Should the EU sanction its Member States for breaches of rule of law and human rights? Part 1: The Legal Framework

Professor Steve Peers, University of Essex

I’ve taught EU law and human rights for over twenty years now, and the issue of sanctions against Member States for human rights breaches used to be the easy bit. Why? Because the procedure to enforce such sanctions (set out in Article 7 TEU) had never been used – and there was no apparent prospect that it ever would be. So there was no need to discuss it in any detail. A more theoretical sort of academic might have spent time counting the angels on the head of this constitutional pin, but I was anxious to move on to the real world issues of arrest warrants and asylum seekers.

Everything has since changed. Like Article 50 – which similarly raises fundamental issues about the EU’s relationship with its Member States – Article 7 was apparently dashed off in previous Treaty amendment talks without much thought to its detailed application in practice, perhaps because its authors thought it would never be used. Yet here we are, with both Articles now a live political and legal issue: the Ragnarok of EU law.

There are two recent parallel major developments. First of all, the Article 7 process has been triggered both against Poland (by the European Commission) and Hungary (by the European Parliament). Secondly, there are case law developments raising general questions about Member States’ observance of human rights and the rule of law outside the very specific (and very political) Article 7 process. In this context, last week the CJEU delivered its first judgment that a Member State is infringing judicial independence by means of reforms to its judicial system (see discussion here).

The prospect of the EU sanctioning its Member States for breaches of human rights and the rule of law raises a number of fundamental legal and political issues – and is best understood in a broader historical context. In light of the recent developments (and ongoing disputes), this is an opportune moment to provide an overview and analysis of this issue.

I’ll do this in a series of three blog posts, addressing in turn:

a)      the legal framework for sanctions under Article 7

b)      the overlap of the sanctions rules with other aspects of EU law

c)       the historical context and broader constitutional dynamics.

The legal framework for sanctions

Although many people refer to Article 7 TEU, there are other Treaty provisions which are inextricably linked: Article 2 TEU sets out the values which Article 7 is used to enforce; Article 354 TFEU describes voting rules for the EU institutions; and Article 269 TFEU provides for limited jurisdiction for the CJEU over the sanctions procedure.  All of this must be distinguished from the normal rules of EU law, discussed in the second blog post.

First of all then, what are the values of the EU, legally speaking? Article 2 TEU states:

The Union is founded on the values of respect for human dignity, freedom, democracy, equality, the rule of law and respect for human rights, including the rights of persons belonging to minorities. These values are common to the Member States in a society in which pluralism, non-discrimination, tolerance, justice, solidarity and equality between women and men prevail.

Article 7 then sets out the process of enforcing those values. It begins with Article 7(1), which provides for a kind of ‘yellow card’ – a warning if there is there is ‘a clear risk of a serious breach’ of those EU values:  

1. On a reasoned proposal by one third of the Member States, by the European Parliament or by the European Commission, the Council, acting by a majority of four fifths of its members after obtaining the consent of the European Parliament, may determine that there is a clear risk of a serious breach by a Member State of the values referred to in Article 2. Before making such a determination, the Council shall hear the Member State in question and may address recommendations to it, acting in accordance with the same procedure.

The Council shall regularly verify that the grounds on which such a determination was made continue to apply.

Notice that the ‘yellow card’ process can be triggered by the European Parliament, or a group of Member States, or the Commission. There is no requirement of unanimity of Member States to approve a Council decision to issue a ‘yellow card’ (this is a common misunderstanding), but the threshold of four-fifths of Member States’ governments in the Council is nevertheless fairly high. Triggering the process (as the EP did for Hungary, and the Commission did for Poland), does not, as some think, mean that the Council will agree to issue a ‘yellow card’, or has done so already. Indeed, the Council is still considering the proposals to issue a ‘yellow card’ against both Poland and Hungary, having held several of the hearings referred to in Article 7(1). If the Council ever did issue a ‘yellow card’, note that this does not entail a sanction as such: it is only a finding of a risk to EU values, with possible recommendations. Nevertheless, the issue of a ‘yellow card’ is perceived as extremely politically serious.

This brings us to Article 7(2), which is the ‘red card’ of the process:

2. The European Council, acting by unanimity on a proposal by one third of the Member States or by the Commission and after obtaining the consent of the European Parliament, may determine the existence of a serious and persistent breach by a Member State of the values referred to in Article 2, after inviting the Member State in question to submit its observations.

The procedure here is even tougher: unanimity of the Member States. The European Parliament cannot trigger the process, but could veto it  if the Commission or a group of Member States trigger it. The threshold to be met is higher: not just the risk of a serious breach, but the ‘existence of a serious and persistent breach’ of those values. It’s likely that the EU would get to the ‘red card’ stage after issuing a ‘yellow card’, but that’s not a legal requirement: a ‘straight red’, for (say) a country which had suddenly undergone a military coup, is also conceivable.

What are the consequences of a ‘red card’? Article 7(3) sets them out:

…the Council, acting by a qualified majority, may decide to suspend certain of the rights deriving from the application of the Treaties to the Member State in question, including the voting rights of the representative of the government of that Member State in the Council. In doing so, the Council shall take into account the possible consequences of such a suspension on the rights and obligations of natural and legal persons.

The obligations of the Member State in question under the Treaties shall in any case continue to be binding on that State.

