Opinion 2/15 on the scope of EU external trade policy: Some background information before next week’s hearing

Dr Andrés Delgado Casteleiro

Senior Research Fellow, Max Planck Institute Luxembourg for International, European and Regulatory Procedural Law

Introduction

On September the 13th and 14th the Court of Justice of the EU (CJEU) will hold its hearings for Opinion 2/15, which concerns the EU’s competence to conclude a new Free Trade Agreement (FTA) with Singapore, in a rare sitting of the Full Court of CJEU judges. This blogpost provides a brief overview of some of the relevant issues that will most probably play a role during the hearings. The first part provides some context on the EU’s trade policy. The second part focuses on the main issues concerning the EU´s competence to conclude FTAs. The final section discusses some broader implications that Opinion 2/15 might have – in particular for EU/UK trade relations after Brexit, and the controversial proposed EU/US trade deal (TTIP).

  

EU Trade Policy after the Lisbon Treaty

One of the main innovations introduced with Lisbon Treaty was the expansion of the scope of the EU´s competence over external (non-EU) trade policy, which is mostly known as the Common Commercial Policy (CCP). Article 207 TFEU extended the scope of the CCP as to encompass not only trade in goods but also trade in services, commercial aspects of intellectual property and foreign direct investment.

This expansion of the CCP´s scope meant not only that those subject-matters were an EU competence, but more importantly, following Article 3 (1) TFEU, they were all an exclusive competence of the EU – apart from an exception for transport services. The exclusive nature of the CCP entails two interrelated aspects: first, only the EU can negotiate and conclude trade agreements, and second, EU Member States cannot negotiate and conclude agreements in that area without the prior authorization of the EU. Also, Article 207 provides that usually the EU Council votes by qualified majority on external trade laws and treaties, so Member States have no veto. However, Article 207 does allow for a veto as regards some aspects of services trade, or where there is a veto in another área of EU law (tax, for instance).

In practice, exclusive competence would make things easier for the EU in terms of negotiating, concluding, and ratifying its international agreements, as only the EU would be legally entitled to negotiate those agreements. By contrast, whenever an international agreement concerns an area not covered only by EU exclusive competence, the agreement will be concluded by both the EU and its Member States.

Depending on whom you ask these latter agreements, commonly known as ‘mixed agreements’, could be seen as an awful or a great thing. On one hand, the whole process of concluding and ratifying mixed agreements is more cumbersome, as the EU and its 28 Member States have to conclude and ratify the agreement. The ratification process of mixed agreements normally takes years, as some Member States require that the agreement has to be approved by their national parliaments, although sometimes the EU agrees to apply such treaties (or parts of them) provisionally in the meantime.  On the other hand, mixed agreements could be seen as enhancing the role of the Member States during the negotiations, which can result on a much smoother implementation of the agreement.

In realpolitik terms, the discussion on whether a certain agreement should be mixed or not hides a battle for power between the EU (mostly the European Commission) and the Member States. As mixed agreements give more power to the Member States (often more than they are constitutionally entitled to), it seems rather logical that the EU Commission would like to restrict their use to the bare minimum. This is the underlying conflict in Opinion 2/15: if the Court decides that the EU-Singapore FTA falls within the EU’s exclusive competence, the EU would be able to conclude the agreement alone. If, on the contrary, the CJEU decides that the FTA does not only cover areas of EU exclusive competence, but also shared competence, or even Member States´ exclusive competence, the agreement will be concluded jointly by the EU and its Member States.

The EU-Singapore FTA and EU competence

To what extent does the EU-Singapore FTA fall within the scope of the EU´s (exclusive) CCP?

The EU-Singapore FTA covers broadly speaking four áreas: goods, services, intellectual property and investment. In relation to trade in goods, there is no doubt that this part of the FTA falls within the scope of the EU’s exclusive trade powers. That the CCP encompasses trade in goods has been clear since even before Opinion 1/94 – the key CJEU ruling on the scope of the EU’s trade policy powers before the Treaty of Lisbon. Likewise, trade in services, competition, public procurement and intellectual property would also be covered by exclusivity. While there were some doubts about to what extent they would be covered by article 207 TFEU, the Court seems to have cleared those doubts in Daiichi Sankyo as regards intellectual property, and Commission v Council, as regards services.

