Why Uber isn’t Appy: the ECJ defines the difference between transport and digital services

Lorna Woods, Professor of Internet and Media Law, University of Essex

The Court of Justice has followed its own established tradition and given us a significant judgment just shortly before a holiday break, perhaps in the hope that any emotionally driven (negative) response will have gone away by the time every one has got back to work. Last year we had Tele2/Watson (discussed here); this year it is Uber. The Court, in a relatively short judgment, seems to have followed its Advocate General (discussed here) - at least in outcome - to find that Uber provides a transportation service that may be regulated by the relevant Member State. While Uber may suggest at least in media reports that this ruling is not that significant to its business, the ruling may be the subject of some scrutiny by legal advisors to intermediation services to understand precisely the point at which such services are no longer to be considered information society services (within the eCommerce Directive) and what they might be considered to be instead.

To understand the significance of the judgment at this point, it is necessary to have some awareness of the patchwork of EU legislation potentially covering these services. The eCommerce Directive provides the framework for online businesses and famously provides the safe harbour provisions for those providing some forms of intermediation services: mere conduits; providers of caching services; and hosts. This directive also provides for regulation in place of establishment within the field of the directive, and limits the sorts of regulation that may be allowed. Specifically licensing for the service is not permitted.

The Services Directive provides a similar approach, but certain sectors are excluded (gambling as well as transport, for example) and may therefore be subject to more detailed regulatory systems. Broadcasting (audiovisual media services) are subject to a separate regime too, which specifies certain rules about the content that may be provided on such services.

In sum, the categorisation of a service into a particular category affects the extent to which those services may be subject to regulation. The providers of electronic intermediation services have to date benefitted from a regulatory approach which not only limits regulation but in some instances protects them also from liability in the interests of developing the market in such services.

What we see with Uber, and other intermediation services, is not just the connection of two individuals or entities who want to contract with one another but the creation of that circumstance as well as the control over the terms on which that business is carried out. Essentially, the question before the Court was whether such behaviour was just about providing technical services (an app) or whether the control was such that the intermediary had gone beyond intermediation and at what point that boundary was overstepped. 

The Court here confirmed that, in principle, a service providing information from one party to another would fall within the eCommerce Directive as an information society service (though it did not provide the detailed analysis of the Advocate General); taxis are by contrast transportation services. The service provided by Uber was more than "an intermediation service consisting of connecting, by means of a smartphone application, a non-professional driver using his or her own vehicle with a person who wishes to make an urban journey" (para 37).

From the Court’s perspective, it seems that there are three elements – though their interrelationship is not clear:

That the services be integral to the provision of other services (para 40);

The market creation aspect (para 39) – that is the service providers would not provide the service without the platform’s intervention (in the Court’s words the service providers were ‘led’ to do this); and

The decisive influence by the platform over the conditions under which that service is provided (para 39).

Given the structure of the Court’s judgment (and its use of the word ‘thus’ at the beginning of para 40), it could be argued that the over-arching concern is that identified at (1), but that the issues identified at (2) and (3) help identify a services integral nature. Whether, however, both market creation and control of conditions are necessary.  The Court did not make this point express but merely listed them as factors in this instance; in this there is a similarity to the Opinion of the Advocate General. 

As previously noted, this issue may have consequences for other platforms in the sharing economy and whether they are seen as part of the service that they facilitate. In essence we are seeking to place these platforms on a scale between bulletin board, client management system and agency.

The Court did not expressly consider a point which was central to the reasoning of the Advocate General – that is, the question of whether the two elements could be seen as economically independent of one another (in which case, they should be viewed separately).  One response would be to note that the Court has talked of the electronic communications aspect being integral to the overall service. The terrain described by points 2 and 3 above however is not exactly that of economic interdependence, though the Court suggests as the Advocate General argued that the economic activity is taking place only because of the role played by the platform. 

Does this then suggest that there is a difference between service which amateurs are encouraged to supply and those supplied by those professionally so engaged? This distinction may not make much sense in the context of the gig economy and piecework systems of what is de facto employment.

By contrast to the Advocate General, the Court – after concluding that neither the eCommerce Directive nor the Services Directive was applicable to Uber’s app – took the view that the app was part of a service in the field of transport since that concept “includes not only transport services in themselves but also any service inherently linked to any physical act of moving persons or goods from one place to another by means of transport” (para 41). 

