EU Law Blog

Failure of the Constitutional Treaty in a Comparative Perspective: Article by Cheryl Saunders

Professor Cheryl Saunders of the Melbourne Law School has written a really interesting article on the failure of the Constitutional Treaty from a comparative perspective. Although the Reform Treaty has taken over, the article remains topical and of considerable interest.

Here is what the abstract states :

The failure of any constitution-making process is deeply disappointing for some and a source of satisfaction for others. The satisfaction of the latter may be short, or at least not long, lived, however, if it subsequently turns out that the changes were necessary, or even demonstrably useful. Initial failure in a constitutional project is relatively common, for reasons that range from the difficulty of the process to the novelty and perceived significance of the issues at stake. Experience suggests, however, that, at least where the rationale for the constitutional proposals was sufficiently soundly based, failure may not be the end of the story. It follows that it makes sense to take stock after such an event: to identify what is lost, that was of value; to determine what, if anything, might be improved, if another constitutional moment presents itself; and to consider whether constitutionalisation should be attempted again, or whether other mechanisms can be used instead.

You can download it from the SSRN site here.

Really, this article must be read by all with an interest is comparative constitutional law and the evolution of the EC.

Citizenship, Student Grants and Country of Origin Impediments: Joined Cases C-11/06 and C-12/06

The Court of Justice has handed down a judgment in Joined Cases C-11/06 and C-12/06 Morgan an Bucher that is so exciting that we can barely contain ourselves. It really does reward reading and so we should just suggest you go and read it for yourselves.

Here's a bit of an introduction to whet your appetite for it. The Court held that a national law that makes the award of education and training grants for studies in another member State subject to the condition that those studies should be a continuation of studies pursued for at least one year in the member State awarding the grant is liable to deter citizens of the Union from making use of their freedom of movement and is thus contrary to Articles 17 EC and 18 EC.

Ms Morgan, a German national, moved to Great Britain where she worked for a year as an au pair before starting her university studies in England, for which she applied to the German authorities for a grant. Her application was rejected because, under German legislation, the grant was subject to the condition that the course of study should constitute a continuation of education or training pursued for at least one year in a German establishment.

Ms Bucher, also German, lived in Bonn until she decided to move to Düren, a German town close to the Dutch border, and pursue a course of study in Heerlen, in the Netherlands. She applied to the authorities in Düren for a grant. She was refused because she was not ‘permanently’ resident near a border as required by the German legislation.

The Court of Justice held that while member States remain competent to establish a system of grants for the pursuit of education, they must ensure that if students pursue their education in another member State, they must ensure that the detailed rules for the award of those grants do not create an unjustified restriction on freedom of movement. In the present case, German legislation imposed a two fold obligation on the receipt of a grant for study abroad : First, the applicant for a grant must have attended an education or training course for at least one year in Germany and second, the applicant must continue only that same education or training in another member State. The Court held that on account of the personal inconvenience, additional costs and possible delays which it entails, the German legislation is liable to discourage citizens of the Union from leaving Germany in order to pursue studies in another member State. It therefore constitutes a restriction on freedom of movement for citizens of the Union.

The Court recalled that recalled that national legislation of a member State which places certain of its nationals at a disadvantage simply because they have exercised their freedom to move and to reside in another ember State constitutes a restriction on the freedoms conferred by Article 18(1) EC on every citizen of the Union (see Case C‑406/04 De Cuyper, paragraph 39; Case C-192/05 Tas Hagen and Tas, paragraph 31; and Case C-76/05 Schwarzand Gootjes-Schwarz, paragraph 93). The opportunities offered by the Treaty in relation to freedom of movement for citizens of the Union cannot be fully effective if a national of a member State can be deterred from availing himself of them by obstacles placed in the way of his stay in another Member State by legislation of his State of origin penalizing the mere fact that he has used those opportunities (see, to that effect, Case C‑224/98 D’Hoop, paragraph 31; Case C‑224/02 Pusa, paragraph 19; and Schwarz and Gootjes‑Schwarz, paragraph 89).

Interestingly, the Court added that that consideration is particularly important in the field of education in view of the aims pursued by Article 3(1)(q) EC and the second indent of Article 149(2) EC, namely, inter alia, encouraging mobility of students and teachers (see D’Hoop, paragraph 32, and Case C-147/03 Commission v. Austria, paragraph 44).

There's a lot, really a lot that can be written about this judgment. It shows for one thing how real, effective and far reaching is the concept of a single European market for education.

