The European Central Bank (ECB) and the national central banks of the euro area form the European System of Central Banks (ESCB), or the Eurosystem. But at this moment twelve (soon eleven) EU member states are (still) outside the Eurozone.
The General Council of the European Central Bank is the transitional link between the Eurosystem and the EU members with a national currency and a so called derogation.
This blog post is dedicated to our readers in Bulgaria, the Czech Republic, Denmark, Estonia, Latvia, Lithuania, Hungary, Poland, Romania, Slovakia, Sweden and the United Kingdom.
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Current treaty
The current Treaty establishing the European Community (TEC) sets out Transitional provisions in Chapter 4 of Title VII Economic and monetary policy, in Part Three Community policies (in the latest codified version of the treaties, Official Journal 29.12.2006 C 321 E/93─101).
Chapter 4 Transitional provisions contains Articles 116 to 124 TEC.
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General Council of the ECB
Article 123(3) TEC sets up the General Council of the ECB as a transitional body:
Article 123(3) TEC
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3. If and as long as there are Member States with a derogation, and without prejudice to
Article 107(3) of this Treaty, the General Council of the ECB referred to in Article 45 of the
Statute of the ESCB shall be constituted as a third decision-making body of the ECB.
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ECB decision-making bodies
Since the General Council of the ECB is seen as a transitory exception to the institutional framework of the European Central Bank, the referral to Article 107(3) TEC reminds us of the ordinary decision-making bodies of the ECB:
Article 107(3) TEC
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3. The ESCB shall be governed by the decision-making bodies of the ECB which shall be the Governing Council and the Executive Board.
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General Council tasks
At the start of the second stage of economic and monetary union (EMU), the European Monetary Institute (EMI) was established to prepare the establishment of the European Central Bank (ECB) and the introduction of the euro currency (third stage of EMU).
Article 117(2) TEC mentions a number of EMI’s tasks. EMI has been replaced by the ECB.
Article 117(2) TEC
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2. The EMI shall:
— strengthen cooperation between the national central banks,
— strengthen the coordination of the monetary policies of the Member States, with the aim of ensuring price stability,
— monitor the functioning of the European Monetary System,
— hold consultations concerning issues falling within the competence of the national central banks and affecting the stability of financial institutions and markets,
— take over the tasks of the European Monetary Cooperation Fund, which shall be dissolved; the modalities of dissolution are laid down in the Statute of the EMI,
— facilitate the use of the ecu and oversee its development, including the smooth functioning of
the ecu clearing system.
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ESCB Statute
Protocol (No 18) on the Statute of the European System of Central Banks and of the European Central Bank (1992), in the latest consolidated version of the treaties OJ 29.12.2006 C 321 E/256, has a Chapter IX Transitional and other provisions for the ESCB.
Article 43 General provision excludes member states with a derogation from enumerated rights and obligations.
Article 44 Transitional tasks of the ECB confers the tasks of the EMI on the ECB and sets out the advisory task of the ECB during the preparation of abrogation of derogations.
Article 45 The General Council of the ECB institutes the General Council as a third decision-making body of the ECB and sets out the institutional basics. Since Article 45 of the ESCB Statute is referred to in Article 123(3) TEC, here is the wording:
Article 45 ESCB Statute
The General Council of the ECB
45.1. Without prejudice to Article 107(3) of this Treaty, the General Council shall be constituted as a third decision-making body of the ECB.
45.2. The General Council shall comprise the President and Vice-President of the ECB and the Governors of the national central banks. The other members of the Executive Board may participate, without having the right to vote, in meetings of the General Council.
45.3. The responsibilities of the General Council are listed in full in Article 47 of this Statute.
Article 46 Rules of Procedure of the General Council.
Article 47 Responsibilities of the General Council.
Article 48 Transitional provisions for the capital of the ECB.
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Article 53 Applicability of the transitional provisions states that as long as there are member states with a derogation, Articles 43 to 48 shall be applicable.
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Draft Constitution
The euro currency had been introduced, and the euro banknotes and coins were in circulation, when the European Convention deliberated institutional reform of the European Union. It is hardly surprising that the Convention proposed a reworked section with the aim to simplify and to clarify the transitional provisions.
Section 4 Transitional provisions comprises Articles III-91 to III-96 of the draft Constitution (OJ 18.7.2003 C 169/45─46).
Article III-93 of the draft Constitution is a consolidation and update of the treaty provisions we looked at above:
SECTION 4
Transitional provisions
Article III-93 Draft Constitution
1. If and as long as there are Member States with a derogation, and without prejudice to Article III-79(3), the General Council of the European Central Bank referred to in Article 45 of the Statute of the European System of Central Banks and the European Central Bank shall be constituted as a third decisionmaking body of the European Central Bank.
2. If and as long as there are Member States with a derogation, the European Central Bank shall, as regards those Member States:
(a) strengthen cooperation between the national central banks;
(b) strengthen the coordination of the monetary policies of the Member States, with the aim of ensuring price stability;
(c) monitor the functioning of the exchange-rate mechanism;
(d) hold consultations concerning issues falling within the competence of the national central banks and affecting the stability of financial institutions and markets;
(e) carry out the former tasks of the European Monetary Cooperation Fund, previously taken over by the European Monetary Institute.
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Finland
The Finnish government reported on the results of the European Convention in Valtioneuvoston selonteko Eduskunnalle konventin tuloksista ja valmistautumisesta hallitusten väliseen konferenssiin (VNS 2/2003 vp). Finland had adopted the euro. A section discussed economic and monetary policy (8.5 Talous. ja rahapolitiikka) on pages 65 to 67, but I found nothing specific about Article III-93 of the draft Constitution.
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Sweden
Ahead of the intergovernmental conference, the Swedish government presented its views in a memorandum, Regeringens skrivelse 2003/04:13 Europeiska konventet om EU:s framtid (2 October 2003).
Sweden had not negotiated an opt-out from the treaty obligation to introduce the euro currency, but still the government had arranged a referendum on the adoption. The negative referendum result, which left Sweden in legal limbo, was fresh.
If the updated Article III-93 of the draft Constitution had little practical significance for Finland, the cursory treatment of transitional monetary provisions by the Swedish government may have had other reasons. Anyway, I found no specific mention of draft Constitution Article III-93 in the memorandum.
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de Poncins
Étienne de Poncins presented the text of Article III-93 in Vers une Constitution européenne (Éditions 10/18, 2003), page 315, without comment.
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Constitutional Treaty
The transitional EMU provisions of the intergovernmental conference (IGC 2004) are found in Section 5 Transitional provisions, comprising Articles III-197 to 202 of the Treaty establishing a Constitution for Europe (OJ 16.12.2004 C 310/86─90).
Article III-199 Constitution
1. If and as long as there are Member States with a derogation, and without prejudice to Article III-187(1), the General Council of the European Central Bank referred to in Article 45 of the Statute of the European System of Central Banks and of the European Central Bank shall be constituted as a third decision-making body of the European Central Bank.
2. If and as long as there are Member States with a derogation, the European Central Bank shall, as regards those Member States:
(a) strengthen cooperation between the national central banks;
(b) strengthen the coordination of the monetary policies of the Member States, with the aim of ensuring price stability;
(c) monitor the functioning of the exchange-rate mechanism;
(d) hold consultations concerning issues falling within the competence of the national central banks and affecting the stability of financial institutions and markets;
(e) carry out the former tasks of the European Monetary Cooperation Fund which had subsequently been taken over by the European Monetary Institute.
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Let us see it our standard references contribute anything towards our understanding of the provision.
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Sweden
The government of Sweden, still outside the eurozone as a member state with a derogation, offered a short and bland description of the aims of economic and monetary union (EMU) in the draft ratification bill, Lagrådsremiss Fördraget om upprättande av en konstitution för Europa (2 June 2005), page 171:
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”Den ekonomiska och monetära unionen (EMU) är ett samarbete inom EU som syftar till att samordna medlemsländernas ekonomiska politik och att införa en gemensam valuta. EMU har genomförts i tre etapper. Den sista etappen inleddes 1999 och innebär en fullbordad valutaunion med gemensam centralbank (Europeiska centralbanken) samt gemensam valuta och penningpolitik. En förutsättning för valutaunionen har varit och är att de deltagande ländernas ekonomier befinner sig på ungefär samma nivå. Ett antal ekonomiska krav som ett land måste uppfylla för att få delta i valutaunionen har därför ställts upp, de s.k. konvergenskriterierna. För att säkerställa sunda offentliga finanser inom unionen har därför EU inrättat den s.k. stabilitets- och tillväxtpakten.”
The Swedish government did not mention Article III-199 of the Constitution specifically, although the national central bank (Sveriges Riksbank) participates in the General Council of the European Central Bank.
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Finland
In Finland, the government’s ratification bill, Hallituksen esitys Eduskunnalle Euroopan perustuslaista tehdyn sopimuksen hyväksymisestä ja laiksi sen lainsäädännön alaan kuuluvien määräysten voimaansaattamisesta (HE 67/2006 vp), mentioned Article III-199 of the Constitution on page 185. The government remarked on the essential similarity of Article III-199 with Article 123(3) TEC and Article 117(2) TEC save for technical adjustments. The Finnish government mentioned that Article III-199 applies to the states, which have not yet adopted the euro:
”III-199 artikla vastaa asiasisällöltään SEY 123 artiklan kolmatta kohtaa sekä SEY 117 artiklan toista kohtaa teknisiä muutoksia lukuun ottamatta. III-199 artikla koskee Euroopan keskuspankin yleisneuvostoa sekä Euroopan keskuspankin tehtäviä niihin valtioihin liittyen, jotka eivät ole vielä ottaneet euroa käyttöön.”
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Original Lisbon Treaty
In Article 2, point 103, of the original Treaty of Lisbon (ToL) the intergovernmental conference (IGC 2007) managed to adopt the substance of the Convention and Constitution proposals, but the amendments were inserted in the ‘usual’, i.e. unreadable manner adopted by the IGC 2007 (OJ 17.12.2007 C 306/79).
This is the wording the EU citizens were offered until the belated publication of the consolidated versions of the Lisbon Treaty:
103) Article 118 shall be repealed. A new Article 118a shall be inserted as follows:
(a) paragraph 1 thereof shall take over the text of Article 123(3); the words ‘of this Treaty’ shall be deleted;
(b) paragraph 2 thereof shall take over the text of the first five indents of Article 117(2); the five indents shall be amended as set out below and shall be preceded by the following introductory words:
‘If and as long as there are Member States with a derogation, the European Central Bank shall, as regards those Member States:’
(i) in the third indent, the words ‘European Monetary System’ shall be replaced by ‘exchange-rate mechanism’;
(ii) the fifth indent shall be replaced by the following:
‘— carry out the former tasks of the European Monetary Cooperation Fund which had subsequently been taken over by the European Monetary Institute.’.
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Renumbering
The Treaty on the Functioning of the European Union (TFEU) table of equivalences confirms that the new Article 118a TFEU (ToL) in the original Treaty of Lisbon was to be renumbered Article 141 TFEU in the consolidated version, under the title ‘Economic and monetary policy’, renumbered Title VIII, and in the renumbered Chapter 5 ‘Transitional provisions’ (OJ 17.12.2007 C 306/215).
(In the consolidated version of the Lisbon Treaty, OJ 9.5.2008 C 115, the Tables of equivalences start on page 361, but the ToL numbers have been omitted.)
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Consolidated Lisbon Treaty: TFEU
A readable Article 141 of the Treaty on the Functioning of the European Union (TFEU) is found in the consolidated versions 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 115/110:
Part Three Union policies and internal actions
Title VIII Economic and monetary policy
Chapter 5 Transitional provisions
Article 141 TFEU
(ex Articles 123(3) and 117(2) first five indents, TEC)
1. If and as long as there are Member States with a derogation, and without prejudice to Article 129(1), the General Council of the European Central Bank referred to in Article 44 of the Statute of the ESCB and of the ECB shall be constituted as a third decision-making body of the European Central Bank.
2. If and as long as there are Member States with a derogation, the European Central Bank shall, as regards those Member States:
— strengthen cooperation between the national central banks,
— strengthen the coordination of the monetary policies of the Member States, with the aim of ensuring price stability,
— monitor the functioning of the exchange-rate mechanism,
— hold consultations concerning issues falling within the competence of the national central banks and affecting the stability of financial institutions and markets,
— carry out the former tasks of the European Monetary Cooperation Fund which had subsequently been taken over by the European Monetary Institute.
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ESCB Statute ─ transitional provisions
In the consolidated versions of the Lisbon Treaty, the Protocol (No 4) on the Statute of the European System of Central Banks and of the European Central Banks sets out the transitional EMU provisions in more detail in Chapter IX Transitional and other provisions for the ESCB (OJ 9.5.2008 C 115/247─250):
CHAPTER IX
TRANSITIONAL AND OTHER PROVISIONS FOR THE ESCB
Article 42 (ex Article 43)
General provisions
42.1. A derogation as referred to in Article 139 of the Treaty on the Functioning of the European Union shall entail that the following Articles of this Statute shall not confer any rights or impose any obligations on the Member State concerned: 3, 6, 9.2, 12.1, 14.3, 16, 18, 19, 20, 22, 23, 26.2, 27, 30, 31, 32, 33, 34, and 49.
42.2. The central banks of Member States with a derogation as specified in Article 139(1) of the Treaty on the Functioning of the European Union shall retain their powers in the field of monetary policy according to national law.
42.3. In accordance with Article 139 of the Treaty on the Functioning of the European Union, ‘Member States’ shall be read as ‘Member States whose currency is the euro’ in the following Articles of this Statute: 3, 11.2 and 19.
42.4. ‘National central banks’ shall be read as ‘central banks of Member States whose currency is the euro’ in the following Articles of this Statute: 9.2, 10.2, 10.3, 12.1, 16, 17, 18, 22, 23, 27, 30, 31, 32, 33.2 and 49.
42.5. ‘Shareholders’ shall be read as ‘central banks of Member States whose currency is the euro’ in Articles 10.3 and 33.1.
42.6. ‘Subscribed capital of the ECB’ shall be read as ‘capital of the ECB subscribed by the central banks of Member States whose currency is the euro’ in Articles 10.3 and 30.2.
Article 43 (ex Article 44)
Transitional tasks of the ECB
The ECB shall take over the former tasks of the EMI referred to in Article 141(2) of the Treaty on the Functioning of the European Union which, because of the derogations of one or more Member States, still have to be performed after the introduction of the euro.
The ECB shall give advice in the preparations for the abrogation of the derogations specified in Article 140 of the Treaty on the Functioning of the European Union.
Article 44 (ex Article 45)
The General Council of the ECB
44.1. Without prejudice to Article 129(3) of the Treaty on the Functioning of the European Union, the General Council shall be constituted as a third decision-making body of the ECB.
44.2. The General Council shall comprise the President and Vice-President of the ECB and the Governors of the national central banks. The other members of the Executive Board may participate, without having the right to vote, in meetings of the General Council.
44.3. The responsibilities of the General Council are listed in full in Article 46 of this Statute.
Article 45 (ex Article 46)
Rules of Procedure of the General Council
45.1. The President or, in his absence, the Vice-President of the ECB shall chair the General Council of the ECB.
45.2. The President of the Council and a Member of the Commission may participate, without having the right to vote, in meetings of the General Council.
45.3. The President shall prepare the meetings of the General Council.
45.4. By way of derogation from Article 12.3, the General Council shall adopt its Rules of Procedure.
45.5. The Secretariat of the General Council shall be provided by the ECB.
Article 46 (ex Article 47)
Responsibilities of the General Council
46.1. The General Council shall:
— perform the tasks referred to in Article 43;
— contribute to the advisory functions referred to in Articles 4 and 25.1.
46.2. The General Council shall contribute to:
— the collection of statistical information as referred to in Article 5;
— the reporting activities of the ECB as referred to in Article 15;
— the establishment of the necessary rules for the application of Article 26 as referred to in Article 26.4;
— the taking of all other measures necessary for the application of Article 29 as referred to in Article 29.4;
— the laying down of the conditions of employment of the staff of the ECB as referred to in Article 36.
46.3. The General Council shall contribute to the necessary preparations for irrevocably fixing the exchange rates of the currencies of Member States with a derogation against the euro as referred to in Article 140(3) of the Treaty on the Functioning of the European Union.
46.4. The General Council shall be informed by the President of the ECB of decisions of the Governing Council.
Article 47 (ex Article 48)
Transitional provisions for the capital of the ECB
In accordance with Article 29.1, each national central bank shall be assigned a weighting in the key for subscription of the ECB's capital. By way of derogation from Article 28.3, central banks of Member States with a derogation shall not pay up their subscribed capital unless the General Council, acting by a majority representing at least two thirds of the subscribed capital of the ECB and at least half of the shareholders, decides that a minimal percentage has to be paid up as a contribution to the operational costs of the ECB.
Article 48 (ex Article 49)
Deferred payment of capital, reserves and provisions of the ECB
48.1. The central bank of a Member State whose derogation has been abrogated shall pay up its subscribed share of the capital of the ECB to the same extent as the central banks of other Member States without a derogation, and shall transfer to the ECB foreign reserve assets in accordance with Article 30.1. The sum to be transferred shall be determined by multiplying the euro value at current exchange rates of the foreign reserve assets which have already been transferred to the ECB in accordance with Article 30.1, by the ratio between the number of shares subscribed by the national central bank concerned and the number of shares already paid up by the other national central banks.