Consequently, the Court avoids having to follow the reasoning of the Advocate General to find Uber responsible for the taxi drivers, instead going straight to the point that Member States may regulate the circumstances in which such intermediation takes place (para 47). This seems a more logical consequence of the reasoning than the somewhat artificial distinction that the Advocate General made between app and taxi service. It does mean, however, that those providing apps to facilitate the provision of services may find themselves having to look to the regulatory framework for that particular service, rather than the regulatory framework for electronic communications.

Barnard & Peers: chapter 14

Photo credit: The Independent

The Future of EU External Trade Policy - Opinion 2/15: Report from the Hearing

David Kleimann and Gesa Kübek*

On September 13 and 14, the Court of Justice of the European Union (CJEU) held its hearings for Opinion 2/15, which concerns the EU’s competence to conclude the recently negotiated EU-Singapore Free Trade Agreement (EUSFTA). The CJEU convened in a rare sitting of the Full Court of CJEU judges. It was presided by Judge Lenaerts and Vice-President Tizzano, with Judge Ilešič fulfilling the function of the Court’s Rapporteur. Mrs. Sharpston serves as Advocate General.

This note offers a first-hand report on the hearing and summarizes the exchange of arguments between the Commission, on the one side, and the Council and the member states, on the other side. The first section sets the stage by providing relevant contextual information to the proceeding and highlights the systemic importance of the coming judgment. Section II first outlines the main and general lines of reasoning that the parties presented during the hearing. Secondly, we highlight a selection of policy specific, novel, or even ‘curious’ legal arguments that were advanced by the representatives of the Council and the Commission on the one, and the members of the Court, on the other hand. Section III concludes this note with one of many still unanswered, yet systemically highly significant legal questions that surfaced in the course of the oral phase of the proceedings. There's some further background to the case in an earlier post on this blog.

I.                   The Crux of Opinion 2/15

“Does the European Union have the ‘requisite competence’ to conclude the EU – Singapore Free Trade Agreement [EUSFTA] alone?” More specifically, the Commission, in October 2014, had asked the Court to clarify whether and which areas of the EUSFTA fall under EU-exclusive, shared, or member states’ exclusive competences respectively.

The crux of the matter brought before the Court lies exactly in this precise delineation of EU external competences: If the content of the EUSFTA falls under EU exclusive powers in its entirety, its conclusion as ‘EU-only’ would be mandatory. If certain treaty provisions are regarded as exclusive national competences, the agreement ought to be concluded as a ‘mixed’ agreement, including all EU member states as independent contracting parties. If only EU exclusive as well as shared competences were touched upon by the FTA, the decision to propose the conclusion (on behalf of the Commission) and to conclude the agreement (on behalf of the Council) as either ‘EU only’ or ‘mixed’ is legally optional and referred to the political discretion of the EU institutions involved in the applicable procedures set out in Article 218 TFEU (the general rules on EU negotiation and conclusion of treaties) in conjunction with Article 207 TFEU (the provision on the EU’s Common Commercial Policy).

The importance of the Court’s judgment for the governance of EU commercial relations with third countries – in particular the controversial EU/US trade deal (‘TTIP’) and EU/UK trade relations after Brexit – can hardly be underestimated. Given the broad and deep material coverage of the EUSFTA, the judgment will serve as a precedent for the conclusion of the vast majority of future EU trade and investment agreements. As such, the Court judgment in Opinion 2/15 could possibly mark the beginning of the era of ‘EU-only’ trade and investment agreements and, conversely, the end of the EU member states lengthy parallel ratification procedures required by ‘mixity’. As mirrored by the inter-institutional political debate on the legal status of the EU Canada Comprehensive Economic Trade Agreement (CETA), the eventual outcome of Opinion 2/15 has important implications on both the efficiency, reliability and credibility of EU trade and investment policy formulation, on the one hand, and the de jure legitimacy of multi-level economic governance in the European Union, on the other.

