27 June 2007

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.


Mel Marquis said...

In partial response to the question posed by Professor Monti, there is an opinion of the Legal Service of the Council, dated 22 June 07, which is part of the background to the Protocol on internal market and competition. The clarification in the Protocol is primarily for the avoidance of doubt regarding the option to use Article 308 as a legal basis. In pertinent part, the opinion states: "The fact that, in a future Treaty, Article 3 listing the objectives of the Union would not contain a specific reference to 'a system ensuring that competition in the internal market is not distorted' would not, therefore, prevent the EU legislator to act in order:
− to 'establish an internal market' (future Article 3, paragraph 3), and
− that the activities of the Union 'shall include (…) the adoption of an economic policy
which is based (…) on the internal market (…) and conducted in accordance with the
principle of an open market economy with free competition' (future Article 4).
3) The future IGC may deem it appropriate, for reasons of transparency, to accompany the text
of the future Treaty by a Declaration stating that 'with regard to the establishment of the
internal market as set out in article 3 TEU, the Conference confirms that the Union will, if
necessary, take action under Article 308 to ensure that competition is not distorted'.
4) The future IGC might also choose to add a Protocol to the future Treaty, in order to confirm
the above. Such a Protocol would be in conformity with the Treaty but legally superfluous."

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