The main part of the hearings and, I would assume, the questions of the judges would concern the extent to which the EU´s CCP competence would cover the investment chapter of the agreement. As mentioned before, article 207 TFEU establishes that the EU has competence over Foreign Direct Investment (FDI). Yet, what is FDI?

A first possible way to approach the concept of FDI as enshrined in the Treaties is to understand, that the framers have coined a new and autonomous concept of Foreign Direct Investment. This new definition of FDI would cover all aspects linked to investment protection as enshrined in the EU-Singapore FTA, covering FDI stricto sensu as well as portfolio investment (ie buying minority non-controlling shares in a business), dispute settlement and even protection against expropriation. This position would render the investment protection provisions of the EU-Singapore FTA an exclusive competence of the EU since they would fall within the scope of the CCP.

The main problem with this expansive view of the scope of the EU’s competence over FDI is that would contradict both the international and EU (internal) definitions of FDI. Therefore, it seems rather unlikely that the Court would coin a new understanding of FDI completely detached from the international concept and irrespective of the Court’s case law on direct investment. 

A second possible definition of FDI that the Court could give would follow the international definition of FDI that excludes portfolio investments from its scope. This definition of FDI can be found in multiple OECD and IMF instruments. Moreover, it would also be in consonance with the definition of direct investment that the CJEU has developed in its internal market case law (see Angelos Dimopoulos, EU Foreign Investment Law (OUP, 2011)). Given that the EU-Singapore FTA defines investment in a very broad way as to include: “every kind of asset which is owned, directly or indirectly or controlled, directly or indirectly by investors of one Party in the territory of the other Party, that has the characteristics of an investment, including such characteristics as the commitment of capital or other resources, the expectation of gain or profit, the assumption of risk, or a certain duration”, this reading of the FDI competence would entail that not everything in the Investment Protection chapter would be covered by the CCP. Therefore, those parts not covered by the CCP would be covered either by other EU implied powers, or by EU Member States’ competences. I think that most probably this will be definition of FDI that the CJEU will favour, since it is in line with its internal case law and the relevant international instruments.

The third possible understanding of the scope of the FDI as enshrined in the CCP is the most restrictive one of all three. Based on a literal reading of Article 206 TFEU, it would argue that the EU’s exclusive competence does not cover all aspects related to FDI but instead it only covers the issue of the initial admission of FDI. Article 206 TFEU provides that among the CCP objectives, the progressive abolition of restrictions on international trade and on foreign direct investment is the aspect of FDI which has been entrusted to the EU (Jan Asmus Bischoff, 'Just a little bit of “mixity”? The EU’s role in the field of international investment protection law' (2011) 48 Common Market Law Review, Issue 5, pp. 1527–1569). Consequently, post-admission measures would fall outside the scope of the CCP. This narrow reading of FDI under the CCP would very much restrict the EU’s powers in the field of FDI, and it seems rather unlikely that the Court given its expansive view of the CCP would adopt it.

Does the EU have any other exclusive competence covering certain aspects of the EU-Singapore FTA?

If the Court decided to choose either the second or third possible definition of the scope of the FDI competence, it would then have to establish whether there are any other implied and exclusive powers that would cover those aspects of the investment chapter of the EU-Singapore FTA not covered by the FDI exclusive competence. This question is especially interesting as regards portfolio investment and whether there might be an implied  and exclusive power stemming from Article 63 TFEU concerning the free movement of capital from non-EU countries.

The Commission in its Communication “Towards a comprehensive European international investment policy” (COM (2010) 343 final) argues in this direction: “to the extent that international agreements on investment affect the scope of the common rules set by the Treaty's Chapter on capitals and payments, the exclusive Union competence to conclude agreements in this area would be implied.” This would mean that one way or another both FDI and portfolio investments would be covered by an EU exclusive competence, so in principle there would no need for the participation of EU Member States in the EU-Singapore FTA based on the inclusion of an Investment Protection chapter in it.

