Multilevel Regulation and the EU: The Interplay Between Global, European and National Normative Processes

Multilevel Regulation and the EU Multilevel Regulation and the EU The Interplay between Global, European and National...

Author: Andreas Follesdal | Ramses A. Wessel | Jan Wouters

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Multilevel Regulation and the EU

Multilevel Regulation and the EU The Interplay between Global, European and National Normative Processes

Edited by

Andreas Follesdal Ramses A. Wessel Jan Wouters

LEIDEN • BOSTON 2008

This book is the result of academic cooperation in the framework of the EU’s Network of Excellence CONNEX (Connecting Excellence on European Governance) Copyright coverphotograph ANP This book is printed on acid-free paper. A C.I.P. Catalogue record for this book is available from the Library of Congress.

ISBN 978 90 04 16438 3 Copyright 2008 Koninklijke Brill NV, Leiden, The Netherlands. Koninklijke Brill NV incorporates the imprints Brill, Hotei Publishing, IDC Publishers, Martinus Nijhoff Publishers and VSP. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, microﬁlming, recording or otherwise, without written permission from the Publisher. Authorisation to photocopy items for internal or personal use is granted by Koninklijke Brill NV provided that the appropriate fees are paid directly to The Copyright Clearance Center, 222 Rosewood Drive, Suite 910, Danvers MA 01923, USA. Fees are subject to change. PRINTED IN THE NETHERLANDS

Contents

Acknowledgements Abbreviations

xv xvii

Multilevel Regulation and the EU: A Brief Introduction Jan Wouters, Ramses Wessel and Andreas Follesdal 1. Multilevel Regulation: First Impressions of a Complex Reality 2. Time to Take Stock 3. Structure of the Book

1 1 3 5

Part I Multilevel Regulation and the EU:Towards a Research Agenda The Phenomenon of Multilevel Regulation: Interactions between Global, EU and National Regulatory Spheres Ramses Wessel and Jan Wouters 1. Introduction 2. The Phenomenon of Multilevel Regulation 2.1. The Invasion of International Organisations 2.2. The Expansion of Regulation: from Government to Governance 2.3. Governance and Regulation as a Multi-actor Game 2.4. The Case Studies in this Book 3. The Response from the Legal Community 3.1. Constitutionalism 3.2. Global Administrative Law 3.3. Fragmentation 3.4. The Contributions in this Book

9 9 12 12 21 26 30 31 32 35 37 39

Multilevel Regulation and the EU

4. An Agenda for Research 4.1. Combining Different Legal Perspectives: Accountability, Democracy, Legitimacy, Rule of Law 4.2. A Public Policy Perspective on Multilevel Regulation 4.3. Rule Dynamics, Co-ordination and Co-operation in Multilevel Regulation 4.4. Accountability, Democracy and Social Justice in Multilevel Regulation 5. Concluding Observations

40 40 42 42 45 47

Part II Mapping the Unmappable:Case-Studies of Multilevel Regulation Challenges to the Legitimacy of International Regulation: The Case of Pharmaceuticals Standardisation Bärbel R. Dorbeck-Jung 1. Introduction 2. Theoretical Framework 2.1. Notion of Legitimacy 2.2. Acceptability of Rules – Evaluation Framework 2.3. Acceptance of Rules – Exploring the Inﬂuence of International Regulation 3. Regulatory Activities of the ICH 3.1. A Brief History of the ICH; Organisation Model 3.2. Regulatory Activities: The Formal Procedures 3.3. Future of ICH Harmonisation 4. Evaluation 4.1. Acceptability of the ICH Regulatory Activities a. Questions of Evaluation b. Evaluation 4.2. Acceptance of the Guidelines a. Questions of Evaluation b. Evaluation 5. Conclusions and Recommendations

vi

51 51 53 53 55 57 58 58 60 62 63 63 63 65 66 66 67 69

Contents

Financial Trade Associations and Multilevel Regulation Caroline Bradley 1. Introduction 2. Regulating Local, National and International Financial Markets 3. Consultation in Multilevel Regulation 4. Rhetoric and Financial Regulation in Multilevel Systems 4.1. Market Protection Rhetoric 4.2. Harmonization Rhetoric 5. Even Better Regulation: Ensuring Consumer Protection in Markets with Harmonized Rules 6. Conclusion Multilevel Banking Regulation: An Assessment of the Role of the EC in the Light of Coherence and Democratic Legitimacy Bart De Meester 1. Introduction 2. Coherence and Democratic Legitimacy 2.1 Coherence 2.2. Democratic Legitimacy 3. The Basel Committee, the IASB and their Mutual Inﬂuence 3.1. Basel Committee on Banking Supervision and Basel II 3.2. International Accounting Standards Board and IFRS 3.3. Mutual Inﬂuence of Basel II and IAS/IFRS 4. Inﬂuence of the EC in International Standard-setting for Banks 4.1. Inﬂuence of the EC in the Basel Committee a. European Commission and the ECB as Observers b. Regulatory Dialogue c. Aspirations for a More Important Role of the EC d. Coordinating the Actions of the European Members of the Basel Committee e. Involvement of the European Parliament in Inﬂuencing the Basel Committee 4.2. Inﬂuence of the EC in the IASB a. No Direct Inﬂuence of the EC in the IASB b. Regulatory Dialogue c. Aspirations for a More Inﬂuential Role of the EC d. Involvement of the European Parliament in Inﬂuencing the IASB

73 73 79 88 92 93 97 99 100

101 101 102 103 105 106 106 109 111 114 114 114 115 116 119 121 123 123 126 127 128

vii

Multilevel Regulation and the EU

5. Implementation of International Standards by the EC 5.1. Implementation of Basel II into the EC a. Co-decision and the Lamfalussy Process b. Parliamentary Involvement in the Implementation Process 5.2. Implementation of IAS/IFRS into the EC a. Implementation Process b. Involvement of the European Parliament 5.3. Coherence in Implementation of Basel II and IAS/IFRS 6. Conclusion Multilevel Internet Governance Involving the European Union, Nation States and NGOs Robert Uerpmann-Wittzack 1. Introduction 2. The Creation of the .eu ccTLD 2.1. EU Regulation 2.2. EU Law-Making under the Rule of ICANN 3. Internet Governance: From Self-Regulation to Public-Private Partnership 3.1. ICANN a. The Creation of ICANN b. Open Deliberation, Community Consensus and Internet Elections 2000 c. The Governmental Advisory Committee (GAC) 3.2. The World Summit on the Information Society a. National Sovereignty over ccTLDs b. States as Primordial Stake-Holders 4. International Regulation in the Absence of Public International Law 4.1. Public-Private Partnership 4.2. Delegation to Private Actors 5. Conclusions The Interaction between Global, Regional and National Regulation in the Deﬁnition of Terrorism Erling Johannes Husabø 1. Introduction 2. Multiple Deﬁnitions at the Global Level

viii

129 129 129 132 137 137 140 141 142

145 145 146 146 147 150 150 150 152 155 161 161 163 163 163 164 167

169 169 170

Contents

3. 4. 5. 6.

Two Deﬁnitions at the Regional Level Deﬁnitions at the National Level Controversies Concerning “Freedom Fighters” Conclusion: Interaction, Controversy and Increased Complexity

173 176 179 183

The Transatlantic Common Aviation Area: Competing Legal Orders and State Self-Interest 185 Mirjam Kars and Helen Stout 1. Introduction 185 1.1. The Multilevel Regulation Perspective 185 1.2. Aviation as an International and Supranational Issue 185 1.3. Outline of this Chapter 186 2. Bilateralism: Air Transport Agreements under International Law 187 2.1. The Chicago Convention 187 2.2. Air Service Agreements 188 2.3. The EU Member States and their Bilateral Air Service Agreements with the US: Bilaterals and Open Skies Agreements 188 3. Gradual Phase-out of Bilateralism in Europe 189 3.1. The Single EU Aviation Market 189 3.2. The Commission Intervenes with the Aid of the European Court of Justice 191 3.3. Mixed Agreements 193 4. The Formation of OST 2007 194 4.1. Access to Heathrow 194 4.2. Ownership and Control 197 4.3. A Tentative Agreement 199 4.4. A First-Stage Agreement 202 5. The Perspective of Competing Legal Orders 204 5.1. Competing Legal Orders 204 5.2. A Second Look at the Formation of OST 2007 206 a. European Commission versus Member States who Violate EC Regulations by Engaging in Bilaterals with Nationality Clauses 206 b. EU Member States versus USA 207 6. Conclusion 208

ix

Multilevel Regulation and the EU

Part III Challenges Flowing from Multilevel Regulation How Do Judges Cope with Multilevel Regulation? Rory Stephen Brown 1. Introduction 2. Case Study I: Human Rights on a Global Plane 3. Case Study II: Torturous, Tortuous, or Just Tortious Reasoning? 4. Case Study III: The Terrorisation of a Terrorist? 5. Conclusion Legal Protection of the Individual Against UN Sanctions in a Multilevel System Clemens A. Feinäugle 1. Introduction 2. Status Quo of Jurisprudence 2.1. Yusuf (T-306/01) a. The Facts b. Substance of the Application: Scope of Review and Human Rights Violations 2.2. Ayadi (T-253/02): Please Do It at the National Level! a. The Facts b. Substance of the Application: Upholding Yusuf and Pledging the National Level to Grant Diplomatic Protection 2.3. Möllendorf (C-117/06) a. The Facts b. Opinion of Advocate General Mengozzi 2.4. Bosphorus Airways a. The Facts b. Substance of the Application 2.5. Comparison of the Judgments 3. Latest Developments on the UN Level: Focal Point and Revised Listing and Delisting Procedure 3.1. Innovations brought about by UN Resolution 1735 (2006) a. The Previous Listing Procedure b. The Amended Listing Procedure c. Assessment

x

213 213 214 219 224 229

231 231 232 232 232 233 235 236 236 238 238 239 241 241 242 243 244 244 245 246 248

Contents

3.2. Innovations brought about by UN Resolution 1730 (2006) a. The Focal Point b. The Amendments to the Delisting Procedure c. Assessment 4. Overall Assessment of the Status Quo of Jurisprudence and of the New Options on the Level of the UN 4.1. The Binding Nature of the International Human Rights for the UN Security Council 4.2. The Contents of a Right of “Due Process” 4.3. Application of these Standards to the Status Quo of Legal Protection against UN Sanctions 5. Conclusion and Outlook Trapped between Courts or How Terrorist Suspects Lost Their Right to a Remedy Christina Eckes 1. Introduction 2. The Two Different Types of Sanctions 2.1. Sanctions Based on UN Lists 2.2. Lists Originating at the European Level 2.3. Concluding Remarks 3. Judicial Protection from UN Lists 3.1. Cases Before the CFI a. Primacy of UN law b. The ECJ’s Case Law c. The Transfer of the ECJ’s Position to Individual Sanctions d. Rejection of the CFI’s Assumption of Indirect Review 3.2. Concluding Remarks 3.3. The Strasbourg Court a. Protection of the Individual b. The Supremacy of UN Law c. National Courts d. Concluding Remarks 4. Judicial Protection from EU Lists 4.1. Cases before the EU Courts a. Judicial Review of CFSP Measures b. Review of Individual Sanctions 4.2. The ECtHR

