Towards a Financial Transaction Tax: the Commission’s proposed Directive of February 14

Pierre-Antoine Klethi

LLM Candidate, King’s College London

 

The issue of introducing a financial transaction tax (hereinafter – FTT) at the EU’s border came back in the frontline in the aftermath of the financial crisis, as an option to “moralise capitalism”. However, the idea appeared to be highly controversial, so that no agreement could foreseeably be reached on an EU-wide basis.

As a result the process for enhanced cooperation in this area was launched. Following the request of eleven Member States – Austria, Belgium, Estonia, France, Germany, Greece, Italy, Portugal, Slovakia, Slovenia and Spain – on 22 January 2013, the Council adopted Decision 2013/52/EU[i] authorising enhanced cooperation in the area of financial transaction tax. Consequently, on 14 February the Commission issued a proposal for directive[ii]. For us, it is the occasion to (re)discuss the concept of enhanced cooperation (I), the competences of the EU in fiscal matters (II) and the idea of FTT itself (III).

I. How does enhanced cooperation work?

The enhanced cooperation procedure (see also the article of Jose Manuel Panero Rivas on this blog), was first introduced by the Treaty of Amsterdam of 1997. It aims at enabling Member States that wish to deepen further the integration to do so without being held back by the opposition of other Member States, which is particularly problematic in situations where the Council must vote unanimously to adopt a decision. The possibility of enhanced cooperation is currently regulated by Article 20 TEU[iii] and Articles 326 to 334 TFEU[iv].

The scope of enhanced cooperation can only be “within the framework of the Union’s non-exclusive competences”, since for EU exclusive competences, there can be no distortion of rules. In the FTT case, fiscal policy is indeed a non-exclusive Union competence (see part II below). To avoid distortions to the internal market that could appear following the adoption of national measures taxing the financial sector, the Commission decided to make use of Article 113 TFEU, which gives some competences of harmonisation to the Council regarding tax matters.

Furthermore, the enhanced cooperation procedure “shall aim to further the objectives of the Union, protect its interests and reinforce its integration process”. It is also evident that “any enhanced cooperation shall comply with the Treaties and Union law”, “shall not undermine the internal market”, nor “distort competition between [Member States]”. In the present case, the main aim is to “ensure the proper functioning of the internal market and to avoid distortion of competition”. But one may also think of the objective of building a “social market economy”, which could entail the fact that all economic actors shall pay a fair share of taxes.

In addition, enhanced cooperation is a solution of last resort, to be used only if “the objectives of such cooperation cannot be attained within a reasonable period by the Union as a whole”. Regarding the FTT, this was noted by the Council in June 2012, as there was no unanimous support to the proposal of introducing an EU-wide FTT.

Furthermore, in conformity with the Treaties, at least nine Member States could ask the Commission to make a proposal of enhanced cooperation to the Council. In the case of the FTT, they were eleven (see above).

In principle, having received a request to make proposal for enhanced cooperation in certain area, the Commission may refuse to make the proposal; in that case, it shall explain the reasons for it. Enhanced cooperation needs to be approved by the Council, after having obtained the consent of the European Parliament. In the field of the Common Foreign and Security Policy (CFSP), there are some specific rules set in Article 329(2) TFEU.

It should be noted that participation must remain open to any Member State wishing to join it at any time. In that case, the State shall notify the Commission of its will; the Commission then has four months to assess whether the conditions are met. The TFEU even requires that participation in the procedure be promoted. The “competences, rights and obligations” of non-participating Member States shall be respected; on the other hand, these Member States “shall not impede [the] implementation” of enhanced cooperation.

All Member States participate in the discussions, but only those participating in the enhanced cooperation procedure have the right to vote. Naturally, only the participating Member States are bound by decisions adopted under enhanced cooperation, and these rules do not form part of the acquis communautaire that candidates to EU membership are required to accept.

Enhanced cooperation is already being used in divorce law (by 14 Member States, which will be joined by Lithuania next year) and will be used for the creation of an EU patent (all Member States but Italy and Spain agreed to join).

II. The Union’s fiscal competences

In this context it is worth to quickly remember a few facts about the Union’s competences on fiscal matters.

On the one hand, the Union is competent to legislate on indirect taxes (i.e. on consumption, e.g. the VAT which has been subject of many directives). Article 113 TFEU, which is referred to in the present case about enhanced cooperation on the FTT, states that: “The Council shall, acting unanimously in accordance with a special legislative procedure and after consulting the European Parliament and the Economic and Social Committee, adopt provisions for the harmonisation of legislation concerning turnover taxes, excise duties and other forms of indirect taxation to the extent that such harmonisation is necessary to ensure the establishment and the functioning of the internal market and to avoid distortion of competition.”

