Category: Article

The Year of the Citizen: Moving Beyond Lip Service

Amanda Spalding

LLM student at King’s College London

 

This year has been deemed the Year of the Citizen by the European Union, thus it seems appropriate to look at what it actually means to be an EU citizen today. EU Citizenship was introduced (some would say invented) in 1992.[i] It was initially a merely symbolic concept with very few actual consequences; however the Court of Justice of the European Union (the Court, the Court of Justice) has over the years significantly expanded its relevance to create a number of rights. In one early case, Grzelczyk, the Court stated “Union citizenship is destined to be the fundamental status of nationals of the Member States, enabling those who find themselves in the same situation to enjoy the same treatment in law irrespective of their nationality, subject to such exceptions as are expressly provided for.”[ii]  In this article I shall first briefly explore what is meant by the phrase ‘fundamental status’ and then contrast its possible meanings against some of the Courts case law.

 

The Fundamental Status Question

What is meant by making EU citizenship the ‘fundamental status’ of nationals of Member States is not expanded upon by the Court.  One could see there are two possible meanings of ‘fundamental status.’

The first is the idea that it is the most important status for citizens implying that it supersedes any national identity.  This seems to be incorrect since Article 9 of the Treaty on the European Union provides that ‘Citizenship of the Union shall be additional to and not replace national citizenship.’ The fact that citizenship is dependent on Member State nationality also discredits this definition of ‘fundamental status.’

The second possible meaning is that it is supposed to eliminate the possibility of discrimination on the basis of nationality. The idea being that once EU law is engaged the only status that matters is our EU citizenship. This is supported by the principle laid down in the case of Martinez-Sala[iii] that citizenship provisions may only be invoked where EU law is engaged; they are not applicable in purely internal situations. However the Court has certainly expanded the concept of EU citizenship in unexpected ways in order to rule on matters which seemed to be purely internal situations. The case-law on this point shall be explored below, but first it is important to discuss the case of Martinez-Sala in more detail.

 

Martinez-Sala

It is always important to discuss Martinez-Sala case when exploring the direction in which the Court of Justice is taking citizenship because it represents a big shift in the ideals underpinning the EU model.

The case concerned a Spanish mother living in Germany who was refused a child benefit because she could not produce a certain residence document.  It was not disputed that from a national perspective the decision was valid. Moreover, all the parties to the case, including the German government, acknowledged that refusing the benefit due to lack of residence document was discrimination exclusively based on her nationality. However, the German government argued that the case did not fall within the scope of Community law, because Ms. Martínez Sala could not be regarded as a worker.

Prior to the Maastricht Treaty this would have been the case, however, Ms. Martinez-Sala argued that the very fact that she was an EU citizen brought the case within the scope of EU law. And the Court of Justice accepted this argument stating that after the creation of EU citizenship, the relationship between a Member State and nationals of another Member State were governed by Community law, even if the citizen in question was economically inactive.

It is widely recognized that this case significantly extended the scope of EU law and enhanced the rights of non-economic migrants. It discarded the idea of EU citizenship as a warm fuzzy nothing which simply encompassed rights which already existed and transformed the concept into something with real meaning.  It brought all EU nationals – whether economically active or not – under the same banner of EU citizen and thus abandoned the perception that EU law concerned only ‘workers’. This was a fundamental change in the EU’s outlook, moving it away from a purely economic body to a more political being – something that unites all the people of Europe. It also represented a further limitation on Member State power in an important area of sovereignty – the relationship between a state and its residents. This limitation on sovereignty is a theme which also runs through the cases to be discussed below.

 

Chen

In Chen[iv] a pregnant Chinese national moved legally to Northern Ireland and gave birth there. Every baby born in Northern Ireland was entitled to dual Irish and British citizenship. The mother then moved to Wales where they applied for long-term residence, which was refused.

This was challenged as breaching EU law because the baby was an EU national and as such was free to move around the Union as she pleased. This was not denied but the mother was not an EU national – could she exercise her daughters free movement rights? The UK government argued that because the mother was not an EU citizen, this was a purely internal situation regarding the UKs immigration policies.

The Court of Justice thought otherwise. It reasoned that the mother was her daughter’s primary carer and financial support, and without her the baby’s citizenship rights would be meaningless. Thus the mother should be able to stay with her daughter for as long as she is her dependent. The Court of Justice met the outrage of Member States by stating that this was not an abuse of citizenship rights nor was it an infringement of Member State sovereignty because the states themselves decide how nationality is granted. This is compatible with the view of the ‘fundamental status’ of citizenship being a basis for the elimination of discrimination because it recognises that the baby’s citizenship rights cannot be stripped from her purely because of her age. The fact that the Court reiterates the point that Member States are free to set their own nationality laws reinforces the idea of the ‘fundamental status’ of citizenship as being parasitic in nature. It will only apply to people the Member States see fit to grant nationality to.

 

Rottman

However in the case of Rottman[v] the Court did impinge on Member State nationality rules on the basis of citizenship. In that case an Austrian man acquired German nationality by naturalisation and as such lost his Austrian nationality. Germany then wished to revoke his German nationality on the grounds that it was obtained fraudulently (Mr Rottman had not disclosed he was under investigation in Austria).

A preliminary ruling was sent to the Court of Justice asking whether or not the citizenship provisions meant the withdrawal of German nationality also resulted in a loss of EU citizenship. If this was the case then Mr Rottman would be rendered stateless.

Although the Court of Justice emphasised the fact that acquisition and loss of nationality are matters for the Member States, it went on to say that where a citizen of the Union is to be rendered stateless then the situation shall fall within the scope of EU law. Such a decision will be reviewable in light of EU law against the principle of proportionality. The Court then went on to specify that to be proportionate the authorities must consider and correctly balance factors such as whether this decision is justified in relation to the gravity of the offence committed, the lapse of time between the naturalisation decision and the withdrawal decision and whether it is possible for that person to recover his original nationality.

Thus the Court used EU citizenship as a way of reviewing the legitimacy of a decision to revoke the nationality of a citizen of the Union. This lends more credit to the idea of EU citizenship as superseding national citizenship. Whether or not EU law is truly engaged here depends on the relationship between EU citizenship and Member State nationality. If, as outlined above, EU citizenship is parasitic in nature, the removal of Member State nationality should not concern the Court of Justice. Once nationality is removed so is its jurisdiction. However, the idea that the Court of Justice can interfere with the removal of nationality on the basis of EU citizenship suggests that they are more intertwined than that. Citizenship therefore seems to take precedence over Member States sovereign rights to determine its nationals which point to it as a replacement national identity. The case also has nothing to do with the elimination of discrimination which seems to move EU citizenship away from that meaning.

 

Ruiz-Zambrano

The highly unusual case of Ruiz-Zambrano[vi] is the most significant indicator yet of the idea of citizenship as superseding national identity. Mr Zambrano was a Colombian national who left his country of origin and sought asylum in Belgium. His asylum application was rejected but he was not sent back to Colombia. His subsequent applications for asylum or to have his situation regularised where also refused.

Despite this, he and his wife became registered as residents of a Belgian municipality and began to work full-time. Meanwhile his wife gave birth to two children who had Belgian nationality. Mr Zambrano lost his job when the Belgian authorities gave notice to his employer that he did not have a work permit. Then he was unable to claim unemployment benefit and he challenged the refusal of the Belgian government to grant him a work permit or in any way regularise his situation.

This went to the Court of Justice. The Belgian government, along with various other intervening Member States were of the opinion that situations such as these – where the children of non-citizens of the Union have never exercised their right to free movement – does not come within the remit of EU law.

The Court once again emphasised the idea of EU citizenship as the fundamental status of nationals of Member States. It then went on to say that as such Article 20 TFEU precludes measures ‘which have the effect of depriving citizens of the Union of the genuine enjoyment of the substance of the rights conferred by virtue of their status as citizens of the Union.’[vii] It then went on to hold that the refusal to grant a work permit to the father of EU citizens who were still dependant on him had such an effect and thus was in breach of EU law.

