PhD Researcher, School of Law, University of Surrey

Introduction

The term European or, more precisely, European Union (EU) citizenship finds expression within a web of rights and responsibilities contained in primary and secondary EU legislation. This year marks the 20th anniversary of the establishment of EU citizenship and as such an EU campaign entitled ‘The European Year of Citizens 2013’ has been launched to raise awareness of the general public about those rights and responsibilities. The campaign also aims to send the message across the continent that EU citizens have an active role to play in reinforcing their EU conferred rights through their direct participation in the democratic life of the EU. The vitality of direct participation in the democratic life of the EU was recently highlighted by the Treaty of Lisbon.[1] The Treaty has introduced Article 11(4) TEU which provides for the European Citizens’ Initiative (ECI), a mechanism whose purpose is to give individual citizens a ‘voice’ in the EU.

This article provides a tour de horizon of the legal framework of the ECI and addresses certain criticisms expressed during its brief life, most recently at a conference on the first year of the ECI which took place earlier this year.[2] The article commences by briefly describing the need for a form of participatory democracy in the EU before it moves on to outline the ECI’s legal framework and the requirements for the submission of a successful Initiative. Whilst the focus is on the legal issues pertaining the functioning of the ECI, certain proposals for further review of the ECI’s legislative framework will also be considered.

The Need for Participatory Democracy

The journey for participatory democracy did not begin in Lisbon. For a long time now the increase of EU’s powers and impact since its inception, coupled with the establishment of the principles of direct effect and primacy of EU law by the CJEU, generated an increasing need for ‘input legitimacy’ in the EU.[3] In other words, since the early stages of European integration it was anticipated that the evolution of the EU and political choices of its Institutions (the legislature, in particular) needed to reflect the will of the people.[4] The attempts to create more legitimacy in the EU relied on the nation-state model of representative democracy, according to which citizens authorise representatives through elections to act on behalf of their interests.[5] A primary example is the evolution of the European Parliament. Although the European Parliament started as an assembly of national parliamentarians, since 1979 citizens vote for Members of the European Parliament.[6]

The above development aside, the continuous low turnout in European Parliament elections is often interpreted as a sign of public apathy and growing estrangement of EU citizens. As such, low voting turnout has raised concerns about the lack of communication between the EU and its people. Such detachment between the EU as a system of governance and the citizenry of the Member States has attracted criticism regarding the success of the European Parliament as a representative body. In order to bridge the gap the EU has created and developed a number of instruments which aim at enhancing participatory democracy at supranational level.[7] These include, inter alia, petitions to the European Parliament, the right to complain directly to the European Ombudsman and consultation campaigns by the European Commission before the launching of the formal legislative process.[8]

The Treaty of Lisbon attempts to strengthen the abovementioned representative and participatory aspects of the democratic life of the EU. Regarding the former, the Treaty enhances the powers of the European Parliament and increases the role of national parliaments in EU legislative scrutiny. Regarding the latter, the Treaty introduces the ECI, according to which one million signatures from seven Member States could allow a group of EU citizens to put considerable pressure upon the Commission to give serious consideration to their request and submit a legislative proposal to that effect.

The ECI is thus ‘the latest part of a movement towards establishing participatory democracy as a complement to existing forms of representative democracy in the EU.’[9]

The Legislative Framework of the ECI

Whilst Article 11(4) provides the legal basis for the ECI, it is the ‘ECI’ Regulation 211/2011 which establishes the conditions and provisions regarding the functioning of the ECI mechanism. The ECI Regulation was adopted after thorny negotiations and compromises between the Council and the European Parliament and formal registration of ECIs began on 1st April 2012. In a nutshell, the organisers of an Initiative need to set up a ‘Citizens’ Committee’ comprised by seven citizens from different Member States and form their initiative as either a draft legal proposal or as general principles. They must then register their Initiative with the Commission which has two months to accept or reject the registration. If the Commission accepts the initiative, a one year limit begins during which the Citizens’ Committee needs to gather one million signatures to support their proposal. The signatures can be gathered either online or on paper and they should emanate from seven Member States. It should be noted that there is a threshold of signatures for each Member State which is the number of each country’s Members of European Parliament multiplied by 750. Once the signatures have been gathered, they have to be certified by national authorities. The European Commission is then obliged to examine the initiative but it is not forced to take any form of action; it has absolute discretion on how to proceed with an ECI.

So far, twenty-four initiatives have requested registration to the Commission, of which sixteen have been registered. Two of them have been withdrawn, so there are currently fourteen open Initiatives. It is also noteworthy that eight Initiatives have been refused registration because they covered areas which fall outside the powers of the Commission.

Legal Issues

The provisions of the ECI Regulation have been subject to criticism as to whether they achieve the purpose of creating clear, simple, user-friendly and proportionate procedures and conditions so as to encourage participation by citizens and make the EU more accessible. [10]

To begin with, there are minimal legal criteria in order for an ECI to be registered by the Commission. According to Article 4(2) of the Regulation, an ECI cannot be registered if it is manifestly abusive, frivolous or vexatious or contrary to the values of the EU. Also, an ECI cannot be registered if its subject matter falls manifestly outside the powers of the Commission. The limitation that an ECI should fall in the scope of the competences of the EU is reasonable but could prove difficult for laymen who are not are not acquainted with the TFEU’s competence typology. Therefore, in order to ensure the correct wording of their proposals and the appropriate legal basis, organisers probably need legal advice which increases the required funding.

In addition, it is open to dispute whether the Regulation allows for ECIs which propose the alteration of Treaty provisions. As Dougan explains, the dispute does not arise because of a question on whether the Commission has the power to propose an amendment to the Treaties.[11] Article 48 TEU clearly identifies the Commission’s power to submit proposals for Treaty changes either through the ordinary revision procedure (Article 48(2)-(5) TEU) or through the simplified revision procedure (Article 48(6) TEU). The issue rather arises because of the wording of Article 11(4) TEU which refers to legal acts of the Union required for the purpose of implementing the Treaties. On the one hand, the European Parliament and Civil Society organisations support the view that ECIs should be used for this purpose since the Treaties concern vital topics of great interest to EU citizens. It has even been commented that excluding Treaty amendments is a significant departure from the effect utile of the ECIs.[12] On the other hand, most Member States interpret the ECI Regulation as referring to Initiatives aimed at amending existing secondary legislation but not changing the Treaties.

Although the requirement of one million signatures can be seen as proportionate in the current EU of approximately 500 million citizens, a host of bureaucratic issues has raised concerns to the various organisers vis-à-vis the effectiveness of the ECI. For instance, Annex III of the Regulation provides that the rules for collecting signatures shall be drawn up by the national governments. As a result, different signature requirements exist across the EU and eighteen countries require signatories’ ID or passport number in order for the signatory forms to be valid. A survey conducted by European Citizen Action Service, a non-profit organisation located in Brussels, indicates that there is strong resistance in the majority of the respondents to providing such personal data out of fear for their privacy.[13] Carsten Berg, director of an ECI Campaign, a coalition of democracy advocates and NGOs, has urged for the removal of such restrictive requirements. His view has been shared by most ECI organisers.[14] Five countries have announced very recently that they will reduce cumbersome requirements for ECIs after July 1st.[15]

Finally, Article 3(4) of the ECI Regulation provides that in order to be eligible to sign an ECI, signatories shall be citizens of the EU. As a result, third-country nationals and legal persons are not able to organise or sign an ECI even if they are lawfully resident within the EU or qualify for long-term residency status. This creates a contradiction between the right to an ECI and other political rights under Article 20(2) TEU. The non-inclusive character of the ECI mechanism ultimately creates a narrow concept of political participation which does not reflect the broad aim of the EU to offer fresh channels of public engagement. [16] ECI organisers have raised concerns about the issue of ECI exclusiveness of application to EU citizens by arguing that the current formulation leaves out a substantial percentage of the target audience from supporting an Initiative.

Conclusion

The past year has seen the registration of ECIs covering a range of policy areas from education (Fraternité 2020, High Quality EU Education for All) to human rights (One of Us) and from voting rights (Let Me Vote) to environmental issues (Waste Management, End Ecocide in Europe) and more.[17] As a matter of fact, a few days ago the Right2Water ECI became the first ECI which has managed to collect the minimum number of signatures in eight countries. The first year was arguably a successful one for ECIs despite some ‘teething problems’ faced by the organisers such as the complex procedural requirements and the technical burdens which cost delays and extra financing.

