Five constitutional principles of EU law

2015-12-28

This post is archived. Opinions expressed herein may no longer represent my current views. Links, images and other media might not work as intended. Information may be out of date. For further questions contact me.

Update May 9, 2016: For the most up to date analysis, see my free book Little Guide to the European Union, in particular the chapter about the distribution of competences in the EU.

For the time being, the European Union is not founded on a constitution but on two international treaties, namely (i) the Treaty on European Union, and (ii) the Treaty on the Functioning of the European Union. While these are never referred to as a “constitution” they do in fact provide for a primary corpus of law that incorporates constitutional principles.

Given the nature of inter-state covenants as agreements between sovereign states, the grounds of legitimation for the Union are not to be found in the very status of its primary law but in its actual content. The nation states that have signed and ratified the treaties underpinning the EU have made a certain innovation in international affairs: that of broadening the scope of international treaties to the point where their provisions have no practical difference from those of a constitution, i.e. a codified corpus of primary law that underpins a republic.

For the purposes of this article, we will adopt a limited view of constitutionalism, to encompass only those principles that govern (a) the grounds for Union-level legitimacy, and (b) the relationship between the supranational and the national levels. In this light, “constitutional principles” refers to a set of rules concerning the abstract structure of the polity, rather than the qualities and scope of policies pursued by it.

The principles we will present and comment upon one-by-one are the following:

1. conferral
2. subsidiarity
3. proportionality
4. division of powers (institutional independence)
5. delegated sovereignty

The basics of a supranational polity

1. The principle of conferral

The grounds for the legitimacy of Union-level politics are shaped by the Member States. Together they form the constitutional subject of this order. The nation states that are the contracting parties of the European Treaties have agreed to confer to supranational institutions a set of competences in order to achieve objectives they have in common. This is the overarching theme of the European Union as is stipulated in Article 1 of the Treaty on European Union (TEU).

The separation and distribution of competences between the Union and the Member States follows a three-fold classification: (1) exclusive, (2) shared, (3) supportive. Each of these classes is explicitly referred to in the Treaty on the Functioning of the European Union (TFEU), in Articles 3, 4, and 6 respectively.

The law-makers’ approach in the TFEU is enumerative and descriptive, as they document specific areas of policy that fall within those three classes.

Exclusive competence for the EU covers (Article 3.1 TFEU):

(a) customs union; (b) the establishing of the competition rules necessary for the functioning of the internal market; (c) monetary policy for the Member States whose currency is the euro; (d) the conservation of marine biological resources under the common fisheries policy; (e) common commercial policy.

The EU also maintains exclusive competence over international agreements that are deemed necessary for enabling it to perform its internal tasks.

By “exclusive” we refer to those areas of policy where the Union level takes precedence over the Member State level. If the EU were a federation or a nation state, these would be the federal or the nation-wide powers.

Shared competence between the EU and the Member States concerns (Article 4.2 TFEU):

(a) internal market; (b) social policy, for the aspects defined in this Treaty; (c) economic, social and territorial cohesion; (d) agriculture and fisheries, excluding the conservation of marine biological resources; (e) environment; (f) consumer protection; (g) transport; (h) trans-European networks; (i) energy; (j) area of freedom, security and justice; (k) common safety concerns in public health matters, for the aspects defined in this Treaty.

By “shared” we refer to a sphere of policies where Union initiatives have to interoperate with national ones. Neither side can take actions that prejudice the others’ capacity to perform its function. As will be examined in the following subsections, the degree to which competences are shared is governed by the principles of subsidiarity and proportionality.

Supportive competence is maintained by the EU on issues that are perceived as primarily national, namely (Article 6 TFEU):

The Union shall have competence to carry out actions to support, coordinate or supplement the actions of the Member States. The areas of such action shall, at European level, be: (a) protection and improvement of human health; (b) industry; (c) culture; (d) tourism; (e) education, vocational training, youth and sport; (f) civil protection; (g) administrative cooperation.