This seems to have entirely removed the need for a cross-border link in order for citizenship provisions to be applicable. This case again has nothing to do with discrimination. Unlike in Chen, the children here have not attempted to exercise their EU citizenship rights and been discriminated against. This judgement implies that the Belgian government should have recognised that these children were first and foremostly EU citizens and that an act which deprives them of the possibility of exercising the rights bestowed by that identity will be prohibited. This seems to exemplify the idea of EU citizenship being more important than national identity. It allows the Court of Justice to interfere in areas which until now had been thought outside its reach.

 

The Future of EU Citizenship

From the above case law we can see that the prediction in Grzelczyk[viii] has had a lasting impact on the case law of the Court. The ‘fundamental status’ of citizenship was initially used to ensure equal treatment between nationals and non-nationals. It was based on the argument that we are all European, ergo we should receive the same treatment in other Member States. However, the reference to the ‘fundamental status’ in later cases such as Rottman and Ruiz-Zambrano show that it may have a different meaning. The pure status of ‘citizen’ seems to confer a package of rights and duties. These rights and duties are to be protected regardless of whether or not they have been exercised. However, recently the Court moved away from this style of judgement.

In McCarthy[ix], a woman was a national of both the UK and Ireland, however, she had never resided elsewhere. Following her marriage to a Jamaican man, she obtained an Irish passport and applied to the UK authorities for a residence permit as an Irish national wishing to reside in the UK. Her husband applied for a residence document as the spouse of an EU citizen. The UK refused the applications. The Court of Justice found that the EU Directive which allowed for the spouse of an EU citizen to reside with them in the EU did not apply here because she had never exercised her right to free movement. She had always resided in a Member State of which she was a national. So it appears that the Court has drawn a line under Ruiz-Zambrano. The cases of Rottman and Ruiz-Zambrano were exceptional with very sympathetic circumstances so they may possibly be conceived as a ‘one offs’.

The number of intervening Member States in cases such as Ruiz Zambrano (7 states) and Rottman (8 states) reveal the dissatisfaction with the way the Court has used the citizenship provisions. No doubt when the citizenship was ‘invented’ it was meant as a woolly provision, not a tool for the Court to further limit Member States’ power. The turnouts for the elections to the European Parliament with less than 50% of the population voting in 2009[x] indicates the public does not see its EU citizenship as its most important status. This is supported by a poll which found that only 18% of Europeans know their rights as EU citizens and only 41% knew what ‘citizen of the EU’ meant.[xi] Thus it seems evident that the people of Europe do not consider their most important status to be that of EU citizens. The idea of it as removal of discrimination may also be tested in the coming months. The Eurozone crisis has reignited anti-EU feeling within many Member States and reinforced divisions among its citizens. The attempts by various Member States,[xii]including the UK, to qualify the access of Romanians and Bulgarians to free movement and non-discrimination shows the solidarity of the EU may be crumbling. Such behaviour does not exactly seem to be in the spirit of the Year of the Citizen.

[i] The Maastricht Treaty amended the EEC Treaty to insert Art 8 on citizenship

[ii] Case 184/99 Grzelczyk [2001] ECR 1- 6193

[iii] Case 85/96 Martinez-Sala [1998] ECR I-269

[iv]Case 200/02 Chen  [2004]ECR I-9925

[v] Case 135/08 Rottman [2010] ECR I- 1449

[vi] Case 34/09 Ruiz-Zambrano [2011] ECR I- 1177

[vii] Case 34/09 Ruiz-Zambrano [2011] ECR I- 1177 para 42

[viii] Case 184/99 Grzelczyk [2001] ECR 1- 6193

[ix] Case 434/09 McCarthy [2011] ECR I3375

[xi] R. Bellamy ‘Evaluating Union Citizenship: Belonging, Rights and Participation within the EU’ 12( 6) Citizenship Studies 2008

A Continuing analysis of the Never-Ending Story: Golden Shares after Italian elections

Jelena Ganza

PhD candidate, Dickson Poon School of Law, KCL

 

‘Golden shares’ challenged

The ‘golden shares’ (hereafter GS) were created at the time of privatisation when the EU Member States’ Governments were actively disposing of their shareholdings in former state monopolies, such as energy companies and telecoms. Under the normal operation of company laws a loss of share ownership would normally trigger a loss of control.  However, since many of the privatised companies were operating in strategic industries which provided public services, the Governments sought to retain their controlling grip via ‘golden shares’. Being a special class share, GS grants its holder (usually the Minister responsible for the relevant industry) with a wide range of special powers that allows them to control the company. Such State-driven interventions could make acquisitions in companies less attractive, thus the use of (non-discriminatory) golden shares could be justified only by the existence of overriding public interests and only if applied in a legally certain and proportional way.[i] The striking majority of GS, which were put to the scrutiny of the Court of Justice, have failed to pass this justification test, the only exception being case C-503/99 Commission v Belgium.[ii]

 

Passing the justification test

In Belgium the GS in two strategic energy companies SNTC and Distigaz were implemented by virtue of two Royal Decrees of 10 June 1994[iii] and of 16 June 1994[iv] respectively, allowing the Minister for Energy to exercise limited special powers. The Minister had the right to be notified in advance on any transfer of company’s system of lines and conduits or on any dealings in other strategic assets of the company, which are essential for the domestic distribution of energy products.[v]  Within 21 days after receiving prior notification the Minister could oppose any of the above operations in cases where they could have adverse effects to the national interests in the energy sector.[vi]  The GS also empowered the Minister to appoint two non-voting representatives of an ‘advisory capacity’ to the board of directors, which could propose the annulment of any decision that is deemed contrary to the national energy policy.[vii] The Belgian GS have passed the narrow justification test since they granted the Minister with special powers which were limited to certain decisions concerning specific strategic assets of particular companies, and were limited by time. Apart from Belgian GS, no other arrangement of such kind has been justified. In spite of the narrow justification criteria some Member States were eager to retain their GS following the condemning judgement: they sought to adjust national laws to match those of Belgium.

 

Obstinate and insufficient: Italian golden shares

Italy could be seen as an example of persistent non-compliance with the Court’s judgements, since the Government held on to its GS while continuously amending their scope and application in quest for passing of the strict justification tests.[viii] Due to this tactics the golden share Decree-Law 332/1994[ix] (created back in 1994) became an obstinate piece of legislation. GS created by the foresaid Decree were repeatedly overruled by the Court delivering condemning rulings in 2000 (Case C-58/99)[x] and 2009 (Case C-326/07)[xi]. Over the course of the infringement proceedings the Italian Government has shown its loyalty to the EU law by revealing an inclination to comply and amend its GS. Nevertheless, for nearly a decade, the Government’s willingness to conform was not supported by adequate compliance initiatives. Since the first ruling the Italian GS have undergone a number of makeovers, yet those amendments proved to be  ‘bad laws’, while being inadequate and insufficient to remedy the breaches established by the Court.[xii] The compliance initiative by former Prime Minister Silvio Berlusconi[xiii] of 20 May 2010 proved to be insufficient[xiv] and the Commission has pursued a penalty action under Article 260 TFEU. When the new technocratic government (led by former EU Competition Commissioner Mario Monti) has been appointed in November 2011 to implement necessary austerity measures, the final compliance on GS could have been envisaged. Monti has confirmed that in time of the general elections the new golden share law would be drafted and implemented. Monty has stood up to his promise and on 16th of March 2012 (one year prior to general elections scheduled for April 2013) a new golden share Decree-Law No.21 entered into force (hereinafter – the Law).[xv] The Law sought bringing the national GS in proximity to the justified Belgian measures: the long-awaited urgent compliance measure recasts original GS of Decree-Law 332/1994.

 

The new golden share law

The new law has limited the discretionary powers reserved for the Italian authorities to veto and approve certain important decisions in companies which operate in defence and national security and in companies which hold strategic assets in energy, transport and communications industries. Firstly, the execution of special powers is now divided between the two types of companies/assets and two separate Articles provide detailed rules for each of the types, guaranteeing legal certainty as found in Belgian law. Secondly, the Law has a wider scope of application: it applies to any company operating in defence or national security and to all companies that hold ‘strategically important assets’. The latter innovation extends the applicability of the GS beyond the boundaries prescribed by Belgian law (which applied only to two companies). Lastly, the exercise of special powers appears to be less generic and is limited to time-limited, specific circumstances. For example, Article 1 of the Law states that special powers in defence and national security companies could be ‘triggered’ in case of a serious threat to the essential interests of defence and security of the Italian State. In case of such a threat the Italian government has special powers to (a) impose specific conditions on the purchase of an interest; (b) power to veto resolutions of the General Meeting or the Board of Directors concerning important decisions; and (c) power to oppose a purchase of shares by any person if such acquisition could jeopardize the interests of the defence and national security.

