Would an independent Scotland have to reapply to join the EU?

Steve Peers

There has been extensive discussion, during the current campaign on the referendum on Scottish independence, on the legal issues relating to an independent Scotland's membership of the European Union. Would an independent Scotland automatically be a member of the EU? Would the Treaties have to be renegotiated, with Scotland as a Member State participating fully? Or would Scotland have to apply to 'rejoin' the EU as a non Member State? Would an independent Scotland retain the UK’s current opt-outs from the single currency and Justice and Home Affairs (JHA) matters?

I have looked at these issues before, as part of a longer analysis of the legal issues arising from the EU Treaty amendment process, published in the Yearbook of European Law. However, now that the issue has arisen in practice, it's a good time to revisit the topic.

General points

First of all, as a matter of (non-legal) principle, it's clear what the answer ought to be. If Scottish independence is supported by a majority of Scottish votes, then, given that the legitimacy of the vote is accepted by the rest of the UK, Scotland ought to remain an EU Member State with the same opt-outs that the UK now has. Our views on the desirability of independence (for the record, I would be sad to see Scotland leave the UK) should not influence our interpretation of the legal position, or our recognition of the democratic legitimacy of the process. But nor can we assume that the legal position is aligned with what it ought to be.

Secondly, one aspect of the debate is worth noting: it seems to be taken for granted that Scotland ought to remain an EU Member State after independence. From the perspective of the Eurosceptic Deep South of the UK, this is surprising. There are, of course, some Eurosceptics in Scotland: the Shetland Islands and Western Isles voted against the Common Market in 1975. But polls show 2-1 support for remaining in the EU, so it doesn't seem to be an issue. Perhaps Scots just want to make sure that after separation from England, they would still have something to whinge about.

This raises a further interesting scenario: what if Scotland votes against independence this year, but the UK as a whole votes to leave the EU in a few years' time? Could support for independence then increase, given the link with the more popular (in Scotland) case for EU membership?

Finally, it's worth noting that Scottish independence would redress one 'reverse discrimination' issue in EU law, and exacerbate another one - assuming that both Scotland and the remaining UK were both EU Member States. It would end the anomaly by which students from other Member States have the same generous treatment as regards tuition fees in Scotland as Scottish students, while students from the rest of the UK do not. This might well raise questions about the affordability of this policy.

And it would create a new route for British citizens with third-country national family members to avoid the increasingly obnoxious constraints placed by British immigration law upon family reunion with their loved ones. Scottish politicians have talked about increasing immigration to Scotland; the combination of harsh immigration laws in the remaining UK and the application of EU free movement law would mean that they would get their wish.

The legal issues

Would it be possible for an independent Scotland simply to become an EU Member State without further ado, simply by virtue of its independence? The analogy here would be with Algeria, which technically remained a part of France (as a matter of EU law) until the Treaties were amended to catch up with reality in 1993. However, there is a world of difference between a third country which is no longer part of a a Member State and no longer wishes to remain part of the EU, and a State which, having been part of a Member State, wishes to succeed to that Member State's membership of the EU.

The starting point is that the EU Treaties (unlike the founding treaties of some other international organisations) list the Member States of the EU: see particularly Article 52 TEU, and the other provisions referred to in my Yearbook article. It must follow that to alter the list of Member States a Treaty amendment is needed, even where part of an existing Member State has seceded. It is not sufficient for the Member States to agree informally among themselves to this end, for the Court of Justice of the European Union (CJEU) has ruled that the Treaty can only be amended by using the formal procedures provided for to this end (Case 43/75 Defrenne II).

So which Treaty Article would apply to those amendments? Article 48 TEU provides for the Treaties to be amended by unanimous consent of the Member States, while Article 49 TEU provides for a new Member State to join by means of an accession treaty negotiated between the existing Member States and the new Member State, and then ratified by all of them. The key difference between the two procedures from an independent Scotland's point of view (there are other differences, but let's leave them aside for now) is that it would be in a stronger position as a would-be Member State (Article 48) than as a non-Member State (Article 49). So this is, not surprisingly, the view of the Scottish government.

However, the use of Article 48 has to be rejected. The basic legal problem is that only Member States can be party to a Treaty amendment pursuant to Article 48, whereas Scotland would not be a Member State, since it would not be listed in Article 52. If Scotland were a Member State already, recourse to Article 48 to amend the Treaties merely to confirm that fact would not be necessary. It cannot simply be asserted that the listing of the United Kingdom as a Member State in Article 52 implicitly covers Scotland also, after independence, since the whole purpose of holding an independence referendum is precisely to become a separate State. As others have pointed out: after a divorce, you're single.

Sir David Edward has argued that the drafters of the Treaties did not intend that a portion of a Member State which voted to secede from an existing Member State would have to apply as a new Member State. There is no evidence of what the Treaty drafters thought of this issue (if they thought about it at all), but given that some Member States face secessionist movements or even (in the case of Cyprus) breakaway self-declared States, it's hard to believe that all Treaty drafters took such a view.

Also, it has been argued that depriving Scots of EU citizenship would be a breach of the citizenship provisions of the Treaties, since they would lose that status without their consent. But this begs the question: for the reasons I set out here, a vote for an independent Scotland would be a vote to leave the EU. By the same token, the foundation of the EU on the principles of democracy (Article 2 TEU) is not as such relevant, since the second sentence of Article 2 states that these principles are common to the Member States. The same goes for the principle of sincere cooperation set out in Article 4(3) TEU. This argument essentially boils down to: an independent Scotland would remain a Member State, because it is a Member State. It's entirely circular.