Taking stock of the problems that have emerged at this early stage, there have already been numerous recommendations regarding the review of the ECI Regulation which is planned to take place in 2015. Proposals have been made for the extension of the period of signature collection, establishment of an independent help-desk, internalization of the online collection signature server and enlargement of access to sign an ECI.[18] In addition, there are calls for the clarification of EU data protection law and for creating uniform requirements for signature collection around the EU.[19]

No doubt, by giving the opportunity to EU citizens to assist in setting the political agenda of the EU, the ECI can be characterised as an important step forward for transnational democracy in the EU. Nonetheless, current experience shows that there are still issues to be dealt with for the ECI to become an easily accessible and user-friendly instrument of participatory democracy

All in all, the Commission’s discretion regarding the outcome of an ECI should not be underestimated. One can only imagine the disappointment of organisers who, after having devoted endless amount of time and effort to gathering one million signatures, may find that their initiative has not made any substantial difference in the legislative framework of the EU. It is thereby submitted that the (positive) attitude of the European Commission and the other institutions is perhaps the most important factor in the success of the ECI mechanism. After all, no one would want to see ECIs turning from instruments of enthusiasm and engagement to reasons of frustration.

Robert Miklós Babirad

J.D. Masters Diploma candidate in EU Law, King’s College London; Post Graduate Diploma in EU Law (Merit); Member of the New York Bar

I           Introduction

On March 27, 2013, the Commission invited public comments regarding a proposal to simplify procedures under the EU Merger Regulation.[1]  Changes would include altering market share thresholds relating to which mergers would qualify for access to the simplified merger notification procedure.[2]  Additionally, Commission Regulation (EC) No 802/2004 implementing Council Regulation (EC) No 139/2004[3] (`the Implementing Regulation’) would be amended with regard to the forms for merger notification.[4]

Mergers unable to qualify for notification under the simplified procedure would also benefit from the proposed changes.[5]  Only information relating to markets in which the market shares of those firms merging, which is in excess of the established thresholds for notification under the simplified procedure, would be required for submission in a notification to the Commission.[6]  An important aspect of the proposed changes would be that seventy percent of all mergers notified to the Commission would now qualify for notification under the simplified procedure.[7]

The issue is whether these proposed changes under the EU Merger Regulation will be helpful to fostering European competitiveness and economic development.  This article will begin by briefly discussing the process of notifying a merger to the Commission with a focus on the simplified merger notification procedure; the changes to both the Notice detailing the simplified notification procedure as well as to the forms for notification under the Implementing Regulation will then be discussed; and finally, the article will assess the overall helpfulness of the proposal.

II         The Simplified Merger Notification Procedure

Under the EU Merger Regulation[8]it is mandatory for the Commission to be notified of those mergers encompassing a “Community dimension” in order to obtain approval prior to effecting the merger with limited exceptions.[9]  The EU Merger Regulation provides for this notification to the Commission before a merger may be implemented.[10] A determination as to whether a merger contains a “Community dimension” is governed by the turnover threshold of the merging undertakings under the EU Merger Regulation.[11]

The Commission Notice on a simplified procedure for treatment of certain concentrations under Council Regulation (EC) No 139/2004[12] (“the Notice”) provides for notification to the Commission using a form that is shorter and not as extensive with regard to its informational requirements for qualifying mergers that have not traditionally presented prima facie difficulties with regard to competition.[13]

Mergers qualifying under the simplified procedure may also obtain authorisation after a “lighter procedure” and without the need for the Commission to engage in an extensive investigation of the market relating to the merger being notified.[14]  A “short-form clearance decision” for the merger is typically adopted within a period of 25 working days from the notification date to the Commission.[15] A more comprehensive Phase II Commission investigation will occur if the merger presents “serious doubts”[16] as to whether it will be compatible with regard to competition and the EU’s single market.[17]  The objective of the simplified merger notification procedure is to increase the focus and effectiveness of controlling mergers under the EU Merger Regulation.[18]

A key benefit available to those merging undertakings with access to the simplified short form notification merger procedure is that of a reduction in the amount of detailed information and associated expenses, which would otherwise be expended in completing a non-simplified merger notification to the Commission.[19] The information that must be provided for a regular Form CO notification as well as for a notification under the simplified procedure is provided in Annexes I and II respectively of the Implementing Regulation.[20]  It is a benefit to both the merging entities as well as to the Commission to encourage use of the simplified procedure, because of the reduction in resources under this form of merger notification.

III        Proposed Changes

Expansion of access to the simplified merger notification procedure includes a proposal to increase the qualifying market share threshold under the Notice from 15% to 20% for those competing firms in the same market merging.[21]  A merger concerning undertakings participating in markets that are upstream and downstream from one another would be able to take advantage of an increased 25% to 30% qualifying threshold for access to the procedure under the proposal.[22]  Additionally, access to the simplified merger notification procedure under the proposal would be available where two undertakings are participants in the same market and their joint share of the market exceeds the threshold of 20%, but as a result of their merger, the resultant market share increase from the merger is insubstantial.[23]

The Implementing Regulation[24] will also be revised under the proposal with regard to the notification forms for mergers.[25]  An important aspect of the proposed changes relates to those cases, which would be unable to qualify for access to the simplified merger notification procedure.[26]  The firms engaged in a merger would be required to submit comprehensive information in a notification to the Commission solely for the markets in which their market share is found to be in excess of the thresholds established for qualification under the simplified merger notification procedure.[27]  This is a positive change, which will enable the Commission to focus exclusively on information with the potential to pose a threat to competition within the single market upon implementation of the merger.

The primary objective underlying the short form simplified merger notification procedure is that of facilitating the process of notification and reducing burdens of an administrative nature for those mergers, which the Commission has traditionally found unlikely to present concerns relating to competition within the EU’s single market.[28]  The proposed changes will act as a positive expansion toward the attainment of these goals.

The changes proposed are with the intent of streamlining and reducing resources otherwise unnecessarily expended on merger cases.[29]  The Commission will instead be able to use its resources more efficiently on those mergers which necessitate a more comprehensive assessment and may actually result in a harmful impact upon both consumers and competition within the single market.[30]  Additionally, burdens of an administrative nature for both undertakings notifying a merger and with regard to burdens imposed upon the resources of DG Competition will continue to be reduced by this procedure and its expansion.[31]

The Commission’s primary objective in amending the Notice as well as the notification forms under the Implementing Regulation is to reduce procedural administrative burdens in an effort to increase European competitiveness and to stimulate continued economic growth.[32]  These changes to the Notice and Implementing Regulation will be helpful for the attainment of these objectives by encouraging a more efficient use of resources for both DG Competition and the merging parties.

IV        Helpfulness of Proposed Changes

The primary concern regarding mergers under the EU competition law system is that a particular merger when effected will have the result of reducing post-merger competitiveness within the common market.[33]  The proposed changes to the simplified merger notification procedure will not have the result of decreasing competitiveness or hindering the necessary scrutiny and control of mergers, which remain a primary and essential concern regarding any merger that is to be implemented within the single market.  Expanding access to the simplified procedure as well as reducing burdens of both a financial and administrative nature for both the merging parties and DG Competition will foster greater growth within Europe; facilitate the notification of mergers, which are not detrimental to the single market; and stimulate greater European competitiveness.

It may be argued that expanding access to use of the simplified notification procedure will act as a detriment to competition and to the necessary oversight of proposed mergers within the single market.  An increase in the qualifying market share for access to the simplified notification procedure may enable too many potential mergers to employ this procedure without sufficient safeguards.  An increasing number of merging firms will be able to notify under the simplified and shortened notification procedure because of the increased qualifying percentages, thereby resulting in an increase in the number of mergers that the Commission will potentially approve without a comprehensive relevant market investigation.[34]  A less comprehensive investigation of the market with regard to a greater number of qualifying mergers may hinder the Commission’s ability to engage in fully informed decision making and may result in greater threats to competition within the EU’s single market.

Additionally, amending the Implementing Regulation with regard to the merger notification forms would enable merging firms that are unable to qualify under the simplified procedure to only be required to provide information to the Commission with regard to markets in which the market share of the merging firms is in excess of the access threshold mandated under the simplified merger notification procedure.[35]  It may be argued that a reduction in the amount of information being provided in a notification under this proposed change will have a negative impact on the Commission’s ability to make an informed assessment as to whether a merger should be approved and its assessment of potential anti-competitive effects.

