Treaty on Stability, Coordination and Governance: impact on the eurozone and the rule of law - European Scrutiny Committee Contents


2  The legal issues—the evidence

The Government's view

THE PRIME MINISTER'S STATEMENTS AFTER THE EUROPEAN COUNCIL OF 9 DECEMBER

13.  The Prime Minister said that the UK wielded its veto in the European Council on 9 December:

·  because other Member States would not agree to including safeguards on the internal market and financial services within the EU Treaties; and

·  to stop EU institutions being used under the EU Treaties for the benefit of the eurozone without the safeguards above.

14.  On the latter points, the Prime Minister said in his press conference after the European Council meeting:

    [...] there are also risks with others going off and forming a separate treaty; and we should acknowledge that. So we will insist that the EU institutions—the Court, the Commission—that they work for all 27 nations of the European Union.

    Indeed, those institutions are established by the Treaty and that Treaty is still protected.[11]

In his statement to the House on 12 December, the Prime Minister said this:

    I understand why they would want to use EU institutions—but this is new territory and does raise important issues that we will want to explore with the euro-plus countries. So in the months to come we will be vigorously engaged in the debate about how institutions built for 27 should continue to operate fairly for all member states, Britain included. The UK is supportive of the role of the institutions, not least because of the role they play in safeguarding the single market, so we will look constructively at any proposals with an open mind. But let us be clear about one thing: if Britain had agreed treaty change without safeguards, there would be no discussion. Britain would not have proper protection.[12]

CORRESPONDENCE WITH THE GOVERNMENT DURING THE NEGOTIATION OF THE SCG TREATY

15.  The negotiations on the draft SCG Treaty took place within the Ad Hoc Working Group on the Fiscal Stability Union, which met on 20 December 2011, 6 January and 12 January. The draft Treaty was also discussed at a Eurogroup-plus meeting on 23 January and at a Sherpa meeting on Friday 27 January. The UK Government was present at each such meeting. There was also a meeting on the 10 February to discuss the arrangements for the operation of Article 8 of the Treaty.

16.  Several iterations of the draft were made public over the course of the negotiations. In the light of these, we wrote to the Minister for Europe on 12 January asking that he send us the latest draft of the SCG Treaty, together with a commentary on it, in time for our last meeting before the European Council on 31 January. We were becoming increasingly concerned about the legality of the proposed roles of the Court of Justice and the Commission:

    The role of the latter as foreseen in Article 8 of the 10 January version of the agreement strikes us as particularly problematic. We say this in view of the fact that the Commission is an EU institution with no inherent jurisdiction; as such its competence to act in new fields, and the cost of so doing, have to be agreed to by all 27 EU Member States; and in view of the prohibition of infringement proceedings in Article 126(10) TFEU, to which the objective and procedures in Article 8 bear close resemblance.[13]

17.  We also had reservations about the encouragement in Article 10 of the draft Treaty for contracting States to use enhanced cooperation, also a mechanism the scope of whose use had been agreed to by 27 EU Member States, to ensure the proper functioning of the eurozone. We asked of the Minister:

    […] whether the Government thinks reference to its use in a non-EU Treaty is appropriate; whether encouraging its use "whenever appropriate and necessary" is consistent with the EU Treaty requirement that it be used "as a last resort" (Article 20(2) TEU); and what safeguards the UK thinks will be necessary to ensure that greater use of enhanced cooperation does not undermine the internal market or economic cohesion in the EU, does not create barriers or discrimination in trade within the EU, and does not distort competition within the EU, all of which prohibitions are required by Article 326 TFEU.[14]

18.  The Minister's reply of 24 January[15] addressed enhanced cooperation—"[…] the use of enhanced cooperation envisaged will be under the EU Treaties and thus will be compliant with all the safeguards and procedural steps provided in the EU Treaties"—but did not provide a response on the use of the institutions. This is perhaps the more surprising, in terms of genuine engagement with the Committee, in light of the fact that the Prime Minister and Foreign Secretary after the 31 January European Council both stated that there were real concerns about the use of the institutions.[16] These concerns were more formally expressed in a letter of 22 February from the UK's Permanent Representative to the EU, Sir John Cunliffe, to the Secretary-General of the Council, Mr Uwe Corsepius,[17] in which he stated that:

·  to avoid the SCG Treaty setting objectionable precedents, "[…] the EU institutions must only be used outside the EU Treaties with the consent of all Member States";

·  that the SCG treaty "[…] should not undermine the operation of the single market or otherwise infringe on areas of policy that are properly for discussion by all member States in the EU context"; and

·  the UK had previously raised these issues in the negotiations, and in writing, and in view of its "continuing concerns" on the above points "we must reserve our position on the proposed treaty and its use of the institutions, in particular in Article 3(2), Article 7, and Article 8."