However, it is not very clear how that competence would be exclusively implied since free movement of capital is a shared competence, and the EU has not exercised its competences under Article 64 (2) and 66 TFEU. Thus, it would be difficult to argue that the implied powers doctrine would apply since there is no internal legislation to be affected (P Eeckhout, EU External Relations Law (Oxford, OUP, 2011)). Yet, it would not be impossible, since the EU has established a harmonized regulatory framework for portfolio investments within the EU that makes reference to relations with non-EU countries.

Therefore, it would appear that portfolio investments could be an area largely covered by Union rules (Angelos Dimopoulos, EU Foreign Investment Law (OUP, 2011), p 105), which is the threshold in the case law for determining whether the doctrine of implied and exclusive powers could be applied. Recent case-law on implied powers does not give much clue about how the CJEU could see the issue. While the CJEU has been flexible in understanding whether a certain area is largely covered by Union rules, the fact that these rules must be affected has started to figure prominently in the Court’s reasoning (see Opinion 1/03, Opinion 1/13 and the broadcasting rights case), though not applied in a fully consistent fashion.

Implications of Opinion 2/15

Opinion 2/15 will not only determine whether the EU-Singapore FTA falls within EU exclusive competence, but could have the potential in setting tone for the next FTAs currently being negotiated or in the process or being signed. In other words, if the EU-Singapore FTA is found to fall within EU’s exclusive competence, the next EU FTAs could be concluded only by the EU. Conversely, if it is not within the EU’s exclusive competence, future EU FTAs will likely be mixed agreements.

This is especially relevant when one considers that the issues covered in the EU-Singapore FTA are the same kind of issues currently being discussed in the controversial EU-US negotiations on the TTIP. An Opinion 2/15 ruling establishing a broad scope for the EU’s CCP could allow the EU conclude the TTIP without its Member States alongside, making the ratification process far faster and, more importantly, less prone to surprises within the national parliaments´ ratification processes. By establishing that the TTIP can only be concluded by the EU, only the European Parliament would have to consent to the agreement. While this is by no means an easy task (see the EP´s position on the ACTA and (at first) the SWIFT Agreements), it is a far easier task than getting the TTIP ratified by the EU and its 28 Member States. Given the opposition of most of the European left and some parts of the right to the TTIP, I doubt that the TTIP would survive its ratification process if it is deemed a mixed agreement following Opinion 2/15.

Furthermore, if, as it looks right now, the UK government might prefer to settle its new relationship with the EU after BREXIT with an FTA (Canada + type of agreement) the Court’s opinion could potentially decide whether EU Member States have a veto in negotiating the new trade relationship with the UK. As Robert Peston has suggested, this may prove to be a key political issue in the UK/EU negotiations, as it will be harder for the UK to achieve its negotiating objectives if the remaining Member States all have a veto.

However, it must be pointed out that regardless of whether the Opinion finds that the EU has exclusive competence over the matter covered in the FTA, politics can overrun these legal considerations, as the Commission sadly reminded us back in June. Its decision to propose that CETA (the EU-Canada FTA) must be a mixed agreement regardless of the competences involved and the Commission´s Legal Service opinion marks a very worrying precedent that could undermine the effectiveness of the Lisbon Treaty reforms were Opinion 2/15 to conclude that the EU has exclusive competence to conclude FTAs.

Barnard & Peers: chapter 25, chapter 27

Photo credit: cnn.com

On really responsive rule-making? The EU-US transatlantic trade and partnership (TTIP) negotiations

Dr.Elaine Fahey, Senior Lecturer, The City Law School, City University London

The script

The EU and US have now completed 6 rounds of negotiations on the Transatlantic Trade and Investment Agreement (TTIP), the trade agreement under negotiation between the EU and US to cut trade barriers and ‘behind the borders’ barriers (technical regulations, standards, approvals) in a wide variety of sectors. It is touted as having the potential to become the global trade standard. Already, the epitaph is alleged to have been written on the Agreement. Yet while this misses the mark as to the theatre of global rule-making, on the other hand, skepticism is not unwarranted. It has at times appeared as an extraordinary experiment in rule-making.[1]  TTIP harbours ambitions to grow as a living regulatory entity. It has become rife with controversy, for its secrecy, for its possible inclusion of the Investor Settlement Dispute Mechanism (ISDM) and its impact on EU regulatory standards. Some have even tried to stop the negotiations using EU law itself, in the form of a failed European Citizens Initiative.