249 249 250 253 254 254 255 256 257

261 261 264 264 266 267 267 268 269 272 275 276 278 279 279 281 282 284 285 285 289 291 294

xi

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4.3. National Courts 4.4. Concluding Remarks 5. Interplay between the Two Courts Multilevel Economic Regulation and the EC Protection of Fundamental Rights Mielle Bulterman 1. Introduction 2. The Protection of Fundamental Rights in the EC Legal Order 2.1. The Protection of Fundamental Rights in the Community Legal Order – General Overview 2.2. Protection of the Right to Property 2.3. Right to Pursue a Business Activity 2.4. Principle of Proportionality 3. Right to Property and Community Economic Regulation 3.1. Market Regulation and Fundamental Rights Protection 3.2. Economic Sanctions and Fundamental Rights Protection 3.3. Protective Measures and Fundamental Rights Protection 4. Impact of the ECHR 4.1. Right to Property as Guaranteed in the ECHR 4.2. Challenging Economic Regulation before the ECtHR 5. Impact of the Global Regulatory Dimension 5.1. Enforcing Global Regulatory Norms before the European Court 5.2. Challenging Global Regulatory Norms before the European Court 6. Conclusion Reducing the Judicial Deﬁcit in Multilevel Environmental Regulation: The Example of Plant Protection Products Andrea Keessen 1. Introduction 2. Regulation of Plant Protection Products 2.1. International Rules and Measures 2.2. European Rules and Measures 2.3. National Rules and Measures 3. Judicial Review 3.1. Getting a Preliminary Ruling

xii

294 296 297

301 301 302 302 304 306 306 307 307 309 310 312 313 315 316 316 318 321

323 323 324 325 326 327 328 329

Contents

3.2. Trying Direct Action 4. Impact of the Aarhus Convention 4.1. Access to Justice at the International Level 4.2. Anticipating the Implementation of the Aarhus Convention at the European Level 4.3. Implementing the Aarhus Convention 4.4. Access to Court under the Aarhus Regulation 4.5. Trying a Direct Action Again 4.6. Access to National Courts 5. Conclusion Multilevel Regulations Reviewed by Multilevel Jurisdictions: The ECJ, the National Courts and the ECtHR Andrea Ott 1. The Bilateral Level: The EU Legal Order and International Law 1.1. Case Law of the European Courts on International Law 1.2. The ECJ in the Stream of the Political Questions Doctrine? a. The Political Questions Doctrine in National Courts b. Comparison of National Case Law with the ECJ’s Jurisdiction: Limits to Jurisdiction? 2. Multilateral Jurisdictions: The ECJ, the National Courts and the ECtHR 2.1. From Solange Doctrine to European Arrest Warrant: From Conﬂict to Cooperation on their Own Terms? 2.2. The ECJ and the ECtHR: Two Planets in two Different Orbits? 3. Conclusion Hierarchy in Multilevel Regulation Nikolaos Lavranos 1. Introduction 2. The Standard Hierarchy of Norms within the Community Legal Order 3. The Example of WTO Law 4. The Example of UN Security Council Resolutions 5. The Example of the ECHR 6. Conclusions

330 332 333 334 336 339 341 342 343

345 345 348 352 352 355 357 357 362 365 367 367 368 369 370 372 373

xiii

Multilevel Regulation and the EU

Epilogue:Toward more Legitimate Multilevel Regulation Andreas Follesdal 1. Introduction 1.1. Multilevel Governance 2. Legitimacy Deﬁcit of the EU: Concepts and Issues 2.1. Mechanisms of Legitimation 3. Legitimacy and the Need for Assurance 4. Contributions of Institutions 5. Legitimacy, Assurance and Democratic Accountability 6. Legitimacy, Assurance and Multilevel Regulation 6.1. Two Constructive Suggestions 7. Conclusion

377 378 380 381 383 384 385 389 394 397

About the Contributors

399

Index

407

xiv

377

Acknowledgements

This project is the result of intensive collaboration between academics from a variety of countries and backgrounds. It is part of an ongoing co-operation in the framework of the EU’s Network of Excellence, Connex (Connecting Excellence of European Governance). The basis was laid at a seminar organised by the Hague Institute for the Internationalisation of Law (HiiL) in 2006, where the contributors exchanged their initial ideas and decided to engage in a joint effort to map the phenomenon of what we have termed “multilevel regulation”. We are grateful to a number of people and institutions. Financial and/or organisational support was provided by Connex, HiiL as well as by the Faculty of Management and Governance of the University of Twente, the Leuven Centre for Global Governance Studies (in particular Mr Axel Marx and Mrs Michèle van Buggenum) and the Norwegian Centre for Human Rights. We are also indebted to Ian Priestnall for language correction and to Ms Wibke Franz for additional subediting.

Abbreviations

ACI ADR AEA ARC ASAs

Airport Council International European Agreement concerning the International Carriage of Dangerous Goods by Road Association of European Airlines Accounting Regulatory Committee Air Service Agreements

BA BIS BMI

British Airlines Bank for International Settlements British Midland Airways

CEBS CIP CCP ccTLD CESR CFI CFSP CGFS CHMP CITES

Committee of the European Banking Supervisors Competitiveness and Innovation Framework Programme (EU) Common Commercial Policy Country Code Top Level Domain Commission of European Securities Regulators (European) Court of First Instance (EU) Common Foreign and Security Policy Committee on the Global Financial System Commission for Medicinal Products for Human Use Convention on International Trade in Endangered Species of wild fauna and ﬂora Centre for Medicines Research International Committee of Experts on Terrorism Counter-Terrorism Committee

CMR CODEXTER CTC

Multilevel Regulation and the EU

DENIC DNS DoC DOT DSB

Deutsches Information Network Center Domain Name System (US) Department of Commerce (US) Department of Transport Dispute Settlement Body

EAW EBC EC Treaty EC ECB ECE ECHR ECJ ECtHR EEB EFRAG EFSA EFTA EU EURid EWG

European Arrest Warrant European Banking Committee Treaty establishing the European Community European Community European Central Bank United Nations Economic Commission for Europe European Convention on Human Rights and Fundamental Freedoms European Court of Justice European Court of Human Rights European Environmental Bureau European Financial Reporting Advisory Group European Food Safety Authority European Free Trade Association European Union European Registry for Internet Domains Expert Working Group

FAO FCTC FDA FRY FSA FTA

Food and Agriculture Organization Framework Convention on Tobacco Control Food and Drug Administration Federal Republic of Yugoslavia Financial Services Authority Financial Trade Associations

GAAP GAC GATT

Generally Accepted Accounting Practices Governmental Advisory Committee General Agreement on Tariffs and Trade

xviii

Abbreviations

GCC GEF gTLD

German Constitutional Court Global Environmental Facility Generic Top Level Domain

IAEA IAIS IASB ICANN ICAO ICC ICH

IFRIC IFRS IHR ILO IMF IMO IOSCO IRO ISDA ISO ITU IWG

International Atomic Energy Agency International Association of Insurance Supervisors International Account Standards Board Internet Corporation for Assigned Names and Numbers International Civil Aviations Organization International Criminal Court International Conference on Harmonisation of Technical Requirements for the Registration of Pharmaceutical for Human Use ICH Good Clinical Practices International Finance Institutions International Federation of Pharmaceutical Manufacturers Association International Finance Reporting Interpretations Committee International Financial Reporting Standards International Health Regulations International Labour Organization International Monetary Fund International Maritime Organization International Organization for Securities Communities International Regulatory Outlook International Swaps and Derivatives Association International Organization for Standardisation International Telecommunications Union Implementation Working Group

JAT

Yugoslavian Airline Company

KLM

Koninklijke Luchtvaart Maatschappij

ICH-GCP IFI IFPMA

xix

Multilevel Regulation and the EU

MEP MHLW MLG MOU

Member of European Parliament Ministry of Health and Welfare Multilevel governance Memorandum of Understanding

NATO NGO NSMD

North-Atlantic Treaty Organization Non-Governmental Organization Non-state market driven

OAS OCC OECD OIA OST OTC

Organization of American States Ofﬁce of the Comptroller of the Currency Organization for Economic Cooperation and Development Ofﬁce of International Affairs Open Skies Treaty over-the-counter

PJCC POPs

(EU) Police and Judicial Cooperation in Criminal Matters Stockholm Convention on Persistent Organic Pollutants Persistent Organic Pollutants

QMV

Qualiﬁed Majority Voting

SARS SEC

Severe Acute Respiratory Syndrom Securities and Exchange Commission

TCE

Treaty Establishing a Constitution for Europe (European Constitution) Treaty establishing the European Community Technical Expert Group Treaty establishing the European Union Top Level Domain Trade-Related Aspects of Intellectual Property Rights

TEC TEG TEU TLD TRIPs

xx

Abbreviations

UK UN UNAIDS UNC UNCLOS UNDP UNESCO UNEP UNFPA UNGA UNHCR UNICEF UNIDROIT UNMIK UNSC UNTAET UPU US USA

United Kingdom (of Great Britain and Northern Ireland) United Nations Joint United Nations Programme on HIV/Aids United Nations Charter United Nations Convention on the Law of the Sea United Nations Development Programme United Nations Educational, Scientiﬁc and Cultural Organization United Nations Environment Programme United Nations Population Fund United Nations General Assembly United Nations High Commissioner for Refugees United Nations Children’s Fund International Institute for the Uniﬁcation of Private Law United Nations Mission in Kosovo United Nations Security Council United Nations Transitional Administration in East Timor Universal Postal Union United States (of America) United States of America

WEU WHO WIPO WMO WSIS WTO

Western European Union World Health Organization World Intellectual Property Organization World Meteorological Organization World Summit on the Information Society World Trade Organization

xxi

Multilevel Regulation and the EU: A Brief Introduction Jan Wouters, Ramses Wessel and Andreas Follesdal

1. Multilevel Regulation: First Impressions of a Complex Reality This book starts out from the ﬁnding that international regulatory processes are having an ever-increasing impact on European and national regulatory activities. It is difﬁcult, though, to gain a comprehensive insight into these processes and the manifold interactions between legal orders. Let us therefore give some ﬁrst impressions of this complex reality, in order to indicate that international regulatory activity takes place in a great variety of forums and in many different forms, which are often poorly understood.1 There appears to be, in the ﬁrst place, a broad range of international regulatory forums, from intergovernmental organisations with a broad mandate (e.g. the United Nations, the World Trade Organization (WTO), the Organisation for Economic Co-operation and Development) to intergovernmental bodies with very technical and speciﬁc mandates (e.g. the International Civil Aviation Organisation, the International Telecommunication Union, the Codex Alimentarius Commission), treaty-based conferences that do not amount to an international organisation (e.g. Conferences of the Parties under the main multilateral environmental agreements, such as the Framework Convention on Climate Change and the Kyoto Protocol), informal intergovernmental cooperative structures (e.g. the G-8, the Financial Action Task Force on Money 1

There is as yet no comprehensive overview of these processes. For a recent collection of analyses regarding multilevel environmental regulation, see G. Winter (ed.), Multilevel Governance of Global Environmental Change: Perspectives from Science, Sociology and the Law, Cambridge, UK, Cambridge University Press, 2006. For an excellent overview of the law-making activity of intergovernmental organisations, see J.E. Alvarez, International Organizations as Law-makers, Oxford, UK, Oxford University Press, 2005.

