Tag: Enhanced co-operation

Jose Manuel Panero Rivas

MA in Economics for Competition Law candidate, King’s College London, LL.M in European Law, College of Europe, Bruges

 

On 11 December 2012, Advocate General Bot delivered his opinion on Joined Cases C-274/11 (Spain v Council) and C-295/11 (Italy v Council).^[i] Should the Court follow his reasoning, the case is likely to have a major impact on the enhanced co-operation procedure (hereinafter “the ECP”), allowing Member States a large room of manoeuvre to use the procedure. This is something which, by its very existence, is likely to erode the relevance of veto ‘rights’ in the limited fields where unanimity within the Council is still required.

In the next paragraphs we will: (i) briefly introduce the ECP; (ii) summarily explain the facts of the case and the applicants’ pleas, (iii) expose the conclusions of the AG and (iv) explain the relevance of the Opinion (should this be followed by the CJEU) in a broader context.

a)    Brief introduction to the ECP

As the well-instructed readers of this blog know, the ECP is regulated in both the TEU and the TFEU. On the one hand, Articles 20(1) and (2) the TEU read as follows:

‘1. Member States which wish to establish enhanced cooperation between themselves within the framework of the Union’s non-exclusive competences may make use of its institutions and exercise those competences by applying the relevant provisions of the Treaties, subject to the limits and in accordance with the detailed arrangements laid down in this Article and in Articles 326 to 334 of the Treaty on the Functioning of the European Union.

Enhanced cooperation shall aim to further the objectives of the Union, protect its interests and reinforce its integration process. Such cooperation shall be open at any time to all Member States, in accordance with Article 328 of the Treaty on the Functioning of the European Union.

2. The decision authorising enhanced cooperation shall be adopted by the Council as a last resort, when it has established that the objectives of such cooperation cannot be attained within a reasonable period by the Union as a whole, and provided that at least nine Member States participate in it. The Council shall act in accordance with the procedure laid down in Article 329 of the Treaty on the Functioning of the European Union.’

At their turn, Articles 326 to 334 TFEU establish in detail the procedure and limits for the use of the ECP.

The idea of establishing the ECP was to allow a group of Member States holding a sufficient “critical mass”, within the framework of the Treaties and without contravening them, to move forward in the integration process, leaving the door open for the remaining Member States to potentially join in the future.

Of course the possibility to resort to such action is not a “blank check” to Member States but it is subject to certain limits – some of them admittedly imprecise. The most relevant are:^[ii]

i)     For an ECP to be allowed its outcome should respect the Treaties, in particular concerning the decisional procedure and the jurisdictional control.

ii)   The ECP should remain within the limits of competence of the Union, but not to refer to its exclusive competences.

iii)  The ECP should not hamper either the internal market or the economic and social cohesion.

iv)  The ECP should concern at least one third of EU Member States.

v)    The procedure should remain open to the rest of the EU Member States.

vi)  The decision to go through the ECP should be a “last resort” solution.

However, until now, these limits and their boundaries have been considered mainly by scholars. In the case at stake, the Court, as the supreme interpreter of the Treaties, has been invited to rule and set its doctrine on most of them.

b)   Context of the case and pleas of the Applicants

The adoption of the Regulation to establish an EU-wide intellectual property system[iii] has been a controversial subject in the Council meetings. One of the conflicting points has been the linguistic regime, for which a solution of compromise was advanced: the possibility to file patent applications in any language of the Union (establishing a mechanism for compensating translation costs) but granting the patent having unitary effect only in one of the official languages of the European Patent Office as provided by the European Patent Convention[iv] (hereinafter “EPC”) (namely, English, French or German). However, even this solution of compromise generated the opposition to the system (or, at least, the linguistic regime) of two countries: Italy and Spain.

Once the Council confirmed, after several attempts to reach an agreement, that no unanimity could be reached concerning the language arrangement, the Council started an ECP by means of its Decision of 10 March 2011[v] (“the contested Decision”).

Spain and Italy challenged the Decision under what AG Bot has classified as six pleas:^[vi]

i)     The Council was not competent to establish an ECP as, the Applicants consider, the subject of the procedure concerns an exclusive competence of the Union (namely, the establishment of competition rules for the functioning of the internal market, mentioned in Article 3.1 b) TFEU). Accordingly, in adopting the contested Decision the Council infringed Article 20(1) TEU as an ECP can only be used in matters falling within the non-exclusive competencies of the Union;

ii)   The decision adopted by the Council would constitute a misuse of powers. The Applicants maintain that, contrary to Article 20 TEU, the true objective of the decision was not to integrate all Member States by means of multi-speed integration;

iii)  In adopting the contested Decision the Council failed to respect the judicial system of the Union by failing to specify in the contested Decision, the judicial regime envisaged for unitary patents matters;

iv)  In adopting the contest Decision the Council failed to fulfil the ‘last resort’ condition foreseen in in Article 20(2) TEU;

v)   An infringement of Articles 118 and 326 TFEU and Article 20(1) TEU insofar as the Decision undermined the internal market and economic, social and territorial cohesion, constitutes a barrier to and discrimination in trade between Member States and distorts competition between them;

vi)  The Decision failed to comply with Articles 327 and 328 TFEU insofar as (i) the Decision obliges Spain to waive its right under Article 65 of the EPC to require a translation of the patent specification into Spanish in order for it to produce legal effects in Spain; and (ii) the condition that ECP would be open to non-participating Member States laid down in Article 328 TFEU is not fulfilled, as the co-operation makes provision for a language regime Spain cannot accept. 

c)    The Opinion of the Advocate General

In his Opinion, AG Bot advised the CJEU to dismiss the actions of both Spain and Italy.