The history of transatlantic relations is littered with many failed attempts to integrate EU and US legal order through mutual recognition, even in very limited fields. TTIP had been poised to shake up this dynamic. It has become an exercise in ‘really responsive rule-making’. However, many questions remain about international negotiations and the standard of what is and should be ‘really responsive EU rule-making’:- I reflect on its script, production process and the cast of actors.

The production process

Most EU-US rule-making processes in the past has been conducted firmly behind closed doors, in inscrutable so-called ‘Dialogues’, in a range of fields that many will never have heard of. They traditionally privileged industry. The TTIP negotiations have marked an enormous shift in EU-US rule-making.

The TTIP negotiations have been ostensibly very open as a process. There is a lively EU TTIP twitter account (@EU_TTIP), RSS feeds, video-streamed meetings, broad public consultations and prolific document dissemination- more ‘quantitatively’ than its harshest critics might care to admit. In fact, the EU often has appeared as a transparency ‘manna’ in contrast to the tight-fisted US provision of information, even tweeting about its own transparency or pictures of public consultations and meetings. However, the TTIP negotiation mandate and draft text have long been leaked alongside the official channels of information, posted in reputable German broadsheets like Die Zeit, as well as dedicated leaking forums: http://eu-secretdeals.info/ttip/).  This leaking has threatened to take the wind out of EU openness sails.

The Ombudsman late into the negotiations recently raised questions as to the true place of openness in the negotiations and launched a public consultation. Her actions appear inadequately searching, and even late in the game. A range of key CJEU decisions on transparency in 2014 (in’t Veld, Mastercard etc; see the previous blog posts on those cases here and here) have not done enough to dent the exception surrounding international relations as regards access to information. In fact, the leaking of the EU-Canada free trade agreement (CETA) in August this year by the German broadcaster ARD demonstrates the truly dented credibility of the state of openness, international negotiations and the EU.

The cast of actors

The response by the Commission to steep and sharp public scrutiny of TTIP have been to set up more civil society dialogue engagement points (eg civil society advisory bodies) and more floods of consultations. These processes have delivered only partially-scrutable results. For example, it received nearly 150,000 for the ISDM, over half which will we never know about. The involvement of civil society in the TTIP negotiations has arguably become quite unwieldy.

The responses of the would-be incumbent trade Commissioner Malmstrom to the ISDM saga have provoked scorn for her breath-taking flip-flopping on its inclusion or exclusion from TTIP. The ‘flexibility’ about the normative agenda through ‘really responsive rule-making’ is a serious concern.

There is still much scope for more truly responsive rule-making, for example, a more vibrant institutional dialogue and for parliamentary participation, at both national and EU level. The powers of the European Parliament to approve any agreement reached have been raised as both a shield and a sword to any would-be critics of its credentials as a rule-making project. Many explore its potential within a living regulatory entity.[2] However, the vastness of the rule-making exercise may warrant a pause for thought on this. For the newly elected Parliament to make an impact on the negotiations, it must surmount a significant information gap and grasp the mantle of data. The place of data transfer within TTIP has had endless twists and turns- first the NSA affair, then the Google decision, then the decision by Microsoft to shift cloud computing and comply with EU law. Yet it risks being swallowed up within the broad swathe of TTIP. The TTIP negotiators face the question of how to be really responsive to this- and whether the European Parliament and Congress- neither a homogenous entity- will accept it all.

A battle is often bitter because the stakes are so small. EU-US trade relations have never been more liberalized or responsive to each other. It colours the context of what the stakes actually are. How ‘really responsive’ the negotiations can and should be has some legal and political distance to travel.

Editor's note: This blog post was previously published on the eutopia blog; thanks for permitting it to be reblogged here.

 

Barnard & Peers: chapter 3, chapter 24

 

---

[1]See E. Fahey & M. Bartl ‘A Postnational Marketplace: Negotiating the Transatlantic Trade and Investment Partnership (TTIP)’ in E. Fahey & D. Curtin (Eds.), A Transatlantic Community of Law: Legal Perspectives on the Relationship between the EU and US legal orders (Cambridge: Cambridge University Press, 2014).

