EU TFEU: Approximation of internal market laws in sensitive areas

Approximation or harmonisation of internal market laws in sensitive areas, such as company taxes, is subject to unanimous decision making by the EU Council. The Treaty of Lisbon does not change the unanimity rule, although the reform treaty tries to make the relationship between ordinary and special legislative procedures clearer.


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Article 115 of the Treaty on the Functioning of the European Union (TFEU) is found in the consolidated version of the Treaty on European Union and the Treaty on the Functioning of the European Union, published in the Official Journal of the European Union, OJ 9.5.2008 C 115/95:

Part Three Union policies and internal actions

Title VII Common rules on competition, taxation and approximation of laws

Chapter 3 Approximation of laws

Article 115 TFEU
(ex Article 94 TEC)

Without prejudice to Article 114, the Council shall, acting unanimously in accordance with a special legislative procedure and after consulting the European Parliament and the Economic and Social Committee, issue directives for the approximation of such laws, regulations or administrative provisions of the Member States as directly affect the establishment or functioning of the internal market.

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In Article 2, point 80 of the Treaty of Lisbon (ToL) the IGC 2007 renumbered and amended Article 94 of the Treaty establishing the European Community (TEC), and in point 82 it amended the new Article 95 TFEU (ToL) (OJ 17.12.2007 C 306/69):

APPROXIMATION OF LAWS

80) The order of Articles 94 and 95 shall be reversed. Article 94 shall be renumbered 95 and Article 95 shall be renumbered 94.

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82) In Article 94, renumbered 95, the words ‘Without prejudice to Article 94,’ shall be inserted at
the beginning.

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The TFEU table of equivalences confirms that Article 94 TEC first became Article 95 TFEU (ToL) in the original Treaty of Lisbon, and it tells us that it was later renumbered Article 115 TFEU in the consolidated version (OJ 17.12.2007 C 306/211).

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The current Article 94 of the Treaty establishing the European Community (TEC) is found under Title VI ‘Common rules on competition, taxation and approximation of laws’, Chapter 3 ‘Approximation of laws’, in the latest consolidated version of the treaties in force (OJ 29.12.2006 C 321 E/79).

When the proposed TFEU Article 114 (the current Article 95 TEC) with the normal or ordinary procedures for approximation (harmonisation) of laws was lifted to the beginning of the Chapter 3, the sensitive areas, mentioned in the second paragraph, requiring unanimity, were left to be dealt with in Article 115 TFEU (the current Article 94 TEC) of the amending treaty.

The new order feels like an improvement, but in spite of the words added at the beginning of Article 115 TFEU, plain language to express the scope of the provision would not have been amiss.

The only specific amendment by the Treaty of Lisbon was to add the words ‘Without prejudice to Article 94,’ (renumbered Article 114 TFEU) at the beginning. The words ‘acting unanimously on a proposal from the Commission’ were replaced by ‘acting unanimously in accordance with a special legislative procedure’ according to horizontal amendment 3 of Article 2 of the Treaty of Lisbon (OJ 17.12.2007 C 306/42), and the words ‘common market’ at the end were replaced by ‘internal market’ in line with horizontal amendment 2(g) (OJ 17.12.2007 C 306/41).

Here is the current Article 94 TEC:

Article 94 TEC

The Council shall, acting unanimously on a proposal from the Commission and after consulting the European Parliament and the Economic and Social Committee, issue directives for the approximation of such laws, regulations or administrative provisions of the Member States as directly affect the establishment or functioning of the common market.

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We have seen the minor differences between Article 94 TEC in force and Article 115 TFEU.

For the sake of systematic comparison, we look at the Article during the intervening treaty reform stages.

First, we turn to the European Convention, the closest thing to a constituent assembly EU citizens have had. The Article in question is located in Part III ‘The policies and functioning of the Union’, Title III ‘Internal policies and action’, Chapter I ‘Internal market’, Section 7 ‘Approximation of legislation’.