THE MINISTER FOR EUROPE'S EVIDENCE TO THE COMMITTEE ON 23 FEBRUARY

The scrutiny process

19.  We first of all asked the Minister to explain why his reply[18] to our letter of 12 January[19] had failed to respond to our questions about the safeguards which the Government had been seeking at the European Council meeting of 8-9 December 2011, and about the legality of the use of proposed EU institutions in the draft SCG Treaty.[20] The Minister replied that the Government had recently decided to release greater detail of the UK's approach to the December European Council negotiations;[21] but that it could not be expected to give a "running commentary" on the negotiation of the draft SCG Treaty, which were confidential and in which the UK was not a participant;[22] and that it did not come to a formal view on the use of the institutions until the European Council on 31 January, although it had communicated its concerns informally throughout the negotiations.[23] Our concern was not, however, to inquire into the negotiations, but rather to know what safeguards the UK had demanded before agreeing to a revision of the Treaties, and to know the Government's views on the use of the EU institutions and of enhanced cooperation in the draft Treaty. Our views are well summarised in a point made to the Minister by Mr Clappison:

    […] that was an excellent answer, which was very comprehensive and showed tremendous grasp of the details but, as the Chairman has just said, we would have appreciated that before we embarked on our inquiry, not least because it would have given us the opportunity to ask some of the expert witnesses we have had along to the inquiry about the points that you have just very properly made in your answer now. The answer to the Chairman's letter, which you gave us back in January, was very short; it was not much more than a page long. It looks like an answer to a question that was not asked, and no answers to the questions that were asked.[24]

The Government's legal concerns with the SCG Treaty

20.  We asked the Minister to explain the Government's legal concerns with the SCG Treaty, in the light of the Prime Minister's comments after the European Council on 31 January and of Sir John Cunliffe's letter of 22 February. He said that there were elements of the SCG Treaty that gave the Government "some concern, lest they be used in the future either to set unwelcome precedents or to impinge upon the integrity of European law and the arrangements set out in the European treaties".[25] We pressed him for detail of what this actually meant. He replied as follows:

    In respect of Article 7, first of all, on the reverse qualified majority voting mechanism, our concern is less with the content of this particular case, because we are not in the euro and, by virtue of our protocol, we are exempt from penalties and sanctions under the Stability and Growth Pact or excessive deficit procedures, than the potential this might have for a precedent possibly being set for the use of this mechanism in other areas of the European Union treaties.

    In Article 8, our concerns centre on the possible role both of the Commission and of the European Court of Justice. Here we are talking about the role of the Commission to judge national budgets. The principle that we continue to assert is that we think EU institutions should only be used outside the EU treaties with the consent of all Member States, and any such use must respect the treaties, because it is the treaties that have primacy in any clash. With regard to the role of the European Court of Justice under Article 8, in part the answer there is the same as I have just given in respect of the Commission's role under Article 8; it is about everybody having to agree to the institution operating outside the scope of the treaties, and that action in respect of the treaties, at all times.

    Article 273 allows Member States to ask the institutions to act on their behalf in matters beyond the Treaty, but on the subject matter that is dealt with by the Treaty. There is nothing in the treaties that provides for a state's obligation to write a deficit break into its law or constitution, so the question in our minds is if that takes the Court into new territory.[26]

But the Minister was reluctant to elaborate much further. When asked about Article 7, he said that he thought it was possible for a non-EU Treaty to stipulate voting procedures, such as reverse qualified majority, in an EU institution, which would appear to ignore the Government's concerns about the precedent this might set for other areas of the EU treaties.

