        within the regulatory powers conferred upon the Commission by Article 53a of
        Directive 85/611/EEC. Since the implementing powers conferred upon the
        Commission by the Directive do not include the choice and structure of ratios, a
        Commission recommendation is for the moment the only available instrument to
        support a common, comprehensive reading of the relevant contents of Schedule C.
(4)     The description of the UCITS' investment objectives should inform investors about the
        investment goal the UCITS intends to pursue. Therefore, it is desirable that the
        simplified prospectus contain, in a concise form, an appropriate description of the
        outcomes sought for the investment, information on any third-party guarantees which
        protect investors, for example against a downfall or on a minimum level of increase of
        the value of their investment and information on index-tracking objectives.
(5)     In conformity with the requirements set forth under Article 24a(1) and (2) of Directive
        85/611/EEC, the description of the UCITS' investment policy in the simplified
        prospectus should allow the average investor to understand the manner and method by
        which the investment goal is expected to be achieved and draw investors’ attention on
        the UCITS’ relevant characteristics. Therefore, it is desirable that the simplified
        prospectus briefly make clear the main categories of eligible instruments, the portfolio
        management strategy of the UCITS, by drawing attention to possible risk-
        concentration profiles where relevant, and the key characteristics of the bonds in
        which the UCITS invests. It is also desirable that the simplified prospectus contain
        information on the financial derivative instruments, the management style and the
        strategy to achieve the index-tracking objective in the case of index-tracking funds.
(6)     In keeping with the safeguards provided for in Article 24a(1) and (3) of Directive
        85/611/EEC, the average investor should be enabled to understand the risk profile of a
        UCITS and be adequately informed of relevant risk characteristics. It is therefore
        desirable that the simplified prospectus contain a brief and easily comprehensible
        description, in narrative form, of all the risks material and relevant to the UCITS. It is
        also advisable to encourage Member States, where they deem it relevant in the light of
        customary disclosure practice and existing investor protection standards, to require
        that this information be supplemented by a quantitative risk indicator based on the
        UCITS volatility, but subject to further convergence work on such risk indicators.
(7)     To avoid misleading information for investors on historical performance and to
        advance the comparability of UCITS for investors within the Community, it is
        necessary to clarify the way past performance should be presented.
(8)     For the sake of clarity and concision of the simplified prospectus, it is desirable that
        information on the tax regime be limited to the tax regime applicable to the UCITS in
        its home Member State. To facilitate proper investor information, it is however
        appropriate that this information be supplemented by a warning that further taxation
        may apply to the individual investor taking into account that the taxation of individual
        investors will depend on the fiscal regulation applicable in their personal or particular
        case.
 ---pagebreak--- L 144/44           EN               Official Journal of the European Union                  30.4.2004
(9)      To ensure effective investor protection and enhance investor confidence in the fund
         industry, it is desirable that the simplified prospectus provide for full transparency of
         all the costs actually borne by investors in relation to their investment. To this end, it is
         necessary to disclose a total expense ratio (TER) calculated as an indicator of the
         fund's total operating costs. It is therefore also necessary to clarify how the TER
         should be calculated. Since entry and exit commissions and other expenses directly
         paid by the investor are not included in the TER, it is desirable that they be shown
         separately as well as all the other costs not included in the TER, including disclosure
         of transaction costs when these are deemed to be available by the home Member State
         competent authorities. In any case, it is desirable to disclose the portfolio turnover rate
         calculated on a standardised basis, as an additional indicator of the relevance of
         transaction costs.
(10)     In view of the current differences in market practice on fee-sharing agreements and
         comparable fee arrangements, it is appropriate that these be adequately disclosed to
         investors. To improve transparency for investors, it is therefore necessary that the
         simplified prospectus indicate the existence of any such agreements or arrangements.
         It is also advisable to invite investors to consult the full prospectus for detailed
         information on this kind of arrangement, which should enable them to understand to
         whom the expenses are paid and whether possible conflicts of interest will be resolved
         in their best interest.
(11)     The understanding of investors' needs in terms of product information and cross-
         border comparability has to be made subject to further progress, also in the light of
         consumer studies on national markets, in order to underpin the completion of a true,
         investor-friendly, internal market for UCITS. Member States should therefore carry
         out, in so far as possible, further testing of measures taken in this field, in particular
         following this recommendation, and to report accordingly to the Commission. The
         Commission may consider in due time whether there is a need to propose legislative
         measures to leverage on experience and Member States' feedback on the
         implementation of this recommendation,
HEREBY RECOMMENDS:
1. As regards the investment information referred to in the second heading of Schedule
C in Annex I to Directive 85/611/EEC it is recommended that Member States apply the
following interpretations.
