UKIP borders and asylum policy: You cannot be serious

Steve Peers

There’s no doubt that the United Kingdom Independence Party (UKIP) has been gaining increased support in recent years, not least because of its policies on immigration – which are linked intrinsically with its intention to withdraw from the European Union.

Undoubtedly leaving the EU would leave the UK free to regulate fully the movement of people coming from the remaining EU. But what would that actually mean in practice? We have some indications today from the party’s immigration spokesman.

Border controls

UKIP would have a UK-only lane at border crossings, with EU citizens having to wait with all other nationalities in the slow lane. This would violate current EU law, but of course UKIP want the UK to leave the EU. So of course this plan is perfectly feasible in principle, and indeed it’s the logical consequence of leaving the EU.

But UKIP don’t mention the further consequence: if EU citizens have to wait in the slow lane when entering the UK, UK citizens will likewise have to wait in the slow lane when entering the remaining EU countries. Indeed, this is just one of the many complications for British citizens that would result from leaving the EU, which I detailed in a post on this blog earlier this year. So any time UK citizens might save being fast-tracked as they return to the country would be lost every time they visit the EU.

Perhaps UKIP would tell us that we shouldn’t visit Europe so much, but instead have our holidays in the UK. This reminds me of a UKIP activist I met a few years back, who was personally boycotting all European food and drink. If she hasn’t actually starved to death by now, she’s surely leading a pretty miserable life.

Asylum

UKIP’s immigration spokesman is quoted as saying:

"UKIP will support the measures to abolish the provisions of the Dublin Treaty, that says that we cannot choose to identify the country an illegal migrant comes from if they do not have any identifying documents. We will send you back."

First of all, the Dublin Regulation isn’t a treaty, it’s a Regulation. But if the UK left the EU, as UKIP propose, we wouldn’t be subject to the Dublin rules as such, unless we indeed signed a treaty with the EU to that effect. The EU has been willing to sign such treaties with non-member states: Norway, Iceland, Switzerland and Liechtenstein. (It’s also signed such a treaty with one of its members – Denmark – for complicated legal reasons).

Would the EU as a whole be willing to sign such a treaty with the UK? We can be nearly certain that they would not. The EU has only been willing to sign such treaties with Norway et al because those states not only have free movement of people with the EU, but also are associated with the Schengen rules abolishing border controls. It’s not politically realistic to abolish those controls without having rules on allocation of asylum seekers. Indeed, the first appearance of the Dublin rules was as part of the original Schengen Convention of 1990.

If the UK left the EU, it would not be part of the Schengen system. Indeed the UK doesn’t participate in Schengen already, and there’s no realistic prospect that it will ever do so. And since UKIP loathes immigration from the EU so much, there would not be free movement either. While the EU might nevertheless conceivably be willing to extend the Dublin rules to neighbouring countries (like Serbia, for instance) if that would reduce the number of asylum-seekers reaching the EU, a Dublin treaty with the EU would have exactly the opposite effect.

Could the UK sign side deals with individual EU countries? For instance, could it send asylum-seekers to France or Greece on the basis of bilateral agreements? No. It’s clear by analogy from the case law of the CJEU (such as its very recent judgment on broadcasting rights) that the EU as a whole has exclusive competence over the allocation of asylum-seekers as between EU Member States and third countries. In fact, in light of that recent judgment, the EU might well have exclusive external competence over all asylum matters.  

The EU can delegate its exclusive competence back to Member States. But if the UK leaves the EU, it’s fair to predict that hell would freeze over before the Commission proposed to allow Member States to sign such a deal, or (if it did) that the EP and Council would approve the idea, or that Member States would want to make use of such powers as regards the UK.  

In those circumstances, it would not be possible to send asylum-seekers to any EU Member States. And since the immigration status of airplane passengers from third countries is closely controlled by carrier sanctions, the main route for asylum-seekers to get to the UK is indeed via land though the EU. Although perhaps UKIP believe that since climate change isn’t happening, it might soon be viable to travel by land from Africa to the UK.

The consequence of this is obvious: there would be more asylum-seekers coming to the UK, not fewer, if the UK left the EU. While refugee advocates would welcome this outcome, it’s clearly the opposite of what UKIP wants to achieve. But perhaps we cannot expect too much policy coherence from a party whose supporters believe that Jesus is on their side to deliver them from EU tyranny.

[Photo(shop) credit: Jamie East]

Barnard & Peers: chapter 3

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Is the new Council of Europe treaty on match-fixing compatible with EU internal market law?

Tom Serby, Senior Lecturer in Law, Anglia Law School, Anglia Ruskin University

There is a growing epidemic of betting related match fixing in sport. To address it, the Council of Europe recently opened for signature a Convention on the Manipulation of Sports Competitions. However, Malta has asked the CJEU to rule on whether this treaty offends against the rules of the internal market, specifically freedom to provide services. This legal challenge highlights the difficulty in obtaining international agreement on how best to fight the match fixing.

The first 15 countries, including Russia and Germany, as well as six other EU Member States (Bulgaria, Denmark, Finland, Greece, Lithuania and Netherlands) signed up to the Convention as soon as it was open for signature, on September 18^th2014; Malta’s is a lone voice in opposition. UEFA and the IOC (the Olympic movement) back the Convention but the associations of regulated European bookmakers are more guarded, sharing some of Malta’s concerns.

Match fixing, which the Convention addresses, has moved up the agenda for sports governing bodies, national governments and the the European Commission (which has funded various studies into it), in the wake of the scandals over the last decade which have affected in particular, but not only, the sports of football and cricket.

The growth in betting related match fixing, (or “spot fixing” where an event within a match is fixed rather than the overall result), is well known to anyone with only a passing interest in sport. The rise in this corrupt “manipulation” of sport, where athletes take bribes to underperform in order to facilitate winning on betting, has been fuelled by the huge rise in both licensed and unlicensed online gambling. INTERPOL investigations have proved that much of the fixing is at the behest of international (particularly from Asia where betting is often illegal) criminal gangs and is used for Money laundering purposes.  The infamous Calcioscommesse football scandal for instance, was financed out of Singapore, the corruptors acted in Italy, bets were placed all over Asia, and money proceeds were laundered through Panama.

Manipulation or fixing is very difficult to detect, and thus to prevent, as it crosses jurisdictions and is largely the result of online activity. Sports governing bodies have acknowledged that, while they have a role to play by tightening up their Codes of Ethics and Disciplinary procedures and introducing Integrity Units to investigate any suspected malpractice by athletes, they cannot on their own eradicate the problem without governmental support.

Under the Lisbon Treaty and TFEU Art 165 the EU has a role in promoting sport which specifically falls short of law harmonization. Under what has become known as the doctrine of the “specificity” of sport the CJEU will only interfere in the internal rules and regulations laid down by sporting federations in so much as they have an economic impact. So famously, in the Bosmanruling, the Court ruled as unlawful (under the internal market freedom of movement provisions) UEFA’s then transfer rules which restricted, on the basis of a player’s nationality, football clubs signing players from other EU Member States.

Malta’s complaint in regard of the Convention is brought under Article 218 TFEU, which is a special jurisdiction allowing the CJEU to rule if an envisaged treaty (ie not in force for the EU yet) is compatible with EU law or not. The object of the Convention is to establish international cooperation in terms of defining unlawful manipulation of sports competitions (ie corrupt betting related fixing) and in the investigation and prevention of fixing.