 

Defence and security companies

As a pre-condition for exercise of special powers in defence and security companies the seriousness of a potential threat to the essential interests has to be evaluated and the following assessed: the purpose of the resolution, the strategic assets or businesses subject to the transfer, suitability of the defence system and national security, information security relating to military defence, international interests of the State, protection of the national territory or critical infrastructure.[xvi]  In order to evaluate the seriousness of a potential threat the Government shall, in accordance with the principles of proportionality and reasonableness, apply a ‘fit and proper test’ in light of the buyer’s potential influence on society, taking into account the adequacy and the reliability of the buyer. Monti’s Law sets the prior notification obligation similar to Belgian GS: any operation that has the potential to be vetoed has to be notified to the Government within ten days prior to implementation of such operation. The Government can exercise its veto power within fifteen days following notification if any of the risks mentioned above become evident. The veto power could be exercised in form of imposition of specific conditions sufficient to safeguard the essential interests of defence and national security.

 

Energy, transport and communication companies

Article 2 of the Law governs special powers in strategic companies operating in energy, transport and communications sectors, covering companies, plants, assets and relationships which are of strategic importance, are dealing with network industries and are vital to ensure the minimum supply and the continuity of essential public goods and services of strategic importance. The prior notification obligation also applies to the above companies and it has to be made within 10 days prior to important operations.[xvii] The Government could veto any of such operations within 15 days of receiving the notification, if such operation could possess actual and serious threat to the public interests of safety and operation of networks, services and plants and possess threat to continuity of vital supply of any such services. The Government is also entitled to impose conditions or veto purchases of ‘strategic assets’ for companies or residents originating from a non-EU country.[xviii] Any such acquisitions must be notified to the Italian Government within 10 days prior to transaction and it could then either veto or make such an acquisition subject to specific conditions within 15 days from receiving notification. The power to veto/impose specific conditions could be exercised only in exceptional situations where the public interest relating to the safety and operation of any ‘strategic asset’ may be materially jeopardized. In case of Article 2 a ‘fit and proper test’ will be carried out in light of the buyer’s potential influence on the society.

 

New golden share doomed?

Monti’s new GS Law aimed at establishing a comprehensive, legally certain and precise investment control regime in the strategic sectors. More than a decade of inadequate compliance initiatives have seemed to come to an end. However, in order to be fully effective the Law had to be ‘activated’ by further Decrees of the Prime Minister, specifying which companies and ‘strategic assets’ are subject to new regime.[xix] The deadline for implementation of Decrees was in September (for companies operating in energy, transport and telecoms) and August (for defence and security sector) 2012, but no such Decrees were implemented, rendering Monti’s ‘good law’ ineffective.

Due to the new developments on Italian political arena, in spite of the technocratic Government’s promises, the ‘activating’ Decrees could not be implemented in time: Italian politicians have prevented this from happening. Berlusconi blamed Monti’s Government for driving Italy into further recession and after losing the support of major parties, Monti had to resign on 8 December 2012 leaving the GS issue unsettled.Following Monti’s resignation, the Italian Parliament has been dissolved while the elections which followed in February 2013 culminated in ‘political stalemate’.

The necessary Decrees on golden shares are not likely to be implemented in the foreseeable future, since the political party, which won a majority in Italian Chamber of Deputies, does not have a majority in the Senate (both majorities are necessary for the Law to be implemented). The EU Commission is currently looking at the Monti’s Law, but with reservation for further Decrees, the new GS regime as a whole could only be evaluated if (and after) all legislative measures are implemented.

 

Concluding remarks

For nearly two decades the GS are in place and over the years the Italian Government has repeatedly tested the patience of the EU Commission while engaging with procrastination and non-compliance with the condemning judgements on GS. At the time of implementation of first Italian GS, Berlusconi’s Government was in office and over years it has resisted to fully withdraw unjustified laws. Monti’s Law had a possibility of a bright future – it could have started a new chapter on GS justification. However, the latest elections precluded this from happening since Berlusconi’s protectionist influence is yet again back on political scene. The ‘loyalty to the EU principle’ enshrined in Article 4(3) TEU is seems to be, once again, neglected.

 

[i]         See, to that effect, Joined Cases C-163/94, C-165/94 and C-250/94 Sanz de Lera and Others [1995] E.C.R. I-4821, para. [23]; Case C-54/99 Église de Scientologie de Paris and Another v. Prime Minister [2000] E.C.R. I-1335, para. [18]; Case C-326/07 Commission v. Italy [2009] E.C.R. I-02291, para. [14]; Case C-367/98 EC Commission v. Portugal [2002] E.C.R. I-04731, para. [48].

[ii]        Case C-503/99 EC Commission v. Belgium [2002], E.C.R. I-04809,  (golden shares justified); Case C-483/99 EC Commission v. France [2002] E.C.R. I-04781; Case C-98/01 Commission v. United Kingdom [2003] E.C.R. I-04641; Joined cases C-282/04 and C-283/04 EC Commission v. Netherlands [2006] E.C.R. I-09141; Case C-58/99 EC Commission v. Italy [2000] E.C.R. I-03811; Case C-174/04 EC Commission v Italy [2005] E.C.R. I-04933; Case C-326/07 EC Commission v. Italy, see (i) above; Joined cases C-463/04 and C-464/04 Federconsumatori v. Commune di Milano [2007] E.C.R. I-10419; Case C-463/00 EC Commission v. Spain [2003] E.C.R. I-04581;  Case C-274/06 EC Commission v. Spain [2008] E.C.R. I-00026; Case C-207/07 EC Commission v. Spain [2008] E.C.R. I-00111; Case C-367/98 EC Commission v. Portugal, see (i) above; Case C-171/08 EC Commission v. Portugal [2010] E.C.R. I-0000, Case C-543/08 EC Commission v. Portugal [2010] E.C.R. I-11241; Case C-212/09 EC Commission v. Portugal [2011] E.C.R. I-00000; Case C-112/05 EC Commission v. Germany [2007] E.C.R. I-08995.

[iii]        Moniteur Belge of 28 June 1994, p. 17333

[iv]       Moniteur Belge of 28 June 1994, p. 17347

[v]        Case C-503/99 Commission v. Belgium, see (ii) above, para. [9]-[10]

[vi]       ibid

[vii]       ibid

[viii]      See Jelena Ganza on ‘Italian Golden Shares – a Never-Ending Story?’ http://kslr.org.uk/blogs/europeanlaw/2013/01/15/italian-golden-shares-a-never-ending-story/#_edn9

[ix]       (Italian Privatisation Law as amended), Decreto del Presidente del Consiglio dei Ministri, definizione dei criteri di esercizio dei poteri speciali, di cui all’art. 2 del decreto-legge 31 maggio 1994, n. 332, convertito, con modificazioni, dalla legge 30 luglio 1994, n. 474; Decree-Law No 332 of 31 May 1994 (GURI No 126 of 1 June 1994), converted, after amendment, into Law No 474 of 30 July 1994, (GURI No 177 of 30 July 1994)

[x]        Case C-58/99 Commission v. Italy, see (ii) above

[xi]       Case C-326/07 Commission v. Italy, see (i) above

[xii]       First amendment: Article 66 of Financial Law No 488 of 23/12/1999 and Decree on 11/02/2000 aimed to bringing legal certainty to when the special powers of Decree-Law 332/1994 could be used, (in Italian) at: http://www.normattiva.it/uri-res/N2Ls?urn:nir:stato:legge:1999;488 Gazzetta Ufficiale, n. 302 del 27-12-1999; for Decree 11/02/2000 see http://gazzette.comune.jesi.an.it/2000/40/5.htm; Second amendment: Article 4(227) to (231) Finance Law No 350 of 24/12/2003 and implementing Decree of 10/06/2004; (‘Urgent provisions to ensure the liberalisation and privatisation of specific public service sectors’, GURI No 170 of 24 July 2001), published in Italian Official Gazette No 120 on 25 May 2001, the original text could be found at: http://www.normattiva.it/uri-res/N2Ls?urn:nir:stato:decreto-legge:2001;192; For Berluscony’s Decree in Italian see Decreto Del Presidente Del Consiglio Dei Ministri 20 maggio 2010 (published in Italian Official Gazette n.117 del 21-5-2010 ) (10A06506).