48.2. In addition to the payment to be made in accordance with Article 48.1, the central bank concerned shall contribute to the reserves of the ECB, to those provisions equivalent to reserves, and to the amount still to be appropriated to the reserves and provisions corresponding to the balance of the profit and loss account as at 31 December of the year prior to the abrogation of the derogation. The sum to be contributed shall be determined by multiplying the amount of the reserves, as defined above and as stated in the approved balance sheet of the ECB, by the ratio between the number of shares subscribed by the central bank concerned and the number of shares already paid up by the other central banks.
48.3. Upon one or more countries becoming Member States and their respective national central banks becoming part of the ESCB, the subscribed capital of the ECB and the limit on the amount of foreign reserve assets that may be transferred to the ECB shall be automatically increased. The increase shall be determined by multiplying the respective amounts then prevailing by the ratio, within the expanded capital key, between the weighting of the entering national central banks concerned and the weighting of the national central banks already members of the ESCB. Each national central bank's weighting in the capital key shall be calculated by analogy with Article 29.1 and in compliance with Article 29.2. The reference periods to be used for the statistical data shall be identical to those applied for the latest quinquennial adjustment of the weightings under Article 29.3.
Article 49 (ex Article 52)
Exchange of banknotes in the currencies of the Member States
Following the irrevocable fixing of exchange rates in accordance with Article 140 of the Treaty on the Functioning of the European Union, the Governing Council shall take the necessary measures to ensure that banknotes denominated in currencies with irrevocably fixed exchange rates are exchanged by the national central banks at their respective par values.
Article 50 (ex Article 53)
Applicability of the transitional provisions
If and as long as there are Member States with a derogation, Articles 42 to 47 shall be applicable.
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Sweden
Even if Sweden is one of the EU member states with a derogation, the most artificial one at that, I found nothing about Article 118a TFEU (ToL) in the Lisbon Treaty ratification bill of the Swedish government, Regeringens proposition 2007/08:168 Lissabonfördraget (3 July 2008).
Have they confounded the properties of EMU, the economic and monetary union, with those of emu, the bird?
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Priollaud and Siritzky
In ‘Le traité de Lisbonne ; Commentaire, article par article, des nouveaux traités européens (TUE et TFUE)’ (La Documentation Française, 2008), François-Xavier Priollaud and David Siritzky present the Lisbon Treaty provisions of Chapter 5 (Dispositions transitoires) on page 260 to 261. Their characterization of Articles 141 to 144 TFEU is succinct:
« Les art. 141 à 144 TFUE comprennent les dispositions applicables aux États membres faisant l’objet d’une dérogation, sans changement notable. »
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United Kingdom FCO
‘A comparative table of the current EC and EU treaties as amended by the Treaty of Lisbon (Cm 7311, 21 January 2008) offers the following comment on Article 141 TFEU (on page 13):
“Draws on and updates Articles 123(3) and 117(2) TEC.”
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UK House of Commons Library
The UK House of Commons Library presented the amending treaty in ‘The Treaty of Lisbon: amendments to the Treaty establishing the European Communities’ (Research paper 07/86, 6 December 2007. There was a short explanation of Article 118a TFEU (ToL), on page 64:
“A new Article 118a (Constitution Article III-199) updates present Articles 117(2) and 123(3), providing for Member States with a derogation from EMU the institutional machinery (including the European Monetary Institute and the General Council of the ECB) to monitor their progress towards the adoption of the euro.”
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Ironies
One of the ironies uncovered during this research was that the government of the EU member state most peculiarly affected by the transitional EMU provisions, i.e. Sweden, had nothing to say about the General Council of the European Central Bank in voluminous legislative materials.
Another irony is that the Lisbon Treaty, although not in force, is sometimes clearer and more up-to-date in its consolidated versions than the existing treaties, even where there are no ‘institutional innovations’ to speak of.
In other words, it is advisable to use the Treaty of Lisbon and commentaries on it as references, even if you study the EU treaties in force.
Ralf Grahn
Wednesday, 19 November 2008
Tuesday, 18 November 2008
Euro currency: Convergence criteria
During the present financial turmoil and the economic downturn, the rules concerning economic and monetary union (EMU) are under even closer scrutiny in European capitals than normally. The euro is, relatively speaking, seen as a safe harbour, but circumstances make it harder to fulfil the criteria for the third stage of EMU.
Adopting the euro currency is a treaty obligation for every EU member state except the United Kingdom and Denmark, but in order to join the Eurozone a member state has to qualify.
The hurdles are set out in the so called convergence criteria, or Maastricht criteria. Their aim is to bridge the gap between the single currency area and national economic and fiscal policies.
Given the obligation to adopt the euro currency and the move from a national currency to the euro, the convergence criteria are placed among the transitional provisions at treaty level.
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Current treaty
The current Treaty establishing the European Community (TEC) sets out Transitional provisions in Chapter 4 of Title VII Economic and monetary policy, in Part Three Community policies (in the latest codified version of the treaties, Official Journal 29.12.2006 C 321 E/93─101).
Chapter 4 Transitional provisions contains Articles 116 to 124 TEC.
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Convergence criteria
The convergence criteria are laid out in general terms in Article 121(1) TEC (ex Article 109j). The transitional European Monetary Institute (EMI) has since been replaced by the European Central Bank (ECB) and the ecu by the euro:
Article 121 TEC
1. The Commission and the EMI shall report to the Council on the progress made in the fulfilment by the Member States of their obligations regarding the achievement of economic and monetary union. These reports shall include an examination of the compatibility between each Member State's national legislation, including the statutes of its national central bank, and Articles 108 and 109 of this Treaty and the Statute of the ESCB. The reports shall also examine the achievement of a high degree of sustainable convergence by reference to the fulfilment by each Member State of the following criteria:
— the achievement of a high degree of price stability; this will be apparent from a rate of inflation which is close to that of, at most, the three best performing Member States in terms of price stability,
— the sustainability of the government financial position; this will be apparent from having achieved a government budgetary position without a deficit that is excessive as determined in accordance with Article 104(6),
— the observance of the normal fluctuation margins provided for by the exchange-rate mechanism of the European Monetary System, for at least two years, without devaluing against the currency of any other Member State,
— the durability of convergence achieved by the Member State and of its participation in the exchange-rate mechanism of the European Monetary System being reflected in the long‑term interest-rate levels.
The four criteria mentioned in this paragraph and the relevant periods over which they are to be respected are developed further in a Protocol annexed to this Treaty. The reports of the Commission and the EMI shall also take account of the development of the ecu, the results of the integration of markets, the situation and development of the balances of payments on current account and an examination of the development of unit labour costs and other price indices.
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Protocol on convergence criteria
Independent central bank plus low inflation, moderate government deficit, no devaluation and low interest rates; the convergence criteria are set out in more detail in Protocol (No 21) on the convergence criteria referred to in Article 121 of the Treaty establishing the European Community (1992):
THE HIGH CONTRACTING PARTIES,
DESIRING to lay down the details of the convergence criteria which shall guide the Community in taking decisions on the passage to the third stage of economic and monetary union, referred to in Article 121(1) of this Treaty,
HAVE AGREED upon the following provisions, which shall be annexed to the Treaty establishing the European Community.
Article 1
The criterion on price stability referred to in the first indent of Article 121(1) of this Treaty shall mean that a Member State has a price performance that is sustainable and an average rate of inflation, observed over a period of one year before the examination, that does not exceed by more than 1 ½ percentage points that of, at most, the three best performing Member States in terms of price stability. Inflation shall be measured by means of the consumer price index on a comparable basis, taking into account differences in national definitions.
Article 2
The criterion on the government budgetary position referred to in the second indent of Article 121(1) of this Treaty shall mean that at the time of the examination the Member State is not the subject of a Council decision under Article 104(6) of this Treaty that an excessive deficit exists.
Article 3
The criterion on participation in the exchange-rate mechanism of the European Monetary System referred to in the third indent of Article 121(1) of this Treaty shall mean that a Member State has respected the normal fluctuation margins provided for by the exchange-rate mechanism on the European Monetary System without severe tensions for at least the last two years before the examination. In particular, the Member State shall not have devalued its currency's bilateral central rate against any other Member State's currency on its own initiative for the same period
Article 4
The criterion on the convergence of interest rates referred to in the fourth indent of Article 121(1) of this Treaty shall mean that, observed over a period of one year before the examination, a Member State has had an average nominal long-term interest rate that does not exceed by more than 2 percentage points that of, at most, the three best performing Member States in terms of price stability. Interest rates shall be measured on the basis of long-term government bonds or comparable securities, taking into account differences in national definitions.
Article 5
The statistical data to be used for the application of this Protocol shall be provided by the Commission.
Article 6
The Council shall, acting unanimously on a proposal from the Commission and after consulting the European Parliament, the EMI or the ECB as the case may be, and the Committee referred to in Article 114, adopt appropriate provisions to lay down the details of the convergence criteria referred to in Article 121 of this Treaty, which shall then replace this Protocol.
(Source: Pages 295 and 296 in the consolidated version of the treaties.)
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Abrogating a derogation
The second sentence of Article 122(2) TEC (ex Article 109k) lays out the procedure for abrogating a derogation, i.e. for joining the euro area:
Article 122(2) TEC
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2. At least once every two years, or at the request of a Member State with a derogation, the Commission and the ECB shall report to the Council in accordance with the procedure laid down in Article 121(1). After consulting the European Parliament and after discussion in the Council, meeting in the composition of the Heads of State or Government, the Council shall, acting by a qualified majority on a proposal from the Commission, decide which Member States with a derogation fulfil the necessary conditions on the basis of the criteria set out in Article 121(1), and abrogate the derogations of the Member States concerned.
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Conversion measures
Article 123(5) TEC (ex Article 109l) indicates the exchange rate and the conversion measures to be settled, when a member state is joining the euro area:
Article 123(5) TEC
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5. If it is decided, according to the procedure set out in Article 122(2), to abrogate a derogation, the Council shall, acting with the unanimity of the Member States without a derogation and the Member State concerned, on a proposal from the Commission and after consulting the ECB, adopt the rate at which the ecu shall be substituted for the currency of the Member State concerned, and take the other measures necessary for the introduction of the ecu as the single currency in the Member State concerned.
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Draft Constitution
The euro currency had been introduced, and the euro banknotes and coins were in circulation, when the European Convention deliberated institutional reform of the European Union. It is hardly surprising that the Convention proposed a reworked section with the aim to simplify and to clarify the transitional provisions.
Section 4 Transitional provisions comprises Articles III-91 to III-96 of the draft Constitution (OJ 18.7.2003 C 169/45─46).
Article III-92 of the draft Constitution proposed a consolidation of the treaty provisions we looked at above:
SECTION 4
Transitional provisions
Article III-92 Draft Constitution
1. At least once every two years, or at the request of a Member State with a derogation, the Commission and the European Central Bank shall report to the Council of Ministers on the progress made by the Member States with a derogation in fulfilling their obligations regarding the achievement of economic and monetary union. These reports shall include an examination of the compatibility between each of these Member States' national legislation, including the statutes of its national central bank, and Articles III-80 and III-81 and the Statute of the European System of Central Banks and the European Central Bank. The reports shall also examine whether a high degree of sustainable convergence has been achieved, by analysing how far each of these Member States has fulfilled the following criteria:
(a) the achievement of a high degree of price stability; this will be apparent from a rate of inflation which is close to that of, at most, the three best performing Member States in terms of price stability;
(b) the sustainability of the government financial position; this will be apparent from having achieved a government budgetary position without a deficit that is excessive as determined in accordance with Article III-76(6);
(c) the observance of the normal fluctuation margins provided for by the exchange-rate mechanism for at least two years, without devaluing against the euro;
(d) the durability of convergence achieved by the Member State with a derogation and of its participation in the exchangerate mechanism, being reflected in the long-term interest-rate levels.
The four criteria mentioned in this paragraph and the relevant periods over which they are to be respected are developed further in the Protocol on the convergence criteria. The reports of the Commission and the European Central Bank shall also take account of the results of the integration of markets, the situation and development of the balances of payments on current account and an examination of the development of unit labour costs and other price indices.
2. After consulting the European Parliament and after discussion in the European Council, the Council of Ministers, on a proposal from the Commission, shall adopt a European decision establishing which Member States with a derogation fulfil the necessary conditions on the basis of the criteria set out in paragraph 1, and shall abrogate the derogations of the Member States concerned.
3. If it is decided, according to the procedure set out in paragraph 2, to abrogate a derogation, the Council of Ministers shall, on a proposal from the Commission, with the unanimity of the members representing Member States without a derogation and the Member State concerned, adopt the European regulations or decisions irrevocably fixing the rate at which the euro is to be substituted for the currency of the Member State concerned, and laying down the other measures necessary for the introduction of the euro as the single currency in that Member State. The Council of Ministers shall act after consulting the European Central Bank.
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Protocol
The European Convention indicated the existence of a Protocol on the convergence criteria, but the Convention did not propose its own version.
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Finland
The Finnish government reported on the results of the European Convention in Valtioneuvoston selonteko Eduskunnalle konventin tuloksista ja valmistautumisesta hallitusten väliseen konferenssiin (VNS 2/2003 vp). Finland had adopted the euro, so the section on economic and monetary policy (8.5 Talous. ja rahapolitiikka) on pages 65 to 67 did not discuss the convergence criteria or the procedures to abrogate a derogation and to take the conversion measures.
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Sweden
Ahead of the intergovernmental conference, the Swedish government presented its views in Regeringens skrivelse 2003/04:13 Europeiska konventet om EU:s framtid (2 October 2003). Non-euro Sweden was fairly supportive of effective decision-making in the eurozone and international representation for the euro area in international financial institutions (page 49─50), but on the heels of the negative euro referendum the government had nothing to say about the convergence criteria or euro conversion.
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de Poncins
Étienne de Poncins presented the text of Article III-92 in Vers une Constitution européenne (Éditions 10/18, 2003), pages 313 and 314, without comment.
***
Constitutional Treaty
The transitional EMU provisions of the intergovernmental conference (IGC 2004) are found in Section 5 Transitional provisions, comprising Articles III-197 to 202 of the Treaty establishing a Constitution for Europe (OJ 16.12.2004 C 310/86─90).
Article III-198 Constitution
1. At least once every two years, or at the request of a Member State with a derogation, the Commission and the European Central Bank shall report to the Council on the progress made by the Member States with a derogation in fulfilling their obligations regarding the achievement of economic and monetary union. These reports shall include an examination of the compatibility between the national legislation of each of these Member States, including the statutes of its national central bank, and Articles III-188 and III-189 and the Statute of the European System of Central Banks and of the European Central Bank. The reports shall also examine whether a high degree of sustainable convergence has been achieved, by analysing how far each of these Member States has fulfilled the following criteria:
(a) the achievement of a high degree of price stability; this is apparent from a rate of inflation which is close to that of, at most, the three best performing Member States in terms of price stability;
(b) the sustainability of the government financial position; this is apparent from having achieved a government budgetary position without a deficit that is excessive as determined in accordance with Article III-184(6);
(c) the observance of the normal fluctuation margins provided for by the exchange-rate mechanism of the European monetary system, for at least two years, without devaluing against the euro;
(d) the durability of convergence achieved by the Member State with a derogation and of its participation in the exchange-rate mechanism, being reflected in the long-term interest-rate levels.
The four criteria laid down in this paragraph and the relevant periods over which they are to be respected are developed further in the protocol on the convergence criteria. the reports from the commission and the european central bank shall also take account of the results of the integration of markets, the situation and development of the balances of payments on current account and an examination of the development of unit labour costs and other price indices.
2. After consulting the European Parliament and after discussion in the European Council, the Council, on a proposal from the Commission, shall adopt a European decision establishing which Member States with a derogation fulfil the necessary conditions on the basis of the criteria laid down in paragraph 1, and shall abrogate the derogations of the Member States concerned.
The Council shall act having received a recommendation of a qualified majority of those among its members representing Member States whose currency is the euro. These members shall act within six months of the Council receiving the Commission's proposal.
The qualified majority referred to in the second subparagraph shall be defined as at least 55 % of these members of the Council, representing Member States comprising at least 65 % of the population of the participating Member States. A blocking minority must include at least the minimum number of these Council members representing more than 35 % of the population of the participating Member States, plus one member, failing which the qualified majority shall be deemed attained.
3. If it is decided, in accordance with the procedure set out in paragraph 2, to abrogate a derogation, the Council shall, on a proposal from the Commission, adopt the European regulations or decisions irrevocably fixing the rate at which the euro is to be substituted for the currency of the Member State concerned, and laying down the other measures necessary for the introduction of the euro as the single currency in that Member State. The Council shall act with the unanimous agreement of the members representing Member States whose currency is the euro and the Member State concerned, after consulting the European Central Bank.
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Protocol
The intergovernmental conference (IGC 2004) adopted a Protocol (No 11) on the convergence criteria (OJ 16.12.2004 C 310/339─340).
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Let us see it our standard references contribute anything towards our understanding of the provision.
