Institutional balance and the negotiation of international agreements

Andrés Delgado Casteleiro, Lecturer at Durham Law School

Introduction

In last Thursday’s judgment on the Case C-425/13, Commission v Council, the CJEU was asked to determine the scope of the Council’s powers to issue negotiating directives to the Commission and the role of the special committee overseeing the Commission during the negotiations with Australia concerning the linking of its emissions trading system with the EU.  The case concerns the division of powers between the Council and the Commission and the extent to which the former can exercise some kind of control over how the latter is conducting international negotiations.

Background

Between 2012 and 2013, the Commission negotiated an agreement with Switzerland to link their emissions trading scheme to the EU’s. To be better informed of the how the negotiations were being conducted, the Council set up a special committee pursuant to Article 218 (4) TFEU (the Treaty clause setting out rules on how the EU negotiates and concludes international treaties). However, the Council was not completely satisfied on how the Commission consulted this committee during the negotiations of the agreement. Certain Member States argued that the information provided by the Commission was scant. In fact, the Commission referred the Council to a website of the Swiss Federal Office for the Environment when asked to provide an update on how negotiations were going.

In light of what the Council regarded as the Commission’s failure to effectively consult the special committee, when the Council adopted the negotiating directives for the conclusion of a similar agreement with Australia, it envisaged a greater involvement of the Council during the negotiations through the special committee. The Decision of the Council of the European Union of 13 May 2013 authorizing the opening of negotiations on linking the EU emissions trading scheme with an emissions trading system in Australia (Council Decision) establishes in the second sentence of Article 2 that “the Commission shall report in writing to the Council on the outcome of the negotiations after each negotiating session and, in any event, at least quarterly.” Moreover, Article 1(2) of the Decision states that the Commission shall conduct the negotiations in accordance with the very detailed negotiating directives and procedures set out in the Annex to the Council Decision. The annex provides, among other things, that detailed negotiating positions of the Union shall be established within the special committee.

Inasmuch as the Council Decision restricted the Commission’s scope of maneuver when negotiating with Australia, the Commission brought an action against it. The Commission’s plea boils down to two claims. First, the obligation to report in writing after each negotiation session or at least quarterly constitutes a breach of Article 13(2) TEU (role of the institutions), Article 218(2) to (4) TFEU (Treaty negotiation process), Article 295 TFEU (possibility to conclude interinstitutional arrangements) and the principle of institutional balance. Secondly, in so far as it provides that ‘detailed negotiating positions of the Union shall be established’ by the special committee or the Council, the Commission alleges a breach of Article 13(2) TEU, Article 218 TFEU and the principle of institutional balance.

The Judgment of the CJEU

In relation to the Commission’s first claim, the Court began by recalling the constitutional significance of Article 218 TFEU insofar as it confers specific powers on the EU institutions with a view to establishing a balance between those institutions during the treaty-making procedure. In practice, Article 218 TFEU gives different roles to each institution. Even though the Treaties have decided that the Commission is to act as the negotiator and to ensure the EU’s external representation (in all those areas not covered by the CFSP, see article 17 (1) TEU), the Council is nonetheless entrusted with the power to sign and conclude the agreement. According to the Court, in the context of those functions, the Council and the Commission are required to comply with the second sentence of Article 13(2) TEU, which states, “the institutions shall practice mutual sincere cooperation.” Moreover, that cooperation becomes of crucial importance for EU action at international level, as such action triggers a closely circumscribed process of concerted action and consultation between the EU institutions (para 64).

It is in this context of concerted action and consultation that article 13 (2) TEU triggers that article 218 (4) TFEU comes in, as the consultation and cooperation between the Council and the Commission will be channeled through the special committee. Consequently, what do the obligations of cooperation and consultation amount to? For the Court, those obligations mean that the Commission must provide the special committee with all the information necessary for it to monitor the progress of the negotiations, such as, in particular, the general aims announced and the positions taken by the other parties throughout the negotiations. It is only in this way that the special committee is in a position to formulate opinions and advice relating to the negotiations (para 66).

In any event, the Court also reminds the Commission that regardless of whether there is a special committee in place, it can be required to provide that information to the Council as well. Given the role of the Council in the treaty-making procedure, it should possess all the necessary information to have clear knowledge of the ongoing negotiations concerning the preparation of an agreement that will be submitted for its approval. Consequently, the Court concludes that an obligation such as the one enshrined in Article 2 of the Council decision which sets out the Commission’s obligation to report in writing to the Council on the outcome of the negotiations after each negotiating session and, in any event, at least quarterly’, is in conformity with Article 218(2) and (4) TFEU (para 68).

Furthermore, the Court considers that an obligation of information as the one recognized in Article 2 of the Council decision does not violate Article 13 (2) TFEU, insofar as the Council’s powers to lay down such an obligation of information have been exercised with due regard to the Commission’s power to negotiate international agreements (para 70).