[xiii]      Decreto Del Presidente Del Consiglio Dei Ministri 20 maggio 2010 (published in Italian Official Gazette n.117 del 21-5-2010 ) (10A06506);

[xiv]      See Jelena Ganza, (viii) above

[xv]      Decreto-Legge 15 marzo 2012, n. 21  Norme in materia di poteri speciali sugli assetti societari nei settori della difesa e della sicurezza nazionale, nonche’ per le attivita’ di rilevanza strategica nei settori dell’energia, dei trasporti e delle comunicazioni. (12G0040) (published in Italian Official Gazette n.63 of 15-3-2012).

[xvi]      See Article 1 of Decree-Law No. 21, (xv) above

[xvii]     Actions such as changes in ownership structure, winding up, merger or de-merger, transfer of the head office abroad, change the corporate purpose, dissolution of the company, change of statutory provisions, transfer of subsidiaries.

[xviii]     Article 2(5) and (6) of Decree-Law No. 21, (xv) above

[xix]      According to Article 1(7) of Decree-Law No. 21, (xv) above, the list of companies subject to golden shares has to be updated at least every three years.

 

The Kadi Saga: UN targeted asset-freezing sanctions under scrutiny

Georgina Morgan

LLM Student at King’s College London

 

The (previous named) ECJ’s decision in September 2008 in Kadi I has been called “one of the most discussed judgments in ECJ history.”[1] Following the recent release of the Attorney General’s Opinion in Kadi II, and in anticipation of the CJEU’s decision, this controversial litigation appears an apt topic for ‘The Year of the Citizen’. Bearing in mind the original conception of the European Union as a trade union, the fact that one of the Court’s most discussed judgments concerns anti-terrorism measures against individuals demonstrates just how much the sphere of the Union has grown to encompass. This article will explore but a few of the vast range of legal issues raised by the “saga” of the Kadi cases.[2]

 

The background

The Kadi cases are the most notable in a series of challenges against the targeted asset-freezing sanctions stemming from the United Nations Security Council (UNSC). The EU Regulation that Mr. Kadi challenged (in so far as it applied to him) implemented Resolution 1267 (1999) of the UNSC, which set up the sanctions regime targeted at Al-Qaeda and associated individuals. Unlike other lines of sanctions,[3] the 1267 sanctions list is controlled by a subsidiary body of the UNSC, known as the Sanctions Committee.

 

Mr Kadi was first included on the sanctions list in 1999. Once listed, Mr Kadi was subject to a worldwide asset-freeze and travel ban – all without being informed of the reasons for his listing or being given any meaningful opportunity to challenge the measures. Targeted asset-freezing sanctions are the most severe illustration of the move in counter-terrorist action in the ‘war on terror’ towards pre-emptive action, in clear violation of the principles of the rule of law.

 

Kadi I

In Kadi I, the (then) ECJ in 2008 reversed the decision of the (then) CFI with regards to its ability to review the legislation in light of certain fundamental rights. The CFI had held that such a review of the EU Regulation was precluded by virtue of the source of the measure being implemented: the source being the UNSC. The crucial difference that so changed the outcome of the ECJ’s decision was the finding, in accordance with the principles from Les Verts,[4] that all EU measures are subject to review against established legal standards regardless of the source of the measure.[5] After having crossed this hurdle, the ECJ then conducted a marginal review of the Regulation, which was all that was required to establish a breach of due process rights.[6] This led the Court to annul the measure in so far as it applied to Mr. Kadi, but not without the delay of three months being given to the Commission to allow them to review their procedure in light of the judgment.

 

This decision provoked strong reactions from both ends of the spectrum. Outrage revolved around the ECJ’s audacity in interfering with matters as paradigmatically political as counter-terrorism action, and for disregarding the EU’s obligations towards international law through conducting (what effectively amounted to) an indirect review of the UNSC.[7] Praise, on the other hand, focused on the ECJ’s strong stance in relation to its protection of fundamental rights.[8]

 

While space does not permit a detailed examination of these arguments, it is suggested here (in agreement with Maya Lester, counsel for Mr. Kadi, and Piet Eeckhout) that the decision was far from revolutionary and was in fact appropriate in context.[9] The case confronted the issue of which of the EU’s fundamental Treaty principles to prioritise legally when they came into conflict: the EU’s international obligations under Article 3(5) TEU (chosen by the CFI), or fundamental rights and principles of law under Article 2 TEU (prioritised by the ECJ). The ECJ’s active role in promoting the EU as an institution that guarantees the protection of human rights is widely documented,[10] and such rights protection is “foundational for the EU’s democratic legitimacy.”[11] Had the ECJ followed the reasoning of the CFI and declined jurisdiction to review the Regulations by virtue of their origin, it would have left a gaping legal vacuum and the clear message for Member States that the guarantees of rights protection by the EU were empty rhetoric.[12]

 

The corrections made by the ECJ to the CFI’s legally flawed decision – which risked turning the UNSC into a “supreme, unfettered legislature”[13]– are therefore strongly supported by the wider considerations of the constitutional principles at stake. The ECJ made a decision to uphold human rights in the face of political pressure the contrary, demonstrating the substance behind the EU’s rights discourse. Furthermore, the frustration with the UNSC sanctions regime evident in the rising number of domestic challenges illustrates that the ECJ’s decision was necessary and timely.


The practical ramifications

Since the judgment in 2008, the UNSC has made a variety of modifications to the operation of the Sanctions Committee. ‘Narrative summaries’ of reasons for individual listings began to be issued in the aftermath of the judgment, and Resolution 1904 (2009) set up the Office of the Ombudsperson to review delisting applications – a direct consequence of the ECJ’s decision in Kadi I.[14] That the UNSC has not fought the challenges but rather  implemented changes to the regime is perhaps the most convincing evidence in favour of the ECJ’s decision in Kadi I. Furthermore, a statement from the UN General Assembly issued in 2009 urged states to include “adequate human rights guarantees” in their national sanctions measures, which effectively endorses the ECJ’s position.[15]


Although these are moves in the right direction, the basic inadequacies in the regime still persist. The system still provides no procedure for impartial review nor guarantees concerning the adequate provision of evidence to those listed.[16] However, a distinct increase in the individuals being delisted can be seen on the Sanctions Committee website. Along with a number of other individuals, Mr Kadi himself was finally delisted at the level of the UN Sanctions Committee on the 5th October 2012. While the need for further change is still pressing, the international pressure on the Sanctions Committee to reform has shown that the Kadi I decision was a far cry from the “pyrrhic victory” prophesied by de Burca.[17]


Kadi II

March saw the release of Attorney General Bot’s Opinion in Kadi II. If the CJEU follows the Opinion, both decisions of the lower court in the Kadi “saga” will have been overturned on appeal.

 

The Kadi II litigation was launched to challenge Mr Kadi’s relisting following the ECJ’s decision in Kadi I. As the ECJ in Kadi I insufficiently addressed the implications of indirectly reviewing the operation of the Sanctions Committee or the appropriate level of review, the European General Court (EGC) had little guidance upon which to rely in Kadi II other than the phrase “in principle, full review”.[18] In line with the OMPI judgment, the EGC’s interpretation was that the ECJ intended review to extend beyond due process to a substantive review of the evidence on which the listing decision is based, all of which should be disclosed to the listed individual.[19] Not only does this raise issues regarding the ability of the European courts to conduct such review, it also dangerously fails to strike a reasonable balance between the interests at stake, and risks opening the doors for substantial judicial interference with the political prerogative of security management.