Free Movement of Capital, Shareholder Rights and Volkswagen Law: Case C-112/05

The Court of Justice has handed down an important judgment in Case C-112/05 Commission v. Germany on free movement of capital and restrictions on shareholder rights in the so-called "Volkswagen Law" in Germany.

Germany enacted legislation in 1960 (partly) privatizing Volkswagen. The legislation capped the voting rights at 20% even if a shareholder exceeded that holding, fixed a blocking minority at 20% and gave the German Federal State and the Land of Lower Saxony each the right to appoint two representatives to the supervisory board.

The Commission considered that those provisions of the 1960 law restricted the free movement of capital in a manner contrary to Article 56 EC as well as the freedom of establishment guaranteed by Article 43 EC.

The Court of Justice held that the restrictions placed on shareholder rights in Volkswagen were contrary to Article 56 EC on the free movement of capital. It held that while the EC Treaty did not define ‘movement of capital’ within the meaning of Article 56(1) EC, it has previously recognized the nomenclature set out in Annex I to Council Directive 88/361/EEC of 24 June 1988 for the implementation of Article 67 of the Treaty [article repealed by the Treaty of Amsterdam] as having indicative value. Movements of capital within the meaning of Article 56(1) EC therefore include direct investments, i.e. investments of any kind undertaken by persons and which serve to establish or maintain lasting and direct links between the persons providing the capital and the undertakings to which that capital is made available in order to carry out an economic activity (see, Case C‑446/04 Test Claimants in the FII Group Litigation, paragraphs 179 to 181, and Case C‑157/05 Holböck, paragraphs 33 and 34).

The Court held that the capping of voting rights at 20% and the fixing of the blocking minority at 20% taken together enable the German Federal State and the Land of Lower Saxony to exert considerable influence of Volkswagen beyond that which they could exert under general company law. That considerable influence is liable to deter investors from other member States.

The Court also found that the right granted to the German Federal State and the Land of Lower Saxony to appoint two representatives to the supervisory board enables them to exert considerably more influence than their actual level of shareholding would allow normally which thus reduces the influence of other shareholders. That too is liable to deter foreign investors.

The Court of Justice stated that restrictions on the free movement of capital could be justified under Article 58 EC. But it held in this case that the German government had advanced no viable justification for the restrictions.

Rather oddly the German government claimed that the privatization legislation of 1960 was not a state measure and thus not caught by Article 56 EC. It claimed that the 1960 law reproduced an agreement which should be classified as a private law contract. The Court would have none of that and held that the fact that the agreement has become the subject of a Law suffices for it to be considered as a national measure for the purposes of the free movement of capital. It concluded rather tartly that the exercise of legislative power by the national authorities duly authorized to that end is a manifestation par excellence of State power.

The Court dismissed the action as regards Article 43 EC because the Commission put forward no arguments to substantiate that claim.

Jacco Bomhoff on Case C-98/06 Freeport

Jacco Bomhoff over at the Comparative Law Blog - that we admire and recommend - has written a really interesting and thought provoking post on the Court of Justice's recent judgment in Case C-98/06 Freeport. We noted it briefly here.

You can read that post here. Scroll down until you find the post of Wednesday, October 17th 2007.

Reform Treaty Agreed

An agreement has been reached at the informal meeting of the Heads of State and of Government in Lisbon.

As part of the package, the following texts were approved :

A protocol 9a on the Decision of the Council Relating to the Implementation of Article 9c(4) of the Treaty on European Union and Article 205(2) of the Treaty on the Functioning of the European Union between 1 November 2014 and 31 March 2017 on the one hand, and as from 1 April 2017 on the other. You can find that document here.

Note to the authors of that protocol : "Functioning" is spelt with one "n" in English.

A declaration on Articles 9c(4) of the Treaty on European Union and Article 205(2) of the Treaty on the Functioning of the European Union. That is available in all languages except English. That's actually quite important as it sets out a further system for a blocking minority in qualified majority voting.

A Declaration in relation to (sic) the delimitation of competences. That's available here.

A new version of Article 9a of the Treaty on European Union on the composition of the European Parliament. In plain English that means the number of seats. There is a Declaration that states that the additional seat in the European Parliament will be attributed to Italy.