Finally, in relation to Article 295 TFEU concerning the obligation to consult each other and by common agreement make arrangements for their cooperation, the Court understands that this obligation to conclude interinstitutional arrangements does not prevent the Council from being able to set out, in a decision authorizing negotiation, arrangements relating to the information that the Commission must provide to it periodically throughout the negotiating process (para 72). Hence, the Court dismissed the Commission’s first claim.

In relation to the second claim, concerning the powers of the special committee to establish detailed negotiating positions of the Union; the Court conducts its analysis in two stages. First, it examines whether the Council has the power to set up procedures pursuant to the first part of Article 218 (4) TFEU, like the one enshrined in the annex of the Council decision. Secondly, it focuses on the specific procedure set out in the annex to the Council decision and more specifically the powers that were conferred upon the special committee.

In the analysis of whether the Council has the power to set up a procedure like the one drawn up in the annex of the Council Decision, the Court examines the mandate of the special committee. In this regard, it considers that the special committee designated by the Council has the mandate to follow the conduct of the negotiations and guide the negotiator (para 76). In addition, the Court argues that since the Council is empowered to designate a special committee and the Commission is required to conduct the negotiations “in consultation with” that committee, the Commission must inform the committee of all aspects of the negotiations in order that it may be properly consulted (para 77). Therefore, Article 218(4) TFEU generally allows the Council to set out procedural arrangements governing the process for the provision of information, for communication and for consultation between the special committee and the Commission, as such rules meet the objective of ensuring proper cooperation at the internal level (para 78).

However, when analyzing the minutiae of the annex to the Council Decision, the CJEU considered that certain parts of that annex were not designed to enhance the transfer of information and the consultation between the special committee and the Commission. Instead, it argued that the possibility for the special committee to establish detailed negotiating positions as envisaged in the second sentence of the first paragraph of the Annex seek to bind the Commission in contravention of article 218 (4) TFEU, Article 13 (2) TEU and the principle of institutional balance. For the Court, the power to establish detailed negotiating procedures goes beyond the consultative function assigned to the special committee. The annex has the effect of imposing negotiating positions on the negotiator, i.e. the Commission (para 90). Therefore, the Court accepted the Commission’ second claim and partially annulled the Council Decision.

Comment

To a certain extent, the EU’s treaty-making procedure constitutes an example of the Principal – Agent problem. The Council (Principal) authorizes the Commission (Agent) to negotiate on its behalf, yet it does not completely trust the Commission. The Court understands that it is the information asymmetry that fuels the Council’s lack of trust on the Commission’s role as a negotiator. Consequently, anything in the Council decision that might exceed the obligation to inform and consult would be a breach of the principle of institutional balance, regardless of how badly the Commission had previously complied with that obligation.

In this regard, a parallelism with Case C-658/12 European Parliament v Council (Mauritius, AKA Somali Pirates) (discussed here) could be drawn. In that case the Court understood that by not informing the European Parliament (EP) immediately and fully informed concerning the conclusion of an extradition agreement with Mauritius, the Council had breached Article 218 (10) TFEU. Inasmuch as that provision aimed as ensuring that the EP could effectively exercise its powers in relation to the conclusion of international agreements, the Council had breached the principle of institutional balance. In the present case, the Court understands that an obligation to inform the Council on on-going negotiations is an expression of that principle. The Council also needs to be immediately and fully informed throughout the negotiations of an agreement it will end up concluding.

Finally, in the last couple of years we have witnessed an increase in the litigation between the different EU institutions concerning the exercise of their powers and the delicate balance between them in the field of EU External Relations. It appears that the EU institutions are still learning how to live with each other after the Lisbon Reform. Yet within this learning process, it appears, that the EU institutions seem to be moving away from cooperation arrangements and are pushing for a rigid interpretation of their respective powers. This is clearly seen in how the principle of institutional balance figures prominently in the present case or in other cases such as Mauritius Island, Case C-409/13 (Council v Commission) concerning the Commission’s right to withdraw proposals (discussed here), or Case C-28/12, Commission v Council, (US Air Transport Agreement). While in principle this is not per se a problem, it could signal that an increasing institutional divide on the way the to conduct the EU’s external representation after the Lisbon Treaty is emerging.

Barnard & Peers: chapter 24

Photo credit: carbonsolutionsglobal.com

The Essent judgment: Another revolution in the case law on free movement of goods?

Filippo Fontanelli, Lecturer in International Economic Law, University of Edinburgh

Introduction

On 11 September 2014, the Court of Justice of the EU delivered the judgment in the Essent case (Joined Cases C-204 to C-208/12, not to be confused with Case -91/13, also named Essent, of the same day). The judgment contains a delicate assessment of proportionality involving several interlaced interests: promotion of free energy trade, protection of the environment and human health, compliance with international commitments on emission-reduction, promotion of local employment, and incentives to achieve energy self-sufficiency.

