Thursday, 13 March 2008

EU TFEU: Internal market softeners and derogations

The competitiveness of member states’ economies varies hugely, and efforts enhance competition within the European Union may affect them differently. The Commission has the responsibility to take these differences into account, when it draws up its proposals for the internal market. This can happen through the standards set, or by transitory periods, or they can accommodate certain members by temporary derogations (exemptions).

These softeners, or ‘safety valve’ principles form an integral part of rule making for the single market.

In addition, we get a bird’s eye view of the whole treaty reform process, leading up to the Union policies and internal actions as agreed in the Treaty of Lisbon.

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In the Treaty of Lisbon (ToL) the intergovernmental conference amended Article 15 of the Treaty establishing the European Community (TEC), which was adopted as Article 22b of the Treaty on the Functioning of the European Union (TFEU). Here is the text of the IGC 2007 (OJ 17.12.2007 C 306/52):

42) An Article 22b shall be inserted, with the wording of Article 15. In the first paragraph, the words ‘during the period of establishment’ shall be replaced by ‘for the establishment’.

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Even minimal amendments, indeed, especially these, require recourse to the current TEC to make sense (so we turn to the latest consolidated version of the TEU and the TEC in OJ 29.12.2006 C 321 E/49):

Article 15 TEC

When drawing up its proposals with a view to achieving the objectives set out in Article 14, the Commission shall take into account the extent of the effort that certain economies showing differences in development will have to sustain during the period of establishment of the internal market and it may propose appropriate provisions.

If these provisions take the form of derogations, they must be of a temporary nature and must cause the least possible disturbance to the functioning of the common market.

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We keep in mind that we study Part Three Union policies and internal actions, Title I The internal market, of the TFEU.

Our following task is to consolidate the Article, merging existing contents with amendments, and taking into account that the ToL uses one set of numbering, but indicates a new numbering for future consolidated versions of the treaties (in the tables of eqivalences). The end result should look like this:

Article 22b TFEU (ToL), after renumbering Article 27 TFEU

When drawing up its proposals with a view to achieving the objectives set out in Article 22a [TFEU (ToL), after renumbering Article 26 TFEU], the Commission shall take into account the extent of the effort that certain economies showing differences in development will have to sustain for the establishment of the internal market and it may propose appropriate provisions.

If these provisions take the form of derogations, they must be of a temporary nature and must cause the least possible disturbance to the functioning of the internal market.

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After spanning the whole distance from the current TEC to the new TFEU, we take a look at two of the individual arches in between, the draft Constitution and the Constitution.

Perhaps a few preliminary general comments are in order. The treaty reform process can be seen as continuous. You can choose to look at the Treaty of Maastricht (Treaty on European Union, TEU) as a first, remarkable stage, which however left unfinished business to which were later added the fact and the prospect of enlargement. These questions were only in part remedied by the Treaty of Amsterdam and the Treaty of Nice, attested to by the fact that the same European Council which agreed on the Nice Treaty felt the need to declare the need for continued reform. With this interpretation we have a more or less continuing reform process from about 1990 until today (2008).

The other point of view would be to see the unsatisfactory Treaty of Nice (signed 2001) as the starting point for a new reform process, with the Declaration of Laeken, the European Convention and its draft Constitution, the IGC 2004 and the Constitutional Treaty, and the retrenchment after failed ratification and the partial relaunch by the IGC 2007 leading to the Lisbon Treaty as the principal stages. Even this shorter history of treaty reform, from December 2000 (Nice) until today (early 2008), presents the picture of seven lean years since no substantial changes have been harvested, namely entered into force (although the accession treaties of 2003 and 2005 should be remembered).

The common denominator has been institutional all along, with decision making structures of the European Union in focus.

The two high points were, in my opinion:

1) The convention method and the work of the first Convention leading to the Charter of Fundamental Rights, and the European Convention (the second one), which produced the draft Constitution. Without being perfect, they embodied more democratic legitimacy than any attempt since the Spinelli draft (1984).

2) The Treaty establishing a Constitution for Europe (2004), where the IGC 2004 achieved some technical improvements and subtracted a few substantial ones, was still remarkable in that it promised substantial reform and a fairly well organised and readable text (although overly long).

Having read countless stories on the ‘failed Constitution’, I think it is time to make a distinction. The Constitutional Treaty was not a failure. Actually, it was as good as it gets at this stage of development, given the strictures of unanimous decision making in a large forum of disparate member states.