Follesdal, Wessel and Wouters (eds), Multilevel Regulation and the EU, 1–6 ©2008 Koninklijke Brill NV. ISBN 978 90 04 16438 3. Printed in the Netherlands.

Multilevel Regulation and the EU

Laundering, the Basel Committee on Banking Supervision), and even private organisations (e.g. the International Organisation for Standardisation, private regulation of the internet). The decision-making processes that result in regulatory activity in these forums likewise seem to be very diverse. They differ, for instance, on the issue as to who can take the initiative and formulate proposals for decisions (governments, organs of the organisation, interest groups, independent experts), the format wherein proposals are discussed (organisation of negotiations, formal and informal sessions, caucuses, negotiating groups, amendments, etc.), and the actual decision-making mode (consensus, voting by unanimity or by a certain type of majority, equality or inequality of voting power, methods of voting), including the question of which actors and stakeholders (e.g. organs of the organisation, governments, civil society organisations, businesses, parliamentarians, etc.) are involved – directly, or indirectly, formally or informally – in the decision-making. At least as diverse seem the instruments used within these various regulatory forums. These range from “hard law” to “soft law”, exchange of best practices and benchmarking, to mutual recognition and even to tools that at ﬁrst sight may not seem normative in nature but that can have such effects, such as policy programmes, modes of assessment, reporting and monitoring systems, and loan conditionality.2 The degree to which such international regulatory regimes are binding is linked with both the character of the instruments and procedures aimed at implementation and compliance. Rules, standards and principles can be included in traditional, legally binding conventions, negotiated between States or in the framework of an international organisation, or can have the status of technical annexes to such conventions, to be amended through simpliﬁed procedures; but they can also take the form of mere recommendations, policy guidelines or political declarations. A normative impact can even result from exchanges of best practices among States and the setting of benchmarks for good policies. What is clear is that the impact, direct or indirect, of such international regulatory activities upon citizens and businesses is as yet poorly understood. It is well known that international organisations may take binding decisions in respect of their Member States. Thus, apart from the EU, organisations with the power to take binding decisions include the Council of Europe, the United Nations, the World Health Assembly of the WHO, the Council of the ICAO, the OAS, the WEU, NATO, OECD, UPU, WMO and IMF. What has been much less studied is the impact of these and other organisations’ regulatory activities

2

2

J.E. Alvarez, ibid., p. 217.

Multilevel Regulation and the EU: A Brief Introduction

on subjects within those Member States, and the mechanisms through which such effects occur. A prominent example of forceful, direct regulatory power in this respect is the use the UN Security Council is increasingly making of “smart sanctions” – sanctions directed at certain individuals, businesses or groups of persons – and the Council’s use of lists of terrorist suspects since “9/11”. The binding force of Chapter VII resolutions means that these far-reaching measures work through in all domestic legal systems, including the EU legal order. The WTO is another international organisation whose activities have a powerful regulatory impact upon the EU and its Member States. For instance, the binding effect of decisions taken by the WTO’s Dispute Settlement Body (DSB) reaches beyond the WTO Members involved in the dispute in the ﬁrst place and may have considerable implications for business operators. Apart from the fact that the WTO lacks facilities by which it can be accessed by businesses or individuals via a judicial procedure, such as those available at EU and Member State level, it may itself be bound by international regulation set by other international organisations, from the Security Council to the Codex Alimentarius Commission. Similar examples may be found in the interlinkage of EU and global regulation regarding health, the environment and ﬁnancial transactions, to name just a few prominent examples.

2. Time to Take Stock As the contribution of Wessel and Wouters indicates, scholars of political science and public administration have focused extensively on “multilevel governance” over the past decade. Their main ﬁeld of study has hitherto been the relation between the EU and its Member States. Due to the developments described above we feel there is a need to broaden the scope to take more prominent account of the global regulatory dimension as well as the mutual interactions between global, European and national regulatory processes. Legal studies have only recently come to recognise the phenomena connected to “multilevel governance”.3 Nevertheless, an increasing number of studies start from the 3

See inter alia, apart from the studies mentioned supra notes 1 and 2, M. Bothe, “The United Nations Framework Convention on Climate Change: an Unprecedented Multilevel Regulatory Challenge”, Zeitschrift für ausländisches öffentliches Recht und Völkerrecht, Vol. 63 2003, pp. 239-254; W.W. Burke-White, “Complementarity in Practice: the International Criminal Court as Part of a System of Multi-level Global Governance in the Democratic Republic of Congo”, Leiden Journal of International Law, Vol. 18 2005, pp. 557-590; T. Hervey, “Regulation of Genetically Modiﬁed Products in a Multi-level System of Governance: Science or Citizens?”, Review 3

Multilevel Regulation and the EU

notion that the national (and even the EU) legal order is part of, and subject to, a multilevel normative process, recognising that the creation, interpretation and application of national, European and international norms must take account of the multilevel structure of the system. With the development of the international legal order we have grown accustomed to legal norms being created outside the national legal systems. What seems to be a novel development, however, is the extent to which international institutions and forums engage in standard-setting activities, which increasingly not only affect the EU Member States but also their citizens and businesses. Faced with these developments, the instruments available to the judiciary for judicial protection, especially of fundamental human rights, and those allowing democratic control by the legislature and/or the executive, may be inadequate to protect the citizen when the strict dividing lines between international, European and national law become blurred. So far, legal theory and practice have not been able satisfactorily to address the emerging issues of legitimacy, accountability and human rights. They have at best offered partial solutions. A combination of insights from other disciplines is needed to be able to enhance the legitimacy of international regulation, to provide the necessary accountability and legitimacy of standard-setters and to cope with the multilevel nature of what has traditionally been viewed as separate national, European and international legal spheres. The present book aims to contribute to this debate by examining and reﬂecting upon the extent to which the EU and its Member States are confronted with “international regulation” by international organisations and bodies. Moreover, as both the EU (as a crucial level between the international and national legal orders) and national regulatory activities become increasingly dependent on rules enacted by international organisations and bodies operating on a global level, the contributions in the book highlight how the classical mechanisms for ensuring accountability, legitimacy and the protection of human rights may need to be amended. The book brings to light even more challenges, though. The of European Community and International Environmental Law, Vol. 10 2001, pp. 321-333; S. Oberthür and T. Gehring (eds.), Institutional Interaction in Global Environmental Governance: Synergy and Conﬂict among International and EU Policies, Cambridge, MA, MIT Press, 2006; E.U. Petersmann, “From ‘Memberdriven Governance’ to Constitutionally Limited ‘Multi-level Trade Governance’ in the WTO”, in: G. Sacerdoti, et al., (eds.), The WTO at Ten: The Contribution of the Dispute Settlement System, Cambridge: Cambridge University Press, 2006; D. Zacharias, “Cologne Cathedral versus Skyscrapers: World Cultural Heritage Protection as Archetype of a Multilevel System”, Max Planck Yearbook of United Nations Law, Vol. 10 2006, pp. 273-366. 4

Multilevel Regulation and the EU: A Brief Introduction

phenomenon of multilevel regulation leads to problems such as the question of safeguarding coherence between legal systems in terms of substantive normative harmony, but also of upholding regulatory trade-offs made at a certain level of policy making (e.g. trade and non-trade values). Last but not least, a serious issue arises regarding the inﬂuence of private (commercial) actors on normative processes at various levels to which states do not always have access.

3. Structure of the Book In the light of the considerations set out above, the contributors to this book look beyond the EU and take the inﬂuence of other international organisations or global regulatory forums/regimes into account. The phenomenon that regulation is increasingly left to (or in fact takes place in) international organisations and other global or regional forums leaves its mark on the (traditional) freedom of States to establish their own rules, as well as on their ability to hold on to checks and balances (democracy, legitimacy, the rule of law) that form part and parcel of their domestic legal system. The contributors investigate the consequences of “regulation beyond the State” for established systems of governance and for their legitimacy, including democratic accountability and human rights within states. The chapters aim to display the various relations that may exist between regulatory regimes at different levels of governance. The ﬁrst part of the book embarks on a general exploration and sets out the development of a research agenda regarding the phenomenon of multilevel regulation. Ramses Wessel and Jan Wouters examine the phenomenon of multilevel regulation in greater detail, linking it to the scholarly debates on regulation and multilevel governance and exploring the responses to this phenomenon that the legal community has produced to date. They conclude with reﬂections on an agenda for future research in a multidisciplinary perspective. The second part, “mapping the unmappable”, provides a number of case studies as – obviously non-exhaustive – examples of the phenomenon of multilevel regulation and the problems it entails. Bärbel-Dorbeck Jung analyses the challenges to the legitimacy of international regulation in the area of pharmaceuticals. Caroline Bradley examines ﬁnancial trade associations and the impact of their activities on multilevel regulation on ﬁnancial services. Bart De Meester takes a closer look at the phenomenon of multilevel regulation in the area of banking services from the EC’s point of view. Robert Uerpmann-Wittzack analyses multilevel regulatory governance of the internet. Erling Johannes Husabø studies the normative processes at various levels that deﬁne the notion of terrorism. Finally, Mirjam Kars and Helen Stout take a closer look at the transatlantic common aviation area as a case study of multilevel regulation. 5

Multilevel Regulation and the EU

The third part of the book deals with the implications of multilevel regulation for human rights, judicial control and the rule of law. Focusing on the question of how judges cope with multilevel regulation, Rory Stephen Brown provides us with a thorough analysis of three human rights cases which feature multilevel regulatory regimes. Clemens A. Feinäugle analyses the problems involved with multiple jurisdictions for human rights review of Security Council sanctions in Europe. The contribution by Christina Eckes highlights the divergent ways in which the different European courts maintain human rights protection for terrorist suspects. Mielle Bulterman discusses the manner in which international economic legal rules impact individual rights under European Community law. Andrea Keessen investigates how the judicial deﬁcit in multilevel environmental regulation can be reduced, taking plant protection products as an example. Andrea Ott’s contribution on multilevel regulations reviewed by multilevel jurisdictions analyses the manner in which European and national courts are trying to come to grips with the phenomenon of multilevel regulation. Finally, Nikos Lavranos elaborates the argument that a system of hierarchy of norms, as practised in European Community law, is not static but ﬂexible, differing depending on the area of the law and the speciﬁc circumstances of the case under consideration. In the epilogue to this book Andreas Follesdal considers seven steps toward more legitimate multilevel regulation.