II.                Commission vs. Council and the Member States: The Arguments

Throughout the course of the hearing, the arguments of the parties focused on four contentious policy areas covered by the EUSFTA, notably disciplines on transport, investment, intellectual property rights, as well as sustainable development (labor rights & environmental protection). In the following, we will first outline a number of general legal arguments advanced by the parties that recurred during the hearing in application to all or most issue areas and discernably built on established CJEU case law. Subsequently, we highlight a selection of specific legal constructions that the parties put forward in respect of EUSFTA transport and investment rules.

1.     General Arguments of the Parties

a.      The Commission

As a first and predominant line of defense, the Commission representatives articulated a number of general arguments that aim at fitting the content of the EUSFTA, in its entirety, within the scope of the EU’s exclusive Common Commercial Policy (CCP) competence – Article 207 TFEU – as well as within the ambit other exclusive EU competences that can be implied in accordance with Article 3 (2) TFEU.

As such, the Commission proposed the broadest possible conceptual interpretation of the ordinary terms of Article 207, seeking to attribute maximum meaning to the expansion of CCP powers by the Lisbon reform of 2009, which saw the addition of services, foreign direct investment, and trade related intellectual property rights to the scope of CCP exclusive external powers.

Secondly, the Commission relied on a broad application of the ‘centre of gravity’ theory, which the Court had developed in its case law. The theory’s ‘predominance-test’ requires the use of a single legal basis where one of the aims and components of a measure “is identifiable as the main [one], whereas the other is merely incidental” (COM representative in reference to Case C-377/12, concerning the legal base of the EU partnership agreement with the Philippines). In this way, the Commission defended EUSFTA rules as measures falling under Article 207 where they “specifically [relate] to international trade in that [they are] essentially intended to promote, facilitate or govern trade and [have] direct and immediate effects on trade” (COM representative in reference to Case C-414/11 - Daiichi Sankyo).

Third, the Commission representatives made frequent use of the provisions of Article 3 (2) to advocate for implied exclusivity of otherwise shared competences. In codification of settled ERTA case law, Article 3 (2) TFEU prescribes EU exclusivity in case “the scope of EU rules may be affected or altered by international [member state] commitments where such commitments are concerned with an area which is already covered to a large extent by such rules” (Opinion 1/13, on the Hague Convention on child abduction, in reference to Article 3 (2) TFEU, 3^rd situation). Otherwise, EU exclusive competence may be implied where the “attainment of the Community objective [is] inextricably linked to the conclusion of the international agreement” (Opinion 1/03 on the Lugano Convention on civil jurisdiction, codified in Article 3 (2) TFEU, 2^nd situation).

Building on these three main lines of argumentation, the Commission developed a number of specific arguments in support of EU exclusivity in regard of foreign direct investment (FDI) protection and intellectual property rights (first, second, and third argument), sustainable development disciplines (second argument), and areas otherwise covered by EU rules to a large extent, such as maritime transport (second and third argument).

Yet, the Commission found it necessary to draw a second line of defense: in the alternative to full EU exclusivity, it held that the EUSFTA concerned EU exclusive and shared competences only. As such, the conclusion of the EUSFTA as ‘EU-only’ or ‘mixed’ would remain optional – or facultative - in accordance with the procedural rules of Article 218 TFEU in conjunction with Article 207 TFEU.

b.     The Council and the Member States

Living up to observers’ expectations, the Council and the member states’ representatives attacked the Commission presumption of EU exclusivity on various general and issue specific grounds, with an ubiquitous reference to the principle of conferral, which is set out in Article 5 (2) TEU. The EUSFTA concerned, in addition to the EU exclusive competence under Article 207 TFEU, both shared as well as exclusive member states’ competences. In consequence, “mixity is a must” for both the Council and the member states.

In particular, the Council and the member states demanded a narrow text based interpretation of Article 207 TFEU. Secondly, both Council and member states advocated for a restrictive employment of the ‘center of gravity’ theory that, in its application, needed to rest upon “objective factors amenable to judicial review” (member states representatives in reference to Case C—411/06, Shipments of Waste). More than once, the representatives of various parties referred to Opinion 2/00, on the Cartagena Protocol, in which the Court decided that “[w]hatever their scale, the practical difficulties associated with the implementation of mixed agreements (..) cannot be accepted as relevant when selecting the legal basis for a [Union] measure”. Instead, the Council and the member states advocated on several occasions that the choice of the legal basis should take account of the Court’s reasoning in Case C-411/06, where it was held that “[e]xceptionally, if (…) it is established that the act simultaneously pursues a number of objectives or has several components that are indissociably linked, without one being secondary and indirect in relation to the other, such an act will have to be founded on the various corresponding legal bases”.

