Magical Formula

Following the example of Peter Lindseth, I thought I'd also copy/paste my reply to Kenneth Anderson's question on Opinio Juris:

Part 1:

Kenneth,

I’m not sure that I understand what you’re looking for. Obviously there is analysis like the one mentioned by my – let’s go with colleague – prof. Maduro above. The most famous one in recent weeks is by Joshka Fischer, also on Project Syndicate:

http://www.project-syndicate.org/commentary/fischer67/English

Such analysis is not uniquely the province of jurists; when you’re re-writing a constitution, you can do whatever you like as long as it is legitimate. And legitimacy is a political issue, not legal. What European law specialists can do is point out where there is and is not a need for a Treaty change. Behind closed doors, that’s what the Council has Mr. Legal for (the successor to Jean-Claude Piris, who actually wrote the Lisbon Treaty, in the sense of turning the political agreement into legal language). However, for many of the main proposals on the table today, it is perfectly clear that they require a Treaty change. (Or a change in the ECB’s statutes.) In that situation, law scholars have no particularly privileged position. They can make their proposals just like everybody else.

Part 2:

The “non-functionalist” outcome [i.e. the outcome that does not involve giving the EU whatever powers it needs to get the job done] will continue to be on the table for the very simple reason that, if the people are allowed to vote, they will vote against further integration in virtually every EU Member State. The victims of the crisis will vote against because they don’t want austerity – regardless of whether it is necessary – and the countries that are currently paying the bill will vote against because the people don’t want to pay for other people’s sins – regardless of whether it is necessary. (And the Brits will vote against because, well, because they’re Brits.)

And that is the uncertainty, looking forward: the members of the Council are exposed to two opposing sources of pressure: on the one hand, they want to do what is necessary, and on the other hand they want to “obey” their voters. (Or at least not upset them too much.) This tension is resolved a little through elections, even though such elections only bring people to power who will end up doing much the same thing as the politicians they replaced.

(Which is why elections in Greece aren’t a very helpful idea. Note also the paradox of Spain, where the indignados were so unhappy with Zapatero that they ended up electing a centre-right government instead.)

A more drastic solution is referendums. Even though voters have a surprising ability to abstain from voting while still complaining, referendums forcibly put everyone back on the same page. They give the people ownership of the problem and its solution, especially if they are properly designed, for example by giving people different alternatives, the way Switzerland does. If the people of Greece don’t like the current deal with the EU, do they want the government to renegotiate, to leave the Euro, or to leave the EU entirely? Regardless of how they answer, the legitimacy problem is resolved, at least as to Greece. The people deserve to get what they want, right between the eyes.

As the reaction to the Greek referendum idea demonstrates, most European leaders will not go that far. However, they are still exposed to elections. Sarkozy has to run for re-election next year. Merkel has a few more years, but she can’t afford to lose too many state-elections. This is why the uncertainty continues, and why everyone is looking for the magic formula. Joschka Fischer’s article, that I linked to above, is an attempt to do exactly that. He’s proposing something he really doesn’t like – a European Senate – as a way of simultaneously improving the EU’s legitimacy and pushing forward with European integration. And in many ways he’s right; all it takes is some magic formula that resonates with voters that shows them that the powers that be take their concerns seriously. The only problem is that it is impossible to tell which formula will work. Probably, the answer is that it takes a formula that is both drastic enough to have substance, and that is then adopted with full commitment by a large number of influential politicians, who use their political skill to sell it to the people. Untill the politicians take such a risk, there will be no magic formula, no solution to the tension between what needs to be done and what the people want done, and no end to the uncertainty and the speculation.

Last Week in Luxembourg

Unquestionably, the most important judgment last week was Scarlet Extended v. Sabam, the internet privacy case. Internet Service Providers cannot be made to police the use of peer-to-peer file sharing software among their customers, because such a requirement would violate both the rights of the ISPs and of their customers. Cf. EUObserver, bbc.co.uk.