Notice that the Member States don’t have to act unanimously in the Council when deciding exactly what sanctions to apply to the black sheep amongst them. The unanimity threshold only applies when taking the previous step of deciding whether there’s a serious and persistent breach of the EU values.  As for the specific sanctions which might be imposed, the Treaty mentions suspension of voting rights, but that’s just one example. The Council might instead (or additionally) impose other sanctions, such as suspension of MEPs’ voting rights (which raises the awkward question of whether they might also end up sanctioning any opposition MEPs from the Member State in question – whose voices would ideally need to be heard). However, there’s an obligation to consider the rights of individuals and businesses, which suggests that trade sanctions might be problematic. It might also be hard to justify restricting free movement rights, but in any event note that there are specific rules on asylum for EU citizens fleeing from a Member State subject to a ‘red card’. (I discuss them further in the second blog post).

Most significantly, there’s no provision to expel a Member State from the EU as such. Having said that, a Member State subject to suspension might be so outraged to be in that position that it triggers the process of leaving the EU under Article 50. The UK’s withdrawal process has been complicated and controversial enough; now imagine the legal and political complexities of a Member State subject to an Article 7 ‘red card’ triggering Article 50. Should its political authorities’ actions be considered legally and morally valid? What if a group of exiles claim to be the legitimate government of that Member State (a la the USSR-era Baltic States), and that purported government does not wish to leave the EU?  What if a part of that Member State, at odds with the government in power over EU membership and its violation of EU values, attempts to secede?

Of course, the possibility of withdrawal (alongside concerns about sovereignty, and the workings of partisan politics) may also have influenced the pronounced reluctance of the EU to use the Article 7 process. Does the EU really want Michel Barnier’s main task to be crowd control?

Article 7(4) TEU then provides that the Council, again by qualified majority, may ‘vary or revoke’ its sanctions against a Member State ‘in response to changes in the situation which led to their being imposed’. Article 7(5) notes that the rules on voting within the institutions when Article 7 is being applied are set out in Article 354 TFEU. The latter provides that the Member State which is the subject of potential sanctions has no vote at any stage of Article 7, as otherwise this would obviously have made the adoption of any decision on breach of EU values impossible. Abstentions cannot prevent the adoption of a ‘red card’ decision. Where the Council votes to implement a ‘red card’ decision, a higher threshold for adopting EU laws applies (72% of participating Member States in favour, instead of the usual 55%). If a Member State’s voting rights are suspended, the usual rules on Council voting with only some Member States participating apply. For its part, the EP ‘shall act by a two-thirds majority of the votes cast, representing the majority of its component Members’.

Finally, Article 269 TFEU significantly limits the role of the CJEU over the sanctions procedure:

The Court of Justice shall have jurisdiction to decide on the legality of an act adopted by the European Council or by the Council pursuant to Article 7 of the Treaty on European Union solely at the request of the Member State concerned by a determination of the European Council or of the Council and in respect solely of the procedural stipulations contained in that Article.

Such a request must be made within one month from the date of such determination. The Court shall rule within one month from the date of the request.

The legal issues

Given the limit on judicial control of the Article 7 process, it is almost entirely political. So the legal questions arising from it may be largely hypothetical in practice. However, they do exist.

The first important point is the wide scope of issues which can be the subject of the Article 7 process. It is sometimes claimed that the process can only be used to sanction Member States for breaches of EU law, but this is clearly false. There is no reference to EU law breaches in Articles 2 or 7. Indeed, such a limit on the scope of Article 7 would be odd, given that Article 269 TFEU limits the Court’s jurisdiction, yet other provisions of the Treaties (discussed further in the next blog post) give the Court extensive jurisdiction over the enforcement of ordinary EU law.

This claim about the limited scope of Article 7 is also absurd if you consider the broader context. Imagine, for instance, a Member State placing LGBT citizens in concentration camps. A narrow interpretation of Article 7 would mean that the EU could only complain about this to the extent that being locked up in camps would have a discriminatory effect on the detainees’ access to employment. Yes it would, but that would hardly be the most outrageous aspect of detaining LGBT people in camps because of their sexual orientation. (EU law is also relevant to LGBT refugees, but the Article 7 process would have to be triggered first for it to be relevant to refugees who are EU citizens).

So obviously Article 7 is not intended to be limited in this way. Indeed, its broad scope partly explains why the CJEU’s jurisdiction is limited – to avoid giving it jurisdiction to rule on issues which are not normally within the scope of EU law. (Another reason is the intention to keep the Article 7 process in the hands of politicians, not judges).

On the other hand, the Article 7 process and ordinary EU law can overlap. The Court can use its ordinary jurisdiction to rule on an issue being discussed in the Article 7 process, and vice versa. This was confirmed implicitly in last week’s judgment on Poland and the rule of law, given that the issues in that judgment also formed a part of the Commission’s Article 7 case against Poland. In fact, the Advocate-General’s opinion addressed the overlap explicitly (paras 48-50), arguing that ‘[t]here are firm grounds for finding that Article 7 TEU and Article 258 TFEU are separate procedures and may be invoked at the same time’.  As noted already, this alternative option of using ordinary EU law to restrain Member States’ breaches of human rights or the rule of law is discussed in the next blog post in this series.

Exactly how does the Court’s limited jurisdiction over Article 7 work? The wording of Article 269 TFEU definitely covers the decisions on the ‘yellow card’ or the ‘red card’. At first sight, it also applies to the implementation of sanctions, since the text refers to any Council actions pursuant to Article 7 TEU. But on this point, the use of the word ‘determination’ is confusing, as Article 7 doesn’t use that word to refer to the implementation of sanctions,  but only the decisions on whether EU values have been (or might be) breached.