Only the ratification process failed, falling victim to the almost impossible requirement to get any meaningful reform approved constitutionally in 27 member states.

The end result is, after the relaunch, the Lisbon Treaty, a sort of ‘Zombie Constitution’, with most of the material contents of the Constitutional Treaty, but without its soul. In addition, the vestments are tattered, riven into a myriad of separate amendments. Only when consolidated versions of the Treaty of Lisbon appear, can a citizen of the EU read and begin to understand the most important document of the European Union since 2004.

The last leg of this ‘scenic route’ takes us back to the policies and internal actions of the European Union.

Because the focus during the whole reform process has been on decision making and institutional issues, the policy areas and internal actions of the EU, including the internal market, have mainly been reorganised and tidied up, without much substantial reform (with the area of freedom, security and justice the most notable exception).

Therefore, the study of the new EU policies ‘de lege ferenda’ is very much the study of existing Community policies ‘de lege lata’, with some new terminology and a few nuances thrown in for good measure. (Calls for a reform of the substantial areas of action have been heard, but the European leaders have been silent lately. A number of member states signalled the need to reform the Euratom Treaty, treated even more like a stepchild or afterthought by various reform conclaves.)

In other words, do not be surprised if you find few surprises, but still there is cause to study the internal EU actions as they are meant to be, and the preceding stages.

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The European Convention proposed the following in the draft Treaty establishing a Constitution for Europe (OJ 18.7.2003 C 169/30):

Article III-15 Draft Constitution

When drawing up its proposals with a view to achieving the objectives set out in Article III-14, the Commission shall take into account the extent of the effort that certain economies showing differences in development will have to sustain for the establishment of the internal market and it may propose appropriate measures.

If these measures take the form of derogations, they must be of a temporary nature and must cause the least possible disturbance to the functioning of the internal market.

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The Treaty establishing a Constitution for Europe merged two Articles of the draft, so technically we compare the text of its fourth paragraph with draft Article III-15, but reading the whole Article III-130 of the Constitutional Treaty reminds us of the context (OJ 16.12.2004 C 310/58):

Article III-130 Constitution

1. The Union shall adopt measures with the aim of establishing or ensuring the functioning of the internal market, in accordance with the relevant provisions of the Constitution.

2. The internal market shall comprise an area without internal frontiers in which the free movement of persons, services, goods and capital is ensured in accordance with the Constitution.

3. The Council, on a proposal from the Commission, shall adopt European regulations and decisions determining the guidelines and conditions necessary to ensure balanced progress in all the sectors concerned.

4. When drawing up its proposals for achieving the objectives set out in paragraphs 1 and 2, the Commission shall take into account the extent of the effort that certain economies showing differences in development will have to sustain for the establishment of the internal market and it may propose appropriate measures.

If these measures take the form of derogations, they must be of a temporary nature and must cause the least possible disturbance to the functioning of the internal market.

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You are now free to make your own comparison. If you find that the changes from the present TEC to the Lisbon Treaty are of less than mind-boggling proportions, you may be right.

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For those who want to compare the Treaty of Lisbon with its immediate predecessor, the Constitutional Treaty, there is now a technically advanced alternative available, with differences highlighted.

The bulky Part III of the Constitution, The policies and functioning of the Union, largely corresponding to the TFEU we are studying, has just been launched side by side with the Lisbon Treaty provisions.

This commendable work of an Anonymous compiler is of great service for everyone interested in the latest EU treaty developments. Instead of anonymity he or she should get public recognition. Go to Constitreaty:

http://www.constitreaty.com

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Article 22b TFEU (ToL), after renumbering Article 27 TFEU, like its predecessors, offers a ‘safety valve’, when proposals to achieve the internal market leading to fiercer competition put too much strain on some (lesser developed) economies. The Commission is given the responsibility to take the effects of its proposals into account.

Basically, the general standards to achieve may be set sufficiently low to allow the less competitive economies to pass muster, or offer transitory periods to achieve higher norms (for instance safety or environmental requirements).

On the other hand, individual derogations (exemptions) are possible according to paragraph 2. These are meant to give one or more member states a grace period to catch up with the others, but they have to fulfil two criteria:

1) They must be temporary.

2) They must cause the internal market the least possible disturbance, namely distort competition as little as possible under the circumstances. In other words, the derogations must pass the test of proportionality.

Within these parameters the Commission and the legislators, the Council and the European Parliament, have wide powers to judge the (political) expediency of the measures.


Ralf Grahn