 

As such, it was advocated that the CJEU’s decision in Kadi II ought to take a more narrow interpretation of its Kadi I decision.[20] AG Bot has given the first indication of the line the Court will take, and, as anticipated, it has been narrowed: he recommends that the judgment of the EGC be set aside and the action brought by Mr. Kadi against his re-listing be dismissed. The Opinion clearly takes a more deferential stance towards the political nature of the counter-terrorist measures, and towards the UNSC’s designated role in identifying and tackling threats to international peace.[21] His suggested approach is that:

 

“The respect which the European Union must pay to…international law does not…have to be reflected in immunity from jurisdiction…but in an adaptation of the judicial review conducted.”[22]

 

A number of reasons are then given for conducting a low procedural review of the implementation by the Commission. As well as addressing the political nature of counter-terrorist action, notable amongst these is the reliance on the improvements in the procedure for review before the Sanctions Committee post-Kadi. As highlighted above, it is certainly debatable whether the Office of the Ombudsperson is in fact quite as effective in the listing and delisting process as the Attorney General maintains.[23] However, whilst the challenge in Kadi I was relatively straightforward once the ECJ established jurisdiction, the modifications since made to the regime do make a challenge at judicial level increasingly complicated. As Ginsborg and Scheinin advocate (also implicit in the Opinion), it is possible that the judiciary have gone as far as they can in pushing for reform of the sanctions regime and it has to be a political solution that confronts the remaining inadequacies.[24]

 

Interim conclusion

While the ECJ made an appropriate decision in Kadi I, especially in light of the flawed CFI judgment, it nonetheless opened a Pandora’s box – partly through the nature of the issues in the case, and partly due to repercussions from its own reticence. In addition to navigating the network of international organisations, the European courts are having to grapple with relatively novel issues concerning the role of the judiciary in reviewing counter-terrorism action, where on both sides there is much at stake: interference with individual liberty and the rule of law on the one hand, and the protection of civilians from heinous terrorist attacks on the other. After the overtly political decision of the EGC in Kadi II, it is highly likely in the light of the AG’s Opinion that the broad interpretation given to the ECJ’s judgment in Kadi I will be narrowed by the CJEU in their forthcoming decision.[25] It will be of significance for all cases concerning counter-terrorism measures exactly how the ECJ reconciles the conflicting interests of the individual, the state and the international order.

 

Although the judicial challenges to the UNSC sanctions regime have stimulated reforms at the UN level, the changes implemented thus far do not go deep enough. AG Bot’s Opinion reflects the current feeling that further improvement of the regime demands a political solution, namely developing cooperation between the EU and the UN in this area. However, considering that the deep structural deficiencies of the sanctions regime are reflective of a general trend in counter-terrorism towards pre-emptive action, it is perhaps wishful thinking to anticipate such fundamental change stemming from the originators and greatest advocates of such action. Nonetheless, despite targeted sanctions being the West’s strongest pre-action measure in the ‘war on terror’, their suitability for and efficacy in combatting terrorism is being increasingly doubted.[26] As Eckes says, “the end of fighting terrorism no longer justifies all means.”[27] It remains to be seen what means the end does justify.

 

 


[1] Murphy (2012: p.115).

[2] Kadi I, C-402/05 and C-415/05. Kadi II, joined cases C‑584/10, C‑593/10 and C‑595/10. AG Bot’s Opinion [123].

[3] Such as the sanctions stemming from Resolution 1373 (2001).

[4] C-294/83 Les Verts [23], cited by the ECJ in Kadi I at [281].

[5] Kadi I [281-327].

[6] Kadi I [331-372].

[7] See, for instance, Grainne de Burca, Jean Monnet Working Paper 01/2009.

[8] See, for instance, Türküler Isiksel (2010) European Law Journal 16(5).

[9] Maya Lester, counsel for Mr Kadi, at King’s College, 05/11/12. Eeckhout, EJIL:Talk! (Blog) (25 February 2009).

[10] Türküler Isiksel at no.8, p.553.

[11] Von Bogdandy, (2012) Common Market Law Review 49:489. Note how important this is in the context of the EU’s current legitimacy crisis and democratic deficit at the institutional level.

[12] Note context of the recent wave of EU rights discourse, including the incorporation of the EU Charter of Fundamental Rights into the Lisbon Treaty and the proposed accession to the ECHR.

[13] Eeckhout, (2007) European Constitutional Law Review 181.

[14] As pointed out in AG Bot’s Opinion in Kadi II [83].

[15] G.A. Resolution 63/185 (2009), UN Doc. A/RES/63/185, para.20, cited in Ginsborg (2011: p.5).

[16] Ginsborg & Scheinen, EUI Working Paper, RSCAS 2011/44 (May 2011).

[17] De Burca, above no. 7 (p.46).

[18] Kadi I [326], Kadi II at [132].

[19] Kadi II [135].

[20] Ginsborg, no.16 (p.10).

[21] Opinion of AG Bot, especially [71], [80].

[22] Ibid, [52] (italics my own).

[23] Ibid [86].

[24] Opinion of AG Bot at [76]. Ginsborg, no.16 (p.10).

[25] Ibid.

[26] Murphy (2012: p.146). This is particularly in light of the low costs of funding terrorism – the cost of the London 7/7 bombings is estimated at less than £8000. Danziger, Journal of Money Laundering Control (2012) 15(2), 210-236.

[27] Eckes, “EU Counter-Terrorist Policies and Fundamental Rights: The Case of Individual Sanctions” (2010: p.12).

The European Citizens’ Initiative: Giving Voice to EU Citizens

Anastasia Karatzia

PhD Researcher, School of Law, University of Surrey

 

Introduction

The term European or, more precisely, European Union (EU) citizenship finds expression within a web of rights and responsibilities contained in primary and secondary EU legislation. This year marks the 20th anniversary of the establishment of EU citizenship and as such an EU campaign entitled ‘The European Year of Citizens 2013’ has been launched to raise awareness of the general public about those rights and responsibilities. The campaign also aims to send the message across the continent that EU citizens have an active role to play in reinforcing their EU conferred rights through their direct participation in the democratic life of the EU. The vitality of direct participation in the democratic life of the EU was recently highlighted by the Treaty of Lisbon.[1] The Treaty has introduced Article 11(4) TEU which provides for the European Citizens’ Initiative (ECI), a mechanism whose purpose is to give individual citizens a ‘voice’ in the EU.

 

This article provides a tour de horizon of the legal framework of the ECI and addresses certain criticisms expressed during its brief life, most recently at a conference on the first year of the ECI which took place earlier this year.[2] The article commences by briefly describing the need for a form of participatory democracy in the EU before it moves on to outline the ECI’s legal framework and the requirements for the submission of a successful Initiative. Whilst the focus is on the legal issues pertaining the functioning of the ECI, certain proposals for further review of the ECI’s legislative framework will also be considered.

 

The Need for Participatory Democracy

The journey for participatory democracy did not begin in Lisbon. For a long time now the increase of EU’s powers and impact since its inception, coupled with the establishment of the principles of direct effect and primacy of EU law by the CJEU, generated an increasing need for ‘input legitimacy’ in the EU.[3] In other words, since the early stages of European integration it was anticipated that the evolution of the EU and political choices of its Institutions (the legislature, in particular) needed to reflect the will of the people.[4] The attempts to create more legitimacy in the EU relied on the nation-state model of representative democracy, according to which citizens authorise representatives through elections to act on behalf of their interests.[5] A primary example is the evolution of the European Parliament. Although the European Parliament started as an assembly of national parliamentarians, since 1979 citizens vote for Members of the European Parliament.[6]

 

The above development aside, the continuous low turnout in European Parliament elections is often interpreted as a sign of public apathy and growing estrangement of EU citizens. As such, low voting turnout has raised concerns about the lack of communication between the EU and its people. Such detachment between the EU as a system of governance and the citizenry of the Member States has attracted criticism regarding the success of the European Parliament as a representative body. In order to bridge the gap the EU has created and developed a number of instruments which aim at enhancing participatory democracy at supranational level.[7] These include, inter alia, petitions to the European Parliament, the right to complain directly to the European Ombudsman and consultation campaigns by the European Commission before the launching of the formal legislative process.[8]

 

The Treaty of Lisbon attempts to strengthen the abovementioned representative and participatory aspects of the democratic life of the EU. Regarding the former, the Treaty enhances the powers of the European Parliament and increases the role of national parliaments in EU legislative scrutiny. Regarding the latter, the Treaty introduces the ECI, according to which one million signatures from seven Member States could allow a group of EU citizens to put considerable pressure upon the Commission to give serious consideration to their request and submit a legislative proposal to that effect.