On the other hand, the Union is not competent to harmonise direct taxes (i.e. on production of goods and services, e.g. corporate tax), except if the Member States unanimously decide so. However, although direct taxation falls within their competence, Member States must none the less exercise that competence consistently with Community law[v]. Thus, in the area of free movement, not only are the custom duties and charges having an equivalent effect prohibited (Article 30 TFEU), but internal taxation measures must also be applied in a non-discriminatory manner to domestic and foreign (EU) products, so as to avoid protection of some products (Article 110 TFEU).

III. The Financial Transaction Tax: pros and cons

The proposal of the Commission[vi] is to establish a levy of 0.1% on transactions of bonds and shares and 0.01% on transactions of derivative contracts. Using these numbers, a Union-wide FTT could bring in nearly €60 billion, which could potentially enhance the Union’s own resources in its budget.

Only transactions between financial institutions would be taxed, not those involving businesses and citizens (the latter being involved in a minor share of all financial transactions), nor those involving the States managing their public debts. In addition, it is worth noting that primary market transactions in shares and bonds (i.e. when these financial instruments are sold for the first time by their issuers) will remain tax free. Furthermore, the FTT would be applied to all transactions of instruments issued in a Member State, even if the ulterior transactions take place outside the EU; this aims at avoiding tax avoidance but is highly controversial and is likely to create heated debates with EU’s international partners. A further idea looking rather strange is that an exchange of financial instruments is considered as two transactions (selling and buying), leading to a taxation in the Member State of residence of both the seller and the buyer (so, the effective rate per transaction – but not per party – is double). A party to the transaction residing in a third country will be deemed to be resident in the Member State of its EU counterparty. Finally, the Commission recognised the possibility of double taxation between FTT and non-FTT jurisdictions, but this could prove an incentive to join the FTT-area.

Those in favour of such a tax claim that the financial sector should pay a fair share of the collective tax burden, especially since it benefited from very costly rescue plans during the financial and economic crisis in 2008-2009. Moreover, banking institutions of some countries still continue to benefit from State aid because of their exposure to the debt crisis in the Eurozone. Furthermore, this debt crisis requires the Member States to find new resources. Since labour is already heavily taxed in most of them, they must turn to taxes on capital. Capital revenues are also seen as less “meritocratic” than labour revenues. Last but not least, taxing financial transactions would discourage speculation and therefore contribute to “moralising capitalism”.

On the other side, those opposing the introduction of the FTT fear a loss of competitiveness of Europe’s financial centres (this fear is particularly acute in the UK, preoccupied about safeguarding the City’s worldwide importance and influence), since investors would prefer to use their money somewhere else where it is less taxed[vii]. So, there would be less investment in the EU, which could lead to less growth and losses of jobs, in particular in the financial centres. But the Commission considers that the 11 participating Member States are economically too important to be abandoned by financial actors. Other arguments of opponents to the FTT can be mentioned, such as the fact that some speculation is necessary to ensure the liquidity of the markets, etc. All those arguments are subject to fierce economic debate not only between Member States, but also between economists.

Where are we now?

Following the request of the 11 interested Member States, the Commission accepted to resort to enhanced cooperation on 23 October 2012. The European Parliament then gave its agreement on 12 December 2012 and the Council on 22 January 2013. As already noted, the Commission has published a proposal of directive on the FTT on 14 February 2013.

Now, Member States have to discuss the proposal within the Council. All Member States will be involved in the discussion, but, in the end, only the participants in the enhanced cooperation will vote on the proposal. Moreover, the European Parliament will also be consulted. In addition, since the proposal intends also to cover transactions taking place abroad, provided one of the parties is resident in the EU, it is very likely that some international partners of the EU will express their views and try to influence the outcome through diplomatic means.

[i] Council Decision of 22 January 2013 authorising enhanced cooperation in the area of financial transaction tax (2013/52/EU), OJ L 22, 25.01.2013

[ii] COM/2013/71.

[iii] Consolidated version of the Treaty on the European Union (TEU), OJ C 326, 26.10.2012.

[iv] Consolidated version of the Treaty on the Functioning of the European Union (TFEU), OJ C 326, 26.10.2012.

[v] See e.g. paragraph 29 of Case C-446/03, Marks & Spencer [2005] ECR I-10837.

[vi] More information and official documents on the taxation of the financial sector are available on the Commission’s website. See in particular the document COM/2013/71 of 14 February 2013.

FEATURED: KCL’s International Graduate Legal Research Conference 2013

A featured event invite for a brilliant Graduate Research Conference organised by PhD students at King’s College London’s Dickson Poon School of Law

 

The seventh annual International Graduate Legal Research Conference (IGLRC) will be held on the 8-9 April 2013 at King’s College London, home of one of the top 25 law schools worldwide and located in the heart of London’s legal district.

