European Law: Enforcement

This Part concentrates on the “enforcement” of European law in the courts. We shall see that European law establishes rights and obligations that directly affect individuals. The direct effect of European law in the national legal orders will be discussed in Chapter 5. Where a European norm is directly effective, it will also be “supreme” over national law. The “supremacy” of European law is the subject of Chapter 6. How will individuals enforce their “supreme” European rights? Chapters 7 and 8 look at the dual enforcement machinery within the Union legal order. Individuals will typically enforce their European rights in national courts. And in order to assist these courts in the interpretation and application of European law, the Union envisages a preliminary reference procedure. But the Union legal order has equally required national courts to provide effective remedies for the enforcement of European rights, and has even created a European remedy of state liability. Having the indirect enforcement of European law through the national courts discussed in Chapter 7, the direct enforcement of European law in the European Courts will be explored in Chapter 8.

1. Chapter 5 Direct effect

2. Chapter 6 (Legal) Supremacy

3. Chapter 7 National actions

4. Chapter 8 European actions

Introduction

The second pillar of European competition law focuses – in principle – on the behaviour of a single undertaking. Article 102 does not require the collusive behaviour of two or more economic actors. It can sanction the unilateral behaviour of a dominant undertaking where this behaviour amounts to a “market abuse”. The provision states:

The provision encapsulates a number of fundamental choices with regard to the European economic constitution. For by concentrating on a “dominant position within the internal market,” Article 102 goes beyond penalizing pure monopolies. In that respect it is wider than its American counterpart. But by insisting on market abuse, it is narrower than the American prohibition. For unlike the latter, Article 102 will not directly outlaw distorted market structures. Dominance is not itself prohibited – only the abuse of a dominant position. Once this abuse is however established it appears to be prohibited as such. For Article 102 has – unlike Article 101 – no “third paragraph” exempting abusive behaviour on the ground of its pro-competitive effects. However, like Article 101, the prohibition of market abuse will only apply where the abusive behaviour “may affect trade between Member States”. This jurisdictional condition indeed defines the scope of all European competition law.

Introduction

The inclusion of a Treaty chapter on competition stemmed from the “general agreement that the elimination of tariff barriers would not achieve its objectives if private agreements of economically powerful firms were permitted to be used to manipulate the flow of trade”. Originally, European competition law was thus primarily conceived as a functional complement of the European law governing the internal market. While the free movement provisions were to protect the internal market from public interferences, the rules on competition were designed to protect it from private power. This link between the internal market and European competition law continues to be textually anchored in the Treaties. For the principal provisions on European competition law are found in Chapter 1 of Title VII on “Common Rules on Competition, Taxation and Approximation of Laws”. The Chapter is thereby divided into two Sections – one dealing with classic competition law, that is: “[r]ules applying to undertakings”; the other with public interferences in the market through “[a]ids granted by States” to private undertakings. Chapters 11 and 12 of this book will deal with the Treaty’s section on undertakings.

The English word “undertaking” has traditionally not meant what the European Treaties want it to mean. The word is a translation from the German and French equivalents, and was deliberately chosen to avoid pre-existing meanings in British company law. According to the European Court, an undertaking is “every entity engaged in an economic activity, regardless of the legal status of the entity and the way in which it is financed”. This definition ties the notion of undertaking to an activity instead of the institutional form of the actor. This functional definition broadens the personal scope of the competition rules to include entities that may – formally – not be regarded as companies. However, by concentrating on economic activities, the Court has excluded activities of a public nature. The advantage of a functional definition is its flexibility; its disadvantage however is its uncertainty. For depending on its actions, an entity may or may not be an “undertaking” within the meaning of EU competition law.

Introduction

Since European law is directly applicable in the Member States, it must be applied alongside national law by national authorities. And since European law may have direct effect, it might come into conflict with national law in a specific situation.

Where two legislative wills come into conflict, each legal order must determine how these conflicts are to be resolved. The resolution of legislative conflicts requires a hierarchy of norms. Modern federal States typically resolve conflicts between federal and state legislation in favour of the former: federal law is supreme over State law. This “centralist solution” has become so engrained in our constitutional mentalities that we tend to forget that the “decentralized solution” is also possible: local law may reign supreme over central law. Supremacy and direct effect are thus not different sides of the same coin. While the supremacy of a norm implies its direct effect, the direct effect of a norm will not imply its supremacy. Each federal legal order must thus determine which law prevails. The simplest supremacy format is one that is absolute: all law from one legal order is superior to all law from the other. Absolute supremacy may however be given to the legal system of the smaller or the bigger political community. Between these two extremes lies a range of possible nuances.

