Article 50 negotiations: Implications of 'no deal' Contents

Appendix 2: Submission by Professor Kenneth Armstrong, University of Cambridge

EU Agencies and the European Administration

Executive Summary

Context

1.European Union agencies are part of a complex administrative landscape. Their role relates primarily to the post-legislative implementation, application and elaboration of EU policy and regulatory frameworks.

2.On 2 February 2017, the Government published a White Paper on ‘The United Kingdom’s exit from and new partnership with the European Union’ (Cm 9417). The White Paper (para 8.42) briefly states the position of the Government in terms of the future relationship with European Union (EU) agencies:

There are a number of EU agencies, such as the European Medicines Agency (EMA), the European Chemicals Agency (ECHA), the European Aviation Safety Agency (EASA), the European Food Safety Authority (EFSA) and the European (Financial Services) Supervisory Authorities (ESAs), which have been established to support EU Member States and their citizens. These can be responsible for enforcing particular regulatory regimes, or for pooling knowledge and information sharing. As part of exit negotiations the Government will discuss with the EU and Member States our future status and arrangements with regard to these agencies.

3.During the Committee stage of the European Union (Notice of Withdrawal) Bill, amendments to the Bill were proposed that, if accepted, would require the Governmentwithin 30 days of the coming into force of the Act—to report to Parliament on the UK’s future participation in, and relationship to, a number of EU agencies. The amendments were not called. It is in the context of uncertainty as to the UK’s future relationship with EU agencies—whether or not there is a final ‘deal’ with the EU—that this report identifies the role played by EU agencies and the implication of Brexit for that role when the UK leaves the EU.

4.Three points should be clarified at the outset:

5.As the UK prepares to withdraw from the EU, it will be faced with the difficult task of seeking to maintain or replicate regulatory structures which derive from, or are connected to, EU legislation. That is the task of the Great Repeal Bill and it will be an enormous task. However, the scale of the undertaking in respect of the post-Brexit administrative landscape has probably been underestimated with too much attention focusing on the legislative side and too little on the administrative side. Moreover, the very different roles played by different EU agencies prodcues a highly variegated pattern of engagement between, on the one hand, economic interests and, on the other hand, national and European administrative structures.

6.Understanding the role played by EU agencies is, therefore, a necessary but not a sufficient basis for evaluating the administrative challenges following the UK’s withdrawal from the EU.

Origins

7.Agencies were not an original feature of the institutional landscape of the European Communities before UK membership and emerged only gradually in the years immediately following its membership. It was not until the 1990s and the 2000s that European agencies became a significant institutional innovation. There are thirty three working agencies listed on the EU’s website (See glossary).

8.Prior to their emergence, ‘European’ administration was centralised within the European Commission (and on occasion within the Council of the EU). Given that tasks had been delegated to the European Commission, further delegations of power to other bodies and agencies was limited not least by a narrow interpretation of ECJ case law on the capacity to further delegate discretionary powers. However, in order to ensure that the European Commission was responsive to national interests, its capacity to exercise implementing powers was under the supervision of committees of representatives of national administrations and national experts. It was this system of ‘comitology’ rather than agencies that was the dominant institutional feature of the administrative framework.

9.Nonetheless, the number and role of EU agencies has steadily grown reflecting:

Constitutional and Legal Environment

10.There is a sizeable legal literature on the process of ‘agencification’ of the European administrative landscape (a brief literature review is included at the end of the report). A common finding of that literature is that EU agencies have grown despite a relatively hostile constitutional and legal environment which apparently restricted the capacity to delegate powers to bodies and agencies outside of the formal institutional structures of the EU. The Lisbon Treaty significantly altered the constitutional basis for the exercise of executive power:

11.The new legal context of European administration is illustrated in the judgment of the Court of Justice arising from a legal challenge brought by the UK to the powers of the European Securities and Markets Authority (ESMA) to control ‘short-selling’. The Court confirmed that the EU legislature does have the power to delegate specific tasks to EU agencies with judicial review ensuring that agencies remain within the boundaries of the mandate given to them. Once the UK leaves the EU, it will no longer have access to the mechanism of judicial review that brought about this case in the first place (see para 48 below).