21.  On Article 8, it appeared the Government's concern was whether the Court of Justice's jurisdiction over a contracting State's compliance with Article 3(2), in other words over its balanced budget rules, was consistent with the Court's jurisdiction under Article 273 TFEU,[27] and whether the Commission's role was provided for in the existing Treaties.[28] However, the basis for the latter concern was harder to discern. When asked whether the Commission had de facto infringement powers, in that the trigger for the legal proceedings was a negative Commission report which meant that the matter "will be brought to the Court of Justice by one or more of the Contracting Parties", the Minister and his legal adviser disagreed. The reasons they gave were that Article 8(1) did not impose an obligation on a contracting State because: "will", as opposed to "shall", was not mandatory Treaty language—"It is because the Treaty does not say that they must bring the action; it says they will bring the action";[29] there was no sanction against a State for failure to bring an action;[30] and the provision was clear that it is the States which bring the action.[31] When the Chairman sought simple clarification on whether the Government thought the role of the Commission in Article 8 was lawful in EU terms, the answer received was: "I think there is possibly a range of views on this issue"[32] and the Government was "reserving [its] position".[33]

22.  On the emphasis on enhanced cooperation in Article 10, the Minister's answers were clearer. First, even though the Treaty placed an emphasis on enhanced cooperation, it could only be applied in accordance with the procedures and limitations set out in the EU Treaties:

    Nothing in the Intergovernmental Treaty can amend or set aside what is written down in the EU treaties about how enhanced cooperation has to operate: the rule that it must be used as a "last resort"; that it must "not undermine the [single] market or economic, social and territorial cohesion; … it [must] not [constitute] a barrier to or discrimination in trade between Member States; [it must not] distort competition between [Member States]" and it must "respect the competences, rights and obligations of those Member States [that] do not participate in [a specific enhanced cooperation initiative]". Those rules all continue to apply, whether there is enhanced cooperation that springs from the Intergovernmental Treaty or springs from some other initiative among a variety of EU Member States. Clearly we could not block a proposal for enhanced cooperation that respected all those requirements. We would consider carefully whether to resist, including if necessary through challenge in the EU courts, any resort to enhanced cooperation that we considered did not satisfy all the conditions laid down in the treaties themselves for its use.[34]

These considerations would apply, for example, to the recent application to proceed by way of enhanced cooperation on the financial transaction tax proposal.[35]

23.  Secondly, the risk of caucusing within the eurozone or among the contracting State was overstated:

    Also, one ignores the reality I observe in the EU week by week, in which the 17, let alone the 25 parties of this treaty, simply do not act as a cohesive bloc but pursue alliances with other countries, including us, on a whole range of issues. Since the December European Council, many of the countries that have signed the Intergovernmental Treaty have been extremely eager to show that they want to work with us as a key partner on a whole range of measures, and especially the single market.[36]

What are the consequences of the Government's legal concerns?

24.  We pushed the Minister to answer this question. There seemed to us an inherent contradiction in the Government's stance towards the SCG Treaty, which the Minister summarised as follows:

    […] while we do not want to block our partners from undertaking these economic and political tasks, we also reserve our legal position very clearly in respect of certain aspects of this Treaty, particularly in regard to the proposed use of the institutions in certain Articles.[37]

Our concern was that the Government's legal reservations did not appear to be premised upon the possibility of misuse, or even abuse, of the powers given to the EU institutions under Articles 3(2) and 8; rather to relate to the consistency of such powers with the EU Treaties and to their use without the consent of all 27 Member States.[38] We pressed the Minister on this, asking him to say whether the Government was concerned with the way the SCG Treaty was drafted or might be applied. "We have had concerns about both" was his reply.[39] This prompted a question asking the Minister to confirm whether the Government had given its consent for the use of the EU institutions, to which he replied: "We have not been asked and we have not volunteered it. At the moment, it is a hypothetical question." The Minister refused to accept that the absence of the UK's consent to the use of the EU institutions in the SCG Treaty must mean that the Treaty was unlawful per se:

    Mr Clappison: [...] if we have not given our consent, it is not lawful […].

    Mr Lidington: The Intergovernmental Treaty itself says that, if there is any conflict between it and the EU treaties, it is the EU treaties that shall prevail.

    Mr Clappison: I am not asking that question. I am asking, quite simply, if we have given our consent to the use of the EU treaties. If your answer is we have not been asked to do it, we have not given our consent. We would agree with that.

    Mr Lidington: That is right.

    Mr Clappison: In the terms of this letter, if we have not given our consent, then the use is not lawful.