Article III-64 of the draft Treaty establishing a Constitution for Europe was still the first Article of Section 7. The terminology of the draft Constitution differed from the TEC and there were some changes in wording, including the words ‘Without prejudice to Article III-65’ added at the beginning. But the substance remained unchanged. See OJ 18.7.2003 C 169/38.

Article III-64 Draft Constitution

Without prejudice to Article III-65, a European framework law of the Council of Ministers shall establish measures for the approximation of such laws, regulations or administrative provisions of the Member States as directly affect the establishment or functioning of the internal market. The Council of Ministers shall act unanimously after consulting the European Parliament and the Economic and Social Committee.

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In the Treaty establishing a Constitution for Europe, approved by 18 member states, the provisions on approximation (harmonisation) were located in Part III ‘The policies and functioning of the Union’, Title III ‘Internal policies and action’, Chapter I ‘Internal market’, Section 7 ‘Common provisions’.

The IGC 2004 lifted Article III-172 (the current Article 95 TEC) as the new ‘high road’ to the top of Section 7, and Article III-173 (the current Article 94 TEC) sank to become the ‘low road’ for areas requiring unanimity.

Consequently, the referral at the beginning changed. The ‘Council of Ministers’ became the ‘Council’ in the Constitutional Treaty, but otherwise the IGC 2004 took over the wording of the draft Constitution.

Article III-173 is found in OJ 16.12.2004 C 310/75:

Article III-173 Constitution

Without prejudice to Article III-172, a European framework law of the Council shall establish measures for the approximation of such laws, regulations or administrative provisions of the Member States as directly affect the establishment or functioning of the internal market. The Council shall act unanimously after consulting the European Parliament and the Economic and Social Committee.

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What has been said about Article 115 TFEU, with the shifted position, but substantially unchanged from the current Article 94 TEC?


United Kingdom

Professor Steve Peers covered the Treaty of Lisbon in a number of Statewatch Analyses. ‘EU Reform Treaty Analysis no. 3.3: Revised text of Part Three, Titles I to VI of the Treaty establishing the European Community (TEC): Internal Market and competition’ (Version 2, 23 October 2007) includes the current Title VI Common rules on competition, taxation and approximation of laws.

Peers indicated the changing numbering of Article 94 TEC, 95 TFEU (ToL), to be renumbered Article 115 TFEU in the consolidated version, and highlighted the changes, and he added the following comment (pages 30–31):

“The draft Reform Treaty attempts to clarify the relationship between Articles 94 and 95.”

The analysis 3.3 and other useful Statewatch analyses are available through:

http://www.statewatch.org/euconstitution.htm


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The Foreign and Commonwealth Office (FCO) offers a convenient source of brief annotations on Lisbon Treaty amendments in ‘A comparative table of the current EC and EU treaties as amended by the Treaty of Lisbon’ (Command Paper 7311, published 21 January 2008). It offers the following comment on Article 115 TFEU, Article 95 TFEU (ToL) in the original Lisbon Treaty (page 12):

“In substance the same as Article 94 TEC.”

The FCO comparative table is available at:

http://www.official-documents.gov.uk/document/cm73/7311/7311.asp

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The UK House of Commons Library Research Paper 07/86 ‘The Treaty of Lisbon: amendments to the Treaty establishing the European Community’ (published 6 December 2007) discussed the approximation of internal market laws on page 60 (under the heading ‘2. Taxation’).

The Research Paper commented briefly on the harmonisation of internal market laws, before moving on to tax harmonisation:

“Articles 94–97 (Constitution Articles III-172 – III-176) are on the approximation of internal market laws. The general aims are unchanged and the Council will adopt measures for the approximation of laws, regulations or administrative provisions of the Member States that directly affect the internal market. The out-dated term “common market” is removed and replaced with “internal market”.”