 

[2] Parker, Richard W. and Alemanno, Alberto, Towards Effective Regulatory Cooperation Under TTIP: A Comparative Overview of the EU and US Legislative and Regulatory Systems (May 15, 2014). European Commission, Brussels, May 2014. Available at SSRN: http://ssrn.com/abstract=2438242.

The CJEU increases public access to legal advice on international treaties

Steve Peers

Introduction

The different approaches between the EU and the USA as regards data protection continue to result in considerable friction. Even before the Snowden revelations about the surveillance of EU citizens by the American security services, there were arguments about American access to airlines’ passenger name records and information about money transfers.

Both of these disputes were eventually solved by means of a treaty between the US and the EU regulating the USA’s access to such information. As regards money transfers, that access enables the USA to carry out its ‘Terrorist Finance Tracking Programme’ (TFTP). While the first version of the treaty regulating access to the TFTP data was rejected by the European Parliament (EP), a second version was approved after the text was amended.

After the CJEU’s recent judgments concerning data retention and Google Spain, and in light of the pending Europe v Facebook case, it might now be questioned whether the EU/US treaties on passenger data and TFTP are invalid due to breach of the data protection rights guaranteed by EU law. However, that’s a topic for a future blog post.

In the meantime, the Court of Justice of the European Union (CJEU) ruled today on a related question. When the negotiations for the TFTP treaty were underway, the ‘legal base’ of the future treaty (ie, the precise EU powers to negotiate and conclude it) was disputed, and the Council’s legal service gave a legal opinion on this issue. A Member of the European Parliament (MEP), Sophie in’t Veld, requested access to the legal opinion and was refused, on the grounds that revealing legal advice relating to international negotiations would undermine those negotiations. She challenged this decision before the General Court, and was partly successful. 

The Council appealed that judgment to the Court of Justice, and has entirely lost in today’s judgment. While that judgment significantly increases public access to documents as regards legal advice, it still leaves intact the possibility of the institutions to refuse access as regards the substance of negotiations. 

The judgment

The EU’s access to documents legislation (Regulation 1049/2001) provides in principle for public access to EU documents. It contains exceptions allowing documents to be refused on grounds of (among other grounds) ‘international relations’ and ‘legal advice’. According to the General Court, the Council legal service’s advice on the TFTP treaty could be refused on the former ground, to the extent that it disclosed substantive details of the draft negotiating mandate, since this would damage the EU’s position by revealing it to the other side.  

However, to the extent that the legal advice did not reveal the EU’s substantive negotiating position, this ground for refusal could not automatically be applied. The General Court took into account the fact that an EP resolution had already made this particular legal base issue public, and that legal base disputes relating to international treaties can be the subject of advance rulings of the CJEU before those treaties come into force.

As regards this first issue, all of the Council’s objections to the judgment were rejected by the CJEU. The Court ruled that while legal advice relating to international treaty negotiations did not always have to be disclosed, it could not always automatically be refused either. Rather, the Council had to give reasons why disclosing the opinion to the public (after redacting all of the information relating to the substance of the negotiations) would undermine international negotiations.

Furthermore, the CJEU ruled that the General Court was right to apply a more stringent standard of judicial review as regards this issue as compared to the substantive negotiating mandate (where the EU courts would still leave a wide discretion to the EU institutions).

The second issue was the ‘legal advice’ exception. The CJEU had previously ruled, in the Turco case, that access to legal advice could only be exceptionally refused in legislative proceedings. By contrast, the negotiation of an international treaty is an executive power, conferred by the Treaties upon the EU Commission or the High Representative for EU foreign policy.

But nevertheless, the General Court had ruled that the legal advice exception could not be applied in this case either. The Council’s argument that it needed to keep legal advice secret to avoid embarrassment was too general and unsubstantiated. It was irrelevant that the legal advice concerned an international treaty, since the ‘international relations’ exception already addressed that aspect. Moreover, the EU legislation provides that the use of the ‘legal advice’ exception is subject to a public interest override. On this point, there was a close link to the EU’s legislative activity relating to police cooperation and personal data exchange, and waiting until the agreement was in force would rob public access to information of much of its purpose.  Again, all of the Council’s objections to the judgment were rejected by the CJEU.

