Taking into account the division of powers and responsibilities between central and national administrators of the future Union Registry it could rise doubts whom to turn to with matters regarding specific cases within their practical functioning.
It follows from Annex I to the Regulation that the account administrator for operator holding account is a national administrator of the Member State “where installation is located”. For person holding account the account administrator is a national administrator that “has opened an account”. This crucial differentiation creates an area for possible choices as regards jurisdictional matters – mainly for the prospective holders of person holding accounts.
The draft of the Commission Regulation establishing a Union Registry for the trading period commencing on 1 January 2013, and subsequent trading periods, of the Union emissions trading scheme pursuant to Directive 2003/87/EC of the European Parliament and of the Council and Decision 280/2004/EC of the European Parliament and of the Council and amending Regulations (EC) No 2216/2004 and (EU) No 920/2010 (hereinafter referred to as ‘Regulation’) struggles with some difficult legal problems of a precedent nature.
Among them is the one that originates in the fundamental structural change that will be in full effect from 2013, namely the substitution of multiple national registries with the single Union Registry. Furthermore, it follows from the newly published draft legal measure for the structure of the Union Registry that prospective account holders will enjoy some degree of discretion relating to the jurisdictional matters. Beneath there is an attempt to establish what would be the practical consequences for their choices.
The general point is that the entity responsible for operation and maintaining the Union Registry will be the Central Administrator, each Member State will designate, however, a national administrator and access and manage its own accounts and the accounts in the Union Registry under its jurisdiction through its national administrator.
It is interesting to see, how the Regulation resolves manifold organisational and legal troubles flowing from this crucial modification. I seems that the new provisions should build on experience gained, as regards jurisdictional issues, in the occurrence of recent thefts of allowances from registries. It should be reminded that jurisdictional questions were pivotal for deciding on some important legal questions, mainly on the ownership of the stolen allowances.
It would be useful to note that under the new Union Registry provisions there are envisioned different types of accounts with differentiated legal status. Further remarks will deal with the most commonly used types of accounts i.e. the operator holding account and the person holding account (trading account, aircraft operator holding accounts, national holding accounts, EU accounts, external platform and verifier accounts excepting).
As regards jurisdictional matters the crucial differentiation between operator holding account and person holding account follows from Annex I to the Regulation which stipulates that the account administrator for operator holding account is a national administrator of the Member State ‘where installation is located. For person holding account the account administrator is, however, a national administrator that ‘has opened an account’. It could be inferred from the above that – contrary to the operator holding account (which is covered by the jurisdiction binding on the territory, where an installation is located, and may only sell or divest of its operator holding account together with the installation linked to the operator holding account (Article 23(5)) – the prospective holder of a person holding account, having no installation, can choose in which Member States he would like to open an account (with some exceptions, however – see further remarks). The said Annex I to the Regulation determines also the question that the competent administrator for operator as well as person holding account is national – and not the central – administrator.
For the prospective holders of person holding accounts there was created, however, in such a manner an area for possible choices according to the criteria for most advantageous for the specific carbon market participant legal regime. It isn’t the purpose of the present remarks at this stage to evaluate these regimes from the point of view of the said benefits but to examine some features and the potential scope for the freedom to choose the jurisdiction for the emission account location.
The scope for possible choices
At the beginning some preliminary remarks. According to Regulation each Member State is obliged to designate a national administrator. The Regulation further states that ‘The Member State shall access and manage its own accounts and the accounts in the Union Registry under its jurisdiction through its national administrator’ and ‘Every account shall have an administrator who shall be responsible for administering the account on behalf of a Member State or on behalf of the Union’.
The Regulation rules, furthermore, on decisive issue relating to the jurisdiction – pursuant to the Article 10(4) accounts will be governed by the laws and fall under the jurisdiction of the Member State of their administrator and the units held in them shall be considered to be situated in that Member State's territory. The said rule is even more important in the context of recital (12) in the preamble to the Regulation which confirms that allowances and Kyoto units exist only in dematerialised form, are fungible, and their ownership is established by their existence in the account of the Union Registry in which they are held.
It should also be noted that subject to an exception relating to the aircraft operators, the Member State responsible for managing an account mustn’t change.