    Mr Lidington: I think that is taking it a step further [...].[40]

The view of the expert legal witnesses

VALUE OF AN INTERGOVERNMENTAL TREATY

25.  The idea of enshrining balanced budget rules and a concomitant enforcement mechanism in the EU Treaties was thought to have been an initiative principally of the French and Germans. The Foreign Secretary's letter to the Chairman of the Foreign Affairs Committee confirms this to be the case: "On 7 December, Angela Merkel and Nicolas Sarkozy sent a further letter to Mr. van Rompuy with a different set of ideas. They made clear that they were seeking change to the EU treaties [...].Their proposals were not discussed […] in advance of the European Council."[41] Professors Craig and Dougan thought the ultimate objective was to give the balanced budget rules a more elevated status and greater legitimacy than would have been the case if they had been proposed in EU secondary legislation—EU Treaty revisions require ratification through national parliaments and so engage the attention of the public more. So when the UK vetoed a revision of the EU Treaties, a non-EU treaty was preferred to a Directive. One of the paradoxes of this, according to Professor Craig, was that legal force of the SCG Treaty was "almost certain to be less peremptory than it would have been if the same rules had been embodied in ordinary EU legislation."[42] Professor Dougan agreed that a treaty, be it in the context of the EU or public international law (non-EU), was a political necessity for Germany, but the SCG Treaty was not a legal necessity for the eurozone[43]—many of its provisions were aspirations rather than obligations.[44]

26.  A concern shared by several of the legal experts was that the considerable legislative overlap between the SCG Treaty and current or proposed EU secondary legislation—the innovations of the Treaty were limited to a) the domestic implementation of b) stricter balanced budget rules and c) their enforcement by the Commission and Court of Justice in Articles 2(3) and 8, and d) the voting obligations on the excessive deficit procedure in Article 7—made the framework of eurozone rules less transparent and even harder to comprehend.[45]

THE RULE OF LAW - A PRINCIPLE INFRINGED?

27.  Professor Craig argued that what had been agreed at the December European Council and in the negotiation of the SCG Treaty should raise a concern over the application of the rule of law in the EU. He characterised it as follows: presented with a veto on changing the EU's competence over eurozone States through a revision of the EU Treaties, the EU 25 had proceeded to achieve the same ends through a non-EU treaty in circumstances where EU rules on how change should occur had been blocked:

    […] the question you raised is a question that has been nagging at many commentators or observers. It is the question I addressed in the first part of the paper, which I called the background principle. I think that, whichever way you look at it, the bottom line is that you have a decisional rule-you have a rule about how decisions are meant to be made—that is embodied within the Lisbon Treaty. It is a rule about how change should occur, and it is a rule that says you should undertake change if there is unanimity. It also contains quite sophisticated rules for further change to be able to take place through enhanced co-operation within the framework of the Lisbon Treaty. Whatever one believes about its desirability or not, this new treaty does raise an issue of principle, which you can call a rule-of-law issue of principle, that is concerned with whether we should bear with equanimity the idea of those decision-making rules being circumvented by a treaty outside the fabric of the Lisbon Treaty in circumstances where the rules as to how change should be undertaken within the Lisbon Treaty are not capable of being met, particularly given that the SCG treaty can only work through the participation of the EU institutions in the way that is written into that treaty. That does raise an issue of principle, which is a rule-of-law issue.[46]

28.  We asked Professor Craig about the legality of giving new powers, through a non-EU intergovernmental treaty, to the EU institutions. He replied that, unequivocally, new powers could not (lawfully) be given to the institutions through a treaty of this kind.[47] The more equivocal issue was whether a similar point of principle arose in the instance of EU institutions using existing powers under the SCG Treaty. In other words, cutting and pasting existing institutional powers under EU primary and secondary law into the SCG Treaty. Though tempted at first to distinguish this use of the EU institutions as unproblematic, on reflection he had revised his opinion: "It is not that straightforward because to say that there is an existing power to do X, whatever X is, under the Stability and Growth Pact, does not per se legitimate the use of that very same power in the context of a different treaty."[48]

29.  When asked whether the approach taken at the December European Council and in the negotiation of the SCG Treaty set a new precedent, Professor Craig replied that:

    There is absolutely no doubt that, if this is ratified, it will be a precedent in the sense that it will be a solid piece of evidence that the EU as a whole, having been blocked or stopped from achieving its goals through the normal methods of treaty revision, will have recourse to a treaty of this kind outside the existing Lisbon Treaty, and that EU institutions will be involved in it. That is a precedent.[49]

30.  Professor Dougan took a different view:[50]

    […] I do not see the same types of issues, particularly as regards the principle of whether member states, having failed to achieve a treaty amendment so as to pursue an objective that they want to achieve, can then pursue that objective outside the EU framework by means of ordinary international law. That is one issue that Professor Craig flagged up, and it is one that I would disagree with.

