Authorities - FMA Österreich
You are here: 

Authorities

Jump to: Footer

The term “authorities” means the government, provinces and municipalities. According to Article 1(4)a) EMIR, EMIR does not apply to European Union bodies charged with or intervening in the management of the public debt.

Authorities are responsible for their own debt management as a task falling of their budget management amid their own autonomous scope. Therefore, the provisions pursuant to Article 1(4)a) EMIR do not apply to them as they are bodies charged with or intervening in public debt management. Persons who are given the responsibility for public debt management by the authority are also covered by this exemption. For example, this covers the Austrian Treasury (OeBFA – Österreichische Bundesfinanzierungsagentur GmbH) which is charged with this task on behalf of and on account of the government.

Furthermore, authorities that establish positions in derivative contracts are not considered as undertakings under EMIR, and, therefore, are not considered as non-financial counterparties. Consequently, they are not subject to EMIR requirements (reporting, clearing obligation etc.).

However, commercially active operations attributable to the authorities (with their own legal personality) that enter into derivative contracts may be classified as non-financial counterparties in this respect and, hence, subject to these obligations under EMIR.

According to Article 1(4)a) EMIR, EMIR does not apply to bodies (in the European Union) that are responsible for or involved in public debt management. From the perspective of the European Commission, which has also in particular considered the question of whether municipalities fall within the scope of EMIR application, those municipalities fall under this exemption provision that are considered competent for the management of government debt or such bodies that could be deemed to be involved (see the explanations covered in Part II point 15 of the EC: EMIR Frequently Asked Questions of the European Commission).

Under Austrian Federal Constitutional Law, budget management, which also includes debt management, is the responsibility of the relevant authority as task within its effective scope (Article 13 and Article 116 para. 2 in conjunction with Article 118 para. 2 B-VG). The authorities may, therefore, apply the exemption from Article 1(4)a) EMIR to themselves. Consequently, authorities do not fall within the scope of EMIR pursuant to this provision governing and, therefore, are not subject to any obligations (e.g. reporting or clearing obligations) on the basis of EMIR.

This exemption also applies for public bodies/persons who are entrusted by an authority in the case of the latter being charged with public debt management (the Österreichische Bundesfinanzierungsagentur GmbH is charged with this task on behalf of and on the account of the government) since such bodies are also covered by the term “bodies (of the European Union), which are charged with or intervene in public debt management”.

A non-financial counterparty as defined in Article 2 (9) EMIR is an undertaking established within the European Union that is not a financial counterparty. In relation to the assessment of whether there is an undertaking as defined in this provision, according to the case-law of the Court of Justice of the European Union, it does not depend on the legal status or the type of financing being conducted by the person in question, but depends instead on the type of activity being conducted, specifically on the provision of goods and services on a market (see the explanations contained in Part II point 14 of EC: EMIR Frequently Asked Questions of the European Commission.)

The performance of a public authority activity may, however, by no means be considered a commercial activity.

An authority may be commercially active in that it offers goods and services on a market, and even as an economically independent operation (c.f. operations of a commercial nature as defined in Article 2 of the Corporation Tax Act).

With regard to such activities of a commercial nature, it is necessary to remember the following points: unlike the situation under corporation tax law (where an operation of a commercial nature itself is the taxable entity), under civil law there is only one legal person, namely the authority itself (see margin note 64 of the Guidelines on Corporation Tax (Körperschaftssteuerrichtlinien – KStR 2013)). As a result, the respective authority itself is always, where applicable, the party of any derivative contract.

Consequently, for the evaluation of whether there is an undertaking and, hence, an NFC pursuant to Article 2 no. 9 EMIR, it may depend on whether the authority itself (and where applicable including all operations of a commercial nature) as a whole can be considered to be an undertaking or not.

Such a classification of the authority concerned as being an undertaking may not usually be questioned, since in an overall view of authorities, their public authority activities or the activities and tasks that are not based around the provision of goods and services on a market outbalance those that are. Moreover, on the income side, the income from the provision of public services vastly outweighs the income resulting from the provision of goods and services on a market.

Authorities, since they are not considered as undertakings and, therefore, are not a non-financial counterparty are not subject to reporting and clearing obligations under EMIR.

This applies to a greater extent to the activities of authorities that may not been seen as being “commercial”, in particular, public authority operations (including public authority operations as defined in Article 2 para. 5 KStG). Such authorities do not fall within the definition of an undertaking pursuant to Article 2 no. 9 EMIR.

A municipality operates a public authority operation (without a separate legal personality, cf. Article 2 para. 5 KStG), which supplies the population with services, the provision of which the public is obliged to accept on the basis of a legal instruction, e.g. for waste disposal or street cleaning. As part of this public authority operation, the municipality enters into positions in derivative contracts (since the utility company itself does not have a legal personality under civil law):

For the municipality, as a public body charged with or intervening in public debt management, EMIR does not apply. Furthermore, the municipality is not active in a commercial manner, and, therefore, cannot be considered a non-financial counterparty. For this reason, EMIR is not applicable for the municipality.

A municipality operates a utility company (without a separate legal personality cf. Article 2 para. 3 KStG), which supplies the population with electricity (or gas or heating). As part of operating the utility company, the municipality itself establishes positions in derivative contracts (since the utility company itself does not have its own legal personality under civil law):

For the municipality, as a public body charged with or intervening in public debt management, EMIR does not apply. Furthermore, it must also be assessed whether the municipality itself is to be classified as an “undertaking”. Based on the explanations above, this is, indeed, not the case.

Consequently, also in this case, the municipality also does not constitute a non-financial counterparty, and, therefore, EMIR also does not apply.

Where an authority outsources activities to undertakings with a separate legal personality (= legal persons), it has to be checked to what extent these legal entities (but not, however, the authority) are to be qualified as NFC as defined under EMIR. It should be noted that in this instance, the corporate tax assessment differs from the evaluation of whether it is an undertaking as defined in Article 2 point 9 EMIR. This is due to the fact that while the public authority activity in the form of a legal person under private law is taxable for the purposes of corporate tax, it does not, however, count as a commercial activity under EMIR.

A municipality owns a public utility company in the form of a stock company for supplying electricity (or gas or heating) in the municipality. This stock company (as a separate legal person) holds positions in derivative contracts:

The stock company, but not, however, the municipality itself, is a non-financial counterparty since only the stock company is a contractual party of the derivative contract. Only the stock company is subject to EMIR reporting requirements, and, provided that clearing thresholds are exceeded, also subject to the clearing obligation.

A municipality owns a stock company that is responsible for waste disposal or street cleaning in its municipal territory, with the population being required to make use of these services. This stock company (as a separate legal person) holds positions in derivative contracts:

Neither the stock company, which is not active in a commercial manner since it does not perform services on any market, nor the municipality itself, which under civil law is not a party to the derivative contract, are non-financial counterparties. EMIR, therefore, does not apply.