5 Conclusions
63. It is clear to us that the SCG Treaty does
little towards solving the eurozone crisis, other perhaps than
providing some comfort to international markets. Moreover it is
possible that the Treaty will prove to be politically impossible
to enforce. As undesirable as it may be, some form of breakdown
of the eurozone clearly remains possible.
64. It seems to us that on balance the UK is
better off with this SCG Treaty than with amendments to the TFEU
of similar content. This is because insofar as actions under the
SCG Treaty might disadvantage the UK, for instance in relation
to the single market, they could be challenged in the Court of
Justice as incompatible with the TFEU. Whereas if those actions
derived from an amended TFEU
they might be less easy to challenge. Fears about threats to
the UK from agreement on the SCG Treaty, particularly to the UK's
negotiating weight, appear unsubstantiated. The Financial Secretary
to the Treasury demonstrated, with his references to the Prime
Minister's joint letter before the March 2012 European Council
and to current negotiations on budgetary matters and financial
services regulation, that the Government has had some success
on matters of importance to the UK.[116]
65. Whether or not the amendment to Article 136
TFEU is a necessary or a desirable precursor to the ESM may be
open to debate. But it does raise the question as to why if it
is not necessary the European Council clearly suggested it is.
More importantly for Parliament why, until very recently, did
the Government also suggest that the amendment is necessary?
66. The Foreign and Commonwealth Office was less
than cooperative in helping us to scrutinise the draft SCG Treaty
on behalf of the House. Our letter of 12 January,[117]
and the Minister's reply
of 24 January,[118]
are the clearest evidence of this. The Minister for Europe defended
his Department's approach by relying on the confidentiality of
negotiations and the inappropriateness of providing running commentaries.
This was not what we asked: as the relevant
Select Committee of the House, we wanted to know what safeguards
the Government had sought at the December 2011 European Council,
and what its views, whether formal or informal, were on the proposed
use of the institutions in the draft SCG Treaty, revisions of
which were put in the public domain. On the former we were rebuffed,
on the latter ignored. By 10 January it was, however, clear that
the Government did have concerns about the use of EU institutions,[119]
although it chose not to apprise us, and thereby the House, of
them. We strongly deprecate the Government's failure to respect
the principle of accountability.
67. We agree, for the reasons enumerated by Professor
Craig, that the approach taken to proceed with the fiscal compact
by way of an intergovernmental agreement when a revision of the
EU Treaties had been blocked raises a fundamental question about
the application of the rule of law within the EU. We conclude
that the SCG Treaty would have been an EU treaty but for the veto
and that the veto therefore was a real veto. However, we also
conclude that the EU institutions and the governments of the 25
Member States who have signed the Treaty, subject of course to
its successful ratification, have embarked on a dangerous precedent
in seeking to attain their political objectives irrespective of
the rule of law in the EU.
68. The approach taken is also likely to render
the foundation for the use of the EU institutions in the resulting
SCG Treaty legally unsound. We consider that all Member States
should have to agree to the new powers given to the Commission
in Articles 3(2) and 8; that, unless Article 126(10) TFEU is amended,
the de facto infringement
powers of the Commission in Article 8(1) will in any event conflict
with that provision of the TFEU; that the mechanism in Article
8(1) is a contrivance to avoid a conflict with the Court of Justice's
jurisdiction in Article 273 TFEU; and that, as such,
the Court should refuse jurisdiction to hear an application brought
by a contracting State pursuant to a negative report of the Commission
under Article 8(1) of the SCG Treaty.
69. We have looked carefully at the counter-argument
of Professor Dougan. Without further authority, we are not convinced
by the argument that Member States should be given a wide margin
of discretion to use the institutions as they choose where voluntary
jurisdiction is given to the Court of Justice. We also find the
distinction between all
Member States giving their consent to the use of the institutions
(the Bangladesh and Lomé Convention cases) and only 25
giving their consent significant, and not answered by Professor
Dougan's analogy with enhanced cooperation, or with the residual
monitoring functions of the Commission under the EU Treaties.
We note his emphasis on the key criterion for conferral of power
by non-EU agreements to EU institutions being consistent with
the EU Treaties. As we conclude that the Commission's powers in
Article 8(1) were de facto in violation of
Article 126(10) TFEU, we think this criterion is not met.