This two-day conference has a reputation for being a unique platform to meet other researchers and academics from across the world. It will also give delegates a fantastic opportunity to listen to a wide variety of selected presentations from legal researchers working in highly topical areas of contemporary legal scholarship. In particular, the following panels have been confirmed to take place during the IGLRC 2013:

Commercial Law
Competition Law
Constitutional Law
Criminal Law and Criminology
Environmental Law
European Union Law
Human Rights Law
Intellectual Property
International Economic Law
Legal Theory
Private Law
Public International Law

This year we are pleased to announce that our keynote speech will be given by Professor David Caron, the new Dean of the Law School at King’s College London.

You can find more information on how to register here.Those registering in advance will receive a £5 discount, paying £50 for the whole conference.

Further information about the conference can also be found via our website www.iglrc.com or by simply subscribing to IGLRC 2013 on Facebook and Twitter.

Case Comment: C-523/11 and C-585/11 Prinz and Seeberger – AG Sharpston strikes again

 

Re-posted from the Eutopia Law Blog

 

Adrienne Yong

PhD Candidate at King’s College London

 

Yet another chapter of the European citizenship saga sought clarification by AG Sharpston in the Prinz and Seeberger Opinion delivered last week on February 21, 2013. Concerning one of the most prevalent categories of citizens claiming rights under the Art 20 and 21 TFEU – students – Prinz and Seeberger discusses a classic situation that has pervaded the over 20 years of Union citizenship development. Effectively, AG Sharpston aims to explicate the notion of proportionality in citizenship, which has for years escaped valid clarification. She discusses the different strands of objectives of integration, with more substantial meaning than it would appear at first.

 

Facts

In Prinz, a German moved from Germany to Tunisia with her family for her father’s job, then returned years later for secondary school, subsequently deciding to attend university in Holland. She was granted funding from German authorities for her first year, but was rejected for the second as she failed to satisfy the ‘three-year rule’ residency requirement, which stated that a citizen had to be resident in Germany for three years prior to the start of their course.

In Seeberger, a German who attended school in Germany, then moved to Spain with his family for his father’s work in the middle of secondary school, completed his secondary education in Spain and after some time qualifying to university in Spain, sought a grant to fund his studies in Spain from the German authorities. This was denied again on the ‘three-year rule’.

Both argued that Art 20 and 21 TFEU were contravened for impeding free movement, and the Court of Justice of the European Union (CJEU) was asked to clarify whether this ‘three-year rule’ was contrary to EU law.

 

AG Opinion

In her Opinion, AG Sharpston sought to explicate her perspectives on the meaning and justification behind integration and proportionality, particularly referring to the justification behind residency requirements often being the protection of national resources. It is questioned by AG Sharpston whether the consistent invocation of the unreasonable burden reasoning requires reconsideration. Beginning by eliminating the provisions inapplicable in order to conclusively consider the effect of suitable criteria, she then delivers her insightful comments regarding justifications, proportionality and interpretation of the ‘three-year rule’.

Evidently, the three-year rule is a restriction. Germany thus submits two justification objectives, one under the economic rationale, the other socially related. She separates the two and considers the legitimacy and appropriateness of both restrictions in a detailed analysis of each objective’s interpretation.

It is evident that AG Sharpston is unconvinced that Member States should simply lay out economic objectives based on avoiding unreasonable burdens on the financial resources of Member States. This was discussed in Bidar and Morgan and Bucher. She believes it is apt for the CJEU to perhaps guide Member States as to what may constitute reasonable or unreasonable burdens, as this highly variable concept is subject to an element of potential exploitation on the part of the protectionist Member States. Suggested is a thorough analysis of whether the burden truly risks interfering with the balance of Member State resources to avoid invoking protectionism behind a veil of valid justification. She then continues to distinguish an economic objective from an integration objective, which brings into play the political elements of a proportionality assessment.

The interplay between integration and economics as objectives of justifications becomes a sticky situation, but ultimately AG Sharpston aims to clarify whether it suffices to consider integration an objective on its own. There is an inconsistency if integration objectives are cited to justify rendering an economic objective proportionate. This is because choosing to require a degree of integration simply to meet budgetary concerns actually ignores the notion of being integrated.

She goes onto state the ‘three-year rule’ is far too restrictive given it requires uninterrupted periods of residence immediately prior to education, and whilst there is no direct mention of nationality, the inherent connection a national has renders it a difficult factor to ignore when considering proportionality. This is particularly relevant here, as both claimants are German. She opines there are certainly less restrictive measures possible, though interestingly does not suggest any outwardly. Though the ‘three-year rule’ is transparent, efficient and legally certain – the rationales behind Germany’s choice of restriction – this does not translate to it being necessarily proportionate.