Comments

In principle, this judgment could significantly open up the debate concerning the legality of planned international treaties. While the CJEU did not rule that legal advice in such cases should be disclosed as a rule (as legal advice relating to legislative procedures must), it is now clear that refusing access to such documents as a rule is a breach of the access to documents regulation. The Council (or Commission) must give detailed specific reasons to show why they think such documents should be refused because their release would undermine the conduct of negotiations in any specific case. This is obviously a difficult task, since to provide those reasons, those institutions would have to predict the hypothetical actions of third States without disclosing to the applicant much of the details.

Moreover, they must consider the public interest in access to that legal advice. The General Court’s further reasoning on this issue wasn’t expressly endorsed by the CJEU, but neither did the CJEU disavow it. So it is arguable that whenever there is a link between the treaty negotiations in question and the EU’s legislative activity, and/or the treaty in question touches upon an issue of broad public concern like data protection, then the public interest overrides the Council’s.

On the other hand, unlike the position as regards the EU legislative process, the CJEU has left intact wide discretion for the institutions to refuse to disclose their negotiating position, and therefore any details of that position in the legal advice can be redacted. Since there is an obvious close link between the legal advice and the substantive position, it remains to be seen whether the documents will still be intelligible.

Will the release of such documents damage the EU’s negotiating positions as regards international treaties? In the case of the USA, surely it has seen all the documents anyway, due to the efficiency of its espionage agencies. That will also be the case, to some extent, with some or all of the other countries the EU negotiates with.

As for the European Parliament, the Treaty anyway guarantees it information on all ongoing negotiations, and the CJEU has recently confirmed that this is an enforceable right. However, it is not yet clear how far that right extends, and in particular whether it extends to negotiating mandates. In any event, it is clear from the judgment that if the EP hears about a legal dispute concerning a planned treaty, and decides to make that dispute public by referring to it in a resolution, the Council’s argument that the legal advice cannot be disclosed is significantly weakened.

Another reason for the secrecy of the EU’s international negotiations may be to avoid complications arising from public debate. However, this strategy is largely self-defeating, since the secrecy itself engenders great suspicion from critics about what the EU and its negotiating partners might be planning, and so may fuel opposition to the eventual treaty (if the negotiations are successful). A clear case in point is the current talks on an EU/US free trade agreement.  

It is true to say that this process is ultimately democratic, since all international treaties agreed by the EU and third States then have to be approved by the Council, and most have to be approved by the European Parliament and often also national parliaments. However, it is not democratic in the full sense of the term, since there is a very limited opportunity for and open and public debate (as compared to the legislative process) before the negotiations have concluded.

Today’s judgment has opened up that debate somewhat, by making it easier to make a successful request for the legal advice relating to such negotiations. Sometimes the legal advice may relate to broad issues of public concern, such as human rights protection, but sometimes it will relate to more technical institutional points. The latter points could still be relevant politically, since they could determine (for instance) how much power Member States or the EP have to block a treaty if they object to the substance of it.

But overall, the judgment will not satisfy the demand for greater openness of the treaty negotiation procedure, and so the paradoxical effect of secrecy breeding opposition to treaties will continue. For those who seek greater public involvement in the process, getting access to more information on legal advice but no further information on the substance of the talks is like being served a salad when they are hungry for steak.

Barnard & Peers: chapter 3, chapter 24 

Only Nixon could go to China: Could Juncker be a reformist Commission President?

 

Steve Peers

Just as all observers of British politics know that ‘a week is a long time in politics’, their American counterparts know that ‘only Nixon could go to China’. The basic idea behind the latter catchphrase is that only a politician with a firmly established reputation could convince his or her supporters to back a significant change of course. In Nixon’s case, only a firm anti-Communist could convince American conservatives that a rapprochement with Communist China was a good idea.  