The Scottish government seeks to circumvent this chicken-and-egg problem by stating that the current Member States (ie the 28 Member States not including Scotland) could amend the Treaties by means of Article 48 in the 18-month period before Scottish independence took effect, in order to provide for immediate Scottish EU membership upon independence day. It's not quite clear why, as a matter of politics, the other Member States would wish to do Scotland this enormous favour. Anyway, as a matter of law, they couldn't do it: as Professor Kenneth Armstrong has pointed out, Article 49 is obviously the lex specialis provision regarding the addition of new countries to the list of Member States set out in Article 52. However, it would be possible to use Article 48 to amend Article 49 on this point, at the same time as providing for new rules on Scottish membership. This seems an unlikely scenario, however, since it would encourage secessionist movements in other Member States, even if the amendment to Article 49 were limited to the case of Scotland.

In fact, in my view, Article 49 arguably has to be used in conjunction with Article 48, since any Treaty amendment which gives a permanent opt-out for a new Member State from significant EU policies goes beyond what can be addressed in an accession treaty (see my Yearbook article for elaboration), and presumably Scotland would want to keep the UK's current opt-outs. On the other hand, it might reasonably be argued that an exception to the latter rule might be made here, since the legal position as regards the territorial scope of those opt-outs would not really be changing.

Having said that, I am not convinced that the use of Article 49 necessarily would be that difficult in practice. In principle, it should be possible to draw up a very short accession treaty quite quickly, given that Scotland is already applying EU law by virtue of its integration into the United Kingdom. There would be a technical problem negotiating with a State which does not yet exist, but there could be informal talks during the period leading up to independence, with the accession treaty signed on the day of independence. It would arguably be possible (as Professor Armstrong has pointed out) to apply the accession treaty provisionally, pending full ratification, or retroactively if necessary.

An alternative route is to agree a very far-reaching association agreement between the EU and Scotland to ensure that EU law still applies to Scotland in the interim period before the accession treaty can be ratified or (if need be) negotiated. This treaty could in turn be applied provisionally from the date of independence (there are many precedents for the provisional application of treaties between the EU and third States, and Article 218 TFEU expressly provides for this possibility).

This potentially simple legal process could, however, be complicated by purely political problems, if one or more Member States (and it would only take one) wished to slow down the process for whatever reason. It cannot simply be assumed at this stage that this would (or would not) necessarily happen. While Sir David Edward has argued that there would be an obligation to negotiate in good faith in the event of a Scottish 'yes' vote, it is hard to find a provision in the Treaties which supports that proposition.

So, the bottom line is that when Commission President Barroso and Vice-President Reding argue that Scottish membership of the EU would entail (a) an accession treaty and (b) be lengthy and difficult, they are clearly right on the first point, but wildly speculating on the second.


Barnard & Peers: chapter 2 

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Democracy and its discontents: Should the results of the European Parliament elections determine the next President of the European Commission?

Steve Peers

It is highly unlikely that the next President of the European Commission will be decided by the Court of Justice of the European Union (CJEU).  Law sets the framework in which elections take place, but usually does not directly impact upon the outcome - although there are important exceptional cases to the contrary, such as the American election of 2000.

The election of the Commission President in 2014 is also an exceptional case, at  least to the extent that the rules have changed and their interpretation is contested. Previously the President was appointed by the European Council, after approval of its preferred nominee by the European Parliament. The new rules, which were introduced by the Treaty of Lisbon and are now being applied for the first time, now specify that the President is 'elected' by the European Parliament, on the basis of a nomination by the European Council, 'taking account of' the results of the election to the European Parliament.

At first glance, the rules have not really changed, given that the European Council anyway has assumed since 1999 that the Commission President had to come from the same political background as the largest party in the European Parliament. However, the majority of European political parties take the view that the Treaty amendments mean that they should nominate their preferred candidate for the job of Commission President before the elections, and that the candidate preferred by the party winning the most seats should be the next Commission President.

They take this view not only because of the change in the rules, but also because of the more fundamental political consideration that enhancing the link between the election to the Parliament and the Commission President selection would enhance the democratic legitimacy of the EU. Voters would be selecting the EU executive in the same way that the votes in national parliamentary elections select the executive in Member States with parliamentary systems.

However, this interpretation is not uncontested. The ECR party (technically the AECR party, in the election), which includes the British Conservatives, will not name a candidate, since it objects in principle to the link between elections to the European Parliament and the selection of the Commission President, and is running wholly national campaigns instead. The EFD party, which includes the UK Independence Party, will not name a candidate either. Moreover, Angela Merkel, the German Chancellor, does not accept any automatic link between the. EP elections and the nomination of the Commission President. Finally, the UK Labour party doesn't support the candidate chosen by the Party of European Socialists as its nominee for Commission President, although it nevertheless agrees in principle to the idea of the parties nominating such candidates.

The ECR party objects to the idea of the European Parliament elections deciding the Commission President on grounds of democraticy legitimacy, because it believes that there is no public demand for the move and that the principal method of legitimacy of EU policies should be via the mans of national governments. A detailed critique of the idea, by Heather Grabbe and Stephan Lehne for the Centre for European Reform, also objects to the proposal on a number of grounds.