6

PART I MULTILEVEL REGULATION AND THE EU: TOWARDS A RESEARCH AGENDA

The Phenomenon of Multilevel Regulation: Interactions between Global, EU and National Regulatory Spheres Towards a Research Agenda

Ramses Wessel and Jan Wouters*

1. Introduction Over the past decade globalisation and global governance have become central themes, not just in international relations and politics, but also in the study of international and national law. The reason may well be, as some observers hold, that “central pillars of the international legal order are seen from a classical perspective as increasingly challenged: the distinction between domestic and international law becomes more precarious, soft forms of rule-making are ever more widespread, the sovereign equality of states is gradually undermined, and the basis of legitimacy of international law is increasingly in doubt.”1 Indeed, many of these themes feature in current research programmes. Domestic legal systems – traditionally by deﬁnition caught in national logic – increasingly recognise the inﬂuence of international and transnational regulation and

* The authors gratefully acknowledge the research support of Axel Marx, research coordinator of the Leuven Centre for Global Governance Studies. 1

N. Krisch and B. Kingsbury, “Introduction: Global Governance and Global Administrative Law in the International Legal Order”, EJIL, Vol. 1 2006, pp. 1-13, at p. 1.

Follesdal, Wessel and Wouters (eds), Multilevel Regulation and the EU, 9–47 ©2008 Koninklijke Brill NV. ISBN 978 90 04 16438 3. Printed in the Netherlands.

Multilevel Regulation and the EU

law-making on their development.2 Legal scholars attempt to cope with the proliferation of international organisations and other entities contributing to extra-national normative processes.3 While the notion and consequences of globalisation are the subject of debate, common denominators seem at least to include a profound transformation of the traditional Nation State and the inability of sovereignty to protect the State against foreign interference.4 The proliferation of international organisations5 and the expansion of international law as well as the related need for national legal systems to implement ever more international rules are commonly considered to go hand in hand with globalisation.6 Apart from challenging some of the foundations of international law, globalisation raises questions in particular about to the negative effects it may have on the rule of law, democracy and legitimacy (infra, 4.1.). The interactions between national and international legal spheres, including the European legal sphere for EU Member States, have intensiﬁed and gained increased visibility over the last few years. It is becoming ever more difﬁcult to draw dividing lines between legal orders: international law is increasingly coming to play a role in national (and EU) legal orders, whereas national (and EU) legal developments are exerting a bottom-up inﬂuence on the evolution of

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For an analysis of the main trends see the research programme of the Hague Institute for the Internationalisation of Law (HiiL): <www.hiil.org/ﬁles/Research%20 Programme.pdf>. See K. Jayasuriya, “Globalization, Law, and the Transformation of Sovereignty: The Emergence of Global Regulatory Governance”, Indiana Journal of Global Legal Studies, Vol. 2 1999, pp. 425-255. In his book International Organizations as Law-makers (Oxford University Press, 2005) José Alvarez reveals that the role of international organisations in law-making not only increased, but also that international law is not always well enough equipped to handle this development. Cf. also D. Sarooshi, International Organizations and their Exercise of Sovereign Powers, Oxford: Oxford University Press, 2005. See earlier in particular J. Delbrück (ed.), New Trends in International Lawmaking – International “Legislation” in the Public Interest, Berlin: Ducker & Humblot, 1996; on the development of the (sub-) discipline of the law of international organisations in general, see J. Klabbers, “The Life and Times of the Law of International Organizations”, Nordic Journal of International Law, 2001, pp. 287-317. A. von Bogdandy, “Globalization and Europe: How to Square Democracy, Globalization and International Law”, EJIL, Vol. 5 2004, pp. 885-906 at pp. 886-887. On this phenomenon see N.M. Blokker and H.G. Schermers, (eds), Proliferation of International Organizations, The Hague: Kluwer Law International, 2001. A. von Bogdandy (see supra n. 4), p. 889.

The Phenomenon of Multilevel Regulation

the international legal order.7 In political science and public administration, the phenomenon of interacting and partly overlapping policy spheres is often referred to as multilevel governance. Two dimensions of this concept are particularly relevant to the present book. The ﬁrst one, “governance without government”, points to the phenomenon that a number of public tasks are increasingly assumed and carried out by actors other than the classical government institutions of the Nation State (and its subdivisions).8 The second dimension, “governance beyond the State”, refers to the complexity of governance at distinct but increasingly intertwined levels. “Multilevel” then refers to a variety of forms of decision making, authority, policy making, regulation, organisation, ruling, steering, etcetera, characterized by a complex interweaving of actors operating at different levels of formal jurisdictional or administrative authority, ranging from the local level, via the national level, to the macro-regional and global level.9 These phenomena involve important questions concerning the location of power, the sharing of responsibility, the legitimacy of decisions and decision takers, and the accountability to citizens and organisations in different national, sub-national and international settings. From a legal perspective, the interactions between global, European and national regulatory spheres lead to what one could refer to as the phenomenon of “multilevel regulation”.10 We understand

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On the phenomenon of what can be cautiously referred to as a new “Europeanisation” of international law, see J. Wouters, A. Nollkaemper, and E. de Wet, (eds), The Europeanisation of International Law: The Status of International Law in the EU and Member States, The Hague: T.M.C. Asser Press, 2008. See for instance O. Treib, H. Bähr and G. Falkner, “Modes of Governance: A Note Towards Conceptual Clariﬁcation”, European Governance Papers, No. N-05-02, 17 November 2005, available at <www.connex-network.org/eurogov/pdf/egpnewgov-N-05-02.pdf>. A classic is L. Hooghe and G. Marks, Multi-level Governance and European Integration, Lanham, MD: Rowan & Little Field Publishers, 2001. In legal academic circles the notion has been picked up and applied, inter alia, by N. Bernard, Multilevel Governance in the European Union, The Hague: Kluwer Law International, 2002. See R.A. Wessel, The Invasion by International Organizations. De toenemende samenhang tussen de mondiale, Europese en nationale rechtsorde [The Increasing Interrelatedness between Global, European and National Legal Orders], Inaugural Lecture, University of Twente, 12 January 2006, p. 26, available at <www. mb.utwente.nl/ces/research/other_publications_including_i/oratiewessel.pdf>. The term, however, is quite common in biochemics, see for instance I. Olson, et al., “Multilevel Regulation of Lysosomal Gene Expression in Lymphocytes”, Biochemical and Biophysical Research Comunications, 1993, pp. 327-335; or V. 11

Multilevel Regulation and the EU

“regulation” in a broad sense here, referring to the setting of rules, standards or principles that govern conduct by public and/or private actors. Whereas “rules” are the most constraining and rigid, “standards” leave a greater range of choice or discretion, while “principles” are still more ﬂexible, leaving scope to balance a number of (policy) considerations. The purpose of the present contribution is to introduce and further analyse this relatively new phenomenon. We examine two questions: what are indications of interactions between normative processes at global, European and national level11; and what consequences do these interactions have for the research agenda related to the further development of the global and European legal order? In section 2 we ﬁrst of all attempt to map and further deﬁne the phenomenon of multilevel regulation. This is followed in section 3 by an analysis of the responses from the legal community to this phenomenon. In section 4 we try to set out an agenda for further research, including legal and non-legal approaches.

2. The Phenomenon of Multilevel Regulation 2.1. The Invasion of International Organisations As the contributions to this book indicate (see also infra, 2.4.), international organisations and international regimes are increasingly engaged in normative processes which, de jure or de facto, impact on States and even on individuals and businesses. Since decisions of international organisations are increasingly coming to be considered a source of international law12, it is quite common to regard them in terms of international regulation or legislation. Whereas regulation, as stated above, is the more comprehensive term used in this book, “legislation” has a more narrow connotation as “legislative power” has been said to have three characteristics: (1) a written articulation of rules that (2)

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Oke and R. Losick, “Multilevel Regulation of the Sporulation Transcription Factor σK in Bacillus subtilis”, Journal of Bacteriology, 1993, pp. 7341-7347. We largely leave out the more direct bi- or multilateral (transnational) relations between States. For an interesting theoretical analysis of the interdependence of regulatory policies of different countries see D. Lazer, “Global and Domestic Governance: Modes of Interdependence in Regulatory Policymaking”, ELJ, 2006, pp. 455-468. See also I.F. Dekker and R.A. Wessel, “Governance by International Organisations: Rethinking the Source and Normative Force of International Decisions”, in: I.F. Dekker and W. Werner, (eds), Governance and International Legal Theory, Leiden/ Boston: Martinus Nijhoff Publishers, 2004, pp. 215-236.