If this maelstrom of values were insufficient to raise the interest of the readership, the judgment has also a purely doctrinal undertone. Indeed, the Court appears to ignore – deliberately – the summae divisiones which it itself has maintained for decades between distinctly and indistinctly applicable measures, as well as between justifications under Article 36 TFEU (which set the explicit Treaty-based grounds for restricting the free movement of goods) and other mandatory requirements (the other grounds for restricting such free movement). Thousands of EU law academics might now need to finally drop the standard exam-questions on “Measures equivalent to a quantitative restriction (MEQRs) from Cassis to Keck and beyond” yearly rephrased and administered since time immemorial: it might turn out that, after all, Cassis is no longer good law.

The case

The facts of the main proceedings relate to a complex domestic regulatory regime which, in turn, implements devilishly detailed EU acts. However, the crux of the dispute is easily summarised: a Flemish Regional scheme requires energy suppliers connected to the electricity grid to demonstrate the use of a certain amount of renewable energy, on pain of a hefty penalty. Only locally produced green energy counts toward that quota, hence suppliers cannot use green energy produced abroad to prove compliance.

Essent could have met or at least approached the quota had it been allowed to factor in the calculation renewable energy that it had sourced from Norway, Denmark, Sweden and the Netherlands, but it was not. It then incurred a series of yearly sanctions, and challenged them repeatedly before the Belgian courts. The Belgian judges raised a preliminary question to the Court of Justice asking, essentially, whether the discriminatory treatment of foreign green energy towards the fulfilment of the compulsory quota is in violation of the treaty obligations regarding freedom of movement of goods and the prohibition of discrimination based on nationality.

[Skip to the next section if you arrived to this post by Googling “mandatory requirements” and you must submit your essay three hours from now. For the others, a few words on the legal context of the dispute.]

Directive 2001/77 (governing the facts of the main proceedings, now replaced by Directive 2009/28) recognizes that renewable energies are underused in the Union, an unfortunate circumstance given that the development of a green energy industry could, at once, alleviate the dependence of EU countries from foreign supply, contribute to the fulfilment of the climate-change commitments entered into under the Kyoto protocol, and foster local employment policies. Therefore, the EU encourages national schemes supporting the consumption of renewable energy, without harmonising them. Better, “until a [Union] framework is put into operation”, which is presumably in the works (see recital 14 of the Preamble of Directive 2001/77).

In order to facilitate the trade in green energy, the Directive established a compulsory system of certification, whereby energy derived from renewable sources is entitled to a “guarantee of origin”. Guarantees of origin issued in EU members are mutually recognized across the Union.

National support schemes can provide various incentives to facilitate the production and consumption of green energy. Typically, benefits are available only to producers and suppliers handling green energy, which necessarily hold the relative guarantees of origin. However, member states are not required to make the specific benefits dependent on the possession of the guarantees. The Preamble of the Directive is clear in this sense: “[s]chemes for the guarantee of origin do not by themselves imply a right to benefit from national support mechanisms established in different Member States”. Guarantees of origin are therefore necessary but possibly insufficient conditions to enjoy national incentives.

The Flemish scheme implementing the Directive, for instance, is premised on the possession (and periodic surrendering) of “green certificates”. Green certificates are granted to producers of green energy based in the Flemish region, which sell them alongside the energy. Suppliers are under an obligation to surrender a certain quota of green certificates to avoid sanctions. At the stage of surrendering, guarantees of origin attached to green energy purchased abroad cannot substitute for the missing green certificates to fill the quota.

A provision of the relevant Flemish Decree envisages the possibility for the Flemish government to accept non-Flemish certificates for the purpose of filling the quota, but no implementing act has been adopted to regulate this possibility, which therefore remained wishful thinking.

The Flemish scheme was challenged under the Directive, under Article 34 TFEU prohibiting measures equivalent to quantitative restrictions (MEQRs), and under Article 18 TFEU prohibiting discrimination based on nationality.

The Directive clearly does not require Member States to link support schemes to guarantees of origin. It simply requires States to issue them and recognize them across the Union, so that consumers are always informed of the green-ness (or lack thereof) of the energy they purchase.

The real challenge to the Flemish scheme was brought under Article 34 TFEU. The domestic measure encourages suppliers operating in the Flemish regions to buy renewable energy from local producers, as equally green foreign energy is unusable towards fulfilment of the quota. Local green energy is artificially made more precious, because of the green certificates it is associated with, which rational producers must crave, to avoid fines. The restrictiveness of the scheme was plainly acknowledged by the Court (para. 83), although it focused on the trade of electricity rather than the trade of guarantees of origin, an impossibly murky issue that would have required determining whether intangible guarantees qualify as “goods”.