1.1. Interpretation of ‘short definition of UCITS’ objectives’
In the first indent, Member States are recommended to interpret ‘a short definition of UCITS'
objectives’ as meaning the following information:
           (a)   a concise and appropriate description of the outcomes sought for any
                 investment in the UCITS;
           (b)   a clear statement of any guarantees offered by third parties to protect investors
                 and any restrictions on those guarantees;
           (c)   a statement, where relevant, that the UCITS is intended to track an
                 index/indices, and sufficient indications to enable investors both to identify the
 ---pagebreak--- 30.4.2004        EN                Official Journal of the European Union                 L 144/45
               relevant index/indices and to understand the extent or degree of tracking
               pursued.
1.2. Interpretation of ‘the unit trust's/common fund's or the investment company's investment
policy’
In the second indent Member States are recommended to interpret ‘the unit trust's/common
fund's or the investment company's investment policy’ as meaning the following information,
provided it is material and relevant:
          (a)  the main categories of eligible financial instruments which are the object of
               investment;
          (b)  whether the UCITS has a particular strategy in relation to any industrial,
               geographic or other market sectors or specific classes of assets, e.g.
               investments in emerging countries’ financial instruments;
          (c)  where relevant, a warning that, whilst the actual portfolio composition is
               required to comply with the broad legal and statutory rules and limits, risk-
               concentration may occur in regard of certain tighter asset classes, economic
               and geographic sectors;
          (d)  if the UCITS invests in bonds, an indication of whether they are corporate or
               government, their duration and the rating requirements;
          (e)  if the UCITS uses financial derivative instruments, an indication of whether
               this is done in pursuit of the UCITS' objectives, or for hedging purposes only;
          (f)  whether the UCITS’ management style contemplates some reference to a
               benchmark; and in particular whether the UCITS has an ‘index tracking’
               objective, with an indication of the strategy to be pursued to achieve this;
          (g)  whether the UCITS’ management style is based on a tactical asset allocation
               with high frequency portfolio adjustments.
1.3. Joint presentation of the UCITS’ objectives and investment policy
Home Member States are recommended to allow the information required under points 1.1
and 1.2 to be set out as a single item in the simplified prospectus (e.g. for the information on
index tracking), provided that the information so combined does not lead to confusion of the
objectives and policies of the UCITS. The order of the information items may be adapted to
reflect the UCITS’ specific investment objectives and policy.
1.4. Interpretation of ‘a brief assessment of the fund’s risk profile’
In the second indent, Member States are recommended to interpret ‘a brief assessment of the
fund's risk profile’ as meaning the following information:
1.4.1. Overall structure of the information provided;
 ---pagebreak--- L 144/46          EN                Official Journal of the European Union                 30.4.2004
          (a)   a statement to the effect that the value of investments may fall as well as rise
                and that investors may get back less than they put in;
          (b)   a statement that details of all the risks actually mentioned in the simplified
                prospectus may be found in the full prospectus;
          (c)   a textual description of any risk investors have to face in relation to their
                investment, but only where such risk is relevant and material, based on risk
                impact and probability.
1.4.2. Precisions regarding the textual description of risks
1.4.2.1. Specific risks
The description referred to in point 1.4.1(c) should include a brief and understandable
explanation of any specific risk arising from particular investment policies or strategies or
associated with specific markets or assets relevant to the UCITS such as:
          (a)   the risk that the entire market of an asset class will decline thus affecting the
                prices and values of the assets (market risk);
          (b)   the risk that an issuer or a counterparty will default (credit risk);
          (c)   only where strictly relevant, the risk that a settlement in a transfer system does
                not take place as expected because a counterparty does not pay or deliver on
                time or as expected (settlement risk);
          (d)   the risk that a position can not be liquidated in a timely manner at a reasonable
                price (liquidity risk);
          (e)   the risk that the investment's value will be affected by changes in exchange
                rates (exchange or currency risk);
          (f)   only where strictly relevant, the risk of loss of assets held in custody that could
                result from the insolvency, negligence or fraudulent action of the custodian or
                of a subcustodian (custody risk);
          (g)   risks related to a concentration of assets or markets.