However, the possible negative implications of the proposed changes appear to be outweighed by existing precautions taken by the Commission.  The proposed increased qualifying percentages under the simplified notification procedure continue to be within “safe harbours” previously established by the Commission.[36]  Additionally, mergers qualifying under the simplified procedure will continue to be subject to the EU Merger Regulation’s “ex-ante merger control” system.[37]  The proposed changes will only benefit those mergers, which in the Commission’s experience have not posed a threat to competition rather than lowering existing safeguards, which would increase the probability of anti-competitive activity.[38]  It is also important to note that the Commission will continue to require critical information in any notification, which potentially reflects a threat to competition, regardless of whether the notification occurs under the standard or simplified notification procedure.[39]  A comprehensive investigation by the Commission of the relevant market where there is a potential threat to competition due to a proposed merger will also continue to take place.[40]

The changes being considered by the Commission do not reduce the oversight or scrutiny provided for under the EU Merger Regulation.[41]  An example of oversight, which will be unaffected by the proposed changes is that of Article 16 providing for the Court of Justice to review Commission decisions regarding the imposition of fines or penalty payments.[42]  Additionally, the Commission has the power under Article 8 to dissolve mergers where an incompatible concentration was effected without Commission approval or without adhering to a mandated condition for implementation.[43]  Fines may also be imposed by the Commission if the information in a notification is false or misleading by the merging parties.[44]  It is important that these safeguards remain unaffected by any proposed changes to the notification procedure.

Expanding access to the simplified merger notification procedure and updating the notification forms under the Implementing Regulation will not have a detrimental impact on the need to protect the EU single market from anti-competitive conduct regarding proposed mergers. Facilitating EU economic development in the field of mergers, which are subject to Commission notification, will have a positive effect on economic growth within the EU.  Establishing greater access to the simplified merger notification procedure and updating the notification forms will facilitate the notification process and positively stimulate EU economic growth in the field of mergers.

V         Conclusion

A proposal to expand access to the simplified notification procedure under the EU Merger regulation will have a positive impact on reducing administrative burdens and expanding European economic growth.  Both the Commission as well as the merging parties will benefit from the proposed changes.  Safeguards for the protection of the single market from anti-competitive conduct in the field of mergers will also remain in place and are unaffected by the proposed changes.  Additionally, amending the notification forms under the Implementation Regulation will enable the Commission to focus its resources more efficiently and effectively on potentially problematic areas with regard to a proposed merger rather than on issues that do not raise any competitive concerns.[45]

It was a great privilege for the authors of this post to have been present for the seventh annual IGLRC held at King’s College London on the 8-9 April 2013. Indeed, the panels were sure to provoke a lot of great discussion chaired by Professor Alex Türk, both in the realm of the tense political, social side of the Union and in the midst of the tough economic times Europe faced and still faces. As greatly varied subjects within EU Law itself, there were two panels split accordingly, the first discussing the EU’s modern social side including issues on identity, fundamental rights and political undertones of judicial review and revocation and the second primarily focused on the financial side of the EU in austerity, agencies and supervisory authorities in banking.

The first panel consisted of Eleni Frantziou (University College London), Ana Júlia Maurício (Cambridge) and Erin O’Leary (Liverpool John Moores). It was interesting that whilst the topics of each presenter did vary greatly on the face of it, it would ultimately emerge that they all voiced a commonality. Some presented it as a concern, others as an issue to be acknowledged. They all came back to the same point regarding the un-reconciled status of the EU as lacking coherence in terms of its policy and direction. However, whilst pessimistic in nature on the outset, the three presenters each demonstrated a keen desire for there to perhaps be more room for constitutionalism within the EU legal order and structure. The presence of this trend was an interesting one to note and one certainly considered as being characteristic of the EU generally. The themes were presented from the point of view of fundamental rights and horizontal effect, from national final administrative acts and revocation and from a more socio-legal linguistic identity point of view.

The first panel began with a refreshing reference to artistic culture, entitled ‘The constitutional value of the Charter of Fundamental Rights after Lisbon: The importance of being earnest’, analogising Oscar Wilde with the constitutional value of the Charter of Fundamental Rights. After an update on the status of fundamental rights under Lisbon, the sensitive issues were tackled. The fact that there was an undermining of the Charter’s constitutional impact was lamented, which hindered the consolidation of a European identity. This was due to excessive reliance on general principles of EU Law as opposed to the Charter in governing how citizens enjoy rights. It was argued that the Court of Justice of the European Union (CJEU) had to be earnest about their direction for the Charter before it could be clearly stated exactly what their intentions were. The perspective advanced was that there needed to be a new methodology for the application of human rights following the Lisbon Treaty, placing the Charter first, then the ECHR, and following that, general principles to aid in correct interpretation. This interesting methodology instigated a lively debate considering its merits and demerits leaving great food for thought as we then delved into a more technical topic.

The provisions and conditions regarding revoking national final administrative acts could be described as a niche area, certainly the thoughts of this author when reading the title of the second presentation, ‘National final administrative acts contrary to EU Law: A critical analysis of the Court of Justice’s case law’. The speaker considered the political relationship between remedies and behaviour of MS in complying with EU law. Though a topic clearly outside many of the attendees’ remit of knowledge, clarity in both delivery and content aided the audience in comprehending the specific topic separated into two parts, firstly aid (state and national aid) and then in regards to the free movement of persons. The presentation and discussion both centred round the stark difference in treatment concerning the treatment of both by the CJEU. Highlighted were the exceptional cases,[1] which seemed to be at odds with the prior line of reasoning. It was commendable to the speaker that though her topic was not widely understood before the day began, she certainly shed some light on the matter by the end of it. Ultimately again, the theme emerged of the divergence rife within the Union’s constitutional decisions. Her focus on this idea contextualised her area of expertise with that of the previous in term of the delicate balance required in both because of the EU’s constitutional nature.

The panel rounded off with a non-lawyer’s perspective on the hypocrisy in the EU’s motto in her take that it was more akin to being ‘United in diversity: the lesser of two evils’. As highlighted, to hear a fresh non-legal perspective of an idea of predominantly considered in the legal sphere was a welcome and indeed interesting debate. From a largely linguistic point of view, the notion of the diversity of languages and its consequences for the united Union was considered. The large number of both languages and cultures in the EU contribute to the difficulty in becoming such. This was due to the inherent connection between the two and the undesirability to have a lingua franca for the Union. It perpetuated the idea that there has been a failure to achieve equality, which means there is also legal certainty compromised. It seemed that there was an inevitable sphere of linguistic uncertainty. Again, identity was a key issue given that without an agreement as to one, there would constantly be a tension in the supranational order. Whilst there was significant criticism advanced as to the lack of a clear answer for why there is such hypocrisy and tension within the Union, it only served to emphasise again that this characteristic of the EU would be here to stay, and likely the source and subject of many a debate to come.

The second panel was an opportunity for one of the authors to dig deeper into a relevant debate, of which topics and presentations on offer didn’t disappoint. The EU has been epitomised in recent months as an unpredictable political playground. Solidarity and austerity are seen as two conflicting schools of thought, with a line being firmly drawn between the two. The solidarity of many countries has faltered under immense economic pressure. Germany’s resistance to guarantee funds to enable further bailouts and the UK’s proposed attempts at future renegotiations and referendums have spurred a culture of countries looking from the outside at the problems facing the EU from within. The term ‘austerity’ has become taboo to many EU citizens and only the most daring of us would ever utter these words in order to raise a debate. Luckily for us, the speakers were not worried by such a fear.

The first speaker was Luca Lionello, (Catholic University of Milan) with a presentation entitled ‘Austerity Measures, Shift of Sovereignty and Democratisation of European Institutions’. The title was intriguing given its boldness in tackling austerity and sovereignty in the same sentence. Aren’t these terms a modern day juxtaposition? The presentation dug deeper into the reality of austerity measures and the impact they have on country independence. He tackled the recent adoption of the Euro plus pact, the Six Pack and the Treaty on Fiscal Stability, as several EU members have adopted austerity measures to respect the new rules on fiscal integration. However, the question on everyone’s lips was; are these measures legitimate and can they solve anything? Luca raised three main points to question the legitimacy of the measures (1) as fiscal policy is a core competent of national sovereignty, the development of a strong European supervision on national budgets will probably oblige members states to reform their own constitution, (2) the new economic governance is managed by intergovernmental bodies that dont directly respond to the citizens in contradiction with the EU’s democratic principle and (3) the adoption of austerity measures under the new rules on fiscal integration has caused the violation in many member states of social and labour rights. The tone of the talk was hopeful that the way to remedy these illegitimacy’s was providing European institutions with the competence and the appropriate means to guarantee social protection of the EU according to the principle of subsidiary. However, with recent economic catastrophes, like that seen in Cyprus, it seems principle of subsidiarity may take a backseat on the EU agenda while we ride through the storm.