The Phenomenon of Multilevel Regulation

have legally binding effect as such and (3) have been promulgated by a process to which express authority has been delegated a priori to make binding rules without afﬁrmative a posteriori assent to those rules by those bound.13 An even more distinguishing element, perhaps, is that such rules imply future application to an indeterminate number of cases and situations.14 It is undisputed that international organisations may take binding decisions vis-à-vis their Member States and that they may even exercise sovereign powers, including executive, legislative and judicial powers.15 Thus, apart from the EC and the UN16, organisations with a competence to take legally binding decisions include the World Health Assembly of the WHO, the Council of the ICAO, the OAS, the WEU, NATO, OECD, UPU, WMO and IMF.17 As Alvarez notes, more and more technocratic international organisations “appear to be engaging in legislative or regulatory activity in ways and for reasons that might be more readily explained by students of bureaucracy than by scholars of the traditional forms for making customary law or engaging in treaty-making. They also often

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B. Oxman, “The International Commons, the International Public Interest and New Modes of International Lawmaking”, in J. Delbrück, (ed.), New Trends in International Lawmaking – International Legislation in the Public Interest, Berlin: Duncker & Humblot, 1996, pp. 21-60 at pp. 28-30. Cf. also T. Stein, “Comment” in Delbrück, op. cit., pp. 212-213. C. Schreuder (“Comment” in ibid., pp. 213-215) points to the establishment by the Security Council of criminal tribunals as a sign of international legislation. A.J.J. de Hoogh, “Attribution or Delegation of (Legislative) Power by the Security Council?”, in: M. Bothe and B. Kondoch, (eds), The Yearbook of International Peace Operations, Vol. 7 2001, pp. 1-41, at p. 27. Cf. T. Stein, “Comment” in Delbrück (see supra n. 13), pp. 212-213. See quite extensively on this issue D. Sarooshi (see supra n. 3). On decisions of the EU see e.g. A. von Bogdandy, F. Arndt and J. Bast, “Legal Instruments in European Union Law and their Reform: A Systematic Approach on an Empirical Basis”, Yearbook of European Law 2004, Oxford: Oxford University Press, 2005, pp. 91-136. Cf. P.J. Sands and P. Klein, Bowett’s Law of International Institutions, London: Sweet & Maxwell, 2001; H.J. Schermers and N.M. Blokker, International Institutional Law: Unity within Diversity, Leiden: Martinus Nijhoff Publishers, 2003; J. Klabbers, An Introduction to International Institutional Law, Cambridge: Cambridge University Press, 2004; C.F. Amerasinghe, Principles of the Institutional Law of International Organizations, Cambridge: Cambridge University Press, 2005; and N.D. White, The Law of International Organisations, Manchester: Manchester University Press, 2005. 13

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engage in law-making by subterfuge.”18 Thus, Alvarez’s survey includes standard setting by the IMO, the FAO, the ICAO, the ILO, the IAEA, UNEP, the World Bank, and the IMF. In addition, many international conventions – including UNCLOS (on the law of the sea) and a number of WTO agreements – incorporate generally accepted international “rules, standards, regulations, procedures and/ or practices” (UNCLOS).19 Alvarez points to the fact that this may effectively transform a number of codes, guidelines and standards created by international organisations and bodies into binding norms. Indeed, while in most cases standard setting is accomplished through softer modes of regulation, this may leave the subjects of regulation “with as little effective choice as some Security Council enforcement actions”.20 Nevertheless, most types of law making by international organisations are generally directed towards the organisation’s own members, viz., States.21 But what if decisions by international organisations either de jure or de facto become part of the domestic legal order of the Member States and directly or indirectly affect citizens and/or businesses within those States? While in most States the decisions of international organisations and bodies typically require implementation in the domestic legal order before they become valid legal norms, the density of the global governance web has caused an interplay between the normative processes at various levels. For EU Member States (and their citizens) this can imply that the substantive origin of EU decisions (which usually enjoy direct effect in, and supremacy over the domestic legal order) is to be found in another international body.22 In many areas, ranging from security to food safety, banking, health issues or the protection of the environment, national rules ﬁnd their basis in international and/or European decisions (see also infra, section 2.4.). In those cases decisions may enter the domestic legal orders as part of European law. But international decisions may also have an independent impact on domestic legal orders. This is not to say that international decisions have a direct effect in the sense we are familiar with in EU law. From the point of view of international law, while “primacy is a matter of logic as

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J.E. Alvarez (see supra n. 3), p. 217. Ibid, Chapter 4. Ibid., at p. 218. A number of international organisations also contain other international organisations as members: for instance, the WTO has the European Community as one of its founding members. For a recent survey of the relations between the EU and other international organisations see: F. Hoffmeister, “Outsider or Frontrunner? Recent Developments under International and European Law on the Status of the European Union in International Organizations and Treaty Bodies”, CMLRev, Vol. 44 2007, pp. 41-68.

The Phenomenon of Multilevel Regulation

international law can only assume its role of stabilizing a global legal order if it supersedes particular and local rules”, at the same time it “allows for an undeﬁned variety of combinations based either upon the doctrine of monism or the doctrine of dualism”.23 However, the fact that many domestic legal orders do not allow their citizens to directly invoke international norms before national courts24 does not mean that these norms are devoid of impact. As the norms are usually based on international agreements and/or decisions of international organisations, States will simply have to follow the rules of the game in their international dealings. This implies that even domestically they may have to adjust to ensure that the rules are observed by all parts of the administration. The de facto impact of the – often quite technical – norms and the need for consistent interpretation25 may thus set aside more sophisticated notions of the applicability of international norms in the domestic legal order. The United Nations Security Council forms a good example of an international body that is increasingly active in the creation of “international regulation” or “international legislation”, although its legal competence to engage in these activities has been questioned.26 Thus, in the area of anti-terrorism measures for

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Th. Cottier, “A Theory of Direct Effect in Global Law”, in: A. von Bogdandy, et. al., (eds), European Integration and International Co-ordination: Studies in Transnational Economic Law in honour of Claus Dieter Ehlermann, The Hague: Kluwer Law International, 2001, pp. 99-123 at p. 102 and p. 104. For a recent survey of the different legal systems in Europe see: A. von Bogdandy, P.M. Huber and P. Cruz Villalón, (eds), Ius Publicum Europaeum; Band I: Staatliches Verfassungsrecht im Europäischen Rechtsraum, Heidelberg: C.F. Müller Verlag, 2007. Ibid. on the impact of the doctrine of consistent interpretation in relation to the domestic effect of WTO law, pp. 109-110. A.J.J. de Hoogh, “Attribution or Delegation of (Legislative) Power by the Security Council?”, in: M. Bothe and B. Kondoch, (eds), International Peacekeeping. The Yearbook of International Peace Operations, Vol. 7 2001, pp. 1-41; and B. Eberling, “The Ultra vires Character of Legislative Action by the Security Council”, International Organizations Law Review, 2005, pp. 337-360. This development is often addressed to question the competence of the Security Council in this respect. See also recently: M. Akram and S.H. Shah, “The Legislative Powers of the United Nations Security Council”; and A. Marschik, “Legislative Powers of the Security Council”, both in: R.St.J. MacDonald and D.M. Johnston, (eds), Towards World Constitutionalism: Issues in the Legal Ordering of the World Community, Leiden: Martinus Nijhoff Publishers, 2005; S. Talmon, “The Security Council as World Legislator”, American Journal of International Law, 2005, pp. 175-193; and E. de Wet, “The Security Council as a Law-Maker: The Adoption of (Quasi)-Legislative 15

Multilevel Regulation and the EU

example, Security Council Resolution 1390 (2002) was no longer directed at the Taliban regime but at individuals (Osama bin Laden, the Al-Qaeda network and the persons and entities associated with them). In that respect the resolution seems to herald a new development, as any connection with the territory of a State is omitted. Perhaps Resolution 1373 (2001) already pointed to something new when, in reaction to the terrorist attacks of 11 September, the Council determined “that such acts, like any act of international terrorism, constitute a threat to international peace and security”, thus referring to terrorist acts in the abstract. The Council then imposed on all States duties to “prevent and suppress the ﬁnancing of terrorist acts”, inter alia by criminalising conduct aimed at ﬁnancing or supporting terrorist acts. Whereas its Charter presents the United Nations as an intergovernmental organisation dealing with the relations between its Member States (compare Arts. 1 and 2), taking decisions that entail obligations on those Member States (Art. 25), and extremely hesitant to interfere in the domestic jurisdiction of any State, the Security Council recently took a number of decisions that directly affect citizens within Member States. Key examples include the establishment of the Tribunals for the former Yugoslavia and for Rwanda, the cases in which the UN has taken over the interim administration of a region or State (UNMIK in Kosovo and UNTAET in Timor Leste)27 and the replacement of traditional sanctions directed at States (e.g. Iraq) by “smart sanctions” directed at certain individuals or groups.28 Thus the Security Council placed greater emphasis

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Decisions”, in: R. Wolfrum and V. Röben, (eds), Developments of International Law in Treaty Making, Berlin: Springer, 2005, pp. 184-225. The debate is somewhat older; see for instance E. Yemin, Legislative Powers in the United Nations and Specialised Agencies, Leiden: A.W. Sijthoff, 1996; and F.L. Kirgis, “The Security Council’s First Fifty Years”, American Journal of International Law, 1995, p. 520. For example, in relation to UNTAET, SC Resolution 1271 (1999) provides in para. 1 that UNTAET “… will be endowed with overall responsibility for the administration of east Timor and will be empowered to exercise all legislative and executive authority, including the administration of justice …” See also C. Stahn, “Governance beyond the State: Issues of Legitimacy in International Territorial Administration”, International Organizations Law Review, 2005, pp. 9-56; B. Kondoch, “The United Nations Administration of East Timor”, Journal of Conﬂict and Security Law, Vol. 2 2001, pp. 245-265; and R. Wilde, “Representing Territorial Administration: A Critique of Some Approaches”, EJIL, 2004, pp. 71-96. Smart sanctions are also referred to as “targeted” or “designer” sanctions. While the Afghanistan/Al-Qaeda sanctions renewed academic attention to this issue, comparable smart sanctions were for instance already established by Res. 1127 (1997) and 1173 and 1176 (1998) against UNITA (Angola); by Res. 1132 (1997)

The Phenomenon of Multilevel Regulation

on its ability to take decisions with a great impact on intra-state issues rather than being involved merely in relations between States. Of course, even this development is not entirely new. By now we are used to the Council’s occasional determination of (the effects of) domestic conﬂicts as threats to (international) peace and security. Moreover, the discussion on military intervention for humanitarian reasons highlighted the possible (and in the eyes of some even necessary) role of the Security Council in this area.29 In this sense it could be argued that the Security Council is no longer dealing with a particular situation between States or within a State, but with a more abstract situation that does not involve a particular dispute. Another example of an abstract danger could be Resolution 1422 (2002). By exempting certain “acts or omissions relating to a United Nations established or authorized operation” from the jurisdiction of the International Criminal Court, even though no ICC investigation was imminent, the Council in effect held the abstract possibility of such an investigation to be a threat to peace. A particularly clear example is Resolution 1540 (2004), in which the Council again identiﬁed an abstract danger – the proliferation of weapons

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concerning Sierra Leone; Res. 1160 (1998) concerning Kosovo; Res. 1298 (2000) concerning Eritrea and Ethiopia; and by Res. 1343 (2001) concerning Liberia. More extensively see: I. Cameron, “Targeted Sanctions, Legal Safeguards and the European Convention on Human Rights”, Nordic Journal of International Law, 2003, pp. 159-214; R.A. Wessel, “Debating the ‘Smartness’ of Anti-Terrorism Sanctions: The UN Security Council and the Individual Citizen”, in: C. Fijnaut, J. Wouters and F. Naert, (eds), Legal Instruments in the Fight Against International Terrorism. A Transatlantic Dialogue, Leiden: Martinus Nijhoff Publishers, 2004, pp. 633-660. On the sanctions committees dealing with the cases see: G.L. Burci, “Interpreting the Humanitarian Exceptions Through the Sanctions Committees”, in: V. Gowlland-Debbas, (ed.), United Nations Sanctions and International Law, The Hague: Kluwer Law International, 2001, pp. 143-154, at pp. 144-145. For a survey of Security Council activities in this area see: I. Österdahl, “The Exception as the Rule: Lawmaking on Force and Human Rights by the UN Security Council”, Journal of Conﬂict & Security Law, 2005, pp. 1-20. Earlier: B. Graefrath, “Leave to the Court What Belongs to the Court: The Libyan Case”, European Journal of International Law, 1993, p. 184; M. Bedjaoui, The New World Order and the Security Council: Testing the Legality of its Acts, Dordrecht: Martinus Nijhoff Publishers, 1994; J.E. Alvarez, “Judging the Security Council”, American Journal of International Law, 1996, pp. 1-39; D.W. Bowett, “The Court’s Role in Relation to International Organisations”, in: V. Lowe and M. Fitzmaurice, (eds), Fifty Years of the International Court of Justice: Essays in Honour of Sir Robert Jennings, Cambridge: Cambridge University Press, 1996, pp. 181-192; and J. Dugard, “Judicial Review of Sanctions”, in: V. Gowlland-Debbas, United Nations Sanctions and International Law, The Hague: Kluwer Law International, 2001, pp. 83-91. 17