1.4.2.2. Horizontal risk factors
The description referred to in point 1.4.1(c) should also mention, where relevant and material,
the following factors that may affect the product:
          (a)   performance risk, including the variability of risk levels depending on
                individual fund selections, and the existence, absence of, or restrictions on any
                guarantees given by third parties;
          (b)   risks to capital, including potential risk of erosion resulting from
                withdrawals/cancellations of units and distributions in excess of investment
                returns;
 ---pagebreak--- 30.4.2004         EN               Official Journal of the European Union                  L 144/47
          (c)   exposure to the performance of the provider/third-party guarantor, where
                investment in the product involves direct investment in the provider, rather
                than assets held by the provider;
          (d)   inflexibility, both within the product (including early surrender risk) and
                constraints on switching to other providers;
          (e)   inflation risk;
          (f)   lack of certainty that environmental factors, such as a tax regime, will persist.
1.4.2.3. Possible prioritisation of information disclosure
In order to avoid conveying a misleading image of the relevant risks, Member States are also
recommended to consider requiring the presentation of the information items to prioritize,
based on scale and materiality, the risks so as to better highlight the individual risk profile of
the UCITS.
1.4.3. Additional disclosure of a synthetic risk indicator
Where the UCITS has been set up at least one year before, home Member States are also
invited to consider as a possible option requiring that the description referred to in point
1.4.1.c) be supplemented by a synthetic indicator of risk in just one figure or word, based on
the volatility of the UCITS' portfolio, in which case:
          (a)   the volatility of the UCITS' portfolio should be intended as measuring the
                dispersion of the UCITS’ return;
          (b)   the UCITS' return should be calculated taking into account all the UCITS' net
                asset values (NAVs) of the period, e.g. daily NAVs where this is the normal
                frequency of NAV calculation as approved by the UCITS competent
                authorities, computed by assessing the UCITS assets on that same frequency.
1.5. Interpretation of ‘historical performance of the unit trust/common fund/investment
company (where applicable)’
In the third indent, Member States are recommended to interpret the ‘historical performance
of the unit trust/common fund/investment company (where applicable)’ with ‘a warning that
this is not an indicator of future performance’ as meaning the following information:
1.5.1 Disclosure of past performance:
          (a)   the UCITS' past performance, as presented using a bar chart showing annual
                returns for the last 10 full consecutive years. If the UCITS has been in
                existence for fewer than 10 years but at least for a period of one year, it is
                recommended that the annual returns, calculated net of tax and charges, be
                given for as many years as are available;
          (b)   if a UCITS is managed according to a benchmark or if its cost structure
                includes a performance fee depending on a benchmark, the information on the
                past performance of the UCITS should include a comparison with the past
 ---pagebreak--- L 144/48         EN               Official Journal of the European Union                 30.4.2004
                performance of the benchmark according to which the UCITS is managed or
                the performance fee is calculated. Member States are recommended to require
                that comparison to be achieved by representing the past performance of the
                benchmark and that of the UCITS on the same bar-chart and/or separately.
1.5.2. Disclosure of cumulative (average) performance
Additionally, Member States are recommended to consider requiring disclosure, either of the
cumulative performance, or the cumulative average performance of the fund over specific
periods of time (such as on three, five and 10 years). In case they use either of these options,
Member States are recommended to require also a comparison with the cumulative
performance, or cumulative average performance (where relevant) of a benchmark, when
comparison to a benchmark is required in accordance with point 1.5.1(b).
1.5.3. Exclusion of subscription and redemption fees, subject to appropriate disclosure
Taking into account existing regulatory standards, Member States are recommended to
consider, whether or not to require subscription and redemption fees to be included in the
calculation of the fund performance. However, Member States should require the exclusion of
that information (where relevant) to be subject to an appropriate statement drawing attention
to this fact. Member States are also recommended to encourage their competent authorities to
ensure progressive convergence to standards aligned on best practice in performance
calculation.
1.5.4. Disclosure of a benchmark
Member States are also invited to consider as a possible option requiring disclosure of a
benchmark for all UCITS authorised in their jurisdiction, regardless of the fact that the
UCITS' investment objective does not explicitly refer to a benchmark.