Under the social objective put forward by the Germans, solidarity is a feature. Ultimately, AG Sharpston considers that the ‘three-year rule’ has little to achieve by means of social objectives given that the link between requiring citizens to reside three years prior to education and them remaining after their studies is tenuous at best. Again legal certainty, transparency and efficiency did not outweigh proportionality.

AG Sharpston answers the CJEU’s question in the positive: Art 20 and 21 TFEU would preclude the ‘three-year rule’ from preventing the claimants from being granted the funding needed for education outside their own home States. Whilst a simple question in effect, AG Sharpston has managed to delve deeper into the meaning and notion of proportionality in terms of what Member States use as justifications, deconstructing their generic excuses of integrationist and economic objectives to uncover what their argument really insinuates and striking them down by use of the famous tool, proportionality.

Energy Efficiency in EU law: A Conundrum?

 

Gianni Lo Schiavo

LL.M., College of Europe


PhD Candidate, the Dickson Poon School of Law, King’s College London

 

1. Introduction

Energy efficiency constitutes the third pillar of the “20+20+20” initiative of 2009 aimed at reforming climate change and energy policy by 2020 in the European Union (EU)[1]. The adoption of the Commission’s proposal on a directive for energy efficiency by the Council in October 2012[2] and its publication on 14 November 2012[3] are the ultimate achievements of the EU in the field of energy efficiency.

The Directive repeals two directives on energy efficiency[4] and is intended to attain the target of “20% primary energy savings in 2020”.[5]

This article aims at analysing the most important developments contained in the Directive, taking into account their impact in light of the 2020 target.

 

2. Energy efficiency and EU law

Energy efficiency is not defined in the European Treaties. The only reference to it is contained under the new Article 194 TFEU included by the Lisbon Treaty.[6] This provision, establishes that, among other objectives, the EU promotes energy efficiency. This is not a new objective of EU policies.[7] However it is only with the new “20+20+20” initiative that energy efficiency has acquired a primary role in EU policy-making.

 

2.1 The “20+20+20” initiative and energy efficiency

EU law has already pioneered energy efficiency in the 90s.[8] More recently, energy efficiency has acquired more importance. Already in a 2006 Communication, the Commission foresaw a number of measures to achieve the 20% increase in energy efficiency.[9] However, it was only with the “20+20+20” initiative that energy efficiency has assumed a central role. Following the 2007 Spring European Council conclusions,[10] the European Commission adopted the seminal EU Climate and Energy Package in 2009.[11] It establishes a number of proposals which aim to achieve three objectives by 2020: the reduction of greenhouse gases emissions by 20%, the increase in the use of renewable energies by 20% and the improvement in energy efficiency by 20%. The reference year to achieve these objectives has been set in 2020.

Hence, energy efficiency constitutes one of the three pillars of the initiative and aims at saving “the EU some € 100 billion and cut emissions by almost 800 million tonnes a year”. [12] As part of this pillar, the Commission published a Communication[13] in 2008 named “Energy Efficiency: Delivering the 20% Target” which contained specific measures to be addressed to achieve the target.[14] A strong emphasis in the document was put on the obstacles to energy efficiency improvements consisting in “the poor implementation of existing legislation, the lack of consumer awareness and the absence of adequate structures to trigger essential investments in and market uptake of energy efficient buildings, products and services” and the ways to overcome them in the near future.

Notwithstanding the ambitious programme put forward by the Commission, current achievements have not been as effective as hoped. As shown by the European Council Conclusions of 4 February 2011,[15] the 20% energy efficiency target is currently not on track and further measures are needed in order to achieve the energy efficiency goal.

 

2.2 The Directive on energy efficiency

The Commission made a legislative proposal on a Directive on energy efficiency on 22 June 2011 on the basis of Art.194(2) TFEU. As stated in the Impact Assessment, the policy choices followed by the Commission were three: set indicative targets to be achieved by the Member States, evaluate the nature and impact of individual policy measures, and extend the scope of the two former instruments to be merged into one directive. Overall, according to the Commission, these policy objectives were favoured with a view to achieve strong energy savings and reinforce action for energy services.

After first reading amendments, the European Parliament and the Council approved the proposal in October 2012. The directive has been published on 14 November 2012. According to Art.28, Member States shall transpose the Directive eighteen months after its entry into force. So the delay of transposition is set by the end of the first half of 2014.

The directive is divided into four main chapters: the first on subject matter, scope, definitions and energy efficiency targets; the second on efficiency in energy use; the third on efficiency in energy supply; the fourth on horizontal provision; and the fifth on final provisions. In the preamble, the Directive states a number of targets which the directive aims at achieving.

Through referring both to the European Council Conclusions of 4 February 2011[16] and to the 2011 Energy Efficiency Plan,[17] the Directive recalls that Member States are not yet on target to achieve the 2020 energy efficiency goals. On the contrary, these goals require that Member States set strict indicative national energy efficiency targets, schemes and programmes.