While the EU only has an ancillary role on these affairs it should not be inferred that it has no means at its disposal for influencing national decisions. There have been instances where EU law was interpreted in such ways as to encompass cases that prima facie did not seem to fall under its scope of authority. This is currently underway with European Competition Commissioner Margrethe Vestager, who tries to address tax dodging of multinational corporations by considering it a matter of unfair competition (where the EU is competent), rather than one of taxation (which is a national prerogative).

To offer a theoretical example, while industry may be a national competence, no individual Member State may deviate from—or even contradict—the general framework of EU law on, say, environmental policy (a shared competence), or competition policy (an exclusive competence).

Thus, even though the principle of conferral is aimed at drawing clear delineations between the Union and the Member States, there are other factors and legal principles involved that, once accounted for, inevitably obfuscate the demarcation line between what exactly the Union level can and cannot do. This is especially true since Article 4 TEU concludes with this sentence:

The Member States shall facilitate the achievement of the Union’s tasks and refrain from any measure which could jeopardise the attainment of the Union’s objectives.

[Correction/addition to December 21 article on the principle of conferral: I had not acknowledged the fact that the distribution of competences was laid down in TFEU, while I gave the impression that the classification was implicit. Such omission or the resulting misinformation was not intentional and, I believe, had no impact on my subsequent comments on the principle of conferral. My sincere apologies nonetheless.]

2. The principle of subsidiarity

Subsidiarity is stated together with conferral and proportionality in Article 5 of the Treaty on European Union. Protocol No. 2 of the same Treaty “On the application of the principles of subsidiarity and proportionality” establishes the relevant criteria.

Subsidiarity is the principle by which decision-making for any given topic should take place as close to the citizen and to locality as possible. In practice, it means that purely national issues are better dealt with at the national level, while those with a cross-border or international dimension are best addressed at the Union level.

Given the classification of the separation and distribution of competences stemming from the application of the principle of conferral, subsidiarity is accounted for in areas of policy that are the shared competence of the EU and its Member States. While the Treaties do provide an exhaustive list of issues, actual cases present a higher degree of complexity that requires an interpretation of the Union’s primary law. Subsidiarity is then enshrined in the Treaties for the purposes of guiding and framing this exercise.

To determine whether the matter at hand and/or some of the elements thereof is to be addressed at Union or national level, a set of questions is asked (a “subsidiarity test” as it were):

• Does the issue have cross-border ramifications or origins that render any one Member State incapable of fully addressing it?
• Should something be done or not? Is action or inaction contrary to the stated ends of the Union as envisaged in the Treaties?
• Is Union-level action preferable to a national one, by virtue of the advantages it offers?

What this usually entails in terms of the legislative procedure for shared competences is that the European Commission—the institution initiating the law-making process in the EU—makes proposals for directives rather than regulations. The difference between the two is that the latter have universal application across the Union, without any further input from national parliaments, while the former need to be transposed into national law with some additions from Member State legislators.

National parliaments maintain the right to block draft legislative acts if they assert that the principle of subsidiarity is not observed. According to the Protocol on the application of the principles of subsidiarity and proportionality, within eight weeks from the publication of the first draft each national parliament can issue a reasoned opinion contesting the respect for the principle of subsidiarity. Each parliament has two votes at its disposal (one for each chamber if bicameral). If the reasoned opinions submitted cover at least one third of the votes then the proposed piece of law needs to be revised.

It is not clear whether this mechanism for parliamentary control works as intended, also due to the fact that the questions to the subsidiarity test can almost always be answered following the “more Europe” rationale. At first, the reasoned opinion has to be on the justification and impact assessment provided by the Commission. Secondly, the time frame for issuing an opinion seems rather short for the purposes of involving multiple national parliaments. Thirdly, there is no fixed and effective platform for national parliaments to coordinate their efforts and form majorities. Besides, that would add extra workload to an already cumbersome legislative procedure, assuming other factors to be constant.

Perhaps then, the principle of subsidiarity is necessary but not sufficient for determining the specifics of any given action within the context of shared competences. A formalised setup could be more appropriate. For those issues that stand at the intersection of the supranational and the national levels, which are genuinely “shared” between the Union and the Member states, such as on economic governance, there could be a purpose-specific inter-parliamentary entity that would bring together delegates both from the national parliaments and the European Parliament. This would guarantee a permanently stronger role for national parliaments, better democratic legitimacy from Member States for issues that directly affect them, while also providing scope for the Union-level input from Members of the European Parliament.