Post-election scenarios

It's always risky to guess the results of a political  process, but it's necessary in this case because the idea of a 'partisan' Commission President can't be judged without making certain assumptions about what will happen at the time of the next appointment. The Grabbe/Lehner paper suggests three scenarios: (a) the EP wins the argument and the largest party's candidate is proposed by the European Council without demur; (b) a deadlock between the European Parliament and European Council results over the appointment; and (c) a backroom deal is done. They were writing in October 2013, when (c) seemed more probable; in the meantime, the European People's Party looks less likely (as they had assumed) to win the largest number of seats, and is going ahead with its plan to nominate a candidate.

However, there could still be a messy deadlock. Whichever party wins the most seats in the European Parliament in the May elections will not hold a majority of the seats, due to the application of proportional representation voting as required by the EU Treaties. So for it to vote down the preferred nominee of the European Council, it will need the support of some other parties. Equally it will need the support of some other parties for its preferred candidate for President to be elected - assuming that the European Council puts that name forward in the first place. If the European Council fails to put that name forward, there could indeed be a deadlock.

Having said that, it should be recalled that the European Parliament has always sought to enhance its role in the appointment of the Commission. It began to hold hearings for nominees to the Commission even before it gained a decisive role in its appointment. And when the last two Commissions were appointed, it found a way to reject individual nominees, even though the Treaties don't provide for this. It might therefore be expected that if it comes to it, a majority of MEPs would veto any candidate for Commission President who is not the nominee of the largest party, and that the European Council will recognise reality accordingly. In effect, when it comes to appointment of the Commission President, the European Council would become the equivalent of a constitutional monarch like Queen Elizabeth II.

Is the 'election' of the Commission President via the European Parliament elections a good idea?

Just because it seems to be increasingly likely to happen, does not necessarily mean that it is a good idea. Let's look first of all at one set of arguments advanced by Grabbe/Lehne, concerning its potential effect on the effectiveness of the Commission. First of all, they argue that a 'partisan' Commission President could not do his or her job effectively, given the number of Commission tasks which require objective assessment, namely economic governance, state aids, competition, human rights and infringement actions. Secondly, they argue that a President elected via the EP elections might not be a leading political figure, and would be less able to work closely with national governments. Thirdly, he or she would be beholden to the EP, and therefore his or her initiatives would be blocked by the Council, resulting in the legislative gridlock familiar to Americans. Fourthly, given that the other Commissioners are chosen by the Member States, it is possible that the President comes from one party and the majority of Commissioners will come from the opposing political background.

The second set of arguments concern the legitimacy and democratic credentials of the notion. Here the Grabbe/Lehne argument overlaps with the ECR's explanation of its position. Both argue that the EP is remote from its constituents, and that enhancing the link with the selection of the Commission President will not change this, given that the candidates will not have wide recognition.

These are all valid arguments in principle, so let's examine them one by one. First of all, it should not be forgotten that many of the Commission's more technical tasks have been transferred to EU agencies, and that its main task remains the proposal of legislation. There are obviously political choices to be made about which legislation is proposed by the Commission, and about the content of Commission measures implementing it. State aid and competition decisions are anyway subject to objective rules and can be challenged in the courts, and the Commission's infringement actions have to be made out in court. It would be a good idea, if the Commission President were 'partisan', to establish mechanisms to ensure that the less political aspects of its decision-making are separate from its political choices. But this is not impossible: see, for instance, the separation of the European Central Bank's functions as regards (politically accountable) banking supervision from its role as an independent central bank. Anyway, the Grabbe/Lehner argument forgets that since 1999, the Commission President has already been chosen from the party which won the most seats in the EP - without any sign of contamination of the Commission's more technical tasks.

Secondly, while it seems likely that the next Commission President will not be a former Prime Minister (unlike the last three Presidents). However, this is not a guarantee of effectiveness: the most effective Presidents (Hallstein and Delors) had not been Prime Ministers, whle the least effective President (Santer) had been. This line of argument assumes that neither the Member States nor the Commission President will make any effort to work effectively with the other, but this seems unlikely. The history of the EU shows a continuing attempt to reach a broad consensus between institutions. Similarly, as regards the third argument, any Commission President is bound to know that his or her initiatives have to obtain the support of a least a qualified majority in the Council.

The fourth argument (the partisan mix of the Commission) is perhaps the strongest point. To draw an analogy, it is difficult enough for the British Conservative party to accept that it has to govern with a minority of Liberal Democrats in the cabinet. So how could a government work if David Cameron were Prime Minister, with a majority of cabinet members from the Labour party?

The answer is that the EU institutions also seek broad consensus within them. In fact, due to the different makeup of the different governments of the Member States, the Commissioners have always had a broad mix of political backgrounds. Also, the Grabbe/Lehner thesis overlooks the Treaty provisions which seek to reinforce the influence of the Commission President: the requirement of all Commissioners to work under his guidance and her ability to sack individual Commissioners. The added legitimacy of indirect election of the President would only reinforce this. Plus, as noted above, the Commission President will need the support of several political parties to be elected anyway. Finally, a more radical answer to this critique is that the EP should go further, expecting the political parties to nominate an entire team of Commissioners which would constitute the next Commission. So far, of course, this step has not been taken.

