The harmonising force of the EU Internal Market: does it still exist? The case of the Trade Secrets Directive
November 16, 2015
The EU Internal Market is based on a fundamental principle: a single marketplace that ensures the free movement of goods, people, businesses and services. This means getting rid of as many trade barriers as possible – technical, fiscal and legal.
To achieve this, the principal building block was ‘harmonisation’. Via directives adopted by the EU legislator, one common regulatory framework applies across every Member State. Fragmentation of markets is abolished, or reduced to a minimum.
Above all, harmonisation is a business-friendly approach: it gets rid of red tape, allowing companies across all sectors to contribute to economic growth and innovation, ultimately benefiting citizens. This is the cornerstone of the European project.
However, recent cases suggest the EU Institutions are stepping back from this approach
The goal of harmonisation is still valid in theory, but there is a noticeable trend towards ‘carving out’ certain industries who will, in practice, be forced to respect higher standards under other legislation, as we can see in the proposal for a Trade Secrets Directive, currently being debated in trilogues by the Council, European Parliament (EP) and Commission.
This noble initiative recognises the importance of European companies being able to protect their business know-how from competitors, proposing a harmonised definition of a ‘trade secret’ that would apply across all 28 EU Member States.
However, the Council and the EP both wish to amend the Commission’s draft by inserting a provision that effectively denies full protection to trade secrets where stricter standards are imposed under other EU or national legislation. This goes against the spirit of the proposal.
As a result, some industries would be subject to unequal treatment, not being entitled to benefit from this new regime in practice, and therefore at risk of losing their trade secrets.
Take the example of the Clinical Trials Regulation (2014): this legislation adopted in 2014 requires the reporting of certain clinical trial data. Some stakeholders (e.g. NGOs) are exploiting the vague formulations in this Regulation and putting pressure for a more comprehensive obligation that would necessitate publication of sensitive commercial know-how.
The revised Tobacco Products Directive is also a case in point. Despite the lip-service paid to the importance of trade secret protection in the basic text, the reporting obligations built into the secondary legislation (implementing acts) force manufacturers to disclose information that is not fully owned by them, but by their suppliers. These enhanced obligations could result in confidential information ending up in the hands of competitors – or worse, counterfeiters.
Under the Regulation on Energy Market Transparency (REMIT), energy companies are required to report significant details of their transactions and orders in relation to wholesale energy products, including commercially sensitive information like the price, quantity, date and time of trades.
We also cannot forget to mention the proposed Transatlantic Trade and Investment Partnership (T-TIP), where there is a general risk of EU standards on intellectual property (and other aspects) being watered down to the benefit of US rules.
On top of this, it must be recalled that the Trade Secrets proposal is being discussed in informal first-reading trilogues, in extremely opaque and secretive conditions, with only a handful of decision-makers around the table. Public documents are rare and stakeholders are left in the dark. All in all, it is a classic case of poor regulation.
The four examples above – and there are certainly others (e.g. GMOs) – illustrate the dangers of dismantling the single market, the main success story of the European Union. It requires a reaction. One of the first initiatives should be the main sectors affected by this issue coming together and taking joint action to promote their shared interests as well as the general interest of the EU.