The Court therefore examined whether the scheme was justifiable “on one of the public interest grounds listed in Article [34 TFEU] or by overriding requirements” and whether it satisfied the test of proportionality (para. 89).

The purpose of the scheme was found in the promotion of the use of renewable sources for producing energy (para. 95). This legitimate purpose does not feature in Art. 36 TFEU and therefore, by exclusion, was provisionally accepted by the Court under the doctrine of the rule of reason. Under this principle, domestic measures setting mandatory requirements on goods, which restrict inter-state trade, are justified if they pursue a reasonable policy objective and the restriction entailed is not disproportionate to the contribution made towards that objective. Mandatory (or “overriding”) requirements are not limited to the values listed in Art. 36 TFEU, and routinely include objectives such as consumer interests and environmental protection. In its customary incarnation, the rule of reason can only be used to justify rules that do not discriminate according to the origin of the goods.

The reasoning of the Court on the proportionality of the Flemish scheme is not linear, but proceeds by accumulation. It essentially lists the reasons why the scheme is not as vicious as Essent would claim, invoking contextual elements, policy considerations and semantic tricks. In short, the Courts makes the following remarks, which I briefly assess in the brackets.

Essent claimed that the Flemish scheme does not encourage the consumption of green energy, but only its production. The Court objected (para. 98) that this is normal, as the greenness of energy relates precisely to its method of production (This is a massive non sequitur. If taken seriously, this would mean that green energy might as well be wasted after production, as the benefit to the environment was done already. To the contrary, the only raison d’être of renewable energy is that it is supposed to supplant the consumption of non-renewable energy).

The Court also noted that Member States are allowed by the Directive to set national targets of production of green energy (para. 99), suggesting perhaps that the discrimination inherent in the support scheme was dictated by the concern to achieve these targets (This suggestion is misleading. Whether its motivation is allowed or not by EU law has nothing to do with the EU-compliance of the Flemish measure).

The Court answered also the most difficult question. If the Flemish scheme genuinely aims to increase the production of green energy for environmental purposes, how come it does in fact discourage the purchase of green energy produced abroad, by refusing to accept foreign guarantees of origin as substitutes of Flemish green certificates? The brief answer is worthy of a Sibyl: “it should be observed that the starting points, the renewable energy potential and the energy mix of each Member State vary” (para. 100) (This is too obscure to attempt a reading. Suffice it to say that because guarantees of origin are subject to mutual recognition under the Directive, one would presume that these alleged variations are capable of being taken into account to certify the green nature of the energy, therefore an equivalence between Flemish certificates and any other guarantee is arguably possible to concoct).

Finally, the Court noted (para. 101) that national support schemes are important to achieve the objectives of the Directive (irrelevant per se) and that “it is essential that Member States be able to control the effect and costs of their national support schemes according to their potential, whilst maintaining investor confidence” (para. 102) (With a bit of effort, one can see why discrimination is justified: Member States do not want to make available to all EU producers subsidies whose cost is “ultimately [borne] by the [local] consumers” (para. 107). Also, they cannot suddenly withdraw support schemes when it turns out that they operate mainly for the benefits of foreign producers: investor claims would follow and hit hard).

“In the light of the foregoing,” the Flemish scheme was found to be proportionate, and therefore compliant with Article 34 TFEU (para. 103).

The Court then extended the proportionality analysis to other accessory elements of the schemes. It considered the penalties imposed, leaving it to the national judge to assess their proportionality to the sought objective (para. 114). It also speculated on the fairness of the market of green certificates that can fulfil the compulsory quotas, whose supply is artificially restricted. The Court therefore advocated the establishment of mechanisms under which these certificates can be traded “under fair terms” (para. 111). The irony of the last remark is highlighted in the comments below.

Comments

The Court nonchalantly applied a mandatory requirement to a facially discriminatory measure, sending Cassis to the museum of judge-made law no longer in force, and tacitly ignoring the exhaustiveness of Article 36 TFEU. It conflated overriding requirements and values listed in Article 36 TFEU into a single pool of excuses.

The passing reference to the contribution of reduced emissions to human health (para. 93) should not mislead: if human health hat were indeed the relevant objective of the Flemish scheme, it would have been at the centre of the ensuing proportionality test (just to mention one element, there should have been an analysis of the Flemish scheme’s contribution to increased health protection). That the quota has discriminatory effects which hinder trade was also undoubtable.

Therefore, a distinctly applicable measure was justified on the basis of a public interest other than those listed in Article 36 TFEU. This had also been the case in the parallel case of Ålands Vindkraft, C‑573/12, on which the Court delivered its judgment on 1 July 2014; see paras. 76-77 (the Opinion of this case was also prepared by Bot, and delivered shortly after his Opinion in Essent). Indeed, the Court has seemingly lost interest in making a big deal of the difference between discrimination de jure and discrimination de facto.