Note also that the only possible challenger is the Member State sanctioned under Article 7 – not any other Member State, an EU institution, or an individual or business. If individuals are barred from challenging the validity of Article 7 implementation decisions, even indirectly via national courts to the CJEU, how else can the Council’s obligation to ‘take into account the possible consequences of such a suspension on the rights and obligations of natural and legal persons’ be enforced? At any rate, there’s no limit on the Court being asked by national courts to interpret the decisions implementing sanctions, which could be significant in working out the impact of sanctions on individuals. In particular, if Council decisions under Article 7 disapply ordinary EU law in some way, there should be no objection to the Court’s ordinary jurisdiction to interpret such ordinary EU law applying.

A Court judgment under Article 269 TFEU can only address procedural issues, not substance. In other words, the Court cannot be asked to rule on the question of whether the Member State concerned has actually breached EU values (or seriously risks breaching them). As we will see in the second blog post, however, the developing case law on the overlap between Article 7 and ‘ordinary’ EU law renders this firewall a little diffuse. Also, one can imagine that a Member State may make arguments about the fairness of the hearings, even where (as in the case of Poland and Hungary) some hearings have been held. (Update, Sep 1 2019: the Council's internal rules on Article 7 hearings have now been published). Finally, the time limits in Article 269 require significant fast-tracking: the challenge must be made one month after the determination (the usual deadline to bring an action to challenge an EU act is two months after publication) and (uniquely in EU law) one month for the Court to give its ruling.  

Even though Article 7 has not resulted in any sanctions decision yet, some issues about its scope may be addressed in the near future, because Hungary has brought a legal challenge to the European Parliament’s decision merely to trigger Article 7. This case might be inadmissible, because usually it is not possible to challenge the start of an EU legal procedure, but only a legal act once adopted, which may explain why Article 269 TFEU makes no reference to challenging acts of the European Parliament at all (or indeed, to challenging acts of the Commission or the Member States). The substance of the Hungarian government’s argument is that the European Parliament wrongly ignored abstentions when counting votes cast to trigger the Article 7 process.

One key legal and political question is the interpretation of the unanimity requirement to issue a ‘red card’ determination of a serious breach of EU values. Some have suggested that since two Member States are facing Article 7 procedures, and they would have a natural tendency to stick together and vote for each other, unanimity can never be reached. Therefore, for the ‘red card’ procedure to be effective, it must be interpreted to mean that any Member State facing an Article 7 procedure must lose its vote even as regards issuing a ‘red card’ against another Member State.

With respect, this interpretation is untenable. Article 354 TFEU refers to ‘the Member State in question’ not voting in its own case – clearly using the singular, as well as the definite article. There is no way to stretch the canons of interpretation for this to refer to multiple Member States. Such wild leaps of legal fancy are particularly inappropriate when a main point of the process is to ensure protection of the rule of law in the European Union.

Conclusions

Article 7 TEU recently turned 20 years old. It was conceived as a political process par excellence, and it remains supremely political at childhood’s end, even as the first attempts to trigger it are made. Due to its impact on national sovereignty, and the web of transnational partisan politics in which the governments concerned are embedded, Article 7 has long been seen as a ‘nuclear weapon’ – only to be used as a last resort, in a political emergency such as a military coup. Although the attempt to nuance Article 7, by adding a ‘yellow card’ process, dates from 2003, in practice this version of the process is perceived as politically ‘nuclear’ too.

The obvious problem here – which the ‘yellow card’ reform sought but failed to address – is that democracy rarely collapses overnight. In the famous words of Michael Rosen, ‘people think that fascism arrives in fancy dress’, but in fact ‘it arrives as your friend’ – promising to:

…restore your honour, 

make you feel proud, 

protect your house, 

give you a job, 

clean up the neighbourhood, 

remind you of how great you once were, 

clear out the venal and the corrupt, 

remove anything you feel is unlike you...

And to that end, and for those reasons, it often gains a foothold through the democratic process. Yet the values of the EU to be protected also include democracy – and the Article 7 process is in the hands of the governments of fellow Member States. All have some skeletons in their own closet; and all have backs that might need some scratching by the governments of the States being criticised.

So is the Article 7 process doomed? In fact, the expansion of EU law in areas with significant relevance to human rights – and the willingness of the CJEU to rule on the judicial independence of national courts in general – means that recourse to the nuclear option may arguably not be necessary. In effect, the conflict over the protection of human rights and the rule of law in Member States can also be fought by conventional means: the ordinary system for the enforcement of EU law as such, to which we will turn in the second post in this series. As for the broader tension when concerns about the rule of law and human rights stem from a democratic outcome, this will be assessed as part of the broader discussion in the third post.  

Barnard & Peers: chapter 9

Photo credit: euobserver

Further development of the EMU – should legitimacy come first or last?

Päivi Leino-Sandberg: Adjunct Professor of EU Law, Academy of Finland Research Fellow, University of Helsinki

The June 2012 European Council adopted a report setting out ‘four essential building blocks’ for the future Economic and Monetary Union (EMU): an integrated financial framework, an integrated budgetary framework, an integrated economic policy framework and, finally, strengthened democratic legitimacy and accountability.[1] In its discussions, the European Council stressed that:

Throughout the process, the general objective remains to ensure democratic legitimacy and accountability at the level at which decisions are taken and implemented. Any new steps towards strengthening economic governance will need to be accompanied by further steps towards stronger legitimacy and accountability.[2]

But while the European Council has repeatedly expressed its concern about the legitimacy problems of the EMU, the tools proposed for tackling these problems have remained extremely modest. This trend continues in the recent Five Presidents’ Report adopted in June 2015 (discussed here and here), which again includes a brief concluding section on ‘Democratic Accountability, Legitimacy and Institutional Strengthening’, but manages to discuss the topic without any tangible results. For many readers of the Five Presidents’ Report, it might not be evident that a further centralization of power to EU institutions will automatically bring about greater legitimacy. After all, in many cases the democratic guarantees continue to function best at national level.