A key provision of the Convention is at Article 3 (5)(a) which defines "illegal sports betting" as "all sports betting activity whose type or operator is not allowed under the applicable law of the jurisdiction where the consumer is located".  The Convention prescribes at Article 11 website blocking and a ban on advertising to enforce the restriction on illegal betting. In other words, a betting operator licensed in say Malta, could be prohibited from going about its business in another EU state, say Poland, if Polish law proscribes some of the betting methods which in Malta are perfectly legal; thereby constituting a classic impediment to an internal market.

In Poland gambling is legal, and indeed is a source of important public revenue being relatively highly taxed; however, unusually for the EU, online gambling is illegal.  In practice blocking of foreign websites is not enforced and many Poles therefore work round this restriction on online gambling.

In Malta, on the other hand, betting operators are highly prized as economic entities and both regulation and tax are very light on betting companies in order to stimulate an important part of the economy for this, the smallest EU member state. Not unreasonably the Maltese argue that the Convention exceeds the ambit of EU competence by introducing regulations on gambling which is not a settled matter in the EU. Moreover, Malta will argue that any unduly restrictive provisions which drive gamblers into the unregulated market are counter-productive, since it is widely acknowledged that it is the unregulated betting market that is the source of much of the match fixing problem.

Malta’s case is that the definition of “illegal betting” is discriminatory under TFEU Art 18, and unlawful under articles 49 (freedom of establishment) and article 56 (freedom to provide services); and it is expected that Malta will argue before the Court that while they accept that the regulation on illegal gambling is in pursuit of a justifiable public policy aim (the eradication of match fixing), attacking gambling which is licensed in one EU State but not another, is not a proportionate means of achieving the aim given the evidence that unlicensed as opposed to licensed gambling is primarily the source of match fixing.

The complex and voluminous case law on the Court of Justice on this issue (most recently reiterated in Pfleger) makes clear that Member States have a great deal of discretion to regulate gambling. However, that discretion is not unlimited, and there are circumstances in which gambling regulation can constitute a disproportionate restriction of internal market rights.

There are two possible outcomes of this litigation. First of all, if the CJEU rules that the relevant rules in the Convention are incompatible with EU internal market law, neither the EU nor the Member States will be able to ratify it. Secondly, if the Court rules that there is no breach of internal market law, it will probably indicate in detail how to interpret the relevant provisions of the Convention in order to ensure compatibility with EU law. In that case, the opinion of the CJEU will of course inform the manner in which the Convention is implemented in Member States. 

As the Convention is the first multinational treaty aimed at harmonizing different states’ fight against betting related sports corruption, the Court’s ruling is eagerly anticipated.  Watch this space……

Barnard & Peers: chapter 14, chapter 16, chapter 24

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‘The Right to be Forgotten’: The future EU legislation takes shape

Steve Peers

The furore over the ‘right to be forgotten’ in EU data protection law focusses, obviously enough, on the CJEU’s judgment in Google Spain, which obliquely referred to such a right, by means of interpreting the EU’s existing data protection Directive. But in principle the Court’s ruling might have limited impact, since the EU is embarked upon a lengthy process to replace that Directive.

The initial proposal for a new General Data Protection Regulation was tabled by the Commission at the start of 2012, and the European Parliament (EP) voted its opinion on the proposal this spring. For its part, the Council (Member States’ justice ministers) is moving more slowly. So far, it has only agreed its position on the external relations aspects of this proposal. But following the delivery of the Google Spain judgment this spring, it has turned its attention to the right to be forgotten.

The Council had initially discussed this issue in 2012-13 (see a record of those talks here). It then paused to wait for the Court’s judgment. Following that ruling, the incoming Italian Council Presidency then resumed discussions on the issue in July, and tabled a revised version of its proposal a couple of weeks ago. The Council has not yet agreed on this issue (see the Member States’ positions here), and in any event, once the Council has adopted its position on the entire proposal, it would still have to negotiate with the EP.

However, there seems to be an emerging consensus in the Council. Given the importance of the issue, which has attracted more public interest than any EU law issue in the last few months, it’s worth examining where the discussions are going.

First, of all, it should be recalled that the Council has already agreed that search engines like Google, and possibly many other Internet companies not based in the EU, will be subject to the new Regulation, when it agreed on the external relations rules in the proposal.

As for the ‘right to be forgotten’ itself, it’s in Article 17 of the proposed Regulation. The Commission initially proposed that the data subject could exercise the right (which is combined with the current right of erasure) against the original data controller, on one of four grounds: the data are no longer necessary; the data subject withdraws consent or when the storage period has expired; the data subject objects to the processing on specified grounds; or the processing is no longer valid on some other ground. The data controller had to inform third parties of any request to exercise that right.

In this initial proposal, there would be exemptions from the right on grounds of: freedom of expression; public health; historical, scientific or statistical research; compliance with a national or EU legal obligation; or cases where access to the data was merely restricted.  The Commission would have the power to adopt ‘delegated acts’ to spell out the right in more detail.

In the EP’s view, the right could also be exercised directly against third parties, and there would be a further possibility to exercise the right following an order by a court or regulatory authority (presumably including a data protection authority).

In the Council’s latest text, these grounds for exercising the right (as amended by the EP) are retained. The obligation to inform third parties is also retained, but the Italian Presidency’s explanation of its proposal makes clear that this text is taking on board – rather than rejecting – the Court of Justice’s ruling that Google must itself be considered a ‘controller’ of the personal data, and therefore directly subject to data protection rules.

As for the exceptions to the right, the ‘freedom of expression’ exception remains, fleshed out with the wording of Article 10 ECHR, taking ‘due account of the public interest…in relation to the personal quality of the data subject’. The Presidency’s explanations make clear that this awkward wording is meant to encompass the ‘public figure’ exception hinted at (but not elaborated upon) in the Google Spain judgment.  There would also be new exceptions, as regards ‘archiving purposes in the public interest’, social protection, making or defending legal claims, performing a public interest task or exercising official authority. The Commission power to adopt delegated acts has been dropped.

There’s no longer an exception (as regards the right to be forgotten) for the commercial interests of data controllers such as Google. But that won’t really change the status quo, since the CJEU easily found in Google Spain that Google’s economic interests were overruled by the data subject’s right to privacy.

New clauses in the preamble would reflect the CJEU’s ruling on the ‘public figure’ exception, the possibility of complaint either to the controller or to a data protection authority or the courts, and the role of the controller in applying the balancing test. The preamble would also note that the right to be forgotten has to be balanced against other rights; the wording here is taken from Article 52(1) of the Charter, which sets out a general rule on limitations of Charter rights.

What are we to make of these proposals? First of all, it’s clear that the essential features of the Google Spain judgment seem likely to be codified, not overturned, by the new law. This is assumed in the Presidency’s explanatory notes. Indeed, the Google Spain judgment turned on the Court’s reasoning that it was ‘no longer necessary’ to make available (accurate) data on the data subject’s previous financial troubles, via means of Google. And that very ground for exercising the right to be forgotten would be expressly retained in the new legislation.

The other grounds for exercising that right, as set out in the proposal, were not addressed in the judgment, although the Court would likely have ruled that they existed if it had been asked. Here, it’s important to point out the express power to withdraw consent for data processing. This would clearly cover cases of ‘revenge porn’,  where one sexual partner initially agreed to the images being posted on the Internet but withdrew his or her consent when the relationship broke down. (For cases where there was never any consent to posting such images on the Internet, data protection law would have been violated from the outset).