In his preliminary observations, AG Bot took the position that the review the Court should undertake of decisions establishing ECPs should be limited. He recalled AG Jacobs’ Opinion in Joined Cases C-248/95 and C-249/95^[vii] in which he pointed out that such light-touch should be taken or else the Court would risk to “usurp the legislative role of the Council by imposing its own views of the economic policies to be pursued by the [Union]”.^[viii]

In that regard, the AG pointed out that the choice of initiating the ECP is made by the Council, which grants authorisation on a proposal of the Commission and after obtaining the consent of the Parliament. In the context of that procedure, the institutions asses the effects of the ECP, weighting the different interests at stake and making political choices. It is in the light of those elements that the Council determines whether an ECP is the appropriate procedure to further the objectives of the Union, protect its interests and reinforce its integration. ^[ix]

Therefore, AG Bot advises the Court, in general, not to substitute the reasoning of those institutions by its own and confine itself to reviewing whether, in the exercise of the freedom conferred to the legislator, it has not committed a manifest error, misused its powers or manifestly exceeded the limits of its discretion.^[x]

Entering into the specific pleas put forward by the contending parties, the AG advises the Court to dismiss all pleas on the following grounds:

i)     The first plea should be dismissed, as the issue does not relate to a matter where the Union has exclusive competences, but instead refers to the functioning of the internal market, which is a shared competence according to the loose wording of Article 4 TFEU.^[xi] Specifically, the AG considers that “Since the Treaty of Lisbon Article 118 TFEU has supplied an appropriate legal basis for the creation of intellectual property rights and that provision refers expressly to the establishment and functioning of the internal market, an area which comes within the competence shared between the Union and the Member States.”[xii]

ii)   The second plea should be equally dismissed. Against the argument that the ECP should be considered, in this case, as a ‘solution of exclusion’, the AG is of the view that there was “no objective, relevant and consistent evidence which proves that the contested decision was adopted with the purpose of achieving an end other than stated or evading a procedure specifically prescribed by the Treaties”.^[xiii]

iii)  Concerning the third plea, on the lack of establishment of a judicial regime in the Council decision, the AG notes that the authorisation given by the Council is merely an authorisation for the adoption of other legislative acts, which will then have to give specific effect to that ECP. Indeed, in the Council’s proposal for a Regulation implementing the ECP in the area of the creation of unitary patent protection, the question was addressed.^[xiv]

iv)  As regards the fourth plea (on the anticipated use of what is a ‘last resort mechanism’), AG Bot notes the different attempts to move forward the mechanisms for the EU Patent system and the recurring conflicts, pointing out in any event the wide discretion that, in his view, should be given to the Council.

v)   On the fifth plea (negative impact of the proposal on the internal market and cohesion), the AG advised the Court to dismiss it, as the contested decision does not foresee the specific regime, which will only be defined (and challenged, if necessary) at a latest stage. In any event, the elements analysed by the AG point indeed to the opposite direction: the proposal does not hamper the internal market and/or cohesion, but goes in the benefit of those objectives.^[xv]

vi)  On the sixth plea (concerning specific concerns on the compatibility of the linguistic regime with the EPC), the AG advice to refuse the plea as inadmissible insofar as the specific language arrangements were not part of the contested decision.

d)   Relevance for the specific case and for the future of the enhanced co-operation procedure

In parallel to the procedure before the CJEU, the creation of the EU patent system follows its own legislative course. Indeed, the same day the AG Opinion was delivered, the Parliament approved, in three separate voting sessions, the EU ‘Patent Package’ (integrated by the proposals for legislating on Unitary Patent, Language Regime and Unified Patent Court).^[xvi]

However, the importance of the Opinion and the judgment goes well beyond the specific case. As mentioned above, and for the first time ever, the CJEU will have to rule on the legality of a decision authorising the use of the ECP. We will attend to the Court final judgment, but – at the risk of being completely wrong – it seems likely that the CJEU will follow its Advocate General.

The impact of a judgment dismissing the action would be quite relevant, and this is not purely of academic interest. Indeed, there is a major ECP on the horizon, the one concerning the establishment of the financial transaction tax, where all the previous conditions for the starting of the procedure seem to be in place.^[xvii] The final ruling of the Court on this case is likely to affect the position of those Member States which would not opt for it (namely UK) as well as their chances of successfully blocking the ECP procedure. Of course, the circumstances of cases are always different, but it would not be surprising that, when drafting its final judgment in this case, the judges of the CJEU will consider the far-reaching consequences of their judgment in foreseeable ECP cases. We have to wait and see if the CJEU will act (again) as an ‘internal federator’ of the Union, and if its ruling will allow Member States to firmly say to reluctant partners whether they could live with or without them.