There are various legitimacy related challenges that should be addressed if there indeed is a wish to make the EMU more sustainable. For example, think about the blurred division of competence between the EU and its Member States especially in the area of economic governance. While the Treaties still specify economic and fiscal policy as falling under Member State competence, the six-pack and the two-pack have increased EU level steering, and in practice turned EU recommendations binding by introducing sanctions for non-compliance. Since all EU institutions agreed on the necessity of these amendments, their significance for the division of competences between the EU and Member States has been subject to very little public discussion.[3] Many of the reforms are legally problematic, but a formal Treaty amendment reassessing the nature of Union economic policy competence was not deemed possible within the timeframe that has been deemed necessary. Ambiguity in drafting the rules has in many ways been intentional, but it has also contributed to blurring responsibilities between the EU and national level. The complexity of rules has increased, which in its turn has strengthened the discretion of the Commission in implementing the rules, and weakened faith in them. At the same time, Member States have needed to embark on numerous ‘solidarity operations’. In addition, the strict conditionality attached to financial assistance has had major implications for the policy choices of programme countries. As a result of the crisis and the way in which it has been dealt, Europe is effectively divided into creditors and debtors. Very few see the EMU as treating them fairly.  This has contributed little to the aim of improving the legitimacy of decision-making, and is probably the strongest motivation for the need to reform the EMU. An arrangement that is widely experienced as being unfair cannot be sustainable in the long run.

Second, thinking how many of the problems relating to the euro-crisis are connected with a lack of transparency when making past decisions, one would think that European decision-makers would now hurry to do what they can to improve openness. In April 2011 the President of the Euro Group, today the President of the Commission, Jean-Claude Juncker, was quoted as stating that when it came to economic policy, he was ‘for secret, dark debates’.[4] Even the more minor steps are still to be taken, such as the formal extension of the scope of Regulation No 1049/2001 on public access to documents to those held by the European Council; however, almost six years after the entry into force of the Lisbon Treaty stipulating such an extension, the amendment is still to be made. Most decisions aiming at curing Europe’s economic crisis are characterised by a lack of procedural transparency. Proposals have been made late; this sets clear limitations on national discussions,[5] as well, since they are then conditioned by the fear that the EU would – in particular in case national debates proved substantial and required amendments - not be capable of taking the necessary decisions in a timely manner. Again, this has not contributed to a stronger legitimacy of decision-making.

Last week, on 21 October 2015, the Commission adopted a package of proposals intended to implement the first stage of proposals included in the Five Presidents’ Report. In many ways, these proposals take the development to the completely wrong direction with respect to the concerns expressed above. The Commission Communication ‘On steps towards Completing Economic and Monetary Union’ once again includes the compulsory final section on ‘Effective democratic legitimacy, ownership and accountability’. It repeats the old ideas of dialogue with and debates in national parliaments, without adding anything new.

In fact, when reading the Commission Communication, there is fairly little to add to what the Grand Committee of the Finnish Parliament already commented to similar proposals in its Statement 4/2012:

“It is dangerous for democracy to adopt quasi-democratic rules that offer the appearance but not the reality of democratic legitimacy. […]The committee considers that respect for the treaty is a minimum requirement for the EU’s democratic legitimacy. […] The measures taken to control the economic crisis leave something to be desired in this respect, as regular procedures have been waived and serious doubts have been voiced about whether these measures are consistent with the treaty. […]Finally, the committee wishes to point out that democracy also requires that the principles of transparency and public access to documents are realised in the development of EMU.”

In short, the place of legitimacy and democracy seem to be exactly the same as they were in 2012.

As far as the trend of blurring competences is concerned, the package includes a Proposal for a Council decision laying down measures in view of progressively establishing unified representation of the euro area in the International Monetary Fund. While being somewhat out of touch with reality (in the form of decision-making rules in the IMF, and the modalities for amending them), the reading of Union competence reflected in the proposal is fundamentally flawed. The proposal refers to how the recent measures of economic governance

“have integrated, strengthened and broadened EU-level surveillance of Member State policies in essential areas of macroeconomic and budgetary relevance. The European Stability Mechanism was established as the permanent crisis resolution mechanism for the countries of the euro area. The Union has also put in place a Banking Union with centralized supervision and resolution for banks in the euro area and open to all other Member States. At the same time, the external representation of the euro area has not kept up with those developments. The progress that has been achieved on further internal integration of the euro area needs to be projected externally […].”

While unified representation does not necessarily mean a shifting of competence, in the view of the Commission, there is in the IMF context an obligation of “full coordination” of national positions. The proposal does not stipulate what happens if a shared position cannot be found. Considering that economic and fiscal policy remain national competence, as does the ESM, one wonders whether this new attempt to blur the division of competence further does anything to strengthen the voice of the euro group in the IMF, or whether actually the opposite is the case.

The new package also includes a Commission decision establishing an independent advisory European Fiscal Board, which many European actors have seen necessary in  limiting Commission discretion in the application of the rules of economic governance and making the monitoring exercise more objective. The Board set up by the Commission based on its own decision, and applicable as of 1 November 2015, now has the task of contributing ‘in an advisory capacity to the exercise of the Commission's functions in the multilateral fiscal surveillance as set out in Articles 121, 126 and 136 TFEU as far as the euro area is concerned’. For this purpose it shall provide to the Commission an evaluation of the implementation of the Union fiscal framework, advise it on the prospective fiscal stance appropriate for the euro area as a whole based on an economic judgment; cooperate with the national fiscal councils, and on the request of the President, provide ad-hoc advice.