31.  For Professor Dougan, the real question was not the principle of whether a non-EU treaty could confer functions on the EU institutions—it could: it was the conditions under which those functions were conferred. For authority he relied on two cases—the Bangladesh case[51] and the Lomé Convention case[52]—in which the Court of Justice recognised the principle that the Member States could draw upon the EU institutions for non-EU purposes, but he agreed with Martin Howe that in those cases all Member States had agreed to the proposals.[53] However:

    […] in both cases—Advocate-General Jacobs, as he then was—dealt more with the possibility that there could be situations where individual member states or even external organisations such as the UN might ask the Commission to carry out certain delegated functions on their behalf. The test that the advocate-general proposed in those cases is probably a very sensible one. The question is: is it incompatible with its obligations under the treaties? If, for example, the member states were asking the Commission to behave in a way that infringed its duty of impartiality or its duty of independence, we would all have a real problem. If they are not asking the Commission to behave in that way, however, it does not seem objectionable.[54]

32.  On the question of whether all Member States needed to consent, Professor Dougan thought that an analogy could be made with enhanced cooperation, in which fewer than the EU 27 could use the EU institutions to legislate:

    It is perfectly possible within the treaties to make use of the institutions for the interests of certain member states against the opposition of others. That is within the scope of the treaties, so obviously it is not a direct analogy, but it is a useful indication that, as a point of principle, it may be possible. The real question is whether that would make the Commission behave in a way that would be incompatible with its duty of impartiality. If it would, that is a real problem, but if it would not, it should not be.[55]

33.  Martin Howe was not so sure:

    […] that the existence of the enhanced co-operation procedure actually assists the argument that the Commission can act privately for a sub-group of member states. What one can draw from that is a contrary argument, which is that the treaty authorises the institutions to act under certain defined conditions on behalf of sub-groups of member states who wish to engage in enhanced co-operation. Hence, the argument would go that, in general, a sub-group of member states that wants to get together outside the authorised framework of enhanced co-operation cannot hijack—to use a pejorative word—the institutions for its private purposes.[56]

34.  Professor Peers referred also to the Bangladesh and Lomé Convention cases:

    In the debate on the draft REU treaty, it has often been assumed that giving any role to an EU institution outside the scope of its current powers under EU law would be legally questionable. However, the case law of the Court of Justice of the EU has not ruled this out in all cases. In particular, the Court of Justice has ruled that Member States can act collectively outside the framework of the EU Treaties in areas where the EU and Member States share a parallel competence, and in that context can confer powers to act upon the EU institutions: see Case C-316/91 EP v Council and C-181/91 and C-248/91 EP v Council and Commission. These cases involved collective action by all Member States, although the Court did not refer to this factor expressly in its judgment. So the question remains open whether or not it would be legal in principle for some Member States to confer additional power upon the EU institutions by means of an international treaty outside the EU framework. If this is legal in principle, there would probably be conditions upon the use of those institutions, in particular a requirement of compliance with EU law.[57]

35.  Professor Peers' conclusions were less conclusive than those of Professor Dougan:

    Article 14(2) includes a target date of entry into force, but this does not really have any legal relevance, as the treaty will still enter into force one month after it has sufficient ratifications, whether that takes place before or after the target date. The bigger issue is the number of ratifications—originally nine eurozone States, then fifteen, and now twelve (2/3 of the eurozone States). This provision fails to provide for the legal position if fewer than twelve eurozone States have ratified the treaty before 1 January 2013; this issue ought to be clarified.[58]

VOTING OBLIGATIONS IN ARTICLE 7

36.  Article 7 "commits" contracting States to supporting the Commission's recommendations in the Council in relation to the excessive deficit procedure in Article 126 TFEU, unless there is a (reverse) qualified majority against. We asked Professor Dougan and Martin Howe whether they thought it was possible for a non-EU treaty to stipulate voting procedures in an EU institution. Professor Dougan replied that:

·  although there was a commitment to vote presumptively in favour of a Commission proposal, it was not an absolute commitment. Contracting States could decide to change their minds: none of them is bound to follow the Commission proposal;[59] and

·  reverse qualified majority voting was not unique to the SCG Treaty. It was a feature— a central feature some would say— of the Six Pack of legislative measures. Its role precisely was to try to increase the automatic nature of sanctions against Member States that are incurring excessive deficits. It was not unique in that regard, even if still relatively unusual.[60]

37.  Professor Peers took the same view:

    Article 7 only specifies that Member States "commit" to apply it; this falls short of a fully-fledged legal obligation. It leaves open the possibility that Member States might decide not to support the Commission's proposals or recommendations. Since this Article does not amend the role of the Commission or the Council as such, it would not breach any rule (if there is one) that a group of Member States cannot confer new powers upon the EU institutions. To some extent this reverse voting rule is already set out in EU legislation, for instance in Articles 5(2) and 6(2) of Reg. 1173/2011, concerning the enforcement of the excessive deficit rules as regards the imposition of fines on eurozone Member States.[61]

ROLE OF THE COMMISSION IN ARTICLE 8

38.  Professor Craig thought that the Commission had de facto infringement powers in Article 8: it was the trigger for legal proceedings because the contracting States were under a "mandatory obligation" to bring an action in the event of a negative report from the Commission. This was "simply a legal contrivance" to try to circumvent the injunction on the Commission from bringing an action in its own name when the jurisdiction of the Court of Justice was premised on Article 273 TFEU.[62] There was a further conflict with the EU Treaties: the Commission was prevented by Article 126(10) TFEU from bringing infringement proceedings in the context of the excessive deficit procedures in Article 126 (1)-(9) TFEU. Martin Howe agreed with these views.[63]

39.  Professor Peers thought Article 8 conferred significant powers on the Commission in a procedure similar to the pre-judicial stage of the infringement procedure:

    On the other hand, the option to invite the European Commission to give its opinion on whether a Member State has complied with the debt brake rule, the Commission's role in a procedure similar to the pre-judicial stages of the infringement procedure in such a case, and the subsequent obligation to bring an action against a Member State which has breached the debt brake rule, in the Commission's view, would all confer significant additional powers upon that institution. Article 8 should also be clarified to make clear that the Member State which has allegedly breached Article 3(2) would be joining in the action against itself.[64]

40.  For Professor Dougan the key consideration in assessing the legality of the role of the Commission was that the contracting States had ceded jurisdiction over Article 8 to the Court of Justice by voluntary agreement.[65] In light of this, a wide margin of discretion should be given to the contracting States "subject to EU law and not breaching the treaties directly, to design the type of enforcement system they want to have imposed upon themselves."[66] It was not therefore a question of whether the Commission's role was new, but whether its role infringed the existing Treaties. As the Commission had no formal role in bringing proceedings under Article 8, its role was not problematic. Further, it could be said to be analogous with the monitoring role of the Commission elsewhere under the Treaties.[67]

DOES ARTICLE 8(1) PLACE LEGALLY BINDING OBLIGATIONS ON CONTRACTING STATES?

41.  We asked Professors Craig, Dougan and Peers to comment on the Government's assertion that the use of "will" in Article 8(1)—"the matter will be brought to the Court of Justice of the European Union by one or more Contracting Parties"—meant that States were not under a mandatory obligation to bring proceedings, so could elect not to. None agreed.[68]

JURISDICTION OF THE COURT OF JUSTICE IN ARTICLE 8

42.  Professor Craig thought that whether what was presently contained in Article 8 was lawful or not would ultimately depend on the interpretation by the Court of Justice of the meaning and scope of Article 273 TFEU; this in turn would depend upon whether the Court, if the question were put to it, found that the present mechanism whereby the Commission, in effect, triggers the action was lawful under the Article 273.[69] The prohibition on the Commission bringing enforcement action under Article 126(1-9) in his view reinforced "very considerably" the conclusion that to construe Article 273 as allowing de facto a Commission enforcement action for breach of the self­same rules "looks very odd indeed".[70]

43.  When pressed to give a best guess on whether the Court of Justice would find in favour of jurisdiction to hear proceedings brought under Article 8, Professor Craig thought with some certainty that it would in the case of inter-State proceedings, because these were "a special agreement for the purposes of coming within Article 273",[71] but that these would be very rare indeed.[72] But in the case of proceedings triggered by a negative report from the Commission, he was less sure:

    I simply do not know what they will do about the first half of Article 8. I find that one more difficult to guess. There will be a temptation to validate it, to legitimate it, and say that the Commission is not formally bringing the action and that is good enough and therefore you can use 273. The problem with that conclusion is that it looks pretty artificial and, as I intimated in my paper in the evidence I gave, on many occasions in the past where member states have tried through various contrivances to get round a rule in the treaty by factually organising their behaviour in such a way as to minimise the likelihood of engagement with a particular treaty Article, the Court of Justice and the Commission legal service and the Council legal service have quite rightly said, "No, we are not going to allow that to happen. We will look at the substance."[73]

44.  Professor Peers thought that Article 8 related "to the subject matter of the Treaties" and was confident that it did not exceed the scope of Article 8:

    According to the preamble to the draft treaty, Article 8 is based on Article 273 TFEU, which provides that:

    "The Court of Justice shall have jurisdiction in any dispute between Member States which relates to the subject matter of the Treaties if the dispute is submitted to it under a special agreement between the parties."

    Therefore it cannot be objected that this provision per se is in breach of EU law. Although it has been argued that Article 8 exceeds the scope of Article 273 TFEU, since the 0.5% debt brake rule is new to EU law, and is therefore outside the "subject-matter" of the Treaties, this argument is not convincing. Article 344 TFEU subjects all disputes concerning the "interpretation or application" of the Treaties to the exclusive jurisdiction of the Court of Justice. Since Article 273 provides for only optional jurisdiction of the Court of Justice, the two provisions cannot overlap. So Article 273 cannot apply to EU law as such, since Article 344 applies to EU law; it follows that Article 273 applies (only) to disputes regarding measures which are not part of EU law as such, but which are connected to the "subject-matter" of the Treaties. Obviously the debt-brake rule meets that criterion.[74]

45.  Professor Hix and Martin Howe thought the Court would take an expedient approach to its jurisdiction under Article 273 TFEU, in reflection of the ultimate political objective: "where there's a political will, the EU will find a way around this";[75] and, in the case of Martin Howe:

    The Court reflects political developments and the political ethos of the European Union in which it operates. One would be asking that Court, as it were, to ban the Commission from performing an activity that the Commission itself wants to perform and which the majority of member states want it to perform, in the face of the objection of maybe the United Kingdom and possibly one or two others. Unless the legal arguments are crystal clear, the prospects of winning that might not be too good.[76]

46.  Professor Dougan's views were consistent with his answers on the Commission's role under Article 8, which he did not consider to be legally objectionable. He also thought that the enforcement mechanism under Article 8 could amount to a "special arrangement" for the purposes of Article 273 TFEU, and prayed in aid to this end the published legal advice of the Council legal service.[77]

ENHANCED COOPERATION

47.  None of the expert witnesses thought that the reference to "mak[ing] active use" of enhanced cooperation "whenever appropriate and necessary" in Article 10 was legally significant. The reference was merely declaratory of powers that already existed in the EU Treaties, the procedures for which took precedence over the SCG Treaty. Additionally, Article 10 made explicit mention to the relevant Treaty provisions.[78]

48.  Professors Hix[79] and Dougan agreed that Article 10 was more significant as a declaration of political intent, enhanced cooperation only having been used on two previous occasions.[80] Professor Craig, like the Minister for Europe, was more sanguine about the prospect of unity among the eurozone or EU 25.[81]

WAS THE UK RIGHT TO EXERCISE ITS VETO AND WHAT ARE THE CONSEQUENCES?

49.  Both Professor Hix and Craig questioned whether the UK would have vetoed the provisions contained in the SCG Treaty, had they been known at the December European Council. The SCG Treaty was a significantly watered down version of the tougher language used in the Statement of the eurozone Heads of State or Government at the December European Council.[82] The substance of the SCG Treaty over and beyond existing EU obligations was minimal; even the balanced budget rules in Article 3(2), when examined closely, no longer had to be enshrined in a constitutional or statutory rule.[83]

50.  Professor Hix thought that veto had not achieved anything in the short-term; in the long-term he was concerned that it may well lead to a growing separation of European integration into two tracks.