Multilevel Regulation and the EU

of mass destruction to non-State actors – as a threat to peace, and it again laid down a general obligation on all States that they shall refrain from assisting non-State actors in acquiring weapons of mass destruction, to criminalise the behaviour of non-State actors aimed at acquiring such weapons, etc.30 Earlier examples of resolutions attempting to “regulate” a certain area without any relation to a speciﬁc conﬂict include the protection of civilians in armed conﬂicts and the spread of HIV/AIDS, as well as certain methods employed by terrorist groups. However, in this context the Council had not (yet) invoked its Chapter VII powers to lay down binding norms.31 The World Trade Organization is another body whose decisions have been labelled international regulation.32 While one may debate whether the decisions taken by the WTO’s Dispute Settlement Body (DSB) are to been seen as proof of the organisation’s “legislative” or “adjudicative” powers, the fact remains that they reach beyond the WTO Members involved in the dispute and may even have serious consequences for individuals (including enterprises in particular).33 A similar phenomenon may be discovered in another dimension of the WTO: intellectual property, regulated in the so-called TRIPs,34 which may affect the producers of HIV/AIDS medicines, in that an international decision ensures that their products may be sold under the market value in developing countries. Apart from the fact that the WTO has no facilities for individual access to a judicial review procedure such as those applicable within the EU, it may nevertheless

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B. Eberling, (see supra n. 26), pp. 337-360. On “abstract” or “thematic” decisions see also: C. Denis, Le Pouvoir normatif du Conseil de sécurité des Nations unies: Portée et limites, Brussels: Bruylant, 2004, paras. 118-130 en paras. 171-181; as well as J.E. Alvarez, (see supra n. 3), 2005, pp. 173-176. B. Eberling, (see supra n. 30). See in particular N. Lavranos: Decisions of International Organizations in the European and Domestic Legal Orders of Selected EU Member States, Groningen: Europa Law Publishing, 2004. This forms one of the reasons for the debate on the constitutionalisation of trade law. See for instance D.Z. Cass, “The ‘Constitutionalization’ of Trade Law: Judicial Norm-Generation as the Engine of Constitutional Development in International Trade”, European Journal of International Law, 2001, pp. 39-75; as well as Cass, op. cit., 2005. On the impact of the WTO on the international legal order see the interesting book by J.H. Jackson, Sovereignty, the WTO and the Changing Fundamentals of International Law, Cambridge: Cambridge University Press, 2006. On TRIPs see e.g. S.K. Sell, Private Power, Public Law: The Globalization of Intellectual Property Rights, Cambridge: Cambridge University Press, 2003.

The Phenomenon of Multilevel Regulation

ﬁnd itself bound by Security Council resolutions, which may have a conclusive impact on the outcome of a WTO dispute settlement procedure. Other examples of international regulation can be found with the UN High Commissioner for Refugees (in relation to the ﬁxing of standards regarding the establishment of a refugee status of the governance of refugee camps), the World Health Organization (in establishing global health risks), the so-called Financial Action Task Force of the OECD (in the area of money laundering), WIPO (in the area of intellectual property) and the World Bank (in setting criteria for obtaining ﬁnancial support). International norms do not always reach States’ domestic legal order directly: they may have followed a route through other international bodies. In the European Union the relation between EU decisions and decisions taken by other international bodies is indeed quite obvious.35 Whereas this has been particularly apparent in the area covered by the internal market, the Union recently made clear that there is also an interplay between its decisions and United Nations anti-terrorism measures. In the Yusuf and Kadi cases, citizens of the Union did not succeed in having their names removed from UN and EU sanctions lists.36 The Member State in question (Sweden) was faced with the supremacy of EU law, whereas the European Court of First Instance held that the European Community is bound by UN law and the Court was in no position to judge the legality of UN Security Council Resolutions. At the same time the relationship between the European Community and the WTO may be regarded from a multilevel perspective. While the WTO is in no way comparable to the UN where questions of hierarchy and primacy are concerned, the ECJ has indicated the necessity that Community law be interpreted in conformity with WTO law. In that sense similar arguments to those used by the Court of First Instance in the Yusuf and Kadi cases could appear in cases where individuals claim to be a victim of a WTO (DSB) decision, in which case they would add to the already difﬁcult position of individuals under WTO law.37

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See also Hoffmeister (see supra n. 22). CFI Cases T-306/01, Ahmed Ali Yusuf and Al Barakaat International Foundation v. Council and Commission; and T-315/01, Yassin Abdullah Kadi v. Council and Commission, 21 September 2005. See also R.A. Wessel, “The UN, the EU and Jus Cogens”, International Organizations Law Review, 2006, No.1, pp. 1-6. So far the direct effect of WTO law has not been accepted by the European Court of Justice. See for instance Case C-149/96, Portugal/Council. For examples in the area of international trade see: S. Shapiro, “International Trade Agreements, Regulatory Protection and Public Accountability”, Administrative Law Review, 2002, p. 435. 19

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There thus seems to be a need to investigate the interplay between regulatory powers of international organisations.38 The close relationship between norms enacted by the World Health Organization, the World Trade Organization and the European Union, for instance, is quite obvious.39 The new International Health Regulations (IHR) as well as the WHO Framework Convention on Tobacco Control (FCTC) may be seen as examples. One could also point to the International Codex Alimentarius Commission, a subsidiary common body of FAO and WHO which develops international standards on food safety. It cannot be denied that – in particular through the WTO’s Agreement on Sanitary and Phytosanitary Standards40 – these standards have an effect in other legal orders, including in those of the EU and its Member States. The fact that the European Community has been a Member of the Codex Alimentarius Commission since 200341 reinforces the multilevel nature of this ﬁeld of regulation.42 Similar examples may be found in the area of environmental protection, where international standards are set that are not only binding on States but also on the European Community and which – in any case through the latter – are also relevant to individuals. Heldeweg points to some examples in the area of tradable

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For a theoretical approach to regulatory interaction see also: V. Mayer-Schönberger and A. Somek, “Introduction: Governing Regulatory Interaction: the Normative Question”, ELJ, 2006, pp. 431-439 (Special issue of the ELJ Governing Regulatory Interaction: the Normative Question). J. Wouters and B. De Meester, “Safeguarding Coherence in Global Policy-Making on Trade and Health: The Triangle WHO – WTO – EU”, International Organizations Law Review, 2005; and N. Lavranos, (see supra n. 32). On the inﬂuence of the EU on other international organisations see: L. Azoulai, “The Acquis of the European Union and International Organisations”, ELJ, 2005, pp. 196-331. The direct effect of WTO decisions in European Community law is still rejected by the European Court, as conﬁrmed in such cases as C-377/02, Van Parys, 1 March 2005 and T-19/01, Chiquita, 3 February 2005. On this topic see: P. Eeckhout, “Does Europe’s Constitution Stop at the Water’s Edge? Law and Policy in the EU’s External Relations”, Walter van Gerven Lectures (5), Groningen: Europa Law Publishing, 2005, pp. 14-17. Art. 3.4 and Annex A.3.a) SPS Agreement. Council Decision 2003/822/EC of 17 November 2003 on the accession of the European Community to Codex Alimentarius Commission, O.J., 2003, L309/14. See F. Hoffmeister, (see supra n. 22), at p. 44. Cf. also B.M.J. van der Meulen and A.A. Freriks, “Millefeuille – The Emergence of a Multi-Layered Controls System in the European Food Sector”, Utrecht Law Review, 2006, pp. 156-176, available at <www.utrechtlawreview.org>.

The Phenomenon of Multilevel Regulation

allowances.43 Regulation 2037/2000 on substances that deplete the ozone layer,44 implementing the Vienna Convention and Montreal Protocol45, contains a system of trade through licences to import or export controlled substances from other countries (which may or may not be parties to the Montreal Protocol). More important, and certainly more innovative, may be the Directive establishing a scheme for greenhouse gas emission allowance trading within the Community.46 This scheme precedes the obligations under the ﬁrst commitment period of the Kyoto Protocol (2008-2012) and aims to prepare the Community for allowances trading. Finally, the effects on individuals are particularly evident in the framework of the so-called “Aarhus regime”. The Aarhus Convention47 is an important multilateral environmental treaty to which the Community is a signatory and which is underpinned by three basic legal requirements in the area of openness and participation: a) access to environmental information; b) public participation; c) access to judicial review in environmental cases. Each of these requirements, also referred to as the “Aarhus pillars”, has given rise to legislation or proposals based thereon. In other cases, too, the EC is a party to international environmental treaties,48 or is involved in their implementation on behalf of EU Member States.49

43

44 45 46 47

48

49

M.A. Heldeweg, “Good Environmental Governance in the EU: Lessons from Work in Progress”, in: D.M. Curtin and R.A. Wessel, Good Governance and the European Union: Some Reﬂections of Concepts, Institutions and Substance, Antwerpen: Intersentia, 2004, pp. 175-214. OJ L 244/1, 2000. OJ L 297/10, 1988 (Vienna Convention) and OJ L 299/21, 1988 (Montreal Protocol). Directive 2003/87 (2003) OJ L 275. Convention on Access to Information, Public Participation in Decision Making and Access to Justice in Environmental Matters, signed by the EC on 25 June 1998; COM(1998) 344 ﬁnal. R.A.J. van Gestel and J.M. Verschuuren, “Internationaal en Europees milieurecht in Nederland? Gewoon toepassen!” [International and European Environmental Law in the Netherlands? Just apply it!], SEW, 2005, pp. 244-251. The authors refer to the Treaty of Basel, the UN/ECE Treaty of Helsinki, the Kyoto Protocol of the UN Climate Treaty, the Treaty of Bern, and the 2001 UNEP Treaty on POP’s. See Basel: <www.basel.int/text/text.html>; Helsinki: <www.unece.org/env/water/ welcome.html>; Kyoto: ; Bern: ; Aarhus: <www.unece.org/env/pp/>; POP: <www.pops. int/>; CITES: <www.cites.org/>. See for instance the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES). 21