Third, the parties argued in favor of restrictive reading of implied exclusive competences under Article 3 (2), 3^rd situation, in that respective conclusions required a “comprehensive and detailed analysis of the relationship between the envisaged international agreement and the EU law in force” (Council and member states representatives in reference to Opinion 1/13).

Following these more restrictive of the possible realm of interpretative approaches, the Council and the member states concluded that member states remained exclusively competent for maritime transport, FDI protection, portfolio liberalization and protection and (alleged) non-commercial aspects of intellectual property rights protection. Moreover, the parties held that the EUSFTA’s disciplines on labor rights and environmental protection established various independent and non-incidental aims and objectives that required reference to multiple legal bases in the TFEU.

2.     Policy-specific Arguments of the Parties

Up to until this point, arguably, the Commission, on the one side, and the Council and the member states, on the other, walked on trodden paths of EU primary law interpretation and established case law, in application to an economic treaty of unprecedented scope and depth and a constantly evolving EU internal legislative status quo. In the following few paragraphs, we highlight a selection of rather unconventional and even curious policy-specific arguments in the areas of transport and investment that may yet move the needle on the evolution of EU external exclusive competences.

a.      Transport

In the area of transport, the Commission notably questioned the scope of the carve-out Article 207(5), which exempts “the negotiation and conclusion of international agreements in the field of transport” from the TFEU provisions of the CCP. In a remarkable construction, the Commission argued that the addition of foreign direct investment to the terms of Article 207(1) via the Lisbon Treaty reform of 2009 had moved mode 3 of transport services provision as defined by WTO law, i.e. establishment and FDI, back into the scope of the CCP. Mode 1, 2, and 4 (movement of the service itself, movement of service recipients and providers) remained outside of the CCP’s legal basis as regards transport. The EU, however, was now exclusively competent for the negotiation and conclusion of agreements liberalizing and protecting foreign direct investment in all sectors, including transport. The Council and member states cried foul in reference to Opinion 1/08, in which the CJEU ruled that transport was fully exempted from the CCP, and which remained “good law” even after the Lisbon reforms and protected the full integrity of the 207(5) transport carve-out from the CCP. The Commission, in view of the parties, was victim of its own faulty logic reasoning. Any exemptions from Article 207 (5) would deprive the provision of its effectiveness.

In the area of maritime transport services, the Commission advocated for implied ERTA exclusivity (Article 3 (2), 3^rd situation TFEU) based on Regulation 4055/86. The Regulation prescribes broad mode 1 liberalization between EU member state nationals established in EU member states and third countries but does evidently not afford any liberalization commitment to nationals of third countries. The Council and member states hence pointed at the missing pieces for a comprehensive EU internal legal framework for transport services that could otherwise confer implied Union exclusivity. The parties further argued that the wide-ranging EUSFTA disciplines and objectives in this field were not incidental or subordinate to the commercial treaty objectives. Maritime transport services, in the view of the parties, remained a shared competence in accordance with Article 4 (2) (g) TFEU. Moreover, member states remained exclusively competent in regard of the regulation of third country vessels operators.

Inspired by this exchange of arguments, Advocate General Sharpston addressed the Council with a question of systemic relevance: What is, at the end, the decisive criterion or the threshold for the conclusion of an EU agreement in a field that is internally only partly covered by common rules, such as maritime transport? How many “hoops”, Sharpston asked, does the Commission have to “jump through” to prove EU exclusivity to the Council? Mrs. Sharpston further questioned whether internal exclusivity was a necessary condition for external exclusivity of competences. The Council, in response, denied that internal exclusivity was a conditio sine qua non but insisted on “strict conditions” for the conferral of implied exclusivity that were set out in Article 3 (2) TFEU. Moreover, the Council advocated for an application of the gravity theory that advanced “clear dividing lines”.