The Reasearch Paper then proceeded to discuss the approximation (harmonisation) of tax law and the British official position (pages 60–61):

“Harmonisation in the sphere of direct taxes under Article 94 TEC is much more limited than in that of indirect taxes. Although directives introduced under Article 94 TEC may be approved under the co-decision procedure, this does not apply to fiscal provisions. The TFEU, like the Constitution, maintains the requirement for unanimity in Article 95 on any fiscal measure introduced under this Treaty base. The wording of Articles 94 and 95(2) (Constitution Articles III-173 and III-172) is fundamentally unchanged.

The possibility that all taxation measures might be subject to unanimity [sic] at some point in the future has been a controversial issue for some time. The Government’s position on the issue has been stated many times. In June 2003 the then Paymaster General, Dawn Primarolo, said the British Government would “not accept any changes that move away from unanimity on tax matters. When the then Prime Minister, Tony Blair, made a statement to the House following agreement on the Constitution in June 2004, he underlined the point that “this treaty … keeps unanimity for the most important decisions … in particular for tax, social security, foreign policy, defence and decisions on the financing of the Union affecting the British budget contribution.” Tony Blair told the Liaison Committee on 18 June 2007 shortly before the June European Council which agreed the IGC Mandate: “we will not agree to anything that moves to qualified majority voting, something that can have a big say in our own tax and benefit system”.”

(I have deleted the footnotes, but they can be found in the original document.)

The Library Research Paper 07/86 is available at:

http://www.parliament.uk/commons/lib/research/rp2007/rp07-086.pdf

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The House of Lords European Union Committee report ‘The Treaty of Lisbon: an impact assessment, Volume I: Report’ (HL Paper 62-I, published 13 March 2008) is a valuable resource on the Treaty of Lisbon, but I found no reference to Article 115 TFEU (Article 94 TEC or Article 95 ToL).

The report is accessible at:

http://www.publications.parliament.uk/pa/ld200708/ldselect/ldeucom/62/62.pdf


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Sweden

The consultation paper ’Lissabonfördraget’ is still valuable as a description of the Lisbon Treaty amendments, and it is available at:

http://www.regeringen.se/content/1/c6/09/49/81/107aa077.pdf

But my standard reference is currently the Swedish government’s draft ratification bill ‘Lagrådsremiss – Lissabonfördraget’, published 29 May 2008 and sent to the Council on Legislation (Lagrådet) for an expert opinion. The draft deals with the EU’s internal policy areas in Chapter 23 ‘Unionens interna åtgärder’, and section 23.1 presents the internal market (Inre marknaden), on pages 175 to 181.

The Swedish government presents a short background paragraph on the harmonisation of laws in the internal market (page 176):

”Artiklarna 94–97 i EG-fördraget återger möjligheten att harmonisera lagstiftningen på den inre marknaden. Det finns en stor volym sekundärrätt med utgångspunkt i artikel 95 i EG-fördraget samt en omfattande praxis på området. Möjligheten till harmonisering av medlemsstaternas lagar och författningar är en förutsättning för den inre marknadens bibehållande och fortsatta funktion.”

The government later remarks on the essentially unchanged nature of most internal market provisions (e.g. page 176), but on the following page it adds a comment on the changing position of Articles 94 and 95, with the remark that the purpose is to clarify the relationship between the Articles and it mentions the words added at the beginning of Article 95 TFEU (ToL):

“Vad avser tillnärmning av lagstiftning, byter artiklarna 94 och 95 plats. Syftet med omnumreringen är att klargöra förhållandet mellan de båda artiklarna. I inledningen till artikel 95 i EUF-fördraget görs ett tillägg om att artikeln inte ska påverka tillämpningen av artikel 94 i EUF-fördraget.”

The draft bill ‘Lagrådsremiss – Lissabonfördraget’ can be downloaded through:

http://www.regeringen.se/sb/d/5676/a/106277

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Finland

The Finnish ratification bill, ‘Hallituksen esitys Eduskunnalle Euroopan unionista tehdyn sopimuksen ja Euroopan yhteisön perustamissopimuksen muuttamisesta tehdyn Lissabonin sopimuksen hyväksymisestä ja laiksi sen lainsäädännön alaan kuuluvien määräysten voimaansaattamisesta’ (HE 23/2008 vp), is the most systematic analysis of the Lisbon Treaty I have encountered.