***
Sweden
The government of Sweden, still outside the eurozone, offered a short and bland description of the aims of economic and monetary union (EMU) in the draft ratification bill, Lagrådsremiss Fördraget om upprättande av en konstitution för Europa (2 June 2005), page 171:
.
”Den ekonomiska och monetära unionen (EMU) är ett samarbete inom EU som syftar till att samordna medlemsländernas ekonomiska politik och att införa en gemensam valuta. EMU har genomförts i tre etapper. Den sista etappen inleddes 1999 och innebär en fullbordad valutaunion med gemensam centralbank (Europeiska centralbanken) samt gemensam valuta och penningpolitik. En förutsättning för valutaunionen har varit och är att de deltagande ländernas ekonomier befinner sig på ungefär samma nivå. Ett antal ekonomiska krav som ett land måste uppfylla för att få delta i valutaunionen har därför ställts upp, de s.k. konvergenskriterierna. För att säkerställa sunda offentliga finanser inom unionen har därför EU inrättat den s.k. stabilitets- och tillväxtpakten.”
In addition, the Swedish government mentioned Article III-198 Constitution in connection with the amended decision-making procedures.
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Finland
In Finland, the government’s ratification bill, Hallituksen esitys Eduskunnalle Euroopan perustuslaista tehdyn sopimuksen hyväksymisestä ja laiksi sen lainsäädännön alaan kuuluvien määräysten voimaansaattamisesta (HE 67/2006 vp), mentioned Article III-198 Constitution on page 185. In addition to the similarities with the current treaty provisions, the Finnish government mentioned the new recommendation from the euro area countries:
”III-198 artikla, joka koskee uusien jäsenvaltioiden hyväksymistä euron käyttäjiksi, vastaa asiallisesti SEY 121 artiklan ensimmäistä kohtaa, SEY 122 artiklan toista kohtaa sekä SEY 123 artiklan neljännen kohdan ensimmäistä lausetta.
Artiklan 2 kohdassa olevia päätöksentekomenettelysäännöksiä on kuitenkin uusittu. Uusitun määräyksen mukaan neuvoston on, ennen kuin se tekee normaalikokoonpanossaan lopullisen päätöksen uuden jäsenvaltion hyväksymisestä euron käyttäjäksi, saatava suositus euron käyttöön ottaneiden jäsenvaltioiden edustajilta. Kyseinen suositus annetaan määräenemmistöllä, joka on määritelty III-179 artiklan yhteydessä.”
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Original Lisbon Treaty
In Article 2, point 102, of the original Treaty of Lisbon (ToL) the intergovernmental conference (IGC 2007) managed to adopt the substance of the Constitution’s proposal using a drafting technique apt to drive even the most ardent supporter of European integration into deep despair (OJ 17.12.2007 C 306/77─78). This is the wording the EU citizens were offered until the publication of the consolidated versions of the Lisbon Treaty:
102) Article 117 shall be repealed, with the exception of the first five indents of paragraph 2 thereof, which shall become the first five indents of paragraph 2 of Article 118a; they shall be amended as set out in point 103 below. A new Article 117a shall be inserted as follows:
(a) paragraph 1 thereof shall take over the wording of Article 121(1), with the following amendments:
(i) throughout the paragraph, the words ‘the EMI’ shall be replaced by ‘the European Central Bank’;
(ii) at the beginning of the first subparagraph, the following shall be inserted: ‘At least once every two years, or at the request of a Member State with a derogation,’;
(iii) in the first subparagraph, first sentence, the words ‘the progress made in the fulfilment by the Member States of their obligations’ shall be replaced by ‘the progress made by the Member States with a derogation in fulfilling their obligations’;
(iv) in the first subparagraph, second sentence, the words ‘each Member State's national legislation’ shall be replaced by ‘the national legislation of each of these Member States’ and the words ‘of this Treaty’ shall be deleted;
(v) in the third indent of the first subparagraph, the words ‘against the currency of any other Member State’ shall be replaced by ‘against the euro;’;
(vi) in the fourth indent of the first subparagraph, the words ‘the Member State’ shall be replaced by ‘the Member State with a derogation’ and the words ‘of the European Monetary System’ shall be deleted;
(vii) in the second subparagraph, the words ‘the development of the ecu’ shall be deleted;
(b) paragraph 2 thereof shall take over the wording of the second sentence of Article 122(2), with the following amendments:
(i) at the end of the text, the words ‘set out in Article 121(1)’ shall be replaced by ‘set out in paragraph 1’;
(ii) the following new second and third subparagraphs shall be added:
‘The Council shall act having received a recommendation of a qualified majority of those among its members representing Member States whose currency is the euro. These members shall act within six months of the Council receiving the Commission's proposal.
The qualified majority of the said members, as referred to in the second subparagraph, shall be defined in accordance with Article 205(3)(a).’;
(c) paragraph 3 thereof shall take over the wording of Article 123(5), with the following amendments:
(i) at the beginning of the paragraph, the words ‘If it is decided, according to the procedure set out in Article 122(2), to abrogate a derogation,’ shall be replaced by ‘If it is decided, in accordance with the procedure set out in paragraph 2, to abrogate a derogation,’;
(ii) the words ‘adopt the rate’ shall be replaced by ‘irrevocably fix the rate’.
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Renumbering
The Treaty on the Functioning of the European Union (TFEU) table of equivalences confirms that the new Article 117a TFEU (ToL) in the original Treaty of Lisbon was to be renumbered Article 140 TFEU in the consolidated version, under the title ‘Economic and monetary policy’, renumbered Title VIII, and in the renumbered Chapter 5 ‘Transitional provisions’ (OJ 17.12.2007 C 306/215).
(In the consolidated version of the Lisbon Treaty, OJ 9.5.2008 C 115, the Tables of equivalences start on page 361, but the ToL numbers have been omitted.)
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Consolidated Lisbon Treaty: TFEU
A readable Article 140 of the Treaty on the Functioning of the European Union (TFEU) is found in the consolidated versions 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 115/108─110:
Part Three Union policies and internal actions
Title VIII Economic and monetary policy
Chapter 5 Transitional provisions
Article 140 TFEU
(ex Articles 121(1), 122(2), second sentence, and 123(5) TEC)
1. At least once every two years, or at the request of a Member State with a derogation, the Commission and the European Central Bank shall report to the Council on the progress made by the Member States with a derogation in fulfilling their obligations regarding the achievement of economic and monetary union. These reports shall include an examination of the compatibility between the national legislation of each of these Member States, including the statutes of its national central bank, and Articles 130 and 131 and the Statute of the ESCB and of the ECB. The reports shall also examine the achievement of a high degree of sustainable convergence by reference to the fulfilment by each Member State of the following criteria:
— the achievement of a high degree of price stability; this will be apparent from a rate of inflation which is close to that of, at most, the three best performing Member States in terms of price stability,
— the sustainability of the government financial position; this will be apparent from having achieved a government budgetary position without a deficit that is excessive as determined in accordance with Article 126(6),
— the observance of the normal fluctuation margins provided for by the exchange-rate mechanism of the European Monetary System, for at least two years, without devaluing against the euro,
— the durability of convergence achieved by the Member State with a derogation and of its participation in the exchange-rate mechanism being reflected in the long-term interest-rate levels.
The four criteria mentioned in this paragraph and the relevant periods over which they are to be respected are developed further in a Protocol annexed to the Treaties. The reports of the Commission and the European Central Bank shall also take account of the results of the integration of markets, the situation and development of the balances of payments on current account and an examination of the development of unit labour costs and other price indices.
2. After consulting the European Parliament and after discussion in the European Council, the Council shall, on a proposal from the Commission, decide which Member States with a derogation fulfil the necessary conditions on the basis of the criteria set out in paragraph 1, and abrogate the derogations of the Member States concerned.
The Council shall act having received a recommendation of a qualified majority of those among its members representing Member States whose currency is the euro. These members shall act within six months of the Council receiving the Commission's proposal.
The qualified majority of the said members, as referred to in the second subparagraph, shall be defined in accordance with Article 238(3)(a).
3. If it is decided, in accordance with the procedure set out in paragraph 2, to abrogate a derogation, the Council shall, acting with the unanimity of the Member States whose currency is the euro and the Member State concerned, on a proposal from the Commission and after consulting the European Central Bank, irrevocably fix the rate at which the euro shall be substituted for the currency of the Member State concerned, and take the other measures necessary for the introduction of the euro as the single currency in the Member State concerned.
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Protocol on the convergence criteria
For those who want to read Article 140 TFEU alongside the relevant Protocol on the convergence criteria in an updated form, here is the text from the consolidated version of the Lisbon Treaty (pages 281 and 282):
PROTOCOL (No 13)
ON THE CONVERGENCE CRITERIA
THE HIGH CONTRACTING PARTIES,
DESIRING to lay down the details of the convergence criteria which shall guide the Union in taking decisions to end the derogations of those Member States with a derogation, referred to in Article 140 of the Treaty on the Functioning of the European Union,
HAVE AGREED upon the following provisions, which shall be annexed to the Treaty on European Union and to the Treaty on the Functioning of the European Union:
Article 1
The criterion on price stability referred to in the first indent of Article 140(1) of the Treaty on the Functioning of the European Union shall mean that a Member State has a price performance that is sustainable and an average rate of inflation, observed over a period of one year before the examination, that does not exceed by more than 1 ½ percentage points that of, at most, the three best performing Member States in terms of price stability. Inflation shall be measured by means of the consumer price index on a comparable basis taking into account differences in national definitions.
Article 2
The criterion on the government budgetary position referred to in the second indent of Article 140(1) of the said Treaty shall mean that at the time of the examination the Member State is not the subject of a Council decision under Article 126(6) of the said Treaty that an excessive deficit exists.
Article 3
The criterion on participation in the Exchange Rate mechanism of the European Monetary System referred to in the third indent of Article 140(1) of the said Treaty shall mean that a Member State has respected the normal fluctuation margins provided for by the exchange-rate mechanism on the European Monetary System without severe tensions for at least the last two years before the examination. In particular, the Member State shall not have devalued its currency's bilateral central rate against the euro on its own initiative for the same period.
Article 4
The criterion on the convergence of interest rates referred to in the fourth indent of Article 140(1) of the said Treaty shall mean that, observed over a period of one year before the examination, a Member State has had an average nominal long-term interest rate that does not exceed by more than two percentage points that of, at most, the three best performing Member States in terms of price stability. Interest rates shall be measured on the basis of long-term government bonds or comparable securities, taking into account differences in national definitions.
Article 5
The statistical data to be used for the application of this Protocol shall be provided by the Commission.
Article 6
The Council shall, acting unanimously on a proposal from the Commission and after consulting the European Parliament, the ECB as the case may be, and the Economic and Financial Committee, adopt appropriate provisions to lay down the details of the convergence criteria referred to in Article 140(1) of the said Treaty, which shall then replace this Protocol.
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Sweden
The Lisbon Treaty ratification bill of the Swedish government, Regeringens proposition 2007/08:168 Lissabonfördraget (3 July 2008), on page 185, mentions the Article 117a in the same terms as the government used about the corresponding Article of the Constitutional Treaty, so it does not go into fine detail:
”I ett flertal fall på området ekonomisk och monetär politik ska rådet fatta beslut med kvalificerad majoritet enligt den nya definition av detta begrepp som införs genom Lissabonfördraget (se även avsnitt 14.4). Det rör sig bl.a. om rådsbeslut om rekommendationer till en medlemsstat som för en politik som inte är förenlig med de allmänna riktlinjerna eller har ett alltför stort underskott (artiklarna 99.4 104.6 och 104.7 i EUF-fördraget), rådsbeslut om antagande av landsspecifika riktlinjer (artikel 115a.1b i EUF-fördraget), rådsbeslut om åtgärder för att säkerställa ett enat externt handlande (artikel 115c.2 i EUF-fördraget) och olika rådsbeslut som rör de s.k. medlemsstaterna med undantag (artiklarna 116a.4 och 117a.2 i EUF-fördraget). Särskilda övergångsbestämmelser när det gäller omröstning i rådet enligt artikel 205.3 i EUF-fördraget finns i artikel 3.4 i ett protokoll om övergångsbestämmelser som fogas till EU-fördraget, EUF-fördraget och Euratomfördraget.”
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Priollaud and Siritzky
In ‘Le traité de Lisbonne ; Commentaire, article par article, des nouveaux traités européens (TUE et TFUE)’ (La Documentation Française, 2008), François-Xavier Priollaud and David Siritzky present the Lisbon Treaty provisions of Chapter 5 (Dispositions transitoires) on page 260 to 261. Their description of Article 140 TFEU is succinct:
« L’art. 140 TFUE prévoit la procédure d’entrée d’un nouvel État membre dans la zone euro, pour laquelle la capacité décisionnelle des pays dont la monnaie est l’euro est également renforcée (v. commentaire chapitre précédent). »
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United Kingdom FCO
‘A comparative table of the current EC and EU treaties as amended by the Treaty of Lisbon (Cm 7311, 21 January 2008) offers the following comment on Article 140 TFEU (on page 13):
“Draws on Articles 121, 122(2) and 123(5) TEC. Sets out procedure for abrogating a derogation. The provision in paragraph 2 regarding the recommendation of a qualified majority of Member States whose currency is the euro is new.”
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UK House of Commons Library
The UK House of Commons Library presented the amending treaty in ‘The Treaty of Lisbon: amendments to the Treaty establishing the European Communities’ (Research paper 07/86, 6 December 2007. There was a short explanation of Article 117a TFEU (ToL) and the other transitional provisions), on page 64:
“A new Article 117a (Constitution Article III-198) is based on present Articles 121(1), 122(2) and 123(5), but updated to remove references to 1996, 1997 and other dates relating to the introduction of the euro.”
[I have deleted the footnotes, which can be found in the original.]
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Adopting the euro currency may look more enticing amid the current financial turmoil and the recession, but at the same time the difficulties for the vulnerable member state currencies increase, making it harder to fulfil the convergence criteria.
The Lisbon Treaty does not change much substantially, adding the recommendation by the Eurozone members, but here too the new treaty in its consolidated form would be easier to read and to comprehend than the current one.
Ralf Grahn
Adopting the euro currency is a treaty obligation for every EU member state except the United Kingdom and Denmark, but in order to join the Eurozone a member state has to qualify.
The hurdles are set out in the so called convergence criteria, or Maastricht criteria. Their aim is to bridge the gap between the single currency area and national economic and fiscal policies.
Given the obligation to adopt the euro currency and the move from a national currency to the euro, the convergence criteria are placed among the transitional provisions at treaty level.
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Current treaty
The current Treaty establishing the European Community (TEC) sets out Transitional provisions in Chapter 4 of Title VII Economic and monetary policy, in Part Three Community policies (in the latest codified version of the treaties, Official Journal 29.12.2006 C 321 E/93─101).
Chapter 4 Transitional provisions contains Articles 116 to 124 TEC.
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Convergence criteria
The convergence criteria are laid out in general terms in Article 121(1) TEC (ex Article 109j). The transitional European Monetary Institute (EMI) has since been replaced by the European Central Bank (ECB) and the ecu by the euro:
Article 121 TEC
1. The Commission and the EMI shall report to the Council on the progress made in the fulfilment by the Member States of their obligations regarding the achievement of economic and monetary union. These reports shall include an examination of the compatibility between each Member State's national legislation, including the statutes of its national central bank, and Articles 108 and 109 of this Treaty and the Statute of the ESCB. The reports shall also examine the achievement of a high degree of sustainable convergence by reference to the fulfilment by each Member State of the following criteria:
— the achievement of a high degree of price stability; this will be apparent from a rate of inflation which is close to that of, at most, the three best performing Member States in terms of price stability,
— the sustainability of the government financial position; this will be apparent from having achieved a government budgetary position without a deficit that is excessive as determined in accordance with Article 104(6),
— the observance of the normal fluctuation margins provided for by the exchange-rate mechanism of the European Monetary System, for at least two years, without devaluing against the currency of any other Member State,
— the durability of convergence achieved by the Member State and of its participation in the exchange-rate mechanism of the European Monetary System being reflected in the long‑term interest-rate levels.
The four criteria mentioned in this paragraph and the relevant periods over which they are to be respected are developed further in a Protocol annexed to this Treaty. The reports of the Commission and the EMI shall also take account of the development of the ecu, the results of the integration of markets, the situation and development of the balances of payments on current account and an examination of the development of unit labour costs and other price indices.
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Protocol on convergence criteria
Independent central bank plus low inflation, moderate government deficit, no devaluation and low interest rates; the convergence criteria are set out in more detail in Protocol (No 21) on the convergence criteria referred to in Article 121 of the Treaty establishing the European Community (1992):
THE HIGH CONTRACTING PARTIES,
DESIRING to lay down the details of the convergence criteria which shall guide the Community in taking decisions on the passage to the third stage of economic and monetary union, referred to in Article 121(1) of this Treaty,
HAVE AGREED upon the following provisions, which shall be annexed to the Treaty establishing the European Community.
Article 1
The criterion on price stability referred to in the first indent of Article 121(1) of this Treaty shall mean that a Member State has a price performance that is sustainable and an average rate of inflation, observed over a period of one year before the examination, that does not exceed by more than 1 ½ percentage points that of, at most, the three best performing Member States in terms of price stability. Inflation shall be measured by means of the consumer price index on a comparable basis, taking into account differences in national definitions.