Moving on to the exceptions from the right, the most controversial aspect is the reconciliation of the right to be forgotten with the freedom of expression. As noted above, the proposal codifies but does not clarify the ‘public figure’ exception. There’s a cross-reference to Article 80 as regards the freedom of expression. This Article (in the Commission’s original proposal) reproduces the current ‘journalist exception’ for the ‘processing of personal data carried out solely for journalistic purposes or the purpose of artistic or literary expression’. While some Member States object that this exception does not apply to bloggers (see the footnotes to the latest text), the CJEU took a broad approach to this exception in the case of Satamedia, regarding a company which sends out text messages about people’s tax information as a journalist. On the other hand, the Court did not regard Google itself as a journalist.

The better view is surely that bloggers and anyone otherwise expressing themselves on social media fall within the scope of the ‘freedom of expression’ exception, even if they are not professional journalists. After all, such persons are still exercising their freedom of expression, and it would be deeply unprincipled, in the modern world, to protect that freedom for one group of people but not others. Moreover, such a distinction would clearly violate Article 10 ECHR, in light of the relevant case law of the European Court of Human Rights.

The CJEU did not consider in Google Spain whether freedom of expression could be relied upon to argue that journalists (and others) need unrestricted Internet access to do their jobs properly. So arguably this is still an open issue that could be raised by a journalist in an appropriate case.

More fundamentally, the latest draft entrenches the CJEU’s position that Google is mainly responsible for processing complaints about privacy, without ensuring that it is accountable. In other areas of law, there are reporting requirements imposed upon companies to ensure that they meet their legal, social and ethical obligations. Since Google will in practice usually be in charge of striking the balance between privacy and freedom of expression, the new legislation should require that it report on how it has balanced these rights, so that there can be a public discussion of the appropriateness of its actions.

Finally, how might the new Regulation (in the current draft) apply to Wikipedia and social networks? As discussed in a previous blog post, obviously Wikipedia could try to rely upon the ‘public figure’ exception. It could also try to rely upon the exceptions for archiving or historical interest, although that depends upon the final wording of other provisions of the Regulation.

Equally, the precise application of the new rules to entities like Facebook depends on the final wording of the ‘household exception’ in the new legislation, as well as the open question of how (if at all) the Google Spain judgment applies to user-generated content, as well as user-controlled privacy settings.

Overall, the latest drafts of the new Regulation on the ‘right to be forgotten’ will disappoint not only the fiercest critics of the Google Spain ruling, who regard any limitation of search engine results on privacy grounds as anathema, but also the more moderate critics (like myself) who believe that the ruling failed to strike clearly the right balance between the right to privacy and the right to freedom of expression. It’s not yet too late to urge the Council (and then, the Council and the EP) to address issues such as the unjustified special treatment of journalists, the accountability of search engines and the application of the new rules to other types of Internet use.

Barnard & Peers: chapter 9

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Copyright: anything left of Member States’ external competence?

Lorna Woods and Steve Peers

The extent of broadcasters’ rights is near the top of a long list of controversial issues arising from the law of copyright. Equally controversial is the extent of the EU’s exclusive external competence, which (where it exists) prevents Member States from signing treaties and (usually) means that they do not have a veto in the Council over the treaty concerned. These two issues came together in the recent CJEU judgment in Case C-114/12 Commission v Council, which concerned the EU’s competence to negotiate the Council of Europe’s draft treaty on the rights of broadcasting organisations.

Background

The regime covering mass electronic distribution of audiovisual works is complex, reflecting the traditionally national nature of broadcasting markets and the layered nature of intellectual property rights in audiovisual works.  In addition to the content-based rights, which are often assigned or licensed to the broadcaster, the broadcaster has rights in the signal itself (broadcasters’ neighbouring rights). These rights are found in a number of international treaties, including TRIPS. Similar rights relating to control over the fixation of the signal, as well as the making available of the signal to the public were contained in a number of directives variously implemented in the Member States, in particular Directive 2006/115/EC on Rental and Lending Rights (codifying  Directive 92/100) and Directive 93/83/EEC Satellite and Cable Directive, now codified  as Directive 2006/116). These rules have tended to be technologically specific and while Directive 2001/29 (the InfoSoc Directive) confirmed broadcasters’ rights whether wireless or cable technology was used, questions remained, notably the issue of identifying where the activity of ‘making available’ or ‘communicating to the public’ is taking place, especially in an Internet age.

There has been considerable litigation on these directives and how they operate in a new technical environment. Clearly something needed to be done and broadcasters have for some time been lobbying for change. Against this background, the Council of Europe agreed to start work on a Convention that protected broadcasters’ neighbouring rights.  According to a 2010 report, the aim of the Convention was to agree on a set of exclusive rights of broadcasting organisations, such as the right of fixation the right of reproduction, the right of retransmission, the right of making available to the public, the right of communication to the public and the right of distribution, in technologically neutral terms. Other issues were also to be discussed: the protection of pre-broadcast programme-carrying signals, the term of protection, the need for a non-exhaustive list of limitations and exceptions, the enforcement of rights and obligations concerning technological measures and rights-management information.

As for the EU’s role in these talks, the Council and Member States’ representatives adopted a single joint Decision authorising the joint participation of the EU and its Member States in the negotiations for a Convention. While the EU position would be represented by the Commission, the Member States’ collective position (if they could reach one) would be represented by the Council Presidency. If Member States could not reach a collective position on matters falling within their competence, they would negotiate individually.

The Commission disagreed with the Council’s decision on both substantive and procedural grounds, and so brought an annulment action before the Court of Justice.

Judgment

First of all, the Court quickly dismissed any doubt that the action was admissible. Even though the act in question had been adopted by the Member States alongside the Council, the Council was ‘involved’ in the entire Decision because it was both conferring and receiving power pursuant to it.

As to the substance, the Court agreed with the Commission that the envisaged treaty fell within the scope of the EU’s exclusive external competence. This was the first case in which the Court interpreted Article 3(2) TFEU (added by the Treaty of Lisbon), which provides that the EU has exclusive competence to conclude an international agreement where ‘its conclusion is provided for in a legislative act of the Union or is necessary to enable the Union to exercise its internal competence, or in so far as its conclusion may affect common rules or alter their scope’

.  

The last of the three categories mentioned in Article 3(2) is similar to the classic exposition of the EU’s exclusive external competence in the ERTA judgment, although some academic opinion has suggested that the Treaty drafters have not adequately synthesized the judgment. On the other hand, some Member States intervening in support of the Council in this case suggested that the TFEU provision narrows the EU’s exclusive external competence, in particular in light of the Protocol to the Treaties on shared competences, which was also added by the Treaty of Lisbon.

However, the Court stated simply that the Treaty provision meant the same thing as the ERTAjudgment, as elaborated in the subsequent case law of the CJEU. The Protocol on shared competences was irrelevant, since it only referred to Article 2(2) TFEU, which defines the EU’s shared internalcompetences.

The Court then summarised the key aspects of the ERTA case law: it is not necessary for the international treaty and the EU legislation concerned to overlap fully; it may be sufficient that the area concerned is ‘largely covered’ by EU rules; and it is irrelevant that there is no contradiction between the treaty concerned and the internal EU rules. To show whether external competence was exclusive on this basis, there had to be a ’specific analysis of the relationship between’ the relevant international treaty and EU legislation. The Court added that the party alleging that competence was exclusive had the burden of proving it.