Introduction

When the British Parliament legislates, it need not “justify” its acts. It is traditionally considered to enjoy a competence to do all things. This “omnipotence” was inherent in the idea of a sovereign parliament in a “sovereign state”. The European Union is neither “sovereign” nor a “state”. Its powers are not inherent powers. They must be conferred by its foundational charter: the European Treaties. This constitutional principle is called the “principle of conferral”. The Treaty on European Union defines it as follows:

Under the principle of conferral, the Union shall act only within the limits of the competences conferred upon it by the Member States in the Treaties to attain the objectives set out therein. Competences not conferred upon the Union in the Treaties remain with the Member States.

The Treaties employ the notion of competence in various provisions. Nevertheless, there is no positive definition of the concept. So what is a legislative competence? The best definition is this: a legislative competence is the material field within which an authority is entitled to legislate. What are these material fields in which the Union is entitled to legislate? The Treaties do not enumerate the Union’s “competences” in a single list. Instead, the Treaties pursue a different technique: they attribute legal competence for each and every Union activity in the respective Treaty title. Each policy area contains a provision – sometimes more than one – on which Union legislation can be based. The various “Union policies and internal actions” of the Union are set out in Part III of the Treaty on the Functioning of the European Union.

The Treaties thus present a picture of thematically limited competences in distinct policy areas. This picture is however – partly – misleading. Three legal developments have posed serious threats to the principle of conferral. First, the rise of teleological interpretation (see Section 1 below). The Union’s competences are interpreted in such a way that they potentially “spill over” into other policy areas. This “spillover” effect can be particularly observed with regard to a second development: the rise of the Union’s general competences.

European Law: Creation

This Part analyses the Union as an institutional “creature”, and considers the creation of European (secondary) law. It starts in Chapter 1 with an overview of the four major Union institutions: the European Parliament, the Council, the Commission, and the European Court. Chapter 2 investigates how these institutions cooperate in the creation of European legislation. The Union cannot legislate in all areas of social life; and Chapters 3 and 4 look at two constitutional limits to Union legislation. Based on the principle of conferral, the Union must act within the scope of competences conferred upon it by the Member States. The scope of these competences – and their nature – will be discussed in Chapter 3. Chapter 4 analyses the second constitutional limit to the exercise of Union competences: European fundamental rights. These rights first emerged as general principles of Union law, but have now been codified in the Union’s Charter of Fundamental Rights.

1. Chapter 1 Union institutions

2. Chapter 2 Union legislation

3. Chapter 3 Union competences

4. Chapter 4 Fundamental rights

Introduction

Classic international law holds that each State can choose the relationship between its “domestic” law and “international” law. Two – constitutional – theories thereby exist: monism and dualism. Monist States make international law part of their domestic legal order. International law will directly apply as if it were domestic law. By contrast, dualist States consider international law separate from domestic law. International law is viewed as the law between States; national law is the law within a State. While international treaties are thus binding “on” States, they cannot be binding “in” States. International law here needs to be “transposed” or “incorporated” into domestic law and will thus only have indirect effects through the medium of national law. The dualist theory is based on a basic division of labour: international institutions apply international law, while national institutions apply national law.

Did European law leave the choice between monism and dualism to its Member States? Section 1 examines this question in greater detail, before the remainder of this Chapter explores the doctrine of direct effect for European law. Section 2 starts out with the direct effect of the European Treaties. The European Court indeed confirmed that some Treaty provisions would be self-executing in the national legal orders. Nonetheless, the European Treaties are framework treaties; that is: they primarily envisage the adoption of European secondary law. This secondary law may take various forms. These forms are set out in Article 288 TFEU.

European Law: Substance

This final Part analyses the substantive heart of European law, that is: the law governing the internal market and European competition law. From the very beginning, the central economic task of the European Union was the creation of a “common market”. The Rome Treaty had not solely provided for a common market in goods. It equally required the abolition of obstacles to the free movement of persons, services and capital. Europe’s “internal market” was thus to comprise four fundamental freedoms. Two of these freedoms will be discussed in turn: Chapter 9 looks at the free movement of goods, while Chapter 10 examines the free movement of persons. The two subsequent chapters analyse two pillars of European competition law: Articles 101 and 102 TFEU. The former deals with anti-competitive agreements, the latter concerns the abuse of a dominant position by an undertaking. European competition law is thereby traditionally seen as a functional complement to the internal market. It would – primarily – protect the internal market from private power.