On the other hand, the Court did strike down a Spanish Royal Decree that gave data subjects a greater level of protection than what was foreseen by the Data Protection Directive 95/46. Apparently the Directive aims at full harmonisation on this point. Asociación Nacional de Establecimientos Financieros de Crédito

The Court sided with the Commission on the alternative modes of TV-advertising used in Spain, “such as telepromotions, advertorials, overlays, sponsorship credits, micro‑ads comparable to advertorials, self‑promotional spots, virtual advertising and public service advertising”. They do count as advertising, putting Spain in violation of the maximum amount of time allowed for that purpose by art. 18(2) of Directive 89/552.

In Medeva and in Georgetown University and others, the Court gives some guidance as to the correct interpretation of art. 3 of Regulation 469/2009 on the supplementary protection certificate for medicinal products.

For some reason, Italy apparently decided to ignore the whole Factortame/Brasserie du Pêcheur line of cases. Commission v. Italy (FR, IT)

In anti-terrorism news, the General Court rejected Jose Maria Sison’s claim for compensation based on the unlawful freezing of his assets. Sison v. Council

In Jones and others v. Commission, the General Court dives into the pre-1990 British Coal market. Curiously, the applicant’s claim is rejected, but the Commission is still ordered to pay their costs.

The Commission’s Decision not to go after the producers of ink cartridges and toners for competition law violations was upheld in EFIM v. Commission.

This Week in Luxembourg

The first Grand Chamber judgment this week concerned the corporate tax regime in Gibraltar. The Commission thought that it involved illegal state aid, the General Court disagreed, and now the Grand Chamber sided with the Commission. The reform does display unlawful selectivity in its treatment of offshore companies, contrary to what the General Court had said (par. 85-110). In the remainder, the Grand Chamber takes care of the case itself, noting for example the absence of any stare decisis rule for the Commission (par. 136). Commission v. Gibraltar and UK

The Grand Chamber also released another sequel to Ruiz-Zambrano, following McCarthy in May, this time in the form of five cases coming from Austria. The big difference was that this time there was no risk of Union Citizens being deprived of subsistence, since they would be taken care of regardless of whether their loved ones would be allowed to stay in Austria. For that reason, the Court came out on the side of the Austrian government. This whole “genuine enjoyment” test looks like it will be a pretty rare creature. Dereci et al. v. Bundesministerium für Inneres cf. Eutopialaw

In 2006, Germany became very unhappy about an intended audit by the Court of Auditors of its VAT system, the fear being that the audit would extend “to [a] review [of] the economic policy of the Member States in so far as that policy contributes to the creation of GNI which itself underpins the calculation of an own resource of the European Union” (par. 39), so they threw up a huge fuss, for which they were now finally rebuked by the Grand Chamber. Commission v. Germany

Zaza Retail cleared up some issues about territorial insolvency under art. 3(2) of Regulation 1346/2000, as well as the role of the public prosecutor as the plaintiff asking for insolvency. The result is that the Belgians were entitled to have Zaza declared bankrupt insofar as it was active in Belgium, but not prior to its bankruptcy in the Netherlands.

As I already explained when AG Trstenjak’s opinion (NL, DE, FR) came out in September, the mortgage non-payment case of Lindner is a bit complicated. The Court now cut the knot and decided that the Czech court was entitled to appoint a mandataris ad litem once the defendant could not be located, thus avoiding some of the problems the AG ran into. Hypoteční banka, a.s. v. Udo Mike Lindner

The Court signed off on Bulgaria’s practice of banning certain criminals and other offenders from leaving the country for extended periods of time, as long as the measure is proportionate. Gaydarov and Aladzhov

Italy was slapped with a penalty payment of € 30 million for every six months that they fail to recover a sum of illegal state aid (if they recover part, the payment decreases proportionately), as well as a lump sum fine of € 30 million. Commission v. Italy

Since the Court’s case law on terror suspect asset freezes is now pretty well settled, appeals are normally unsuccessful. That goes for this week’s Bank Melli v. Council as well.