Applying these principles to the facts of the case, the Court summarised the relevant EU legislation (the five Directives referred to above), stating that the intellectual property rights concerned ‘are the subject, in EU law, of a harmonised legal framework which seeks, in particular, to ensure the proper functioning of the internal market’, which integrated technological, digital and information society developments, and which had ‘established a regime with high and homogeneous protection’ for broadcasters as regards their broadcasts.  It was irrelevant that this harmonisation appeared in different EU measures, which also regulated other intellectual property rights.

So the area of law to be compared as between EU law and the planned treaty was the neighbouring rights of broadcasters. On this point, while there were some differences between the existing EU rules and the planned treaty, any new rules on the planned treaty were liable to have a significant impact upon the EU acquis. In particular, the Court distinguished its prior case law which had held that external competence was shared when the EU set minimum standards, on the grounds that in this area EU legislation simply limited its scope instead. Since the new treaty might extend the scope of the EU rules, its subject-matter fell within the scope of the EU’s external competence. And on several points, the Court did not believe there was enough evidence to support the claims of the Council and some Member States that issues not covered by the EU acquis at all would be inserted into the future treaty.

For example, one particular issue relates to the protection of signals prior to their broadcast to the public – usually this occurs when one broadcaster transmits a signal to another. This issue is not currently covered by the EU rules. If the decision was taken to protect these signals, this protection could be provided in a number of ways.  The Court highlighted one option – the extension of the term ‘broadcasts’ to cover pre-broadcast signals would have horizontal effects through the regulatory system, and therefore impact on the EU acquis.  The other possible mechanisms noted (the introduction of sui generis legal protection of pre-broadcast signals or the application of the provisions dealing with ‘technical measures’ to the pre broadcast signals) would not have such an effect. The Court emphasized that in the absence of any reference to these approaches in the Council of Europe preparatory documents ‘those approaches seem, at this stage, to be hypothetical and cannot therefore be relevant to determining the exclusive or shared nature of the competence of the European Union in the present case’ (para 99).

Having ruled in favour of the Commission on its substantive argument, the Court ruled that it was not necessary to decide on the three alternative procedural arguments which the Commission had made: such a ‘hybrid’ decision of the Council and Member States was not permitted by EU law; the Council had wrongly voted by unanimity, not qualified majority; and the Council had breached the principle of sincere cooperation. The first two of these arguments had been accepted by Advocate General Sharpston in her Opinion (she thought the final argument was superfluous). However, unlike the Court, she had ruled against the Commission on the substantive point, on the basis that the Commission had argued that all of the provisions of the draft Convention were closely linked to EU law, but had failed to prove this on the facts.

Comments

First of all, as regards the admissibility of this action, the Court’s ruling is convincing as regards the Council conferring power on Commission, but arguably not as regards Member States conferring power on the Council (since it would be operating outside the EU framework in that context), and certainly not as regards Member States conferring power on Member States. The better argument for the admissibility of this action is that if the Council and Member States adopt a hybrid decision like this one, their action is indissociable. Put another way, if the Council and Member States act together in this way, there’s joint and several admissibility.

Secondly, as for the procedural points not addressed by the judgment, the Advocate-General’s opinion is not convincing. Since mixed agreements, ie agreements ratified by both the EU and its Member States, are a common feature of EU law, then there should no problem with the idea that a decision relating to negotiations on those agreements could in principle be a hybrid decision. Conceptually, that’s no different from the nature of the final mixed agreement.

As for the substantive competence issues, first of all it’s important that the Court clarified the point that ERTAand the case law elaborating upon it are still applicable to Article 3(2) TFEU, in light of the doubt which some had expressed on this point. The judgment is presumably relevant by analogy to the first two grounds for exclusive competence listed in Article 3(2) TFEU (where competence is provided for in a legislative act of the Union or is necessary to enable the Union to exercise its internal competence). At the very least, it must follow that the Protocol on shared competence is also irrelevant to those two other grounds, since as the Court rightly said, that Protocol only refers to Article 2(2) TFEU.

Despite this important clarification, the application of the ERTA judgment itself remains complex and seems highly fact dependent in each case, arguably making the prediction of outcome difficult. Here, it is notable that the Court and the Advocate General came to different conclusions in determining the key question of whether the conclusion of the Convention affects common rules or alters their scope (Article 3(2) TFEU).  The Advocate General and the Court both stated that the burden of proof was on the Commission to show that exclusive competence had been established. As a corollary it seems the default position is shared competence. To quote the Advocate General:

if the analysis of the Convention and EU rules on the basis of the information presently available shows that in at least one respect Member States retain competence, the Commission’s plea must be rejected. [para 143]

While the Court accepted this allocation of the burden of proof, it is when we get to the specifics that differences emerge as can be seen in a couple of examples. Article 8(3) of Directive 2006/115 states:

Member States shall provide for broadcasting organisations the exclusive right to authorise or prohibit the rebroadcasting of their broadcasts by wireless means, as well as the communication to the public of their broadcasts if such communication is made in places accessible to the public against payment of an entrance fee.

The Advocate General analyses the matter as follows: ‘Thus, EU law does not yet regulate ‘at least’ the right of retransmission by wire or cable, whereas the Convention might do so and the Member States are currently authorised to provide for it in their own jurisdiction’ [para AG 150].  The Court accepts the same point but draws a very different conclusion from it – that the proposed Convention, by regulating areas currently outside EU competence, in itself might have an impact on EU law. The Court does not explain how, merely adopting the Commission’s position [92]. The fact that broadcasters are already partially covered by EU law does not seem to address the point.  So, the Opinion seems more logical on this point.

In a number of the aspects of the Convention under consideration, the question of whether there was impact would be affected by the approach finally taken by the negotiators. For example, the scope of the Convention would depend on its definition. While EU law does not have a definition of the term ‘broadcasting organisations’ there would be some confluence with the rights-holders under the various directives. The impact on EU law is therefore uncertain.  The Advocate General concluded cautiously:

If the definition in the Convention creates an absolute category that is wider than broadcasting organisations that are rightholders under the said directives, the creation of that category might possibly limit the European Union’s freedom to decide on its own definition. That may not be the case if the definition in the Convention were non-exhaustive and did not offer protection to entities other than existing rightholders under EU law. [AG 156]

While in this case it was necessary to finally determine the point as to whether there is impact on EU law or not, this then begs the question of what to do in such a circumstance – do we assume that if there is a possible interpretation that could affect EU law then the text is satisfied, or is a higher standard of proof required?

The difference on this point can be seen in the respective approaches of the Advocate General and the Court to pre-broadcast signals. It is clear that currently EU law does not require the protection of such signals and that the Convention proposed to afford protection to such signals. Given the early stages of negotiations, it is unclear what sort of mechanism was likely. Some possibilities might utilise techniques found in the existing legal framework (for example extending the definitions, or applying the technical measures rules to pre-broadcast signals). Since such an approach would have an impact on EU law, then that would bring the issue within the exclusive competence of the EU – appoint on which the Advocate General and the Court agreed.

