The European Commission's proposal to set up a European Labour Authority is likely to lead to haggling over the location of the new agency's headquarters - and a potential conflict with the European Parliament.

The commission said on Tuesday (13 March) that it will be up to member states to decide where the new agency will be based.

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The publication of the proposal came just a day after a committee of the European Parliament agreed grudgingly to the relocation of the European Medicines Agency (EMA) from London to Amsterdam.

In a committee text adopted on Monday - and which will be put to a final vote in the Strasbourg plenary on Thursday - MEPs expressed their discontent over the selection procedure.

National governments coming together in the Council of the EU decided where the EMA should move after Brexit by subsequent rounds of voting and ultimately by drawing a lot.

MEPs were annoyed at not being involved.

The adopted text up for a vote on Thursday said that "decisions in relation to the location of [EU] bodies and agencies need, and legally must, be taken under the ordinary legislative procedure, fully respecting the European Parliament's prerogatives, whereby the European Parliament and the Council are equal co-legislators".

Seat of the agency: [x]

But although the commission's explanatory memorandum attached to the legislative proposal on the labour agency said that it will be up to member states to decide the seat of the new labour agency, the actual draft regulation itself merely stated: "The seat of the Authority shall be [x]."

This means that the parliament has the possibility to propose an amendment to fill out location "X". If the council opts for a different location, the two institutions will end up in a deadlock.

The commission decided to set up a the European Labour Authority to inform citizens that work in another EU country of their rights, although the draft regulation specified that no new rights or obligations will be created for either individuals or employers.

The authority would also assist national authorities in complying with EU rules on labour.

According to the commission, action was needed because the number of cross-border labour mobility had almost doubled over the past decade. Last year, 17 million of the EU's 500 million citizens worked or lived in another member state than the one of their nationality.

The new agency will assist member states with joint inspections, but only at the invitation of the member states.

Merger would be 'challenging'

In an accompanying impact assessment, the commission said it also considered whether setting up a new agency was really necessary.

It mused whether the tasks could be performed by one of the four already existing EU agencies that deal with labour.

"However, building on an existing decentralised agency would pose a number of challenges," the commission said.

Three of the four labour-related agencies mostly have research expertise, while a fourth is focused on third countries.

In addition, the agencies have a so-called tripartite structure, which means that employer organisations and trade unions participate alongside national authorities in the agencies' governing bodies.

Such a structure was "not deemed the ideal arrangement for the new authority, which has a strong operational mandate", the commission said.

"The reform of the governance structure may reveal itself problematic," it added.

Supervisory option dismissed over costs

The commission also considered the powers of the proposed agency, through three options.

It considered, under what it called giving the agency a supervisory role, setting up a 'European Inspection Corps', composed of national detached experts, and setting up physical points of contact in each member state where citizens could go with their questions.

But the corps would cost around €3.3m, while the contact points would cost some €8m.

There were benefits to giving the agency a supervisory role: "The consequent increase in the deterrence effect vis-à-vis fraudulent companies would contribute to lower levels of social fraud and a more level playing field," the commission said.

But it concluded that a lighter touch option - the "operational role" - was more efficient because it was cheaper: in total €14.3m less per year.

From experience, the commission expected that the agency would not be immediately fully operational. Its budget would increase from €11m in 2019 to €21m in 2020, and increasing step-by-step to €52m a year in 2024.

However, the commission added that this calculation was based on if the headquarters of the agency were based in Brussels. If it is located in a more expensive city where labour costs are higher, the budget may need to be increased.