2. As regards the economic information referred to in the third heading of Schedule C in
Annex I to Directive 85/611/EEC it is recommended that Member States apply the
following interpretations:
2.1. Interpretation of ‘tax regime’
In the first indent, Member States are recommended to interpret ‘tax regime’ as meaning the
following information:
          (a)   the tax regime applicable to the UCITS in its home Member State;
          (b)   a statement which recalls that the regime of taxation of the income or capital
                gains received by individual investors depends on the tax law applicable to the
                personal situation of each individual investor and/or to the place where the
                capital is invested and that if investors are unclear as to their fiscal position,
                they should seek professional advice or information from local organisations,
                where available.
2.2 Interpretation of ‘entry and exit commissions’ and ‘other possible expenses or fees’
2.2.1. Overall contents of the information provided
 ---pagebreak--- 30.4.2004        EN                 Official Journal of the European Union                 L 144/49
In the second and third indents, Member States are recommended to interpret the ‘entry and
exit commissions’ of the fund and ‘other possible expenses or fees, distinguishing between
those to be paid by the unit-holder and those to be paid out of the unit trust's/common fund's
or the investment company's assets’ as meaning the following information:
          (a)   disclosure of a total expense ratio (TER), calculated as indicated in Annex I,
                except for newly created UCITS where a TER cannot yet be calculated;
          (b)   on an ex ante basis, disclosure of the expected cost structure, i.e. an indication
                of all costs available according to the list set forth in Annex I so as to provide
                investors, insofar as possible, with a reasonable estimate of expected costs;
          (c)   all entry and exit commissions and other expenses directly paid by the investor;
          (d)   an indication of all the other costs not included in the TER, including
                disclosure of transaction costs when these are deemed to be available by the
                home Member State competent authorities;
          (e)   as an additional indicator of the importance of transaction costs, the portfolio
                turnover rate, calculated as shown in Annex II;
          f)    an indication of the existence of fee-sharing agreements and soft commissions.
The requirement set out in point (f) of the first paragraph should not be interpreted as a
general validation of the compliance of any individual agreement or commission with
Directive 85/611/EEC, and especially with Article 5f(1)(b) thereof, or with national
regulations. Taking into account current market practice, Member States are therefore invited
to require UCITS to consider how far existing fee-sharing agreements and comparable fee-
arrangements are for the exclusive benefit of the UCITS.
Member States are recommended to provide for the simplified prospectus to make a reference
to the full prospectus for detailed information on that kind of arrangements, which should
allow any investor to understand to whom expenses are to be paid and how possible conflicts
of interest will be resolved in his/her best interest. Member States are therefore recommended
to ensure that the information provided in the simplified prospectus remains concise.
2.2.2 Precisions on the notions of ‘fee-sharing agreements’ and ‘soft commissions’
2.2.2.1 Identification of ‘fee-sharing agreements’
Member States are recommended to identify and classify as fee-sharing agreements those
agreements whereby a party remunerated, either directly or indirectly, out of the assets of a
UCITS agrees to split its remuneration with another party and which result in that other party
meeting expenses through this fee-sharing agreement that should normally be met, either
directly or indirectly, out of the assets of the UCITS.
Furthermore, Member States are recommended to consider the following as fee-sharing
agreements within the meaning of the above paragraph:
          (a)   fee-sharing agreements on transaction costs between a UCITS’ management
                company and a broker whereby the broker agrees to split with the management
 ---pagebreak--- L 144/50          EN               Official Journal of the European Union                 30.4.2004
                company the transactions fees paid by the UCITS to the broker for processing
                transactions for the UCITS;
          (b)   fee-sharing agreements in funds of funds between a UCITS management
                company and another fund (or its management company) whereby, if that
                UCITS invests in the fund, part of the fees charged to that UCITS (either
                directly – subscription/redemption fees – or indirectly – TER) because of this
                investment will be paid by the target fund (or its management company) to the
                UCITS management company.
2.2.2.2. Identification of ‘soft commissions
Member States are recommended to identify as soft commissions any economic benefit, other
than clearing and execution services, that an asset manager receives in connection with the
fund’s payment of commissions on transactions that involve the fund’s portfolio securities.
Soft commissions are typically obtained from, or through, the executing broker.
2.2.3. Presentation of TER and portfolio turnover rate
Member States are invited to allow both the TER and the portfolio turnover rate to be either
included in or attached to the simplified prospectus in the same paper as information on past
performance.
3. The Member States are requested to inform the Commission, in so far as possible, by 30
September 2004 of any measures they have taken further to this recommendation and to
inform it of the first results of its implementation, in as far as they are able, no later than 28
February 2005.
4. This recommendation is addressed to the Member States.
Done at Brussels, 27 April 2004.