For the time being, subsidiarity is a sound principle in an otherwise limited or incomplete framework. In fact, decisions tend to be adopted in a centralised-and-centralising, top-down fashion, and as far away from the citizen as possible, since it is always expedient to justify any action, or at least a significant number of its elements, as best suited for a Union-wide approach.

3. The principle of proportionality

This is the vaguest of the principles and is mentioned together with that of subsidiarity, both in Article 5 TEU and in Protocol No. 2 of that Treaty. Where it differs from subsidiarity is in its scope: it applies an overarching boundary to the exercise of powers by the European Union, by making them employ means and pursue intermediate ends that are in line with the ultimate objectives of the Union as envisaged in the Treaties.

Given that proportionality is not decoupled from subsidiarity, we may suggest that it offers another basis for either national parliaments to issue a reasoned opinion in their ex ante review of a draft legislative act, or for the Court of Justice of the EU to offer its own judgement in an ex post review of an adopted piece of law.

At any rate, the inherent vagueness of the principle of proportionality renders this a fallback clause, a safeguard for when nothing else applies, rather than the default mode of determining the distribution and separation of competences and elements thereof in the EU.

4. The principle of the division of powers

The European Treaties establish seven institutions, each performing a distinct function. Those are:

• deciding executive: the European Council;
• implementing executive: the European Commission;
• legislative: the European Parliament representing the citizens and the Council of the European Union representing the Member States;
• judiciary: the Court of Justice of the European Union (CJEU);
• monetary: the European Central Bank (ECB);
• auditory: the European Court of Auditors.

Connatural with the division of powers is the “institutional independence” of institutions from each other and from external political control. For instance, the European Council cannot instruct the Court of Justice of the EU to issue judgements that favour its own political agenda. The Commission or any of the two legislative institutions cannot set conditions for the ECB on the conduct of monetary policy, and so on.

Institutional independence does not, in principle, mean that an institution can act arbitrarily. They all have their own mandate, while they are bound by the general principles of EU law, such as subsidiarity and proportionality. It thus is the case that independence of this sort attains a more limited meaning to signify that of an “operational” or “functional” autonomy that is, nonetheless, meant to work in concert with the other parts of the Union in pursuit of its general objectives.

This can however create tensions between the purpose of an institution and the overall ambition of the Union, such as when the ECB is supposed to cling on to its rather rigid mandate of pursuing a medium-term inflation target of “below but close to 2%” in spite of what is actually happening in the real economy, all while the objective of the Union, as stipulated in Article 3 TEU, aims for such laudable goals as “full employment”, to “combat social exclusion”, promote “social justice and protection”, “solidarity between generations”, “economic, social and territorial cohesion”.

It is understandable that these broad concepts are subject to interpretation. It also is true that a polity sets priorities and faces trade-offs within a given set of circumstances. Constitutions or, in this case, the European Treaties, often include provisions that may contradict one another in a certain state of affairs. That is so because primary law is supposed to be generic, setting the general framework, the abstract structure—the “practical morality” as it were—of the polity. It is up to secondary law and to the courts to apply criteria for the specific issues.

Still, the fact that the ECB in particular is on the same footing as the three traditional branches of government, is problematic due to the actual “caretaker” role of a central bank. A central bank is supposed to play a supportive role in meeting the general objectives of the polity. It is there to ensure that the regulation of the economy insofar as monetary and financial affairs are concerned is fully aligned with the overarching goals of the state. It is hierarchically inferior to the executive, the legislative, and the judiciary, for it has to work within the boundaries they jointly draw. A similar argument can be propounded for the Court of Auditors, though since its actual power is far less significant than that of the ECB, there is no urgency to alter its status.

The institutional independence of the European Central Bank ought to be explicitly bound by a “flexibility clause” that would, at the very least, enable the European Council to set context-dependent and transient guidelines when the prevailing conditions call for emergency action. A broad set of scenarios could even be enshrined in the Treaties, such as the power to temporarily set an upper limit to the unemployment rate and prioritise full employment over price stability.

