27 June 2007

The End of Competition Part 2

More on the politics of the Brussels summit. I have found a press conference held by President Sarkozy which is illuminating and I am just translating the juicy sound bites here.

In his speech, speech the President made the following comments:
“we have obtained a major reorientation on the objectives of the Union. Competition is no longer an objective of the Union or an end in itself, but a means to serve the internal market.’

‘the place of public services in Europe has been recognised and consecrated by a protocol that specifies that they play a major role, that the Europeans are attached to them and that their organisation is first and foremost, for the Member States. It is for another place to place this in harmony with competition, as a means and not an end in itself.

In the Q&A this exchange is interesting:

Question: To return to the objectives of the EU, on competition and the protection of citizens: what do these changes mean exactly in the daily life of the French and or the Europeans?

Answer: This perhaps gives a little more humanity to Europe. Because as an ideology, as dogma, what did competition give to Europe? It has give less and less to the people who vote at the European elections, and less and less to the people who believe in Europe. There was perhaps a need to reflect. I believe in competition, I believe in markets, but I believe in competition as a means and not an end in itself. This may also give a different legal direction to the Commission. That of a competition that is there to support the emergence of European champions, to carry out a true industrial policy. ….

It was not a question of making an economic Treaty or a liberal Treaty and explain it to the citizen. It was a question of turning our backs to ideology, dogma ad naivety.

Therefore, of course we can consider this doing politics. But precisely because we are political leaders, and it is perhaps because we have not done enough politics in Europe that we find ourselves in a Europe that people do not recognise themselves in anymore. From this perspective, I put pressed, with my friends, that France and The Netherlands were not late, that what happened to us could happen to others. In fact I find that [our decision] is an extremely important awakening. We are in a country which voted ‘no’ and it was a way of saying to our colleagues and friends in Europe: ‘wake up, you must see things differently.’ We have shown that this was possible even among 27 [member states] without leaving anyone behind…

The Commissioner for competition did not quite see eye to eye with these assertions.

Statement by European Commissioner for Competition Neelie Kroes on results of June 21-22 European Council - Protocol on Internal Market and Competition
An Internal Market without competition rules would be an empty shell - nice words, but no concrete results.
The Protocol on Internal Market and Competition agreed at the European Council clearly repeats that competition policy is fundamental to the Internal Market. It retains the existing competition rules which have served us so well for 50 years. It re-confirms the European Commission's duties as the independent competition enforcement authority for Europe.
Now I would like to get back to the job. The Commission will continue to enforce Europe's competition rules firmly and fairly: to bust cartels and monopolies, to vet mergers, to control state subsidies. That is in the interests of our Internal Market. It is in the interests of European citizens and consumers, it is what Europe's business community quite rightly expects and deserves, and it is a firm foundation for Europe's prosperity, notably by ensuring fair conditions for international investment.

Reform of the EC Treaties

Some more clarity has emerged about the Treaty amendment. The official resource is the Presidency Conclusions of 23 June 2007. Essentially there will be a Reform Treaty that amends both the Treaty of European Union and the EC Treaty. The TEU will remain as named, and the EC Treaty will be called the Treaty for the Functioning of the European Union (TFEU). The Treaty will be ready by the end of 2007 and in force by, I think, 2009. Then the Community will be known as a Union for all its activities.

For competition lawyers the key changes are twofold.

First, the ‘end of competition’
The TEU will have a general article at the beginning about the ambitions of the Union (Article 3). This was supposed to contain some reference to undistorted competition, but it has now gone. However, I understand that in the TFEU there will still be an Article 3 (which lists the tasks of the Union) and this will include Art 3(1)(g) which states that one of the tasks is establishing a system where competition is not distorted.

Article 3(3) TEU is the section where I think the reference to competition was deleted. This is the wording as it stands (and apparently ‘undistorted competition’ should have followed after the ‘internal market’ phrase.

“The Union shall establish an internal market. It shall work for the sustainable development of Europe based on balanced economic growth and price stability, a highly competitive social market economy, aiming at full employment and social progress, and a high level of protection and improvement of the quality of the environment. It shall promote scientific and technological advance.”