There's a Declaration ad Article 222 of the Treaty on the Functioning of the European Union on the number of Advocates-General in the Court of Justice. The Declaration states that if, in accordance with Article 222, first subparagraph, of the Treaty on the Functioning of the European Union, the Court of Justice requests that the number of Advocates- General be increased by three (eleven instead of eight), the Council will, acting unanimously, agree on such an increase.
In that case, the Conference agrees that Poland will, as it is already the case for Germany, France, Italy, Spain and the United-Kingdom, have a permanent Advocate-General and no longer take part in the rotation system, while the existing rotation system will involve the rotation of five Advocates-General instead of three. That Declaration can be downloaded here.

Last but not least, a Declaration ad Article 9e of the Treaty on European Union that deals with the appointment of the High Representative of the Union for Foreign Affairs and Security Policy. And that is here.

Here's a link to a neat web page setting out a timeline with links on institutional reform. It would be even neater if it actually worked (the web page and links, that is).

Professional Secrecy, Presumption of Innocence and the Decision to Publish a Decision: Case T-474/04

It's a litigious world out there. Even a decision to publish a decision can be the object of an action for annulment. And be annulled, as in Case T-474/04 Pergan Hilfsstoffe für industrielle Prozesse GmbH v. Commission.

In its judgment in Case T-474/04 the Court of First Instance annulled a decision of the Commission, taken by the antitrust Hearing Officer, to publish a decision finding antitrust violations containing references to the applicant, Pergan.

That sounds a bit weird. So here's the story. The Commission took a decision on 10 December 2003 (the peroxides decision) imposing fines on five undertakings for their participation in cartels on the market for organic peroxides. But the Commission did not fine Pergan nor did it find that it had breached the antitrust rules in the operative part of the decision. The Commission found that the proceedings against Pergan were time barred and that there was no need to refer to Pergan's participation in the infringement in the operative part of the peroxides decision, or to address the decision to it. The Commission did refer to Pergan in the grounds of the decision and described its alleged role in the cartels.

The Commission informed Pergan of the decision and sent it a copy informing it of its intention to publish a non-confidential version. Pergan then requested that all references to it be removed from the version to be published. That request was submitted to the Commission’s hearing officer. The hearing officer refused to remove from the definitive version the majority of the references made to Pergan on the ground that they were not business secrets.

Pergan then applied to the Court of First Instance to have the hearing officer's decision annulled.

The Court of First Instance agreed with Pergan and annulled the decision.

It held that the Commission had applied the obligation to respect professional secrecy in Article 287 EC too narrowly. The scope of that obligation went beyond protecting business secrets. According to the Court of First Instance, the protection of professional secrecy encompasses the principle of presumption of innocence. That presumption precludes any formal finding and even any allusion to the liability of an accused person for a particular infringement in a decision bringing the administrative procedure to an end, unless that person has been able to challenge the substance of that decision. Because the operative part of the peroxides decision did not refer to it, Pergan could not and in fact did not challenge the peroxide decision itself.

The Court further held that, since the Commission’s findings relating to an infringement committed by an undertaking are capable of infringing the principle of the presumption of innocence, those findings must, in principle, be regarded as confidential as regards the public, and therefore as being of the kind covered by the obligation of professional secrecy. That principle stems from the need to respect the reputation and dignity of the person concerned as that person has not been finally found guilty of an infringement (see, by analogy, Case T‑15/02 BASF v. Commission , paragraph 604). The confidentiality of such information is confirmed by Article 4(1)(b) of Regulation No 1049/2001, which provides that information, whose disclosure would harm the protection of privacy and the integrity of the individual, is to be protected.

Cacophonic outpouring on globalization

Deepak Lal (when does he get a Nobel Prize ?) complains in his wonderful recent book "Reviving the Invisible Hand: The Case for Classical Liberalism in the Twenty-First Century" of:

the cacophony of outpourings on globalization by sundry sociologists, philosophers, and political scientists as well as some economists" (p. xi)

And here's a prime specimen of such an outpouring from the Commission in its Communication entitled "The European Interest: Succeeding in the age of globalisaton" which is a "contribution to the October Meeting of Heads of State and Government". Here's an extract (reproduced exactly, with no attempt to sort out the grammar and style):

The EU must be in a position to present to citizens with a compelling vision of how a global Europe is adapting to new needs while protecting their interests, reforming its economic and social governance to ensure continuing prosperity, solidarity and security for the next generation as well as today's citizens. Meeting challenges of this scale can only be done effectively by making the most of the partnership between Member States and the EU level. Active involvement and a sense of stronger ownership by all actors are prerequisites for a successful Lisbon strategy. It will require a concerted commitment to engage in a capable and responsive communication strategy with EU citizens.