 

The ECI is thus ‘the latest part of a movement towards establishing participatory democracy as a complement to existing forms of representative democracy in the EU.’[9]

 

The Legislative Framework of the ECI

Whilst Article 11(4) provides the legal basis for the ECI, it is the ‘ECI’ Regulation 211/2011 which establishes the conditions and provisions regarding the functioning of the ECI mechanism. The ECI Regulation was adopted after thorny negotiations and compromises between the Council and the European Parliament and formal registration of ECIs began on 1st April 2012. In a nutshell, the organisers of an Initiative need to set up a ‘Citizens’ Committee’ comprised by seven citizens from different Member States and form their initiative as either a draft legal proposal or as general principles. They must then register their Initiative with the Commission which has two months to accept or reject the registration. If the Commission accepts the initiative, a one year limit begins during which the Citizens’ Committee needs to gather one million signatures to support their proposal. The signatures can be gathered either online or on paper and they should emanate from seven Member States. It should be noted that there is a threshold of signatures for each Member State which is the number of each country’s Members of European Parliament multiplied by 750. Once the signatures have been gathered, they have to be certified by national authorities. The European Commission is then obliged to examine the initiative but it is not forced to take any form of action; it has absolute discretion on how to proceed with an ECI.

 

So far, twenty-four initiatives have requested registration to the Commission, of which sixteen have been registered. Two of them have been withdrawn, so there are currently fourteen open Initiatives. It is also noteworthy that eight Initiatives have been refused registration because they covered areas which fall outside the powers of the Commission.

 

Legal Issues

The provisions of the ECI Regulation have been subject to criticism as to whether they achieve the purpose of creating clear, simple, user-friendly and proportionate procedures and conditions so as to encourage participation by citizens and make the EU more accessible. [10]

 

To begin with, there are minimal legal criteria in order for an ECI to be registered by the Commission. According to Article 4(2) of the Regulation, an ECI cannot be registered if it is manifestly abusive, frivolous or vexatious or contrary to the values of the EU. Also, an ECI cannot be registered if its subject matter falls manifestly outside the powers of the Commission. The limitation that an ECI should fall in the scope of the competences of the EU is reasonable but could prove difficult for laymen who are not are not acquainted with the TFEU’s competence typology. Therefore, in order to ensure the correct wording of their proposals and the appropriate legal basis, organisers probably need legal advice which increases the required funding.

 

In addition, it is open to dispute whether the Regulation allows for ECIs which propose the alteration of Treaty provisions. As Dougan explains, the dispute does not arise because of a question on whether the Commission has the power to propose an amendment to the Treaties.[11] Article 48 TEU clearly identifies the Commission’s power to submit proposals for Treaty changes either through the ordinary revision procedure (Article 48(2)-(5) TEU) or through the simplified revision procedure (Article 48(6) TEU). The issue rather arises because of the wording of Article 11(4) TEU which refers to legal acts of the Union required for the purpose of implementing the Treaties. On the one hand, the European Parliament and Civil Society organisations support the view that ECIs should be used for this purpose since the Treaties concern vital topics of great interest to EU citizens. It has even been commented that excluding Treaty amendments is a significant departure from the effect utile of the ECIs.[12] On the other hand, most Member States interpret the ECI Regulation as referring to Initiatives aimed at amending existing secondary legislation but not changing the Treaties.

 

Although the requirement of one million signatures can be seen as proportionate in the current EU of approximately 500 million citizens, a host of bureaucratic issues has raised concerns to the various organisers vis-à-vis the effectiveness of the ECI. For instance, Annex III of the Regulation provides that the rules for collecting signatures shall be drawn up by the national governments. As a result, different signature requirements exist across the EU and eighteen countries require signatories’ ID or passport number in order for the signatory forms to be valid. A survey conducted by European Citizen Action Service, a non-profit organisation located in Brussels, indicates that there is strong resistance in the majority of the respondents to providing such personal data out of fear for their privacy.[13] Carsten Berg, director of an ECI Campaign, a coalition of democracy advocates and NGOs, has urged for the removal of such restrictive requirements. His view has been shared by most ECI organisers.[14] Five countries have announced very recently that they will reduce cumbersome requirements for ECIs after July 1st.[15]

 

Finally, Article 3(4) of the ECI Regulation provides that in order to be eligible to sign an ECI, signatories shall be citizens of the EU. As a result, third-country nationals and legal persons are not able to organise or sign an ECI even if they are lawfully resident within the EU or qualify for long-term residency status. This creates a contradiction between the right to an ECI and other political rights under Article 20(2) TEU. The non-inclusive character of the ECI mechanism ultimately creates a narrow concept of political participation which does not reflect the broad aim of the EU to offer fresh channels of public engagement. [16] ECI organisers have raised concerns about the issue of ECI exclusiveness of application to EU citizens by arguing that the current formulation leaves out a substantial percentage of the target audience from supporting an Initiative.

 

Conclusion

The past year has seen the registration of ECIs covering a range of policy areas from education (Fraternité 2020, High Quality EU Education for All) to human rights (One of Us) and from voting rights (Let Me Vote) to environmental issues (Waste Management, End Ecocide in Europe) and more.[17] As a matter of fact, a few days ago the Right2Water ECI became the first ECI which has managed to collect the minimum number of signatures in eight countries. The first year was arguably a successful one for ECIs despite some ‘teething problems’ faced by the organisers such as the complex procedural requirements and the technical burdens which cost delays and extra financing.

 

Taking stock of the problems that have emerged at this early stage, there have already been numerous recommendations regarding the review of the ECI Regulation which is planned to take place in 2015. Proposals have been made for the extension of the period of signature collection, establishment of an independent help-desk, internalization of the online collection signature server and enlargement of access to sign an ECI.[18] In addition, there are calls for the clarification of EU data protection law and for creating uniform requirements for signature collection around the EU.[19]

 

No doubt, by giving the opportunity to EU citizens to assist in setting the political agenda of the EU, the ECI can be characterised as an important step forward for transnational democracy in the EU. Nonetheless, current experience shows that there are still issues to be dealt with for the ECI to become an easily accessible and user-friendly instrument of participatory democracy

 

All in all, the Commission’s discretion regarding the outcome of an ECI should not be underestimated. One can only imagine the disappointment of organisers who, after having devoted endless amount of time and effort to gathering one million signatures, may find that their initiative has not made any substantial difference in the legislative framework of the EU. It is thereby submitted that the (positive) attitude of the European Commission and the other institutions is perhaps the most important factor in the success of the ECI mechanism. After all, no one would want to see ECIs turning from instruments of enthusiasm and engagement to reasons of frustration.

 

 

[1] European Union, Treaty of Lisbon Amending the Treaty on European Union and the Treaty Establishing the European Community, 13 December 2007, 2007/C 306/01

[2] ‘ECI Day 2013:Sign Up to It!’ European Economic and Social Committee Conference, 9 April 2013, see http://www.eesc.europa.eu/?i=portal.en.events-and-activities-eci-day-2013

[3] Stijn Smismans ‘Should participatory democracy become the normative model for EU governance?’ http://www.re-public.gr/en/?p=481 accessed 12 January 2013

[4] Fritz Scharpf Governing in Europe: Effective and Democratic? (OUP 1999) 6

[5] Ben Crun ‘Tailoring Representativve Democracy to the European Union: Does the European Constitution Reduce the Democratic Deficit?’ (2005) 11(4) ELJ 452,453

[6] Article 10(1) TEU provides that citizens are directly represented at Union level in the European Parliament

[7] Bruno Kaufmann ‘Active Citizenship and Representation in Europe: Towards Transnational Democracy?’ http://www.iri-europe.org/files/9513/6140/0060/EU-CH-Citizenship-Booklet.pdf accessed 12 April 2013

[8] See Articles 227 TFEU, 228 TFEU, 11(3) TEU respectively

[9] Julia De Clerck-Sachsse ‘Civil Society and Democracy in the EU: The Paradox of the European Citizens’ Initiative’ (2012) 13(3) Perspectives on EU Politics and Society 299

[10] As outlined in Regulation (EU) No 211/2011 of 16 February 2011 on the citizens’ initiative

[11] Michael Dougan ‘What are we to make of the Citizens’ Initiative?’ 48 CMLR 1807,1835

[12] Michael Efler ‘ECI:Legal options for implementation below the constitutional level’ http://www.democracy-international.org/index.php?id=1342&type=98 accessed 10 December 2012