With subsidiarity at the forefront of the audiences mind, we were greeted by Pieter Van Cleynenbreugel, (University of Leuven) with a presentation entitled ‘Between Delegation and Attribution: Article 114 TFEU, Integrated Administration and the Constitutional Circumvention of the Meroni-judgement on the Establishment of new EU Regulatory Agencies’. The cynical tone of the speakers’ thoughts was presented by the notion that the Meroni judgment [2] is still repeatedly invoked to curb the regulatory powers of independent EU agencies. This powerful debate has been made even more relevant by the introduction of the institutional set up and decision-making powers of the new European Supervisory Authorities (ESA’s) in financial markets regulation. A decisional tug of war is ongoing at EU level between the Meroni delegation limits with the EU treaties’ competence attribution framework. It seems the EU has been rather inventive in delegating power as the incorporation allows it to partially circumvent traditional Meroni delegation limits and to re-qualify them as novel, thus enabling and restraining instruments governing the process of agency establishment in general rather than agency delegation in particular. After a discussion on the relevant case law and highlighting Articles 114 and 291 TFEU, the line of reasoning given by the EU was adamantly and persuasively criticised by the speaker, leaving many thinking, where do we go from here?

It was with bated breath that the audience waited for the last speaker on the Panel. Gianni Lo Schiavo (King’s College London) presented on ‘The European Financial Supervisors: A true constitutional challenge in the aftermath of the European Crisis’. This was clearly the hot topic of the panel with many audience members having prepared questions in advance for the speaker to answer. The speaker took a novel approach to his presentation and made a clear case for the introduction of the macroeconomic layer into the European economic constitution established by the Maastricht Treaty. The issues raised by the speaker covered not only the economic crisis but the underlying constitutional crisis as well.  Whilst the new European Financial Supervisors were shown to be important improvements, Gianni spent no time getting to the harsh questions of these entities. The first problem was the shaky ground that these entities seem to have been built upon. The new European delegated governance is being shaped, but it is unclear whether their role will be enhanced as standalone bodies. Secondly, and importantly, the discussion turned to sovereignty; how do these bodies relate to national authorities and their powers, could this indicate a real ‘top down’ process of market regulation and control? The presentation ended stressing the urgency of the need for clear answers of effectiveness and shared responsibilities.

Both panels presented papers that prove themselves in both relevance and content. They raised significant issues, but more importantly current issues, and like with any conference by the end both authors found themselves with more questions than they started with as to the future of the EU’s plans in many aspects, on their direction in future development on fundamental rights, identity and that ever tricky balance between sovereignty and supranationality, and on economic recovery and the agencies that could aid in its implementation.

Amongst other reasons, one of the advantage of this system over the current system whereby the ESFS/ESM facilitate the funds to national treasuries which subsequently recapitalise national banks themselves is that the funds being transferred to banks will not come to increase Member State’s debt-to-GDP ratio as the funds will be perceived as coming from a different legal entity, the ESM. This is a very important fact as it will allow cutting the existing vicious circle between sovereigns and banks, something which has greatly contributed to the debt crisis in Europe.

Some unanswered questions concerning the proposals

It is undeniable that the Council’s proposals constitute a giant’s step towards a genuine EMU given the extensive powers which are granted to the single banking supervisor. However, the text of the proposal and the various press releases and press conferences that have accompanied it cannot clarify some unknowns which come to mind when reading the proposals. Some of the most flagrant ones are:

• Why is it to be expected that the ECB will carry out a more precise and careful prudential supervision of systemic banks than national central banks currently do? At the end of the day, it seems that staff from national central banks is going to be transferred to Frankfurt, which entails that it will most likely be the same people carrying out the supervision of the same credit institutions, but simply from a different geographical location.
• Is the “two-speed” supervision that the proposals are establishing desirable for the European credit sector itself? It is not difficult to imagine a situation where clients, considering that their interests are better protected when the supervision is carried out by the ECB than by national central banks, will transfer their savings to systemic institutions, leading to the disappearance of smaller credit institutions, thereby leading to a higher market concentration, which can have pernicious competition effects.
• What implications will this have for the IMF and its financial intervention in Eurozone countries? Will the IMF be entitled to give instructions to the ECB on how to conduct its prudential supervision as it current does to national central banks having received financial assistance from the IMF? A well-thought answer is to be provided to this question if we do not want to see muddy relations within the Troika.
• Although the proposals foresee a common backstop loss mechanism (the ESM), why does it not contain a common “safety net” for depositors, which is equally important and necessary for a genuine EMU to exist?[11] There won’t be a fully-fledged EMU until such mechanism is put in place in the EU.
• When bank recapitalisations are carried out by Member States, State aid rules apply. But what will apply when the recapitalisation is done directly by the ESM? Wouldn’t there be a conflict of interest between the ESM’s underlying goal of maximising the returns on its loans and the purpose of State aid rules of limiting distortions on competition? It is to be expected that it will be broadly in line with the rules contained in Articles 107 and 108 TFEU but, what if it doesn’t? Could such decisions be challenged before the Court of Justice?

Conclusion

The two proposals of the Council are certainly to be seen as a giant’s step towards a genuine EMU as the SSM is undoubtedly a central instrument of any decent monetary union. However, and although many unresolved questions arise, there are two main things which are to be regretted: first, that not all Member States subscribed to this initiative (thereby further fostering a two-speed EU) and, second, that the proposal does not cover all the necessary instruments for a fully-fledged monetary union to exist (in particular, the common safety net for depositors is clearly missing[12]). We are therefore facing another clear example of what Robert Schuman had in mind when proclaiming that “Europe will not be made all at once, or according to a single plan. It will be built through concrete achievements (…)”.[13] The EMU is therefore no exception to this sequential nature of the EU construction, which needs to take another giant’s step to get to a truly genuine EMU.

LLB Law and European Studies graduate from the University of Portsmouth

In its practice exceeding more than fifty years, the Court of Justice of the European Union (CJEU) has developed several seminal legal principles with an aim to ensure a uniform and consistent application of the EU Treaties.[i] Guaranteeing smooth interpretation and application of EU law is not only an aspiration, but also the CJEU’s duty established under Article 19 of the Treaty on European Union (TEU).[ii] This article seeks to provide a general overview of the principle of effective judicial protection. It aims to outline the role of the EU and national bodies which can advise on EU citizens’ rights in cases of misapplication of Union law. Further, the article will appraise how the seminal principles developed by the CJEU enabled individuals to obtain remedies in their national courts.

Effective judicial protection can be interpreted in a three-stage process. The first stage concentrates on the question if the EU citizens are aware of their rights. The second stage is defined with the concept of access to justice. The final stage is focused on the effective co-operation between the national courts of the Member States and the CJEU and enforcement of the decisions of the national courts.

I.             Awareness of the protection of EU citizens’ rights

Protecting the rights of EU citizens and ensuring that the objectives of the concept of European citizenship are observed is a necessity. Although the 1957 EEC Treaty[iii] was silent on the protection of fundamental rights and European citizenship, from the 1970s onwards many initiatives have been put forward in order to establish a “Europe for Citizens”.[iv]

In the current Treaty framework, European citizenship and its objectives are defined in Art.20 TFEU[v] which identifies and accentuates the advantages of being an EU citizen. European citizenship provides us with many benefits: the rights to move, work and reside within the Union; right to study in another Member State; the right to vote in the European Parliament elections in the country where you reside and the right to receive protection from another EU Member State in the country you are visiting if your country of origin is not represented.[vi]

In 1975, Belgian Prime Minister Tindemans clearly enunciated that ‘[n]o one wants to see a technocratic Europe. European Union must be experienced by the citizen in his daily life.’[vii] Thus, if the EU seeks to fulfil its aspiration to create ‘an ever closer Union among the peoples of Europe’, it needs to place the citizen at the heart of its decision making.

The 2010 Eurobarometer survey[viii] revealed that the majority of the EU citizens were unaware of their rights granted by the EU.[ix] The purpose of the European Citizenship Report 2010[x] was to identify the obstacles to EU citizens’ rights and suggest practical solutions in order to overcome the problems that EU citizens might encounter. The outcome of the consultations was the launch of a website called ‘Your Europe’.  The web page provides practical information about Union citizens’ rights and about national rules and procedures from which the Union citizens can benefit. Another proposal in line with the European Year of Citizens 2013 includes the organisation and promotion of events on EU citizenship and citizens-related policies which will potentially increase the civic involvement and thus strengthen citizens’ awareness of their EU citizenship status.

II.           Access to justice: the role of EU and national bodies

Once EU citizens are aware of their rights, the second fundamental point which needs to be considered is which institutions or bodies can advise EU citizens on their rights? As the 2012 Eurobarometer survey[xi] revealed, the EU citizens need more information about where to turn in cases of violation of their EU rights.