As for the argument about political legitimacy, the poll which the ECR commissioned to justify its decision not to run a candidate was very interesting. While large numbers of voters were critical of the EU's legitimacy, and were not familiar with the names of the candidates for Commission President, the bigger percentage of respondents agreed that they were 'happy' with the idea of the vote for the EP elections determining who would become Commission President, because this would make the EU more democratic. This was particularly pronounced in Poland, where the poll of Poles (I couldn't resist) indicated that 50% supported the idea, while only 19% were opposed. The idea was also supported in France, Italy and Spain, but opposed in Germany and the UK - which makes the British Conservative position (and perhaps also the UK Labour Party's contortions) understandable.  In any event, the poll suggests that many of those who think the EU lacks legitimacy would be 'happy' with the idea of enhancing that legitimacy by means of the indirect election of the Commission President. And how many people had heard of Barroso, in February 2004? Or Obama, in January 2008?

This is ultimately the decisive argument in favour of indirect election - the need to attempt to forge a greater democratic link between EU citizens and the Union. The idea certainly has its flaws, but for the reasons set out above, the existing EU institutional system can adjust to accommodate it. Those flaws are outweighed by the advantages of seizing the opportunity to take a significant step towards democratising the EU, and giving the voters an opportunity, however indirect, to (in Weiler's terms) 'throw the rascals out'. Nor does it mean that the EU necessarily becomes more centralised. In my view, the debate on the future of the EU could only have benefited from (for instance) John Major setting out the ECR's case across Europe for a less centralised, less regulated EU focussing on free trade.


Barnard & Peers: chapter 3

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The CJEU secures asylum seekers' right to family housing

Steve Peers

What obligations do Member States have to ensure that asylum-seeking families are housed adequately? The Court of Justice of the European Union (CJEU) has today usefully clarified the minimum standards which Member States must observe on this issue, in its judgment in Saciri. This judgment is a welcome confirmation that whatever the practical difficulties facing Member States in managing their reception for asylum-seekers, families cannot simply be left homeless or forced to live in grossly inadequate conditions by means of the refusal of support for financial assistance to obtain housing.

Judgment

The case concerns a family of asylum-seekers (two parents and three children) who needed accommodation in Belgium while their asylum application was being considered. The Belgian agency responsible for reception of asylum-seekers replied that it could not provide reception, and referred them to the social assistance agency. Since the Saciri family could not pay the rent being charged for private properties, they asked the social assistance agency for financial support.

But there was a 'Catch-22': the agency refused to give them support, since the family was not living in accommodation provided for by the reception agency - even though the reception agency had told them that it could not help them. A lower court in Belgium ruled that the reception agency had to pay them financial support, and that agency appealed to the referring court, which asked the CJEU questions about the EU's first-phase reception conditions Directive.

First of all, the CJEU pointed out that the Directive allows for support for asylum-seekers either in kind (ie providing housing directly) or by providing financial allowances. Then it confirmed its prior case law (Cimade and GISTI) to the effect that benefits must be provided as soon as the asylum application is made, in particular in light of the right to human dignity set out in the EU Charter of Fundamental Rights.

Next, as for the amount of the financial allowances, regardless of how the aid is provided, the Directive states that it must ensure a dignified standard of living for applicants' health, as well as subsistence. Member States must also, according to the Directive, take account of those with special needs (including minors), entailing a requirement to preserve family unity as well as the best interests of the child. The CJEU confirmed that these principles meant that applicants must be able to obtain housing on the private market if necessary, although this did not mean that asylum-seekers could make their own choice of housing.

The CJEU then ruled that, although the specific rules in the Directive relating to housing only apply where the housing is provided in kind by Member States, it still followed that any allowances provided to assist with housing had to ensure the unity of the family.

Finally, the Court ruled that where accommodation facilities are overloaded, it was open to Member States to refer asylum-seekers to the authorities responsible for public assistance, provided that the latter authorities ensure that the minimum standards in the Directive are met.

The Court concluded by noting that 'saturation of the reception networks [is not] a justification for any derogation from meeting' the standards in the Directive.

Comments

The CJEU's judgment neatly addresses the 'Catch-22' created by national law, which to some extent reflects the structure of the Directive. On the one hand, the Directive lays out general rules on reception support, but then on the other hand, it only lays out detailed rules as regards housing where the State provides such housing in kind. What if the State does not, or cannot, provide for housing in kind?

The Court's answer to this question takes account of the definition of 'material reception conditions' in the Directive, which expressly includes 'housing'. So it logically follows that such material support must include assistance to obtain housing, where no housing is provided for in kind.

Moreover, it is expressly clear from the Court's judgment that a family of asylum-seekers is entitled to support to obtain family housing on the private market, although the Court does recognise that the asylum-seekers do not have a fully free choice of where they may be housed. This necessarily means that, if there is no publicly-provided accommodation available, the authorities must ensure that a family of asylum-seekers has enough support to afford to rent a property at market rates, which is big enough to house their family in dignity. But the house need not be palatial. Probably this means that a family of five cannot demand enough financial support to rent a four-bedroom house; but neither can they all be expected to sleep on the same sofa.

