Dear Subscriber,

Welcome to the September 03 issue of K-Zine, Kilroys Solicitors e-briefings for business™ from an Irish and European perspective.

 In this issue our main focus is on the transposition into Irish law, with effect from the 25th July 2003, of the four EU Directives comprising the new regulatory framework for the electronic communications sector.

We look at the extension as and from the 15th September 2003 of the anti-money laundering provisions of the Criminal Justice Act 1994 to impose the reporting of suspicion obligations on auditors, accountants, solicitors, estate agents, auctioneers and tax advisors.

We also look at the new EU Commission rules that from 1st May 2004 will replace the anti-trust notification procedure with a self-certification regime and which will extend the Commission's "dawn raid" powers to cover private homes and vehicles.

We also comment on the requirement, as and from 1st January 2005, for all EU Public companies to prepare consolidated accounts in accordance with International Financial Reporting Standards.

Kind regards,
Kevin O'Brien

 
Electronic Communications
 EU Regulatory Framework for the Electronic Communications Sector transposed into Irish law as and from 25th July 2003.
Commercial
15th September 2003 sees the extension of Irish Money Laundering legislation to Accountants, auditors, auctioneers, estate agents, solicitors and tax advisors.
EU Competition law
 New EU Competition law rules that will abolish the Notification Procedure and introduce new "dawn raid" powers to have far reaching effects from 1st May 2004.
Financial Services
 New Accounting Standards for EU Public Companies will come into force on 1st January 2005.




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EU Regulatory Framework for the Electronic Communications Sector transposed into Irish law as and from 25th July 2003.

On the 25th July 2003 the Minister for Communications, Marine and Natural Resources made Regulations, transposing the EU regulatory framework for the electronic communications sector comprising the Access Directive (2002/19/EC), the Authorisation Directive (2002/20/EC), the Framework Directive (2002/21/EC) and the Universal Services Directive (2002/22/EC) into Irish law.

An "electronic communications network" refers to a transmission system, switching or routing equipment that conveys signals by wire, radio, optical or other electromagnetic means and used to transmit signals, radio, television or cable television networks, irrespective of the content.

An "electronic communications service" is a service normally provided for reward consisting mainly of signals on electronic communications networks and including telecommunications services and network transmission services used for broadcasting.

As and from 25th July 2003 the licensing structure provided for by Section 111 of the Postal and Telecommunications Act 1983 has been replaced by a general authorisation procedure.


The Access Regulations1
The Regulations give effect to the Access Directive referred to above. These Regulations operate to consolidate the rules governing assess and interconnection.

ComReg has the power to designate operators in the electronic communications sector with SMP and to determine, if necessary, the terms upon which such operators must offer access and interconnect with their networks and services.

An undertaking whether established within the State or some other Member State of the EU has the right to negotiate commercial terms for both access to and interconnection with electronic communication networks and services operating in the State.

Operators within the State are obliged to provide such access on terms that are consistent with the provisions of the Access Regulations when requested to do so by another operator.

ComReg, as the Regulator is obliged to encourage and if necessary to ensure access and interconnection in a manner that promotes efficiency, sustainable competition and gives maximum end-user benefits.

If necessary ComReg may impose obligations to ensure end - to - end connectivity. ComReg can also impose obligations to ensure transparency and non-discrimination regarding access and interconnection.

To ensure non-discrimination ComReg may require that access or interconnection be granted on terms equivalent to those of other undertakings providing equivalent services in the market, or on terms equivalent to those offered by the operator concerned to its subsidiaries or partners.

ComReg may impose price control and cost accounting obligations on an operator. If ComReg is concerned that the Access Regulations have been breached, and having been given the opportunity to remedy the situation, the operator fails to do so, ComReg can institute enforcement proceedings in the High Court.

The Authorisation Regulations2
 These Regulations gives effect to the Authorisation Directive referred to above. The objective is to harmonise and simplify the authorisation rules and conditions to facilitate the freedom to provide electronic communications networks and services.

Because Ireland has operated a standard licensing regime both for fixed-line and mobile operators for a number of years, the introduction of the authorisation procedure referred to below has replaced the standard licensing regime and in doing so has not created any significant additional regulatory requirements.

Any operator intending to provide such networks or services must first notify ComReg. When the notification is received the operator is deemed to be authorised. ComReg will set out the conditions to be attached to such authorisations. Operators with existing licences issued under section 111 of the Postal and Telecommunications Act 1983 are deemed to be authorised.

The Authorisation Regulations set out the rules governing the harmonisation of the assignment of radio frequencies, the rights of use for numbers and the conditions attaching to these rights.

There are provisions dealing with the service of directions and notifications and the institution by ComReg of enforcement proceedings in the High Court.

The Framework Regulations3
These Regulations give effect to the Framework Directive referred to above. The objective is to establish a regulatory framework for electronic communications networks and services, associated facilities and associated services.

These Regulations introduce a new basis for determining SMP. Under the old rules operators with a 25% market share of the relevant market were generally speaking designated as having SMP and therefore subject to specific regulatory obligations. Under the new framework, SMP is now determined on a basis equivalent to the Competition law principle of dominance.