Another mechanism exists – the development of a sui generis right – which would not have this effect. Here the Advocate General suggested that in such a situation there would be no exclusive competence. In stark contrast, the Court dismissed other approaches (including the sui generisright) as hypothetical, and therefore focussed only on the approach that would trigger exclusive EU competence [para 99].  No reason was given as to why the other approaches were more hypothetical than the approach the Court selected.  So while the Court and the Advocate General agree on the principles, they differ in the application of those principles, and it seems that the Court has tended to favour assessments that point towards exclusive competence.

Finally, what are the broader implications of the judgment? The Court of Justice has already ruled (in the Daiichi Sankyo judgment) that the WTO's TRIPs agreement falls within the scope of the EU exclusive external competence over the common commercial (external trade) policy (CCP), which was extended to cover trade-related intellectual property fully by the Treaty of Lisbon. It has also ruled that a Council of Europe treaty relating to enforcement of audiovisual service providers’ rights falls within the scope of the same competence, in light of the full extension of the CCP to services by the same Treaty. Usually, the Member States have no veto as regards CCP matters.

Now it seems that treaties relating to many other aspects of intellectual property can fall within the scope of the EU’s exclusive external competence, due to the exercise of the EU’s powers to adopt internal market legislation. Again, this means that Member States usually lose their veto. This effect is not absolute, given that the recent Marrakesh treaty on copyright exceptions for the blind and the Beijing treaty on audiovisual performances are both mixed agreements (see the list of signatories for the former and latter treaties respectively). However, the power of the EU (and the Commission in particular) in this field is demonstrated by the Commission’s veto of a planned Council of Europe treaty on cross-border broadcasting, at a late stage of negotiations.

More broadly, the Court’s pro-EU application of the test for exclusive competence suggests that it would be easier to find such exclusivity in other areas which the EU has only partly regulated, such as consumer law or immigration law. The broadcasting rights judgment may, in time, prove to be nearly as important as the ERTA judgment which it reconfirms and elaborates upon.

Barnard & Peers: chapter 14, chapter 24 

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Beyond austerity: the future of EU employment law

Professor Catherine Barnard, Trinity College Cambridge

If the critics are right, the EU social model is dead. Those on the right may well be dancing on its grave; those more sympathetic might mourn its passing. My view is more sanguine. Yes, the European social model (ESM) is certainly facing unprecedented challenges. However, I will suggest that these challenges, caused in part by the EU’s response to the crisis but more generally resulting from a growing hostility towards the European Union project as a whole, are not terminal and that there is – and should be - a continued role for the European social model. The EU’s history demonstrates that the ESM has, in fact, a long-standing ability to regenerate and resurrect itself. In this blog post, I would like to consider the future.

Vandenbroucke and Vanhercke argue that ‘Europe needs a Social Union that can support national welfare states on a systemic level in key functions such as macroeconomic stabilisation, and also guide the development of national welfare states on the basis of general social standards and objectives.’ [1] For the eurozone states this may indeed be the best and necessary solution. However, I want to focus on an agenda which might hold some appeal to an EU of 28, or at least a combination of both Eurozone and non-Eurozone states and this inevitably focuses on the narrower domain of employment law. And my discussion is tempered by political reality. 

Social compact

First, I would call for the creation of a European Social Compact to match the Fiscal Compact. This would contain a strong statement of the value and importance of social policy in the EU and would help to address the long-standing concern that, come the crunch, the EU prioritises economic over social interests. This would send a stronger message to the legislature and to the courts of the role and function of social policy, a message that the phrase ‘social market economy’ has failed to send with significant force. So what might go in it?

Apart from general statements that the EU is about improving the living and working conditions of its population, I would like to see express reference being made to other social rights documents, including the European Social Charter of 1961, to create a greater opening of the EU to other international instruments. I would also suggest the need for a clause which explicitly requires the Broad Economic Policy Guidelines to take account of social matters. More radically, I would also like to see the mandate of the European Central Bank (ECB) to be extended, like that of the Federal Reserve in the US and other central banks, to promoting economic growth, as well as high levels of employment and social cohesion, and not just the maintenance of price stability, as specified in Article 127 TFEU.

Ideally any Social Compact would apply to all 28 states and take the form of a Treaty amendment. However, the current political climate makes this seem unlikely (the UK would certainly vote against, as might a number of other Member States worried about the implications of a Treaty amendment on their own national systems). This inevitably means looking at some sort of free standing Treaty, like the Fiscal Compact, which could be signed up to by interested Member States and have force under international law. Another model for flexibility would be to follow the pattern of the Euro Plus Pact, agreed by interested Member States. It is not legally binding but it is taken into account in the various soft-law processes rather in the way of the Stability and Growth Pact Resolution of 1997. 

Medium-term measures

I fully accept that a Social Compact is a long shot and that any reform protocol, while important, is not exciting. So what else could the EU be doing? I would suggest the EU go back to its roots and, as it did in the 1970s, specialise. There are three areas which could be singled out as needing the EU’s attention, where EU level activity might be justified given the transnational dimension, and where action has a direct connection with the European Semester: ageing population, enforcement, and addressing the consequences of privatisation.

The justification for EU involvement with management of an ageing population relates to the key issue of sustainability of public finances which, as the Eurozone crisis has shown, is a matter of common interest. The EU has long had expertise in the discrimination area, starting with sex and then in respect of other protected characteristics. Addressing age discrimination/extending working life initiatives/flexible working fits in with this specialisation while dovetailing with the EU’s social cohesion agenda. On a related issue, developing family friendly policies - which would include elder care as well as child care – would also fit within this theme. The reform of the Parental Leave Directive serves only to highlight other lacuna in EU provision such as the absence of provisions on the right to request reduced hours of working. There may be room for EU intervention here.

Second, there is a growing body of evidence that migrant workers are being mistreated by some employers in certain sectors, particularly meat processing. If these workers cannot, for practical reasons, enforce their rights, there is a role for the EU to consider intervening to require effective remedies. The new Directive 2014/54 on free movement of workers is a step in the right direction. But there is evidence that migrant workers do not enforce their rights through tribunals. This requires more pro-active enforcement. Is there a role for greater coordination at EU level of, for example, labour inspectors? Or even, more radically, some sort of Europol for labour inspections?

If the EU was to devote its attention to the position of (vulnerable) migrant workers, other issues arise for these workers (as well as for nationals). In particular, what sort of contracts do they have? In recent years there has been a proliferation of new types of contracting, including zero hours contracts, internships, crowd employment and employee sharing. To what extent do individuals engaged in this kind of work benefit from employment protection legislation traditionally given only to those defined as ‘employees’? Should the EU envisage legislating for a new type of contract such as Freedland’s contract to provide personal service which would provide a gateway to employment protection?

Third, privatisation of publicly owned industries and services is clearly an important part of the reform agenda for a number of Member States. What are the employment law implications of this? Does the Transfer of Undertakings Directive 2001/23 need revision to provide meaningful rights to transferees in the event of the transfer and for a significant period thereafter? How does the Directive fit into the public procurement process? Is it time for the transfer rules to be re-examined in the light of the new contexts in which they are being invoked? 