The reference to competition is relegated to a Protocol on internal market and competition“The High Contracting Parties, considering that the internal market as set out in Article 3 of the Treaty on European Union includes a system ensuring that competition is not distorted
Have agreed that, to this end, the Union shall, if necessary, take action under the provisions of the Treaties, including under Article 308 of the Treaty on the Functioning of the Union."

Is the deletion of competition significant? If you read the current version of Article 2 EC (which lists the Community’s tasks) as it stands, there is no reference to competition there either. From this perspective competition was never a basic ‘task’ (old Art 2 EC) and is now not an ‘objective’ (new Art 3 TEU). So all those press comments that competition was removed after 50 years are wrong. Competition was never a key objective, only ever a job the Community had to do. Accordingly, the deletion from the draft is a political gesture so that President Sarkozy can tell the French public that the Reform Treaty, unlike the Constitution, is not about importing Anglo-Saxon capitalism. (The fact that the Constitution did not have competition in its aims either is conveniently ignored).

An alternative interpretation (as I suggested in the earlier post) is that the ECJ sees this as a way of rethinking its deontological approach and becomes less daring in extending the law in cases of ambiguity, and perhaps even begins to accept more public policy considerations such as those listed in Article 3(3). But then, as I said above, since there is no substantive change from the new and the old Treaty why should the court change its stance?

The protocol is a messy compromise – competition is ‘subsumed’ into the internal market (if you are familiar with the Guidelines on 81(3) you will see that subsuming is something which the Commission likes to do!) but I don’t get the reference to Article 308. Anyone care to explain? (The only reason I can come up with is that legislation under Art 308 can only pass if it is designed to reach the objectives of the EC and so while competition is not an objective, it is possible to invoke Art 308 to inject more competition in the EU). Has this been done in the past?

Second, a protocol on services of general interest
The current wording is below. There is so much verbiage on this topic but does it mean anything in practice? Article 16 so far seems to have had little impact. So, more pretty language of political value but scant legal interest.

Protocol on services of general interestThe High Contracting Parties, Wishing to emphasise the importance of services of general interest
Have agreed upon the following interpretative provisions, which shall be annexed to the Treaty on European Union and to the Treaty on the Functioning of the Union:
Article 1
The shared values of the Union in respect of services of general economic interest within the meaning of Article 16 EC Treaty include in particular:
- the essential role and the wide discretion of national, regional and local authorities in providing, commissioning and organizing services of general economic interest as closely as possible to the needs of the users;
- the diversity between various services of general economic interest and the differences in the needs and preferences of users that may result from different geographical, social or cultural situations;
- a high level of quality, safety and affordability, equal treatment and the promotion of universal access and of user rights;
Article 2
The provisions of the Treaties do not affect in any way the competence of Member States to provide, commission and organise noneconomic services of general interest.

22 June 2007

The End of Competition?

Breaking news, the EU's committment to 'undistorted competition' looks likely to disappear if the revised Treaty is agreed during the German summit. Excellent coverage in the peerless Financial Times suggests that this is President Sarkozy's doing (funny that, he is supposed to be a right-winger elected on a reform ticket) who was still upset by his clashes with the Commission when he tried to bail out French firms.

This could be significant because of the European Court often referring to the basic principles of EC Law found in the foundational articles in order to interpret EC Law, the so called teleological interpretation (purposive interpretation for the common lawyers). Surely the court cannot but be persuaded that if competition was an objective under the old Treaty, its disappearance indicates that the Court should depart from some of its basic principles. The Daily Telegraph reports fears that this chips away at one of the few good things the EC was actually good at.

However, according to the British (who apparently traded this concession for something else) this is just cosmetic, see Spiegel Online. This is also how the issue is seen by the Commission, who suggest that this would not affect the key role competition plays.

We will have to see the text of the Treaty as a whole before being certain of what this all means, but this goes to show how the pendulum can swing quite quickly from the Lisbon agenda and Mario Monti's DG Competition promoting competition and today's increased protectionism.