Advocate Bot had suggested the Court to abandon the distinction and expressly overturn its previous case-law. The Court did the former but not the latter, suddenly dropping a carefully constructed judicial test that it itself had devised in the wild years of Article 34 TFEU to accommodate reasonable policies which fell outside the scope of Article 36 TFEU.

That direct and indirect discrimination should be treated alike makes perfect sense. This is, for instance, the practice in the GATT, the agreement regulating the removal of trade barriers for trade in goods in the WTO regime. Treating them differently, for instance allowing one to be justified by excuses that do not apply to the other, is irrational: the hindering effect of de jure or de facto discriminatory measures can be identical in the facts, and a harsher treatment of direct discrimination serves only as an incentive for Member States to disguise discrimination on the basis of nationality within the folds of maliciously designed neutral measures.

However, there was some intuitive value to the bygone distinction: direct discrimination is prima facie illegal and must be hard(er) to justify. Think of the judgment in Test-Achats, which does not even attempt to look at a justification for gender-based direct discrimination. In fact, as registered by AG Kokott in the Opinion to that case (para. 59), justifications based on statistical data can support a proportionality assessment of indirect discrimination but cannot suffice to excuse direct discrimination.

In his proposal, AG Bot had reflected this concern, calling for a reinforced test of proportionality applicable to distinctly applicable measures: the reasons advanced to justify direct discrimination must be of particular weight. See at para. 94: “I think that discriminatory measures, particularly those which infringe a principle as fundamental as that of the prohibition of direct discrimination on grounds of nationality, ought to be subject to a strict requirement of proportionality” (emphasis added).

The Court did not deem it necessary to devise a reinforced (“strict”) proportionality test and, in my view, this might have contributed to a puzzling proportionality analysis, which features several controversial passages.

In short, by applying the routine test of proportionality the Court focused on the pursued objective (protection of the environment through increased production of green energy). In so doing, the discriminatory (and trade-restrictive) nature of the Flemish scheme was side-lined in the analysis. Once a decent contribution to the environment was somewhat found, it was downhill from there. The happy run of proportionality apparently skipped the stop of necessity: was there a less restrictive measure available for Flemish authorities to encourage the consumption and production of green energy? Yes there was: the interchangeability of green certificates and foreign guarantees of origin would have averted trade-restriction and promoted environmental protection even more than the Flemish scheme could possibly do.

The measure can only appear proportionate if the elective purpose is another unconfessed one, which is itself somewhat discriminatory. For instance, it could be argued that the growth and operation of a local green-energy industry is the real purpose, and therefore no alternative policy is available: any infant industry policy inherently involves some deal of temporary protectionism, but is for a good cause. The Court, however, did not resort to this “lesser-evil” reasoning, and pretended that discrimination is fully justified by the environmental purpose of the measure at large.

The irony of the finding is the after-thought of the Court with respect to the fairness of the market for green certificates. By virtually banning substitutable foreign certificates, the Flemish government is providing absolute protection to local producers, which might be few in number and, by definition, have the luxury of setting a higher price than they could if an undistorted transnational market were in function. Formally, there is no ban, but the value of local certificates is artificially inflated by the Flemish schemes, and makes it inconvenient for energy-suppliers to purchase green energy from abroad. This is a textbook example of a market distorted by protectionism, where demand is forced to opt for the local product, and foreign competitors are treated much less favourably. The Court concedes that buyers of green certificates, which need to comply with a compulsory quota, might find it unfair that the supply of certificates is artificially restricted to the collective monopoly of local producers, which can charge above-market prices. Local content requirements such as those envisaged by the Flemish scheme constitute a prototypical instrument of protectionism, and not surprisingly they are included, for instance, among the measures prohibited in the WTO Agreement on Trade-Related Investment Measures. It does not get any more protective and trade-distorting than that.

However, the Court limits itself to elegantly call for some “mechanisms” to ensure that suppliers can purchase green certificates “under fair terms” (para. 111), a puzzling statement in light of the previous validation of a protectionist scheme which is trade unfairness incarnated.

Ultimately, this is a memorable case, because it seemingly puts to bed the rule of reason as we knew it. Also, the reasoning on the merits is very hard to decode because the dropping of direct discrimination as a crucial element of the analysis resulted indeed in a confusing assessment of proportionality, which often loses sight of the differential treatment at stake and forgets about the necessity test altogether.

Barnard & Peers: chapter 12, chapter 16, chapter 22

The CJEU enhances the EU’s role as an external actor

Steve Peers

In today’s judgment in Commission v Council, the CJEU ruled that the EU’s partnership treaties with third States must be adopted using EU powers relating to development and trade (common commercial policy) even if those treaties include provisions relating to transport, the environment and readmission. Due to its broad concept of development policy, the Court’s judgment will entail an increase in the EU’s ability to obtain its external policy objectives.