                                                   For the Commission
                                                   Frederik BOLKESTEIN
                                                   Member of the Commission
 ---pagebreak--- 30.4.2004           EN                    Official Journal of the European Union                       L 144/51
                                                        ANNEX I
                                           Total expense ratio (TER)
1. Definition of the TER:
The total expense ratio (TER) of a UCITS is equal to the ratio of the UCITS' total operating
costs to its average net assets calculated as according to paragraph 3.
2. Included/Excluded costs
2.1 The total operating costs are all the expenses which come in deduction of a UCITS' assets.
These costs are usually shown in a UCITS’ statement of operations for the relevant fiscal
period. They are assessed on an ‘all taxes included’ basis, which means that the gross value of
expenses should be used.
2.2 They include any legitimate expenses of the UCITS, whatever their basis of calculation
(e.g. flat-fee, asset-based, transaction-based3), such as:
- management costs including performance fees;
- administration costs;
- fees linked to depository duties;
- audit fees;
- payments to shareholder services providers including payments to the UCITS' transfer agent
and payments to broker-dealers that are record owners of the UCITS' shares and that provide
sub-accounting services for the beneficial owners of the UCITS shares;
- payments to lawyers;
- any distribution or unit cancellation costs charged to the fund;
- registration fees, regulatory fees and similar charges;
- any additional remuneration of the management company (or any other party) corresponding
to certain fee-sharing agreements in accordance to point 4 below.
2.3 The total operating costs do not include:
- transaction costs which are costs incurred by a UCITS in connection with transactions on its
portfolio. They include brokerage fees, taxes and linked charges and the market impact of the
3
  This non-exhaustive typology of calculation bases reflects the diversity of recent commercial practice across
         Member States (i.e. at the end of2003) and should not be interpreted as a general validation of the
         compliance of any individual agreement or commission with Directive 85/611/EEC, as last amended by
         Directives 2001/107/EC and 2001/108/EC, and especially with Article 5f(1)(b) thereof, regarding
         conflicts of interest, or with national regulations.
 ---pagebreak--- L 144/52         EN               Official Journal of the European Union               30.4.2004
transaction taking into account the remuneration of the broker and the liquidity of the
concerned assets;
- interest on borrowing;
- payments incurred because of financial derivative instruments;
- entry /exit commissions or any other fees paid directly by the investor;
- soft commissions in accordance with point 4.
3. Calculation method and disclosure:
3.1 The TER is calculated at least once a year on an ex post basis, generally with reference to
the fiscal year of the UCITS. For specific purposes it may also be calculated for other time
periods. The simplified prospectus should in any case include a clear reference to an
information source (e.g. the fund’s website) where the investor may obtain previous
years’/periods’ TER figures.
3.2 The average net assets must be calculated using figures that are based on the UCITS' net
assets at each calculation of the net asset value, e.g. daily NAVs where this is the normal
frequency of NAV calculation as approved by the UCITS competent authorities. Further
circumstances or events which could lead to misleading figures have equally to be taken into
consideration.
Tax relief should not be taken into account.
The calculation method of the TER must be validated by the UCITS’ auditors and/or
competent authorities.
4. Fee-sharing agreements and soft commissions:
It regularly results from fee-sharing agreements on expenses that are generally not included in
the TER, that the management company or another party is actually meeting, in all or in part,
operating costs that should normally be included in the TER. They should therefore be taken
into account when calculating the TER, by adding to the total operating costs any
remuneration of the management company (or another party) that derives from such fee-
sharing agreements.
There is no need to take into account fee-sharing agreements on expenses that are already in
the scope of the TER. Soft commissions should also be left outside the scope of the TER.
Thus:
          –     the remuneration of a management company through a fee-sharing agreement
                with a broker on transaction costs and with other fund management companies
                in the case of funds of funds (if this remuneration has not been already been
                taken into account in the synthetic TER or through other costs already charged
                to the fund and therefore directly included into the TER) should anyway be
                taken into account in the TER;
 ---pagebreak--- 30.4.2004        EN                Official Journal of the European Union                L 144/53
          –     conversely, the remuneration of a management company through a fee-sharing
                agreement with a fund (except when this remuneration falls under the scope of
                the specific fund-of-fund case covered in the previous indent) should not be
                taken into account.
5. Performance fees:
Performance fees should be included in the TER and should also be disclosed separately as a
percentage of the average net asset value.