12.Another point to draw is that agencies are creatures of EU legislation. Significantly, the extent to which agencies work with non-EU interests is to be found at this legislative level. Indeed, there has been a movement to standardise the provisions in EU legislation that relate to their relationship with non EU states (see paras 29–31 below).

Executive Agencies

13.A key distinction can be drawn between ‘executive’ and other EU agencies. Six ‘executive’ agencies are identified:

14.What these agencies have in common is that they administer funding under a wide variety of EU programmes. They help establish a division of responsibilities between the formal EU institutions that makes decisions as to policy goals and budgets, and the agencies which then ensure the proper implementation of the programmes. They were popularised following the resignation of the Santer Commission with a view to enhancing the transparency or, and accountability for decision-making. What is also noteworthy about these executive agencies is that they are governed by a ‘horizontal’ instrument: Regulation 58/2003.

15.The extent to which these executive agencies might matter to the United Kingdom post-Brexit depends on whether the UK seeks to continue to participate in one or more of the funding programmes for which executive agencies are responsible. It may be that the UK will simply repatriate some of these activities to national institutions. However, the work of the executive agencies supporting EU research, science and technology programmes is particularly important to the future of collaborative research between the UK and its EU partners.

16.Non-EU states can collaborate in research with EU partners but the extent and nature of that collaboration depends on the specific legal context of the relationship between the non-EU state and the EU. A broad distinction we can make is between those states that have the status of ‘associated countries’—where the EU and the non-EU state collaborate pursuant to an association agreement—and non-associated countries where the cooperation is pursuant to a Science and Technology Cooperation Agreement. Associated countries have the same rights as EU states except they do not have a vote in the programme management committee.

17.The Prime Minister’s Lancaster House speech together with the White Paper suggests that there will not be an association agreement governing the UK’s future relationship with the EU. Instead, the basis of any agreement would be a Free Trade Agreement not dissimilar to the recently agreed Canada-EU Trade Agreement (CETA). Canada has participated in research collaboration with the EU as a non-associated state since 1996, based on a Science and Technology Cooperation Agreement. Canadian researchers can participate in Horizon 2020 programmes but do not have direct access to EU funds (resources are pooled from EU and Canadian researchers). In October 2016 an ‘Implementing Agreement’ was concluded between the European Commission and the Canadians to facilitate research collaboration between Canadian researchers and European Research Council-funded researchers. The agreement is administered on the EU side by the European Research Council Executive Agency.

Common Foreign and Security Policy/Common Security and Defence Policy—European Defence Agency

18.The European Defence Agency was established in 2004 as a ‘2nd pillar’ agency by the Council of the EU. Its legal basis is now to be found in Council Decision 2011/411/CFSP. This highlights an important difference between this agency and others, namely that it is an extension not of the executive power of the European Commission but that of the Member States’ governments cooperating in the Council—through national defence ministers—together with the High Representative.

19.There are Framework Partnership Agreements (FPAs) which allow non-EU states to participate with EU countries in defence matters. While the budget of the Agency derives from Gross National Income (GNI)-generated contributions within a three-year financial framework agreed unanimously by the Council, ‘earmarked’ revenues can also be received by the Agency from third countries.

Police Cooperation–Europol

20.Established in 2009 as a creature of intergovernmental cooperation in the sphere of Justice and Home Affairs, in 2016, the European Parliament and the Council enacted Regulation 2016/794 to give Europol a clear legal basis in the post-Lisbon Treaty legal framework. In November 2016—following the referendum result—the UK signalled its intention to exercise its right to opt-in to JHA matters by agreeing to be bound by the new Regulation. The Government’s position was questioned by the House of Commons European Scrutiny Committee who considered such a move to be ‘an anomaly at a time when the UK is seeking to loosen rather than strengthen its ties with EU institutions and agencies’.

21.Article 23 of the 2016 Regulation permits Europol to establish and maintain cooperative relations with the authorities of third countries. Europol has cooperation agreements with Russia, Turkey, Ukraine, Bosnia and Herzegovena. Each party pays its own expenses for participation and any disputes fall to be settled between the parties. Participation does not create a right to participate in the management of Europol.