The Directive defines energy efficiency in “terms of the ratio of output of performance, services, goods or energy, to input of energy”.[18] Energy efficiency targets are related to primary energy consumption as “gross inland consumption, excluding non-energy uses”, and final energy consumption as “all energy supplied to industry, households, services and agriculture”. To that extent, Member States shall notify their targets to the Commission taking into account the “absolute level of primary energy consumption and final energy consumption in 2020”.[19]

The Directive puts great emphasis on the public sector to achieve targets of energy efficiency. In particular, it provides that 3% of public bodies’ buildings shall be renovated to respect minimum energy performance requirements. Similarly, public bodies are required to purchase products, services and buildings with high energy-efficiency performance. Further, the Directive states that Member States shall set up energy efficiency obligation schemes with a view to achieve the energy efficiency goals.

The consumers are entitled to receive intelligent metering system indicating competitive prices, reflecting accurately the consumer’s actual energy consumption and providing information on actual time of use.[20] Similarly, billing information shall be accurate and based on actual consumption. This system of billing information shall be free of charge and be easy to access.[21]

Finally, the chapter on energy efficiency in supply contains provisions on energy auditing, energy transformation, transmission and distribution, energy services and incentives to reduce energy consumption.[22] The primary objective of these provisions is to allow a smart use of energy and to promote energy efficiency in the Member States.

 

3. A commentary to the Directive: critical remarks

The Directive stands out as the most important piece efficiency of legislation in European energy law. Its content, admittedly much more detailed as compared with the Commission’s initial proposal, has been fairly modified. On the whole, as shown also by a Commission Non-paper,[23] the amendments to the Directive have not been beneficial to reach the energy efficiency target.

First, contrary to the initial attempts of the Commission, the Directive follows the policy objective of reaching indicative national targets on Member States rather than the binding targets. This policy choice reflects the need not to impose an excessive burden on Member States and is motivated by the difficulties of accepting “binding terms” in the Council. Admittedly, indicative targets do not share the same guarantees as the binding ones and they appear problematic from the point of view of compliance.

Second, the setting up of an energy efficient obligation scheme where Member States need to indicate at least 1.5% annual energy savings is a positive development because it will induce Member States to save energy. Nonetheless, a number of provisions limit the general scope of the obligation scheme and provide for some alternatives to energy saving calculations that do not contribute to energy efficiency on the whole.[24]

Further, important innovations refer to obligations on the part of the public sector. For instance, public bodies should play an exemplary role in energy savings. Accordingly, the directive contains two provisions on the public sector.[25] First, a percentage of 3% in annual renovation for public bodies’ buildings respectful of energy efficient performance is a positive requirement to assure that energy is not wasted by public bodies. As affirmed in the preamble,[26] both the fact that a considerable share of buildings in the Member States is public and that public buildings have high visibility in public life suggest that effective energy saving can be achieved in future. Second, the provision requiring public bodies of the central government to purchase services and buildings with high energy-efficiency performance stands out as a sound condition to assure energy savings. However, at a more careful reading, one aspect strongly limits the scope of this provision: the obligation to purchase does not apply to local authorities as long as the purchase does not have a value equal or greater than the threshold established in Art.7 of directive 2004/18/EC.[27] Admittedly, this limitation on scope contained in the Directive does not contribute to far-reaching energy savings.

Conversely, from the point of view of the consumer, the directive appears a significant improvement in transparency and access to information. In fact, consumers will be informed on energy consumption through intelligent metering systems and sound billings. Nonetheless, the insertion of conditionalities to metering and billing obligations strongly reduces the potential benefit for energy efficiency.

As for undertakings, the directive establishes, on the one side, incentives for Small and Medium Enterprises (“SMEs”) to promote energy audits and, on the other side, obligations for large companies to carry out energy audits. These could prove to be effective measures to assure that the private sector respects appropriate standards of energy consumption. However, given the voluntary nature of audit for SMEs, it appears less probable that SMEs will make use of audits if the Member States do not provide for substantial incentives to the benefit of the undertaking itself. Conversely, the audit obligation on the part of non-SMEs will take place only from 5 December 2015. Hence, one may question whether these provisions are actually effective in contributing to reach the 2020 targets of energy efficiency.

Finally, the Directive contains a provision on efficiency in heating and cooling that should promote cogeneration. Once again, this provision refers to an obligation to carry out a cost-benefit analysis rather than an obligation of cogeneration as envisaged in the proposal. Hence, even if the proposal attempted at assuring that cogeneration took place in the EU, the final Directive is less stringent in achieving cogeneration as a way to reduce energy consumption.