Legal basis to act

I have given some examples of what the EU might do to boost the social dimension. The question is how the EU might deliver them. The EU has significant legal competence to act in these fields – whether under Article 153 TFEU (the principal social policy legal basis), Article 21(2) or Article 25 TFEU (the citizenship provisions), Article 26(3) TFEU (on guidelines and conditions necessary for ensuring balanced progress in all sectors of the internal market), Article 46 TFEU (the legal basis on which Directive 2014/54 on measures facilitating the exercise of free movement of workers was adopted), Article 50(1) TFEU on freedom of establishment (the legal basis on which the directive on diversity information is proposed), the internal market legal bases, Articles 114 and 115 TFEU but, following the Monti II debacle, probably not Article 352 TFEU.

The use of any of these legal bases have (de)merits but what is even more important is the political will to act and that seems to be lacking in a number of Member States. So this raises the question of whether enhanced cooperation should be considered in the social policy field ‘to enable and encourage a group of Member States to cooperate inside rather than outside the Union, where it is established that the objectives pursued by that cooperation cannot be achieved by the Union as a whole’ (see the Unitary Patent case).The use of enhanced cooperation is strictly limited by the framework for enhanced cooperation between Member States found in Title IV of the TEU and Title III (Article 20 TEU) of Part Six of the TFEU (Articles 326 to 334 TFEU).  Provided these conditions are satisfied, there seems no good reason why enhanced cooperation cannot be used in the social field. It is far from optimal – but better than nothing. The Unitary Patent case may suggest, too, that it has the Court’s blessing.

Despite the doomsayers, the EU is still intact after the most tumultuous years of its existence. The European Social Model, too, has been battered by the crisis, but it was already in difficulties before that. Reforms were necessary. In the last five years, economic governance and its reform has predominated, often at the expense of the development of the social dimension. The European Employment Strategy has been accommodated – and largely subsumed by - the European semester. This loss of a separate and distinct identity of the EES has been damaging. (Part of) the EU is conscious of this and it maybe that the new European Parliament and the new Commission will recognise the need to raise the profile of social policy. The EU’s regenerative capacity in the field of social policy needs to be shown again. And there are lots of ideas as to what the EU might do.

A full version of these comments has appeared in (2014) 67 Current Legal Problems 1


Barnard & Peers: chapter 20 

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[1]Frank Vandenbroucke and Bart Vanhercke note, European Social Union: Ten Tough Nuts to Crack (Friends of Europe, 2014), 16. See also Commissioner Andor, ‘Social Dimension of the Economic and Monetary Union: what lessons to draw from the European Elections’, 13 June 2014 http://europa.eu/rapid/press-release_SPEECH-14-455_en.htm.

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Why the Scottish ‘No’ vote makes UK withdrawal from the EU less likely

Steve Peers

Yesterday’s ‘No’ to Scottish independence is obviously significant first and foremost for Scotland itself, and then the rest of the United Kingdom, given the constitutional reforms that have been promised in its wake. But it also has broader consequences for the UK’s relations with the European Union. In short, the ‘No’ vote has, at first sight, significantly reduced the likelihood of the UK leaving the European Union in the near future.

Part of the reason for that is political. Scotland elects very few Conservatives, and is the least favourable ground in Great Britain for the UK Independence Party. So the ‘No’ vote means that the only two parties which (for now) favour an in/out referendum on the UK’s membership of the EU will have a smaller percentage of seats in the House of Commons. In particular, since it is less likely that the Conservative party will have a majority of seats or form the largest party, it is less likely that there will be a referendum in the first place.

In the event that a referendum is held, Scotland’s ‘No’ vote means that the relatively more pro-EU vote in Scotland would be counted in that vote, and the odds on a majority in favour of ‘Brexit’ are therefore reduced a little.  

But there is a further lesson to be learned from the Scottish result. While the ‘Yes’ argument could draw upon the patriotism of the Scottish people, and their antipathy to being ruled by a Conservative government which they had never voted for, the ’No’ side successfully raised concerns about the economic impact of withdrawal from the UK, and questioned whether the assumptions of the ‘Yes’ side about the post-independence scenario were accurate.

There are obvious parallels with the Brexit debate. Of course, some of the specific issues which loomed large in Scotland (currency and the introduction of border controls) would not be relevant to the Brexit debate, since the UK already retains its own powers on these issues. But the underlying economic uncertainty is the same. The debate as to whether Scotland could become an EU Member State if it left the UK would have a parallel in the debate as to whether the UK could obtain a free trade deal with the EU if it left.

While some appear to believe that the Treaties guarantee that a Member State which leaves the EU is automatically entitled to a free trade deal with the Union, this isn’t correct. Article 50 TEU (the rule which governs withdrawal from the EU) states that there must be an agreement between the EU and the withdrawing State ‘setting out the arrangements for its withdrawal’, merely ‘taking account ofthe framework for its future relationship with the Union’. There’s no guarantee as to what form those relations will take.

It’s likely that if a Brexit referendum were contemplated, at least some other Member States would indicate that they were unwilling to agree to a very generous free trade agreement with the UK. Arguably, they would be bluffing, since the UK has a trade deficit with other Member States, and so it would be in their interest to ensure continued access to the UK market. But similarly in the Scottish referendum, the ‘Yes’ side argued that the UK political parties were bluffing, threatening or scare mongering when they refused to agree to a currency union, and that all Member States would quickly agree to Scottish membership of the EU on the terms which the UK currently enjoys. Obviously they did not convince enough Scottish voters of this – and the opponents of the EU would face a similar hurdle in the Brexit referendum.

One feature of the Brexit referendum would have no equivalent with yesterday’s vote: the issue of the UK’s trade with third countries. Undeniably, after Brexit the UK would be free to sign any trade deals it wished with non-EU countries. In principle, then, the UK could sign trade deals with countries which the EU hadn’t signed an agreement with, as well as more favourable trade deals with those countries which did have a deal with the EU (the EU has free trade deals already with dozens of countries, if you count its association agreements, all of which provide for free trade).  

But of course, this would depend on the willingness of those third countries to sign such a deal. It’s hard to see why those third States who already have a deal with the EU would be willing to offer a more favourable version of the same deal to the UK. Those third States which didn’t have a deal with the EU might conceivably be willing to sign one, but they would probably be unwilling to make such an offer in advance of the referendum result, to avoid interfering with the UK’s and the EU’s affairs. So as with the Scottish referendum, the anti-EU side would have to build an argument for withdrawal upon a highly hypothetical set of circumstances.

Moreover, one segment of public opinion – those voters who dislike major free trade agreements, in particular with the USA – would have no real choice open to them. They would have to choose between the EU’s free trade deal with the USA (which would either be in the process of ratification or still under negotiation; the EU doesn’t usually simply cancel trade negotiations) on the one hand, and a UK/USA free trade deal, as negotiated by the Conservative party and/or UKIP, on the other.

One key factor which worked in favour of the ‘Yes’ side in Scotland – although obviously not enough – was the negativity of the ’No’ side. But in a Brexit referendum, the anti-EU side would suffer from this factor. The pro-EU side would (presumably) be able to point to a renegotiated arrangement with the EU, which is essentially a positive argument.

Finally, it might be argued that a crucial difference between the Scottish referendum and a Brexit referendum is the strength of the common bonds which many Scottish people feel that they share with the rest of the UK. Undoubtedly the British public as a whole does not have such warm feelings towards the EU. 

But then again, neither does the rest of the EU exercise as much as power over the UK as Westminster does over Scotland. The EU didn’t drag the UK into an unpopular war – the Blair government did that to itself. The EU doesn’t set tax rates and welfare rates for the UK, as the UK does for Scotland. In particular, the EU has never imposed a law which generated as much opposition as the early imposition of the poll tax in Scotland, when Scots became lab rats to test Mrs. Thatcher’s most unpopular policy. If the ill will created by that decision in Scotland can dissipate, it’s hard to see how a greater degree of anger could be generated against the EU.