[Please note that the bifurcation of the executive into “deciding” and “implementing” is my own interpretation, based on the particularities of the European Council’s powers and how that institution shapes the intermediate ends pursued by the Commission. The European Treaties do not stipulate that the European Council has any “executive” functions. For more on why I think a narrow reading remains oblivious to the actuality of things, please read/download my free ebook: A Handbook on the European Union.]

5. The principle of delegated sovereignty

Article 50 TEU offers the right to Member States to withdraw from the Union. This actually means that, by having joined the EU, nation states have divided and subsequently transferred part of their sovereignty to the supranational level, without however forfeiting it. At any point in time, a nation state may choose to reclaim its sovereignty.

While this Treaty provision may seem to establish a rather loose bond between the Member States and the Union, the fact is that for this right to be actualised the Council of the European Union has to offer its approval following the adoption of a decision by qualified majority, and after having received the consent of the European Parliament. In practice, no Member State can leave the Union unilaterally, while the Council holds the right to object to any given exit if that would undermine the common good.

Article 50 TEU has not been used to date, making an judgement on it purely theoretical. To offer a realistic though still imaginary scenario, let us consider the case of Greece during the summer of this year. The second bailout programme was expiring, the Greek government was short on funds, while it would soon have to pay back an official creditor, namely the ECB, which held Greek sovereign bonds from its Securities Market Programme at the start of the euro crisis. At the time, a renegade Greek government could have asserted its sovereign right to withdraw from the Union on grounds of continued EU membership being a hindrance to the well-being of its citizens and, hence, contrary to its constitution. The government would assume that Article 50 TEU could be used as a tool for leveraging its negotiating power; a means of blackmail that is. Even in such an extreme case, the EU could stand firm, since an EU-exit would require the consent of the Council, something that would not happen if the other governments were suspicious of Greece’s intentions.

What is important to draw from Article 50 TEU and, perhaps, what many a citizen have not quite recognised, is that national sovereignty, understood in its traditional—and largely outdated—sense as absolute, has long been lost and replaced by a much more limited version of sovereignty, one bound by an over-encompassing framework of general norms, rules and regulations (international law, such as Human Rights, also limits national sovereignty). To that end, “national sovereignty” can only refer to those competences where the EU has only a supportive role to play (as per the principle of conferral). Even then, no Member State can consistently deviate from the legal order of the Union, while there are provisions for penalising a non-complying government, such as Article 7 TEU.

Lessons from the EU’s constitutional order

What we can learn from this overview of the five constitutional principles of European Union law is the following:

• the European Treaties are not referred to as a “constitution” yet they exhibit all of the features of a codified corpus of primary law; an actual constitution for the EU could have the exact same provisions with the term “constitution” being a matter of symbolism;
• the European Union is designed like a federation, though it is for all intents and purposes the “state of its states”, since its source of legitimacy is found in the principles of conferral, subsidiarity, and proportionality;
• the only direct input legitimacy in the Union is provided to the European Parliament, whose powers are still limited in certain areas due to the overall limitations of the EU on such issues as Union-wide taxation (no competence whatsoever), or the right to maintain its own fiscal capacity and manage its genuine “own resources” (currently all EU funds are provided by the Member States in a grand bargain known as the Multi-annual Financial Framework);
• the EU has great potential power, even though the principle of conferral is meant to limit its authority to an exhaustive list of competences;
• a more effective and formalised platform is needed for legislating on areas of policy that stand at the intersection of the supranational and the national levels; the current system of national parliaments issuing reasoned opinions against draft legislative acts is rather limited for the purposes of striking a balance between Union and national legitimacy over competences that are genuinely “shared”, such as economic governance;
• institutional independence, an otherwise sound principle, ought to have a different scope of application for entities that perform ancillary or regulatory functions, such as the European Central Bank, which should be hierarchically inferior to the three traditional branches of government (executive, legislative, judiciary), at least in emergency cases that call for exceptional measures;
• within the context of EU law, national sovereignty, understood as “absolute”, is out of sync with the times and the actuality of the Union; it is, in other words, an illusion.