Article 2
The criterion on the government budgetary position referred to in the second indent of Article 121(1) of this Treaty shall mean that at the time of the examination the Member State is not the subject of a Council decision under Article 104(6) of this Treaty that an excessive deficit exists.
Article 3
The criterion on participation in the exchange-rate mechanism of the European Monetary System referred to in the third indent of Article 121(1) of this Treaty shall mean that a Member State has respected the normal fluctuation margins provided for by the exchange-rate mechanism on the European Monetary System without severe tensions for at least the last two years before the examination. In particular, the Member State shall not have devalued its currency's bilateral central rate against any other Member State's currency on its own initiative for the same period
Article 4
The criterion on the convergence of interest rates referred to in the fourth indent of Article 121(1) of this Treaty shall mean that, observed over a period of one year before the examination, a Member State has had an average nominal long-term interest rate that does not exceed by more than 2 percentage points that of, at most, the three best performing Member States in terms of price stability. Interest rates shall be measured on the basis of long-term government bonds or comparable securities, taking into account differences in national definitions.
Article 5
The statistical data to be used for the application of this Protocol shall be provided by the Commission.
Article 6
The Council shall, acting unanimously on a proposal from the Commission and after consulting the European Parliament, the EMI or the ECB as the case may be, and the Committee referred to in Article 114, adopt appropriate provisions to lay down the details of the convergence criteria referred to in Article 121 of this Treaty, which shall then replace this Protocol.
(Source: Pages 295 and 296 in the consolidated version of the treaties.)
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Abrogating a derogation
The second sentence of Article 122(2) TEC (ex Article 109k) lays out the procedure for abrogating a derogation, i.e. for joining the euro area:
Article 122(2) TEC
-----
2. At least once every two years, or at the request of a Member State with a derogation, the Commission and the ECB shall report to the Council in accordance with the procedure laid down in Article 121(1). After consulting the European Parliament and after discussion in the Council, meeting in the composition of the Heads of State or Government, the Council shall, acting by a qualified majority on a proposal from the Commission, decide which Member States with a derogation fulfil the necessary conditions on the basis of the criteria set out in Article 121(1), and abrogate the derogations of the Member States concerned.
-----
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Conversion measures
Article 123(5) TEC (ex Article 109l) indicates the exchange rate and the conversion measures to be settled, when a member state is joining the euro area:
Article 123(5) TEC
-----
5. If it is decided, according to the procedure set out in Article 122(2), to abrogate a derogation, the Council shall, acting with the unanimity of the Member States without a derogation and the Member State concerned, on a proposal from the Commission and after consulting the ECB, adopt the rate at which the ecu shall be substituted for the currency of the Member State concerned, and take the other measures necessary for the introduction of the ecu as the single currency in the Member State concerned.
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Draft Constitution
The euro currency had been introduced, and the euro banknotes and coins were in circulation, when the European Convention deliberated institutional reform of the European Union. It is hardly surprising that the Convention proposed a reworked section with the aim to simplify and to clarify the transitional provisions.
Section 4 Transitional provisions comprises Articles III-91 to III-96 of the draft Constitution (OJ 18.7.2003 C 169/45─46).
Article III-92 of the draft Constitution proposed a consolidation of the treaty provisions we looked at above:
SECTION 4
Transitional provisions
Article III-92 Draft Constitution
1. At least once every two years, or at the request of a Member State with a derogation, the Commission and the European Central Bank shall report to the Council of Ministers on the progress made by the Member States with a derogation in fulfilling their obligations regarding the achievement of economic and monetary union. These reports shall include an examination of the compatibility between each of these Member States' national legislation, including the statutes of its national central bank, and Articles III-80 and III-81 and the Statute of the European System of Central Banks and the European Central Bank. The reports shall also examine whether a high degree of sustainable convergence has been achieved, by analysing how far each of these Member States has fulfilled the following criteria:
(a) the achievement of a high degree of price stability; this will be apparent from a rate of inflation which is close to that of, at most, the three best performing Member States in terms of price stability;
(b) the sustainability of the government financial position; this will be apparent from having achieved a government budgetary position without a deficit that is excessive as determined in accordance with Article III-76(6);
(c) the observance of the normal fluctuation margins provided for by the exchange-rate mechanism for at least two years, without devaluing against the euro;
(d) the durability of convergence achieved by the Member State with a derogation and of its participation in the exchangerate mechanism, being reflected in the long-term interest-rate levels.
The four criteria mentioned in this paragraph and the relevant periods over which they are to be respected are developed further in the Protocol on the convergence criteria. The reports of the Commission and the European Central Bank shall also take account of the results of the integration of markets, the situation and development of the balances of payments on current account and an examination of the development of unit labour costs and other price indices.
2. After consulting the European Parliament and after discussion in the European Council, the Council of Ministers, on a proposal from the Commission, shall adopt a European decision establishing which Member States with a derogation fulfil the necessary conditions on the basis of the criteria set out in paragraph 1, and shall abrogate the derogations of the Member States concerned.
3. If it is decided, according to the procedure set out in paragraph 2, to abrogate a derogation, the Council of Ministers shall, on a proposal from the Commission, with the unanimity of the members representing Member States without a derogation and the Member State concerned, adopt the European regulations or decisions irrevocably fixing the rate at which the euro is to be substituted for the currency of the Member State concerned, and laying down the other measures necessary for the introduction of the euro as the single currency in that Member State. The Council of Ministers shall act after consulting the European Central Bank.
***
Protocol
The European Convention indicated the existence of a Protocol on the convergence criteria, but the Convention did not propose its own version.
***
Finland
The Finnish government reported on the results of the European Convention in Valtioneuvoston selonteko Eduskunnalle konventin tuloksista ja valmistautumisesta hallitusten väliseen konferenssiin (VNS 2/2003 vp). Finland had adopted the euro, so the section on economic and monetary policy (8.5 Talous. ja rahapolitiikka) on pages 65 to 67 did not discuss the convergence criteria or the procedures to abrogate a derogation and to take the conversion measures.
***
Sweden
Ahead of the intergovernmental conference, the Swedish government presented its views in Regeringens skrivelse 2003/04:13 Europeiska konventet om EU:s framtid (2 October 2003). Non-euro Sweden was fairly supportive of effective decision-making in the eurozone and international representation for the euro area in international financial institutions (page 49─50), but on the heels of the negative euro referendum the government had nothing to say about the convergence criteria or euro conversion.
***
de Poncins
Étienne de Poncins presented the text of Article III-92 in Vers une Constitution européenne (Éditions 10/18, 2003), pages 313 and 314, without comment.
***
Constitutional Treaty
The transitional EMU provisions of the intergovernmental conference (IGC 2004) are found in Section 5 Transitional provisions, comprising Articles III-197 to 202 of the Treaty establishing a Constitution for Europe (OJ 16.12.2004 C 310/86─90).
Article III-198 Constitution
1. At least once every two years, or at the request of a Member State with a derogation, the Commission and the European Central Bank shall report to the Council on the progress made by the Member States with a derogation in fulfilling their obligations regarding the achievement of economic and monetary union. These reports shall include an examination of the compatibility between the national legislation of each of these Member States, including the statutes of its national central bank, and Articles III-188 and III-189 and the Statute of the European System of Central Banks and of the European Central Bank. The reports shall also examine whether a high degree of sustainable convergence has been achieved, by analysing how far each of these Member States has fulfilled the following criteria:
(a) the achievement of a high degree of price stability; this is apparent from a rate of inflation which is close to that of, at most, the three best performing Member States in terms of price stability;
(b) the sustainability of the government financial position; this is apparent from having achieved a government budgetary position without a deficit that is excessive as determined in accordance with Article III-184(6);
(c) the observance of the normal fluctuation margins provided for by the exchange-rate mechanism of the European monetary system, for at least two years, without devaluing against the euro;
(d) the durability of convergence achieved by the Member State with a derogation and of its participation in the exchange-rate mechanism, being reflected in the long-term interest-rate levels.
The four criteria laid down in this paragraph and the relevant periods over which they are to be respected are developed further in the protocol on the convergence criteria. the reports from the commission and the european central bank shall also take account of the results of the integration of markets, the situation and development of the balances of payments on current account and an examination of the development of unit labour costs and other price indices.
2. After consulting the European Parliament and after discussion in the European Council, the Council, on a proposal from the Commission, shall adopt a European decision establishing which Member States with a derogation fulfil the necessary conditions on the basis of the criteria laid down in paragraph 1, and shall abrogate the derogations of the Member States concerned.
The Council shall act having received a recommendation of a qualified majority of those among its members representing Member States whose currency is the euro. These members shall act within six months of the Council receiving the Commission's proposal.
The qualified majority referred to in the second subparagraph shall be defined as at least 55 % of these members of the Council, representing Member States comprising at least 65 % of the population of the participating Member States. A blocking minority must include at least the minimum number of these Council members representing more than 35 % of the population of the participating Member States, plus one member, failing which the qualified majority shall be deemed attained.
3. If it is decided, in accordance with the procedure set out in paragraph 2, to abrogate a derogation, the Council shall, on a proposal from the Commission, adopt the European regulations or decisions irrevocably fixing the rate at which the euro is to be substituted for the currency of the Member State concerned, and laying down the other measures necessary for the introduction of the euro as the single currency in that Member State. The Council shall act with the unanimous agreement of the members representing Member States whose currency is the euro and the Member State concerned, after consulting the European Central Bank.
***
Protocol
The intergovernmental conference (IGC 2004) adopted a Protocol (No 11) on the convergence criteria (OJ 16.12.2004 C 310/339─340).
***
Let us see it our standard references contribute anything towards our understanding of the provision.
***
Sweden
The government of Sweden, still outside the eurozone, offered a short and bland description of the aims of economic and monetary union (EMU) in the draft ratification bill, Lagrådsremiss Fördraget om upprättande av en konstitution för Europa (2 June 2005), page 171:
.
”Den ekonomiska och monetära unionen (EMU) är ett samarbete inom EU som syftar till att samordna medlemsländernas ekonomiska politik och att införa en gemensam valuta. EMU har genomförts i tre etapper. Den sista etappen inleddes 1999 och innebär en fullbordad valutaunion med gemensam centralbank (Europeiska centralbanken) samt gemensam valuta och penningpolitik. En förutsättning för valutaunionen har varit och är att de deltagande ländernas ekonomier befinner sig på ungefär samma nivå. Ett antal ekonomiska krav som ett land måste uppfylla för att få delta i valutaunionen har därför ställts upp, de s.k. konvergenskriterierna. För att säkerställa sunda offentliga finanser inom unionen har därför EU inrättat den s.k. stabilitets- och tillväxtpakten.”
In addition, the Swedish government mentioned Article III-198 Constitution in connection with the amended decision-making procedures.
***
Finland
In Finland, the government’s ratification bill, Hallituksen esitys Eduskunnalle Euroopan perustuslaista tehdyn sopimuksen hyväksymisestä ja laiksi sen lainsäädännön alaan kuuluvien määräysten voimaansaattamisesta (HE 67/2006 vp), mentioned Article III-198 Constitution on page 185. In addition to the similarities with the current treaty provisions, the Finnish government mentioned the new recommendation from the euro area countries:
”III-198 artikla, joka koskee uusien jäsenvaltioiden hyväksymistä euron käyttäjiksi, vastaa asiallisesti SEY 121 artiklan ensimmäistä kohtaa, SEY 122 artiklan toista kohtaa sekä SEY 123 artiklan neljännen kohdan ensimmäistä lausetta.
Artiklan 2 kohdassa olevia päätöksentekomenettelysäännöksiä on kuitenkin uusittu. Uusitun määräyksen mukaan neuvoston on, ennen kuin se tekee normaalikokoonpanossaan lopullisen päätöksen uuden jäsenvaltion hyväksymisestä euron käyttäjäksi, saatava suositus euron käyttöön ottaneiden jäsenvaltioiden edustajilta. Kyseinen suositus annetaan määräenemmistöllä, joka on määritelty III-179 artiklan yhteydessä.”
***
Original Lisbon Treaty
In Article 2, point 102, of the original Treaty of Lisbon (ToL) the intergovernmental conference (IGC 2007) managed to adopt the substance of the Constitution’s proposal using a drafting technique apt to drive even the most ardent supporter of European integration into deep despair (OJ 17.12.2007 C 306/77─78). This is the wording the EU citizens were offered until the publication of the consolidated versions of the Lisbon Treaty:
102) Article 117 shall be repealed, with the exception of the first five indents of paragraph 2 thereof, which shall become the first five indents of paragraph 2 of Article 118a; they shall be amended as set out in point 103 below. A new Article 117a shall be inserted as follows:
(a) paragraph 1 thereof shall take over the wording of Article 121(1), with the following amendments:
(i) throughout the paragraph, the words ‘the EMI’ shall be replaced by ‘the European Central Bank’;
(ii) at the beginning of the first subparagraph, the following shall be inserted: ‘At least once every two years, or at the request of a Member State with a derogation,’;
(iii) in the first subparagraph, first sentence, the words ‘the progress made in the fulfilment by the Member States of their obligations’ shall be replaced by ‘the progress made by the Member States with a derogation in fulfilling their obligations’;
(iv) in the first subparagraph, second sentence, the words ‘each Member State's national legislation’ shall be replaced by ‘the national legislation of each of these Member States’ and the words ‘of this Treaty’ shall be deleted;
(v) in the third indent of the first subparagraph, the words ‘against the currency of any other Member State’ shall be replaced by ‘against the euro;’;
(vi) in the fourth indent of the first subparagraph, the words ‘the Member State’ shall be replaced by ‘the Member State with a derogation’ and the words ‘of the European Monetary System’ shall be deleted;
(vii) in the second subparagraph, the words ‘the development of the ecu’ shall be deleted;
(b) paragraph 2 thereof shall take over the wording of the second sentence of Article 122(2), with the following amendments:
(i) at the end of the text, the words ‘set out in Article 121(1)’ shall be replaced by ‘set out in paragraph 1’;
(ii) the following new second and third subparagraphs shall be added:
‘The Council shall act having received a recommendation of a qualified majority of those among its members representing Member States whose currency is the euro. These members shall act within six months of the Council receiving the Commission's proposal.
The qualified majority of the said members, as referred to in the second subparagraph, shall be defined in accordance with Article 205(3)(a).’;
(c) paragraph 3 thereof shall take over the wording of Article 123(5), with the following amendments:
(i) at the beginning of the paragraph, the words ‘If it is decided, according to the procedure set out in Article 122(2), to abrogate a derogation,’ shall be replaced by ‘If it is decided, in accordance with the procedure set out in paragraph 2, to abrogate a derogation,’;
(ii) the words ‘adopt the rate’ shall be replaced by ‘irrevocably fix the rate’.
***
Renumbering
The Treaty on the Functioning of the European Union (TFEU) table of equivalences confirms that the new Article 117a TFEU (ToL) in the original Treaty of Lisbon was to be renumbered Article 140 TFEU in the consolidated version, under the title ‘Economic and monetary policy’, renumbered Title VIII, and in the renumbered Chapter 5 ‘Transitional provisions’ (OJ 17.12.2007 C 306/215).
(In the consolidated version of the Lisbon Treaty, OJ 9.5.2008 C 115, the Tables of equivalences start on page 361, but the ToL numbers have been omitted.)
***
Consolidated Lisbon Treaty: TFEU
A readable Article 140 of the Treaty on the Functioning of the European Union (TFEU) is found in the consolidated versions 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 115/108─110:
Part Three Union policies and internal actions
Title VIII Economic and monetary policy
Chapter 5 Transitional provisions
Article 140 TFEU
(ex Articles 121(1), 122(2), second sentence, and 123(5) TEC)
1. At least once every two years, or at the request of a Member State with a derogation, the Commission and the European Central Bank shall report to the Council on the progress made by the Member States with a derogation in fulfilling their obligations regarding the achievement of economic and monetary union. These reports shall include an examination of the compatibility between the national legislation of each of these Member States, including the statutes of its national central bank, and Articles 130 and 131 and the Statute of the ESCB and of the ECB. The reports shall also examine the achievement of a high degree of sustainable convergence by reference to the fulfilment by each Member State of the following criteria:
— the achievement of a high degree of price stability; this will be apparent from a rate of inflation which is close to that of, at most, the three best performing Member States in terms of price stability,
— the sustainability of the government financial position; this will be apparent from having achieved a government budgetary position without a deficit that is excessive as determined in accordance with Article 126(6),
— the observance of the normal fluctuation margins provided for by the exchange-rate mechanism of the European Monetary System, for at least two years, without devaluing against the euro,
— the durability of convergence achieved by the Member State with a derogation and of its participation in the exchange-rate mechanism being reflected in the long-term interest-rate levels.
The four criteria mentioned in this paragraph and the relevant periods over which they are to be respected are developed further in a Protocol annexed to the Treaties. The reports of the Commission and the European Central Bank shall also take account of the results of the integration of markets, the situation and development of the balances of payments on current account and an examination of the development of unit labour costs and other price indices.