Barnard & Peers: chapter 3

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The Essent judgment: Another revolution in the case law on free movement of goods?

Filippo Fontanelli, Lecturer in International Economic Law, University of Edinburgh

Introduction

On 11 September 2014, the Court of Justice of the EU delivered the judgment in the Essent case (Joined Cases C-204 to C-208/12, not to be confused with Case -91/13, also named Essent, of the same day). The judgment contains a delicate assessment of proportionality involving several interlaced interests: promotion of free energy trade, protection of the environment and human health, compliance with international commitments on emission-reduction, promotion of local employment, and incentives to achieve energy self-sufficiency.

If this maelstrom of values were insufficient to raise the interest of the readership, the judgment has also a purely doctrinal undertone. Indeed, the Court appears to ignore – deliberately – the summae divisiones which it itself has maintained for decades between distinctly and indistinctly applicable measures, as well as between justifications under Article 36 TFEU (which set the explicit Treaty-based grounds for restricting the free movement of goods) and other mandatory requirements (the other grounds for restricting such free movement). Thousands of EU law academics might now need to finally drop the standard exam-questions on “Measures equivalent to a quantitative restriction (MEQRs) from Cassis to Keck and beyond” yearly rephrased and administered since time immemorial: it might turn out that, after all, Cassis is no longer good law.

The case

The facts of the main proceedings relate to a complex domestic regulatory regime which, in turn, implements devilishly detailed EU acts. However, the crux of the dispute is easily summarised: a Flemish Regional scheme requires energy suppliers connected to the electricity grid to demonstrate the use of a certain amount of renewable energy, on pain of a hefty penalty. Only locally produced green energy counts toward that quota, hence suppliers cannot use green energy produced abroad to prove compliance.

Essent could have met or at least approached the quota had it been allowed to factor in the calculation renewable energy that it had sourced from Norway, Denmark, Sweden and the Netherlands, but it was not. It then incurred a series of yearly sanctions, and challenged them repeatedly before the Belgian courts. The Belgian judges raised a preliminary question to the Court of Justice asking, essentially, whether the discriminatory treatment of foreign green energy towards the fulfilment of the compulsory quota is in violation of the treaty obligations regarding freedom of movement of goods and the prohibition of discrimination based on nationality.

[Skip to the next section if you arrived to this post by Googling “mandatory requirements” and you must submit your essay three hours from now. For the others, a few words on the legal context of the dispute.]

Directive 2001/77 (governing the facts of the main proceedings, now replaced by Directive 2009/28) recognizes that renewable energies are underused in the Union, an unfortunate circumstance given that the development of a green energy industry could, at once, alleviate the dependence of EU countries from foreign supply, contribute to the fulfilment of the climate-change commitments entered into under the Kyoto protocol, and foster local employment policies. Therefore, the EU encourages national schemes supporting the consumption of renewable energy, without harmonising them. Better, “until a [Union] framework is put into operation”, which is presumably in the works (see recital 14 of the Preamble of Directive 2001/77).

In order to facilitate the trade in green energy, the Directive established a compulsory system of certification, whereby energy derived from renewable sources is entitled to a “guarantee of origin”. Guarantees of origin issued in EU members are mutually recognized across the Union.

National support schemes can provide various incentives to facilitate the production and consumption of green energy. Typically, benefits are available only to producers and suppliers handling green energy, which necessarily hold the relative guarantees of origin. However, member states are not required to make the specific benefits dependent on the possession of the guarantees. The Preamble of the Directive is clear in this sense: “[s]chemes for the guarantee of origin do not by themselves imply a right to benefit from national support mechanisms established in different Member States”. Guarantees of origin are therefore necessary but possibly insufficient conditions to enjoy national incentives.

The Flemish scheme implementing the Directive, for instance, is premised on the possession (and periodic surrendering) of “green certificates”. Green certificates are granted to producers of green energy based in the Flemish region, which sell them alongside the energy. Suppliers are under an obligation to surrender a certain quota of green certificates to avoid sanctions. At the stage of surrendering, guarantees of origin attached to green energy purchased abroad cannot substitute for the missing green certificates to fill the quota.

A provision of the relevant Flemish Decree envisages the possibility for the Flemish government to accept non-Flemish certificates for the purpose of filling the quota, but no implementing act has been adopted to regulate this possibility, which therefore remained wishful thinking.

The Flemish scheme was challenged under the Directive, under Article 34 TFEU prohibiting measures equivalent to quantitative restrictions (MEQRs), and under Article 18 TFEU prohibiting discrimination based on nationality.

The Directive clearly does not require Member States to link support schemes to guarantees of origin. It simply requires States to issue them and recognize them across the Union, so that consumers are always informed of the green-ness (or lack thereof) of the energy they purchase.

The real challenge to the Flemish scheme was brought under Article 34 TFEU. The domestic measure encourages suppliers operating in the Flemish regions to buy renewable energy from local producers, as equally green foreign energy is unusable towards fulfilment of the quota. Local green energy is artificially made more precious, because of the green certificates it is associated with, which rational producers must crave, to avoid fines. The restrictiveness of the scheme was plainly acknowledged by the Court (para. 83), although it focused on the trade of electricity rather than the trade of guarantees of origin, an impossibly murky issue that would have required determining whether intangible guarantees qualify as “goods”.

The Court therefore examined whether the scheme was justifiable “on one of the public interest grounds listed in Article [34 TFEU] or by overriding requirements” and whether it satisfied the test of proportionality (para. 89).

The purpose of the scheme was found in the promotion of the use of renewable sources for producing energy (para. 95). This legitimate purpose does not feature in Art. 36 TFEU and therefore, by exclusion, was provisionally accepted by the Court under the doctrine of the rule of reason. Under this principle, domestic measures setting mandatory requirements on goods, which restrict inter-state trade, are justified if they pursue a reasonable policy objective and the restriction entailed is not disproportionate to the contribution made towards that objective. Mandatory (or “overriding”) requirements are not limited to the values listed in Art. 36 TFEU, and routinely include objectives such as consumer interests and environmental protection. In its customary incarnation, the rule of reason can only be used to justify rules that do not discriminate according to the origin of the goods.

The reasoning of the Court on the proportionality of the Flemish scheme is not linear, but proceeds by accumulation. It essentially lists the reasons why the scheme is not as vicious as Essent would claim, invoking contextual elements, policy considerations and semantic tricks. In short, the Courts makes the following remarks, which I briefly assess in the brackets.

Essent claimed that the Flemish scheme does not encourage the consumption of green energy, but only its production. The Court objected (para. 98) that this is normal, as the greenness of energy relates precisely to its method of production (This is a massive non sequitur. If taken seriously, this would mean that green energy might as well be wasted after production, as the benefit to the environment was done already. To the contrary, the only raison d’être of renewable energy is that it is supposed to supplant the consumption of non-renewable energy).

The Court also noted that Member States are allowed by the Directive to set national targets of production of green energy (para. 99), suggesting perhaps that the discrimination inherent in the support scheme was dictated by the concern to achieve these targets (This suggestion is misleading. Whether its motivation is allowed or not by EU law has nothing to do with the EU-compliance of the Flemish measure).