22.Importantly, Article 25 of the Regulation identifies the legal basis upon which information may be shared between Europol and third countries:

23.In the context of withdrawal from the EU, given the post-referendum commitment to working with Europol, it is hard to conceive how this could be achieved without an agreement. Indeed, one would expect that one or other of the agreements that will be adopted via Article 218 TFEU to make provision for the UK’s departure from the EU would serve the purposes of Article 25 of the Regulation.

Decentralised Agencies

24.The broadest generic category of agencies is the so-called ‘decentralised’ agencies. The primary feature of EU agencies is their functional variety and differentiation. Different typologies are to be found within the academic literature but even these have had to keep track of the growth and diversity of agencies. Moreover, agencies will often perform more than one function.

25.The Commission has sought to clarify the different functions of decentralised agencies. Adapting that typology and with some illustrative examples, we can begin to see the different roles and functions of EU agencies:

26.There is no ‘horizontal’ instrument for EU decentralised agencies despite proposals from the European Commission for the adoption of an ‘inter-institutional agreement’. In 2012, the European Commission, Council and Parliament agreed on a common approach to decentralised agencies. The aim was to provide greater coherence and consistency across the agencies, not just in terms of nomenclature but also the internal organisation and structure of agencies and the use of standard clauses in the instruments establishing agencies. A series of ‘roadmaps’ was agreed to structure the incremental alignment of agencies and to guide the establishment of future agencies.

27.In the context of the UK’s withdrawal from the European Union, the extent to which decentralised agencies are important depends upon their function and, therefore, their relevance to different sectors of industry. The examples of agencies identified in the White Paper are good indications of sectors where firms and companies may wish to continue to utilise common EU-wide regulatory structures. Their capacity to do so does not directly depend on the UK remaining a Member State of the EU or on the UK concluding a withdrawal agreement. After all, non-EU companies regularly apply for authorizations to place their goods on the EU market. Nonetheless, much depends on the precise nature of the regulatory set up in a given sector.

28.From the perspective of political representation in decision-making, the management boards of agencies are formed from representatives of Member States. Participation at other levels depends on the structure of international cooperation to be found within each agency.

Decentralised Agencies and International Engagement

29.As part of the strategy to standardise terms within the legal instruments establishing agencies, model clauses have been developed to define the international engagement strategies of agencies. The Regulation establishing the European Agency for the Cooperation of Energy Regulators contains a clause that is not atypical for EU agencies. It states in Article 31:

(1)The Agency shall be open to the participation of third countries which have concluded agreements with the Community whereby they have adopted and are applying Community law in the field of energy and, if relevant, in the fields of environment and competition.

(2)Under the relevant provisions of those agreements, arrangements shall be made specifying, in particular, the nature, scope and procedural aspects of the involvement of those countries in the work of the Agency, including provisions relating to financial contributions and to staff.

30.The working assumption behind this clause is that the working relationship between the agency and a third country is, nonetheless, pursuant to a ‘concluded agreement’ between the EU and that state.

31.A rather different example of an international engagement clause highlights that the relationship between an agency and a third country may have more specific and direct regulatory implications. Article 33 of the Regulation establishing the European Securities and Markets Authority states:

(1)Without prejudice to the respective competences of the Member States and the Union institutions, the Authority may develop contacts and enter into administrative arrangements with supervisory authorities, international organisations and the administrations of third countries. Those arrangements shall not create legal obligations in respect of the Union and its Member States nor shall they prevent Member States and their competent authorities from concluding bilateral or multilateral arrangements with those third countries.

(2)The Authority shall assist in preparing equivalence decisions pertaining to supervisory regimes in third countries in accordance with the acts referred to in Article 1(2).

Budget

32.The budgets of decentralised agencies are funded principally from the EU budget with additional contributions payable where EFTA states make contributions as part of their involvement with the European Economic Area agreement.

Agency

EU Budget Contribution

EEA/EFTA
Contribution

EUROPOL

100 million euro

FRONTEX

238 million euro

15.2 million euro

EFSA

77 million euro

2 million euro

ACER

15.8 million euro

EMSA

53.3 million euro

1.4 million euro

ERA

26.7 million euro

700,000 euro

33.However, some agencies are partially-funded by fees and charges paid by industry: European Chemicals Agency, European Medicines Agency, European Aviation Safety Agency. These agencies may also receive contributions from non-Member States that are parties to the EEA agreement or, like Switzerland, are EFTA states but not a party to the EEA. The 2016 budget for these three agencies breaks down as follows:

Agency

Fees and Charges

General Budget

EEA/EFTA

ECHA

33.5 million euro

71.6 million euro

2.2 million euro

EMA

277 million euro

26 million euro

676,000 euro

EASA

96 million euro

36.3 million euro

2 million

34.Some agencies are entirely self-funded like the European Union Intellectual Property Office (2016 budget of €400 million); the Community Plant Variety Office (2015 budget of €12.8 million).