The Court's answer to these questions was not affected by the overloading of the Member State's reception system. This had practical consequences, in that asylum-seekers can be referred to the social assistance agency instead of the reception agency, and be provided with a financial allowance instead of housing in kind. But the basic obligation to provide enough assistance to ensure a minimum dignified level of accommodation, including family unity, cannot be derogated from.

Finally, it should be noted that the judgment takes a stronger approach to family unity than the wording of the Directive, which states only that family unity shall be ensured 'as far as possible', and only where Member States provide for accommodation in kind. The Court's judgment means instead that families of asylum-seekers must be able to live together in all cases, if necessary in private accommodation, even if this means some additional cost or administrative inconvenience for Member States. This can only be welcomed, as it is an essential step to ensure the protection of the family life of some of the most vulnerable people in the European Union.


Barnard & Peers: chapter 26

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Non-EU benefit claimants and implications for the EU's relations with Switzerland

Steve Peers

Even the most xenophobic of British tabloids is unlikely to greet today's judgment of the Court of Justice of the European Union (CJEU) with the headline, 'Scrounging Swiss'. Yet the judgment, concerning the correct legal base of an EU measure extending revised social security rules to Swiss citizens, raises interesting questions concerning the extension of social security rules to third states in general, and on the EU's relations with Switzerland in particular.

Background

This the second in a series of three cases (to date) in which the UK has challenged the 'legal base' of Council Decisions which establish the EU's position as regards the extension of revised EU rules on social security coordination to particular third countries. The first case (C-431/11, UK v Council) concerned the European Economic Area (EEA), a treaty extending the EU's internal market to Norway, Iceland and Liechtenstein. The UK lost that challenge in September 2013. This case (C-656/11, UK v Council) concerns the extension of those social security rules to Switzerland, pursuant to the EU's free movement agreement with that country. A third case, still pending (C-83/13, UK v Council) concerns the extension of those rules to Turkey.

In all these cases, the Council has taken the view that the correct 'legal base' for its decision is Article 48 TFEU, which concerns the coordination of social security for employed and self-employed workers within the EU. Since the Treaty of Lisbon, this has provided for a qualified majority vote, although a Member State can pull an 'emergency brake' on proposed legislation if it believes that 'important aspects' or the 'financial balance' of its social security system will be affected by the proposal in question. The UK, on the other hand, has argued that the correct 'legal base' for these measures is Article 79 TFEU, which concerns the EU's common immigration policy.

This provision gives the UK (along with Ireland and Denmark) an opt-out. The UK intended to use this opt-out to reduce the cost of the provision of foreign benefits, although the total amount of the benefits paid out is surely not enormous. It may even be less than the cost of bringing this litigation.

It should be noted that the Council has taken a number of other decisions regarding social security rules for associated countries, based on Article 79 TFEU as the UK has advocated. In the Commission's view, set out in an interesting communication on social security and third countries, Article 48 should be used where the EU has a particularly close association with the country concerned, but otherwise Article 79 should be used.

Judgment

In the previous judgment concerning the EEA, the Court ruled that Article 48 TFEU had to be used because: the EEA was a particularly close association between the EU and the countries concerned; the decision aimed to extend the whole EU internal market to those countries; the relevant provisions of the TFEU and EEA treaty were the same; the EEA has particular rules on the legal effect of EEA law; the decision also applied to EU citizens in the third countries concerned; the decision merely updated prior commitments; and it would be difficult to ensure free movement in the event of parallel regimes. Article 79 TFEU could not be used, because it was 'manifestly irreconcilable' with the context and objectives of the EEA.

Most of those points were unique to the EEA, and so the UK had hoped that the previous judgment could be confined to its facts. However, the CJEU extended this case law to cover the EU/Swiss decision as well. It reasons were that: Switzerland has a 'vast' number of treaties with the EU which aim to strengthen the EU/Swiss economic relationship, even though the Swiss had voted not to participate in the EU internal market, via means of the EEA; the EU/Swiss treaty has the same wording as Article 48 TFEU; and the decision simply extends the revised EU rules to the third country concerned. 

The CJEU also ruled that Article 48 TFEU can apply to third-country nationals where an association agreement (which was the basis for the approval for the 'package' of seven EU agreements with Switzerland, in 1999) has already extended EU social security rules to the country concerned, and the decision in question merely aims to update the references concerned. Finally, the CJEU rejected the UK's argument that Article 48 could not apply to the rules on social security for those Swiss citizens not exercising economic activities (who are outside the scope of Article 48), on the grounds that this aspect of the new decision was purely ancillary to the rules on employed and self-employed persons.

So Article 48 TFEU can apply even if the relationship is not as special as the EEA, does not extend the full internal market to the country concerned, and does not contain the particular rules on the legal effect of EEA law. The most recent judgment makes no reference to the complication of having parallel regimes either. Moreover, the UK's best argument - that third country nationals not exercising economic activities were beyond the scope of Article 48 TFEU - has now been shot down by the Court.

It is surely likely, by analogy with this judgment, that the UK will lose its challenge to the Council decision regarding social security for Turkish citizens. Moreover, the Coumcil's decisions relating to social security for other associated third countries, based on Article 79, might even be legally questionable. This is because the Court's judgment today could be understood to mean that the implementation of any specific aspects of the EU's association agreements involve the use of the relevant legal base relating to internal EU law - given that, as the CJEU has always held, all association agreements aim to extend aspects of the EU's internal law to the third country concerned (Case 12/86 Demirel).