Speaking of Iran, AG Yves Bot has a pretty fun case concerning the criminal prosecution of three individuals suspected of selling nuclear technology to Iran. The German court wants to know whether a high-tech oven is an “economic resource” even without the software (really?) and what it means to participate “knowingly and intentionally, in activities the object or effect of which is, directly or indirectly, to circumvent the [embargo]”. (Cf. art. 7(4) of Regulation 423/2007). The answer probably isn’t very helpful, but OK. Federal Prosecutor v. Afrasiabi et al. (NL, DE, FR)

In O’Brien, AG Kokott considers whether judges are “workers” for the purposes of the law on part-time work. Initially, she seems to dodge the issue a little, declining to make it an autonomous concept of EU law but declining to give the MS free reign either, but in reply to question 2 she concludes that discrimination between full-time and part-time judges is not permitted.

AG Jääskinen concluded that the data retention directive 2006/24 does not apply to a request for access to the data covered by that directive in the course of a civil proceeding. In this case, that means that online copyrights are once again safe. Bonnier Audio et al. v. Perfect Communication Sweden (DE, FR)

Finally, it looks like the Polish Constitutional Court incorporated the Solange reasoning into Polish law. EU law is presumptively constitutional, but it may not always be. Verfassungsblog

This Week in Luxembourg

Portugal lost another golden shares case, this one concerning its golden share in Oil and Gas Company GALP Energia SGPS SA. Commission v. Portugal

In Rank Group, the ECJ gave some interesting guidance on Fiscal Neutrality and gambling, without actually answering whether the UK was permitted to exempt certain games of chance from VAT but not others.

More taxation fun: If mineral oils used for navigation are exempt from excise duties (art. 8(1)(c ) of Directive 92/81), what about the oil used to fuel an on-board excavator that is fixed to the ship but has its own engine? The Court ruled that it does not get to enjoy the exemption. Sea Fighter

In the category of HUH???, there is the case of Idromacchine and others v. Commission (DE, FR, IT). What happened is that the Commission mentioned the plaintiffs by name, and in a not entirely flattering way, in a state aid decision against Italy. So they sued the Commission in defamation and now won € 20.000 in damages.

Finally, it might be useful to note that on October 27, the Council has released its report on its performance in the Court in the first half of 2011. That is to say: all cases that it was a party to. Link

P.S. the archive of these emails is here.

Microban

It looks like I missed an interesting judgement last week. Apparently there's more to the General Court's Microban case than meets the eye. In my defence, this is the headnote:

Public health – List of additives which may be used in the manufacture of plastic materials and articles intended to come into contact with foodstuffs – Withdrawal by the original applicant of the application for inclusion of an additive on the list – Commission decision not to include 2,4,4’-trichloro-2’-hydroxydiphenyl ether in the list – Actions for annulment – Admissibility – Regulatory act – Whether directly concerned – No implementing measures – Legal basis

...so you can see why I would not immediately jump in to read the judgement. However, there is an interesting issue of procedure there, regarding the admissibility of an action of annulment for this kind of regulatory act. The new Eutopia Law blog has the story. The key point is that the General Court defined Regulatory Acts as "all acts of general application apart from legislative acts".

[UPDATE: On the blog of the King's Student Law Review, dr. Agne Limante has another useful writeup of this Microban case and the related Inuit case.]