While all of these are undoubtedly noble and necessary tasks which could contribute to strengthening the credibility of EU rules, the public is not to enjoy from information concerning them any more than the Member States are, since information provided by the Board is to remain primarily a Commission prerogative. The decision stipulates that the meetings of the Board shall not be open to the public. And as far as transparency is concerned, the Commission decision is rather straightforward:

Article 6 Transparency

The Board shall publish an annual report of its activities, which shall include summaries of its advice and evaluations rendered to the Commission.

It is of an interest that the Commission sees it fit to set up a body for assisting itself in exercising its Treaty-based tasks, administratively attached to the Commission's Secretariat General, but without a trace of the Treaty-based transparency obligations that apply to the Commission itself: the presumption of openness, and the principle that access to documents can only be limited on a case by case basis, based on Regulation No 1049/2001, which includes an exception to be invoked in case of harm to the financial, monetary or economic policy of the Union or a Member State. Instead of providing access as the main rule, apart from summaries published at a later stage, only the Commission is to know what the European Fiscal Board advices. While this would also seem to be contrary to the Treaty, such an arrangement does little to increase faith in the objectivity of decision-making or the legitimacy of the exercise. Instead, it seems to be nothing than a new way of buttressing the Commission’s own position in the application of rules by offering it the opportunity to justify its position with reference to unpublished advice by an independent Board.

At the same time, the Treaty of Lisbon would already offer a number of solid tools specifically aimed at tackling the Union’s well-known problems relating to democratic legitimacy, through improved openness and wider citizen participation in decision-making, and a clearer division of competence between the EU and its Member States. None of these reforms are as much as mentioned in any of the high-level reports. And yet, they would provide a number of concrete means for many of the problems illustrated above. The most recent Commission package yet again demonstrates a complete failure to grasp what legitimate decision-making is about. It matters how decisions are taken, and what their outcomes are. Therefore, instead of treating the questions relating to legitimacy and democracy as an appendix or afterthought in the style of the recent reports, these should be the questions that are tackled first. An economic policy that is not experienced as legitimate is seldom effective. This would be useful starting point for the further development of the EMU.

Barnard & Peers: chapter 19

Photo credit: voxeurop.eu

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[1] Towards a Genuine Economic and Monetary Union. A report prepared by Herman Van Rompuy, President of the European Council in close collaboration with José Manuel Barroso, President of the European Commission; Jean-Claude Juncker, President of the Eurogroup and Mario Draghi, President of the European Central Bank, 5 December 2012. See also European Council conclusions on completing EMU adopted on 14 December 2012. 

[2] December 2012, para 14; European Council conclusions on completing EMU, adopted on 18 October 2012, para 15.  For a discussion, see e.g. Päivi Leino and Janne Salminen, Should the Economic and Monetary Union Be Democratic After All? Some Reflections on the Current Crisis, 14 German Law Journal (2013) 844–868. 

[3] See Päivi Leino and Janne Salminen, “Going ‘Belt and Braces’ – Domestic Effects of Euro-crisis Law”, EUI Working Paper LAW 2015/15.

[4]“Eurogroup chief: 'I'm for secret, dark debates'”, published by euobserver on 21 Aril 2011, available at https://euobserver.com/economic/32222 .

[5] For a discussion, see Päivi Leino and Janne Salminen, ’The Euro Crisis and Its Constitutional Consequences for Finland: Is There Room for National Politics in EU Decision Making?’, 9 European Constitutional Law Review (EuConst) 3/2013 451–479.  

The Five Presidents’ Report on Completing the EMU: A Glimpse at the Future of Europe

Menelaos Markakis, DPhil student at University of Oxford, Academy of Athens scholar

On 22 June 2015 the Presidents of the EU and Euro area institutions presented their report on ‘Completing Europe’s Economic and Monetary Union’. The report provides a roadmap for ‘deepening’ and ‘completing’ the Economic and Monetary Union (EMU). Building on the measures enacted to combat the crisis, the Five Presidents’ Report makes a wealth of valuable suggestions for strengthening the EMU governance framework and deepening economic integration in the Euro area. The EU Presidents recommend that progress be made towards a genuine Economic Union, a Financial Union, a Fiscal Union, and a Political Union.

An overview of the proposed reforms

The proposed reforms would be implemented in two consecutive stages. In the first stage (1 July 2015 – 30 June 2017), the EU institutions and Member States ‘would build on existing instruments and make the best possible use of the existing Treaties’ (p. 5). In the second stage (mid-2017 to 2025), ‘concrete measures of a more far-reaching nature would be agreed to complete EMU’s economic and institutional architecture’ (p. 5). What follows is perforce merely a general indication of the content covered within the report.

(i)                 A genuine Economic Union

As regards the economic ‘pillar’ of the EMU, the Five Presidents’ Report recommends that each Euro area Member State create a Competitiveness Authority which would be ‘in charge of tracking performance and policies in the field of competitiveness’ (p. 7). The rationale behind this proposal is twofold. Such bodies ‘would help to prevent economic divergence’ and ‘would increase ownership of the necessary reforms at the national level’ (p. 7).

It is patently clear that these Authorities are expected to boost economic convergence in the Euro area, most notably in relation to policy areas which fall outside the EU’s competence. These bodies would have a mandate to ‘assess whether wages are evolving in line with productivity and compare with developments in other euro area countries and in the main comparable trading partners’ (p. 8). Moreover, ‘these bodies could be mandated to assess progress made with economic reforms to enhance competitiveness more generally’ (p. 8). The Five Presidents’ Report further recommends that a Euro area system of Competitiveness Authorities be created, in order to coordinate the actions of these Authorities on an annual basis.