On 6 December 2012, the Fundamental Rights conference was held in Brussels. The topic of the conference was access to justice and the speakers stressed that it is a fundamental matter as it not only ensures the democratic governance within the EU, but also ‘gives practical effect to the foundation stone of the rule of law on which the Union is built’.[xii]

Commissioner Reding in her speech in this conference[xiii] acknowledged that 21% of the EU citizens will turn to their national courts in cases of violation of their Charter rights and 20% will bring their case before the Ombudsman. What is surprising is that EU citizens are still unaware of the role of EU bodies such as SOLVIT or Europe Direct. This suggests that citizens require additional information about the role of EU bodies that can provide legal advice and aid. This can be achieved through co-operation with national media. The roles of national media are not only to inform us about the debates in our nation states, but also to educate us. The launch of a successful partnership with national media of the Member States could have huge benefits. The most valuable contribution would be that the EU could reduce the mistrust between itself and the EU citizens. Once citizens have an objective opinion about the benefits of EU membership then there will be also a decrease in the eurosceptic attitudes in the Member States.

III.         National courts of the Member States and the CJEU and effective enforcement of the national courts’ decisions

As noted earlier, the national courts seems to be the first place where the EU citizens will turn if they encounter misapplication of Union law. Thus, in theory if effective judicial protection exists in the EU, it can also be described as a result of an effective relationship between the CJEU and the national courts of the Member States. This relationship should be based on sincere co-operation and mutual respect as demonstrated by Art.4(3) TEU.[xiv] Maintaining effective relationship between the national courts and the CJEU is vital as in procedural terms individuals do not have the right to appeal to the CJEU. It is the national courts or tribunals of the Member States which have the discretion under Art.267 TFEU[xv] to decide whether or not to refer questions to the CJEU.

For example, the wording of paragraph 2 of Art.267 TFEU states that national courts, which are not the last instance in certain case, ‘may’ refer the question related to interpretation of EU law to the CJEU. This demonstrates that it is solely for the national courts to decide whether or not refer questions to the CJEU. This position is reaffirmed if the Court’s reasoning in CILFIT is taken into account where the Court stated that ‘in all circumstances national courts and tribunals (…) remain entirely at liberty to bring a matter before the Court of Justice if they consider it appropriate to do so’.[xvi] The national courts are enabled to use their discretionary powers not to refer to the CJEU if such question of law was irrelevant or was previously interpreted or when the doctrine of acte clair applies.

Entrusting the national courts of the Member States with such powers is an indication of a mature relationship between the national courts and CJEU. The potential positive outcome of such relationship means that straightforward cases are decided at national level by the national courts and the CJEU has more time to resolve more problematic cases. [xvii]

However, Article 267 TFEU makes a clear distinction between discretionary and mandatory references. For example, the Lyckeskog [xviii] judgment of the CJEU underlined that if a question concerning the interpretation of Union law arose before a court of last resort, it would be under an obligation to request a preliminary ruling in accordance with Art.267 TFEU, either when analysing admissibility or at a later stage. This position was reiterated in the Köbler[xix] case where the CJEU held that non-compliance by a top national court with its obligations under Art.267(3) might render the state in which it is situated liable in damages to an individual who was in that way deprived of his rights under EU law.

One should note, that the relationship between the CJEU and the national court in proceedings under Art.267 TFEU is co-operative rather than hierarchical in nature. Both courts have distinct but complementary roles to play in finding a solution to the case which is to be solved in accordance with EU law. A reference to the CJEU is not an appeal against the decision of the national court. The CJEU does not rule on the application of the law to the facts or the compatibility of national law with the requirements of EU law. These are matters within the exclusive jurisdiction of the national court.

It is also the national courts of the Member States which will award remedies to individuals. Nevertheless, from the early 1990s onwards the Court has requested adequacy and effectiveness in the award of remedies in the domestic enforcement of Union law. As De Burca notes, national courts are required to undertake a case-by-case review of the national rules and disapply any restrictive national provisions whenever necessary in order to award adequate and effective remedies in the spirit of EU law. [xx] This is primarily because national remedies must secure the effectiveness of EU rights.[xxi]

IV.         Conclusion

Effective judicial protection is a fundamental right of EU citizens and, as a result, EU citizens must be aware of their fundamental rights so that they can understand in practice the benefits of their EU citizenship status. Thus it is suggested that the efforts of the EU in the European Year of Citizens 2013 should be primarily focused on educating and informing citizens about their rights and providing information about EU legal advice and aid centres. These are the two fundamental points which will ensure that effective judicial protection finds its place not only in theory, but also in practice.

PhD Candidate, King’s College London

On 29^th January 2013, the Court of Justice of the European Union (CJEU) delivered its judgment in the Radu case.[i] In this case the Court was asked to interpret the Framework Decision on the European Arrest Warrant (FDEAW) through the prism of the Charter of Fundamental Right of the European Union (the Charter) and the European Convention of Human Rights (ECHR).

While this judgment was expected to open the door to a more human rights-enshrined interpretation of the European Arrest Warrant (EAW), the Court seems to have skipped this chance.

European Arrest Warrant basics

The EAW is the first EU criminal law instrument based on the principle of mutual recognition, the so-called cornerstone of European Criminal Law. Having provoked constitutional concerns for abolishing the requirement of double criminality for a list of offences, after ten years it is still here accompanied by the never-ending debate.

The EAW is in fact a judicial decision, issued by the judicial authorities of one Member State (MS), requesting the arrest and surrender of a person from the judicial authorities of another MS for the purposes of (a) conducting a criminal prosecution (b) executing a custodial sentence or (c) detention order. It replaced a slow and politicised mechanism of interstate cooperation in view of the need of faster extradition in the EU internal market. This mechanism is based on the assumption of advanced confidence between the Member States.

Therefore, the state executing the EAW is under the obligation to arrest the wanted person and surrender him to the issuing state, except where the grounds for refusal listed in the FDEAW exists. What usually strikes lawyers is that there is no specific ground for refusal for human rights violations by the issuing authority, which gives no choice to the executing authority but to arrest and surrender the requested person even in the case that the act he committed does not constitute an offence in the executing state and even if his fundamental rights were not observed by the issuing state or there is a high risk of them being violated in view of the bad human rights protection record of this state.

Hence, a new argument has emerged in the light of the de-pillarisation of EU criminal law after the Lisbon Treaty and after the binding effect was given to the Charter. This new argument attempts to establish that the interpretation of the FDEAW should be enriched by the respect for fundamental rights as illustrated by the Charter. Also, the Commission in its latest implementation report[ii] states that ‘the framework decision does not mandate surrender where an executing judicial authority is satisfied…that such surrender would result in breach of a requested person’s fundamental rights arising from unacceptable detention conditions’.

This view is further supported considering the recent N.S. judgment of the CJEU. This case concerns the EU asylum system which is also based on the same principle of mutual recognition as the EU extradition system. The Court ruled that the Member states may not transfer an asylum seeker to the Member State responsible, where they cannot be unaware that systemic deficiencies in the asylum procedure and in the reception conditions amount to substantial grounds for believing that the asylum seeker would face a real risk of being subjected to inhuman or degrading treatment.

Facts of Radu

So, in our story, Mr Radu was a Romanian national, subject to four arrest warrants, issued by the German judicial authority for the purpose of conducting criminal prosecutions in respect of acts of robbery. As he did not consent to his surrender, he claimed that the contested warrants were issued without him having been summoned or having had a possibility of hiring a lawyer or presenting his defense, in breach of Articles 47 and 48 of the Charter and Article 6 of the ECHR.

He argued that the FDEAW and the law implementing it should be interpreted in view of the provisions of both the Charter and of the ECHR. If the judicial authorities of the executing Member State discovered that the fundamental rights were not observed by the issuing authorities, they would be justified in refusing to execute the EAW concerned, even if FDEAW does not expressly provide for that ground for non-execution.

In a nutshell, the questions raised highlight three main issues. Firstly, they involve the different interpretation of the FDEAW in light of the Treaty of Lisbon and the Article 6 TEU and question whether the Charter and the ECHR form part of the primary EU law. Secondly, the questions concern the issue of deprivation of liberty of the requested person, as part of the procedure leading to the execution of the EAW. Since it interferes with the right to liberty and security of a person (Article 6 Charter and Article 5 ECHR read in conjunction with Articles 48 and 52 Charter) the CJEU was asked whether if this is actually necessary and proportionate to the objective pursued in a democratic society. Thirdly, they ask whether, through the prism of this new interpretation, the executing judicial authority can refuse to execute the EAW in the event of breaches of human rights legislation.

Opinion of Advocate General

The Advocate General Sharpston in her well reasoned opinion[iii] interestingly claimed with regard to the first issue that rights emanating from the Charter constitute part of the primary EU law, while the rights originating from the ECHR constitute general principles of EU law.