This Week in Luxembourg

This week, the Grand Chamber considered the problem of which court has jurisdiction over cases regarding tortious publications on the internet. The Court ends up splitting the difference: the ideal forum is the home forum of the defendant or – and this is new – the home forum of the plaintiff, but the case can also be brought anywhere else the content was published, although then the court can only award damages to the extent damage was incurred in that particular jurisdiction. (Sorry about that sentence…) Cf. art. 5(3) Regulation 44/2001. eDate v. X and Martinez v. MGN cf. bbc.co.uk

In Competition law, the Grand Chamber gave Solvay a big win. It found that the General Court had erred by rejecting Solvay’s arguments that its right of access to the file and its right to be heard had been infringed to the point of requiring the nullity of the Commission’s Decisions. As a result, both the General Court’s judgements (1 and 2) and the Commission’s Decisions (1 and 2) go in the trash bin. For those keeping score, the total fine was € 23 million. Solvay v. Commission and Solvay v. Commission

AG Cruz Villalón took a look at some Italian gambling law, and found that it probably favoured incumbents in a manner incompatible with the Treaties. (“Probably” because the national court would still have to have a look.) Some other aspects of the law, however, can stay in place as far as the AG is concerned. Costa and Cifone (NL, DE, FR, IT)

And finally, there are two AG opinions that are a bit more technical:

In Centre Hospitalier universitaire de Besançon (NL, DE, FR), AG Mengozzi interprets Directive 85/374 as allowing Member States to make the user (in this case the hospital or the doctor) liable for using a defective product in addition to the liability of the producer.

And in Söll (NL, DE, FR) AG Jääskinen looks at art. 2(1)(a) of Directive 98/8 to determine the correct definition of “biocidal products”. He opts for a broad definition, whereby the substance in question need not necessarily have a direct biological or chemical effect on the harmful organism in question, as long as it has an indirect effect, and as long as this effect is intended.

P.S. the archive of these emails is here.

Ratings Agencies' Speaking Ban

Given my question from last week, and questions raised by Eugene Volokh and Kenneth Anderson elsewhere, I should probably look into this story myself. The original Financial Times Deutschland story explained:

EU-Binnenmarktkommissar Michel Barnier will es Ratingagenturen notfalls verbieten, Urteile über kriselnde EU-Länder zu veröffentlichen. In einem vertraulichen Vorabentwurf für eine Reform des Gesetzes zu den Ratingagenturen schlägt Barnier vor, dass die neue Wertpapieraufsicht ESMA das Recht erhält, die Veröffentlichung von Einschätzungen über die Zahlungsfähigkeit "vorübergehend zu untersagen". Der Entwurf liegt der FTD vor.

Der Kommission geht es um Staaten, die über Finanzhilfen verhandeln - etwa Gelder aus dem EU-Rettungstopf EFSF oder vom Internationalen Währungsfonds (IWF). Ein Verbot könne verhindern, dass ein Rating in einem "unangebrachten Moment" kommt, "mit negativen Folgen für die Finanzstabilität des Staates und möglichen destabilisierenden Effekten auf die Weltwirtschaft", heißt es im Entwurf.

Spiegel Online has the English version of the story:

European Internal Market Commissioner Michel Barnier is considering a move to ban the agencies from publishing outlook reports on EU countries entangled in a crisis, according to a report in Thursday's issue of the Financial Times Deutschland newspaper.

In an internal draft of a reform to an EU law applying to ratings agencies obtained by the paper, Barnier proposes providing the new EU securities authority, the European Securities and Markets Authority (ESMA), with the right to "temporarily prohibit" the publication of forecasts of a country's liquidity.

The European Commission is particularly concerned about countries that are negotiating financial aid -- for example from the euro rescue backstop fund, the European Financial Stability Facility (EFSF), or the International Monetary Fund (IMF). A ban could prevent a rating from coming at an "inopportune moment" and having "negative consequences for the financial stability of a country and a possible destabilizing effect on the global economy," the draft states.

Now I hope very much that such a thing would be illegal under the European Convention for Human Rights, but I'm less than entirely convinced. Let's look at some relevant precedents, bearing in mind that I don't see how the ban could be struck down on proportionality grounds:

• Casado Coca v. Spain, 26 January 1994: A Spanish ban on professional advertising for attorneys upheld. The Court holds that "rights of others" is a sufficient justification.
• VgT Verein gegen Tierfabriken v. Switzerland, 28 June 2001: A Swiss blanket ban on political advertising on TV is held to be in violation of the Convention. The Court holds that the "rights of others" are an appropriate justification.
  