Broader implications

The CJEU makes no reference to the recent Swiss referendum, which established a legal requirement for the Swiss government to renegotiate the free movement treaty with the EU within three years, to establish a possible quota on free movement. Of course, the judgment does not concern termination of the EU's treaties with Switzerland, but rather their implementation. But it implicitly rejects any argument that the Treaty provisions on association agreements (now Article 217 TFEU) must always be used for decisions relating to such agreements. The Advocate-General's opinion in the previous EEA social security case had argued that Article 217 had to be used, but the Court did not follow that view.

It is therefore arguable that the EU could decide to denounce one or all of the other treaties in the 1999 package based on the particular legal base for the treaty concerned - such as the transport legal base for the treaty on aviation, for instance. If this is correct, most or all of these decisions to denounce could be taken by a qualified majority vote, so this would strengthen the EU's negotiating position with Switzerland when it comes time to renegotiate the main treaty on free movement of persons. It cannot be forgotten that the EU and the Swiss agreed in 1999 that the seven agreements were a package - and that the denunciation of one treaty would mean the denunciation of all of them.


Barnard & Peers: chapter 24

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Counterfeiting the euro: The EU legislature applies the principle of ineffectiveness

Steve Peers

In some of its key judgments concerning EU criminal law, most notably Pupino and its judgments on the legal base for environmental crime legislation, the Court of Justice of the European Union (CJEU) has attempted to strengthen the principle of effectiveness in this area. However, the EU legislature has recently agreed on a new Directive on counterfeiting the euro, which could only be described as an application of the principle of ineffectiveness.

Background

The issue of counterfeiting the euro is currently addressed by a number of measures, most notably a pre-Lisbon measure, a Framework Decision forming part of the previous 'third pillar', which dates from 2000. This Framework Decision sets out substantive criminal law rules regarding counterfeiting currencies, including the euro. It requires Member States to define as a criminal offence the fraudulent making or altering of currency, as well as a number of similar offences.

The various offences must be 'punishable by effective, proportionate and dissuasive criminal penalties, including penalties involving deprivation of liberty which can give rise to extradition'. More precisely, the offence of fraudulent making or altering of currency must be punishable by a possible maximum penalty of at least eight years. This was the first time the EU had included a rule on sentencing in its substantive criminal law legislation, and most such EU measures adopted since have included further sentencing rules.

The new Directive

In its proposal for a Directive to replace the Framework Decision, the Commission again hoped to break new ground: it suggested that for the first time, EU legislation should establish a minimum sentence for certain crimes. In this case, there would be a minimum penalty of at least six months' imprisonment for certain offences of counterfeiting currency, if at least €10,000 was involved.

The Commission's rationale for this proposal was that many Member States had provided for no minimum sanctions, or only for fines as a penalty as regards counterfeiting currency, therefore increasing the incentive for counterfeiters to 'forum-shop' for a jurisdiction which would treat them quite leniently if they were caught. At p 13 of its impact assessment, the Commission offers convincing evidence that this is taking place. In four Member States with no minimum sanctions, or fines as minimum sanctions, there were 343 cases of illegal printeries dismantled from 2002-2011 (86 cases/Member State). In eleven Member States which provide for at least six months' imprisonment for counterfeiting currency, there were only 179 such cases during the same period (16 cases/Member State). This discrepancy isn't due to the size of Member States, since there was only one large Member State in the first category, and three large Member States in the second. As the Commission suggests, 'these figures seem to suggest that Member States with low levels of sanctions tend to attract counterfeiters'.

However, the European Parliament (EP) and the Council were not willing to accept the Commission's proposal on this point. The final agreed Directive only provides for the current eight year possible maximum sentence for fraudulent making or altering of currency, adding a five year possible maximum sentence for related crimes. But there is no provision on minimum criminal sanctions.

On the other hand, two other innovations proposed by the Commission were accepted. First of all, Member States will have to provide for 'effective investigative tools', such as interception and undercover agents, as regards counterfeiting currency. This will prevent investigations being dropped due to the lack of such techniques being available (for an example of this happening in practice, see p. 16 of the impact assessment). Secondly, Member States will have to allow identification of counterfeits while criminal proceedings are underway. This will speed up the process of ensuring that the bogus currency created from the illegal printing press is rejected (for an example of bogus €500 notes being accepted because there was no early access to the counterfeits, see p. 18 of the impact assessment). The European Parliament also insisted upon a new clause requiring the Commission to collect information on the numbers of prosecutions.

The adoption of the Directive will continue the process of replacing pre-Lisbon third pillar acts with ordinary EU legislation (four other Framework Decisions have been replaced by Directives to date). However, since the end of the transitional period relating to pre-Lisbon third pillar acts is nigh (the usual rules on infringement actions and references from national courts will apply from 1 December 2014), this does not matter very much in practice.

The Directive will not apply to the UK and Denmark, matching precisely the opt-out rules relating to the single currency (all other non-eurozone Member States must adopt the euro in principle).  While the Framework Decision will still apply to those countries for now, the UK has decided to opt out of it (without applying to opt back in) as from 1 December this year. In the hypothetical event that the UK then decriminalises the counterfeiting of the euro on its territory, that would arguably be a breach of the principle of 'sincere cooperation' in EU law.