6. UCITS investing in UCITS or in non-UCITS:
When a UCITS invests at least 10 % of its net asset value in other UCITS or in non-UCITS
which publish a TER in accordance with this Annex, a synthetic TER corresponding to that
investment should be disclosed.
The synthetic TER is equal to the ratio of:
" the UCITS' total operating costs expressed by its TER and all the costs suffered by the
    UCITS through holdings in underlying funds (i.e. those expressed by the TER of the
    underlying funds weighted on the basis of the UCITS investment proportion), plus the
    subscription and redemption fees of these underlying funds, divided by
" the average net assets of the fund.
As mentioned in the previous subparagraph, subscription fees and redemption fees of the
underlying funds should be included into the TER. Subscription and redemption fees may not
be charged when the underlying funds belong to the same group in accordance with Article 24
(3) of Directive 85/611/EEC.
When any of the underlying non-UCITS does not publish a TER in accordance with this
Annex, disclosure of costs should be adapted in the following way:
- the impossibility of calculating the synthetic TER for that fraction of the investment must be
disclosed;
- the maximum proportion of management fees charged to the underlying fund(s) must be
disclosed in the simplified prospectus.
- a synthetic figure of total expected costs, by calculating:
          –     a truncated synthetic TER incorporating the TER of each of those underlying
                funds for which the TER is calculated according to this Annex, weighted on the
                basis of the UCITS investment proportion, and
          –     by adding, for each of the other underlying funds, the subscription and
                redemption fees plus the best available upper-bound assessment of TER-
                eligible costs. This should include the maximum management fee and the last
                available performance fee for that fund, weighted on the basis of the UCITS
                investment proportion.
6. Umbrella funds/multiclass funds:
 ---pagebreak--- L 144/54         EN              Official Journal of the European Union                  30.4.2004
In the case of umbrella funds, the TER should be calculated for each subfund. If, in the case
of multiclass funds, the TER differs between different share classes, a separate TER should be
calculated and disclosed for each share class. Furthermore, in keeping with the principle of
equality among investors, where there are differences in fees and expenses across classes,
these different fees/expenses should be disclosed separately in the simplified prospectus. An
additional statement should indicate that the objective criteria (e.g. the amount of
subscription), on which these differences are based, are available in the full prospectus.
 ---pagebreak--- 30.4.2004        EN              Official Journal of the European Union              L 144/55
                                              ANNEX II
                                    Portfolio turnover rate
A fund's or, where relevant, a compartment's portfolio turnover rate should be calculated in
the following way:
        Purchases of securities = X
        Sales of securities = Y
               Total 1 = Total of transactions in securities = X + Y
        Issues/Subscriptions of units of the fund = S
        Cancellations/Redemptions of units of the fund = T
               Total 2 = Total transactions in units of the fund = S + T
        Reference average of total net assets = M
        Turnover = [(Total 1 - Total 2)/M]*100
The reference average of total net assets corresponds to the average of net asset values
calculated with the same frequency as under Annex I, Article 1(3). The turnover rate
disclosed should correspond to the period(s) for which a TER is disclosed. The simplified
prospectus should in any case include a clear reference to an information source (e.g. the
fund’s website) where the investor may obtain previous periods’ p


Avis juridique important

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31976H0492

76/492/EEC: Council recommendation of 4 May 1976 on the rational use of energy by promoting the thermal insulation of buildings

Official Journal L 140 , 28/05/1976 P. 0011 - 0011 Greek special edition: Chapter 12 Volume 1 P. 0128  Spanish special edition: Chapter 12 Volume 2 P. 0114  Portuguese special edition Chapter 12 Volume 2 P. 0114