[13] ‘EU citizens strongly dissatisfied with the personal data requirement in the Citizens’ Initiative draft regulation, survey reveals’ ECAS Report http://www.citizens-initiative.eu/?p=395 accessed 10 March 2013

[14] ‘ECI Day 2013’ Conference (see note 2)

[15]  Carsten Berg ‘Good news for ECI organisers’ <http://www.citizens-initiative.eu/?p=1607#more-1607> accessed 14 May 2013

[16] Michael Dougan (n11) 1821

[18] ‘ECIs: A case for orientation or re-orientation? Report of the ECAS seminar organized on the 19th March 2013’ http://www.eesc.europa.eu/resources/docs/eci-19-03-2013-report.pdf accessed 10 April 2013

[19] ibid

Proposed Changes to Simplified Merger Notification Procedure

Robert Miklós Babirad

J.D. Masters Diploma candidate in EU Law, King’s College London; Post Graduate Diploma in EU Law (Merit); Member of the New York Bar

 

I           Introduction

On March 27, 2013, the Commission invited public comments regarding a proposal to simplify procedures under the EU Merger Regulation.[1]  Changes would include altering market share thresholds relating to which mergers would qualify for access to the simplified merger notification procedure.[2]  Additionally, Commission Regulation (EC) No 802/2004 implementing Council Regulation (EC) No 139/2004[3] (`the Implementing Regulation’) would be amended with regard to the forms for merger notification.[4]

Mergers unable to qualify for notification under the simplified procedure would also benefit from the proposed changes.[5]  Only information relating to markets in which the market shares of those firms merging, which is in excess of the established thresholds for notification under the simplified procedure, would be required for submission in a notification to the Commission.[6]  An important aspect of the proposed changes would be that seventy percent of all mergers notified to the Commission would now qualify for notification under the simplified procedure.[7]

The issue is whether these proposed changes under the EU Merger Regulation will be helpful to fostering European competitiveness and economic development.  This article will begin by briefly discussing the process of notifying a merger to the Commission with a focus on the simplified merger notification procedure; the changes to both the Notice detailing the simplified notification procedure as well as to the forms for notification under the Implementing Regulation will then be discussed; and finally, the article will assess the overall helpfulness of the proposal.

 

II         The Simplified Merger Notification Procedure

Under the EU Merger Regulation[8]it is mandatory for the Commission to be notified of those mergers encompassing a “Community dimension” in order to obtain approval prior to effecting the merger with limited exceptions.[9]  The EU Merger Regulation provides for this notification to the Commission before a merger may be implemented.[10] A determination as to whether a merger contains a “Community dimension” is governed by the turnover threshold of the merging undertakings under the EU Merger Regulation.[11]

The Commission Notice on a simplified procedure for treatment of certain concentrations under Council Regulation (EC) No 139/2004[12] (“the Notice”) provides for notification to the Commission using a form that is shorter and not as extensive with regard to its informational requirements for qualifying mergers that have not traditionally presented prima facie difficulties with regard to competition.[13]

Mergers qualifying under the simplified procedure may also obtain authorisation after a “lighter procedure” and without the need for the Commission to engage in an extensive investigation of the market relating to the merger being notified.[14]  A “short-form clearance decision” for the merger is typically adopted within a period of 25 working days from the notification date to the Commission.[15] A more comprehensive Phase II Commission investigation will occur if the merger presents “serious doubts”[16] as to whether it will be compatible with regard to competition and the EU’s single market.[17]  The objective of the simplified merger notification procedure is to increase the focus and effectiveness of controlling mergers under the EU Merger Regulation.[18]

A key benefit available to those merging undertakings with access to the simplified short form notification merger procedure is that of a reduction in the amount of detailed information and associated expenses, which would otherwise be expended in completing a non-simplified merger notification to the Commission.[19] The information that must be provided for a regular Form CO notification as well as for a notification under the simplified procedure is provided in Annexes I and II respectively of the Implementing Regulation.[20]  It is a benefit to both the merging entities as well as to the Commission to encourage use of the simplified procedure, because of the reduction in resources under this form of merger notification.

 

III        Proposed Changes

Expansion of access to the simplified merger notification procedure includes a proposal to increase the qualifying market share threshold under the Notice from 15% to 20% for those competing firms in the same market merging.[21]  A merger concerning undertakings participating in markets that are upstream and downstream from one another would be able to take advantage of an increased 25% to 30% qualifying threshold for access to the procedure under the proposal.[22]  Additionally, access to the simplified merger notification procedure under the proposal would be available where two undertakings are participants in the same market and their joint share of the market exceeds the threshold of 20%, but as a result of their merger, the resultant market share increase from the merger is insubstantial.[23]

The Implementing Regulation[24] will also be revised under the proposal with regard to the notification forms for mergers.[25]  An important aspect of the proposed changes relates to those cases, which would be unable to qualify for access to the simplified merger notification procedure.[26]  The firms engaged in a merger would be required to submit comprehensive information in a notification to the Commission solely for the markets in which their market share is found to be in excess of the thresholds established for qualification under the simplified merger notification procedure.[27]  This is a positive change, which will enable the Commission to focus exclusively on information with the potential to pose a threat to competition within the single market upon implementation of the merger.

The primary objective underlying the short form simplified merger notification procedure is that of facilitating the process of notification and reducing burdens of an administrative nature for those mergers, which the Commission has traditionally found unlikely to present concerns relating to competition within the EU’s single market.[28]  The proposed changes will act as a positive expansion toward the attainment of these goals.

The changes proposed are with the intent of streamlining and reducing resources otherwise unnecessarily expended on merger cases.[29]  The Commission will instead be able to use its resources more efficiently on those mergers which necessitate a more comprehensive assessment and may actually result in a harmful impact upon both consumers and competition within the single market.[30]  Additionally, burdens of an administrative nature for both undertakings notifying a merger and with regard to burdens imposed upon the resources of DG Competition will continue to be reduced by this procedure and its expansion.[31]

The Commission’s primary objective in amending the Notice as well as the notification forms under the Implementing Regulation is to reduce procedural administrative burdens in an effort to increase European competitiveness and to stimulate continued economic growth.[32]  These changes to the Notice and Implementing Regulation will be helpful for the attainment of these objectives by encouraging a more efficient use of resources for both DG Competition and the merging parties.

 

IV        Helpfulness of Proposed Changes

The primary concern regarding mergers under the EU competition law system is that a particular merger when effected will have the result of reducing post-merger competitiveness within the common market.[33]  The proposed changes to the simplified merger notification procedure will not have the result of decreasing competitiveness or hindering the necessary scrutiny and control of mergers, which remain a primary and essential concern regarding any merger that is to be implemented within the single market.  Expanding access to the simplified procedure as well as reducing burdens of both a financial and administrative nature for both the merging parties and DG Competition will foster greater growth within Europe; facilitate the notification of mergers, which are not detrimental to the single market; and stimulate greater European competitiveness.

It may be argued that expanding access to use of the simplified notification procedure will act as a detriment to competition and to the necessary oversight of proposed mergers within the single market.  An increase in the qualifying market share for access to the simplified notification procedure may enable too many potential mergers to employ this procedure without sufficient safeguards.  An increasing number of merging firms will be able to notify under the simplified and shortened notification procedure because of the increased qualifying percentages, thereby resulting in an increase in the number of mergers that the Commission will potentially approve without a comprehensive relevant market investigation.[34]  A less comprehensive investigation of the market with regard to a greater number of qualifying mergers may hinder the Commission’s ability to engage in fully informed decision making and may result in greater threats to competition within the EU’s single market.

Additionally, amending the Implementing Regulation with regard to the merger notification forms would enable merging firms that are unable to qualify under the simplified procedure to only be required to provide information to the Commission with regard to markets in which the market share of the merging firms is in excess of the access threshold mandated under the simplified merger notification procedure.[35]  It may be argued that a reduction in the amount of information being provided in a notification under this proposed change will have a negative impact on the Commission’s ability to make an informed assessment as to whether a merger should be approved and its assessment of potential anti-competitive effects.

