Tuesday

22nd May 2018

The EU agency that has too much money

The European Union has dozens of agencies with offices all over the continent, but there is one that has an unusual problem: it has too much money.

On 31 December 2015, the Office for Harmonisation in the Internal Market (OHIM) held some €449.6 million in cash.

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OHIM, based in Alicante in south-eastern Spain, takes care of EU-wide intellectual property issues. It is the office where businesses acquire EU trade marks.

“It's the only European agency that is self-sufficient, and that runs with a surplus that is enormous,” said Cecila Wikstroem, a Swedish member of the European Parliament.

According to OHIM, the agency last year had a surplus of €185.2 million, and it also holds money in a reserve fund “to guard against contingencies” and to meet already agreed payments.

The current surplus is no aberration: the agency has held one for at least a decade.

At the end of 2011, the office held €520 million in cash and had a surplus of €257.6 million. Its budget is completely separate from the EU budget or any national budget. But especially in times of austerity, the perception of an EU agency swimming in cash is controversial.

So when lawmakers were updating the rules regarding OHIM, they decided to also tackle this issue.

“In the interest of sound financial management, the accumulation by the Office of significant budgetary surpluses should be avoided,” said the new regulation, which goes into force next Wednesday (23 March).

Wikstroem, a Swedish Liberal who was involved in negotiating the new rules, told this website that the office “should not run with this huge surplus”.

“The agency should run in an efficient manner in order to provide the best services for European businesses,” she said.

'Vague conditions'

The new regulation also includes a provision that makes it possible for the office to transfer its budget surplus to the general EU budget, where it could be used to support, for example, agriculture policy, structural funds or migration initiatives.

However, it is not yet clear how a budget transfer would work in practice.

The rules say that “where a substantive surplus is generated over five consecutive years”, the office's budget committee “shall decide by a two-thirds majority on the transfer to the budget of the Union of a surplus generated from 23 March 2016”.

When the text was being drafted, the European Court of Auditors noted “the mechanism triggering the transfer of a surplus is subject to a number of cumulative conditions which need to be satisfied, some of them being vague”.

There is no definition when a surplus is “substantive”. According to an OHIM spokesperson, this is yet to be defined by the office's governing body – made up of representatives from member states, the EU commission and, from this week under the new rules, from the EU parliament.

Wikstroem said she did not know who would represent the EU parliament, but believed the inclusion of an MEP on the office's board “guarantees democratic scrutiny”.

But why not define already in the legal text what constitutes a substantive surplus?

“Of course, we could have, but at the end of the day when we have managed to get what we wanted, namely the permanent seat for the European Parliament, then I washed my hands and said: this is something for the future governance, for the board, to make a clear definition,” said Wikstroem.

The EU's auditors also expressed concern that there is no specification whether all of the surplus, or only a part of it, would be transferred to the general EU budget.

'Not fair'

But according to Wikstroem, such a transfer to the EU budget should be avoided if possible, because it “would not be fair”.

“It has not been European citizens in general or taxpayers that have generated this surplus, it has been the trademark owners by their initial fee and renewal fees, so it should also flow back to them,” she said, noting that the surplus was created because trademark renewal fees had been priced too high.

Under the new rules, renewal fees would drop in price by more than a third, the MEP added.

According to OHIM, it spent part of the surplus (€62 million) to fund its 2011-2015 strategic plan, worth €200 million, which “has resulted in the transformation of the efficiency, effectiveness and user-friendliness of not only the Office but also of the national and regional [intellectual property] offices in the EU”.

In the past three years, both the surplus and the overall amount of cash has dropped. But while the surplus made up 48 percent of cash in 2012, it was 41 percent last year, which means that a larger share of the office's cash is held in other reserves, and is not counted as surplus.

24-hour press trip

As of this week, OHIM will be renamed as the European Union Intellectual Property Office. To explain the changes, the agency held a press trip to Alicante.

This website was invited through a public relations company to attend the press trip. However, the itinerary of the trip raised some eyebrows.

It would begin with a get-together dinner in Alicante on Sunday (13 March), followed by presentations on Monday that would last two hours and 45 minutes (including coffee break). After that, there would be a tour of the office's “unique working environment and premises” and a lunch. And then back home.

When this website asked an OHIM spokeswoman what the added value was of travelling all the way to Alicante, she noted that the press trip was “an opportunity to get to know some of the journalists and also for journalists to get to know the office”.

She did not agree that the programme was perhaps a bit too thin to gather journalists from all over Europe, nor could she say if the carbon footprint of the flights would be offset.

“That sounds like quite an expensive way to spend trademark owners' money," said MEP Wikstroem when this reporter laid out the programme.

"But it's a beautiful agency, it's well-managed, I must say. It's well-functioning.”

To be fair, the press trip was the first one the agency had organised in two years, and was budgeted at €3,000.

And as the spokeswoman told this website: “You don't have to come.” Which we didn't.

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