• Stambuk v. Germany, 17 October 2002: A fine on a German ophthalmologist for violating the advertising ban struck down on the grounds that the penalty was disproportionate. The Court approved of the aims of "rights of others" and "public health".
• Murphy v. Ireland, 10 July 2003: An Irish ban on religious advertising on TV and Radio is upheld. The Court holds that "rights of others" and "public order and safety" are sufficient justification.
• TV Vest As & Rogaland Pensjonistparti v. Norway, 11 December 2008: A Norwegian blanket ban on political advertising on TV is held to be in violation of the Convention. The disagreement did not concern the appropriateness of the "rights of others" justification, but only the proportionality question.

Preliminary conclusion: the justification is almost never the problem. Instead, the Court will normally look at the case most critically under the heading of "necessary in a democratic society". In my estimation, it is almost unthinkable that the Court would interfere with a law in an area so obscure (to them) and non-political (to them) as ratings agencies, at least not under this proportionality analysis. After all, this law is necessary to stop the heavens from falling down on us...

Mustafic II

Over on the blog of the European Journal of International Law, Tom Dannenbaum has started a series of posts about the Dutch Court of Appeals' Mustafic and Nuhanovic rulings: Part 1, Part 2,

This Week in Luxembourg

This week’s Grand Chamber news:

The main holding in Realchemie is easy enough: “The concept of ‘civil and commercial matters’ in art. 1 of Regulation 44/2001 [includes] a decision of a court or tribunal [imposing] a fine in order to ensure compliance with a judgment given in a civil and commercial matter.”

Also, the Grand Chamber handed down the first of two cases about the border between legislative and administrative functions. In this case, the problem is the Walloon legislature venturing dangerously close to administrative actions by ratifying administrative decisions regarding certain infrastructure projects. What does that decision mean for the rights of affected persons under the Aarhus Convention and other environmental law? The Court follows AG Sharpston, more or less, and takes a substance over formality approach. Boxus et al. v. Région wallonne

Finally, there is the case of Brüstle v. Greenpeace, regarding the interpretation of art. 6(2)(c) of Directive 98/44. When that provision says that “uses of human embryos for industrial or commercial purposes” cannot be patented, what is and is not a “human embryo”? Does that include various kinds of stem cells? And what about scientific research? To my untrained eye, it seems as if the Court gives a fairly expansive answer to these questions, i.e. bad news for the promotion of medicine and science. Cf. bbc.co.uk, EurActiv, EUObserver

UPDATE: There's a longer analysis of this case on the great new EU Law blog Eutopia law.

In other news:

In environmental law, the 4^th Chamber asked nicely whether Northern Ireland would please create some kind of functional separation between the agency drafting the plan and the agency that is consulted under art. 6 of Directive 2001/42 for the purposes of preparing an environmental impact assessment. Department of the Environment for Northern Ireland v. Seaport (NI) and others

The bankruptcy case of Interedil is mostly interesting for its procedural manoeuvring. Since it arises in the area of JHA pre-Lisbon, the Commission wondered whether a court against whose judgement a national appeal was available could ask a prejudicial question. The Court replied that the current jurisdictional rule applies, meaning that the questions are in. There was also a Rheinmühlen/Elchinov issue, where the Court simply repeated its earlier statement: a national appeals court cannot stop a lower court from asking a prejudicial question.

AG Mazák looked at the Market Economy Investor Principle, specifically as applied to the behaviour of the French state as sole shareholder of Électricité de France. The Commission thought it was unlawful state aid (part 1 and part 2, both dated 16 December 2003). The Court of First Instance annulled parts of that decision (NL, DE, FR). The AG now sides with the Commission on all of its grounds for appeal, and is actually quite critical of the CFI in doing so. For this reason, he proposes renvoi. Let’s see what the Grand Chamber says. Commission v. EDF et al.