35.The three agencies that together comprise the European Supervisory Authorities (ESA)—the European Banking Authority (EBA), the European Insurance and Occupational Pensions Authority (EIOPA) and the European Securities and Markets Authority (ESMA)–are publicly co-funded bodies. In 2016 their budgets were:

Agency

EU Budget

EEA/EFTA

Other Contribution

EBA

14.6 million euro

646,000 euro

22.7 million euro

EIOPA

8.4 million euro

367,000 euro

12.9 million euro

ESMA

10.2 million euro

447,000 euro

15.7 million euro

Relationship Between EU Agencies and the Wider European Administrative Landscape

36.The original institutional architecture of the EU–in contrast to the US–was one in which administrative tasks were delegated to the Commission through the comitology system rather than to independent agencies.

37.The comitology system came under strain for a number of reasons:

Agencies were seen as a way of tackling some of these problems.

38.However, agencies are embedded, horizontally, within the wider EU institutional framework including comitology, and vertically, in their collaboration with national administrations and regulators. These horizontal and vertical relationship give a more ‘networked’ dimension to the work of agencies than may be appreciated. Indeed, the Agency for the Cooperation of Energy Regulators (ACER) is an evolution from its earlier manifestation as a network of domestic regulators.

39.The interaction between agencies and EU institutions and national authorities can be illustrated by considering two different case studies: the authorisation of ‘biocides’ and the regulation of ‘credit ratings agencies.

Case Study I: Biocides

Legislative Framework: EU Biocides Regulation 528/2012

Aim: to require a form of authorisation before placing a biocide on the market

Scenario (a)–National Authorisation–Article 29

Application can be made for a national authorisation to place a biocide on the market of the national territory of a Member States. A mutual recognition application can also be made either at the same time (‘in parallel’) or following authorisation (‘in sequence’) to allow the biocide to have access to the market of another Member State.

Although it is the national competent authority—in the UK this is the Health and Safety Executive—which processes the application, the electronic procedure for making the application is on ECHA’s ‘R4BP’ site which transmits applications to the national competent authorities. There is a also a common register of biocides which means that if a product is already authorised in a Member State, an application could then be made for mutual recognition to allow it to be authorised in another Member State.

Rejections of applications for mutual recognition are referred to a ‘coordinators groups’ (composed of representatives of the Member States and the Commission, with a secretariat provided by ECHA). If unresolved, the matter is referred to the European Commission which will adopt an ‘Implementing Decision’ through the comitology procedure after seeking an opinion from the Standing Committee on Biocidal Products (composed of representatives of the Member States) and, if necessary, after receiving a scientific evaluation from ECHA.

Scenario (b)—Union Authorisation—Articles 41 et seq

Unless a biocide (or a biocide of a particular family) is excluded, it is possible to seek a single Union authorisation for products ‘which have similar conditions of use across the Union’ (the Commission is to establish ‘Guidance’ on what this means). Union authorisation permits the product access to the Union market as a whole without the need for mutual recognition of national authorisations. In situations where a Union authorisation is permissible, there is a choice whether to seek national authorisation or Union authorisation.

Although the application is made to ECHA, it will be one of the national competent authorities that will carry out the evaluation of the product. On the basis of this evaluation, the Biocides Products Committee of ECHA then prepares an opinion on the product for transmission to the Commission.

In light of the Opinion, the Commission will draft an implementing measure and, under the comitology procedure that applies, the Standing Committee on Biocidal Products will be consulted. If authorised, the Commission adopts an ‘Implementing Regulation’ and if not authorised, it will adopt an ‘Implementing Decision’.

Case Study II: Authorisation of Credit Rating Agencies

Legislative Framework: Regulation 1060/2009 as amended

Aim: establishes a common regulatory approach to credit ratings agencies with ESMA as the single supervisor.