The report seeks to link this proposed technique of policy co-ordination to already existing forms of rules-based governance in the Euro area. The Commission is expected to ‘take into account the outcome of this coordination … in particular for … decisions to be taken under the Macroeconomic Imbalance Procedure (MIP), including whether to recommend the activation of the Excessive Imbalance Procedure’ (p. 8). In principle, Euro area Member States are and would remain free to choose whether to follow the best practices in Europe. However, if they choose not to, the Commission and Council might respond to such divergence by subjecting the Member States concerned to the Excessive Imbalance Procedure. In this connection, the presidents of the institutions explicitly recommend that the corrective arm of the MIP be used ‘forcefully’, in order to ‘encourage structural reforms’ (p. 8). Furthermore, they do not shy away from adding that social partners ‘should use the opinions of the Authorities as guidance during wage setting negotiations’ (p. 8).

At a later stage, ‘the convergence process would be made more binding through a set of commonly agreed benchmarks for convergence that could be given a legal nature’ (pp. 5 and 9). These binding standards would be laid down in EU legislation. In some areas, this would lead to ‘further harmonisation’ (p. 9). In other areas, ‘it will mean finding country-specific solutions’ (p. 9).  ‘Significant progress towards these standards – and continued adherence to them once they are reached – would be among the conditions for each euro area Member State to participate in a shock absorption mechanism for the euro area’ (p. 5), which will be discussed below (iii).

It is not clear which competence basis the EU institutions would use for the adoption of such instruments. It might be the case that the Five Presidents’ proposals rest on the implicit assumption that the EU Treaties will be amended before or during stage two of this process. It might also be the case that the EU institutions plan to make full use of Articles 114, 136, 153 and 352 TFEU and/or of the Treaty provisions on enhanced cooperation.

In this connection, the Constitutional Affairs Committee of the European Parliament has proposed that binding economic policy guidelines for the Euro area countries be adopted on the basis of Article 136 TFEU (p. 10 para. 15). It has further called for ‘the dropping of the restrictions under Article 136 TFEU’ and for ‘the upgrading of this article into a general clause for the adoption of legal acts concerning the coordination and setting of legally-binding minimum standards with regard to economic, employment and social policy’ (p. 16 para. 73). This would give more say to the European Parliament on Country-Specific Recommendations.

Moreover, it should not escape our notice that ‘Country-Specific Recommendations would continue to be used in this context’ (p. 9). Furthermore, the report suggests that the MIP ‘be utilised as a tool … to foster reforms and monitor progress in each euro area Member State towards these common standards’ (p. 9). As such, rules-based and co-ordination based governance techniques would continue to ‘form “hybrid” normative grids and accountability frameworks’ (Armstrong).

(ii)               Towards a Financial Union

As regards the proposed Financial Union, the Five Presidents’ Report recommends that the Banking Union be completed and that the Capital Markets Union be launched. First, the report recommends the full transposition into national law of the Bank Resolution and Recovery Directive. It is recalled that, in the opinion of the Commission, 11 Member States have not fully implemented the Directive into national law. Second, the report argues that, before the Single Resolution Fund (SRF) is sufficiently capitalised, an ‘adequate bridge financing mechanism’ should be created for banks that need to be orderly unwound (p. 11). Third, a common backstop to the SRF should be implemented. In the opinion of the EU Presidents, this could be achieved through a credit line from the European Stability Mechanism (ESM) to the SRF (see p. 11). ‘In due course, the effectiveness of the ESM’s direct bank recapitalisation instrument should be reviewed, especially given the restrictive eligibility criteria currently attached to it’ (p. 11). Fourth, the report recommends that a European Deposit Insurance Scheme be launched. Fifth, it proposes strengthening macroprudential supervision at EU level and ‘review[ing] the treatment of bank exposures to sovereign debt, for example by setting large exposure limits’ (p. 12).

Building on the Commission’s Green Paper on ‘Building a Capital Market Union’, the report further proposes launching a Capital Markets Union for all 28 EU Member States. This would ‘ensure more diversified sources of finance’ and would ‘strengthen private sector risk-sharing across countries’ (p. 12). However, financial integration carries risks with it, because a problem in one country can rapidly spread to another. As such, the Five Presidents’ Report recommends that financial supervision be strengthened in the EU and that a single European capital markets supervisor be created (p. 12).

(iii)             Towards a Fiscal Union

As regards the proposed fiscal union, the Five Presidents’ Report puts forward two proposals. First, it recommends that an advisory European Fiscal Board be created. This body would coordinate and complement the national fiscal councils that have been set up in accordance with Regulation 473/2013. The European Fiscal Board ‘would provide a public and independent assessment, at European level, of how budgets – and their execution – perform against the economic objectives and recommendations set out in the EU fiscal framework’ (p. 14), thereby adding extra pressure on national Executives and legislatures to take EU fiscal rules seriously. ‘Such a European Fiscal Board should lead to better compliance with the common fiscal rules, a more informed public debate, and stronger coordination of national fiscal policies’ (p. 14).

Second, the report proposes the creation of a fiscal stabilisation function for the Euro area. Such a mechanism would enhance public risk-sharing in the Euro area (p. 4) and could build on the European Fund for Strategic Investments. However, it ‘should not lead to permanent transfers between countries or to transfers in one direction only’ (p. 15). ‘It should also not be conceived as a way to equalise incomes between Member States’ (p. 15). Notably, this stabilisation function ‘should be developed within the framework of the European Union’ (p. 15, emphasis added).