Background

The EU has been signing development policy treaties (and adopting development policy legislation) for a long time, but its formal powers in this field date back to the original TEU (Maastricht Treaty), in force in 1993. When adopting development policy measures, the Council votes by a qualified majority, meaning that a Member State might be outvoted.

There have been several ‘generations’ of EU development policy treaties, each of them wider in scope than the last. The key previous ruling on the scope of the EU’s development policy is a 1996 CJEU ruling concerning an agreement with India. In the Court’s view, the concept of development policy was a broad one, extending beyond the traditional sphere of poverty relief to such areas as energy and culture, as long as the relevant provisions of the treaty did not set out ‘concrete obligations’. If they did, then other EU legal bases, possibly entailing unanimous voting, or the participation of the Member States in the treaty might be required.

Since then, there is another new generation of EU development treaties (now called partnership agreements), extending even further in scope. Member States have insisted that these treaties need their involvement alongside the EU, and also that the treaties concerned need other legal bases to  be adopted.

While today’s judgment concerned a treaty with the Phillippines, the EU has also agreed or is negotiating similar treaties with many other Asian countries, most notably China.

The judgment

According to the Court of Justice, the provisions in the partnership treaty concerning transport and the environment are essentially ‘declarations’, and so do not entail concrete obligations. So the development policy legal base is enough to cover them.

Furthermore, the Court ruled that the treaty provisions on readmission fell within the scope of development policy. This was because while although the commitment in the partnership agreement to accept each party’s own nationals who were present without authorisation, and to negotiate a treaty to this effect, was binding, it was not sufficiently detailed to constitute a ‘concrete obligation’.

Comments  

The consequence of the judgment is that partnership agreements with similar clauses cannot any longer be subject to separate decisions approving them as regards immigration issues, due to the opt-outs of the UK, Ireland and Denmark on such issues. Therefore this judgment continues a general trend in which the Court narrowly interprets the terms of these opt-outs (see the previous posts regarding recent judgments on social security and transport safety). This limitation of the opt-out is the most obvious consequence of the judgment, since the voting rule in Council and the involvement of Member States in signing the treaty were not contested.

However, this is a distinct question from whether EU association agreements need to be subject to the same procedure for separate decisions (which is currently the case) if they contain such clauses on immigration issues. But the case for separate decisions as regards the immigration provisions of association agreements has obviously been weakened by analogy by this judgment. It should be noted that the Court found that all of the ‘migration management’ provisions of the partnership treaty, not just the specific provision on readmission, fell within the scope of the development policy powers.

The Court’s ruling as regards the transport and environment provisions is unsurprising, in light of the previous judgment on the scope of development policy (which the Court reaffirmed). Furthermore, it would be possible, in light of the Court’s ruling on the immigration issues, to include in partnership agreements some specific commitments as regards (for instance) signing further treaties on climate change or aviation liberalisation, since they would not constitute a concrete obligation.

The judgment is more questionable as regards readmission. The Court rightly did not accept the Advocate-General’s opinion that a merely political link between readmission and development was sufficient to bring the former issue within the scope of the latter. Rather, it narrowed the scope of the notion of a ‘concrete obligation’, thereby widening the scope of the notion of development policy. So a legal commitment is not necessarily a concrete obligation: it depends on how specific that commitment is.

More broadly, arguably this judgment opens up scope for the EU to insist on more specific human rights obligations as part of its partnership agreements. An obligation to sign key human rights treaties, and/or to pass certain legislation improving human rights domestically, is arguably not concrete enough within the meaning of this judgment.

Overall, the consequence of this judgment is that the EU’s development policy is broader than had previously been understood to be the case, with the result that the EU can insist upon more obligations on behalf of its partners without this entailing institutional complications on the EU end. The Court’s judgment therefore makes it easier for the EU to insist that more countries adhere to its external policy objectives, and so makes the countries‘ development more conditional upon compliance with the EU’s goals.

Barnard & Peers: chapter 24, chapter 26

They paved paradise, they put up a parking lot; but they couldn't invoke the EU Charter of Rights

Steve Peers

The immortal words of Bob Dylan (and revoiced by Tracy Chapman) lament the irreparability of environmental damage. At least in some cases, however, it is possible to attempt to restore the damage caused. Does national law that seeks to require the restoration of such damage within the scope of EU law - and therefore the scope of the EU Charter of Fundamental Rights?