Registration: Article 14—agencies established in one of the Member States shall apply for registration. Registration is effective for the entire EU. Registration is undertaken by ESMA’s Board of Supervisors consisting of representatives of the national competent authorities.

Third countries: Article 6—the European Commission may adopt an ‘equivalence decision’ recognising the supervisory system of non-EU countries as being equivalent to those required under EU law. ESMA will enter into a cooperation agreement with that country via memorandums of understanding.

Post-Legislative Rulemaking

40.There is another dimension to the work of European agencies that often receives very little attention and that is the work that agencies do either in the production of guidance—used by national authorities and by industry in their interpretation and application of formal rules—or, more directly, in drafting technical norms which are then formally adopted as implementing rules by the European Commission.

41.Post-legislative guidance is produced by at least half of the EU agencies and is an important means of elaborating on the application of formal legislative and delegated rules. This is one area where the representation of national interests in the policy work of EU agencies may be both highly significant but also under-appreciated.

42.The European Securities and Markets Authority has a more direct role in producing draft technical rules. In light of its own consultations with stakeholders, ESMA draft standards which are transmitted to the Commission for adoption as binding ‘regulatory’ standards or ‘implementing’ standards.

43.A key issue for the UK following its withdrawal from the EU will be whether national regulators and civil servants will have means of influencing the content of these different forms of post-legislative rulemaking.

Judicial Review

44.There are two general mechanisms by which the jurisdiction of the EU courts can be engaged in respect of the acts of EU agencies and bodies.

45.Under Article 263 TFEU a direct action may be brought before the EU courts to review the legality of acts intended to produce legal effects for third parties. Actions brought by Member States or the EU’s own institutions are heard by the Court of Justice. Actions brought by natural or legal persons are heard before the General Court. The capacity of individuals and companies to challenge legal acts is further limited by Article 263 TFEU. A challenge is only admissible if:

An act is addressed to a party either because it is explicitly and formally addressed to that party or substantively it is clear that the author of the act intends to create legal effects for an identified party by bringing about a change in that party’s legal position. Accordingly, the EU courts have ruled that a party that intervened in proceedings of the Board of Appeal of the European Chemicals Agency and who was notified of the outcome of the Board’s decision was not the addressee of the decision. This meant that the applicant had to satisfy either of the other tests on standing. Applicants often fail to meet the strict standing rules imposed by the EU courts.

It should also be noted that there is a strict two-month time limit for bringing proceedings.

The effect of these strict procedural requirements is—except in situations where the applicant is the addressee of the legal act being challenged—that litigants may be left to seek remedies in national courts.

46.Under Article 267 TFEU, the legality of agency acts is open to challenge in indirect actions brought in the national courts, with the national court referring any question as to the validity of an EU measure to the Court of Justice under the preliminary ruling mechanism.

47.As Article 263 TFEU also makes clear, the legal acts establishing EU agencies and bodies may lay down specific rules regarding the jurisdiction of the courts in respect of actions brought by non-privileged parties seeking to challenge the acts of agencies ‘intended to produce legal effects in relation to them’. Key examples of this specific jurisdiction are reviews of decisions of the Community Plant Variety Office (CVPO) and decisions of the European Union Intellectual Property Office (EUIPO formerly OHIM).

48.One of the defining objectives of Brexit appears to be to remove the jurisdiction of the EU courts. Certainly, once the UK ceases to be a Member State, the UK government will no longer have standing to challenge the actions of EU agencies. However, to date there have only been two relevant legal actions brought by Member States against agencies: one case involved Cyprus and a challenge to a decision of OHIM on trademarking the word ‘Halloumi’ and a staff dispute case brought by Spain against Eurojust.

49.Non-privileged applicants will still be able to bring direct actions to the EU courts provided they meet the strict standing test and bring their claims within two months. Indeed, companies in non-Member States are not infrequent litigators before the EU courts. In situations where agencies do adopt legal acts that create legal effects for third parties—this would include decisions refusing an authorization or refusing to register a trademark or a plant variety—UK companies will still have a right to bring direct legal challenges before EU courts. However, they will no longer be able to raise challenges to the validity of the acts of EU agencies via indirect challenges in the national courts unless the preliminary ruling mechanism is retained for these types of validity challenges.