 

4. Conclusion

The Directive contains important improvements to raise energy efficiency in Europe but, unfortunately, its content is not as stringent as expected to reach the 20% target by 2020. Even if Member States duly implement the provisions of the Directive, which is still difficult to preconize, the EU does not have realistic chances to attain the planned 20% increase in energy efficiency by 2020 with the new Directive. Hence, it is still open to debate whether the EU should refocus energy efficiency on less ambitious goals or promote stricter policy solutions to reach the 2020 target.

 

[1] Communication “20 20 by 2020 – Europe’s climate change opportunity”, COM (2008)30.

[2] See the speech “Commissioner Oettinger welcomes final adoption of Energy Efficiency Directive”, IP/12/1069, 4.10.2012.

[3] Directive 2012/27/EU on energy efficiency, amending Directives 2009/125/EC and 2010/30/EU and repealing Directives 2004/8/EC and 2006/32/EC, [2012] OJ L315 p.1 (“the Directive”).

[4] Directive 2004/8/EC of the European Parliament and of the Council of 11 February 2004 on the promotion of cogeneration based on a useful heat demand in the internal energy market; and Directive 2006/32/EC of the European Parliament and of the Council of 5 April 2006 on energy end-use efficiency and energy services.

[5] The Directive, recital 2.

[6] On the impact of the Lisbon Treaty on energy policy see L. HANCHER and F. SALERNO, “Energy Policy after Lisbon”, in A. BIONDI, P. EECKHOUT and S. RIPLEY, EU law after Lisbon, Oxford, 2012, pp.367-402.

[7] For a reconstruction of past energy efficiency initiatives in the EU see V. BRUGGEMANN, Energy efficiency as a criterion for regulation of the European Community, (2004), EELR, pp.141-147.

[8] As starting point on energy efficiency in the EU see the Council Resolution of 7 December 1998 on energy efficiency in the European Community, OJ 17.12.1998 C394/01.

[9] Commission Communication, Action plan for energy efficiency: Realizing the potential, COM(2006)545 final.

[10] 7224/1/07 REV 1, 02.05.2007.

[11] On the 20 20 20 package see more extensively K. KULOVESI, E. MORGERA and M. MUNOZ, “Environmental integration and multi-faceted international Dimensions of EU law: Unpacking the EU’s 2009 Climate and Energy Package”, (2009), CMLR, pp.829-891.

[12] COM (2008) 30.

[13] Communication from the Commission of 13 November 2008 – Energy efficiency: delivering the 20% target COM(2008) 772.

[14] The consumption of energy is generally calculated in “Mtoe” which can be defined as the equivalent amount of energy released by burning one Million tonne of crude oil.

[16] The Directive, recital 2.

[17] Ibidem, recital 8.

[18] Ibidem, art. 2 par. 1 n. 4.

[19] Ibidem, art.3.

[20] Ibidem, art. 9.

[21] Ibidem, art.10.

[22] Ibidem, art.8, 14, 15, 16, 18.

[23] See the Commission Non-paper on the Energy Efficiency Directive available at http://ec.europa.eu/energy/efficiency/eed/doc/20120424_energy_council_non_paper_efficiency_en.pdf, 19-20 April 2012.

[24] See the Directive, art.7 par.2. However, as stated in art. 7 par.3, the reduction on energy savings “shall not lead to a reduction of more than 25% of the amount of energy savings”.

[25] The Directive, art.5 and 6.

[26] Ibidem, Preamble 17.

[27] Directive 2004/18/EC of the European Parliament and of the Council of 31 March 2004 on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts, OJ  L 134, 30.4.2004, p.114.

Accession to the ECHR: The Never Ending Story

Amanda Spalding

LLM student at King’s College London

 

On the 1st of December 2009 the new Treaty on the European Union came into force. Article 6(2) of that treaty provided that the EU shall accede to the European Convention on Human Rights and Fundamental Freedoms. In July 2010 negotiations began between the Council of Europe and the European Union in the form of an informal working group to draft an agreement regarding the accession of the European Union to the ECHR. These negotiations are the fruition of many years of debate over this issue and their outcome will likely have a fundamental impact on the EU. Two years have passed since the beginning of the negotiations, in this article I will explore some of the obstacles faced which may explain this delay.

Article 218 of TFEU sets out the procedure, which must be followed by the EU for accession to the European Convention of Human Rights and Fundamental Freedoms (ECHR). It requires the consent of all the Member States of the EU and of the Council of Europe. The Constitutional Treaty[i] had allowed for consent of the EU by qualified majority but this was changed at the request of Denmark in order to avoid the public perception that the EU could extend its powers without unanimous consent from the Member States. As Article 6 TEU specifically states that accession will not extend the competences of the Union, this seems unnecessary. However, as all EU Member States are also members of the Council of Europe, their consent would have been needed anyway. This has proven to be an obstacle to accession.