Multilevel Regulation and the EU

2.2. The Expansion of Regulation: from Government to Governance In their interdisciplinary survey of research on regulation, Baldwin, Scott and Hood developed three deﬁnitions of regulation.50 In the ﬁrst, most stringent deﬁnition, regulation refers to the promulgation of an authoritative set of standards and rules accompanied by some mechanism for promoting and monitoring compliance with these rules and standards. A second, broader deﬁnition refers to all the efforts of State agencies to steer individual and organisational behaviour. This approach takes account of other policy instruments which a State may use to inﬂuence behaviour, such as taxation, disclosure requirements, procurement policies, etc. A third approach to regulation considers all mechanisms of social control, including non-State processes. In recent times, in addition to the standard setting practice of international organisations referred to above, it is especially this third type, with new forms of social or “privatised” regulation that is on the rise and is even proliferating. This evolution is taking place in a context of trends such as the weakening of national governments, the rise and professionalisation of multinational corporations and supply chains, and the proliferation, diversiﬁcation and internationalisation of new social movements and their strategies.51 This shift is often referred to as a shift from government to governance in regard to policy making. Traditionally, social problems or public policy issues were governed by States via a regulatory framework consisting of bureaucracies (departments, ministries) and legislation. This top-down, command-and-control approach 50

51

22

R. Baldwin, C. Scott and C. Hood, “Introduction”, pp. 1-55, in: R. Baldwin, et. al., (eds) A Reader on Regulation, Oxford: Oxford University Press, 1998, pp. 3-4. T. Bartley, “Certifying Forests and Factories: States, Social Movements, and the Rise of Private Regulation in the Apparel and Forest Products Fields”, Politics and Society, Vol. 31(3) 2003, pp. 433-464; B. Cashore, “Legitimacy and the Privatization of Environmental Governance: How Non-state Market-driven (NSMD) Governance Systems Gain Rule-making Authority”, in: Governance – An International Journal of Policy and Administration, Vol. 15(4) 2003, pp. 503-529; D. O’Rourke, “Outsourcing Regulation: Analyzing Nongovernmental Systems of Labor Standards and Monitoring”, Policy Studies Journal, Vol. 31(1) 2003, pp. 1-29; A. Fung, “Making Social Markets: Dispersed Governance and Corporate Accountability” in: John D. Donahue and Joseph S. Nye, (eds), Market Based Governance, Washington, D.C.: Brookings Institution Press, 2003; G. Gerefﬁ, et al., The NGO-industrial complex, Foreign Policy, Vol. 125 2001, pp. 56-65; C. Sabel, “Learning by Monitoring: The Institutions of Economic Development”, pp. 137-165, in: N. Smelser and R. Swedberg, (eds), Handbook of Economic Sociology, Princeton: Princeton University Press, 1994; C. Sabel, Ratcheting Labor Standards. Regulation for Continuous Improvement in the Global Workplace, Washington: World Bank, 2000.

The Phenomenon of Multilevel Regulation

aimed at setting and implementing standards which are/were applicable to all parties involved in the same way. From the 1980s on, though, the deﬁciencies of this approach started to emerge in both old and new policy ﬁelds,52 leading to the development of new policy instruments and arrangements. A major policy shift constitutes a move away from the State as the sole actor in policy making. The State traditionally acted in a top-down, command-and-control fashion. However, apart from an increasing role of international organisations and bodies (supra, 2.1.), new modes of policy making are characterised by a greater role for private actors, either via intensive negotiation, consultation, interaction, and even self-regulation, or via increasing economic and market-oriented strategies and instruments.53 This broadening of the “spectre of intervention” implies a fundamental redeﬁnition of the role of the State:54 the State should no longer row but steer,55 focus more on means than on ends56 and concentrate more on organisation and direction rather than provision.57 The new policy catchwords

52

53

54

55

56

57

See inter alia M. Jänicke, State Failure – the Impotence of Politics in Industrial Society, Cambridge: Polity Press, 1990. C. Crouch and D. Marquand, (eds), Ethics and Markets. Co-operation and Competition within Capitalist Economies, Oxford: Blackwell Publishers, 1993; J. van Tatenhove, et al., (eds), Political Modernisation and the Environment. The Renewal of Environmental Policy Arrangements, Dordrecht: Kluwer Academic Publishers, 2000; A. Mol, “Ecological Modernisation and Institutional Reﬂexivity: Environmental Reform in the Late Modern Age”, Environmental Politics, Vol. 5(2) 1996, pp. 302-323; M. Hajer, The Politics of Environmental Discourse. Ecological Modernisation and the Policy Process, Oxford: Clarendon Press, 1995. D. Liefferink, M.S. Anderesen and M. Eneveldsen, “Interpreting Joint Environmental Policy-Making: Between Deregulation and Political Modernization”, in: A. Mol, et al., (eds), The Voluntary Approach to Environmental Policy. Joint Environmental Policy-Making in Europe, Oxford: Oxford University Press, 2000, pp. 10-31, at p. 14. D. Liefferink, et al., “Interpreting Joint Environmental Policy-Making: Between Deregulation and Political Modernization”, pp. 10-31, in: A. Mol, et al., (eds), (see supra n. 53); M. Jänicke, State Failure – the Impotence of Politics in Industrial Society, Cambridge: Polity Press, 1990, p. 166. D. Osborne and T. Gaebler, Reinventing Government, New York: Basic Books, 1992. D. Miliband, “The New Politics of Economics”, in: C. Crouch and D. Marquand, (eds), Ethics and Markets. Co-operation and Competition within Capitalist Economies, Oxford: Blackwell Publishers, 1993, pp. 21-30. G. Mulgan, “Reticulated Organisations: The Birth and Death of the Mixed Economy”, in: C. Crouch, et al., (eds), Ethics and Markets. Co-operation and Competition 23

Multilevel Regulation and the EU

are bottom-up policy processes, empowerment, the importance of learning processes, (open methods of) co-ordination, co-operation, consensus, ﬂexibility, tailor-made solutions, self-regulation, public-private partnerships, participation and benchmarking. Tatenhove, adopting a European perspective, identiﬁed the following major policy changes: “(a) the traditional divides between state, market and civil society are disappearing, while (b) the interrelations between these spheres increasingly exceed the nation state, (c) resulting in new coalitions between state agencies, market agents and civic parties both on local and global levels”.58 The overall result is a policy style characterized by plurality in terms of policy instruments, coalitions between parties, the allocation and distribution of power and new forms of co-operation. In the United States, too, legal scholars and political scientists describe the emergence of a new democratic model: “The emergent model, which we call democratic experimentalism, combines the virtues of localism, decentralization, and direct citizen participation with the discipline of national coordination, transparency, and public accountability.”59 According to some American scholars these new models try to combine the virtues of localism, decentralisation, and direct participation with the discipline of international or national co-ordination and public accountability.60 “In contrast to conventional hierarchical regulation in which subordinate private actors answer to the authoritative command of a central regulator, the practical core of the new model is centrally monitored local experimentation.”61

58

59

60

61

24

within Capitalist Economies, Oxford: Blackwell Publishers, 1993, pp. 31-47; G. Mulgan, Politics in an Antipolitical Age; Cambridge: Polity Press, 1994. J. van Tatenhove, B. Arts and P. Leroy, “Political Modernisation”, in: J. van Tatenhove, et al., (eds), Political Modernisation and the Environment. The Renewal of Environmental Policy Arrangements, Dordrecht: Kluwer Academic Publishers, 2000, pp. 35-51, at p. 48. B. Karkkainen, A. Fung and C. F. Sabel, “After Backyard Environmentalism. Towards a Performance-Based Regime of Environmental Regulation”, American Behavioral Scientist, Vol. 44(4) 2000, pp. 692-711, at p. 692. D. Esty and D. Geradin, (eds), Regulatory Competition and Economic Integration: Comparative Perspectives. 2001, Oxford UK: Oxford University Press; B. Karkkainen, A. Fung and C. F. Sabel, (see supra n. 59), pp. 692-711; C. Sabel, “Learning by Monitoring: The Institutions of Economic Development”, in: N. Smelser and R. Swedberg, (eds), Handbook of Economic Sociology, 1994, Princeton: Princeton University Press, pp. 137-165; C.F. Sabel, A. Fung and D. O’Rourke, Ratcheting Labor Standards. Regulation for Continuous Improvement in the Global Workplace, Washington: World Bank, 2000 ; M. Dorf and C.F. Sabel, “A Constitution of Democratic Experimentalism”, Columbia Law Review, March 1998, pp. 267-473. B. Karkkainen, A. Fung and C.F. Sabel, (see supra n. 59), p. 691.

The Phenomenon of Multilevel Regulation

These new forms of governance are considered superior to existing policy making strategies because they are assumed to improve the substantive quality of decisions and policy making by incorporating new and more information obtained from the different participants; increase learning processes among the participants (educating the actors involved) and in this way generate new knowledge; with better incorporation of public values into decisions; they are supposed to resolve, contain or reduce conﬂict among competing interests and the actors involved, integrate local knowledge and context in decision making, hence tailoring it to local circumstances; they achieve cost-effectiveness; and they increase compliance via greater commitment to and support for the implementation of decisions.62 Existing policy practices are criticised for being overly rigid (rules that hold across a nation and nations) and for their limitations in being able to incorporate local and speciﬁc information in the design of solutions. As a result of this policy shift one can observe, both nationally and internationally, the emergence of new co-operative policy initiatives and new forms of governance, such as public and stakeholder participation in decision

62

T. Beierle and J. Cayford, Democracy in Practic, Washington: Resources for the Future, 2002; T. Beierle, Public Participation in Environmental Decisions: An Evaluation Framework Using Social Goals. Discussion paper 99-06, Resources for the Future, 1998; C. Sabel, “Learning by Monitoring: The Institutions of Economic Development”, in: N. Smelser and R. Swedberg, (eds) (see supra n. 60), pp. 137165; M. Dorf and C.F. Sabel (see supra n. 60), pp. 267-473; B. Karkkainen, A. Fung and C. F. Sabel, (see supra n. 59), pp. 692-711; S. Helper, J.P. MacDufﬁe and C.F. Sabel, “Pragmatic Collaborations: Advancing Knowledge While Controlling Opportunism”, Industrial and Corporate Change, Vol. 9(3) 2000, pp. 443-488; C. Coglianese and J. Nash, “Environmental Management Systems and the New Policy Agenda”, in: C. Coglianese, and J. Nash, (eds), Regulating from the Inside: Can Environmental Management Systems achieve Policy Goals, Washington: Resources for the Future, 2001; C. Coglianese, Is Consensus an Appropriate Basis for Regulatory Policy? Paper Harvard University. John F. Kennedy School of Government, 2002; G. Cowie and L. O’Toole, “Linking Stakeholder Participation and Environmental Decision-Making”, pp. 61-75, in: F.H. Coenen, et al., (eds), Participation and the Quality of Environmental Decision-Making, Dordrecht: Kluwer Academic Publishers, 1998; B. de Sousa Santos, “Participatory Budgeting in Porto Alegre: Toward a Redistributive Democracy”, Politics and Society, Vol. 26 1998, pp. 461-510; G. Baiocchi, “Participation, Activism and Politics. The Porto Alegre Experiment”, in: A. Fung and E.O. Wright, (eds), Deepening Democracy. Institutional Innovations in Empowered Participatory Governance, London: Verso, 2003, pp. 45-76. 25

