Vilija
Vėlyvytė, British Academy Post-Doctoral Fellow, Somerville College, University
of Oxford
Photo credit: civarmy,
by wikipedia
My new book, ‘Judicial
Authority in EU Internal Market Law: Implications for the Balance of
Competences and Powers’ (Hart Publishing 2022), examines how the Court of
Justice of the European Union expands EU competences through the interpretation
of EU internal market law.
Much has been written about the
EU’s so-called ‘competence creep’, describing the extension of EU competence
(or power) to regulate the internal market into the areas in which the EU has
not been granted explicit competence to act, such as public health, social
security, and others. That discussion criticizes the EU legislature –
Commission, Council and Parliament acting together – for failure to respect the
limits of EU competence and the Court for failure to police those limits. Yet it
largely overlooks a related, and equally important, question: does the Court
itself observe the limits of EU competence in the interpretation of the rules
of the internal market laid down in the Treaties? This question lies at the
heart of my new book. The inquiry conducted in the book exposes the scale of
the problem of the EU’s competence creep and demonstrates that the exercise by
the Court of its interpretative authority is its major, and often dominant, cause.
The limits of EU competence are
governed by the principles of conferral, subsidiarity and proportionality. Whilst
the principle of conferral defines the scope of EU competence, the principles
of subsidiarity and proportionality limit its exercise. The book examines to
what extent the Court observes these principles in the interpretation of EU
free movement rules. It argues that the Court’s observance of the three principles
has been inconsistent, thereby creating constitutional tensions in the EU’s
relationship with the Member States and upsetting the institutional
balance of powers between the EU legislature and judiciary.
Observance of Conferral in Free Movement Case Law
According to the principle of conferral
(Art
5(2) TEU), the EU can act only within the scope of the competences that
Member States have conferred upon it in the Treaties. The Treaties contain a
list of EU competences, dividing them into exclusive, shared and supplementary (see
here).
Notably, the EU does not have any real powers in the areas belonging to its
supplementary competences, such as, for example, healthcare,
education
and, for the most part, social
policy. Its action in these areas is limited to the adoption of measures of
a recommendatory character.
The phrasing of the principle of
conferral in the Treaties suggests that there is a clear line as to what the EU
can and cannot do. But in reality this is far from true. In the way conferral
is interpreted by the Court, it allows the EU to interfere into the areas that
in principle fall outside the scope of its competences to the extent that such
interference stems from the exercise of a competence that has been conferred upon
the EU. For instance, the EU has not been granted competence to legislate in
the area of public health. Yet it can enact such legislation as long as it
contributes to the functioning of the internal market (see Tobacco
Advertising II judgment, concerning the validity of EU directive on the advertising
and sponsorship of tobacco products).
EU legislation aside, Member
States must comply with the rules of the internal market laid down in the
Treaties in all areas, regardless of whether these belong to EU or Member State
scope of competence. So, for example, Member States retain the competence to
regulate the exercise of collective labour rights, namely the right to
collective bargaining and right to strike. However, they must regulate these
rights in a way that does not violate the EU’s economic freedoms – freedom of
establishment and of provision of services in particular (see Viking
and Laval
judgments).
The book argues that if conferral
is to have a meaningful normative function in EU law, there needs to be a limit
to how far EU internal market law can encroach into the areas of competence
that should in principle be exempted from any binding interference on behalf of
the EU. In the context of the judicial interpretation of free movement law, that
limit lies in the conditions that trigger the application of free movement law.
These are the conditions that have to be satisfied for the matter to fall
within the scope of free movement. For instance, in order to benefit from the
EU’s economic freedoms, the activities in question have to be of an economic,
as opposed to social, nature and the challenged national law or practice has to
constitute a restriction on those activities.
When interpreting the meaning of
these conditions in a given case, the Court should adopt a systemic approach,
contextualising them in the requirements of the principle of conferral. This presupposes
a judicial interpretation of the concepts of ‘economic activity’ and ‘restriction’
that balances the objectives of the internal market inherent in these concepts
with the concerns relating to the protection of national competence and
regulatory autonomy. Such balancing exercise should be performed whenever free
movement law collides with policy areas that are constitutionally sensitive
from the EU law point of view. As a consequence, activities which have some
economic features but are otherwise heavily regulated at the national level in
the interests of social policy and solidarity, would fall outside the scope of the
economic freedoms. A prominent example of such activities is the provision of
public healthcare and education services.
Having conducted an inquiry into free
movement case law involving three sensitive areas of national policy –
healthcare, education and collective labour law, the book finds that the Court
has systematically failed to engage in any meaningful reflection of competence
concerns in the interpretation of the scope of free movement rules. This
practice places the Court in tension with the principle of conferral.