Comments

One wonders why the EU legislature puts such store by the Commission producing comprehensive impact assessments, and then ignores the evidence set out in them. It is true that a minimum criminal sentence might be at odds with some Member States' criminal law systems, which the Treaty rightly requires the EU to respect. However, the best way to address this legitimate concern is to provide for an exception for those Member States in the relevant legislation .

While there are generally good reasons, on grounds of subsidiarity and such respects for national systems, for the EU not to interfere with the basic principles of national sentencing systems, the case of counterfeiting the euro is special. (So is the issue of protection of the EU's financial interests, where the Commission has proposed to interfere with national rules on prescription for the first time.) Any counterfeiting of the EU's single currency necessarily impacts on all the Member States using it, as well as (less directly) the Member States which are required to use it in future. The EU legislature's choice to apply the principle of ineffectiveness in this new legislation is therefore regrettable.


Barnard & Peers: chapter 25

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Is the European Union an ideal worth dying for? Thoughts on the future of Ukraine and the EU

Steve Peers

Undoubtedly there were many reasons to find fault with the Yanukovych government of Ukraine, but the catalyst for start of the protests which ultimately brought his government down was his refusal to sign an association agreement with the European Union. Some of the protesters killed last week were even flying the Union flag. Let's assume that fresh elections are held, as planned, in the near future (on the same day as the European Parliament elections) and result in a pro-European government. In that case, this apparently strong enthusiasm of a proportion of the Ukrainian population for joining the European Union will raise fundamental questions about the Union's future.

The initial steps following the election will be relatively easy. First of all, the association agreement will be quickly signed and ratified. This treaty goes much further to link Ukraine to the EU's legal order than the prior Europe Agreements (with Central and European countries) did, and the current Stabilisation and Association Agreements (with the Western Balkans) do. In particular, it contains an enormous list of specific EU laws which Ukraine must comply with by certain dates.

Another potential 'early harvest', which would be very popular with the Ukrainian population, would be the abolition of the visa requirement for Ukrainians to visit the EU. There is already a process to this end set up between the EU and Ukraine, and it could certainly result in a successful result in the near future if there is enough effort on the Ukrainian side - as the examples of the Western Balkans and Moldova prove. Various other treaties on specific issues could also be agreed between the EU and Ukraine. Yet I doubt if this will be enough.

The Copenhagen and Thessaloniki declarations, which set out the EU's clear willingness to admit the countries of (respectively) Central and Eastern Europe and the Western Balkans if the relevant conditions are met, have formed the core of the EU's relations with the countries concerned since their adoption. The realistic promise of EU membership for these countries formed the basis of broad and stable political support for widespread economic and political reform.Of course, in some cases, the promise of possible EU accession is not enough to overcome a country's manifold problems, as the example of Bosnia and Hercegovina shows. But it is hard to see how that country would be better off without that promise.

Indeed, the recent history of Ukraine arguably shows that the absence of a commitment by the Union to admit the relevant country in principle potentially weakens the pro-reform forces politically. Following the Orange Revolution of 2004, the EU would not commit to possible enlargement, suggesting instead the close association agreement which has since been negotiated, and pro-reform forces faced difficulties ever since. Of course, the EU's lack of enthusiasm for Ukrainian membership cannot have been the only reason for those difficulties. But again, the pro-reform forces would surely have been better off if that commitment had been made. You cannot build broad and stable political support for widespread economic and political reform around the goal of EU membership when the EU palpably doesn't want your country to join.

So this time, should the EU make a genuine commitment to admit Ukraine if the conditions are right? On the one hand, Ukraine fits the geographic criteria for membership, and has various historical, cultural and linguistic links with current Member States. It's very diverse, and its borders are historically arbitrary, but the same could be said of other Member States (and non-Member States too). If the political and economic circumstances there change, the potential accession process could always be put on hold for as long as necessary, as it has been in Bosnia and Hercegovina. Its accession would be of major strategic importance for the EU, significantly limiting Russia's sphere of influence in Europe.

On the other hand, the Union's elites and its population clearly have 'enlargement fatigue', and Ukraine is bigger, poorer and potentially more volatile than most of the countries which have joined in recent years. The weeks leading up to a European Parliament election are not an ideal time for politicians to consider making such a brave political commitment.

How can these conflicting considerations be reconciled? The Union has gone as far as it can in terms of developing a close association with Ukraine, in the form of the association agreement which will likely soon be signed. More protocols could be added to this treaty, but that would miss the point: pro-reform forces in Ukraine need a concrete commitment to EU membership as an anchor to build broad support for a significant programme of political and economic reform.

What the Union needs, then, is not a new form of association: it is very good at coming up with them, but that won't be sufficient in this case. What it needs instead is a new form of membership. Let's call it 'associate membership' (although that term is bound to be confused in practice with mere association) for convenience's sake.

An associate member would be legally a member of the EU, with many of the rights and obligations of EU membership, but not all of them. For instance, addressing one of the biggest public concerns in current EU Member States, the free movement of people would not fully apply. This is different from the transitional period for free movement of workers that has applied to many EU enlargements, in that there would be no fixed end date for the limitations concerned. Indeed, there would be no legal commitment to admit the country concerned as a full member of the EU, leaving that possibility subject to the current system for agreeing accession of new Member States.

