There is some irony in the fact that at the time when the European Union (“EU”) was approaching the culmination of arguably its greatest triumph (i.e. the creation of its “single market” on 1 January 1993) it was also grappling with its worst crisis (i.e. the fall out from the Danish “no” vote and so-called “petit oui” of the French in their respective Maastricht referenda in 1992). At the heart of both, was the issue of sovereignty and the extent to which the EU should and could replace national legislatures in regulating the lives of Europeans. In the run-up to the Danish vote, Jacques Delors, the then President of the European Commission, boasted that within a space of five years over 80% of all important legislative decisions would be taken in Brussels. The Danes fearful that their lives were about to be taken over by “faceless Eurocrats” voted for an end to the drain of national sovereignty to what was perceived by many, both inside and outside Denmark, as becoming some vast and unruly EU “Super State”. From that momentous rejection of unfettered European integration a lengthy and heated debate about “subsidiarity” (i.e. the dividing line between the delegated power of the EU and the inherent power of the EU’s Member Sates to legislate) was born.
In no area of EU policy-making has this particular “turf war” been more profoundly felt than the environment. This article examines: (i) the history of “subsidiarity”; (ii) the solutions adopted; and (iii) how these have been applied in practice.
A. HISTORY
When the European Economic Community (“EEC”) was first established in 1957 after the Second World War the founding treaty, the Treaty of Rome, contained no provision which clearly established the division of powers between the EEC and the Member States. This was not a problem that was seriously addressed until the EEC became the EU following amendments made to the Treaty of Rome by the Maastricht Treaty, which entered into force in November 1993 (“EU Treaty”).
Although the principle of “subsidiarity” had already been, incorporated into particular parts of the EEC Treaty prior to Maastricht, including, most notably, the environment 1 , it was the Maastricht Treaty that gave it the elevated status of a general principle of EU law. At the time, it was a principle that everyone seemed to know about, but no one appeared to be able to define – at least in a manner that everyone could agree with 2.
Article 5 of the EU Treaty sets out the principle thus:
“In areas which do not fall within its exclusive competence, the [EU] shall take action, in accordance with the principle of ‘subsidiarity’, only if and insofar as the objectives of the proposed action cannot be sufficiently achieved by the Member State and can therefore, by reason of the scale or effects of the Proposed action, be better achieved by the [EU].”
The Danish vote forced the EU institutions to seek to add some “flesh” to the “bones” of the general principle. In the absence of a clearly defined list of matters to which the principle was to be applied and also in the absence of a decision-making mechanism for its application, the Member States, at the Lisbon Summit in June 1992, called on the Commission and the EU Council to look into the issue.
The Commission had already kicked off the debate in February 1992, stating that it thought it was for the institutions, and in the first place the Commission, to agree on a common approach to avoid endless demarcation disputes between exclusive competence and shared competence. The Commission decided that exclusive EU powers were a “block of exclusive powers joined by the common thread of an internal market” including, but not limited to the following areas:
the removal of barriers to the free movement of goods, persons, services and capital (single market programme); the Common Commercial Policy; the rules on competition; the common organisation of agricultural markets; the conservation of fishery resources and the common organisation of the fishery markets; and the transport policy. These preliminary discussions reached a conclusion of sorts at the Edinburgh Summit in December 1992. First, an agreement was by the Member States on the overall approach to the application by the EU Council of the “subsidiarity” principle.
Secondly, the Member States invited the EU Council to negotiate an Inter-institutional Agreement between the European Parliament, the EU Council and the Commission on the proper application of the principle. Thirdly, the Member States received a report from the President of the Commission regarding the Commission’s implementation of the principle.The most significant of the three was the report presented by the President of the Commission. The Commission gave three undertakings with regard to the application of the “subsidiarity” principle:
to provide an explanation of all legislative proposals with a view to demonstrating that the nature of the problem addressed requires an EU solution and that this solution offers tangible advantages over actions at Member State level; to withdraw or revise certain proposals in the light of these same imperatives; and to re-examine existing legislation. This set of commitments was a tall order for the Commission, particularly the third as regards a review of existing legislation. The third commitment was undertaken with the objective, not so much in terms of “subsidiarity”, but in terms of consolidating existing EU legislation, the production of which had seen a dramatic increase in the run up to 31 December 1992 (the date for the completion of the internal market) 3.