Democratic Accountability, Legitimacy, and Institutional Reform

The discussion thus far has focused on the economic reforms proposed by the presidents of the EU institutions. The focus now shifts to proposed reforms for enhancing the democratic credentials of the EMU. Save for the proposals for a more timely and better-structured parliamentary debate during the European Semester (see p. 17), it is hard to see how these proposals add anything to the already existing ‘six-pack’ and ‘two-pack’ arrangements for ‘institutional dialogue’. Be that as it may, the added emphasis on the role of social partners and civil society, as well as on consultation with EU-level social partners, should be readily applauded (see p. 22).

There is a strong focus on output legitimacy and on synergies between the European and national parliaments. ‘After many years of crisis, governments and institutions must demonstrate to citizens and markets that the euro area will do more than just survive. They need to see that it will thrive’ (p. 5).

Moreover, the report lays down a number of proposals for strengthening the EMU governance framework. More specifically, the EU Presidents suggest that the various treaties concluded outside the formal confines of the Lisbon Treaty be incorporated into the EU Treaties and secondary legislation and that the governance structure of the ESM be ‘fully integrated within the EU Treaties’ (p. 18). The report further suggests that a full-time presidency of the Eurogroup be considered and proposes the creation of a Euro area treasury (see p. 18). In the opinion of the authors of the report, ‘the world’s second largest economy cannot be managed through rule-based cooperation alone’; ‘it will need to shift from a system of rules and guidelines for national economic policy-making to a system of further sovereignty sharing within common institutions’ (p. 5). The division of labour between a Euro area and national treasuries is not made clear.

Regrettably, there is no elaboration of what accountability structures should be put in place if a Euro area treasury or fiscal stabilisation function were to be created. Likewise, there is no analysis of the desired accountability mechanisms for the proposed Financial Union. To be sure, requiring the consent of the European Parliament for the appointment of the Chair and the Vice-Chair of the Supervisory Board was a major step forward (see Article 26(3) of Regulation 1024/2013). What is more, there are no proposals for improving transparency in the workings of the Eurogroup, whose role in economic governance has now been heightened. A body actively seeking to foster economic convergence among Euro area countries (see p. 9) should not operate behind closed doors.

Final remarks

There will be no attempt to summarise the preceding argument. It is nonetheless worth highlighting certain features that are of particular importance. First, since ‘all euro area Member States must participate in all Unions’ (p. 5), these proposals would, if implemented,  put the idea of a multi-speed Euro area to sleep. To be sure, it might still be the case that not all Euro area Member States would meet the requirements to make use of the proposed shock absorption mechanism. Second, the EU Presidents’ proposals would, if implemented, entail a massive upward flow of power from the national to the EU/Euro area institutions and bodies. Arguably, this should be matched by increased democratic controls and robust accountability mechanisms. Third, it is particularly noteworthy that the report notes that all members of the Euro area should gain from EMU membership (p. 4). Spreading welfare gains across the Union and promoting economic, social and territorial cohesion might require that more thought be given to the EU’s regional and structural policies (see also the 1989 Delors Report). Lastly, at least some of the proposed reforms might require a Treaty amendment in order to be implemented, and therefore the Prime Minister of the United Kingdom might get his chance to renegotiate Britain’s relationship with the EU and to enshrine the desired precepts in primary law.

Barnard & Peers: chapter 19 

Photo credit: roarmap.org

Open letter to UK MPs: Ensuring democratic scrutiny of UK surveillance law changes

Steve Peers

Due to my concern about inadequate democratic scrutiny of changes to UK law (often linked to EU law) affecting privacy rights, I am one of the signatories to today's letter to MPs on this issue, published in the Guardian and elsewhere. Thanks to Andrew Murray and Paul Bernal for taking this initiative.

An open letter to all members of the House of Commons,

 

Dear Parliamentarian,

 

Ensuring the Rule of Law and the democratic process is respected as UK surveillance law is revised

 

Actions Taken Under the Previous Government

 

During the past two years, the United Kingdom’s surveillance laws and policies have come under scrutiny as the increasingly expansive and intrusive powers of the state have been revealed and questioned in the media. Such introspection is healthy for any democracy. However, despite a need for transparency in all areas of lawmaking, and in particular in areas of controversy, the previous Government repeatedly resisted calls for an open and transparent assessment and critique of UK surveillance powers. Instead, in response to legal challenges, it extended the powers of the state in the guise of draft Codes of Practice and “clarifying amendments.” As we welcome a new Government we expect another round of revisions to UK surveillance laws, with the likelihood that the Queen’s Speech will signal a revival of the Communications Data Bill. At this time we call on the new Government, and the members of the House, to ensure that any changes in the law, and especially any expansions of power, are fully and transparently vetted by Parliament, and open to consultation from the public and all relevant stakeholders.

 

Last year, in response to the introduction of the Data Retention and Investigatory Powers Bill (“DRIP”), a number of leading academics in the field – including many of the signatories to this letter – called for full and proper parliamentary scrutiny of the Bill to ensure Parliamentarians were not misled as to what powers it truly contained. Our concern emanated from the Home Secretary’s attempt to characterize the Bill, which substantially expanded investigatory powers, as merely a re-affirmation of the pre-existing data retention regime.[1]

 

Since that letter was written, it has become apparent that the introduction of the DRIP Bill was not the only time an expansion of surveillance powers was presented in a way seemingly designed to stifle robust democratic consideration. In February 2015, the Home Office published the draft Equipment Interference Code of Practice.[2] The draft Code was the first time the intelligence services openly sought specific authorisation to hack computers both within and outside the UK. Hacking is a much more intrusive form of surveillance than any previously authorised by Parliament. It also threatens the security of all internet services as the tools intelligence services use to hack can create or maintain security vulnerabilities that may be used by criminals to commit criminal acts and other governments to invade our privacy. The Government, though, sought to authorise its hacking, not through primary legislation and full Parliamentary consideration, but via a Code of Practice.