In respect of the second issue, the Advocate General argued that the deprivation of liberty and the forcible surrender of the person, following the execution of the EAW, especially issued for the purpose of criminal prosecutions, constitute interference with the person’s right to liberty as it is safeguarded by the Article 5 ECHR and Article 6 Charter. For this reason, it should not be arbitrary. The factors which should be taken account include the good faith in which the detention should be performed, the fact that it should be interrelated to the ground of the detention (suitability and effectiveness), the place should be appropriate and the length reasonable (necessity and least restrictive measure test).

With reference to the third point, the Advocate General Sharpston argued that the executing judicial authority could refuse to execute a warrant, when it is demonstrated that the rights of the requested person have been infringed or will be infringed and, in the current case with regard to Articles 6, 47 and 48 Charter, the infringement should be such fundamental that would destroy the fairness of the process.

Judgment

The judgment did not follow the structure of the questions or the conceptual structure given by the Advocate General, confusing its reader despite its short length. However, this is the least, considering that it limited the scope of the preliminary reference and that certain questions remained unanswered.

The CJEU appeared to accept that the Charter constitutes primary law but, according to the Court, the observance of rights enshrined in Articles 47 and 48 of the Charter does not require that the executing authority could refuse the execution of the EAW (Para 39). The Court attempted to clarify in advance that the Radu case related to an EAW issued for the purpose of conducting criminal prosecutions and not for the execution of a custodial sentence (Para 28). Then, it reiterated that the EAW was adopted so that it would simplify the extradition and for its operation which is based on the principle of mutual recognition, states should have mutual trust. Therefore, states cannot flee from an EAW request (Para 33-35).

With respect to grounds of refusal it remained loyal to the letter of the instrument. It left no space for any interpretation enlightened by the Charter sun or even by the Article 1(3) of the Framework Decision on EAW, read in conjunction with Article 6 TEU and the corresponding Charter provisions. Moreover, in an attempt to deepen this view and further justify it, it claimed that if the person was to be heard before the issuing authority, this would inevitably affect the effectiveness of the instrument. This is because the EAW is based on surprising the wanted person so that he could not catch a flight and flee (!) (Para 41). Finally, pursuant to the Court there is always the executing authority to hear the requested person.

Regarding the issue of whether the deprivation of the person’s liberty accompanying the process of arrest interferes disproportionately with the right to liberty and security, the Court just ruled that it is related to the debate on the defense rights.  Thus the Court claimed that the issue does not necessitate special attention, tackling the request to address the breach of those articles (Para 30).

Therefore, in contrast to the opinion of Advocate General Sharpston, according to the Court the FDEAW should be interpreted in such a way so as not to allow the executing authority to refuse the execution of a EAW issued for the purpose of criminal prosecution on the ground of violation of the requested person’s right to be heard.

Comment

The Radu judgment surprised EU criminal lawyers anticipating the post-Lisbon effect on the interpretation of the EAW for its minimalistic and narrow approach. It was an unexpectedly short judgment given the number and the significance of the questions. The Court avoided the substance of the burning issues and narrowed down the scope of the references, causing further questions.

Firstly, it should be noted that the judgment contradicted the Advocate General opinion and the previous CJEU ruling in N.S. case, where it had clarified that the EU asylum system cannot operate on the basis of a “conclusive presumption” that all EU Member States “observe the fundamental rights of the European Union” (Para. 105). In Radu, the Court, based on this conclusive presumption, repeated the need and the obligation of Member States to have mutual trust to each other, in contrast to the abovementioned N.S. judgment. One would wonder here, whether the fact that the issuing state was Germany in this case facilitated the Court to follow this ruling and whether it would have adjudicated differently if the issuing country was one of the so-called ‘non-safe countries’.

The first paragraph of the Court is also noteworthy, since the Court stated that the warrant was issued for the purpose of a prosecution and not for the execution of a custodial sentence. This triggers the question whether the ruling would be different if this was the case of an EAW issued for the execution of a custodial sentence and Mr Radu was requested for this purpose? Would the Court have defied the mutual trust obsession?

Moreover, the Court, after exposing the reasons leading to the adoption of the EAW, argued that if the issuing authority would be required to hear the requested person, this would lead to the failure of the system. The framework decision’s preamble articulates that the extradition procedures should be speeded up in respect of persons suspected of having committed an offence and trying to escape from justice. This is why the system’s key method is to surprise the requested person so as not to allow the possibility of run away (Paras 40, 41). This reasoning, realistic as it may sound in a Europe without internal borders, lacks the most principal constitutional ground. The principle of presumption of innocence, as enshrined in the Article 48 of the Charter and 6(2) ECHR, pronounces that ‘everyone who has been charged shall be presumed innocent until proved guilty according to law’. Isn’t surprising a suspect with the aim of arresting him, then surrendering him to another Member State in order to prosecute him, without any hearing at odds with the presumption of innocence?

The Court’s response was that the person can be heard by the executing judicial authorities. Someone would wonder at this point which the options of the judicial authorities really are, as the Court previously ruled that the states cannot flee from the EAW mechanism which does not provide a ground for refusal for human rights violations (Para 41) So, the scope of the person’s right to be heard is really limited to this point.

Finally, a question of constitutional importance was submitted which finally remained unanswered. The Court skipped the question on whether

the interference on the part of the State executing a EAW with the rights and guarantees laid down in Article 5(1) of the [ECHR] and in Article 6 of the [Charter] (:right to liberty), read in conjunction with Articles 48 (:presumption of innocence) and 52 thereof, with reference also to Article 5(3) and (4) and Article 6(2) and (3) of the [ECHR] (:fair trials rights), satisfy the requirements of necessity in a democratic society and of proportionality in relation to the objective actually pursued.

This could have been a chance for the Court to throw light on the ill-defined constitutional principle of proportionality in relation to the objective actually pursued through legislation in the context of European criminal law.

Due to those remaining question marks, the judgment was surprising and somewhat disappointing. Trying to explain the mystery of this analysis, we could hypothesize that the Court might have been aware of the domino effect of a different ruling on the principle of mutual recognition, the foundation of the whole mechanism. This effect, given the lack of a clearly delineated ground for refusal for the execution of EAW in the event of human rights breaches, could be an open-ended one, especially if there is no political will to reform the measure soon.

PhD student, Dickson Poon School of Law, King’s College London

Introducing the UPC

According to the European Commission, the Unified Patent Court (UPC) is one of the primary aspects of the ‘patent package’ that was given the go ahead by Member States and the European Parliament on the 11^th December 2012. Included within this ‘patent package’ are two Regulations[1] that were adopted on the 17th December 2012. The next aspect comprises of the international Agreement[2] on a Unified Patent Court[3] that was signed on the 19^th February 2013.[4] The final phase is the establishment of a single and specialised patent jurisdiction.[5] However, the focus of this article is limited to the signing of the international Agreement that paves the way for the establishment of the UPC.

With that in mind, it is useful to note briefly the historical background of this continuing movement. The journey, or rather, the struggle toward unitary patent protection in the EU has been ongoing for at least the last thirty years.[6] As a result the receipt of twenty-four signatures for the Agreement on a Unified Patent Court has been marked with importance although it was anticipated that at bare minimum, the thirteen signatures required would have been obtained. The Republic of Ireland’s Minister for Jobs, Enterprise and Innovation who commenced the proceedings at which the Agreement was signed echoed this sentiment:

“I think this is a very significant occasion. I know that this has been a product of work over many years – indeed over almost 40 years from when the idea was first nurtured as a concept… We are very fortunate to be here to sign on behalf of our Member States this important piece of new architecture within the European Union.

What is certain is that the perceived implications of developing the UPC from a preliminary perspective are seen as positive not just to the development of the patent law system within the EU, but more importantly continuing the furtherance of the single market.

What they signed up for

For now, it is important to outline the specifics of what the Member States signed up for on the 19^th February 2013. As already pointed out, twenty-four countries had signed the Agreement. It is expected that Bulgaria will also sign shortly.[7] However, Poland has opted for a ‘wait and see’ policy before it signs, given their uncertainty over the effects that joining may have on their economy.[8] They argue that the comparative costs of joining the UPC may not be beneficial to them given that their country is not a very innovative one. Thus the cost benefits marketed by the EU in using the UPC may simply not be realised in Poland. On the other hand Spain has chosen not to partake in any way or form[9] because the Spanish language had not been included as one of the official languages of the UPC. Notwithstanding that the Agreement has been signed, it is still to be ratified by France, Germany, Ireland and the UK. In the instance of the UK, “CIPA, the IPFed and other professional bodies have written to the IP Minister Lord Younger calling for a proper, evidence-based economic impact assessment…before Parliament is asked to ratify the UPC Agreement[10].” Hence, it may be some time before the UK ratifies the Agreement.