The said freedom as regards jurisdictional matters isn’t however absolute and depends on the future decisions of the Member States. These decisions may relate in particular to the issues listed beneath.
1. Permanent residence or registration of the account holder
The Member State of the national administrator may require that the prospective account holder have their permanent residence or registration in the Member State of the national administrator administering the account (Article 16(2) of the Regulation). It is useful to note, however, that this requirement is – in the light of the Regulation – only optional for Member States. So, in theory is possible that in some Member States this requirement would not be binding and such a regulatory decision of the Member States will open the field for matters under consideration here.
2. Registration for VAT
The Member State of the national administrator may require that prospective account holders are registered for VAT in the Member State of the national administrator of the account (Article 16(3) of the Regulation). This requirement is also subject to optional decision of the Member State.
3. Permanent residence of the authorised representative
Authorised representatives and additional authorised representatives must be natural persons over 18 years of age. All authorised representatives and additional authorised representatives of a single account must be different persons but the same person can be an authorised representative or an additional authorised representative on more than one account. The Member State of the national administrator may require that at least one of the authorised representatives of an account must be a permanent resident in that Member State (Article 21(7)). As is apparent from the wording of this paragraph, requirement for permanent residence of at least one of the authorised representatives is also optional for Member States.
Specific requirements as regards information needed by national administrators to open an account are listed in the Annex III to the Regulation. They, generally are formulated in such a manner that they not influence on jurisdictional choices of holders of person holding accounts (for instance there is required a proof that the person requesting the account opening has an open bank account ‘in a Member State of the European Economic Area’, also as an evidence to support the identity of the natural person requesting the account opening, is mentioned a copy of an identity card ‘issued by a state that is a member of the European Economic Area or the Organisation for Economic Co-operation and Development’.
1. The most important, and the most influential one, effect of the choices made by the prospective holders of the person holding account as regards the location of the account will be that all issues relating to the ownership of the allowances held in the account will be subject to the law of the Member State of the national administrator that has opened the account. This consideration will have a crucial importance deciding issues, for instance, like an ability to acquire by the buyer in good faith of ownership of allowances stolen from an account. The said issue will also have an effect on legal requirements for contracts encompassing transfers or encumbrances in relation to emission allowances – and many other (this is generally point for a separate threads).
2. The jurisdiction covering the national administrator will – on the ground of the Regulation – have an effect also on the procedure for deciding on appeals relating to manifold actions of the account holders. It considers, in particular, the procedure for appealing against refusal by the national administrator to open an account in the registry. Competent for reviewing such an appeal will be the authority relevant under national law. The same issue applies, pursuant to the Article 22(6) to the refusal to approve an authorised representative or additional authorised representative and to some other points like for instance the suspension of access to the account (Article 31(6)) or closures of an account.
3. The location of the account will also be important when nominating an authorised representative or additional authorised representative. In such a case the account holder shall provide information ‘as required by the administrator’. That information includes, at a minimum, the information set out in Annex VII to the Regulation, but it follows that only minimal level is established by the Regulation and the scope of the information needed may differ according to varying requirements of particular national administrators. Some of them may have a more strict politics as regards the issue.
4. If an authorised representative cannot access the Union Registry for technical or other reasons, the national administrator may initiate transactions on behalf of the authorised representative upon request, ‘provided that the national administrator allows such requests’ (and that access was not suspended). Here is identified another competence for a national administrator, which may vary according to the jurisdiction.
5. Finally, the Regulation also stipulates that national administrators shall provide assistance and support to holders of accounts in the Union Registry that are administered by them through national helpdesks. The Central Administrator shall provide support to national administrators through a Central Helpdesk. This feature, last but not least, may occur of great importance for account holders. An efficient helpdesk may be a an incentive to open an account under particular jurisdiction.
The above listing is obviously not exhaustive, but it points to certain questions identifiable by the explicit provisions of the very Regulation. Taking into account that the provisions under consideration here are only at the draft stage, there is time for further analysis and findings for most advantageous for the prospective account holders decisions (assuming that these provisions of the current draft version will not change). The another point is that the future will show whether the provisions referred to above will produce a some sort of competition between different Member States, and executing their powers, national administrators – competition intended to attract the maximum number of new person holding accounts by creating the most friendly and most efficient regulatory environment.