b.     Portfolio Investment

In a genuinely novel line of reasoning, the Commission advanced a treaty interpretation that would justify the implied exclusivity of Union competence over portfolio investment (ie, the purchase of non-controlling shares in companies), which is not included in the ordinary meaning of the term ‘foreign direct investment’ in Article 207 (1) TFEU. In doing so, the Commission departed from the otherwise currently uncontested notion that existing secondary EU legislation is the only contingency that can trigger an ‘ERTA effect’. The ‘ERTA effect’ confers exclusive competence in areas where member states exercise of external competence would otherwise affect already existing or even prospective ‘common rules’ (Art. 3 (2) 3^rd situation TFEU). Such ‘common rules’, according to the Commission, however, could also take the shape of EU primary law. With reference to Article 63 (1) TFEU, the Commission representatives voiced the opinion that the treaty-prescribed freedom of capital movement between member states (as well as member states and third countries) sufficed to constitute ‘common rules’ within the meaning of Article 3 (2) TFEU. The possibility of member states concluding international agreements that affected the prohibition of restrictions on capital movements as codified in Article 63 (1) implied EU exclusive external powers in this area. The Union was therefore exclusively competent for the negotiation and conclusion of agreements covering rules on portfolio investment liberalization and the protection of such investments.

In the alternative, according to the Commission, portfolio investment liberalization falls under the Union’s shared competences.

The Council and the member states took pains to counter the Commission’s line of reasoning with a larger number of sometimes diverging arguments. First and foremost, the parties noted the fact that that Article 63 (1), by itself, only codifies a prohibition of restrictions, but falls short of conferring legislative powers upon the Union. Using Article 63 (1) TFEU as a legal basis for external action was merely a “legal fix” that constituted an instance of “legal imagination” on behalf of the Commission. To the Council, it appeared inconceivable that a provision, which did not suffice as a basis for internal legislation could imply an (exclusive) external competence. Only the exercise of an internal competence may  pre-empt external member state action. Belgium and Germany, secondly, took the stance that such a wide interpretation of Article 3 (2) 3^rd situation TFEU facilitated an undue circumvention of the deliberate choice of the treaty makers to exclude portfolio investment from the scope of Article 207 TFEU and Article 64 TFEU. The two parties insisted on exclusive member state competence for portfolio investment. The representatives of Finland and Slovenia, on the other hand, appeared to suggest that the member states may share external powers with the Union in this area.

Countering the Council’s attack, the Commission, in response to an oral question asked by the Court, held that there was a “simple but very good reason” for the fact that the treaties did not codify a legal basis for the internal liberalization of portfolio investment: Article 63 (1) TFEU itself prescribed a comprehensive prohibition of restrictions to that end.

In another unprecedented interpretation of the treaties, the Commission cited Article 216 (1) in conjunction with Article 63 (1) TFEU as the correct legal bases for external Union acts that covered portfolio investment liberalization. The Council and several member states, in contrast, insisted that Article 216 (1) TFEU only conferred general treaty-making powers upon the Union and was unsuitable to serve as a legal basis for the conclusion of international agreements by the EU.

Upon inquiry of Judge Rapporteur Ilešič, the Commission and Council representatives found themselves in a rare moment of agreement to the extent that Article 64 TFEU could not serve as a legal basis for the internal liberalization of portfolio investment. According to the Commission, the harmonization of EU internal rules on portfolio investment could, however,  “maybe” be based on Article 114 or 352 TFEU – a statement that inspired the Court’s President Lenaerts to remind the Commission of the fact that the choice of the correct legal basis for a Union act was not “à la carte”.

In light of the circumstance that the Commission partly relied on a legal basis for an external competence, which allegedly did not require its internal exercise ex ante, Advocate General Sharpston questioned the Commission on the precise difference between the third situation governed by Article 3 (2) TFEU (as referred to by the Commission) and the second situation provided for by the same rule. Mrs. Sharpston’s enquiry, however, remained unanswered.