70. We note that that the Legal Service of the
Council published its advice on the compatibility of the Article
8 of the SCG Treaty with EU law. This was contrary
to normal practice on the disclosure of its legal opinions and
no doubt intended to dispel doubt among Member States. We asked
Professor Craig to comment on the advice. He described it as a
"best shot", which he did not mean pejoratively.[120]
Martin Howe had more
forthright views, describing the advice as "tortured",
in other words:
[…] to achieve the end
result that political imperatives imposed. I did think that it
was particularly remarkable, in that final paragraph, as to why
the intention that was expressed by these
particular states to incorporate the material into the EU treaties
was at all relevant to the question of whether or not it complies
with article 273 in the first place.[121]
We agree with these views. We were also perturbed
to read in the final paragraph of the expectation, rather than
the possibility, that the SCG Treaty will be incorporated into
the EU Treaties:
It is again to be noted that that the substance of
the draft Treaty is intended to be incorporated into the law of
the Union following steps
to be taken "within five years at most of the entry into
force". When
this happens [...]"[122]
For this to happen the UK would have to give its
consent, but this has been assumed by the Council Legal Service.
We consider that that this legal advice has been manipulated to
achieve the political result that the European establishment desires,
particularly at the expense of the breach of EU law which they
hold up as inviolate.
71. Given the views we express above, we understand
why Sir John Cunliffe was asked
to take the unusual step of writing to the Secretary-General of
the Council on 22 February reserving the Government's position
on the use of the institutions in Article 3(2) and 8. However,
the Government's evidence on the consequence of the letter was
inherently contradictory, and inconsistent with the letter itself.
The tenor of it was that the Government does not want to stand
in the way of 25 States reinforcing the eurozone, but the use
of the institutions outside the EU Treaties without the consent
of 27 Member States is unlawful. This to us suggested a conclusion
that the SCG Treaty as agreed on 31 January must be unlawful in
the Government's view. The Minister accepted that the Government's
concerns were related to both how the Treaty was drafted and might
be applied, but to suggest it was unlawful was "taking it
a step further".[123]
When pressed on whether it thought the role of the Commission
in Article 8 gave it de facto infringement powers, the Government
disagreed, or demurred, telling us the use of "will"
as opposed to "shall" meant there was not a mandatory
obligation on the contracting States to bring proceedings in the
event of a negative report
from the Commission. We could see no contextual basis for this
surprising opinion, nor could Professors Craig, Dougan and Peers.[124]
The Government's reticence
does, however, raise serious questions as to whether the letter
of 22 February is a serious expression of intent.
72. The Government has made clear that it has
reservations about the legality of what has been done, but the
question of what it intends to do remains unsatisfactorily unresolved.
Politically and legally, it is profoundly unwise to suggest taking
action, and then not to explain how it intends to carry it through,
or what concessions are now being sought and achieved.
73. We agree with Professors Dougan and Peers
that the reference to Council voting procedures in Article 7 is
not binding on contracting States, and with all the experts that
the reference to enhanced cooperation in Article 10 cannot change
the way it is applied under the EU Treaties.
We do think, however, that referring to EU procedures in a non-EU
treaty runs the risk of them no longer being considered exclusive
to the EU—Professor Dougan's reference to enhanced cooperation
as support for the use of the institutions in the (non-EU)
SCG Treaty with the agreement of 25 Member States being a case
in point.[125] It also
runs the risk that EU procedures will be used more often than
intended, a particular concern of Professor Hix in relation to
enhanced cooperation.
74. Finally, although questions have been raised
as to what the UK achieved by the use of its veto, we conclude
that the veto was justified because of the very real concerns
about a breach of EU law, even if this was not the reason given
exclusively for the use of the veto in the first place. We note
that there is an increasing tendency for the EU to propound the
virtues of the rule of law but not to apply it in practice. For
example, the Stability and Growth Pact was violated without further
action being taken. Furthermore, we reported in January 2011 that
the EFSM could not be justified under Article 122 TFEU.[126]
In our view, the approach to this SCG Treaty provides further
and ever more disturbing evidence of the European Union dangerously
ignoring its own precepts for political ends. We therefore recommend
that the Government clearly states as soon as possible what action
it now intends to take on the SCG Treaty.
116 Q 252 Back
117
Ev 71 Back
118
Ev 73 Back
119
See the final para of Sir John Cunliffe's letter of 22 February
(Ev 74). Back
120
Q 28 Back
121
Q 106 Back
122
Final para of the Opinion of the Legal Service of the Council
of 26 January 2012: Article 8 of the draft Treaty on Stability,
Coordination and Governance in the Economic and Monetary Union
- Opinion on its compatibility with European Union law. Back
123
Q 179 Back
124
Ev 83, 84 and 85 Back
125
Q 78. Back
126
See HC 428-xii (2010-11), chapter 2, para 12 (12 January 2011) Back
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