Could this principle be relevant to the European Union? The most recent elections for the European Parliament (EP) resulted in an increased vote for anti-EU parties in a number of Member States. As a result, it has been argued by David Cameron and others that Jean-Claude Juncker, who is the preferred candidate to be the next President of the European Commission of the political party which won the most seats in the EP (the ‘European People’s Party’ or EPP), should not be the next President, because he is not reformist enough as he is too much of an ‘old hand’ in EU politics. But it is arguable that in fact, a policy of EU reform could only be carried out by a candidate with a good understanding of how the existing system works, and how to use it.

Secondly, it has been argued in recent days that the very idea of selecting a Commission President based on the nomination of the party which wins the largest number of seats in the EP is wrong in principle – or conversely that it is undemocratic and unprincipled. But the better view is that neither of these views is correct. Rather, the Treaty drafters created a system of dual legitimacy for the selection of the President, albeit one which provides for a greater role for the European Parliament than before.

These two arguments are developed below (in reverse order). But first, a little background for those new to the issue (given that the press has ignored it until recently).

Background

Traditionally, the Commission President was chosen by the heads of State and government of EU Member States unanimously. Over time, the national veto was removed and so the European Council (which consists of those heads of state and government) votes by a qualified majority on his issue. Also over time, the European Parliament was given the power to approve the nominee for President, although it has never rejected a nominee in practice.

The Treaty of Lisbon kept this underlying procedure intact, but refers to it differently. Now Article 17 TEU states that the Parliament ‘elects’ the Commission President. But the person which the EP votes is still nominated by the European Council, although the Treaty now also states that the latter body shall ‘take into account’ the results of the EP elections.

Following the entry into force of the Treaty of Lisbon, the majority of EU political parties (the EPP, the Socialists, the Greens, the Left party and the Liberals) decided to nominate their preferred candidate for Commission President, on the assumption that the person nominated by the largest party ought to become the President of the Commission following the elections. The persons nominated by the parties have become known as ‘Spitzenkandidaten’. It was never clear, however, whether the European Council would accept this process.

The procedure for selecting the Commission President

In a previous post on this blog, written before the elections, I argued that despite some cogent arguments against the idea of the Spitzenkandidaten, in principle the idea should be supported as a move towards greater democratisation of the EU.

Let’s revisit the argument in light of the post-election furore, in which there are competing contentions (as mentioned above) that only a predominant role for the European Council, or for the European Parliament, would be democratic. Neither of these views is convincing.

First of all, the legal arguments. The Treaty clearly gives a role to the European Council, not only the European Parliament, as regards the process leading to the election of a Commission President. If the drafters of the Treaty of Lisbon had really wanted to remove the role of the European Council entirely, they could and would have done so. But they retained the role of that body in selecting the nominee for President.

On the other hand, the Treaty drafters not only retained the role of the European Parliament, but enhanced it, adding references to its role ‘electing’ the President and the requirement for the European Council to take the election results into account. If the Treaty drafters had not wanted to enhance the role of the EP, they would not have made these amendments. The best view is therefore that, as before, both institutions play a significant role in the appointment of the Commission President – but the EP, rather than the European Council, plays the lead role in that process.

Secondly, the broader political arguments. Asserting that either the EP or the European Council should be regarded as the sole or main source of democracy in the EU is risible. They both have democratic legitimacy – as expressly recognised by Article 10(2) TEU, which refers equally to the direct representation of citizens in the European Parliament and their indirect representation, via national parliaments and governments, in the European Council (and the Council, made up of national ministers).

This dual legitimacy is reflected throughout the EU legal order, in the form of the ordinary legislative procedure, the annual budget process, the European Parliament’s power of consent over a number of Council acts (for instance, most treaties to be concluded by the Council), and the power of either the EP or the Council to control delegated acts to be adopted by the Commission. In some cases (for instance, tax legislation), the Council has greater power than the EP, but sometimes the reverse is true (for instance, only the EP can force the resignation of the entire Commission; this is clearly consistent with an increasing role for the EP in appointing it). It logically follows that only a Commission President who commands broad support from both the European Parliament and the Member States can do the job effectively.

