Sunday, 20 April 2008

EU TFEU: Safeguard measures restricting free movement of capital

“Living in interesting times” as regards international financial markets, it may be good to know that the current Treaty establishing the European Community (TEC) and the Treaty on the Functioning of the European Union (TFEU) foresee temporary safeguard measures to protect economic and monetary union (EMU) in exceptional circumstances.


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The Council’s provisional consolidated version of the Treaty on European Union (TEU) and the Treaty on the Functioning of the European Union (TFEU) has been available since 16 April 2008. Go to the following Lisbon Treaty web page and choose your preferred treaty language (out of 23):

http://consilium.europa.eu/cms3_fo/showPage.asp?id=1296&lang=en

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Article 66 TFEU is presented as it stands after the intergovernmental conference (IGC 2007) in the Treaty of Lisbon (ToL) and provisionally consolidated by the Council of the European Union (document 6655/08; page 95), with the location of the provision added from the table of equivalences (page 460 to 462):

Part Three ‘Policies and internal actions of the Union’

Title IV TFEU (ex Title III) ‘Free movement of persons, services and capital’

Chapter 4 ‘Capital and payments’

Article 66 TFEU
(ex Article 59 TEC)

Where, in exceptional circumstances, movements of capital to or from third countries cause, or threaten to cause, serious difficulties for the operation of economic and monetary union, the Council, on a proposal from the Commission and after consulting the European Central Bank, may take safeguard measures with regard to third countries for a period not exceeding six months if such measures are strictly necessary.

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The original unconsolidated Treaty of Lisbon (ToL) with the amendments to the Treaty on European Union and the Treaty establishing the European Community, signed at Lisbon, 13 December 2007, is available in 23 treaty languages through:

http://eur-lex.europa.eu/JOIndex.do?year=2007&serie=C&textfield2=306&Submit=Search&_submit=Search&ihmlang=en

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Article 2 ToL (containing the TEC amendments) had no specific amendments to Article 59 TEC. Cf. point 61 and 62 (OJ 17.12.2007 C 306/56).

‘Acting by a qualified majority’ was deleted according to horizontal amendment 2(d) and the abbreviation ‘ECB’ replaced by ‘European Central Bank’ in line with horizontal amendment 2(j).

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For the consolidated treaties in force in your preferred language version among the then 21 treaty languages (Bulgarian and Romanian missing), go to:

http://eur-lex.europa.eu/JOIndex.do?year=2006&serie=C&textfield2=321E&Submit=Search&_submit=Search&ihmlang=en

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The current Article 59 of the Treaty establishing the European Community (TEC) is found in the latest consolidated version of the treaties (OJ 29.12.2006 C 321 E/65):

Article 59 TEC

Where, in exceptional circumstances, movements of capital to or from third countries cause, or threaten to cause, serious difficulties for the operation of economic and monetary union, the Council, acting by a qualified majority on a proposal from the Commission and after consulting the ECB, may take safeguard measures with regard to third countries for a period not exceeding six months if such measures are strictly necessary.

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The European Convention introduced small stylistic changes in Article III-48 of the draft Treaty establishing a Constitution for Europe, but without material impact (OJ 18.7.2003 C 169/35):

Article III-48 Draft Constitution

Where, in exceptional circumstances, movements of capital to or from third countries cause, or threaten to cause, serious difficulties for the operation of economic and monetary union, the Council of Ministers, on a proposal from the Commission, may adopt European regulations or decisions introducing safeguard measures with regard to third countries for a period not exceeding six months if such measures are strictly necessary. It shall act after consulting the European Central Bank.

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The differences between the draft Constitution and Article III-159 of the Treaty establishing a Constitution for Europe are minimal. ‘Operation’ became ‘functioning’ and the ‘Council of Ministers’ had become the ‘Council’. See OJ 16.12.2004 C 310/67.

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We live “in interesting times” as regards the stability of the financial markets, so Article 66 TFEU may be of more than purely theoretical interest.

The provision offers the EU possibilities to safeguard the operation of economic and monetary union (EMU) with regard to third countries.

These measures can not be taken lightly. ‘Exceptional circumstances’, ‘serious difficulties’ and ‘strictly necessary’ all circumscribe recourse to such measures. In addition, six months is the maximum duration of a measure (but the wording does not exclude a new decision).


Ralf Grahn