The accession process has already faced some difficulties on both sides. Russia held up the beginning of negotiations by being uncooperative regarding Protocol 14 to the ECHR, which allowed for accession of the EU. Now that negotiations have been ‘rebooted’, Russia feels that it will have to consent to any amendments made to the Draft Agreement[ii], if it does not it will withdraw its support for accession.[iii] This ‘rebooting’ of negotiations allows for representatives from all of the Council of Europe states to also propose amendments[iv] which may reveal more reservations on that side.

In the EU the reluctance to accede can be inferred already from the fact that the Court of Justice of the European Union (CJEU) in its Opinion of 1996[v] stated that the Treaties needed to be amended for accession to occur, yet it took over ten years for such a provision to be put in place. This shows a lack of enthusiasm, which is starting to reappear at present stage of accession. In 2010 the French government has expressed a desire to exclude the primary law of the EU from the jurisdiction of the European Court of Human Rights (ECtHR) as it may force Member States to amend the Treaty.[vi] It has also been keen to omit the Common Foreign and Security Policy from the ECtHR’s jurisdiction.[vii] The draft negotiations released reveal that there are obviously other Member States that also have issues with accession:

‘In the absence of a common position among the European Union Member States, some delegations from Member States of the European Union informed the CDDH that they were not in a position to express substantive views in the CDDH at the present stage and that more time was necessary for discussion at European Union level’[viii]

The paper then goes on say that it cannot resolve all conflicts that have arisen ‘given the political implications of some of the pending problems.’[ix] Several governments currently in power in the EU have already voiced issues with the current regime of rights in place. The Polish Constitutional Court is of the opinion that the EU is merely an international agreement[x] and the Polish Government has obtained a derogation of the Charter of Fundamental Rights.[xi] The UK also has derogation from the Charter[xii] and the Government currently in power has expressed interest in repealing the Human Rights Act 1998 and limiting the powers of the EU.[xiii] The current Government has also indicated that it wishes to narrow the jurisdiction of the ECtHR especially in light of accession to the ECHR by the EU.[xiv] These governments are unlikely to be supportive of yet another layer of rights protection in the EU. This appears to be the case as on the 25th of January 2012, Representatives of the Parliamentary Assembly of the Council of Europe and the European Parliament have urged national governments, particularly France and the UK not to stand in the way of the EU signing up to the ECHR.[xv]

As all the Member States are already signatories to the ECHR and people under their jurisdiction[xvi] may challenge their acts, the Member States may argue that this accession is unnecessary: “…one might say that Europe currently has a rich, fertile or perhaps even an excessive, focus on human rights.”[xvii] Again, this appears to be factoring into the opinion of the UK government.[xviii] Thus more negotiation and discussion will clearly be needed, which is likely to delay accession. Even without the already evident dissenting states, accession was unlikely to be straightforward given the number of states involved. ‘Even if we were all desperately anxious to get this through tomorrow, my experience of 47 Governments negotiating documents of this kind is you can be into years and years.’[xix]

The negotiations have also unmasked another possible anti-accession party, the CJEU. This may at first seem odd given that it was the Court itself that first incorporated rights into the EU and began referring to the Convention in its caselaw. However it must be remembered that in Opinon 2/94 the Court was unusually narrow in its interpretation of the Treaties. The CJEU may have perceived accession to the ECHR as a threat to its own power.  This can be seen in the defensive tone of the Court of Justice in its discussion document on accession.[xx] The Court seems almost petulant here, emphasising its own role and takes the view that accession is unnecessary as human rights in the EU are already protected:

‘…under the supervision of the Court of Justice, that human rights as guaranteed by the Convention are observed, even in the absence of an express obligation to that effect. As its case-law bears witness, the Court of Justice regularly applies the Convention and refers in that connection, more and more precisely in recent years, to the case-law of the European Court of Human Rights.’ [xxi]

It goes onto be very protective of its role in the EU system: ‘The Court of Justice has the task of ensuring that in the interpretation and application of the Treaties, the law is observed and it alone has jurisdiction … to declare if appropriate that an act of the Union is invalid.’[xxii]  The Court claims that giving the ECtHR the power to invalidate acts of the EU must avoided where possible. This will be potentially prove to be a dealbreaker in the negotiations. ‘From the very start of the negotiations it has been clear that that autonomy, which is jealously policed by the Court of Justice of the European Union, would be a major issue for the negotiators.’[xxiii]  Thus it seems the Court of Justice may voice strong opposition where it feels the mechanisms to be put in place will challenge its authority over Union law.

