Steve Peers
It is a fundamental principle of EU law, as taught to every student of the subject, that the Commission has a near-monopoly on proposing new EU legislation - it is the ‘motor’ of EU integration. This near-monopoly is often called the Commission’s ‘right of initiative’. But does this right also imply a right to withdraw proposals? And if it does, are there any limitations to this power? These questions were addressed by the CJEU in a significant ruling.
Background
This case was about a proposed framework law governing ‘macro-financial assistance’ to countries outside the EU. This kind of assistance is intended to help non-EU countries facing serious financial difficulties, for example by helping them to meet upcoming loan repayments. Clearly, such assistance benefits the recipient countries’ economies, which indirectly helps EU businesses that export to those countries. It also undoubtedly strengthens the political bonds between those countries and the EU.
Prior to the Treaty of Lisbon, such aid was provided under the EU’s ‘residual powers’, now covered by Article 352 TFEU. However, the Treaty established a specific legal basis for the EU to create rules on providing macroeconomic support to non-EU states: Article 212 TFEU, which allows for legislation to be passed through the ‘ordinary legislative procedure’. The Treaty of Lisbon also introduced Article 213 TFEU, which enables aid to be given in urgent cases, bypassing the full legislative process.
In 2011, the Commission put forward a proposal for a ‘framework law’ on macro-financial assistance. This law would have empowered the Commission to decide which countries outside the EU should receive funding. The Commission’s decisions on this matter would be subject to a form of oversight known as the ‘examination procedure’, a variant of the ‘comitology’ rules. This procedure grants expert committees from Member States the authority to block draft decisions made by the Commission. The European Parliament (EP) has no significant role in this process.
The Commission’s proposals did not satisfy the EP or the Council. The EP suggested that the Commission’s decisions on which countries receive macro-financial assistance should be subject to ‘delegated acts’. These are Commission decisions that can be vetoed by either the Council or the EP. The Council, on the other hand, believed that each decision to grant aid should be subject to the ordinary legislative procedure. Negotiations commenced between the two institutions, and they eventually agreed that the ordinary legislative procedure should be used for this purpose.
The Commission fundamentally disagreed with this aspect of the EP/Council agreement, so it withdrew its proposal before any legislation could be passed. The Council reacted by taking the unusual step of suing the Commission. While ten Member States backed the Council’s decision, the EP – despite having a lot at stake – did not take sides.
The judgment
The Court’s judgment began by acknowledging that the Commission’s power to initiate legislation inherently includes the power to withdraw proposals. However, this power should not be seen as a ‘right of veto’ over the legislative process. Such an interpretation would undermine the principles of institutional balance and conferred powers. In essence, the Commission can withdraw proposals, but this power is not absolute.
The question then becomes: what are the limits to this power? The Court determined that the Commission must provide the EP and the Council with reasons for any withdrawals, backed up by “cogent evidence or arguments.” Decisions to withdraw should be open to legal challenges through actions for annulment. However, the Court deemed it sufficient for these reasons to be communicated to a Council working party and an EP/Council negotiation meeting.
Concerning the substantive grounds for withdrawing its proposal, the CJEU concluded that the amendment desired by the EP and Council would have altered a fundamental element of the proposal. Furthermore, the amendment would have been at odds with the objective of streamlining EU policy in this area. The CJEU also ruled that the principle of democracy had not been violated because the Commission’s right of initiative inherently allows it to withdraw proposals as long as the Council hasn’t taken action. Consequently, the Commission did not violate the principles of conferral of powers and institutional balance.
Finally, the Court addressed a separate issue: whether the way in which the Commission withdrew its proposal violated the principle of ‘sincere cooperation’ among EU institutions. The Court decided that the Commission could not be faulted for withdrawing its proposal at a very late stage in the Council/EP negotiations. This was because it was only at that point that it became clear the co-legislators would insist on using the ordinary legislative procedure for approving each macro-financial assistance decision. Furthermore, the Commission had attempted to find common ground with the other institutions and had put forward compromises. The Court’s analysis implies that the EP’s position (delegated acts instead of a comitology process) would not have substantially changed the proposal.
Comments
Firstly, what are the immediate implications of this judgment? The legislative process in this case failed, but the EU was still able to grant macro-financial assistance to non-EU states. In the absence of framework legislation on the matter, the EU has in practice been using individual legislative measures to assist each country – precisely what the Commission sought to avoid.
In principle, what is the correct procedure for such decisions? The CJEU seems to agree with the Commission’s view that efficiency is the most important factor. There are strong arguments for efficiency in the specific context of macro-financial assistance – payments often have to be made urgently and the non-EU country in question is often in dire straits. However, the Commission and the Court do not refer to this specific context, nor do they weigh the need for efficiency against the opposing need for full democratic oversight.
For example, one recent major recipient of EU macro-financial assistance has been Ukraine, and the EU’s relations with that country have been highly contentious. Ideally, there should be a full democratic debate about whether the EU should be supporting that country’s economy. This would allow those who sympathize with Putin’s Russia, or who have other reasons to criticize the Ukrainian government, to debate the merits of that assistance with those who support that government. Perhaps a good compromise would have been for the Commission to agree to make a full legislative proposal whenever a significant minority (say, a quarter of the Member States and/or a quarter of the MEPs) indicate a desire to debate the merits of giving macro-financial assistance to a particular third country.
