ENSP provides input for the draft legislation on Traceability & Security systems of tobacco products



ENSP Feedback on the proposal

The European Network for Smoking and Tobacco Prevention provided detailed feedback on the draft secondary legislation relating to the establishment and operation of the systems of traceability and security features for tobacco products, as provided for under Articles 15 and 16 of Directive 2014/40/EU.

Among multiple suggestions and adjustments to the draft document the most crucial topic ENSP commented on is Article 15 on Independence. 

INDEPENDENCE FROM TOBACCO INDUSTRY AND GUARANTEE OF MEMBER STATES CONTROL

In Article 27, Secondary repository, point 1 states that “Providers of the primary repositories shall ensure the establishment of a single secondary repository. To that end they shall appoint among themselves a provider of such a repository…”

In that way the tobacco industry will not only select and pay the provider of primary repositories (that unfortunately is decided in EU TPD art 15, but we hope will be amended after final ratification of the WHO FCTC Protocol) but also they will control and de facto select the provider of secondary repository. This selection will be opened only to providers of primary repositories so no other independent third party can even apply to be selected.

In our view:

It is incompatible with the soul of Assumptions including 24 assuring:

  • independence from tobacco industry and
  • Member States core control role

As well as is in obvious contradiction to WHO FCTC Protocol, specifically to:

  • Art. 8.2 that requires that tracking and tracing system shall “be controlled by the Party” and
  • Art. 8.12 “obligation assigned to a Party shall not be performed by or delegated to the tobacco industry.”

To improve, we propose that secondary repository provider shall be independent

third party appointed by the Member States or Commission through a public procedure. It cannot be any party related to tobacco industry and also, due to its controlling, trustworthy and transparency role, it should not be any party that is already selected by tobacco industry to be provider of primary repository. For the same reason already appointed secondary repository provider cannot apply for, nor can it play a role of primary repository.

Proposed point 1:

Point 1 “The Commission or designated Member State shall ensure the establishment of a single secondary repository. To that end they shall appoint a provider of such a repository, which has to be independent from tobacco industry and cannot be a provider of primary repository…”

Consequently in Annex 1, Part B, Art.1 that states:

“The providers of the primary repositories who have been approved in accordance with point 4 of Part A within six months following the entry into force of the Delegated Regulation XXX shall appoint, from amongst themselves, a provider tasked with operating the secondary repository (“the operator of the secondary repository”) for the purpose of carrying out the services specified in Chapter V of this Regulation.”

shall be amended as follows:

The Commission or designated Member State shall select in an open public bid, a provider tasked with operating the secondary repository (“the operator of the secondary repository”) for the purpose of carrying out the services specified in Chapter V of this Regulation. The operator of the secondary repository has to be independent from tobacco industry and fulfil requirements defined in Art. 35 and cannot be a provider of primary repository.

INDEPENDENCE CRITERIA

Article 35, Independence, states:

“1. Member States shall ensure that ID issuers, providers of repository services and anti-tampering devices are independent and exercise their functions impartially.
2. The following criteria shall be used to assess independence:

(d) independence from the tobacco industry in terms of legal form, organisation and decision making. In particular it shall be assessed whether the entity is not under the direct or indirect control of the tobacco industry, including a minority shareholding;

(e) independence from the tobacco industry in financial terms, which will be presumed if the entity generates less than 20% of its annual overall turnover with the goods and services supplied to the tobacco sector;

(f) absence of conflicts of interests with the tobacco industry of the persons responsible for the management of the entity. In particular, they:

(1) shall not participate in company structures of the tobacco industry;

(2) shall act independently from any interest linked to the tobacco industry.

3. Any change in circumstances related to the above criteria that would influence the assessment of the entity’s independence, shall be communicated without delay by the primary repository provider to the Commission. “

In our opinion, the above criteria do not guarantee independence from tobacco industry. Let us just recall the latest history of “evolution” of former Philip Morris’ Codentify system to INEXTO, that clearly proves that tobacco industry, if only needed, can easily and very quickly (in a matter of days):

  1. Create outside of the EU territory a new “fully independent entity” with 0 revenue and even transfer for a symbolic amount of 1 CHF the rights to product that according to their statements cost them a few hundred millions Euro;
  2. Establish the management of the new entity that consist of ex-key directors of PMI who just “resigned’ from lucrative PMI high-level Senior Executive jobs.

In spite of above defined criteria in art. 35 such a new company would have to be considered as independent, and would be eligible to play any role including crucial ones for controlling the tobacco industry and having access to highly sensitive data about investigation queries and third parties commercial data. This situation simply should not be allowed.

We believe that to eliminate such creative activities, the following alterations should be made to Art 35:

  1. All criteria and conditions defined in point 2 should be analysed retroactively:a. For primary repository providers and ID issuers: current year and at least five preceding years;
    b. For secondary repository operator: current year and at least five preceding years;
    In case of newly created companies it has to be required to prove that neither financing including debt, know-how nor management and key employees have not originated or not been related to tobacco in above defined time periods.
  2. 20% revenue clip level seems to be too weak restriction. It shall be not more than 10% in case of primary repository providers and ID issuers and ideally 0% in case of secondary repository operator, retroactively in timeframes preceding the signings as described in point 1.
  3. Absence of conflict of interest should also include other key employees, members from the Executive Board and other representative of any Advisory group, and additional condition of not receiving any benefits from tobacco industry shall be added.
  4.  The obligation to communicate to the Commission any change in circumstances related to the above criteria shall be extended to all entities including secondary repository operator and ID issuers.

Proposed amendments on Art 35 – Independence as follows:
1. Member States shall ensure that ID issuers, providers of repository services and

anti-tampering devices are independent and exercise their functions impartially.

2. The following criteria shall be used to assess independence:
(a) Independence from the tobacco industry in terms of legal form,

organisation and decision-making. In particular it shall be assessed whether the entity is not under the direct or indirect control of the tobacco industry, including a minority shareholding;

(b) Independence from the tobacco industry in financial terms, which will be presumed if the secondary repository provider generates 0% and any other entity generates less than 10% of its annual overall turnover with the goods and services supplied and received from to the tobacco sector;

(c) Absence of conflicts of interest with the tobacco industry from the people responsible for the management of the entity as well as anyone from the Executive Board, Board of Directors or any decision-making committee and taking key operational and functional position. In particular, they:

(1) Shall not participate in company structures of the tobacco industry; (2) Shall act independently from any interest linked to the tobacco industry.
(3) Shall not receive any direct or indirect benefits including financial from the tobacco industry.

(d) The criteria defined in point (a)-(c) should be validated retroactively:
(1) For secondary repository provider: for current year and 5 preceding years;
(2) For all other entities: for current year and 5 preceding years.
(3) Entities that exist shorter than respectively 5 and 2 years have to prove that neither its financing including debt, know-how nor management and key employees have not originated or not been related to tobacco in above defined respective time periods.

3. Any change in circumstances related to the above criteria that would influence the assessment of the entity’s independence, shall be communicated without delay by the ID issuers, providers of primary and secondary repository services and anti-tampering devices provider to the Commission.

 

Read the full ENSP feedback on the proposal…

Read all the comments to the consultation…  


Submitted by: Polina Starchenko, 2 October 2017