The other institutions of the EU shall have to take into account the views of the CJEU as it is very likely that at least one Member State will ask for a CJEU opinion as to the accession agreements compatibility with the Treaties.[xxiv] The CJEU has already shown that it may be uncooperative where it feels threatened.[xxv] There will almost undoubtedly be some effect on the EU’s autonomy as joining the ECHR has been assessed as resulting in ‘European States no longer embody insular, autonomous, self-defined legal systems.’[xxvi] The EU will need the CJEU as a contributor because if it does declare the accession agreement incompatible with the Treaties, then negotiations will have to begin again. Given the already evident reluctance of some of the parties,[1] this would be an undesirable delay. If any kind of incompatibility were found the Union would be forced to revise the Treaties before concluding the agreement; it is unlikely that the EU institutions would take such a risk, given the political importance..’’[2] Thus the views and input of the CJEU will likely be a significant consideration for the negotiators.

Given the already evident dissatisfaction with accession, obtaining consent from all the Member States and the Council of Europe states is likely to be a drawn out and convoluted process. The CJEU has also shown it is weary of the effects of accession and will be unlikely to be cooperative if it feels its position is threatened. Thus throughout the negotiations there will be many different considerations present which means the current draft negotiations are relatively unlikely to mirror the final agreement.

[1] See above.

[2] J. P. Jacque ‘The accession of the European Union to the European Convention on Human Rights and Fundamental Freedoms’ (2011) 48(4) CMLR 995 p. 997

[i]  See the draft at http://european-convention.eu.int/docs/treaty/cv00850.en03.pdf

[iii] See Appendix VI, Statement by the Russian Federation in the working document ‘Relevant excerpts of the Report of the 75th meeting of the CDDH (19-22 June 2012)’ available at http://www.coe.int/t/dghl/standardsetting/hrpolicy/Accession/Working_documents_en.asp

[iv] See para 3 of Report of the first negotiation meeting between the CDDH and the European Commission on the accession of the European Union to the European Convention on Human Rights 21 June 2012, Strasbourg available at http://www.coe.int/t/dghl/standardsetting/hrpolicy/Accession/Meeting_reports_en.asp

[v] Opinion 2/94 [1996] ECR I-1783

[vi] Communication de M. Robert Badinter sur le mandat de négociation (E 5248) May 25, 2010, at: http://www.senat.fr/europe/r25052010.html#toc1

[vii] See I. Smirnova Godoy ‘EU Accession to the ECHR: Talks Enter Final Stretch.’ http://www.europolitics.info/eu-accession-to-echr-talks-enter-final-stretch-art338208-40.html

[viii] CDDH) Report to the Committee of Ministers on the elaboration of legal instruments for the accession of the European Union to the European Convention on Human Rights October 2011 p. 4

[ix] ibid p. 4

[x] Judgement of the Polish Constitutional Court 11 May 2005 available in English at www.trybunal.gov.pl/eng/summaries/wstep_gb.htm Last accessed 11/11/11

[xi] Protocol No 30 to TEU

[xii] Ibid

[xiv] Response to Question 34 European Scrutiny Committee – Minutes of Evidence HC 1492-I http://www.publications.parliament.uk/pa/cm201012/cmselect/cmeuleg/1492/11090701.htm

[xvi] Art 25 ECHR provides ‘The Commission may receive petitions addressed to the Secretary-General of the Council of Europe from any person, non- governmental organization or group of individuals claiming to the victim of a violation by one of the High Contracting Parties of the rights set forth in this Convention, provided that the High Contracting Party against which the complaint has been lodged has declared that it recognizes the competence of the Commission to receive such petitions’

[xvii] S. Douglas-Scott ‘A tale of two courts: Luxembourg and Strasbourg and the growing human rights acquis; (2006) 43 (3) CMLR 629, p. 630

[xviii] Response to Question 34 European Scrutiny Committee – Minutes of Evidence HC 1492-I http://www.publications.parliament.uk/pa/cm201012/cmselect/cmeuleg/1492/11090701.htm

[xix] Kenneth Clark, Oral Evidence to the European Scrutiny Committee, 7 September 2011 available at http://www.publications.parliament.uk/pa/cm201012/cmselect/cmeuleg/uc1492-i/uc149201.htm

[xx] Court discussion document on accession 5/5/10, available at

http://curia.europa.eu/jcms/upload/docs/application/pdf/2010-05/convention_en_2010-05-21_12-10-16_272.pdf

[xxi] ibid p.2

[xxii] ibid p. 3

[xxiii] T. Lock ‘Walking on a tightrope: the draft ECHR Accession Agreement and the autonomy of the EU legal order” (2011) 48 CMLR 1025, p.1028

[xxiv] Under Art 218(11) TFEU

[xxv] ‘an international agreement may affect its own powers provided that the indispensable conditions for safeguarding the essential character of those powers are satisfied and, consequently, there is no adverse effect on the autonomy of the European Union legal order.’ Opinion 1/09 [2011] ECR I-02099

[xxvi] H. Keller and A. Stone Sweet A Europe of Rights  (Oxford University Press, Oxford, 2008) p. 677.