Secondly, the broader consequences of this judgment relate to the relationship between the three main EU institutions. The judgment has procedural and substantive aspects. Procedurally, it appears quite easy for the Commission to justify withdrawing a proposal. It only needs to inform the EP/Council ‘trialogue’ (negotiation) meetings, or a Council working party, of its intention to do so. Here, the Court is essentially legitimizing these less formal aspects of EU governance. However, with respect, its approach is not persuasive. Since a legislative proposal affects the EP as well as the Council, simply informing a Council working party is not enough. In fact, even informing a trialogue committee is insufficient, as many MEPs and Member States are not represented there (the Council Presidency negotiates on behalf of all Member States represented in the Council).
More broadly, the Commission should have to publicly justify its withdrawals to the general public. While it usually does this when withdrawing proposals as part of its work programme, the principle of openness (enshrined in the Treaties) suggests that this should be a legal requirement, applicable to every instance of withdrawal. The best practice would be for the Commission to adopt a formal decision for each withdrawal, publishing it in the EU’s Official Journal, thereby upholding the principle of active transparency.
It is concerning that the Court views the EU system solely in terms of the institutions’ accountability to each other, rather than to the public. The Court’s dismissal of the ‘democratic principles’ argument is much too brief and fails to give that principle equal weight to – let alone greater weight than – the institutional rules outlined in the Treaty. A better approach would have been to interpret the Treaty’s silence on the withdrawal of Commission proposals in light of this democratic principle, emphasizing the vital role this principle gives to the EU institutions that have greater electoral legitimacy.
On the other hand, the Court does confirm that there needs to be judicial oversight of the withdrawal of Commission proposals. The use of the annulment procedure means that not only the Council but also the EP and individual Member States can sue the Commission for withdrawing a proposal. Other parties are likely to lack standing to do so, except in a limited number of cases where Article 263 TFEU allows them to challenge non-legislative acts. Challenging withdrawals through national courts seems impractical at first glance.
What are the substantive limitations on the Commission’s withdrawal of proposals? The CJEU suggests that there might be additional limitations after the Council has ‘acted,’ presumably referring to the Council’s adoption of its first reading position. Only a minority of EU legislative proposals get past this first reading, and in practice, half of those have already been agreed upon by the EP and the Council by that stage. It remains unclear what additional limitations might then exist, beyond those outlined in the Treaty (for instance, amending a Commission proposal after the first reading is easier in some cases). The Court may also take a different approach to non-legislative measures, or to those subject to a special legislative procedure.
So, let’s focus on the most common scenario – the withdrawal of a proposal for a legislative act under the ordinary legislative procedure before the Council adopts its first reading position. The Court did not suggest that a change in the essential elements of a Commission proposal was the only valid reason for withdrawing it. The Commission can presumably still withdraw proposals on other relevant grounds, particularly the most common ones: when the proposal becomes obsolete, or when it has no chance of being adopted.
However, the existence of judicial review means that the Commission’s judgment in this regard could be challenged. The Court might also have to clarify, in a future case, what constitutes a change in the “essential elements” of a proposal. This could arise, for example, when the EP and Council want to significantly broaden or narrow the proposal’s scope. There is no reason why the “essential elements” rule should apply only to cases where the objective is improving the efficiency of EU actions. There are many other potential objectives for EU action.
What other grounds for withdrawal exist? The judgment implies that the Commission cannot simply claim that it has changed its mind, otherwise, judicial review would serve no purpose. There must be valid reasons for the change of mind. Would a new Commission be sufficient justification? This is a pertinent issue considering the Juncker Commission recently withdrew a number of proposals (e.g., the ‘circular economy’ proposals). The reason given was that it had shifted its legislative priorities and wanted to completely restart the process. At first glance, because proposals can always be redrafted during the legislative process, this does not seem like a good enough reason to withdraw a proposal, especially given today’s judgment – and there is still time to bring an annulment action against these withdrawals. One might argue that a new Commission has more leeway to withdraw proposals, but this raises questions about its democratic mandate, particularly if the Commission President did not campaign on withdrawing the proposals in question.
Finally, it could be argued that this judgment has implications not only for the Commission but also for the ‘sincere cooperation’ between the EP and the Council during the legislative process. For instance, the EP and Council have been at loggerheads for years regarding a proposal for maternity leave. Recently, the EP has indicated a willingness to negotiate, which the Council has rejected. Meanwhile, the Commission has done little to try to mediate a compromise, instead resorting to threats of withdrawing the proposal if no agreement is reached. Can the EP sue the Council for being obstructive? Could it sue the Commission if it follows through with its threat to withdraw the proposal after having played no constructive role in the negotiations? If the EU institutions and Member States start to frequently exploit the opportunities this judgment creates, this kind of judicial intervention in the legislative process raises numerous important questions.
Barnard & Peers: chapter 3, chapter 5, chapter 8