AG Cruz-Villalón proposes that the Court should sign off on an Italian law (art. 392 CPP) which aims to protect minor victims of crimes against themselves by not giving them the right to be heard during the pre-trial phase that is accorded to adults under Framework Decision 2001/220, including the fact that such minors cannot appeal the prosecutor’s decision not to let them testify at that stage. The AG argues that the Framework Decision leaves the Member States ample freedom to decide on details such as this. X v. Y (NL, DE, FR, IT)

AG Sharpston has another Dutch Turkish free movement of workers case, and again the Dutch lose. Her conclusion is simple enough to quote: “Article 7 of Decision No 1/80 of the EEC-Turkey Association Council (…) must be interpreted as meaning that the family members of a Turkish worker duly registered as belonging to the labour force of a Member State may continue to invoke that provision notwithstanding that that worker has acquired the nationality of the host Member State while retaining his Turkish nationality.” Joined cases of Kahveci and Inan

Finally, I have a question: Even though the work of ratings agencies is not protected as free speech in Europe like it is in the US, how can this possibly be legal? “The Financial Times Deutschland on Thursday (20 October) disclosed plans by EU single market commissioner Michel Barnier to allow Esma, a new Paris-based EU financial supervisor set up in 2011, to impose "temporary" bans on agencies such as Fitch or Moody's from publishing sovereign debt ratings at critical moments.” Source: EUObserver

This Week in Luxembourg

Another big win for airline passengers. A flight is also cancelled if it takes off but returns to its origin, and the “further compensation” of art. 12 of Regulation 261/2004 may – depending on national law – include non-material damage. The only down side is that art. 12 may not be used as a basis for awarding such damage in case of a failure of the air carrier to comply with art. 8 and 9, which deal with reimbursement or re-routing and the right to care in case of delay or cancellation, respectively. Sousa Rodríguez et al. v. Air France

In the Postal Sector, Belgium is allowed to mandate an external scheme for dealing with customer complaints even for postal companies not subject to a universal service obligation. Express Line

In the state aid case of Deutsche Post and Germany v. Commission, the 3^rd Chamber annulled the General Court’s decision declaring the applicant’s case inadmissible. As it turns out, a Commission decision under art. 10(3) of Regulation 659/1999 requiring the Member State to produce information for the purposes of a state aid investigation is open to challenge before the Community Courts, both by the Member State in question and by the recipient of the aid.

In Prism Investments, the 4th Chamber held that the list of grounds for refusal of recognition of a judgement from another Member State (art. 34 and 35 of Regulation 44/2001) is exhaustive. In this case the defendant/appellant argued that the judgement had already been complied with in the MS of origin, but according to the ECJ that is not a valid reason for refusing recognition.

As one might expect, the Court did not look too kindly on a selective distribution agreement that had the practical effect of banning internet sales in certain areas. However, partly because the case came to the court as a prejudicial question, there are still a few ways in which the agreement can be saved. Pierre Fabre Demo-Cosmetique v. Président de l’Autorité de la Concurrence

The Association belge des consommateurs test-achats, of discrimination in insurance premiums fame, lost in an interesting judicial review of mergers decisions case. The General Court ruled that they were not entitled to protect their procedural rights under art. 11 of Regulation 802/2004 by asking for judicial review of the Commission’s decision not to object to the takeover of Segebel by Electricité de France, because they had not sufficiently availed themselves of those rights in the pre-decision phase. Association belge des consommateurs test-achats v. Commission

While last week the General Court reviewed the Commission’s treatment of an Italian raw tobacco cartel, this week the raw tobacco comes from Spain. Compared to the original decision from 2004, Agroexpansión (FR) and Alliance One both ended up paying somewhat less, because of some extra credit for cooperation and some confusion about the period for which they could be considered as a single economic unit.

P.S. the archive of these emails is here.