This consolidation process went well beyond compliance with the “subsidiarity” principle and involved the revision of many matters within the EU’s exclusive powers (e.g. internal market, competition, etc.). As regards the first commitment and the Commission’s current application of the principle, the Commission issued a report in November 1993 in which it emphasised that all Commission departments were now required to provide detailed justification dealing with “subsidiarity” to accompany all new legislative proposals, whether for regulations, directives or decisions4.
In a final phase of the “subsidiarity” debate, as part of the Amsterdam Treaty amendments, the Member States set out a number of conditions for the EU’s institutions to follow when applying the principles of “subsidiarity” and proportionality. These conditions took the form of a new Protocol to the EU Treaty.
The Protocol does not seek to resolve the issue as to what constitutes exclusive EU competence. It merely seeks to supplement the definition set out in Article 5 of the EU Treaty, emphasising that the “subsidiarity” principle does not call into question the powers conferred on the EU by the EU Treaty, as interpreted by the European Court of Justice (“ECJ”). Furthermore, the Protocol states that the application of the “subsidiarity” principle does not affect the principles developed by the ECJ regarding the relationship between national and EU law, and should take account of Article F(4) of the EU Treaty, according to which the EU shall provide itself with the means necessary to attain its objectives and carry through its policies.
As regards the application of the principle itself, the Protocol states that the Commission in proposing legislation, the subject matter of which falls within shared (i.e. non-exclusive) competence, the EU must justify EU action on the basis that, “the objectives of the proposed action cannot be sufficiently achieved by Member States’ action in the framework of their national constitutional system and can, therefore, be better achieved by action on the part of the [EU]”. This justification must be substantiated by qualitative, or wherever possible, quantitative indicators. To assist the Commission in this task the Protocol sets down three guidelines:
the issue under consideration has transnational aspects which cannot be satisfactorily regulated by action by Member States; actions by Member States alone or lack of EU action would conflict with the requirements of the EU Treaty (such as the need to correct distortion of competition or avoid disguised restrictions on trade or strengthen economic and social cohesion) or would otherwise significantly damage Member States’ interests; and action at EU level would produce clear benefits by reason of its scale or effects compared with action at the level of the Member State. The guidance in the Amsterdam Protocol does not add much in terms of criteria for the application of the “subsidiarity” principle. Nevertheless, it is a clear endorsement of the approach adopted by the Commission since the Edinburgh European Summit in 1992 and acts as a point of reference for the EU’s institutions, including the ECJ.
B. SOLUTIONS
When considering the “subsidiarity” principle in terms of Article 5 the EU Treaty, the first observation to be made is to recognise that “subsidiarity” only applies in areas which fall within the EU’s non-exclusive competence. In areas that are non-exclusive the EU can only act, “if and insofar as the objectives of the proposed action cannot be sufficiently achieved by the Member States”. Not only must this “negative” pre-condition be demonstrated but also, in order to justify action in a non-exclusive area a second “positive” test has to be satisfied that, “by reason of the scale or effects” the proposed action can, “be better achieved by the [EU]”. The test is, therefore, two-fold.
On the basis of the wording of Article 5, when the EU proposes a piece of legislation the first question it has to ask is whether it is proposing to take action in an area of exclusive competence. If it is, then competence to act is not an issue and compliance with the “subsidiarity” principle is not necessary 5. However, if it is not an area of exclusive competence the negative and positive “subsidiarity” tests must be satisfied.
In these terms the first question is: what areas fall within the EU’s exclusive competence? Unfortunately, the answer to this question is not entirely clear and the EU Treaty gives us no indication as to the distinction between exclusive and shared or concurrent competence.
It is the ECJ that has the ultimate power to determine which EU Treaty competence is exclusive to the EU and which is shared with the Member States. There is a considerable amount of case law on the extent of the EU’s exclusive competence, especially in terms of the EU’s relations on the international stage when concluding and implementing bilateral and multi-lateral agreements with non-EU countries 6.Although much of the ECJ’s case law in this area is political in nature, in essence it takes the view that EU competence is exclusive in areas where there is a clear obligation on the EU to act. It should be noted, however, that the ECJ is limited to exercising its powers as regards the application of the principle of “subsidiarity” ex post in terms of the judicial review of EU acts.