In terms of structure, the UPC will be divided into two main parts. Firstly there is the Court of First Instance that will have its centre in Paris with additional ‘thematic’ branches in London[11] and Munich.[12] Secondly the Court of Appeal will be based in Luxembourg and also house the Registry. In addition to these major institutions, each Member State will also have at least one local division.

But what does the UPC mean for the EU as a whole? In short, it means the centralisation of ‘EU Patent’[13] litigation given that Regulation 1257/2012 of the ‘patent package’ gives the European Patent Office (EPO) the power to grant EU Patents.[14] The UPC acts as the central court for resolving patent disputes in the EU concerning the aforementioned EU Patents, meaning it will no longer be necessary for EU Patent holders to contest patent claims for infringement or revocation on a country-by-country basis. Furthermore the decisions of the UPC will be binding throughout the Member States that have signed on. More generally the advantages of having the UPC and the ‘patent package’ as a whole include:[15]

• One stop shop for patent application and litigation
• Cost effectiveness
• No need for translations once the patent is in English, French or German
• Central administration being more efficient avoiding duplication of cases in multiple Member States
• Expert judges
• Furtherance of the single market

Problems so far…

Despite the many perceived advantages of the UPC there will inevitably be problems that arise in relation to its scope or operation. One such problem that has been raised at this preliminary point is under Article 83 of the Agreement on a Unified Patent Court where there is some disagreement on the interpretation of Article 83. In essence, Article 83 entitled “Transitional regime” is about facilitating the move toward the UPC. Under Article 83(1) a seven year transitional period is given whereby a European Patent claim can be brought before national courts instead of the UPC. However, after the seven year transitional period, the UPC will have exclusive competence over EU Patent claims. This is not disputed. Where it becomes unclear is under Articles 83(3) and 83(4), creating confusion with its opt-out clause. Some preliminary debate has already led to diverging interpretations of what happens if the patentee opts out. On the one hand, Article 83(3) can be seen as a means of extending the seven year transition period so that even after this period has expired, the UPC will not have exclusive competence. On the other, a patentee that has opted out can bring his claim under a national court or alternatively opt back in via Article 83(4) and still bring a claim under the UPC. It is the possibility of opting back in that is the real source of confusion because of the potential for absurd results especially where third parties become involved. For example consider the following hypothetical fact pattern:[16]

A PATENTEE opts out of the UPC under Article 83(3) and then licenses the patent to an EXCLUSIVE LICENSEE. The EXCLUSIVE LICENSEE then brings an infringement claim against a THIRD PARTY and uses the UPC by opting in under Article 83(4). The THIRD PARTY wants to counterclaim the invalidity of the patent and subsequently for the revocation of the patent.

Given the construct of Article 83(3) and 83(4) it is open to the interpretation where the THIRD PARTY can file his counterclaim. Two possible scenarios arise:

1)    On a liberal interpretation of Article 83 the THIRD PARTY can choose where to file the counterclaim. That is at the UPC or at the national courts. This interpretation in effect would ignore the fact that the PATENTEE has opted out. More generally it would mean that the UPC retains non-exclusive competence even if a patentee opts out under Article 83(3).

2)    Alternatively on another interpretation, if Article 83 is construed more rigidly and the fact that the THIRD PARTY cannot counterclaim for revocation against the EXCLUSIVE LICENSEE is considered then the THIRD PARTY must file a separate claim for revocation in the national courts because the PATENTEE has opted out. Therefore the UPC has no competence. This interpretation would undermine the very rationale of the UPC in centrally administrating EU Patents.

However, given the infancy of the UPC debates, no conclusive answer has yet been proffered. As such the outcome remains to be seen. It may be some time before we see the UPC in practical effect given that it does not enter into force until France, Germany and the UK have ratified the Agreement. It is estimated that the UPC should come on stream some time in 2014. But until then the discussion continues…

LLM Candidate, King’s College London

The issue of introducing a financial transaction tax (hereinafter – FTT) at the EU’s border came back in the frontline in the aftermath of the financial crisis, as an option to “moralise capitalism”. However, the idea appeared to be highly controversial, so that no agreement could foreseeably be reached on an EU-wide basis.

As a result the process for enhanced cooperation in this area was launched. Following the request of eleven Member States – Austria, Belgium, Estonia, France, Germany, Greece, Italy, Portugal, Slovakia, Slovenia and Spain – on 22 January 2013, the Council adopted Decision 2013/52/EU[i] authorising enhanced cooperation in the area of financial transaction tax. Consequently, on 14 February the Commission issued a proposal for directive[ii]. For us, it is the occasion to (re)discuss the concept of enhanced cooperation (I), the competences of the EU in fiscal matters (II) and the idea of FTT itself (III).

I. How does enhanced cooperation work?

The enhanced cooperation procedure (see also the article of Jose Manuel Panero Rivas on this blog), was first introduced by the Treaty of Amsterdam of 1997. It aims at enabling Member States that wish to deepen further the integration to do so without being held back by the opposition of other Member States, which is particularly problematic in situations where the Council must vote unanimously to adopt a decision. The possibility of enhanced cooperation is currently regulated by Article 20 TEU[iii] and Articles 326 to 334 TFEU[iv].

The scope of enhanced cooperation can only be “within the framework of the Union’s non-exclusive competences”, since for EU exclusive competences, there can be no distortion of rules. In the FTT case, fiscal policy is indeed a non-exclusive Union competence (see part II below). To avoid distortions to the internal market that could appear following the adoption of national measures taxing the financial sector, the Commission decided to make use of Article 113 TFEU, which gives some competences of harmonisation to the Council regarding tax matters.

Furthermore, the enhanced cooperation procedure “shall aim to further the objectives of the Union, protect its interests and reinforce its integration process”. It is also evident that “any enhanced cooperation shall comply with the Treaties and Union law”, “shall not undermine the internal market”, nor “distort competition between [Member States]”. In the present case, the main aim is to “ensure the proper functioning of the internal market and to avoid distortion of competition”. But one may also think of the objective of building a “social market economy”, which could entail the fact that all economic actors shall pay a fair share of taxes.

In addition, enhanced cooperation is a solution of last resort, to be used only if “the objectives of such cooperation cannot be attained within a reasonable period by the Union as a whole”. Regarding the FTT, this was noted by the Council in June 2012, as there was no unanimous support to the proposal of introducing an EU-wide FTT.

Furthermore, in conformity with the Treaties, at least nine Member States could ask the Commission to make a proposal of enhanced cooperation to the Council. In the case of the FTT, they were eleven (see above).

In principle, having received a request to make proposal for enhanced cooperation in certain area, the Commission may refuse to make the proposal; in that case, it shall explain the reasons for it. Enhanced cooperation needs to be approved by the Council, after having obtained the consent of the European Parliament. In the field of the Common Foreign and Security Policy (CFSP), there are some specific rules set in Article 329(2) TFEU.

It should be noted that participation must remain open to any Member State wishing to join it at any time. In that case, the State shall notify the Commission of its will; the Commission then has four months to assess whether the conditions are met. The TFEU even requires that participation in the procedure be promoted. The “competences, rights and obligations” of non-participating Member States shall be respected; on the other hand, these Member States “shall not impede [the] implementation” of enhanced cooperation.

All Member States participate in the discussions, but only those participating in the enhanced cooperation procedure have the right to vote. Naturally, only the participating Member States are bound by decisions adopted under enhanced cooperation, and these rules do not form part of the acquis communautaire that candidates to EU membership are required to accept.

Enhanced cooperation is already being used in divorce law (by 14 Member States, which will be joined by Lithuania next year) and will be used for the creation of an EU patent (all Member States but Italy and Spain agreed to join).

II. The Union’s fiscal competences

In this context it is worth to quickly remember a few facts about the Union’s competences on fiscal matters.

On the one hand, the Union is competent to legislate on indirect taxes (i.e. on consumption, e.g. the VAT which has been subject of many directives). Article 113 TFEU, which is referred to in the present case about enhanced cooperation on the FTT, states that: “The Council shall, acting unanimously in accordance with a special legislative procedure and after consulting the European Parliament and the Economic and Social Committee, adopt provisions for the harmonisation of legislation concerning turnover taxes, excise duties and other forms of indirect taxation to the extent that such harmonisation is necessary to ensure the establishment and the functioning of the internal market and to avoid distortion of competition.”

On the other hand, the Union is not competent to harmonise direct taxes (i.e. on production of goods and services, e.g. corporate tax), except if the Member States unanimously decide so. However, although direct taxation falls within their competence, Member States must none the less exercise that competence consistently with Community law[v]. Thus, in the area of free movement, not only are the custom duties and charges having an equivalent effect prohibited (Article 30 TFEU), but internal taxation measures must also be applied in a non-discriminatory manner to domestic and foreign (EU) products, so as to avoid protection of some products (Article 110 TFEU).