Secondly, the Advocate General questioned the Commission’s perception of the risk that member state agreements could ‘alter the scope of common rules’, whereas the common rules that the Commission referred to were in fact EU treaty provisions. The only way to alter the scope of primary law, Sharpston stated, was a treaty reform via the applicable constitutional provisions. In response, the Commission, in reference to the terms of Article 3 (2) TFEU, clarified that its argument did not extend to the alteration of the scope of treaty rules, but to the probability that the primary legal norm of Article 63 (1) could be affected by independent international member state agreements.

c.      Termination of Member States’ Bilateral Investment Treaties

Another point of legal debate that prominently featured in the hearing concerned the supersession, suspension, and termination of existing member states’ bilateral investment treaties with Singapore once the investment protection provisions of the EUSFTA will be provisionally applied or enter into force when the treaty is concluded. Article 9.10 EUSFTA provides that member states bilateral investment treaties “shall cease to have effect and shall be replaced and superseded by this Agreement”. A footnote to this provision stipulates that “the agreements between Member States of the Union and Singapore […] shall be considered as terminated by this Agreement, within the meaning of subparagraph 1(a) of Article 59 of the Vienna Convention on the Law of Treaties.” Yet, article 59 (1) VCLT prescribes that “a treaty shall be considered as terminated if all the parties to it conclude a later treaty relating to the same subject matter and: (a) It appears from the later treaty or is otherwise established that the parties intended that the matter should be governed by that treaty”.

While the Commission argued that past EU practice entailed an array of precedents for the supersession of member state treaties by EU external agreements, Judge Rapporteur Ilešič and Advocate General Sharpston questioned the appropriateness of the chosen legal modality as well as the EU competence for the termination of member states’ bilateral investment treaties (BITs) with Singapore via Article 9.10 of the EUSFTA. Both the Judge Rapporteur and the Advocate General, advanced a, however, unanswered request for a clarification as to whether the Commission wanted to argue in favour of the termination of the BITs via the duty of sincere cooperation enshrined in Article 4 (3) of the TEU. Otherwise, how would the Commission argue that it can include a provision in an ‘EU-only’ agreement that effectuated not only the succession but also the termination of member state bilateral agreements with Singapore under international law, given that the EU is not a contracting party to these agreements?

III.             Concluding Remarks

Opinion 2/15 raises a vast amount of general as well as policy area specific legal issues that are – in aggregate and in some instances individually - of tremendous importance for the delineation of EU competences vis-à-vis the Union’s member states. The significance of the Court’s judgment very much transcends the question of whether the EUSFTA is characterized as an ‘EU-only’ or a ‘mixed’ agreement in its entirety. Rather, the Court’s much awaited clarifications will have both systemic horizontal as well as policy area specific vertical implications for the operation of the EU’s legal system and its external relations.  Moreover, the judgment will likely clarify and may redefine the role and reach of the member states’ presence in the Union’s external economic relations in adaptation to the primary law reforms of the Lisbon Treaty, constantly evolving EU internal secondary legislation, and the expanding scope and depth of 21^st century trade and investment agreements.

We conclude this note with a question posed by the British Advocate General Mrs. Sharpston, at the very end of the hearing, to all parties. The question, however, remained unanswered.

If the Court, in Opinion 2/15, held that the EU-Singapore FTA is a mixed agreement, what would be the consequence for the conclusion of the treaty? Given the extensive scope of EU exclusive powers under the CCP, could a single member state veto the entire agreement?

David Kleimann and Gesa Kübek

Passau, October 4^th, 2016

Barnard & Peers: chapter 24

Photo credit: www.cnaint.com

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* David Kleimann is a Researcher at the Law Department of the European University Institute (EUI) in Florence (david.kleimann@eui.eu). Gesa Kübek is a Research Assistant at the Law Faculty of the University of Passau (gesa.kuebek@uni-passau.de). This report is based on hand-written notes that the authors prepared during the hearing. All potential errors are attributable to the authors alone.

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

Bad drivers and EU law: The CJEU drives on the wrong side of the road

Steve Peers

There’s an old Canadian joke, which was once voted the ‘Most Canadian Joke Ever’ (mind you, it might not have faced much competition). An American, a Canadian, a Brit and a Frenchman walk into a bar. The barman (bizarrely) asks them each to write an essay about an elephant. The Frenchman writes about the elephant’s sex life. The Brit writes about the role of the elephant in colonial history. The American writes about the military use of the elephant (or perhaps, now, about the use of elephants to intercept telecommunications). And the Canadian writes: “The elephant: Does it fall within federal or provincial jurisdiction?”