2. After consulting the European Parliament and after discussion in the European Council, the Council shall, on a proposal from the Commission, decide which Member States with a derogation fulfil the necessary conditions on the basis of the criteria set out in paragraph 1, and abrogate the derogations of the Member States concerned.
The Council shall act having received a recommendation of a qualified majority of those among its members representing Member States whose currency is the euro. These members shall act within six months of the Council receiving the Commission's proposal.
The qualified majority of the said members, as referred to in the second subparagraph, shall be defined in accordance with Article 238(3)(a).
3. If it is decided, in accordance with the procedure set out in paragraph 2, to abrogate a derogation, the Council shall, acting with the unanimity of the Member States whose currency is the euro and the Member State concerned, on a proposal from the Commission and after consulting the European Central Bank, irrevocably fix the rate at which the euro shall be substituted for the currency of the Member State concerned, and take the other measures necessary for the introduction of the euro as the single currency in the Member State concerned.
***
Protocol on the convergence criteria
For those who want to read Article 140 TFEU alongside the relevant Protocol on the convergence criteria in an updated form, here is the text from the consolidated version of the Lisbon Treaty (pages 281 and 282):
PROTOCOL (No 13)
ON THE CONVERGENCE CRITERIA
THE HIGH CONTRACTING PARTIES,
DESIRING to lay down the details of the convergence criteria which shall guide the Union in taking decisions to end the derogations of those Member States with a derogation, referred to in Article 140 of the Treaty on the Functioning of the European Union,
HAVE AGREED upon the following provisions, which shall be annexed to the Treaty on European Union and to the Treaty on the Functioning of the European Union:
Article 1
The criterion on price stability referred to in the first indent of Article 140(1) of the Treaty on the Functioning of the European Union shall mean that a Member State has a price performance that is sustainable and an average rate of inflation, observed over a period of one year before the examination, that does not exceed by more than 1 ½ percentage points that of, at most, the three best performing Member States in terms of price stability. Inflation shall be measured by means of the consumer price index on a comparable basis taking into account differences in national definitions.
Article 2
The criterion on the government budgetary position referred to in the second indent of Article 140(1) of the said Treaty shall mean that at the time of the examination the Member State is not the subject of a Council decision under Article 126(6) of the said Treaty that an excessive deficit exists.
Article 3
The criterion on participation in the Exchange Rate mechanism of the European Monetary System referred to in the third indent of Article 140(1) of the said Treaty shall mean that a Member State has respected the normal fluctuation margins provided for by the exchange-rate mechanism on the European Monetary System without severe tensions for at least the last two years before the examination. In particular, the Member State shall not have devalued its currency's bilateral central rate against the euro on its own initiative for the same period.
Article 4
The criterion on the convergence of interest rates referred to in the fourth indent of Article 140(1) of the said Treaty shall mean that, observed over a period of one year before the examination, a Member State has had an average nominal long-term interest rate that does not exceed by more than two percentage points that of, at most, the three best performing Member States in terms of price stability. Interest rates shall be measured on the basis of long-term government bonds or comparable securities, taking into account differences in national definitions.
Article 5
The statistical data to be used for the application of this Protocol shall be provided by the Commission.
Article 6
The Council shall, acting unanimously on a proposal from the Commission and after consulting the European Parliament, the ECB as the case may be, and the Economic and Financial Committee, adopt appropriate provisions to lay down the details of the convergence criteria referred to in Article 140(1) of the said Treaty, which shall then replace this Protocol.
***
Sweden
The Lisbon Treaty ratification bill of the Swedish government, Regeringens proposition 2007/08:168 Lissabonfördraget (3 July 2008), on page 185, mentions the Article 117a in the same terms as the government used about the corresponding Article of the Constitutional Treaty, so it does not go into fine detail:
”I ett flertal fall på området ekonomisk och monetär politik ska rådet fatta beslut med kvalificerad majoritet enligt den nya definition av detta begrepp som införs genom Lissabonfördraget (se även avsnitt 14.4). Det rör sig bl.a. om rådsbeslut om rekommendationer till en medlemsstat som för en politik som inte är förenlig med de allmänna riktlinjerna eller har ett alltför stort underskott (artiklarna 99.4 104.6 och 104.7 i EUF-fördraget), rådsbeslut om antagande av landsspecifika riktlinjer (artikel 115a.1b i EUF-fördraget), rådsbeslut om åtgärder för att säkerställa ett enat externt handlande (artikel 115c.2 i EUF-fördraget) och olika rådsbeslut som rör de s.k. medlemsstaterna med undantag (artiklarna 116a.4 och 117a.2 i EUF-fördraget). Särskilda övergångsbestämmelser när det gäller omröstning i rådet enligt artikel 205.3 i EUF-fördraget finns i artikel 3.4 i ett protokoll om övergångsbestämmelser som fogas till EU-fördraget, EUF-fördraget och Euratomfördraget.”
***
Priollaud and Siritzky
In ‘Le traité de Lisbonne ; Commentaire, article par article, des nouveaux traités européens (TUE et TFUE)’ (La Documentation Française, 2008), François-Xavier Priollaud and David Siritzky present the Lisbon Treaty provisions of Chapter 5 (Dispositions transitoires) on page 260 to 261. Their description of Article 140 TFEU is succinct:
« L’art. 140 TFUE prévoit la procédure d’entrée d’un nouvel État membre dans la zone euro, pour laquelle la capacité décisionnelle des pays dont la monnaie est l’euro est également renforcée (v. commentaire chapitre précédent). »
***
United Kingdom FCO
‘A comparative table of the current EC and EU treaties as amended by the Treaty of Lisbon (Cm 7311, 21 January 2008) offers the following comment on Article 140 TFEU (on page 13):
“Draws on Articles 121, 122(2) and 123(5) TEC. Sets out procedure for abrogating a derogation. The provision in paragraph 2 regarding the recommendation of a qualified majority of Member States whose currency is the euro is new.”
***
UK House of Commons Library
The UK House of Commons Library presented the amending treaty in ‘The Treaty of Lisbon: amendments to the Treaty establishing the European Communities’ (Research paper 07/86, 6 December 2007. There was a short explanation of Article 117a TFEU (ToL) and the other transitional provisions), on page 64:
“A new Article 117a (Constitution Article III-198) is based on present Articles 121(1), 122(2) and 123(5), but updated to remove references to 1996, 1997 and other dates relating to the introduction of the euro.”
[I have deleted the footnotes, which can be found in the original.]
***
Adopting the euro currency may look more enticing amid the current financial turmoil and the recession, but at the same time the difficulties for the vulnerable member state currencies increase, making it harder to fulfil the convergence criteria.
The Lisbon Treaty does not change much substantially, adding the recommendation by the Eurozone members, but here too the new treaty in its consolidated form would be easier to read and to comprehend than the current one.
Ralf Grahn
Monday, 17 November 2008
EMU: Member States with a derogation
The march towards economic and monetary union (EMU) was planned in stages leading to the single currency, the euro. The main body of the EU member states advanced to form the Eurozone, but the United Kingdom, Denmark and Sweden remained in their winter quarters as euro outsiders.
The 2004 and 2007 EU enlargements brought twelve new members dedicated to joining the euro area. Slovenia, Cyprus and Malta have already joined the coalition headquarters, and Slovakia is going to become a euro insider 1 January 2009. The rest are in various stages of preparation, but they still have their national currencies.
The Treaty of Lisbon would simplify the treaties by abolishing redundant provisions on the march route, and it would clarify the relations between the euro area insiders and the outsiders, known as member states with a derogation.
***
Current treaty
The current Treaty establishing the European Community (TEC) sets out Transitional provisions in Chapter 4 of Title VII Economic and monetary policy, in Part Three Community policies (in the latest codified version of the treaties, Official Journal 29.12.2006 C 321 E/93─101).
Chapter 4 Transitional provisions contains Articles 116 to 124 TEC.
Member states with a derogation and member states without a derogation are defined in Article 122 TEC (ex Article 109k):
Article 122 TEC
1. If the decision has been taken to set the date in accordance with Article 121(3), the Council shall, on the basis of its recommendations referred to in Article 121(2), acting by a qualified majority on a recommendation from the Commission, decide whether any, and if so which, Member States shall have a derogation as defined in paragraph 3 of this Article. Such Member States shall in this Treaty be referred to as ‘Member States with a derogation’.
If the Council has confirmed which Member States fulfil the necessary conditions for the adoption of a single currency, in accordance with Article 121(4), those Member States which do not fulfil the conditions shall have a derogation as defined in paragraph 3 of this Article. Such Member States shall in this Treaty be referred to as ‘Member States with a derogation’.
2. At least once every two years, or at the request of a Member State with a derogation, the Commission and the ECB shall report to the Council in accordance with the procedure laid down in Article 121(1). After consulting the European Parliament and after discussion in the Council, meeting in the composition of the Heads of State or Government, the Council shall, acting by a qualified majority on a proposal from the Commission, decide which Member States with a derogation fulfil the necessary conditions on the basis of the criteria set out in Article 121(1), and abrogate the derogations of the Member States concerned.
3. A derogation referred to in paragraph 1 shall entail that the following articles do not apply to the Member State concerned: Articles 104(9) and (11), 105(1), (2), (3) and (5), 106, 110, 111, and 112(2)(b). The exclusion of such a Member State and its national central bank from rights and obligations within the ESCB is laid down in Chapter IX of the Statute of the ESCB.
4. In Articles 105(1), (2) and (3), 106, 110, 111 and 112(2)(b), ‘Member States’ shall be read as ‘Member States without a derogation’.
5. The voting rights of Member States with a derogation shall be suspended for the Council decisions referred to in the articles of this Treaty mentioned in paragraph 3. In that case, by way of derogation from Articles 205 and 250(1), a qualified majority shall be defined as two thirds of the votes of the representatives of the Member States without a derogation weighted in accordance with Article 205(2), and unanimity of those Member States shall be required for an act requiring unanimity.
6. Articles 119 and 120 shall continue to apply to a Member State with a derogation.
***
Draft Constitution
The euro currency had been introduced, and the euro banknotes and coins were in circulation, when the European Convention deliberated institutional reform of the European Union. It is hardly surprising that the Convention proposed a reworked section with the aim to simplify and to clarify the transitional provisions.
Section 4 Transitional provisions comprises Articles III-91 to III-96 of the draft Constitution (OJ 18.7.2003 C 169/45─46):
SECTION 4
Transitional provisions
Article III-91 Draft Constitution
1. Member States which the Council of Ministers has decided do not fulfil the necessary conditions for the adoption of the euro shall hereinafter be referred to as ‘Member States with a derogation’.
2. The following provisions of the Constitution shall not apply to Member States with a derogation:
(a) adoption of the parts of the broad economic-policy guidelines which concern the euro area generally (Article III-71(2));
(b) coercive means of remedying excessive deficits (Article III-76(9) and (10));
(c) the objectives and tasks of the European System of Central Banks (Article III-77(1), (2), (3) and (5));
(d) issue of the euro (Article III-78);
(e) acts of the European Central Bank (Article III-82);
(f) measures governing the use of the euro (Article III-83);
(g) monetary agreements and other measures relating to exchange-rate policy (Article III-228);
(h) appointment of members of the Executive Board of the European Central Bank (Article III-84(2)(b)).
In the Articles referred to above, ‘Member States’ shall therefore mean Member States without a derogation.
3. Under Chapter IX of the Statute of the European System of Central Banks and the European Central Bank, Member States with a derogation and their national central banks are excluded from rights and obligations within the European System of Central Banks.
4. The voting rights of members of the Council of Ministers representing Member States with a derogation shall be suspended for the adoption by the Council of Ministers of the measures referred to in the Articles listed in paragraph 2. A qualified majority shall be defined as a majority of the votes of the representatives of the Member States without a derogation, representing at least three fifths of their population. Unanimity of those Member States shall be required for any act requiring unanimity.
***
Finland
The Finnish government reported on the results of the European Convention in Valtioneuvoston selonteko Eduskunnalle konventin tuloksista ja valmistautumisesta hallitusten väliseen konferenssiin (VNS 2/2003 vp), but the section on economic and monetary policy (8.5 Talous. ja rahapolitiikka) on pages 65 to 67 did not waste words on matters as arcane a simplification and clarification.
***
Sweden
Ahead of the intergovernmental conference, the Swedish government presented its views in Regeringens skrivelse 2003/04:13 Europeiska konventet om EU:s framtid (2 October 2003). Non-euro Sweden was fairly supportive of effective decision-making in the eurozone and international representation for the euro area in international financial institutions (page 49─50), but mere simplification and clarification did not merit comments from the government.
***
de Poncins
Étienne de Poncins expressed a few thoughts on the meaning and structure of Article III-91 in Vers une Constitution européenne (Éditions 10/18, 2003), pages 312 and 313:
« Commentaire : cet article précise les cas dans lesquels les États membres de la zone euro prennent part seuls au vote au sein du Conseil mais en présence de l’ensemble des États membres. Comme dans les traités actuels, le fait pour un État membre de ne pas faire partie de la zone euro est considéré comme une « dérogation » par rapport à la règle commune. Cela explique la structure générale de cet article.
Les États membres de la zone euro auraient souhaité que la liste figurant au paragraphe 2 soit étendue s’agissant des alinéas a) et b). La Convention a privilégié l’insertion d’un article III-88 (cf. commentaire sous cet article). Satisfaction leur a toutefois été donnée sur un point : celui relatif à l’adoption des grandes orientations des politiques économiques de la zone eurod’une façon générale (mais non sur celles relative à chaque État membre de la zone euro).
La Conférence intergouvernementale pourrait reprendre le débat. »
***
Constitutional Treaty
The corresponding provisions of the intergovernmental conference (IGC 2004) are found in Section 5 Transitional provisions, comprising Articles III-197 to 202 of the Treaty establishing a Constitution for Europe (OJ 16.12.2004 C 310/86─90).
Article III-197 Constitution
1. Member States in respect of which the Council has not decided that they fulfil the necessary conditions for the adoption of the euro shall hereinafter be referred to as ‘Member States with a derogation’.
2. The following provisions of the Constitution shall not apply to Member States with a derogation:
(a) adoption of the parts of the broad economic policy guidelines which concern the euro area generally (Article III-179(2));
(b) coercive means of remedying excessive deficits (Article III-184(9) and (10));
(c) the objectives and tasks of the European System of Central Banks (Article III-185(1), (2), (3) and (5));
(d) issue of the euro (Article III-186);
(e) acts of the European Central Bank (Article III-190);
(f) measures governing the use of the euro (Article III-191);
(g) monetary agreements and other measures relating to exchange-rate policy (Article III-326);
(h) appointment of members of the Executive Board of the European Central Bank (Article III-382(2));
(i) European decisions establishing common positions on issues of particular relevance for economic and monetary union within the competent international financial institutions and conferences (Article III-196(1));
(j) measures to ensure unified representation within the international financial institutions and conferences (Article III-196(2)).
In the Articles referred to in points (a) to (j), ‘Member States’ shall therefore mean Member States whose currency is the euro.
3. Under Chapter IX of the Statute of the European System of Central Banks and of the European Central Bank, Member States with a derogation and their national central banks are excluded from rights and obligations within the European System of Central Banks.
4. The voting rights of members of the Council representing Member States with a derogation shall be suspended for the adoption by the Council of the measures referred to in the Articles listed in paragraph 2, and in the following instances:
(a) recommendations made to those Member States whose currency is the euro in the framework of multilateral surveillance, including on stability programmes and warnings (Article III-179(4));
(b) measures relating to excessive deficits concerning those Member States whose currency is the euro (Article III-184(6), (7), (8) and (11)).
A qualified majority shall be defined as at least 55 % of the other members of the Council, representing Member States comprising at least 65 % of the population of the participating Member States.
A blocking minority must include at least the minimum number of these other Council members representing more than 35 % of the population of the participating Member States, plus one member, failing which the qualified majority shall be deemed attained.
***
There are both great similarities and some differences between Article III-91 of the draft Constitution and Article III-197 of the Constitutional Treaty.
Let us see it our standard references contribute anything towards our understanding of the provision.
***
Sweden
The government of Sweden, still outside the eurozone, described the new definition of qualified majority voting concerning a number of provisions, among them Article III-197(4), in the draft ratification bill, Lagrådsremiss Fördraget om upprättande av en konstitution för Europa (2 June 2005), page 173─174:
”I ett flertal fall på detta område skall rådet fatta beslut med kvalificerad majoritet enligt den nya definition av detta begrepp som det konstitutionella fördraget innehåller. Det rör sig om rådsbeslut om rekommendationer till en medlemsstat som för en politik som inte är förenlig med de allmänna riktlinjerna eller har ett alltför stort underskott (artikel III-179.4, artikel III-184.6 och 7), rådsbeslut om antagande av landsspecifika riktlinjer (artikel III-194.2), rådsbeslut om åtgärder för att säkerställa ett enat externt handlande (artikel III-196.3) och olika rådsbeslut som rör de s.k. medlemsstaterna med undantag (artikel III-197.4 och III-198.2). Enligt de övergångsbestämmelser som finns i artikel 2.4 i protokollet om övergångsbestämmelser för unionens institutioner och organ skall den nya definitionen av kvalificerad majoritet i dessa artiklar dock få verkan först den 1 november 2009.”