50.When we consider all the actions for annulment brought against EU agencies we find three things. Firstly, many of these actions relate to the procurement and tendering practices of the agencies rather than their regulatory work as such. Secondly, some of the legal actions relate to the application of EU rules on access to documents. Thirdly, once we strip out the case law generated by trademarks and plant variety cases, the bulk of cases relate to the work of the European Chemicals Agency (ECHA), followed by the European Medicines Agency (EMA), with a smaller number of cases involving the European Food Safety Authority (EFSA) and the European Aviation Safety Agency (ASEA). Very few cases are successful and tend to focus on procedural defects such as failures to give adequate reasons or imposing disproportionate fees.

51.It is evident that the extent to which judicial review of EU agencies really matters depends on the particular functions exercised by agencies. Not every agency will produce acts that create legal effects for third parties. Indeed, the task of agencies may be to undertake technical work in respect of applications that are made to, and decided by, the European Commission or the national authorities. For example, the European Food Safety Authority provides scientific support to the European Commission with decisions on the authorisation of food additives, food enzymes and food flavouring subject to a common authorisation procedure conducted by the European Commission in cooperation with the Standing Committee on the Food Chain and Animal Health. These Standing Committees are composed of the representatives of the Member States and is chaired by the Commission. In formal terms, then, the decision-making remains within the ‘comitology’ system—decisions taken by the Commission but with Member States exercising influence and control through the committee system—and with agencies performing tasks of scientific evaluation.

52.The concentration of litigation around a small number of agencies reflects the delegation of specific decision-making competences to these agencies.

Glossary

Agency for the Cooperation of Energy Regulators (ACER)

Office of the Body of European Regulators for Electronic Communications (BEREC Office)

Community Plant Variety Office (CPVO)

European Agency for Safety and Health at Work (EU-OSHA)

European Border and Coast Guard Agency (Frontex)

European Agency for the operational management of large-scale IT systems in the area of freedom, security and justice (eu-LISA)

European Asylum Support Office (EASO)

European Aviation Safety Agency (EASA)

European Banking Authority (EBA)

European Centre for Disease Prevention and Control (ECDC)

European Centre for the Development of Vocational Training (Cedefop)

European Chemicals Agency (ECHA)

European Environment Agency (EEA)

European Fisheries Control Agency (EFCA)

European Food Safety Authority (EFSA)

European Foundation for the Improvement of Living and Working Conditions (Eurofound)

European GNSS Agency (GSA)

European Institute for Gender Equality (EIGE)

European Insurance and Occupational Pensions Authority (EIOPA)

European Maritime Safety Agency (EMSA)

European Medicines Agency (EMA)

European Monitoring Centre for Drugs and Drug Addiction (EMCDDA)

European Union Agency for Network and Information Security (ENISA)

European Union Agency for Law Enforcement Training (CEPOL)

European Police Office (Europol)

European Public Prosecutor’s Office (in preparation) (EPPO)

European Union Agency for Railways (ERA)

European Securities and Markets Authority (ESMA)

European Training Foundation (ETF)

European Union Agency for Fundamental Rights (FRA)

European Union Intellectual Property Office (EUIPO)

Single Resolution Board (SRB)

Selective Literature

Academic

M. Busuioc, European agencies: Law and practices of accountability (Oxford University Press, 2013)

E. Chiti (2009). “An Important Part of the EUs Institutional Machinery: Features, Problems and Perspectives of European Agencies.” Common Market Law Review 46(5): 1395–1442.

D. Levi-Faur (2011). “Regulatory networks and regulatory agencification: towards a Single European Regulatory Space.” Journal of European Public Policy 18(6): 810–829.

M. Thatcher (2011). “The creation of European regulatory agencies and its limits: a comparative analysis of European delegation.” Journal of European Public Policy 18(6): 790–809.

S. Vaughan (2015) “Differentiation and Dysfunction: An Exploration of Post-Legislative Guidance Practices in 14 EU Agencies.” Cambridge Yearbook of European Legal Studies 17: 66–91.

Official Sources

European Commission, European Agencies–the way forward COM (2008) 135

European Commission, Progress Report on the Implementation of the Common Approach on EU Decentralised Agencies COM (2015) 179.





10 March 2017