In today's judgment in Siragusa, the Court of Justice of the European Union (CJEU) was asked to rule on whether the Charter could be invoked by Mr. Siragusa, who had developed buildings on a protected landscape site. Perhaps inspired by the Dylan/Chapman song, the regional government in Sicily knew what it had got once it was gone. While the national law provides that developers can only be punished by a fine if their prohibited development does not expand the floor space of the building, Mr. Siragusa's development was bigger than that.  So he was ordered to tear it down.

In his view, this violated his property rights, and he convinced a national court to ask the CJEU whether the national decision breached Article 17 of the Charter, which recognises the right to property. Of course, there is a need to show a link to EU law before the Charter can be invoked, according to Article 51 of the Charter (see the comprehensive analysis of this Article by Angela Ward in the forthcoming commentary on the Charter).

According to the Court of Justice, there was not a sufficient link to EU law, so the Charter could not be invoked at all. Mr. Siragusa had referred to a number of different EU legal instruments, but the Court ruled that it was not enough that EU law had an 'indirect impact' or was 'closely related' to a dispute. Rather, the question was whether the national law was 'intended to implement' EU law, including the nature of that legislation and its objectives. In this case, none of the EU measures referred to impose specific obligations to protect the landscape, even though landscape protection is referred to in Directive 2011/92 on environmental impact assessment, Directive 2003/4 on environmental information, the Aarhus Convention (which the EU has concluded) and Regulation 1367/2006 on environmental information held by the EU institutions.

The Court also made a general statement about the purpose of protecting human rights within the EU legal order. The objective is 'to ensure that those rights are not infringed in areas of EU activity, whether through action at EU level or through the implementation of EU law by the Member States'. And the reason for this objective is the need to avoid the protection of fundamental rights varying in Member States in such a way as to damage the primacy or effectiveness of EU law.

Comments

The leading case on the interpretation of Article 51 of the Charter is last year's judgment in Fransson. That case concerned the collection of VAT, which is regulated in detail by EU law. Even though the EU legislation does not regulate the process of collection of VAT, the CJEU said there was a sufficient link to EU law for the Charter to apply.

With respect, it is hard to see much distinction in principle between Fransson and Siragusa. EU environmental legislation certainly aims to protect the landscape (as evidenced by the references to landscape protection in the EU environmental legislation discussed by the CJEU), much as it aims to set up a standard system of VAT. It does not impose specific obligations regarding enforcement of landscape protection obligations, but neither does the VAT legislation regulate the details of enforcement of tax collection.

Arguably the cases can be distinguished because the substantive EU law concerning landscape protection imposes less precise obligations than the EU law defining the scope of VAT. However, this is a rather vague distinction, and the Court should indicate clearly whether it wishes to establish such a dividing line, and if so, where exactly to draw it. Today's judgment makes no mention of Fransson in this context, which is hardly helpful.

Finally, it is disturbing that the Court's rationale for protecting human rights within the EU legal order is subordinated to the primacy of EU law. The Treaty drafters made clear that human rights protection is one of the values on which the EU legal order is built. Surely the purpose of the primacy of EU law is to ensure the effective protection of those values - and not the other way around.

Barnard & Peers: chapter 9, chapter 22  

Is readmission linked to development?

Steve Peers

In recent years, the EU has been negotiating Partnership and Cooperation Agreements (PCAs) with a number of Asian countries. These agreements replace the previous development policy agreements which the EU had with the countries concerned. Compared to the previous agreements, the PCAs include go into greater detail about the EU's cooperation with the countries concerned, including the addition of further topics for cooperation.

Given the addition of these new topics, and the expansion of detail on other topics, the issue arises whether (like the previous generation of treaties) the legal base for the treaties concerned should be trade and development alone, or whether other legal bases must be included. Unsurprisingly, the Commission takes the former view, and the Council takes the latter. In fact, the same issue has arisen in respect of some recent association agreements, although they are not at issue in this case and are subject to a different legal base.

Who is correct about the legal base argument, the Commission or the Council? In today's opinion by Advocate-General in Case C-377/12 Commission v Council, Advocate-General Mengozzi argues that the Commission is correct. This particular case concerns the Council's decision to sign the PCA with the Philippines on behalf of the EU, and the Commission is challenging the Council's decision to add legal bases relating to the environment, transport and immigration policy to the trade and development legal bases which the Commission had proposed.

The starting point of the A-G's analysis is the CJEU's prior judgment of 1996 in Portugal v Council, in which the Court ruled that the EU's development policy legal base could apply to the conclusion of a treaty with India which included provisions on issues like energy and culture, along with a clause on suspension of the agreement on human rights grounds. The core of the Court's reasoning was that a development policy treaty could include general provisions on issues like energy and culture, as long as cooperation on these issues contributed to the development of the countries concerned, but if there were any detailed commitments on such issues in the treaty, other legal bases would have to be added. Furthermore, it was acceptable for such treaties to include a clause allowing for their suspension on human rights grounds.