***
Finland
In Finland, the government’s ratification bill, Hallituksen esitys Eduskunnalle Euroopan perustuslaista tehdyn sopimuksen hyväksymisestä ja laiksi sen lainsäädännön alaan kuuluvien määräysten voimaansaattamisesta (HE 67/2006 vp) did not ponder the differences between the draft Constitution and the Constitutional Treaty, but it compared the Section on transitional provisions and Article III-197 in some detail with the current TEC, on pages 184 and 185.
The Chapter on transitional provisions had been shortened, because some of these provisions concerned competence to take certain measures, such as establishing the European Central Bank. Since these action have already been taken, the provisions have been abolished as redundant. The rest of the provisional provisions apply to countries, which have not adopted the euro, but are preparing for adoption.
Article III-197 of the Constitution corresponds with paragraphs one, two and three of Article 122 TEC.
In Constitution Article III-197(2), the non-application of Articles III-179(2), III-191 and III-196(1) to members with a derogation has been added.
Further additions of non-application are mentioned in paragraph 4. The new definition of a qualified majority has been explained in the context of Article III-179:
”5 jakso
Siirtymämääräykset
Siirtymämääräyksiä koskevaa lukua on lyhennetty aiempaan perustamissopimukseen verrattuna. Tämä johtuu siitä, että osa perustamissopimukseen sisällytetyistä siirtymämääräyksistä koski toimivaltamääräyksiä ryhtyä tiettyihin toimenpiteisiin, kuten esimerkiksi Euroopan keskuspankin perustamiseen. Koska kyseiset toimenpiteet on jo suoritettu, vastaavat toimivaltamääräykset on poistettu tarpeettomina. Kaikki jäljellä olevat siirtymäsäännökset koskevat sellaisia maita, jotka eivät ole vielä ottaneet euroa käyttöön, mutta ovat kuitenkin valmistautumassa siihen.
III-197 artikla, jossa määrätään, mitä artikloita ei sovelleta niihin jäsenvaltioihin, jotka eivät ole täyttäneet euron käyttöön ottamiseksi vaadittavia edellytyksiä, vastaa SEY 122 artiklan ensimmäistä, kolmatta ja viidettä kohtaa.
Artiklan 2 kohdan mukaan aiempien rajausten lisäksi kyseisiin jäsenvaltioihin ei sovelleta myöskään III-179 artiklan toista kohtaa, III-191 artiklaa eikä III-196 artiklan ensimmäistä kohtaa.
Artiklan 4 kohdassa on äänestysmääräykset muutettu siten ettei kyseisillä jäsenvaltioilla ole äänioikeutta III-179 artiklan 4 kohdan eikä III-184 artiklan 6,7,8 ja 11 kohdissa tarkoitetussa päätöksenteossa. Päätöksenteossa sovelletaan uutta määräenemmistön määritelmää, joka on selostettu III-179 artiklan yhteydessä.”
***
Original Lisbon Treaty
In Article 2, point 101, of the original Treaty of Lisbon (ToL) the intergovernmental conference (IGC 2007) adopted the substance of the Constitution’s proposal under a clarifying headline relating to member states with a derogation (OJ 17.12.2007 C 306/76─77):
TRANSITIONAL PROVISIONS RELATING TO MEMBER STATES WITH A DEROGATION
101) Article 116 shall be repealed, and the following Article 116a shall be inserted:
‘Article 116a TFEU (ToL)
1. Member States in respect of which the Council has not decided that they fulfil the necessary conditions for the adoption of the euro shall hereinafter be referred to as “Member States with a derogation”.
2. The following provisions of the Treaties shall not apply to Member States with a derogation:
(a) adoption of the parts of the broad economic policy guidelines which concern the euro area generally (Article 99(2));
(b) coercive means of remedying excessive deficits (Article 104(9) and (11));
(c) the objectives and tasks of the ESCB (Article 105(1), (2), (3) and (5));
(d) issue of the euro (Article 106);
(e) acts of the European Central Bank (Article 110);
(f) measures governing the use of the euro (Article 111a);
(g) monetary agreements and other measures relating to exchange-rate policy (Article 188 O);
(h) appointment of members of the Executive Board of the European Central Bank (Article 245b(2));
(i) decisions establishing common positions on issues of particular relevance for economic and monetary union within the competent international financial institutions and conferences (Article 115 C(1));
(j) measures to ensure unified representation within the international financial institutions and conferences (Article 115 C(2)).
In the Articles referred to in points (a) to (j), “Member States” shall therefore mean Member States whose currency is the euro.
3. Under Chapter IX of the Statute of the ESCB and of the ECB, Member States with a derogation and their national central banks are excluded from rights and obligations within the SCB.
4. The voting rights of members of the Council representing Member States with a derogation shall be suspended for the adoption by the Council of the measures referred to in the Articles listed in paragraph 2, and in the following instances:
(a) recommendations made to those Member States whose currency is the euro in the framework of multilateral surveillance, including on stability programmes and warnings (Article 99(4));
(b) measures relating to excessive deficits concerning those Member States whose currency is the euro (Article 104(6), (7), (8), (12) and (13)).
A qualified majority of the other members of the Council shall be defined in accordance with
Article 205(3)(a).’.
***
Renumbering
The Treaty on the Functioning of the European Union (TFEU) table of equivalences confirms that the new Article 116a TFEU (ToL) in the original Treaty of Lisbon was to be renumbered Article 139 TFEU in the consolidated version, under the title ‘Economic and monetary policy’, renumbered Title VIII, and in the renumbered Chapter 5 ‘Transitional provisions’ (OJ 17.12.2007 C 306/215).
(In the consolidated version of the Lisbon Treaty, OJ 9.5.2008 C 115, the Tables of equivalences start on page 361, but the ToL numbers have been omitted.)
***
Consolidated Lisbon Treaty: TFEU
Article 139 of the Treaty on the Functioning of the European Union (TFEU) is found in the consolidated versions 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 115/107─108:
Part Three Union policies and internal actions
Title VIII Economic and monetary policy
CHAPTER 5
TRANSITIONAL PROVISIONS
Article 139 TFEU
1. Member States in respect of which the Council has not decided that they fulfil the necessary conditions for the adoption of the euro shall hereinafter be referred to as ‘Member States with a derogation’.
2. The following provisions of the Treaties shall not apply to Member States with a derogation:
(a) adoption of the parts of the broad economic policy guidelines which concern the euro area generally (Article 121(2));
(b) coercive means of remedying excessive deficits (Article 126(9) and (11));
(c) the objectives and tasks of the ESCB (Article 127(1) to (3) and (5));
(d) issue of the euro (Article 128);
(e) acts of the European Central Bank (Article 132);
(f) measures governing the use of the euro (Article 133);
(g) monetary agreements and other measures relating to exchange-rate policy (Article 219);
(h) appointment of members of the Executive Board of the European Central Bank (Article 283(2));
(i) decisions establishing common positions on issues of particular relevance for economic and monetary union within the competent international financial institutions and conferences (Article 138(1));
(j) measures to ensure unified representation within the international financial institutions and conferences (Article 138(2)).
In the Articles referred to in points (a) to (j), ‘Member States’ shall therefore mean Member States whose currency is the euro.
3. Under Chapter IX of the Statute of the ESCB and of the ECB, Member States with a derogation and their national central banks are excluded from rights and obligations within the ESCB.
4. The voting rights of members of the Council representing Member States with a derogation shall be suspended for the adoption by the Council of the measures referred to in the Articles listed in paragraph 2, and in the following instances:
(a) recommendations made to those Member States whose currency is the euro in the framework of multilateral surveillance, including on stability programmes and warnings (Article 121(4));
(b) measures relating to excessive deficits concerning those Member States whose currency is the euro (Article 126(6), (7), (8), (12) and (13)).
A qualified majority of the other members of the Council shall be defined in accordance with Article 238(3)(a).
***
Sweden
The Lisbon Treaty ratification bill of the Swedish government, Regeringens proposition 2007/08:168 Lissabonfördraget (3 July 2008), on page 185, mentions the Article 116a in the same terms as the corresponding Article of the Constitutional Treaty, so it does not go into fine detail:
”I ett flertal fall på området ekonomisk och monetär politik ska rådet fatta beslut med kvalificerad majoritet enligt den nya definition av detta begrepp som införs genom Lissabonfördraget (se även avsnitt 14.4). Det rör sig bl.a. om rådsbeslut om rekommendationer till en medlemsstat som för en politik som inte är förenlig med de allmänna riktlinjerna eller har ett alltför stort underskott (artiklarna 99.4 104.6 och 104.7 i EUF-fördraget), rådsbeslut om antagande av landsspecifika riktlinjer (artikel 115a.1b i EUF-fördraget), rådsbeslut om åtgärder för att säkerställa ett enat externt handlande (artikel 115c.2 i EUF-fördraget) och olika rådsbeslut som rör de s.k. medlemsstaterna med undantag (artiklarna 116a.4 och 117a.2 i EUF-fördraget). Särskilda övergångsbestämmelser när det gäller omröstning i rådet enligt artikel 205.3 i EUF-fördraget finns i artikel 3.4 i ett protokoll om övergångsbestämmelser som fogas till EU-fördraget, EUF-fördraget och Euratomfördraget.”
***
Priollaud and Siritzky
In ‘Le traité de Lisbonne ; Commentaire, article par article, des nouveaux traités européens (TUE et TFUE)’ (La Documentation Française, 2008), François-Xavier Priollaud and David Siritzky present the Lisbon Treaty provisions of Chapter 5 (Dispositions transitoires) on page 260 to 261. Their first paragraph manages to present the essence in three sentences:
« Ces dispositions transitoires sont celles applicables aux États membres bénéficiant d’une dérogation, c’est’à-dire des pays dont l’euro n’est pas encore la monnaie. Elle reprend les art. 116 à 124 TCE, en les simplifiant. Toutes les dispositions relative aux première et deuxième phases, devenues obsolètes, ont été supprimées. »
***
United Kingdom FCO
‘A comparative table of the current EC and EU treaties as amended by the Treaty of Lisbon (Cm 7311, 21 January 2008) offers the following comment on Article 139 TFEU (on page 13):
“Draws on Article 122 TEC. Sets out position of “Member States with a derogation”.”
***
UK House of Commons Library
The UK House of Commons Library presented the amending treaty in ‘The Treaty of Lisbon: amendments to the Treaty establishing the European Communities’ (Research paper 07/86, 6 December 2007. There was a lengthy explanation of Article 116a TFEU (ToL) and the other transitional provisions), on page 63 and 64:
“Article 116a sets out the arrangements for Member States “with a derogation”. While the article has appears to have changed substantially from the original article, the content for the most part is the same and has been re-arranged or re-worded. The article sets out areas of the Treaty which do not apply to Member States with a derogation, including the following areas which are unchanged from the existing treaty:
· Adoption of broad economic policy guidelines concerning the euro area;
· Coercive means of remedying excessive deficits;
· The objectives and tasks of the European System of Central Banks;
· The issue of the euro and measures governing the use of the euro;
· Acts of the European Central Bank (ECB) and appointments to the Executive Board of the ECB;
· Monetary agreements and other measures relating to exchange rate policy; and,
· Exclusion from rights and obligations relating to the European System of Central Banks.
Two additional areas are covered by the Treaty in this article which are not in previous treaties: decisions establishing common positions relevant to EMU within international financial institutions and conferences and measures to ensure unified representation within international financial institutions and conferences (See Article 115A). Neither of these areas applies to Member States with a derogation.
A new provision is that the voting rights of Member States with a derogation are suspended in two areas:
· Recommendations to Member States within the euro area on the framework of multilateral surveillance, including stability programmes and warnings; and,
· All measures relating to excessive deficits for Member States whose currency is the euro.
Articles 116a–120 (Constitution Articles Article III-197 - 202) concern transitional provisions regarding the single currency. Article 116a (Constitution Article III-197) sets out the arrangements for Member States “with a derogation”. This has changed substantially in format but the content has been for the most part simply re-arranged. Article 116a and Article 99(2), which cover the adoption of broad economic guidelines in the euro area, does not apply to Member States with a derogation. Article 116a(4) has been altered to include two further areas where Member States with a derogation cannot vote:
· recommendations made to those Member States whose currency is the euro in the framework of multilateral surveillance, including on stability programmes and warnings
· measures relating to excessive deficits concerning those Member States whose currency is the euro.
While the IGC did not agree on a new Stability and Growth Pact, a Conference Declaration regarding the Pact was annexed to the Treaty (“Declaration on Article 104 of the Treaty on the Functioning of the European Union”), in which the Conference confirms that the Pact is an “important tool” in the Union’s economic and fiscal policy and “reaffirms its commitment to the provisions concerning the Stability and Growth Pact as the framework for the coordination of budgetary policies in the Member States”.”
[I have deleted the footnotes, which can be found in the original.]
***
The willing and able EU member states have the rights and obligations of the Eurozone, whereas the outsiders are excluded from the enumerated decisions concerning the euro area and the European system of Central Banks (ESCB).
The financial turbulence and the economic downturn seem to have lessened the attraction of being an outsider, but to adopt the euro a member state has to qualify.
Ralf Grahn
The 2004 and 2007 EU enlargements brought twelve new members dedicated to joining the euro area. Slovenia, Cyprus and Malta have already joined the coalition headquarters, and Slovakia is going to become a euro insider 1 January 2009. The rest are in various stages of preparation, but they still have their national currencies.
The Treaty of Lisbon would simplify the treaties by abolishing redundant provisions on the march route, and it would clarify the relations between the euro area insiders and the outsiders, known as member states with a derogation.
***
Current treaty
The current Treaty establishing the European Community (TEC) sets out Transitional provisions in Chapter 4 of Title VII Economic and monetary policy, in Part Three Community policies (in the latest codified version of the treaties, Official Journal 29.12.2006 C 321 E/93─101).
Chapter 4 Transitional provisions contains Articles 116 to 124 TEC.
Member states with a derogation and member states without a derogation are defined in Article 122 TEC (ex Article 109k):
Article 122 TEC
1. If the decision has been taken to set the date in accordance with Article 121(3), the Council shall, on the basis of its recommendations referred to in Article 121(2), acting by a qualified majority on a recommendation from the Commission, decide whether any, and if so which, Member States shall have a derogation as defined in paragraph 3 of this Article. Such Member States shall in this Treaty be referred to as ‘Member States with a derogation’.
If the Council has confirmed which Member States fulfil the necessary conditions for the adoption of a single currency, in accordance with Article 121(4), those Member States which do not fulfil the conditions shall have a derogation as defined in paragraph 3 of this Article. Such Member States shall in this Treaty be referred to as ‘Member States with a derogation’.
2. At least once every two years, or at the request of a Member State with a derogation, the Commission and the ECB shall report to the Council in accordance with the procedure laid down in Article 121(1). After consulting the European Parliament and after discussion in the Council, meeting in the composition of the Heads of State or Government, the Council shall, acting by a qualified majority on a proposal from the Commission, decide which Member States with a derogation fulfil the necessary conditions on the basis of the criteria set out in Article 121(1), and abrogate the derogations of the Member States concerned.
3. A derogation referred to in paragraph 1 shall entail that the following articles do not apply to the Member State concerned: Articles 104(9) and (11), 105(1), (2), (3) and (5), 106, 110, 111, and 112(2)(b). The exclusion of such a Member State and its national central bank from rights and obligations within the ESCB is laid down in Chapter IX of the Statute of the ESCB.
4. In Articles 105(1), (2) and (3), 106, 110, 111 and 112(2)(b), ‘Member States’ shall be read as ‘Member States without a derogation’.
5. The voting rights of Member States with a derogation shall be suspended for the Council decisions referred to in the articles of this Treaty mentioned in paragraph 3. In that case, by way of derogation from Articles 205 and 250(1), a qualified majority shall be defined as two thirds of the votes of the representatives of the Member States without a derogation weighted in accordance with Article 205(2), and unanimity of those Member States shall be required for an act requiring unanimity.
6. Articles 119 and 120 shall continue to apply to a Member State with a derogation.
***
Draft Constitution
The euro currency had been introduced, and the euro banknotes and coins were in circulation, when the European Convention deliberated institutional reform of the European Union. It is hardly surprising that the Convention proposed a reworked section with the aim to simplify and to clarify the transitional provisions.
Section 4 Transitional provisions comprises Articles III-91 to III-96 of the draft Constitution (OJ 18.7.2003 C 169/45─46):
SECTION 4
Transitional provisions
Article III-91 Draft Constitution
1. Member States which the Council of Ministers has decided do not fulfil the necessary conditions for the adoption of the euro shall hereinafter be referred to as ‘Member States with a derogation’.
2. The following provisions of the Constitution shall not apply to Member States with a derogation:
(a) adoption of the parts of the broad economic-policy guidelines which concern the euro area generally (Article III-71(2));
(b) coercive means of remedying excessive deficits (Article III-76(9) and (10));
(c) the objectives and tasks of the European System of Central Banks (Article III-77(1), (2), (3) and (5));
(d) issue of the euro (Article III-78);
(e) acts of the European Central Bank (Article III-82);
(f) measures governing the use of the euro (Article III-83);
(g) monetary agreements and other measures relating to exchange-rate policy (Article III-228);
(h) appointment of members of the Executive Board of the European Central Bank (Article III-84(2)(b)).