 

The previous Government also introduced an amendment via the Serious Crimes Act 2015, described in the explanatory notes to the Bill as a ‘clarifying amendment’.[3] The amendment effectively exempts the police and intelligence services from criminal liability for hacking. This has had an immediate impact on the ongoing litigation of several organisations who are suing the Government based in part on the law amended, the Computer Misuse Act 1990.[4]

 

The Way Ahead

 

The new Conservative Government has announced its intention to propose new surveillance powers through a resurrection of the Communications Data Bill. This will require internet and mobile phone companies to keep records of customers’ browsing activity, social media use, emails, voice calls, online gaming and text messages for a year, and to make that information available to the government and security services. We also anticipate this Parliament will see a review of the Regulation of Investigatory Powers Act 2000, which currently regulates much of the Government’s surveillance powers. The Independent Reviewer of Terrorism Legislation, David Anderson QC, has conducted an independent review of the operation and regulation of investigatory powers, with specific reference to the interception of communications and communications data. The report of that review has been submitted to the Prime Minister, but has yet to be made public: when it is made public, parliamentary scrutiny of the report and any recommendations made following it will be essential.

 

As the law requires that surveillance powers must be employed proportionate to any harm to privacy caused (as required by Article 8 of the European Convention on Human Rights and Article 12 of the Universal Declaration of Human Rights) we believe that any expansion or change to the UK’s surveillance powers should be proposed in primary legislation and clearly and accurately described in the explanatory notes of any Bill. The Bill and its consequences must then be fully and frankly debated in Parliament. When reaching an assessment of the proportionality, of any measure that restricts rights, both our domestic courts and the European Court of Human Rights place great stock on the degree and quality of Parliamentary involvement prior to any measure being adopted. If the matter ever came to before the courts one issue examined would be the nature of any “exacting review” undertaken by MPs into the necessity of extending these powers. The Government should not be permitted to surreptitiously change the law whenever it so desires, especially where such changes put our privacy and security at risk.

 

This letter has been prepared and signed by 35 academic researchers. We are comprised of people from both sides of this issue - those who believe that increased powers are a reasonable response to an emerging threat, and those who think them an unjustified extension of state interference. Our common goal is to see the Rule of Law applied and Parliamentary oversight reasserted. We are calling on all members of the House of Commons, new and returning, and of all political persuasions to support us in this by ensuring Parliamentary scrutiny is applied to all developments in UK surveillance laws and powers as proposed by the current Government.  

 

Signatories

 

Andrew Murray (contact signatory)	Paul Bernal (contact signatory)
Professor of Law London School of Economics a.murray@lse.ac.uk	Lecturer in Information Technology, Intellectual Property and Media Law University of East Anglia Paul.Bernal@uea.ac.uk
Subhajit Basu Associate Professor University of Leeds	Sally Broughton Micova Deputy Director LSE Media Policy Project, Department of Media and Communications London School of Economics and Political Science
Abbe E.L. Brown Senior Lecturer School of Law University of Aberdeen	Ian Brown Professor of Information Security and Privacy Oxford Internet Institute
Ray Corrigan Senior Lecturer in Maths, Computing and Technology Open University	Angela Daly Postdoctoral Research Fellow Swinburne Institute for Social Research Swinburne University of Technology
Richard Danbury Postdoctoral Research Fellow Faculty of Law University of Cambridge	Catherine Easton Lancaster University School of Law
Lilian Edwards Professor of E-Governance Strathclyde University	Andres Guadamuz Senior Lecturer in Intellectual Property Law University of Sussex
Edina Harbinja Lecturer in Law University of Hertfordshire	Julia Hörnle Professor in Internet Law Queen Mary University of London
Theodore Konstadinides Senior Lecturer in Law University of Surrey	Douwe Korff Professor of International Law London Metropolitan University
Mark Leiser Postgraduate Researcher Strathclyde University	Orla Lynskey Assistant Professor of Law London School of Economics
David Mead Professor of UK Human Rights Law UEA Law School University of East Anglia	Robin Mansell Professor, Department of Media and Communication London School of Economics
Chris Marsden Professor of Law University of Sussex	Steve Peers Professor of Law University of Essex
Gavin Phillipson Professor, Law School University of Durham	Julia Powels Researcher Faculty of Law University of Cambridge
Andrew Puddephatt Executive Director Global Partners Digital	Judith Rauhofer Lecturer in IT Law University of Edinburgh
Chris Reed Professor of Electronic Commerce Law Queen Mary University of London	Burkhard Schafer Professor of Computational Legal Theory University of Edinburgh
Joseph Savirimuthu Senior Lecturer in Law University of Liverpool	Andrew Scott Associate Professor of Law London School of Economics
Peter Sommer Visiting Professor Cyber Security Centre, De Montfort University	Gavin Sutter Senior Lecturer in Media Law Queen Mary University of London
Judith Townend Director of the Centre for Law and Information Policy Institute of Advanced Legal Studies University of London	Asma Vranaki Post-Doctoral Researcher in Cloud Computing Queen Mary University of London
Lorna Woods Professor of Law University of Essex

 

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[1] http://bit.ly/1jNzlUz

[2] http://bit.ly/1yiXUZD

[3] http://bit.ly/1LfVFz3

[4] http://bit.ly/1S4RCdJ