1. Chapter 9 Internal market: goods

2. Chapter 10 Internal market: persons

3. Chapter 11 Competition law: cartels

4. Chapter 12 Competition law: abuse

Introduction

The traditional heart within common markets is the free movement of goods. And in order to create a European “common market” in goods, the Union legal order has established a constitutional regime in which illegal barriers to intra-Union trade must be removed. This constitutional regime is however split over two sites within Part III of the Treaty on the Functioning of the European Union. It finds its principal place in Title II governing the free movement of goods. But the latter is complemented by a chapter on “Tax Provisions” within Title VII.

This Chapter analyses the free movement of goods provisions in four steps. Section 1 examines the prohibition on customs duties. These are fiscal duties charged when goods cross (national) borders. Section 2 moves to the second type of fiscal charge: discriminatory taxes imposed on foreign goods. Section 3 then investigates the legality of regulatory restrictions to the free movement of goods. Regulatory restrictions are not, unlike fiscal duties, pecuniary charges. They simply “regulate” access to the national market by – for example – establishing product or labelling requirements. Finally, Section 4 will look at possible justifications for regulatory restrictions to trade in goods.

The idea of European union is as old as the European idea of the sovereign State. Yet the spectacular rise of the latter overshadowed the idea of European union for centuries. Within the twentieth century, two ruinous world wars and the social forces of globalization, however, discredited the idea of the sovereign State. The decline of the monadic State found expression in the spread of inter-state cooperation. The various efforts at European cooperation after the Second World War indeed formed part of a general transition from an international law of coexistence to an international law of cooperation.

The European Union was born in 1952 with the coming into being of the European Coal and Steel Community (ECSC). Its original members were six European States: Belgium, France, Germany, Italy, Luxembourg, and the Netherlands. The Community had been created to integrate one industrial sector; and the very concept of integration indicated the wish of the contracting States “to break with the ordinary forms of international treaties and organizations”. The 1957 Treaty of Rome created two additional Communities: the European Atomic Energy Community and the European (Economic) Community. The “three Communities” were partly “merged” in 1967, but continued to exist in relative independence. A major organizational leap was taken with the 1992 Maastricht Treaty. It integrated the three Communities into the European Union. But for a decade, this European Union was under constant constitutional construction. In an attempt to prepare the Union for the twenty-first century, a European Convention was charged to draft a Constitutional Treaty in 2001. But this Treaty failed; and it took almost another decade to rescue the reform into the 2007 Reform (Lisbon) Treaty that came into force on 1 December 2009. The Lisbon Treaty has replaced the “old” European Union with the “new” European Union. It is this European Union that will be analysed in this “Introduction to European Law”.

Introduction

British constitutionalism defines (primary) legislation as an act adopted by the Queen-in-Parliament. Behind this “compound” legislator stands a legislative procedure. This legal procedure links the House of Commons, the House of Lords and the monarchy. European constitutionalism also adopts a procedural definition of legislative power. However, unlike British constitutional law, the Treaties distinguish two types of legislative procedures: an ordinary legislative procedure and special legislative procedures. Article 289 TFEU states:

1. The ordinary legislative procedure shall consist in the joint adoption by the European Parliament and the Council of a regulation, directive or decision on a proposal from the Commission. This procedure is defined in Article 294.

2. In the specific cases provided for by the Treaties, the adoption of a regulation, directive or decision by the European Parliament with the participation of the Council, or by the latter with the participation of the European Parliament, shall constitute a special legislative procedure.

Introduction

The creation of governmental institutions is the central task of all constitutions. Each political community needs institutions to govern its society; as each society needs common rules and a method for their making, execution, and arbitration. The European Treaties establish a number of European institutions to make, execute, and arbitrate European law. The Union’s institutions and their core tasks are defined in Title III of the Treaty on European Union (TEU). The central provision here is Article 13 TEU:

The provision lists seven governmental institutions of the European Union. They constitute the core “players” in the Union legal order. What strikes the attentive eye first is the number of institutions: unlike a tripartite institutional structure, the Union offers more than twice that number. The two institutions that do not – at first sight – seem to directly correspond to “national” institutions are the (European) Council and the Commission. The name “Council” represents a reminder of the “international” origins of the European Union, but the institution can equally be found in the governmental structure of Federal States. It will be harder to find the name “Commission” among the public institutions of States, where the executive is typically referred to as the “government”. By contrast, central banks and courts of auditors exist in many national legal orders.