The Framework Regulations provide for the establishment of an Appeals Panel to whom any user or undertaking that is affected by any decision of ComReg may appeal. They also set out the steps to be taken and the time limit within which any such appeal must be taken.

The Appeal Panel will have the power to compel the attendance of witnesses, to examine witnesses under oath and to compel the production of documents. Any decision of ComReg will stand until such time as the Appeal Panel overturns it.

Among the tasks of ComReg detailed in these Regulations (subject to Ministerial direction) are; the administration of the national numbering scheme and the effective management and allocation of radio frequencies for electronic communications services.

The Framework Regulations also impose obligations on undertakings that are engaged in activities other than the provision of electronic communications networks or services to keep separate accounts for its various activities audited in accordance with generally accepted auditing standards.

ComReg will have the power to investigate, on request, any dispute between undertakings and to co-operate with any other national regulator in the resolution of cross border disputes.

ComReg has the power to institute summary proceedings for an offence under these Regulations and to commence enforcement proceedings in respect of any breach that has not been remedied within the appropriate time period.

The Universal Service and Users Rights Regulations4
These Regulations give effect to the Universal Service Directive referred to above and deal in the main, with the obligation to provide specified services and the affordability for the end user of those services.

The services covered by the Directive are the provision of:
  • Access to the fixed public telephone network,
  • Access to public pay telephones,
  • Access to Directories and Directory Enquiry services,
  • Access to operator assistance, and
  • Measures for disabled users.
The affordability requirement is concerned with measures such as tariff options, price caps and averaging of tariffs on a geographical basis.

End users must, under the terms of the Directive be capable of making and receiving local, national and international voice calls, making and receiving facsimile communications and access to the Internet.

For further information contact:
Patrick Ryan at
Email : pryan@kilroys.ie

© Kilroys Solicitors 2003

1S.I. No. 305 of 2003: European Communities (Electronic Communications Networks and Services)(Access) Regulations 2003.
2S.I. No. 306 of 2003: European Communities (Electronic Communications Networks and Services)(Authorisation) Regulations 2003.
3S.I. No. 307 of 2003: European Communities (Electronic Communications Networks and Services)(Framework) Regulations 2003.
4S.I. No. 308 of 2003: European Communities (Electronic Communications Network and Services)(Universal Service and User Rights) Regulations 2003.
15th September 2003 sees the extension of Irish Money Laundering legislation - Accountants, auditors, auctioneers, estate agents, solicitors and tax advisors prepare.

The Criminal Justice Act, 1994 as amended (the "1994 Act"), amongst other things, provided for a new offence of money laundering in Irish law and also incorporated the provisions of the first EU Money Laundering Directive (91/308/EEC) and the recommendations of the OECD's Financial Action Task Force on the prevention of the use of the financial system as a vehicle for money laundering.

In broad terms, the 1994 Act requires certain persons ("designated bodies") and their employees to take reasonable measures to establish the identity of customers and clients and to retain the records of identification and the relevant transaction for a period of at least five years.

In addition, designated bodies (including their directors, officers, and employees) must report any suspicion of a money laundering offence to the Garda Siochana. It is not necessary to have any evidence of an offence and a mere suspicion must be reported to avoid being found guilty of a criminal offence.

To date the obligations under the 1994 Act have been the preserve of financial service providers. All this changes from September 15th 2003, with the coming into operation of the Criminal Justice Act 1994 (Section 31) Regulations 2003 (the "CJA Regulations").

The CJA Regulations extend the scope of the 1994 Act by prescribing additional entities as designated bodies for the purposes of the 1994 Act.

The identification, retention and reporting obligations are now extended to the following persons/entities:
  • Accountants;
  • Auctioneers;
  • Auditors;
  • Estate agents;
  • Tax advisors;
  • Solicitors;
  • Investment business firms;
  • Persons providing money remittance services;
  • Administrators, trustees and custodians of investment funds;
  • Dealers in high values goods; and
  • Casinos (notwithstanding that casinos are presently illegal in Ireland!).
It is important to highlight that information received by an accountant, auditor, solicitor, or tax advisor in the course of advising on legal proceedings or in representing a client in legal proceeding, is not required to be reported.

The crime of money laundering is very broadly defined in the 1994 Act.

A person is guilty of money laundering if knowing, believing or being reckless as to whether property is or represents the proceeds of criminal conduct he then;

(a)

converts, transfers or handles the property or removes it from the State with the intention of

  • concealing or disguising its true nature, source, location, disposition, movement or ownership or any rights with respect to it, or
  • assists another person to avoid prosecution, or
  • avoids the making, enforcement or frustration of a confiscation order, or
(b) conceals or disguises its true nature, source location, disposition, movement or ownership or any rights with respect to it, or
(c) acquires, possesses or uses the property.

While on the face of it the general requirements may seem straightforward this is unfortunately not the case. Even with the detailed guidance that has been issued by the Department of Finance Steering Committee on Money Laundering and the financial regulators to their relevant audiences over the years, the area of anti-money laundering compliance is often fraught with difficulty.