The Court answered also the most difficult question. If the Flemish scheme genuinely aims to increase the production of green energy for environmental purposes, how come it does in fact discourage the purchase of green energy produced abroad, by refusing to accept foreign guarantees of origin as substitutes of Flemish green certificates? The brief answer is worthy of a Sibyl: “it should be observed that the starting points, the renewable energy potential and the energy mix of each Member State vary” (para. 100) (This is too obscure to attempt a reading. Suffice it to say that because guarantees of origin are subject to mutual recognition under the Directive, one would presume that these alleged variations are capable of being taken into account to certify the green nature of the energy, therefore an equivalence between Flemish certificates and any other guarantee is arguably possible to concoct).

Finally, the Court noted (para. 101) that national support schemes are important to achieve the objectives of the Directive (irrelevant per se) and that “it is essential that Member States be able to control the effect and costs of their national support schemes according to their potential, whilst maintaining investor confidence” (para. 102) (With a bit of effort, one can see why discrimination is justified: Member States do not want to make available to all EU producers subsidies whose cost is “ultimately [borne] by the [local] consumers” (para. 107). Also, they cannot suddenly withdraw support schemes when it turns out that they operate mainly for the benefits of foreign producers: investor claims would follow and hit hard).

“In the light of the foregoing,” the Flemish scheme was found to be proportionate, and therefore compliant with Article 34 TFEU (para. 103).

The Court then extended the proportionality analysis to other accessory elements of the schemes. It considered the penalties imposed, leaving it to the national judge to assess their proportionality to the sought objective (para. 114). It also speculated on the fairness of the market of green certificates that can fulfil the compulsory quotas, whose supply is artificially restricted. The Court therefore advocated the establishment of mechanisms under which these certificates can be traded “under fair terms” (para. 111). The irony of the last remark is highlighted in the comments below.

Comments

The Court nonchalantly applied a mandatory requirement to a facially discriminatory measure, sending Cassis to the museum of judge-made law no longer in force, and tacitly ignoring the exhaustiveness of Article 36 TFEU. It conflated overriding requirements and values listed in Article 36 TFEU into a single pool of excuses.

The passing reference to the contribution of reduced emissions to human health (para. 93) should not mislead: if human health hat were indeed the relevant objective of the Flemish scheme, it would have been at the centre of the ensuing proportionality test (just to mention one element, there should have been an analysis of the Flemish scheme’s contribution to increased health protection). That the quota has discriminatory effects which hinder trade was also undoubtable.

Therefore, a distinctly applicable measure was justified on the basis of a public interest other than those listed in Article 36 TFEU. This had also been the case in the parallel case of Ålands Vindkraft, C‑573/12, on which the Court delivered its judgment on 1 July 2014; see paras. 76-77 (the Opinion of this case was also prepared by Bot, and delivered shortly after his Opinion in Essent). Indeed, the Court has seemingly lost interest in making a big deal of the difference between discrimination de jure and discrimination de facto.

Advocate Bot had suggested the Court to abandon the distinction and expressly overturn its previous case-law. The Court did the former but not the latter, suddenly dropping a carefully constructed judicial test that it itself had devised in the wild years of Article 34 TFEU to accommodate reasonable policies which fell outside the scope of Article 36 TFEU.

That direct and indirect discrimination should be treated alike makes perfect sense. This is, for instance, the practice in the GATT, the agreement regulating the removal of trade barriers for trade in goods in the WTO regime. Treating them differently, for instance allowing one to be justified by excuses that do not apply to the other, is irrational: the hindering effect of de jure or de factodiscriminatory measures can be identical in the facts, and a harsher treatment of direct discrimination serves only as an incentive for Member States to disguise discrimination on the basis of nationality within the folds of maliciously designed neutral measures.

However, there was some intuitive value to the bygone distinction: direct discrimination is prima facie illegal and must be hard(er) to justify. Think of the judgment in Test-Achats, which does not even attempt to look at a justification for gender-based direct discrimination. In fact, as registered by AG Kokott in the Opinion to that case (para. 59), justifications based on statistical data can support a proportionality assessment of indirectdiscrimination but cannot suffice to excuse directdiscrimination.

In his proposal, AG Bot had reflected this concern, calling for a reinforced test of proportionality applicable to distinctly applicable measures: the reasons advanced to justify direct discrimination must be of particular weight. See at para. 94: “I think that discriminatory measures, particularly those which infringe a principle as fundamental as that of the prohibition of direct discrimination on grounds of nationality, ought to be subject to a strict requirement of proportionality” (emphasis added).

The Court did not deem it necessary to devise a reinforced (“strict”) proportionality test and, in my view, this might have contributed to a puzzling proportionality analysis, which features several controversial passages.

In short, by applying the routine test of proportionality the Court focused on the pursued objective (protection of the environment through increased production of green energy). In so doing, the discriminatory (and trade-restrictive) nature of the Flemish scheme was side-lined in the analysis. Once a decent contribution to the environment was somewhat found, it was downhill from there. The happy run of proportionality apparently skipped the stop of necessity: was there a less restrictive measure available for Flemish authorities to encourage the consumption and production of green energy? Yes there was: the interchangeability of green certificates and foreign guarantees of origin would have averted trade-restriction and promoted environmental protection even more than the Flemish scheme could possibly do.

The measure can only appear proportionate if the elective purpose is another unconfessed one, which is itself somewhat discriminatory. For instance, it could be argued that the growth and operation of a local green-energy industry is the real purpose, and therefore no alternative policy is available: any infant industry policy inherently involves some deal of temporary protectionism, but is for a good cause. The Court, however, did not resort to this “lesser-evil” reasoning, and pretended that discrimination is fully justified by the environmental purpose of the measure at large.

The irony of the finding is the after-thought of the Court with respect to the fairness of the market for green certificates. By virtually banning substitutable foreign certificates, the Flemish government is providing absolute protection to local producers, which might be few in number and, by definition, have the luxury of setting a higher price than they could if an undistorted transnational market were in function. Formally, there is no ban, but the value of local certificates is artificially inflated by the Flemish schemes, and makes it inconvenient for energy-suppliers to purchase green energy from abroad. This is a textbook example of a market distorted by protectionism, where demand is forced to opt for the local product, and foreign competitors are treated much less favourably. The Court concedes that buyers of green certificates, which need to comply with a compulsory quota, might find it unfair that the supply of certificates is artificially restricted to the collective monopoly of local producers, which can charge above-market prices. Local content requirements such as those envisaged by the Flemish scheme constitute a prototypical instrument of protectionism, and not surprisingly they are included, for instance, among the measures prohibited in the WTO Agreement on Trade-Related Investment Measures. It does not get any more protective and trade-distorting than that.

However, the Court limits itself to elegantly call for some “mechanisms” to ensure that suppliers can purchase green certificates “under fair terms” (para. 111), a puzzling statement in light of the previous validation of a protectionist scheme which is trade unfairness incarnated.

Ultimately, this is a memorable case, because it seemingly puts to bed the rule of reason as we knew it. Also, the reasoning on the merits is very hard to decode because the dropping of direct discrimination as a crucial element of the analysis resulted indeed in a confusing assessment of proportionality, which often loses sight of the differential treatment at stake and forgets about the necessity test altogether.

Barnard & Peers: chapter 12, chapter 16, chapter 22

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