There is, however, a key legal obstacle to finalising the Omnibus II Directive. The entire Level 2 text process outlined above, is subject to approval of a ‘sunrise clause’ that temporarily overrides the Omnibus II Level 1 text and allows the Level 2 Regulatory Technical Standards to be drafted, not by EIOPA, but by the Commission.
A sunrise clause is often used in conjunction with a ‘sunset clause’ and allows for an automatic switch between two rules on a set date. The clause currently under discussion in the trialogues states that this switch will take place after two years.
Regulatory Technical Standards are part of the implementing measures (Level 2 text). And, as noted earlier, the Commission has already drafted and consulted on the text with various stakeholders. While using the Commission text would speed the process up, the roots of this debate appear to lie elsewhere.
The proposal to give EIOPA drafting powers was first introduced by the Parliament in its July 2011 ECON draft report. “The ECON proposal appeared to be attempting to wrest power away from the Commission in the preparation of the detailed implementing measures by giving responsibility for the drafting of much of those measures to EIOPA,” Oliver Wareham, a partner of Slaughter and May, told Solvency II Wire.
Mr Wareham noted that the practical implication of the sunrise clause appeared to be to allow the Commission text to become the initial set of implementing measures.
But aside from the practical implications there may be other reasons why the Commission should have the drafting powers. “ECON justified many of the changes to the delegated powers by arguing that supervisory expertise is required for the exercise of those powers. However, in many cases an element of policy judgment is needed and the Commission may well be better placed to take wider policy considerations into account,” Mr Wareham said.
The power to propose implementing measures appears to have little technical significance, as the process for approving the text would be similar. However, it may have political implications.
According to Gregor Pozniak, Secretary General, AMICE, “The Parliament argues that they fought hard to create a strong regulatory body, EIOPA, and that its powers should not be weakened or overridden in the current process.”
One reason why there may be political tensions around this issue is to do with the fact that if the Commission has drafting powers it has to consult with the European Insurance and Pensions Committee (EIOPC). “The EIOPC is a body of Finance Ministry officials. It is possible that some member states see better possibilities to influence the Commission services through this body,” Mr Pozniak said.