However, the possible negative implications of the proposed changes appear to be outweighed by existing precautions taken by the Commission.  The proposed increased qualifying percentages under the simplified notification procedure continue to be within “safe harbours” previously established by the Commission.[36]  Additionally, mergers qualifying under the simplified procedure will continue to be subject to the EU Merger Regulation’s “ex-ante merger control” system.[37]  The proposed changes will only benefit those mergers, which in the Commission’s experience have not posed a threat to competition rather than lowering existing safeguards, which would increase the probability of anti-competitive activity.[38]  It is also important to note that the Commission will continue to require critical information in any notification, which potentially reflects a threat to competition, regardless of whether the notification occurs under the standard or simplified notification procedure.[39]  A comprehensive investigation by the Commission of the relevant market where there is a potential threat to competition due to a proposed merger will also continue to take place.[40]

The changes being considered by the Commission do not reduce the oversight or scrutiny provided for under the EU Merger Regulation.[41]  An example of oversight, which will be unaffected by the proposed changes is that of Article 16 providing for the Court of Justice to review Commission decisions regarding the imposition of fines or penalty payments.[42]  Additionally, the Commission has the power under Article 8 to dissolve mergers where an incompatible concentration was effected without Commission approval or without adhering to a mandated condition for implementation.[43]  Fines may also be imposed by the Commission if the information in a notification is false or misleading by the merging parties.[44]  It is important that these safeguards remain unaffected by any proposed changes to the notification procedure.

Expanding access to the simplified merger notification procedure and updating the notification forms under the Implementing Regulation will not have a detrimental impact on the need to protect the EU single market from anti-competitive conduct regarding proposed mergers. Facilitating EU economic development in the field of mergers, which are subject to Commission notification, will have a positive effect on economic growth within the EU.  Establishing greater access to the simplified merger notification procedure and updating the notification forms will facilitate the notification process and positively stimulate EU economic growth in the field of mergers.

 

V         Conclusion

A proposal to expand access to the simplified notification procedure under the EU Merger regulation will have a positive impact on reducing administrative burdens and expanding European economic growth.  Both the Commission as well as the merging parties will benefit from the proposed changes.  Safeguards for the protection of the single market from anti-competitive conduct in the field of mergers will also remain in place and are unaffected by the proposed changes.  Additionally, amending the notification forms under the Implementation Regulation will enable the Commission to focus its resources more efficiently and effectively on potentially problematic areas with regard to a proposed merger rather than on issues that do not raise any competitive concerns.[45]

[1] Commission Press Release of 27 March 2013, Mergers: Commission consults on proposal for simplifying procedures under the EU Merger Regulation, IP/13/288, p. 1.

<http://europa.eu/rapid/press-release_IP-13-288_en.htm> Accessed 14th of April 2013.

[2] Ibid.

[3] Commission Regulation (EC) 802/2004 implementing Council Regulation (EC) No 139/2004 on the control of concentrations between undertakings 2004 OJ L 133/1.

[4] Commission Press Release of 27 March 2013, Mergers: Commission consults on proposal for simplifying procedures under the EU Merger Regulation, IP/13/288, p. 1.

<http://europa.eu/rapid/press-release_IP-13-288_en.htm> Accessed 14th of April 2013.

[5] Ibid.

[6] Ibid.

[7] Ibid.

[8] Council Regulation (EC) 139/2004 on the control of concentrations between undertakings 2004 OJ L 24/1.

[9] Whish, R. Competition Law, 6th ed. (Oxford University Press, Oxford, 2009), p. 818.

[10] Commission Regulation (EC) 802/2004 implementing Council Regulation (EC) No 139/2004 on the control of concentrations between undertakings 2004 OJ L 133/1, art. 4(1).

[11] Ibid., art. (1).

[12] Commission Notice, on a simplified procedure for treatment of certain concentrations under Council Regulation (EC) No 139/2004 OJ 2005 C 56/32.

[13] Indicative Roadmap of the Planned `Merger Simplification Project,’ January 2013, p. 1.

<http://ec.europa.eu/governance/impact/planned_ia/docs/2013_comp_006_merger_simplification_en.pdf > Accessed 14th of April 2013.

[14] Ibid.

[15] Commission Notice, on a simplified procedure for treatment of certain concentrations under Council Regulation (EC) No 139/2004 OJ 2005 C 56/32, p. 1 (art. 2).

[16] See Council Regulation (EC) 139/2004 on the control of concentrations between undertakings 2004 OJ L 24/1, art. 6(1)(b).

[17] Whish, R. Competition Law, 6th ed. (Oxford University Press, Oxford, 2009), p. 847.

[18] Commission Notice, on a simplified procedure for treatment of certain concentrations under Council Regulation (EC) No 139/2004 OJ 2005 C 56/32, p. 1 (art. 4).

[19] Whish, R. Competition Law, 6th ed. (Oxford University Press, Oxford, 2009), p. 845.

[20] Ibid.

[21] Commission Press Release of 27 March 2013, Mergers: Commission consults on proposal for simplifying procedures under the EU Merger Regulation, IP/13/288, p. 1.

<http://europa.eu/rapid/press-release_IP-13-288_en.htm> Accessed 14th of April 2013.

[22] Ibid.

[23] Ibid.

[24] Commission Regulation (EC) 802/2004 implementing Council Regulation (EC) No 139/2004 on the control of concentrations between undertakings 2004 OJ L 133/1.

[25] Commission Press Release of 27 March 2013, Mergers: Commission consults on proposal for simplifying procedures under the EU Merger Regulation, IP/13/288, p. 1.

<http://europa.eu/rapid/press-release_IP-13-288_en.htm> Accessed 14th of April 2013.

[26] Ibid.

[27] Ibid.

[28] See Indicative Roadmap of the Planned `Merger Simplification Project,’ January 2013, pps. 1-2<http://ec.europa.eu/governance/impact/planned_ia/docs/2013_comp_006_merger_simplification_en.pdf > Accessed 14th of April 2013, and Commission Regulation (EC) 802/2004 implementing Council Regulation (EC) No 139/2004 on the control of concentrations between undertakings 2004 OJ L 133/1, Annex II.

[29]Indicative Roadmap of the Planned `Merger Simplification Project,’ January 2013, pps. 1-2<http://ec.europa.eu/governance/impact/planned_ia/docs/2013_comp_006_merger_simplification_en.pdf > Accessed 14th of April 2013 .

[30] Ibid., p. 2.

[31] Ibid.

[32] Commission Press Release of 27 March 2013, Mergers: Commission consults on proposal for simplifying procedures under the EU Merger Regulation, IP/13/288, p. 1.

<http://europa.eu/rapid/press-release_IP-13-288_en.htm> Accessed 14th of April 2013.

[33] Whish, R. Competition Law, 6th ed. (Oxford University Press, Oxford, 2009), p. 799.

[34] Commission Press Release of 27 March 2013, Mergers: Commission consults on proposal for simplifying procedures under the EU Merger Regulation, IP/13/288, p. 1.

<http://europa.eu/rapid/press-release_IP-13-288_en.htm> Accessed 14th of April 2013.

[35] Ibid.

[36] Indicative Roadmap of the Planned `Merger Simplification Project,’ January 2013, p. 3.

<http://ec.europa.eu/governance/impact/planned_ia/docs/2013_comp_006_merger_simplification_en.pdf > Accessed 14th of April 2013.

 

[37] Ibid., p. 1.

[38] Commission Press Release of 27 March 2013, Mergers: Commission consults on proposal for simplifying procedures under the EU Merger Regulation, IP/13/288, p. 1.

<http://europa.eu/rapid/press-release_IP-13-288_en.htm> Accessed 14th of April 2013.

[39] Ibid.

[40] See Ibid.

[41] Commission Press Release of 27 March 2013, Mergers: Commission consults on proposal for simplifying procedures under the EU Merger Regulation, IP/13/288, p. 1.

<http://europa.eu/rapid/press-release_IP-13-288_en.htm> Accessed 14th of April 2013.

[42] Council Regulation (EC) 139/2004 on the control of concentrations between undertakings 2004 OJ L 24/1, art. 16.

[43] Ibid., art. 8.

[44] Ibid. art. 14(1)(a).

[45] Indicative Roadmap of the Planned `Merger Simplification Project,’ January 2013, p. 2. <http://ec.europa.eu/governance/impact/planned_ia/docs/2013_comp_006_merger_simplification_en.pdf > Accessed 14th of April 2013 .