The new entities now falling within the 1994 Act for the first time must take advice and familiarise themselves with their extensive obligations, provide comprehensive training to employees and ensure appropriate internal procedures are in place for information gathering and to facilitate the reporting of suspicious transactions.

The Act envisages that guidance on the application of the 1994 Act may be given by supervisory, regulatory or representative bodies to their relevant audiences/membership and a number of briefing and guidance documents have been published to date by the Institute of Chartered Accountants in Ireland, the Law Society, I.A.V.I. and the Dublin Funds Industry Association.
For further information contact:
Hilary Griffey at
Email : hgriffey@kilroys.ie

© Kilroys Solicitors 2003
New EU Competition law rules to abolish the Notification Procedure and to introducing new "Dawn Raid" Procedures to have far reaching effects from 1st May 2004.
The 1st May 2004 will see the introduction of Council Regulation EC No 1/2003 throughout the EU, resulting in the most far-reaching changes in EC competition law since 1962. Although the new Regulation will not change EU Competition law rules themselves, the methods used to implement these rules will be amended significantly.

The main changes

1. Abolition of the notification procedure
 The main focus of attention at the moment seems to be on the fact that from 1st May 2004, the current system whereby agreements above certain thresholds must be notified to the European Commission in order to obtain anti-trust approval, will change to a directly applicable exception system, whereby the responsibility will lie with the contracting parties themselves to ensure that their agreements do not restrict competition, or in case they do, that these restrictions qualify under Article 81(3).

This new procedure cuts back on the bureaucracy and cost for companies of the current notification procedure and will allow the European Commission to focus on cartel and price fixing agreements which are contrary to EU Competition law.

2. Homes and private motor vehicles subject to search.
 The Commission has become aware of an increasing practice whereby company directors or staff members retain business records in their own homes.

In a radical change to the existing dawn raid procedures, officials authorised by the Commission will be empowered to enter any premises, including private homes, and vehicles, if a reasonable suspicion exists that books or other records relating to the business and to the subject matter of the inspection may be kept there.

A Commission decision to undertake such a search must specify the subject matter and purpose of the inspection, appoint the date on which the investigation is to begin and indicate the right to have the decision reviewed by the European Court of Justice.

Such Commission decisions should be taken after consultation with the Competition Authority of the Member State in whose territory the inspection is to be conducted and with the authorisation of the judicial authority of the Member State in question.

3. Investigative Powers
The Commission will be empowered to interview any person who may be in possession of useful information and to record the statements made.

In the course of an inspection, officials authorised by the Commission will have the power to affix seals so as to prevent any interference with the materials in question for the period of time necessary for the inspection, although it is recommended that seals should not be affixed for more than 72 hours.

Officials authorised by the Commission will be empowered to ask for any information relevant to the subject matter and purpose of the inspection.

Failure to Comply - the Consequences
 Where the officials authorised to conduct the inspection find that a company opposes the inspection, the Member State concerned shall afford the officials the necessary assistance, requesting where appropriate the assistance of the police or of an equivalent enforcement authority, so as to enable them to conduct the inspection.

Companies should note that fines not exceeding 1% of the company's turnover in the previous business year may be invoked, where the company either intentionally or negligently supplies incorrect, incomplete or misleading information or do not supply information within the required time-limit, where the Commission has made a decision to authorise a dawn raid.

The new Regulation underlines the European Commission's determination to stamp out any attempt by companies to undermine the Commission's competition inspections and marks a change in its practical efforts to ensure that Member State companies comply with European competition legislation.

For further information contact:
Anthony Layng at
Email : alayng@kilroys.ie

© Kilroys Solicitors 2003
New Accounting Standards for EU Public Companies.
With effect from 1 January 2005, all EU listed companies will be required to prepare their consolidated accounts (but not single company accounts) in accordance with International Financial Reporting Standards (IFRS). The introduction of IFRS for EU listed companies is a key part of the Financial Services Action Plan of the EU Commission, which aims to eliminate any remaining barriers to cross-border trading in securities.

The main objective of IFRS will be to introduce uniformity in accounting standards for publicly quoted companies throughout the EU. It is envisaged that IFRS will produce a greater focus on transparency through increased disclosure and the use of fair value measurement for the assets and liabilities. Other changes include larger provisions in company accounts for deferred tax, pensions and certain employee benefits.

Although IFRS applies to all listed companies organised within the EU, there is an option in the Regulations to extend IFRS to unlisted companies and/or to the single company accounts of listed and unlisted companies as well as to consolidated accounts.

In Ireland, the Irish Financial Services Regulatory Authority (IFSRA) has issued a consultation paper to the investment funds industry on the subject. IFSRA invited submissions from the funds industry as to whether IFRS should be extended to Irish authorised investment funds and to financial institutions which service such funds, i.e., fund management companies, trustees and administration companies.

The consultation document invited comments from the industry to be submitted by 31 August 2003 on whether IFSRA should apply to the single company accounts (in addition to the consolidated accounts) of listed and unlisted Irish companies.

For further information contact:
Hilary Griffey at
Email : hgriffey@kilroys.ie or
Jennifer Fox at jfox@kilroys.ie

© Kilroys Solicitors 2003
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