In the Articles referred to above, ‘Member States’ shall therefore mean Member States without a derogation.
3. Under Chapter IX of the Statute of the European System of Central Banks and the European Central Bank, Member States with a derogation and their national central banks are excluded from rights and obligations within the European System of Central Banks.
4. The voting rights of members of the Council of Ministers representing Member States with a derogation shall be suspended for the adoption by the Council of Ministers of the measures referred to in the Articles listed in paragraph 2. A qualified majority shall be defined as a majority of the votes of the representatives of the Member States without a derogation, representing at least three fifths of their population. Unanimity of those Member States shall be required for any act requiring unanimity.
***
Finland
The Finnish government reported on the results of the European Convention in Valtioneuvoston selonteko Eduskunnalle konventin tuloksista ja valmistautumisesta hallitusten väliseen konferenssiin (VNS 2/2003 vp), but the section on economic and monetary policy (8.5 Talous. ja rahapolitiikka) on pages 65 to 67 did not waste words on matters as arcane a simplification and clarification.
***
Sweden
Ahead of the intergovernmental conference, the Swedish government presented its views in Regeringens skrivelse 2003/04:13 Europeiska konventet om EU:s framtid (2 October 2003). Non-euro Sweden was fairly supportive of effective decision-making in the eurozone and international representation for the euro area in international financial institutions (page 49─50), but mere simplification and clarification did not merit comments from the government.
***
de Poncins
Étienne de Poncins expressed a few thoughts on the meaning and structure of Article III-91 in Vers une Constitution européenne (Éditions 10/18, 2003), pages 312 and 313:
« Commentaire : cet article précise les cas dans lesquels les États membres de la zone euro prennent part seuls au vote au sein du Conseil mais en présence de l’ensemble des États membres. Comme dans les traités actuels, le fait pour un État membre de ne pas faire partie de la zone euro est considéré comme une « dérogation » par rapport à la règle commune. Cela explique la structure générale de cet article.
Les États membres de la zone euro auraient souhaité que la liste figurant au paragraphe 2 soit étendue s’agissant des alinéas a) et b). La Convention a privilégié l’insertion d’un article III-88 (cf. commentaire sous cet article). Satisfaction leur a toutefois été donnée sur un point : celui relatif à l’adoption des grandes orientations des politiques économiques de la zone eurod’une façon générale (mais non sur celles relative à chaque État membre de la zone euro).
La Conférence intergouvernementale pourrait reprendre le débat. »
***
Constitutional Treaty
The corresponding provisions of the intergovernmental conference (IGC 2004) are found in Section 5 Transitional provisions, comprising Articles III-197 to 202 of the Treaty establishing a Constitution for Europe (OJ 16.12.2004 C 310/86─90).
Article III-197 Constitution
1. Member States in respect of which the Council has not decided that they fulfil the necessary conditions for the adoption of the euro shall hereinafter be referred to as ‘Member States with a derogation’.
2. The following provisions of the Constitution shall not apply to Member States with a derogation:
(a) adoption of the parts of the broad economic policy guidelines which concern the euro area generally (Article III-179(2));
(b) coercive means of remedying excessive deficits (Article III-184(9) and (10));
(c) the objectives and tasks of the European System of Central Banks (Article III-185(1), (2), (3) and (5));
(d) issue of the euro (Article III-186);
(e) acts of the European Central Bank (Article III-190);
(f) measures governing the use of the euro (Article III-191);
(g) monetary agreements and other measures relating to exchange-rate policy (Article III-326);
(h) appointment of members of the Executive Board of the European Central Bank (Article III-382(2));
(i) European decisions establishing common positions on issues of particular relevance for economic and monetary union within the competent international financial institutions and conferences (Article III-196(1));
(j) measures to ensure unified representation within the international financial institutions and conferences (Article III-196(2)).
In the Articles referred to in points (a) to (j), ‘Member States’ shall therefore mean Member States whose currency is the euro.
3. Under Chapter IX of the Statute of the European System of Central Banks and of the European Central Bank, Member States with a derogation and their national central banks are excluded from rights and obligations within the European System of Central Banks.
4. The voting rights of members of the Council representing Member States with a derogation shall be suspended for the adoption by the Council of the measures referred to in the Articles listed in paragraph 2, and in the following instances:
(a) recommendations made to those Member States whose currency is the euro in the framework of multilateral surveillance, including on stability programmes and warnings (Article III-179(4));
(b) measures relating to excessive deficits concerning those Member States whose currency is the euro (Article III-184(6), (7), (8) and (11)).
A qualified majority shall be defined as at least 55 % of the other members of the Council, representing Member States comprising at least 65 % of the population of the participating Member States.
A blocking minority must include at least the minimum number of these other Council members representing more than 35 % of the population of the participating Member States, plus one member, failing which the qualified majority shall be deemed attained.
***
There are both great similarities and some differences between Article III-91 of the draft Constitution and Article III-197 of the Constitutional Treaty.
Let us see it our standard references contribute anything towards our understanding of the provision.
***
Sweden
The government of Sweden, still outside the eurozone, described the new definition of qualified majority voting concerning a number of provisions, among them Article III-197(4), in the draft ratification bill, Lagrådsremiss Fördraget om upprättande av en konstitution för Europa (2 June 2005), page 173─174:
”I ett flertal fall på detta område skall rådet fatta beslut med kvalificerad majoritet enligt den nya definition av detta begrepp som det konstitutionella fördraget innehåller. Det rör sig om rådsbeslut om rekommendationer till en medlemsstat som för en politik som inte är förenlig med de allmänna riktlinjerna eller har ett alltför stort underskott (artikel III-179.4, artikel III-184.6 och 7), rådsbeslut om antagande av landsspecifika riktlinjer (artikel III-194.2), rådsbeslut om åtgärder för att säkerställa ett enat externt handlande (artikel III-196.3) och olika rådsbeslut som rör de s.k. medlemsstaterna med undantag (artikel III-197.4 och III-198.2). Enligt de övergångsbestämmelser som finns i artikel 2.4 i protokollet om övergångsbestämmelser för unionens institutioner och organ skall den nya definitionen av kvalificerad majoritet i dessa artiklar dock få verkan först den 1 november 2009.”
***
Finland
In Finland, the government’s ratification bill, Hallituksen esitys Eduskunnalle Euroopan perustuslaista tehdyn sopimuksen hyväksymisestä ja laiksi sen lainsäädännön alaan kuuluvien määräysten voimaansaattamisesta (HE 67/2006 vp) did not ponder the differences between the draft Constitution and the Constitutional Treaty, but it compared the Section on transitional provisions and Article III-197 in some detail with the current TEC, on pages 184 and 185.
The Chapter on transitional provisions had been shortened, because some of these provisions concerned competence to take certain measures, such as establishing the European Central Bank. Since these action have already been taken, the provisions have been abolished as redundant. The rest of the provisional provisions apply to countries, which have not adopted the euro, but are preparing for adoption.
Article III-197 of the Constitution corresponds with paragraphs one, two and three of Article 122 TEC.
In Constitution Article III-197(2), the non-application of Articles III-179(2), III-191 and III-196(1) to members with a derogation has been added.
Further additions of non-application are mentioned in paragraph 4. The new definition of a qualified majority has been explained in the context of Article III-179:
”5 jakso
Siirtymämääräykset
Siirtymämääräyksiä koskevaa lukua on lyhennetty aiempaan perustamissopimukseen verrattuna. Tämä johtuu siitä, että osa perustamissopimukseen sisällytetyistä siirtymämääräyksistä koski toimivaltamääräyksiä ryhtyä tiettyihin toimenpiteisiin, kuten esimerkiksi Euroopan keskuspankin perustamiseen. Koska kyseiset toimenpiteet on jo suoritettu, vastaavat toimivaltamääräykset on poistettu tarpeettomina. Kaikki jäljellä olevat siirtymäsäännökset koskevat sellaisia maita, jotka eivät ole vielä ottaneet euroa käyttöön, mutta ovat kuitenkin valmistautumassa siihen.
III-197 artikla, jossa määrätään, mitä artikloita ei sovelleta niihin jäsenvaltioihin, jotka eivät ole täyttäneet euron käyttöön ottamiseksi vaadittavia edellytyksiä, vastaa SEY 122 artiklan ensimmäistä, kolmatta ja viidettä kohtaa.
Artiklan 2 kohdan mukaan aiempien rajausten lisäksi kyseisiin jäsenvaltioihin ei sovelleta myöskään III-179 artiklan toista kohtaa, III-191 artiklaa eikä III-196 artiklan ensimmäistä kohtaa.
Artiklan 4 kohdassa on äänestysmääräykset muutettu siten ettei kyseisillä jäsenvaltioilla ole äänioikeutta III-179 artiklan 4 kohdan eikä III-184 artiklan 6,7,8 ja 11 kohdissa tarkoitetussa päätöksenteossa. Päätöksenteossa sovelletaan uutta määräenemmistön määritelmää, joka on selostettu III-179 artiklan yhteydessä.”
***
Original Lisbon Treaty
In Article 2, point 101, of the original Treaty of Lisbon (ToL) the intergovernmental conference (IGC 2007) adopted the substance of the Constitution’s proposal under a clarifying headline relating to member states with a derogation (OJ 17.12.2007 C 306/76─77):
TRANSITIONAL PROVISIONS RELATING TO MEMBER STATES WITH A DEROGATION
101) Article 116 shall be repealed, and the following Article 116a shall be inserted:
‘Article 116a TFEU (ToL)
1. Member States in respect of which the Council has not decided that they fulfil the necessary conditions for the adoption of the euro shall hereinafter be referred to as “Member States with a derogation”.
2. The following provisions of the Treaties shall not apply to Member States with a derogation:
(a) adoption of the parts of the broad economic policy guidelines which concern the euro area generally (Article 99(2));
(b) coercive means of remedying excessive deficits (Article 104(9) and (11));
(c) the objectives and tasks of the ESCB (Article 105(1), (2), (3) and (5));
(d) issue of the euro (Article 106);
(e) acts of the European Central Bank (Article 110);
(f) measures governing the use of the euro (Article 111a);
(g) monetary agreements and other measures relating to exchange-rate policy (Article 188 O);
(h) appointment of members of the Executive Board of the European Central Bank (Article 245b(2));
(i) decisions establishing common positions on issues of particular relevance for economic and monetary union within the competent international financial institutions and conferences (Article 115 C(1));
(j) measures to ensure unified representation within the international financial institutions and conferences (Article 115 C(2)).
In the Articles referred to in points (a) to (j), “Member States” shall therefore mean Member States whose currency is the euro.
3. Under Chapter IX of the Statute of the ESCB and of the ECB, Member States with a derogation and their national central banks are excluded from rights and obligations within the SCB.
4. The voting rights of members of the Council representing Member States with a derogation shall be suspended for the adoption by the Council of the measures referred to in the Articles listed in paragraph 2, and in the following instances:
(a) recommendations made to those Member States whose currency is the euro in the framework of multilateral surveillance, including on stability programmes and warnings (Article 99(4));
(b) measures relating to excessive deficits concerning those Member States whose currency is the euro (Article 104(6), (7), (8), (12) and (13)).
A qualified majority of the other members of the Council shall be defined in accordance with
Article 205(3)(a).’.
***
Renumbering
The Treaty on the Functioning of the European Union (TFEU) table of equivalences confirms that the new Article 116a TFEU (ToL) in the original Treaty of Lisbon was to be renumbered Article 139 TFEU in the consolidated version, under the title ‘Economic and monetary policy’, renumbered Title VIII, and in the renumbered Chapter 5 ‘Transitional provisions’ (OJ 17.12.2007 C 306/215).
(In the consolidated version of the Lisbon Treaty, OJ 9.5.2008 C 115, the Tables of equivalences start on page 361, but the ToL numbers have been omitted.)
***
Consolidated Lisbon Treaty: TFEU
Article 139 of the Treaty on the Functioning of the European Union (TFEU) is found in the consolidated versions 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 115/107─108:
Part Three Union policies and internal actions
Title VIII Economic and monetary policy
CHAPTER 5
TRANSITIONAL PROVISIONS
Article 139 TFEU
1. Member States in respect of which the Council has not decided that they fulfil the necessary conditions for the adoption of the euro shall hereinafter be referred to as ‘Member States with a derogation’.
2. The following provisions of the Treaties shall not apply to Member States with a derogation:
(a) adoption of the parts of the broad economic policy guidelines which concern the euro area generally (Article 121(2));
(b) coercive means of remedying excessive deficits (Article 126(9) and (11));
(c) the objectives and tasks of the ESCB (Article 127(1) to (3) and (5));
(d) issue of the euro (Article 128);
(e) acts of the European Central Bank (Article 132);
(f) measures governing the use of the euro (Article 133);
(g) monetary agreements and other measures relating to exchange-rate policy (Article 219);
(h) appointment of members of the Executive Board of the European Central Bank (Article 283(2));
(i) decisions establishing common positions on issues of particular relevance for economic and monetary union within the competent international financial institutions and conferences (Article 138(1));
(j) measures to ensure unified representation within the international financial institutions and conferences (Article 138(2)).
In the Articles referred to in points (a) to (j), ‘Member States’ shall therefore mean Member States whose currency is the euro.
3. Under Chapter IX of the Statute of the ESCB and of the ECB, Member States with a derogation and their national central banks are excluded from rights and obligations within the ESCB.
4. The voting rights of members of the Council representing Member States with a derogation shall be suspended for the adoption by the Council of the measures referred to in the Articles listed in paragraph 2, and in the following instances:
(a) recommendations made to those Member States whose currency is the euro in the framework of multilateral surveillance, including on stability programmes and warnings (Article 121(4));
(b) measures relating to excessive deficits concerning those Member States whose currency is the euro (Article 126(6), (7), (8), (12) and (13)).
A qualified majority of the other members of the Council shall be defined in accordance with Article 238(3)(a).
***
Sweden
The Lisbon Treaty ratification bill of the Swedish government, Regeringens proposition 2007/08:168 Lissabonfördraget (3 July 2008), on page 185, mentions the Article 116a in the same terms as the corresponding Article of the Constitutional Treaty, so it does not go into fine detail:
”I ett flertal fall på området ekonomisk och monetär politik ska rådet fatta beslut med kvalificerad majoritet enligt den nya definition av detta begrepp som införs genom Lissabonfördraget (se även avsnitt 14.4). Det rör sig bl.a. om rådsbeslut om rekommendationer till en medlemsstat som för en politik som inte är förenlig med de allmänna riktlinjerna eller har ett alltför stort underskott (artiklarna 99.4 104.6 och 104.7 i EUF-fördraget), rådsbeslut om antagande av landsspecifika riktlinjer (artikel 115a.1b i EUF-fördraget), rådsbeslut om åtgärder för att säkerställa ett enat externt handlande (artikel 115c.2 i EUF-fördraget) och olika rådsbeslut som rör de s.k. medlemsstaterna med undantag (artiklarna 116a.4 och 117a.2 i EUF-fördraget). Särskilda övergångsbestämmelser när det gäller omröstning i rådet enligt artikel 205.3 i EUF-fördraget finns i artikel 3.4 i ett protokoll om övergångsbestämmelser som fogas till EU-fördraget, EUF-fördraget och Euratomfördraget.”
***
Priollaud and Siritzky
In ‘Le traité de Lisbonne ; Commentaire, article par article, des nouveaux traités européens (TUE et TFUE)’ (La Documentation Française, 2008), François-Xavier Priollaud and David Siritzky present the Lisbon Treaty provisions of Chapter 5 (Dispositions transitoires) on page 260 to 261. Their first paragraph manages to present the essence in three sentences:
« Ces dispositions transitoires sont celles applicables aux États membres bénéficiant d’une dérogation, c’est’à-dire des pays dont l’euro n’est pas encore la monnaie. Elle reprend les art. 116 à 124 TCE, en les simplifiant. Toutes les dispositions relative aux première et deuxième phases, devenues obsolètes, ont été supprimées. »
***
United Kingdom FCO
‘A comparative table of the current EC and EU treaties as amended by the Treaty of Lisbon (Cm 7311, 21 January 2008) offers the following comment on Article 139 TFEU (on page 13):
“Draws on Article 122 TEC. Sets out position of “Member States with a derogation”.”
***
UK House of Commons Library
The UK House of Commons Library presented the amending treaty in ‘The Treaty of Lisbon: amendments to the Treaty establishing the European Communities’ (Research paper 07/86, 6 December 2007. There was a lengthy explanation of Article 116a TFEU (ToL) and the other transitional provisions), on page 63 and 64:
“Article 116a sets out the arrangements for Member States “with a derogation”. While the article has appears to have changed substantially from the original article, the content for the most part is the same and has been re-arranged or re-worded. The article sets out areas of the Treaty which do not apply to Member States with a derogation, including the following areas which are unchanged from the existing treaty:
· Adoption of broad economic policy guidelines concerning the euro area;
· Coercive means of remedying excessive deficits;
· The objectives and tasks of the European System of Central Banks;
· The issue of the euro and measures governing the use of the euro;
· Acts of the European Central Bank (ECB) and appointments to the Executive Board of the ECB;
· Monetary agreements and other measures relating to exchange rate policy; and,
· Exclusion from rights and obligations relating to the European System of Central Banks.