Applying that prior case law to the PCA with the Philippines, while the provisions in that treaty on transport and the environment are more detailed than those in prior development policy agreements, the A-G argues that such clauses still set out only general obligations, and still contribute to the development of that country. The Council also raised arguments about the impact of the clause allowing the PCA to be suspended in the event of concerns about human rights, democracy and the rule of law, but the A-G does not believe that should affect the legal base for signing the agreement.

The provision in the PCA on immigration raises more difficult issues. The A-G draws a distinction between the more general paragraphs on immigration management, and the more specific paragraphs dealing with readmission. The former clauses do not set out precise legal obligations, while the latter do: the parties have agreed to take back their own nationals who stay on the territory of the other parties without authorisation, and have agreed to negotiate a readmission treaty. In the A-G's view, these clauses don't contribute to the development of the Philippines either. In fact, they only serve the EU's interest.

But having said that, he still concludes that the Council should not have added a separate legal base for the readmission clauses, since (following other prior case-law) this issue is ancillary to the main thrust of the agreement. In particular, he reaches this conclusion because the EU only obtained the Philippines' consent to the readmission clauses in return for the Union's commitments as regards development in the rest of the PCA.

Comments

Why did the Commission bring this action? It is not contesting the nature of the PCA as a 'mixed agreement', ie concluded by the Member States as well as the EU. Also, the inclusion of the extra legal bases did not change the voting rules in the Council, as it will still vote by a qualified majority regardless. Anyway, as long as the Member States are party to the agreement, there is de facto unanimous voting, since they act by common accord.

The Commission may have an agenda to reduce the use of the transport legal bases in agreements which also relate to trade, given the 'transport services' exception in the Treaty rules relating to the common commercial (external trade) policy, which sullies the purity of a key EU external competence which would otherwise be purely exclusive. This makes sense, but the EU's free trade agreements usually include detailed commitments on trade in transport services, so the transport services exception is surely applicable. On this point, the better strategy for the Commission would be to propose internal EU legislation which more fully harmonises the regulation of transport services to and from third countries. If and when such legislation is adopted, the EU would gain exclusive external competence over this issue via the normal (ERTA) route. Of course, this is easier said than done.

Leaving aside the specific issue of transport services, perhaps the Commission wants to reduce the use of additional legal bases besides the common commercial policy in the EU's free trade agreements more generally (although the PCA with the Philippines is not itself a free trade agreement), given that such clauses are seemingly usually added in order to trigger mixed competence between the EU and the Member States (and therefore give Member States a veto). The most egregious example of this is the bizarre cultural protocol attached to the EU/Korea free trade agreement. If the Court follows the A-G's opinion in this case, the Council's ability to do this will be restrained a little, although the Member States can still get their way on this issue if they insist on attaching a protocol with sufficiently detailed obligations in the extraneous field.

This brings us to the key issue of external migration, in particular readmission. The effect of including legal bases on this issue is that the UK, Ireland and Denmark have an opt-out from legal rules concerned. In practice, the UK tends to opt in to EU readmission agreements anyway, so this is more a point of principle for that Member State.

Is the Opinion convincing? Certainly the PCA does not contain detailed rules on transport or the environment (compare it to the EU's aviation liberalisation treaties with third States, or international environmental treaties), and cooperation on such issues will surely aid the Philippines' development. Of course, increasing transport to and from the country and protecting the environment there may well be contradictory objectives, but the list of EU external objectives in Article 21 TEU is rife with such contradictions.

It could be added that including environmental provisions in the PCA is consistent with the obligation to integrate environmental protection into all EU polices. The A-G is also surely right to say that improving transport security and safety will aid the Philippines' development: no-one will want to fly there if their plane is liable to crash or be blown up.

As for the immigration clauses, the migration management rules are not only not very precise; it could be added that they are closely related to the development of the Philippines. However, the A-G's arguments relating to the readmission clauses are, with great respect, not convincing. It is true to say that they set out precise obligations and do not aid the Philippines' development, but then the A-G does not draw the obvious conclusion that a specific legal base concerning immigration is therefore necessary. While is certainly true that the readmission clauses and the development policy commitments are linked politically, it does not therefore follow that the legal base of the former clauses should change.

One final thought: the judgment in this case, whichever party is successful, could be an opportunity for the Commission to suggest a relaunch or review of the EU's policy on external migration management and/or readmission. For instance, why not adopt EU legislation setting out specific rules on coordination of Member States' external migration treaties? (Such legislation exists in a number of other EU policy fields). This can be justified as a necessary feature of the development of a common EU immigration policy, and would be an opportunity in particular to ensure that such treaties are consistent with the human rights obligations of the EU and its Member States.

Update: the CJEU gave its ruling in this case in September 2014. See comments on the ruling here.

Barnard & Peers: chapter 24, chapter 26