Many of those legal commentators, who have expressed an opinion on the judicial review of an institution’s application of the “subsidiarity” principle, including Lord Mackenzie Stuart, have come out very strongly against making it justiciable before the Court. In their view, the application of the “subsidiarity” principle is clearly a political decision best made by the political institutions (i.e. the EU Council, the European Parliament and, exceptionally, the Commission). There is nevertheless a clear constitutional role for the ECJ to play. Firstly, the ECJ is the final arbiter as regards whether a particular EU act falls within the exclusive competence of the EU, and is, therefore, excluded from the application of the principle. Secondly, in terms of traditional EU approach to “judicial review”, the ECJ can question whether the institution has committed a manifest error or a misuse of powers or has clearly exceeded the limits of its discretion, there is a case for suggesting that the ECJ is not the right body to be conducting a political dissection of the pros and cons of action taken at an EU level. It should be noted that adoption of an act by the EU Council is already a strong indication that it was appropriate for the act to be adopted at an EU rather than a Member State level.
One additional interesting and perhaps less obvious route for the application of the principle by the ECJ is via the obligation placed upon the EU’s institutions to “justify” the adoption of legislative acts (the so-called obligation de motivation).Article 253 of the EU Treaty makes this “justification” an essential procedural requirement and failure to state reasons can lead to annulment by the ECJ. Litigants have tried to rely on the failure of EU institutions to state, adequately, reasons as to why “the objectives of the proposed action cannot be sufficiently achieved by the Member States” and why, “by reason of the scale or effects”, the proposed action can, “be better achieved by the [EU]”. Thus far such claims have yet to succeed. The best known case involved Germany and the annulment of a Directive on deposit-guarantee schemes 7. In its judgement, the ECJ held that the recitals to the Directive clearly showed that a harmonised minimum level of deposit protection wherever deposits are located in the EU, was indispensable. In that case, the Advocate General explored the role of the ECJ in the application of “subsidiarity” principle in some depth, concluding that “… it does not seem excessive to expect [the EU’s] institutions, in the future, systematically to state reasons for their decisions in view of the principle of ‘subsidiarity’”.
The Commission has taken this stricture on board and has developed guidelines for its departments to follow when developing new legislation. In accordance with that guidance, each department is required to answer the following questions:
what are the aims of the proposed action in terms of the EU’s obligations? does the proposed measure fall within the EU’s exclusive competence or is competence shared with the Member States? what is the EU dimension of the problem (i.e. how many Member States are involved and what solution has been applied to date)? what is the most effective solution, given the means available to the EU and to Member States? what specific added value of the proposed EU action and the cost of failing to act? what means of action are available to the EU (e.g. recommendation, financial support, regulation, mutual recognition, etc.)? are uniform rules necessary, or would it be sufficient to adopt a Directive laying down the general objectives and leaving implementation to Member States? The third, fourth and fifth questions do not need to be addressed in situations involving the EU’s exclusive competence. The Commission will apply other criteria (see discussion set out above) as to the appropriate demarcation line between exclusive and non-exclusive competence.
C. PRACTICE
Environmental policy is one of the clearest examples of shared competence. It is an area of policy-making where the EU has already adopted more than 200 pieces of legislation, mostly in the form of Directives setting out the objectives (e.g. emissions reductions) to be achieved whilst leaving the form and methods to the individual Member States.