Now, let’s add an EU law element. Say this group of boozy essay-writers is gathering in a bar in Luxembourg. An EU lawyer joins them. Inevitably, she writes her essay on ‘Which Treaty legal base regulates elephants?’ In fact, this is a genuine legal dispute, at least as regards trade in endangered elephants (does the Treaty rule on environment or on the common commercial policy apply?). And finally, the EU lawyer has brought along her German friend. He only agreed to come because the EU lawyer promised him that everyone would pay for their own drinks. But when he gets to the bar, he finds that the EU lawyer has successfully convinced everyone in Luxembourg that he has to pick up the whole tab for the evening.

While disputes over legal bases might appear to be a particularly arcane feature of EU law, they are usually manifestations of important disputes about how political power is exercised at EU level. Most often, the legal base dispute is really about the extent of the legislative power of the European Parliament, and/or the extent of Member States’ veto powers. 

Today’s judgment on the legal base of the Directive on the exchange of information on driving offences is about two other issues, however: the extent of the Commission’s monopoly of initiative, and the scope of the opt-outs relating to EU Justice and Home Affairs (JHA) law. 

This particular Directive was first proposed by the Commission back in 2008, with a legal base relating to transport. Discussions on this proposal were soon blocked by disputes as to whether it should instead have a legal base relating to police cooperation – which would then have entailed unanimous voting and mere consultation of the European Parliament (EP). However, following the entry into force of the Treaty of Lisbon in 2009, the decision-making procedure relating to transport law, on the one hand, and (most) EU rules on police cooperation, on the other hand, were governed by the same decision-making rules (the ordinary legislative procedure) as far as the Council and EP were concerned. 

But two differences remained: the Commission shared its power of initiative with groups of Member States as regards criminal and police cooperation measures, but not as regards transport law (or any other aspects of EU law); and the UK, Ireland and Denmark have opt-outs from the former area of EU law, but not from transport law. 

The Belgian Council Presidency, in the second half of 2010, relaunched discussions o the Commission’s proposal and soon reached an agreement in the Council. The following Presidency reached an agreement with the EP, and the Directive was adopted in 2011. The UK and Ireland chose to exercise their opt-out, while Denmark was automatically excluded. 

In a nutshell, the Directive sets out a process for exchange of information between Member States as regards specified common driving offences, such as speeding and drunk driving. The subsequent use of that information is then left to the discretion of the State which has received it. 

The CJEU’s judgment

The CJEU ruled entirely in favour of the Commission, holding that the Directive concerned only transport issues. However, it kept the Directive in force for a year, placing the EP and the Council under an obligation to negotiate a new text by the end of that period. The new measure will obviously apply to all Member States, given the absence of any opt-outs relating to transport matters.

According to the Court, applying the usual rule of examining both the aim and content of EU measures to determine their correct legal base, both the aim and content of this Directive concern transport policy. First of all, its aim was to ensure a high degree of road safety, and the prior CJEU case-law had established that road safety was an aspect of the EU’s common transport policy. As the Court pointed out, the Directive applied regardless of whether the offences were regarded as administrative or criminal under national law. It aimed to ‘induce more cautious behaviour’ by drivers, ‘thereby helping to reduce the number of casualties due to road traffic accidents’. 

As for the content of the Directive, it regulated the access to vehicle registration data by each national authority, as well as the notification to the drivers concerned. It also provides for possible further proposals by the Commission in 2016: this is a veiled reference to reviving the Commission’s previous controversial proposals to harmonise the law on drunk driving across the EU (ie, setting a standard maximum level of blood alcohol content). So the Court ruled that the content of the Directive also pursued the objective of road safety. 

The Court then rejected the argument that the Directive fell within the scope of the legal base on police cooperation. While the EU powers on this issue have a wider scope since the Treaty of Lisbon entered into force, this cooperation is still limited to cooperation by police and other law enforcement authorities as regards ‘the prevention, detection and investigation of criminal offences’ (Article 87(1)). Also, the police cooperation legal base had to be interpreted in light of the general objectives of EU JHA law, as set out in Article 67 TFEU, which include ensuring ‘a high level of security’ by means of ‘coordination and cooperation’ between police and other authorities, as well as criminal law measures.