51.  Professor Dougan thought the EU 25 had pretty much achieved the fiscal compact they had hoped for in a revision of the EU Treaties. What was important was not the form the implementation of the balanced budget rules would take, it was the fact that the substantive obligation goes further than what already existed under EU law—the lower limit of the structural deficit being 0.5% (as opposed to 1%).[84] He concluded that the Government's veto was, accordingly, of little positive consequence for the UK, and that it had forfeited some of its natural leadership in single market integration and liberalisation policies.[85]


11   See http://ukeu.fco.gov.uk/en/news/?view=News&id=703971982 Back

12   HC Deb, 12 December 2011, col 521 Back

13   Ev 71 Back

14   Ev 71 Back

15   Ev 73 Back

16   On 30 January in an interview on BBC Radio 4's Today programme, the Foreign Secretary said that there were "some real legal concerns" about the use of the Court of Justice; that the UK could not veto its use as this was a (non-EU) intergovernmental treaty; but that it could take legal action if necessary. And in the press conference after the European Council Summit, the Prime Minister said that "there are a number of legal concerns on the use of EU institutions"; that the UK did not want to stand in the way of the draft treaty, but that it could "take action if […] national interests are threatened." Back

17   Ev 74 Back

18   Ev 73 Back

19   Ev 71 Back

20   Qq 125, 136, 137 Back

21   Q 125. This information was set out in a letter to the Chairman of the Foreign Affairs Committee, and published on its website: http://www.parliament.uk/business/committees/committees-a-z/commons-select/foreign-affairs-committee/news/publication-of-letter-from-fs-dec-2011-euro-council/ Back

22   Qq 130, 137 Back

23   Q 136 Back

24   Q 127 Back

25   Q 134; see also Q 135 Back

26   Q 142 Back

27   Article 273 TFEU gives the Court "jurisdiction in any dispute between Member States which relates to the subject matter of the Treaties if the dispute is submitted to it under a special agreement between the parties." A recital confirms this is what the intergovernmental agreement relies upon to invoke the jurisdiction of the Court of Justice. Back

28   Qq 163, 164 and 180 Back

29   Q 156; see also Qq 153 and 155 Back

30   Q 154 Back

31   Qq 158, 160 and 161 Back

32   Q 165 Back

33   Qq 166-168 Back

34   Q 182 Back

35   Qq 185 and 186 Back

36   Q 184; see also the last paragraph of Q 182 Back

37   Q 138 Back

38   See the answer to Q 142, cited above, and the letter from Sir John Cunliffe, Ev 74. Back

39   Q 173 Back

40   Qq 177-179 Back

41   See footnote 21 Back

42   Q 6 Back

43   Q 62 Back

44   Q 61 Back

45   Qq 2, 64 and 67 Back

46   Q 12 Back

47   Q 15 Back

48   Q 15 Back

49   Q 17 Back

50   Q 66 Back

51   C-181/91 and C-248/91 European Parliament v Council and Commission, 30 June 1993 Back

52   Case C-316/91 European Parliament v Commission, 2 March 1994 Back

53   Q 66 Back

54   Q 78 Back

55   Q 78 Back

56   Q 79 Back

57   Para 2, Ev w3 Back

58   Para 30, Ev w3 Back

59   Q 73 Back

60   Q 74 Back

61   Para 21, Ev w3 Back

62   Q 21 Back

63   Qq 86 and 87 Back

64   Para 23, Ev w3 Back

65   Qq 80 and 87 Back

66   Q 80 Back

67   Q 83 Back

68   See Ev 83, 84 and 85 Back

69   Q 26 Back

70   Q 27 Back

71   Q 29 Back

72   Q 26 Back

73   Q 29 Back

74   Para 22, Ev w3 Back

75   Q 44 Back

76   Q 65; see also Q 88 Back

77   Q 88 Back

78   Qq 35, 42, 89, 92 Back

79   Professor Hix did not think enhanced cooperation could be used for EU policies such as taxation which required unanimity, the financial transaction tax being a specific example (see Qq 40 and 43). We do not think that is correct, and, indeed, the Minister for Europe confirmed that an application from nine Member States to proceed with the financial transaction tax proposal by means of enhanced cooperation had been lodged (see para 22 above). Back

80   Qq 36-39, 89, 94-95 Back

81   Q 41 Back

82   Qq 45 and 46 Back

83   Qq 22 and 46 Back

84   Q 69. For Professor Peers' comments, see also para 9 of Ev w3. Back

85   Q 103 Back


 
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Prepared 3 April 2012