This new possibility need not be confined to Ukraine: it could also be used for Western Balkan states, Turkey and other eastern neighbourhood countries. Indeed, it could also be used for existing Member States which may wish to scale back their current degree of membership in the EU without leaving it altogether. The United Kingdom would be the most obvious candidate for such a change of status, participating perhaps in a 'common market' version of associate membership.

Of course, the associate members could not expect to vote on EU measures which did not apply to them yet (again differentiating them from new full Member States), including any Treaty amendments that did not apply to them. Difficult issues would arise as regards their participation in EU institutions, but these could surely be solved if the political will were present.

Undeniably, this new form of EU membership could only be introduced by way of Treaty amendment, and many Member States dread starting the Treaty amendment process. But, if the political will were there, it would need only a minor amendment to the Treaties to provide for the existence of the new concept, with the details to be worked out in the treaties with the countries concerned, supplemented perhaps by a general legal framework governing the new form of EU membership (to be adopted by the Council or European Council by unanimity, with the consent of the European Parliament). This Treaty amendment could be severed from other possible Treaty amendment issues, reducing the political difficulties in negotiating and ratifying Treaty changes.

Back in 1989, the European Union responded quickly and fully to the end of the Cold War, putting in place a framework for enlargement that ultimately led to the reunification of much of the continent within the EU's legal order. The passion and enthusiasm of pro-European Ukrainians, as well as the Union's need to think creatively about ways to address its relative decline of influence in regional politics, suggest that the time is ripe to create a new form of membership in the European Union.


Barnard & Peers: chapter 2, chapter 24

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Is the UK's restriction on EU workers' access to benefits legal - and if not, should it be?

Steve Peers

Today the UK government has announced a new threshold for determining whether an EU citizen from another Member State is actually a 'worker' or not, for the purposes of claiming benefits. Are these rules compatible with EU law on the free movement of workers? And if not, should EU law be changed so that they are?

According to the new UK rules, to obtain 'worker' status, citizens from other Member States will have to earn £150/week for at least three months. If they manage this, then they will have access to child benefit, child tax credit, job-seekers' allowance and housing benefit. If not, then they will not be automatically denied benefits; rather their position will be subject to a case-by-case analysis.

Is this a violation of EU law? In a series of cases dating from the 1980s, the Court of Justice of the European Union (CJEU) clarifed the meaning of 'worker' for the purposes of the EU Treaties, which provide for the free movement of workers. This case law clarified that a person must be considered to be a 'worker' even if he or she works part-time, as long as the work is 'genuine and effective' and not 'marginal or ancillary'. In particular, an EU citizen claiming top-up benefits might still be considered a 'worker' (Kempf). However, there is no hard-and-fast rule in this case law determining what it takes to be an EU worker.

At first sight, the new UK rules appear to set such a hard-and-fast rule, which conflicts with the case law of the CJEU. It is certain, in light of its prior case law, that the CJEU would hold that at least some people earning an average of less than £150/week for three months were workers. It is even more certain that the CJEU would condemn the rule if it requires the worker to earn more than that amount every week for that period, rather than an average - but it is not clear if the rule goes that far.

 However, the new British rule is not as strict as that. Instead, it appears to create (at most) a rebuttable presumption that the persons earning less than that amount are not workers. Its compatibility with the free movement of workers therefore depends largely on how it is actually applied to individual situations, which might in part depend on the policy guidance which will presumably be issued by the government to the civil servants who apply it. The crucial point should be how exactly the presumption (is that is what it will be) can be rebutted.

So the answer to the first question posed above is: It depends on how the law is applied in practice. That's not a very satisfactory answer, perhaps, but it is often the only honest answer to a legal question. Having said that, it might still be worth challenging the new rules for their compatibility with EU law, via the national courts and by means of complaints to the Commission, to obtain some further clarification of the EU definition of 'worker'.

Should the EU rules on benefits for EU citizens be changed?

This brings us to the second question: Should the rules be changed? Of course, this is a political question, but it has a legal context. Since the rules are closely related to the interpretation of the concept of 'worker', a term set out in the EU Treaties, it would take a treaty amendment to change them. Such a treaty amendment would need the approval of all 28 Member States (or perhaps 29, if Alex Salmond's dreams come true).

In the normal course of events, it is unlikely that all Member States would agree to a Treaty change that would negatively affect their citizens who have moved to other Member States and taken up low-paid work. However, it is just about conceivable that they would be willing to negotiate a limited clarification on workers' access to benefits in the context of a UK bid to renegotiate the terms of its UK membership. Perhaps this change could even apply across the board, to all Member States: it would probably be welcome in some other Member States, and it might even increase public support for further EU enlargement.

It might be argued that any restriction on the established rights of EU workers is unthinkable. But consider the alternative: if the UK were asking to renegotiate its EU membership, that would mean that a Conservative government had won a majority (or very close to a majority) in the 2015 UK general election. That government would be demanding a change in the UK's EU obligations, otherwise it would lead the UK out of the EU. And that would, of course, remove any rights for EU citizens at all in the UK - subject to whatever (doubtless more limited) rights were agreed as part of the UK's hypothetical future association agreement with the EU. Moreover, a modest restriction on the benefits which low-paid workers could receive would be much a less significant restriction on free movement rights than the demand of some critics of EU membership - that the UK should be able to set a quota on the numbers of EU citizens moving to the country. Could it be time to think the unthinkable?


Barnard & Peers: chapter 13

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