COUNCIL RECOMMENDATION  of 4 May 1976  on the rational use of energy by promoting the thermal insulation of buildings  (76/492/EEC)  THE COUNCIL OF THE EUROPEAN COMMUNITIES,  Having regard to the Treaty establishing the European Economic Community,  Having regard to the draft from the Commission,  Whereas, in its resolution of 17 September 1974 concerning a new energy policy strategy for the Community (1), the Council accepted as an objective the "reduction of the rate of growth of internal consumption by measures for using energy rationally and economically without jeopardizing social and economic growth objectives";  Whereas, in its resolution of 17 December 1974 on a Community action programme on the rational utilization of energy (2), the Council noted that, in its communication to the Council entitled "Rational utilization of energy", the Commission had drawn up a Community action programme in this field;  Whereas a suitable system should be introduced to inform the public of the best ways of improving the thermal insulation of buildings, thereby helping to promote the rational use of energy;  Whereas the measures recommended are likely to produce sufficiently large savings in energy to make the required investment economically worthwhile,  HEREBY RECOMMENDS TO THE MEMBER STATES:       1. that they organize or sponsor specific information campaigns designed to stimulate public interest in improving inadequate or poor-quality thermal insulation systems in residential accommodation, particularly by setting up, reorganizing or maintaining information and advisory agencies or offices capable of providing practical information in each case;       2. that, in order to ensure the utmost effectiveness of the measures described in point 1:      2.1. they assess the average extent of thermal insulation in existing residential accommodation, in particular by sample surveys, and endeavour to find methods of improving it;           2.2. they organize competitions or draw up development programmes to obtain the best original ideas for improving insulation in existing residential accommodation, with particular reference to the investment required and to cost effectiveness in terms of energy savings;                  3. that they adopt the harmonized Community reference standards for thermal insulation which are to be drawn up for use in the implementation of all laws, regulations and administrative measures, in particular to ensure that:      3.1. the criteria used as a basis for assessment are identical in all Community countries,           3.2. building materials and components may circulate freely on the Community's internal market.                     The standards should be applied in stages to every type of building in turn, beginning in 1980 with office and public buildings.    Done at Brussels, 4 May 1976.  For the Council  The President  G. THORN  (1)OJ No C 153, 9.7.1975, p. 1. (2)OJ No C 153, 9.7.1975, p. 5.


69/40/EEC: Commission Recommendation of 31 January 1969 relating to the prior application of Council Regulation (EEC) No 1619/68 of 15 October 1968 concerning certain norms applicable in the marketing of eggs


title: COUNCIL RECOMMENDATION of 16 March 1992 concerning the discharge to be given to the Commission in respect of the implementation of the operations of the European Development Fund (1979) (Fifth EDF) for the financial year 1990 (92/172/EEC) #

text:
Avis juridique important

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31992H0172

COUNCIL RECOMMENDATION of 16 March 1992 concerning the discharge to be given to the Commission in respect of the implementation of the operations of the European Development Fund (1979) (Fifth EDF) for the financial year 1990 (92/172/EEC)  -

Official Journal L 075 , 21/03/1992 P. 0054 - 0054

COUNCIL RECOMMENDATION  of 16 March 1992  concerning the discharge to be given to the Commission in respect of the implementation of the operations of the European Development Fund (1979) (Fifth EDF) for the financial year 1990  (92/172/EEC)THE COUNCIL OF THE EUROPEAN COMMUNITIES,  Having regard to the Treaty establishing the European Economic Community, and in particular Article 206b thereof,  Having regard to the Second ACP-EEC Convention, signed at Lomé on 31 October 1979,  Having regard to Council Decision 80/1186/EEC of 16 December 1980 on the association of the overseas countries and territories with the European Economic Community (1),  Having regard to the 1979 Internal Agreement on the financing and administration of Community aid (2), signed on 20 November 1979, and in particular Article 29 (3) thereof,  Having regard to the Financial Regulation of 17 March 1981 applicable to the Fifth European Development Fund (3), and in particular Articles 66 to 70 thereof,  Having examined the revenue and expenditure account and the balance sheet relating to the operations of the European Development Fund (1979) (Fifth EDF) as at 31 December 1989 and the Court of Auditors' report relating to the financial year 1990  together with the Commission's replies (4),  Whereas, pursuant to Article 29 (3) of the Internal Agreement, the discharge for the management of the European Development Fund (1979) (Fifth EDF) must be given to the Commission by the European Parliament on a recommendation from the Council;  Whereas the overall implementation by the Commission of the operations of the European Development Fund (1979) (Fifth EDF) during the financial year 1990 has been satisfactory,  HEREBY RECOMMENDS that the European Parliament give the Commission a discharge in respect of the implementation of the operations of the European Development Fund (1979) (Fifth EDF) for the financial year 1990.Done at Brussels, 16 March 1992.For the  Council  The President  Jorge BRAGA DE MACEDO   (1) OJ No L 361, 31. 12. 1980, p. 1.(2) OJ No L 347, 22. 12. 1980, p. 210.(3) OJ No L 101, 11. 4. 1981, p. 12.(4) OJ No C 324, 13. 12. 1991, pp. 194 to 209 and 305 to 316.