III. The Financial Transaction Tax: pros and cons

The proposal of the Commission[vi] is to establish a levy of 0.1% on transactions of bonds and shares and 0.01% on transactions of derivative contracts. Using these numbers, a Union-wide FTT could bring in nearly €60 billion, which could potentially enhance the Union’s own resources in its budget.

Only transactions between financial institutions would be taxed, not those involving businesses and citizens (the latter being involved in a minor share of all financial transactions), nor those involving the States managing their public debts. In addition, it is worth noting that primary market transactions in shares and bonds (i.e. when these financial instruments are sold for the first time by their issuers) will remain tax free. Furthermore, the FTT would be applied to all transactions of instruments issued in a Member State, even if the ulterior transactions take place outside the EU; this aims at avoiding tax avoidance but is highly controversial and is likely to create heated debates with EU’s international partners. A further idea looking rather strange is that an exchange of financial instruments is considered as two transactions (selling and buying), leading to a taxation in the Member State of residence of both the seller and the buyer (so, the effective rate per transaction – but not per party – is double). A party to the transaction residing in a third country will be deemed to be resident in the Member State of its EU counterparty. Finally, the Commission recognised the possibility of double taxation between FTT and non-FTT jurisdictions, but this could prove an incentive to join the FTT-area.

Those in favour of such a tax claim that the financial sector should pay a fair share of the collective tax burden, especially since it benefited from very costly rescue plans during the financial and economic crisis in 2008-2009. Moreover, banking institutions of some countries still continue to benefit from State aid because of their exposure to the debt crisis in the Eurozone. Furthermore, this debt crisis requires the Member States to find new resources. Since labour is already heavily taxed in most of them, they must turn to taxes on capital. Capital revenues are also seen as less “meritocratic” than labour revenues. Last but not least, taxing financial transactions would discourage speculation and therefore contribute to “moralising capitalism”.

On the other side, those opposing the introduction of the FTT fear a loss of competitiveness of Europe’s financial centres (this fear is particularly acute in the UK, preoccupied about safeguarding the City’s worldwide importance and influence), since investors would prefer to use their money somewhere else where it is less taxed[vii]. So, there would be less investment in the EU, which could lead to less growth and losses of jobs, in particular in the financial centres. But the Commission considers that the 11 participating Member States are economically too important to be abandoned by financial actors. Other arguments of opponents to the FTT can be mentioned, such as the fact that some speculation is necessary to ensure the liquidity of the markets, etc. All those arguments are subject to fierce economic debate not only between Member States, but also between economists.

Where are we now?

Following the request of the 11 interested Member States, the Commission accepted to resort to enhanced cooperation on 23 October 2012. The European Parliament then gave its agreement on 12 December 2012 and the Council on 22 January 2013. As already noted, the Commission has published a proposal of directive on the FTT on 14 February 2013.

Now, Member States have to discuss the proposal within the Council. All Member States will be involved in the discussion, but, in the end, only the participants in the enhanced cooperation will vote on the proposal. Moreover, the European Parliament will also be consulted. In addition, since the proposal intends also to cover transactions taking place abroad, provided one of the parties is resident in the EU, it is very likely that some international partners of the EU will express their views and try to influence the outcome through diplomatic means.

The seventh annual International Graduate Legal Research Conference (IGLRC) will be held on the 8-9 April 2013 at King’s College London, home of one of the top 25 law schools worldwide and located in the heart of London’s legal district.

This two-day conference has a reputation for being a unique platform to meet other researchers and academics from across the world. It will also give delegates a fantastic opportunity to listen to a wide variety of selected presentations from legal researchers working in highly topical areas of contemporary legal scholarship. In particular, the following panels have been confirmed to take place during the IGLRC 2013:

Commercial Law
Competition Law
Constitutional Law
Criminal Law and Criminology
Environmental Law
European Union Law
Human Rights Law
Intellectual Property
International Economic Law
Legal Theory
Private Law
Public International Law

This year we are pleased to announce that our keynote speech will be given by Professor David Caron, the new Dean of the Law School at King’s College London.

You can find more information on how to register here.Those registering in advance will receive a £5 discount, paying £50 for the whole conference.

Further information about the conference can also be found via our website www.iglrc.com or by simply subscribing to IGLRC 2013 on Facebook and Twitter.

Re-posted from the Eutopia Law Blog

Adrienne Yong

PhD Candidate at King’s College London

Yet another chapter of the European citizenship saga sought clarification by AG Sharpston in the Prinz and Seeberger Opinion delivered last week on February 21, 2013. Concerning one of the most prevalent categories of citizens claiming rights under the Art 20 and 21 TFEU – students – Prinz and Seeberger discusses a classic situation that has pervaded the over 20 years of Union citizenship development. Effectively, AG Sharpston aims to explicate the notion of proportionality in citizenship, which has for years escaped valid clarification. She discusses the different strands of objectives of integration, with more substantial meaning than it would appear at first.

Facts

In Prinz, a German moved from Germany to Tunisia with her family for her father’s job, then returned years later for secondary school, subsequently deciding to attend university in Holland. She was granted funding from German authorities for her first year, but was rejected for the second as she failed to satisfy the ‘three-year rule’ residency requirement, which stated that a citizen had to be resident in Germany for three years prior to the start of their course.

In Seeberger, a German who attended school in Germany, then moved to Spain with his family for his father’s work in the middle of secondary school, completed his secondary education in Spain and after some time qualifying to university in Spain, sought a grant to fund his studies in Spain from the German authorities. This was denied again on the ‘three-year rule’.

Both argued that Art 20 and 21 TFEU were contravened for impeding free movement, and the Court of Justice of the European Union (CJEU) was asked to clarify whether this ‘three-year rule’ was contrary to EU law.

AG Opinion

In her Opinion, AG Sharpston sought to explicate her perspectives on the meaning and justification behind integration and proportionality, particularly referring to the justification behind residency requirements often being the protection of national resources. It is questioned by AG Sharpston whether the consistent invocation of the unreasonable burden reasoning requires reconsideration. Beginning by eliminating the provisions inapplicable in order to conclusively consider the effect of suitable criteria, she then delivers her insightful comments regarding justifications, proportionality and interpretation of the ‘three-year rule’.

Evidently, the three-year rule is a restriction. Germany thus submits two justification objectives, one under the economic rationale, the other socially related. She separates the two and considers the legitimacy and appropriateness of both restrictions in a detailed analysis of each objective’s interpretation.

It is evident that AG Sharpston is unconvinced that Member States should simply lay out economic objectives based on avoiding unreasonable burdens on the financial resources of Member States. This was discussed in Bidar and Morgan and Bucher. She believes it is apt for the CJEU to perhaps guide Member States as to what may constitute reasonable or unreasonable burdens, as this highly variable concept is subject to an element of potential exploitation on the part of the protectionist Member States. Suggested is a thorough analysis of whether the burden truly risks interfering with the balance of Member State resources to avoid invoking protectionism behind a veil of valid justification. She then continues to distinguish an economic objective from an integration objective, which brings into play the political elements of a proportionality assessment.

The interplay between integration and economics as objectives of justifications becomes a sticky situation, but ultimately AG Sharpston aims to clarify whether it suffices to consider integration an objective on its own. There is an inconsistency if integration objectives are cited to justify rendering an economic objective proportionate. This is because choosing to require a degree of integration simply to meet budgetary concerns actually ignores the notion of being integrated.

She goes onto state the ‘three-year rule’ is far too restrictive given it requires uninterrupted periods of residence immediately prior to education, and whilst there is no direct mention of nationality, the inherent connection a national has renders it a difficult factor to ignore when considering proportionality. This is particularly relevant here, as both claimants are German. She opines there are certainly less restrictive measures possible, though interestingly does not suggest any outwardly. Though the ‘three-year rule’ is transparent, efficient and legally certain – the rationales behind Germany’s choice of restriction – this does not translate to it being necessarily proportionate.

Under the social objective put forward by the Germans, solidarity is a feature. Ultimately, AG Sharpston considers that the ‘three-year rule’ has little to achieve by means of social objectives given that the link between requiring citizens to reside three years prior to education and them remaining after their studies is tenuous at best. Again legal certainty, transparency and efficiency did not outweigh proportionality.

AG Sharpston answers the CJEU’s question in the positive: Art 20 and 21 TFEU would preclude the ‘three-year rule’ from preventing the claimants from being granted the funding needed for education outside their own home States. Whilst a simple question in effect, AG Sharpston has managed to delve deeper into the meaning and notion of proportionality in terms of what Member States use as justifications, deconstructing their generic excuses of integrationist and economic objectives to uncover what their argument really insinuates and striking them down by use of the famous tool, proportionality.