As we have seen, the Commission and the other EU institutions are required to justify the adoption of environmental legislative proposal as being consistent with the “subsidiarity” principle. Justification of EU environmental measures is usually contained in the “preamble” to the specific pieces of legislation and there are usually three main reasons why the Commission will have proposed EU action:
the transboundary nature of environmental problems (e.g. air and water pollution) mean that unilateral measures alone will in general be less effective than EU wide measures (e.g. the Large Combustion Plants Directive 8 ); ensuring a level-playing field for competition within the internal market (i.e. individual country restrictions on polluting activities will create distortions of competition in the form of additional costs for business, which in an internal market, will disadvantage the country imposing such measures, furthermore making them less likely to introduce such measures in the first place); and the “ecological” need to protect Europe’s environmental and cultural heritage and human health and well being (e.g. the Habitats Directive 9 ). An interesting test bed for the application of the “subsidiarity” principle has been the proposed framework legislation for the introduction of new EU liability rules for environmental damage – frequently referred to, albeit inaccurately, as the EU’s “Superfund”. A White Paper setting out the Commission’s proposals for the regime was adopted by the full Commission on 9 February 2000 10 and the Commission is now to proceed with the drafting of a legislative proposal. The Commission’s proposals have attracted a great deal of criticism. One of the angles for attack has been that Member States already have rules in place for remedying environmental damage and that, in any event, it is an issue the Member States themselves are better able to address in the context of the own domestic legal systems. In other words, the Commission’s plans fail the “subsidiarity” test.
Wise to this, the Commission, in its White Paper, gives the following reasons why it considers EU action appropriate:
the current liability systems in place at a Member State level are inconsistent and need to be harmonised in order to avoid distortions within the EU’s single market; crucial principles that should underlie all environmental legislation (i.e. preventative action, the polluter pays, etc.) are not being properly applied by Member States, as evidenced by the “gaps” in most Member States’ liability regimes on the issue of biodiversity damage (i.e. damage to the “unowned” environment); and national legislation cannot effectively cover transboundary environmental damage within the EU and, therefore, an EU-wide regime is necessary in order to deal with such events. Not wholly convincing! Even the Commission itself admits in its White Paper that a crucial element of its “subsidiarity” case remains unproved: “[c]urrently, the existence of any problem of competition in the internal market caused by differences in Member States’ environmental liability approaches is still unclear”. A number of key Member States, most notably France, Germany and the United Kingdom, have been sceptical about the need for EU intervention in this area up until now. There does not appear to be much in the White Paper that will help to change their minds.
The dilemma for the Commission has been that, on the one hand, it must observe the sensibilities of Member States concerning changes to civil justice regimes which most Member States deem to be sacrosanct whilst, at the same time, producing some worthwhile suggestions concerning real reform. It will be a difficult balancing act to perform in the context of the proposals, currently, being drafted by the Commission. Leaning too far one way or the other will almost certainly result in a legislative stalemate. Resolution of the turf war, therefore, will decide, ultimately, the fate of this initiative.
FOOTNOTES
1 Article 130r(4) of the EEC Treaty, which was added after the adoption of the Single European Act, 1986, stated the following as regards environmental policy: “[T]he [EU] shall take action relating to the environment to the extent to which the objectives referred to [above] can be attained better at [the EEC] level than at the level of the individual Member States”.
2 See A G Toth, “A Legal Analysis of ‘subsidiarity’”, in Legal Issues of the Maastricht Treaty, ed. David O’Keeffe and Patrick Twomey (1994) Wiley Chancery.
3 See “Report to the European Council on the application of the ‘subsidiarity’ principle 1994”, COM(94) 533 final, 29.11.1994.
4 Commission Report to the European Council on the adaptation of EU legislation to the “subsidiarity” principle COM (93) 545 final, 24.11.1993.
5 Though the principle of proportionality, another general principle of EU law, that any action taken by the EU shall not go beyond what is necessary to achieve the objectives of the EU Treaty, has still to be satisfied.
6 See Opinion 1/94 (the EU’s signing of the WTO Agreement), [1994] ECR I-5267 and Dominic McGoldrick, “International Relations Law of the European Union” (1997) Longman, which gives an excellent insight into this area of EU law.
7 Case C-233/94, Germany v European Parliament and the Council [1997] ECR I-2405. 8 Council Directive 88/609/EEC, OJ L336, 07.12.1988. 9 Council Directive 92/43/EC, OJ L206, 22.07.1992. 10 See “Communication from the Commission – White Paper on Environmental Liability”, COM(00) 66 final 09.02.2000.
The information and opinions contained in this publication are provided by national law firm Hammond Suddards Edge. They should not be applied to any particular set of facts without seeking appropriate legal or other professional advice.