Comments 

With great respect, the Court’s judgment is not convincing; but neither is the argument defended by the Council and the EP, which was supported by seven Member States and Advocate-General Bot. 

As for the judgment, while the Court is correct to say that the aim of the Directive is road safety, its analysis of the content of the Directive is problematic. In those Member States which enforce some or all of the driving offences in question by means of criminal law, the process of exchanging information set out in the Directive has the purpose of facilitating the application of prosecution and criminal penalties as regards the persons concerned. The Court ignored the Advocate-General’s point that the Directive draws upon the EU’s ‘Prum’ system for the exchange of information between police authorities. 

While it is arguable that the Court was drawing a distinction between the exchange of information and the subsequent criminal process, such a distinction would not be convincing. The two aspects of criminal law are closely linked, and Article 87 TFEU expressly refers to the exchange of information.

In fact, the Court does not seem to draw such a distinction, relying only upon the aim of securing road safety, and the fact that exchange of information (the content of the Directive) supported this aim. This could be understood to mean that even a measure about the mutual recognition of criminal penalties relating to road traffic offences (such as the existing Framework Decision, referred to by the Advocate-General) falls within the scope of EU transport law, at least as far as transport is concerned. Moreover, logically this approach applies by analogy to criminal law measures related to other aspects of EU law, such as the internal market. As the Advocate-General pointed out, the existence of Article 83(2) TFEU, which provides for the power to adopt substantive criminal law relating to other EU policies, proves that ‘the border is not sealed’ between criminal law and the rest of EU law. 

The Court’s reliance upon Article 67 TFEU is not convincing either. In fact, that provision is less precise than the legal base of Article 87, referring generally to ‘cooperation and coordination’, and not restricting the scope of the policing and criminal law aspects of the JHA Title expressly to criminal offences. 

This brings us to the central flaw of the alternative argument. Both the Advocate-General and the EP stated that Article 87(1) TFEU was not limited in scope to ‘criminal matters’. No, but it is expressly limited in scope to ‘criminal offences’. (The Advocate-General went so far as to quote the wording of Article 87, leaving out these final two words). While some Member States apply criminal law to road traffic offences, others do not. This distinction is surely recognised by Article 67(1) TFEU (not quoted by the CJEU), which states that EU law on JHA matters must respect ‘the different legal systems and traditions of the Member States’. 

The Council’s arguments did accept that the EU police cooperation measures had to be linked to criminal law, but asserted that ‘criminal’ law had a wide meaning, and that administrative procedure had to be regarded as criminal procedure. These arguments ignore the diversity of the Member States’ traditions in this field. 

What approach should the EU legislature – and the Court – have taken? The Court’s analysis is flawed because it ignores the link between criminal law and road traffic offences in many Member States, while the Council and EP ignored the role which administrative law plays in many others. There is a way in which the EU could have attempted to deal with the issue of road safety, while taking account of the diversity of Member States’ systems. It could have adopted parallel measures relating to the different approaches to this issue, as it did when it adopted a Regulation on the civil law aspects of victim protection orders, following a Directive on the criminal law aspects of this issue. 

Finally, as for the UK, its determination to opt out from this measure (which has now been frustrated by the Court) is hard to explain. Officially, at least, the UK opted out of the measure because it would was not consistent with the system applied in the UK (see the government’s explanation to the House of Commons EU Scrutiny committee). But the better course would have been to attempt to negotiate, within the context of the legislation, a different model for the exchange of information which (in accordance with Article 67 TFEU) took account of the specificities of the UK system but which still ensured that the valuable objective of the legislation would be secured in the UK. After all, surely UK citizens also quite rightly feel (in the Advocate-General’s words) ‘the sense of injustice that can arise from the impunity’ of foreign drivers not being penalised for road traffic offences committed in the UK. 

One can only hope that the government did not opt out of the proposal purely in order to boast to those who oppose any EU role in criminal law under any circumstances that it had secured yet another opt-out. The safety of British drivers and pedestrians should not be undermined by the political objective of putting another notch in a Eurosceptic bedpost. 

Barnard & Peers: chapter 5, chapter 25

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