Under the heading Approximation of laws (Lainsäädännön lähentäminen), the bill offers a description of Article 95 TFEU (ToL), renumbered Article 115 TFEU. The government explains the subsidiary nature of Article 95 TFEU (ToL) in relation to Article 94. The added words reflect the current interpretation of the relationship between the Articles (page 209):

”95 artiklassa (uusi 115 artikla) määrätään neuvoston mahdollisuudesta antaa komission ehdotuksesta yksimielisesti Euroopan parlamenttia kuultuaan direktiivejä sisämarkkinoiden vaatimaksi jäsenvaltioiden lainsäädäntöjen yhdenmukaistamiseksi. Artikla vastaa perustuslakisopimuksen III-173 artiklaa ja korvaa SEY 94 artiklan seuraavin muutoksin. SEUT 95 artiklassa on uusi määräys, jonka mukaan SEUT 95 artikla ei rajoita SEUT 94 artiklan soveltamista. Tämä tarkoittaa, että SEUT 94 artikla on ensisijainen SEUT 95 artiklaan nähden. Vastaavaa määräystä ei sisälly nykyiseen SEY 94 artiklaan, mutta määräys vastaa nykyistä oikeustilaa. Käytännössä SEY 95 artiklaa ja SEY 94 artiklaa on tulkittu siten, että SEY 95 artikla on ensisijainen SEY 94 artiklaan nähden.”

The Finnish ratification bill is available at:

http://www.finlex.fi/fi/esitykset/he/2008/20080023.pdf


The Swedish language version of the ratification bill ‘Regeringens proposition till Riksdagen med förslag om godkännande av Lissabonfördraget om ändring av fördraget om Europeiska unionen och fördraget om upprättandet av Europeiska gemenskapen och till lag om sättande i kraft av de bestämmelser i fördraget som hör till området för lagstiftningen’ (RP 23/2008 rd), makes the same remarks under ’Tillnärmning av lagstiftning’ on Article 95 TFEU (ToL), the future Article 115 TFEU, on pages 211–212:

”I artikel 95 (blivande artikel 115) föreskrivs om rådets möjlighet att på förslag av kommissionen enhälligt och efter att ha hört Europaparlamentet utfärda direktiv om tillnärmning av sådan lagstiftning i medlemsstaterna som krävs för den inre marknaden. Artikeln motsvarar artikel III-173 i det konstitutionella fördraget och ersätter artikel 94 i EG-fördraget med följande ändringar. I artikel 95 i EUF-fördraget ingår en ny bestämmelse enligt vilken artikel 95 i EUFfördraget inte begränsar tillämpningen av artikel 94 i EUF-fördraget. Detta betyder att artikel 94 i EUF-fördraget är primär i förhållande till artikel 95 i EUF-fördraget. Någon motsvarande bestämmelse ingår inte i nuvarande artikel 94 i EG-fördraget, men bestämmelsen motsvarar rådande rättsläge. I praktiken har artiklarna 95 och 94 i EG fördraget tolkats så att artikel 95 är primär i förhållande till artikel 94.”

The ratification bill in Swedish can be accessed at:

http://www.finlex.fi/sv/esitykset/he/2008/20080023.pdf

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Both Article 114 TFEU and Article 115 TFEU are general in the sense that they provide legal bases for harmonising measures, when the treaties have not catered for special grounds for internal market legislation.

In the absence of a special base, Article 114 TFEU applies, with the ordinary legislative procedure, for internal market objectives.

When fiscal (tax) provisions, those relating to the free movement of persons and those relating to the rights and interests of employed persons, expressly excluded by Article 114(2) TFEU, directly affect the establishment or functioning of the internal market, Article 115 TFEU enters the picture. These sensitive areas are subject to unanimous decision making by the Council, and the European Parliament is only consulted.




Ralf Grahn