But what does all this mean in practice? It means that the increased role of the EP in the election of the Commission President ought to be respected. So the European Council ought to consider, first and foremost, the name of whichever of the Spitzenkandidaten could possibly command a majority of Members of the European Parliament (MEPs). The first such name is Juncker, given that his party got the biggest number of seats and a large majority of EP parties have already supported the idea that he try to obtain a majority in the EP first.

However, as the EU system currently stands, the European Council should not be expected to approve this name without further ado, but should retain the right to ask the candidate to make specific commitments in order to satisfy the broadest possible majority of Member States that he or she should be appointed.

In particular, in light of the increased vote for anti-European parties, it is more than reasonable to expect the next Commission President to commit himself or herself to significant reform of the EU. The question is therefore whether Juncker, described by some as a federalist supporting greater European integration, is the right person to carry out that reform.

Can Juncker be a reformist?

The starting place for assessing whether Juncker can be a ‘reformist’ Commission President is his own list of five priorities. These include a commitment to discuss a possible renegotiation of UK membership of the EU, referring expressly to David Cameron’s own list of demands (which were discussed in an earlier blog post). At the same time, another Juncker priority is a bigger role for the EU, in relation to monetary union – but as regards the Eurozone Member States only, specifically exempting the UK.

Another Juncker priority is the completion of negotiations (already underway) for a free trade deal between the EU and the United States. This prospect is increasingly controversial (at least in the EU), although it is hard to judge its merits at present without having any idea what the final deal will consist of. However, the idea of such a deal appears to have broad support across the UK’s political spectrum. If it is agreed, it will confound the argument of those who say that the UK needs to leave the EU in order to increase its trade with non-EU countries. But if it is not agreed, then those arguments will be confirmed, at least in part (the EU has negotiated, and is negotiating, free trade deals with many other countries).

Admittedly, Juncker’s list of priorities places qualifications on his support for an EU/US free trade deal, in particular as regards food safety and data protection laws. But reservations like these are shared in a number of national capitals and parliaments and among a number of MEPs. They must be addressed if any trade agreement is to have any chance of being ratified. A more evangelical and uncritical supporter of an EU/US trade agreement would perhaps not be able to persuade as many governments or parliamentarians to support the final deal. In particular, the European Parliament might now contain more MEPs who oppose a potential deal, but Juncker, as the first ever Spitzenkandidate to take office, might be best placed to convince them to support it.

Juncker’s other two priorities concern growth-related policies such as the digital single market, and an energy union for the EU. Both these ideas have broad support across the EU and are not specifically or necessarily federalist. Indeed, the development of the EU’s single market has always been at the forefront of the reasons for the Conservative party’s support of the EU.

So Juncker’s priorities are not as federalist as has been suggested, and already include some elements of reform. Certainly, more reform is needed: the next Commission should ensure that the EU is more transparent, devolves more power to Member States where there is a good case for this, and addresses other public concerns.

Therefore, the European Council should request specific commitments from Juncker on these sorts of issues. But it should not be forgotten that the Commission President will not be the only beast in the EU’s political jungle. Any proposed legislation will still have to be agreed in the EP and the Council. More broadly, Member States set the broad political direction of the EU when their leaders meet in the European Council, and have full power to appoint the President of that body (Herman van Rompuy cannot be reappointed to that job after 1 November 2014).

And political innovations are always possible. For instance, the European Council could set up a high-level body, including (for instance) Tony Blair and Nicolas Sarkozy, to report back in the near future with a list of specific recommendations on reform of the EU. Juncker could be asked to commit to a strong role for a (British?) Vice-President of the Commission in charge of the reform process. More specifically, it might be useful for the European Council and the EP to agree a set of common rules, in the form of a joint statement or inter-institutional agreement, as regards their respective roles in the process for selecting the Commission President.

For an EU reform policy to work, a Commission President with stronger links to the European Parliament might have a better chance of seeing policies supported in that institution, and an ‘old hand’ at EU politics will know more about how to get things done in practice than a newcomer. Juncker is the only candidate who has both strong links to the EP and intergovernmental experience. The current controversy over his potential appointment could be resolved if his critics could acknowledge that indeed, only Nixon could have gone to China.

 

Barnard & Peers: chapter 3