That surely makes you want to read the rest, doesn't it ?

Broad interpretation of Art. 6 §1 of Reg. 44/2001: Case C-98/06

The Court of Justice has given a fairly broad interpretation of Article 6 § 1 of Regulation 44/2001 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters in Case C-98/06 Freeport.

Article 6 § 1 of regulation 44/2001 provides :

"A person domiciled in a Member State may also be sued:
1. where he is one of a number of defendants, in the courts for the place where any one of them is domiciled, provided the claims are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings;"

The question arose whether a defendant "A" can be sued in the court in which defendant "B" is being sued when the action against "A" is contractual but the action against "B" is tortious, there being no contractual relationship between the plaintiff and "B".

The Court of Justice held that Article 6 § 1 could be applied even though the claims brought against a number of defendants have different legal bases.

The Court also held that Article 6 § 1 applies where claims brought against different defendants are connected when the proceedings are instituted, that is to say, where it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings, without there being any further need to establish separately that the claims were not brought with the sole object of ousting the jurisdiction of the courts of the member State where one of the defendants is domiciled.

Let's hope that the folks over at the wonderful Conflict of Laws blog will analyze the judgment too.

Measures against terrorists, transfer of property and references to national law: Case C-117/06

In its judgment in Case C-117/06 Mölendorf the Court of Justice adopted a strict interpretation of Council Regulation (EC) No 881/2002 of 27 May 2002 imposing certain specific restrictive measures directed against certain persons and entities associated with Usama bin Laden, the Al-Qaida network and the Taliban.

What happened was this. The Mölendorfs owned buildings and land in Berlin. In December 2000, they agreed by notarially authorised instrument to sell that property to a group of three buyers. The agreement also provided that the sale price had to be paid to the sellers before final registration of the transfer of ownership in the Land Register. But then, final registration of the transfer of ownership was refused by the competent authority in Germany because one of the three buyers was on the list of persons subject to freezing of funds in accordance with Regulation 881/2002 because of their association with Usama bin Laden, the Al-Qaida network or the Taliban.

The question was posed whether Regulation No 881/2002 and in particular its Article 2 §3 prohibits registration of the transfer of ownership to a buyer who, after conclusion of the contract of sale, has been placed on the list set out in the Annex to that regulation.

The Court of Justice held that the Regulation does indeed prohibit the registration of the transfer of the land.

The Court referred to German property law which was applicable to the transaction in question. It found that under that law ownership of real property cannot be acquired directly as a result of a contract recorded by a notary of sale between the seller and the purchaser. The two parties must conclude an agreement that ownership is to be transferred and for that transfer to be registered in the Land Register for title to the property to pass to the purchaser. Without that registration title does not pass.

The Court of Justice held that real property is an economic resource which, under Regulation 881/2002, must not be made available to persons on the list. Final registration in the Land Register means, under German law, that the property is made available to the buyer, since, according to the applicable law, it is only after final registration that the buyer acquires title to the property and can mortgage it.

The practical consequence is that the sellers, who have received the purchase price, must reimburse the purchasers in accordance with German law. The Court held that the reimbursement in those circumstances was not caught by Regulation 881/2002.

Finally, the Court pointed out any issue of fundamental rights concerned the indirect effect of Regulation 881/2002 and the reimbursement under national law of the purchase price. Thus, as regards the application of Regulation No 881/2002, in accordance with settled case-law, the requirements flowing from the protection of fundamental rights within the EC legal order are also binding on member States when they implement EC rules. Consequently they are bound, as far as possible, to apply the rules in accordance with those requirements (see, Joined Cases C‑20/00 and C‑64/00, Booker Aquaculture and Hydro Seafood, paragraph 88).

President of Court of First Instance gives Interview

President Jaeger, the new President of the Court of First Instance, was interviewed by Stephanie Bodoni, who is to the Court of Justice what Pulitzer Prize winning Linda Greenhouse is to the Supreme Court.

You can read the interview here.

President Jaeger's main preoccupation is to reduce the time taken for the Court of First Instance to hand down its judgments, while maintaining quality. As noted earlier, the Court's statistics show that the average duration of a case is 27.8 months. In order to help speed cases along, the Court of First Instance is now divided into eight, instead of five, chambers.

He made two points about antitrust law. First, he stated he was not in favor of creating a separate, specialized "competition tribunal". He is thus taking a line similar to that of the British House of Lords EU Select Committee report we had noted previously. Second, he made clear that the Court of First Instance did not make antitrust policy but left that to others.