Two additional areas are covered by the Treaty in this article which are not in previous treaties: decisions establishing common positions relevant to EMU within international financial institutions and conferences and measures to ensure unified representation within international financial institutions and conferences (See Article 115A). Neither of these areas applies to Member States with a derogation.
A new provision is that the voting rights of Member States with a derogation are suspended in two areas:
· Recommendations to Member States within the euro area on the framework of multilateral surveillance, including stability programmes and warnings; and,
· All measures relating to excessive deficits for Member States whose currency is the euro.
Articles 116a–120 (Constitution Articles Article III-197 - 202) concern transitional provisions regarding the single currency. Article 116a (Constitution Article III-197) sets out the arrangements for Member States “with a derogation”. This has changed substantially in format but the content has been for the most part simply re-arranged. Article 116a and Article 99(2), which cover the adoption of broad economic guidelines in the euro area, does not apply to Member States with a derogation. Article 116a(4) has been altered to include two further areas where Member States with a derogation cannot vote:
· recommendations made to those Member States whose currency is the euro in the framework of multilateral surveillance, including on stability programmes and warnings
· measures relating to excessive deficits concerning those Member States whose currency is the euro.
While the IGC did not agree on a new Stability and Growth Pact, a Conference Declaration regarding the Pact was annexed to the Treaty (“Declaration on Article 104 of the Treaty on the Functioning of the European Union”), in which the Conference confirms that the Pact is an “important tool” in the Union’s economic and fiscal policy and “reaffirms its commitment to the provisions concerning the Stability and Growth Pact as the framework for the coordination of budgetary policies in the Member States”.”
[I have deleted the footnotes, which can be found in the original.]
***
The willing and able EU member states have the rights and obligations of the Eurozone, whereas the outsiders are excluded from the enumerated decisions concerning the euro area and the European system of Central Banks (ESCB).
The financial turbulence and the economic downturn seem to have lessened the attraction of being an outsider, but to adopt the euro a member state has to qualify.
Ralf Grahn
Friday, 14 November 2008
EU Public Procurement Directive contents overview
The EU Public Procurement Directive 2004/18/EC is long and complex enough to merit a Table of Contents, which offers an overview of the matter and it makes it easier to find the relevant provisions.
The Procurement Directive entered into force on publication in the Official Journal of the European Union, and the member states had the obligation to transpose the Directive into national law on 31 January 2006, at the latest.
***
Directives
Article 249 of the Treaty establishing the European Community (TEC) describes the legal act called Directive:
-----
A directive shall be binding, as to the result to be achieved, upon each Member State to which it is addressed, but shall leave to the national authorities the choice of form and methods.
-----
***
The Procurement Directive or Classic Directive contains both mandatory uniform rules, which the member states have to put into effect, and optional rules, but the ‘forms and methods’ are different in the various member states.
This means that there are differences between the national legislations, within the limits of the Directive and ECJ jurisprudence.
***
Here is the Table of Contents of the EU Procurement Directive 2004/18/EC:
TABLE OF CONTENTS
TITLE I
Definitions and general principles
Article 1 — Definitions
Article 2 — Principles of awarding contracts
Article 3 — Granting of special or exclusive rights: nondiscrimination clause
TITLE II
Rules on public contracts
CHAPTER I
General provisions
Article 4 — Economic operators
Article 5 — Conditions relating to agreements concluded
within the World Trade Organisation
Article 6 — Confidentiality
CHAPTER I I
Scope
S e c t i o n 1 — T h r e s h o l d s
Article 7 — Threshold amounts for public contracts
Article 8 — Contracts subsidised by more than 50 % by contracting authorities
Article 9 — Methods for calculating the estimated value of public contracts, framework agreements and dynamic purchasing systems
S e c t i o n 2 — S p e c i f i c s i t u a t i o n s
Article 10 — Defence procurement
Article 11 — Public contracts and framework agreements awarded by central purchasing bodies
S e c t i o n 3 — E x c l u d e d c o n t r a c t s
Article 12 — Contracts in the water, energy, transport and postal services sectors
Article 13 — Specific exclusions in the field of telecommunications
Article 14 — Secret contracts and contracts requiring special security measures
Article 15 — Contracts awarded pursuant to international rules
Article 16 — Specific exclusions
Article 17 — Service concessions
Article 18 — Service contracts awarded on the basis of an exclusive right
S e c t i o n 4 — S p e c i a l a r r a n g eme n t
Article 19 — Reserved contracts
CHAPTER I I I
Arrangements for public service contracts
Article 20 — Service contracts listed in Annex II A
Article 21 — Service contracts listed in Annex II B
Article 22 — Mixed contracts including services listed in Annex II A and services listed in Annex II B
CHAPTER IV
Specific rules governing specifications and contract documents
Article 23 — Technical specifications
Article 24 — Variants
Article 25 — Subcontracting
Article 26 — Conditions for performance of contracts
Article 27 — Obligations relating to taxes, environmental protection, employment protection provisions and working conditions
CHAPTER V
Procedures
Article 28 — Use of open, restricted and negotiated procedures and of competitive dialogue
Article 29 — Competitive dialogue
Article 30 — Cases justifying use of the negotiated procedure with prior publication of a contract notice
Article 31 — Cases justifying use of the negotiated procedure without publication of a contract notice
Article 32 — Framework agreements
Article 33 — Dynamic purchasing systems
Article 34 — Public works contracts: particular rules on subsidized housing schemes
CHAPTER VI
Rules on advertising and transparency
Section 1 — Publication of notices
Article 35 — Notices
Article 36 — Form and manner of publication of notices
Article 37 — Non-mandatory publication
Section 2 — Time limits
Article 38 — Time limits for receipt of requests to participate and for receipt of tenders
Article 39 — Open procedures: Specifications, additional documents and information
Section 3 — Information content and means of transmission
Article 40 — Invitations to submit a tender, participate in the dialogue or negotiate
Article 41 — Informing candidates and tenderers
Section 4 — Communication
Article 42 — Rules applicable to communication
Section 5 — Reports
Article 43 — Content of reports
CHAPTER V I I
Conduct of the procedure
S e c t i o n 1 — G e n e r a l p r o v i s i o n s
Article 44 — Verification of the suitability and choice of participants and award of contracts
S e c t i o n 2 — C r i t e r i a f o r q u a l i t a t i v e s e l e c t i o n
Article 45 — Personal situation of the candidate or tenderer
Article 46 — Suitability to pursue the professional activity
Article 47 — Economic and financial standing
Article 48 — Technical and/or professional ability
Article 49 — Quality assurance standards
Article 50 — Environmental management standards
Article 51 — Additional documentation and information
Article 52 — Official lists of approved economic operators and certification by bodies established under public or private law
S e c t i o n 3 — A w a r d o f t h e c o n t r a c t
Article 53 — Contract award criteria
Article 54 — Use of electronic auctions
Article 55 — Abnormally low tenders
TITLE III
Rules on public works concessions
CHAPTER I
Rules governing public works concessions
Article 56 — Scope
Article 57 — Exclusions from the scope
Article 58 — Publication of the notice concerning public works concessions
Article 59 — Time limit
Article 60 — Subcontracting
Article 61 — Awarding of additional works to the concessionaire
CHAPTER II
Rules on contracts awarded by concessionaires which are contracting authorities
Article 62 — Applicable rules
CHAPTER III
Rules applicable to contracts awarded by concessionaires which are not contracting authorities
Article 63 — Advertising rules: threshold and exceptions
Article 64 — Publication of the notice
Article 65 — Time limit for the receipt of requests to participate and receipt of tenders
TITLE IV
Rules governing design contests
Article 66 — General provisions
Article 67 — Scope
Article 68 — Exclusions from the scope
Article 69 — Notices
Article 70 — Form and manner of publication of notices of contests
Article 71 — Means of communication
Article 72 — Selection of competitors
Article 73 — Composition of the jury
Article 74 — Decisions of the jury
TITLE V
Statistical obligations, executory powers and final provisions
Article 75 — Statistical obligations
Article 76 — Content of statistical report
Article 77 — Advisory Committee
Article 78 — Revision of the thresholds
Article 79 — Amendments
Article 80 — Implementation
Article 81 — Monitoring mechanisms
Article 82 — Repeals
Article 83 — Entry into force
Article 84 — Addressees
ANNEXES
Annex I — List of the activities referred to in Article 1(2)(b)
Annex II — Services referred to in Article 1(2)(d)
Annex II A
Annex II B
Annex III — List of bodies and categories of bodies governed by public law referred to in the second subparagraph of Article 1(9)
Annex IV — Central Government authorities
Annex V — List of products referred to in Article 7 with regard to contracts awarded by contracting authorities in the field of defence
Annex VI — Definition of certain technical specifications
Annex VII — Information to be included in notices
Annex VII A — Information to be included in public contract notices
Annex VII B — Information which must appear in public works concession notices
Annex VII C — Information which must appear in works contracts notices of concessionaires who are not contracting authorities
Annex VII D — Information which must appear in design contest notices
Annex VIII — Features concerning publication
Annex IX — Registers
Annex IX A — Public works contracts
Annex IX B — Public supply contracts
Annex IX C — Public service contracts
Annex X — Requirements relating to equipment for the electronic receipt of tenders, requests to participate and plans and projects in design contests
Annex XI — Deadlines for transportation and application (Article 80)
Annex XII — Correlation table
***
Procurement Directive 2004/18/EC
A notice to those readers, who want to study the Procurement Directive.
Throughout, because of amendments, we refer to the consolidated version of 1 January 2008 of the Procurement Directive, officially Directive 2004/18/EC of the European Parliament and of the Council of 31 March 2004 on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts (OJ 30.4.2004 L 134/114):
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CONSLEG:2004L0018:20080101:EN:PDF
Ralf Grahn
The Procurement Directive entered into force on publication in the Official Journal of the European Union, and the member states had the obligation to transpose the Directive into national law on 31 January 2006, at the latest.
***
Directives
Article 249 of the Treaty establishing the European Community (TEC) describes the legal act called Directive:
-----
A directive shall be binding, as to the result to be achieved, upon each Member State to which it is addressed, but shall leave to the national authorities the choice of form and methods.
-----
***
The Procurement Directive or Classic Directive contains both mandatory uniform rules, which the member states have to put into effect, and optional rules, but the ‘forms and methods’ are different in the various member states.
This means that there are differences between the national legislations, within the limits of the Directive and ECJ jurisprudence.
***
Here is the Table of Contents of the EU Procurement Directive 2004/18/EC:
TABLE OF CONTENTS
TITLE I
Definitions and general principles
Article 1 — Definitions
Article 2 — Principles of awarding contracts
Article 3 — Granting of special or exclusive rights: nondiscrimination clause
TITLE II
Rules on public contracts
CHAPTER I
General provisions
Article 4 — Economic operators
Article 5 — Conditions relating to agreements concluded
within the World Trade Organisation
Article 6 — Confidentiality
CHAPTER I I
Scope
S e c t i o n 1 — T h r e s h o l d s
Article 7 — Threshold amounts for public contracts
Article 8 — Contracts subsidised by more than 50 % by contracting authorities
Article 9 — Methods for calculating the estimated value of public contracts, framework agreements and dynamic purchasing systems
S e c t i o n 2 — S p e c i f i c s i t u a t i o n s
Article 10 — Defence procurement
Article 11 — Public contracts and framework agreements awarded by central purchasing bodies
S e c t i o n 3 — E x c l u d e d c o n t r a c t s
Article 12 — Contracts in the water, energy, transport and postal services sectors
Article 13 — Specific exclusions in the field of telecommunications
Article 14 — Secret contracts and contracts requiring special security measures
Article 15 — Contracts awarded pursuant to international rules
Article 16 — Specific exclusions
Article 17 — Service concessions
Article 18 — Service contracts awarded on the basis of an exclusive right
S e c t i o n 4 — S p e c i a l a r r a n g eme n t
Article 19 — Reserved contracts
CHAPTER I I I
Arrangements for public service contracts
Article 20 — Service contracts listed in Annex II A
Article 21 — Service contracts listed in Annex II B
Article 22 — Mixed contracts including services listed in Annex II A and services listed in Annex II B
CHAPTER IV
Specific rules governing specifications and contract documents
Article 23 — Technical specifications
Article 24 — Variants
Article 25 — Subcontracting
Article 26 — Conditions for performance of contracts
Article 27 — Obligations relating to taxes, environmental protection, employment protection provisions and working conditions
CHAPTER V
Procedures
Article 28 — Use of open, restricted and negotiated procedures and of competitive dialogue
Article 29 — Competitive dialogue
Article 30 — Cases justifying use of the negotiated procedure with prior publication of a contract notice
Article 31 — Cases justifying use of the negotiated procedure without publication of a contract notice
Article 32 — Framework agreements
Article 33 — Dynamic purchasing systems
Article 34 — Public works contracts: particular rules on subsidized housing schemes
CHAPTER VI
Rules on advertising and transparency
Section 1 — Publication of notices
Article 35 — Notices
Article 36 — Form and manner of publication of notices
Article 37 — Non-mandatory publication
Section 2 — Time limits
Article 38 — Time limits for receipt of requests to participate and for receipt of tenders
Article 39 — Open procedures: Specifications, additional documents and information
Section 3 — Information content and means of transmission
Article 40 — Invitations to submit a tender, participate in the dialogue or negotiate
Article 41 — Informing candidates and tenderers
Section 4 — Communication
Article 42 — Rules applicable to communication
Section 5 — Reports
Article 43 — Content of reports
CHAPTER V I I
Conduct of the procedure
S e c t i o n 1 — G e n e r a l p r o v i s i o n s
Article 44 — Verification of the suitability and choice of participants and award of contracts
S e c t i o n 2 — C r i t e r i a f o r q u a l i t a t i v e s e l e c t i o n
Article 45 — Personal situation of the candidate or tenderer
Article 46 — Suitability to pursue the professional activity
Article 47 — Economic and financial standing
Article 48 — Technical and/or professional ability
Article 49 — Quality assurance standards
Article 50 — Environmental management standards
Article 51 — Additional documentation and information
Article 52 — Official lists of approved economic operators and certification by bodies established under public or private law
S e c t i o n 3 — A w a r d o f t h e c o n t r a c t
Article 53 — Contract award criteria
Article 54 — Use of electronic auctions
Article 55 — Abnormally low tenders
TITLE III
Rules on public works concessions
CHAPTER I
Rules governing public works concessions
Article 56 — Scope
Article 57 — Exclusions from the scope
Article 58 — Publication of the notice concerning public works concessions
Article 59 — Time limit
Article 60 — Subcontracting
Article 61 — Awarding of additional works to the concessionaire
CHAPTER II
Rules on contracts awarded by concessionaires which are contracting authorities
Article 62 — Applicable rules
CHAPTER III
Rules applicable to contracts awarded by concessionaires which are not contracting authorities
Article 63 — Advertising rules: threshold and exceptions
Article 64 — Publication of the notice
Article 65 — Time limit for the receipt of requests to participate and receipt of tenders
TITLE IV
Rules governing design contests
Article 66 — General provisions
Article 67 — Scope
Article 68 — Exclusions from the scope
Article 69 — Notices
Article 70 — Form and manner of publication of notices of contests
Article 71 — Means of communication
Article 72 — Selection of competitors
Article 73 — Composition of the jury
Article 74 — Decisions of the jury
TITLE V
Statistical obligations, executory powers and final provisions
Article 75 — Statistical obligations
Article 76 — Content of statistical report
Article 77 — Advisory Committee
Article 78 — Revision of the thresholds
Article 79 — Amendments
Article 80 — Implementation
Article 81 — Monitoring mechanisms
Article 82 — Repeals
Article 83 — Entry into force
Article 84 — Addressees
ANNEXES
Annex I — List of the activities referred to in Article 1(2)(b)
Annex II — Services referred to in Article 1(2)(d)
Annex II A
Annex II B
Annex III — List of bodies and categories of bodies governed by public law referred to in the second subparagraph of Article 1(9)
Annex IV — Central Government authorities
Annex V — List of products referred to in Article 7 with regard to contracts awarded by contracting authorities in the field of defence
Annex VI — Definition of certain technical specifications
Annex VII — Information to be included in notices
Annex VII A — Information to be included in public contract notices
Annex VII B — Information which must appear in public works concession notices
Annex VII C — Information which must appear in works contracts notices of concessionaires who are not contracting authorities
Annex VII D — Information which must appear in design contest notices
Annex VIII — Features concerning publication
Annex IX — Registers
Annex IX A — Public works contracts
Annex IX B — Public supply contracts
Annex IX C — Public service contracts
Annex X — Requirements relating to equipment for the electronic receipt of tenders, requests to participate and plans and projects in design contests
Annex XI — Deadlines for transportation and application (Article 80)
Annex XII — Correlation table
***
Procurement Directive 2004/18/EC
A notice to those readers, who want to study the Procurement Directive.
Throughout, because of amendments, we refer to the consolidated version of 1 January 2008 of the Procurement Directive, officially Directive 2004/18/EC of the European Parliament and of the Council of 31 March 2004 on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts (OJ 30.4.2004 L 134/114):
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CONSLEG:2004L0018:20080101:EN:PDF
Ralf Grahn
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