The case law has also diminished
the effectiveness of the legislative dimension of the principle of conferral. Specifically,
it has opened up the possibility for matters that had been reserved to the
regulatory prerogative of the Member States to be addressed at the EU’s
legislative level through the functionally broad provisions of the Treaties
(legal bases) dedicated to the regulation of the internal market. For instance,
by holding that the provision of public healthcare is an economic activity, the
Court sent a signal to the EU legislature that healthcare, as a service, could
be legitimately legislated on under Art
59 or Art
114 TFEU. This enabled the adoption of EU
Directive on Patients’ Rights, which governs access to cross-border healthcare,
notwithstanding that EU-wide harmonisation
in the area of public health is excluded by Art
168 TFEU.
Observance of Subsidiarity and Proportionality in Free Movement Case
Law
The principles of subsidiarity
(Art
5(3) TEU) and proportionality
(Art
5(4) TEU) govern the exercise of EU competences. Subsidiarity applies to the
areas of competence that are shared between the EU and Member States. It sets
out the conditions under which the competence concerned should be exercised by
the EU rather than Member States. Essentially, it stipulates that policy decisions
should be taken at the level of the Member States unless action at the EU level
could be more effective. Proportionality, on the other hand, controls the
intensity of EU action. It limits intervention by the EU to what is necessary
in light of the objectives pursued.
The book demonstrates that both
principles are designed to protect national regulatory autonomy in politically
sensitive areas of EU action, but they do so in slightly different ways. If
subsidiarity is primarily concerned with the protection of the scope of
national regulatory autonomy, proportionality ensures that EU regulatory
intervention does not intrude excessively into the various values and interests
protected via the exercise of national regulatory autonomy.
How do the principles of
subsidiarity and proportionality manifest themselves in the judicial
interpretation of the Treaties? They do at the stage of the judicial inquiry
into the justification of national measures restrictive of free movement. The
degree to which restrictive measures can be justified depends on the standard
of judicial review employed by the Court. Accordingly, the standard of judicial
review determines the space left for domestic regulatory action in the
situation concerned. It thus affects both the scope of national regulatory
autonomy (subsidiarity) and the interests protected within its exercise
(proportionality). So, for example, when free movement law is construed to
require that trade unions employ the ‘least restrictive’ means in negotiations
with foreign businesses, this inhibits their autonomy to regulate the terms and
conditions of employment as well as their ability to protect workers’ interests.
This implicates both subsidiarity and proportionality.
The Court has been inconsistent
in its observance of the principles of subsidiarity and proportionality across
the policy areas studied in the book.
In three of the four areas –
healthcare, education and collective labour law, the Court has employed a high standard
of review of national measures, focused on the test of necessity. This approach
is well illustrated by the Bressol
judgment. The case concerned Belgian measures restricting foreign students’
access to some of the oversubscribed medical programmes. For context, in some
of these programmes foreign students (mainly French) would make up more than
80% of the class. This situation raised concerns about the potential shortage
of health specialists in Belgium and, more broadly, about the financial sustainability
of the country’s higher education system, which was based on free and open
access. The Court held that in order to be justified, government measures had
to be appropriate and proportionate. Notably, the assessment of proportionality
had to take into account the possibility that the government might have been
able to achieve its regulatory goals with less restrictive means. Finally, the
government was required to provide ‘an objective, detailed analysis, supported
by figures, … capable of demonstrating, with solid and consistent data, that
there [were] genuine risks to public health’ (para 71).
Essentially, the Court’s
reasoning made clear that the Belgian higher education policy could only be
pursued by employing measures that did not restrict the free movement of
students in the EU.
This approach can be contrasted with
the one employed by the Court in the gambling case law. Governments often limit
access to their gambling markets for foreign operators, often by monopolising
the operation of gambling. (This keeps the revenues derived from gambling
within national borders.) The Court’s review of these types of measures is
highly deferential. It is grounded in respect for national regulatory autonomy in
the gambling sector. In that connection, the Court holds that Member States are
entitled to a margin of appreciation, or discretion, when regulating gambling
activities. Accordingly, ‘it is for those authorities to consider whether, in
the context of the aim pursued, it is necessary to prohibit activities of that
kind, totally or partially, or only to restrict them and to lay down more or
less rigorous procedures for controlling them’ (see Zenatti
judgment, para 33).
As a result, governments are
allowed to bar foreign operators from entering their gambling markets as long
as such restrictions are consistent with the regulatory objectives pursued.
The book ultimately argues that
discrepancies in the standard of judicial review employed in relation to the
areas under study – healthcare, education and collective labour law, on the one
hand, and gambling, on the other – cannot be justified considering their comparable
political and social sensitivity. Rather, these discrepancies indicate that the
Court has been unfairly selective in its observance of the principles of subsidiarity
and proportionality in the free movement case law.
Judicial Reasoning Reform
In light of its findings, the
book advances a proposition aimed at restoring the balance of competences
within the EU and thus easing the tensions created by the case law. Specifically,
it proposes that the principles of subsidiarity and proportionality should be
reinforced into EU-level judicial practice concerning the areas of national
policy which are in principle reserved to Member State competence. In practice,
this would require the Court to employ, in relation to those areas, a set of
techniques of judicial interpretation – already to be found in the Court’s wider
case law – that are aimed at lowering the standard of judicial review. These
techniques are the margin of appreciation, the ‘fair balance’ approach and
exemption from the scope of EU law.
The proposed reform would ensure
that the exercise by the Court of EU judicial authority through the
interpretation of internal market law respects the limits of EU competences.