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making,63 voluntary agreements and covenants, self-regulation by companies via the introduction of management systems and codes of conduct,64 stakeholder partnerships for the management of ecosystems or the monitoring of human rights issues and labour conditions on a global scale,65 collaborative pragmatism,66 the development of corporate social responsibility models and the rise and proliferation of accreditation and certiﬁcation bodies such as the Forest Stewardship Council, Fair Labour Association or Marine Stewardship Council.67

63

64

65

66

67

26

T. Beierle and J. Cayford, Democracy in Practice, Washington: Resources for the Future, 2002; T. Beierle (see supra n. 62); G. Cowie and L. O’Toole, “Linking Stakeholder Participation and Environmental Decision-making”, in: F.H. Coenen, et al., (eds), Participation and the Quality of Environmental Decision-Making, Dordrecht: Kluwer Academic Publishers, 1998, pp. 61-75. C. Coglianese and J. Nash, (eds), Regulating from the Inside: Can Environmental Management Systems Achieve Policy Goals, Washington: Resources for the Future, 2001; K. Kollman and A. Prakash, “EMS-based Environmental Regimes as Club Goods: Examing Variations in Firm-level Adoption of ISO 14001 and EMAS in UK, US and Germany”, Policy Sciences, Vol. 35 2002, pp. 43-67; I. Mamic, Implementing Codes of Conduct. How Businesses manage social performance in global supply chains, Geneva: ILO, 1994; World Bank, Company Codes of Conduct and International Standards: An Analytical Comparison, Washington: Worldbank, 2003. W. Leach, N.W. Pelkey and P. Sabatier, “Stakeholder Partnerships as Collaborative Policy-making: Evaluation Criteria Applied to Watershed Management in California and Washington”, Journal of Policy Analysis and Management, Vol. 21(4) 2002, pp. 645-670. B. Karkkainen, A. Fung and C. F. Sabel, (see supra n. 59), pp. 692-711; B. Karkkainen, “Towards Ecologically Sustainable Democracy”, in: A. Fung and E.O. Wright, (eds), Deepening Democracy. Institutional Innovations in Empowered Participatory Governance, London: Verso, 2003, pp. 208-224. T. Bartley, “Certifying Forests and Factories: States, Social Movements, and the Rise of Private Regulation in the Apparel and Forest Products Fields”, Politics and Society, Vol. 31(3) 2003, pp. 433-464; B. Cashore, “Legitimacy and the Privatization of Environmental Governance: How Non-state Market-driven (NSMD) Governance Systems Gain Rule-making Authority, Governance – An International Journal of Policy and Administration, Vol. 15(4) 2003, pp. 503-529; B. Cashore, G. Auld and D. Newsom, Governing through Markets: Forest Certiﬁcation and the Emergence of Non-State Authority, New Haven: Yale University Press, 2004; D. O’Rourke, “Outsourcing Regulation: Analyzing Nongovernmental Systems of Labor Standards and Monitoring”, Policy Studies Journal, Vol. 31(1) 2003, pp. 1-29.

The Phenomenon of Multilevel Regulation

2.3. Governance and Regulation as a Multi-actor Game What has been set out above already indicates that governance, and by the same token regulation, has become a multi-actor game: apart from intergovernmental organisations, non-governmental and transnational actors are playing an increasing role in global governance.68 In some issue areas there is intense co-operation between State and non-State actors. Apart from the obvious example of the International Labour Organization, one could point to the Codex Alimentarius Commission (supra, 2.1.) or to ICANN,69 which governs the internet. In some areas States have even ceased to play a role and transnational actors have taken over. A prime example is the International Standardization Organization (ISO), which by now has produced some 13,000 rules on the standardisation of products and processes.70 These rules are often adopted by other international organisations, such as the WTO, which allows them to indirectly affect national legal orders.71 A similar situation arises in relation to the norms set by the World Anti-Doping Agency. It is clear that individuals or companies may be confronted by rules that were adopted without any direct inﬂuence by the national legislator or that simply have to be adopted at the national level in order to be able to participate in international co-operation. Something like global law without the State72 does exist and in some areas States do not play any role in global regulation. What one witnesses is a transnational co-operation that has already led to a complete set of rules on the use of the internet: the lex digitalis, comparable to the lex mercatoria related to transnational trade.73 Other examples include the Basel 68

69 70

71

72

73

Anne-Marie Slaughter regards these networks as a better way of world governance than the traditional statecentric approach. See her A New World Order, 2004, Boston MA: Princeton University Press. Another relevant dimension is not addressed in this contribution. Apart from transnational networks, the international legal order is also challenged by “hegemonic international law” (HIL). On the inﬂuence of hegemons see also J.E. Alvarez, (see supra n. 3), pp. 199-217 as well as G. Simpson, Great Powers and Outlaw States: Unequal Sovereigns in the International Legal Order, Cambridge: Cambridge University Press, 2004. Internet Corporation for Assigned Names and Numbers. R.B. Hall and Th.J. Biersteker, (eds), The Emergence of Private Authority in Global Governance, Cambridge: Cambridge University Press, 2002. S. Shapiro, “International Trade Agreements, Regulatory Protection and Public Accountability”, Administrative Law Review, 2002, p. 435. For the contribution to the fragmentation of law see Fischer-Lescano and Teubner, (see infra n. 104), p. 1009. On the lex digitalis see for instance H.H. Perritt Jr., “Dispute Resolution in Cyberspace: Demand for New Forms of ADR”, Ohio State Journal on Dispute Resolution, 2000, 27

Multilevel Regulation and the EU

Committee, in which the central bank directors of a limited number of countries harmonise their policies in such a way as to result in a de facto regulation of the capital market74, and the International Organization of Securities Commissions (IOSCO), which deals with the transnationalisation of securities markets and attempts to provide a regulatory framework for them.75 National agencies thus participate in global (or regional) regulatory networks as independent, autonomous actors and are, in turn, often required to implement international regulations or agreements adopted in the context of these networks at the national level.76 As early as a decade ago, Slaughter termed this phenomenon the “nationalization of international law”.77 According to Jayasuriya these new regulatory forms have three main features: 1. they are governed by networks of State agencies acting not on behalf of the State but as independent actors; 2. they lay down standards and general regulatory principles rather than strict rules; and 3. they frequently contribute to the emergence of a system of decentralised enforcement or the regulation of self-regulation.78 Apart from non-governmental bodies and national agencies making their own international deals, a relatively new development is the proliferation of international bodies that are not based on an international agreement but on a decision by an international organisation. According to some observers these

74

75 76

77

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pp. 675-692. On the lex mercatoria see for instance L.M. Friedman, “Erewhon: The Coming Global Legal Order”, Stanford Journal of International Law, 2001, pp. 347-359. D. Zaring, “International Law by Other Means: The Twilight Existence of International Financial Regulatory Organizations”, Texas International Law Review, 1998, p. 281; M.S. Barr and G.P. Miller, “Global Administrative Law: The View from Basel”, EJIL, 2006, pp. 15-46. Ibid.; and Jayasuriya (see supra n. 3), p. 449. Jayasuriya (see supra n. 3), p. 440. See also S. Picciotto, “The Regulatory CrissCross: Interaction Between Jurisdictions and the Construction of Global Regulatory Networks”, in: W. Bratton, et al., (eds), International Regulatory Competition and Coordination: Perspectives on Economic Regulation in Europe and the United States, Oxford: Clarendon Press, 1996, pp. 89-123. A.-M. Slaughter, “The Real New World Order”, Foreign Affairs, 1997, pp. 183 et seq., at p. 192. Jayasuriya (see supra n. 3), p. 453. On the regulation of self-regulation in particular see G. Teubner, “Substantive and Reﬂexive Elements in Modern Law”, Law & Society, 1983, pp. 239-281. Elements of this development are also addressed by A.-M. Slaughter, (see supra n. 68).

The Phenomenon of Multilevel Regulation

new international entities even outnumber the conventional organisations.79 International regulatory co-operation is often conducted between these non-conventional international bodies.80 The tendency towards functional specialisation because of the technical expertise required in many areas may be a reason for the proliferation of such bodies and for their interaction with other international organisations and agencies, which sometimes leads to the creation of common bodies, such as the Global Environmental Facility (GEF, created by the World Bank and joined by EBDP and UNEP) and UNAIDS, the Joint United Nations Programme on HIV/AIDS (instituted by UNICEF, UNDP, UNFPA, UNESCO, WHO and the World Bank).81 Whereas traditional international organisations are established by an agreement between States, in which their control over the organisation and the division of powers is laid down82, the link between newly created international bodies and the States that established the parent organisation is less clear. In a recent study Martini points to fundamental sectors, such as environmental protection and public health83, where the Global Environmental Facility (GEF, created by the World Bank and joined by EBDP and UNEP) and the Joint United Nations Programme on HIV/ AIDS (UNAIDS, instituted by UNICEF, UNDP, UNFPA, UNESCO, WHO and the World Bank) “demonstrate how the entity’s will does not simply express the sum of the Member States’ positions, but reformulates them at a higher level of complexity, assigning decision-making power to different subjects, especially 79

80

81

82

83

See the early study by C. Shanks, H.K. Jacobson and J.H. Kaplan, “Inertia and Change in the Constellation of International Governmental Organizations, 19811992”, International Organization, 1996, pp. 593 et seq.. Cf. also C. Tietje, “Global Governance and Inter-Agency Cooperation in International Economic Law”, Journal of World Trade, 2002, p. 501. On this phenomenon of what she terms the “new international organization”, see in particular the interesting contribution by C. Martini, “States’ Control over New International Organization”, Global Jurist Advances, 2006, pp. 1-25. On the different dimensions of the relationship between states and international organizations cf. D. Sarooshi, (see supra n. 3). See also M. Forrest, “Using the Power of the World Health Organization: The International Health Regulations and the Future of International Health Law”, Colum. J.L. & Soc. Probs., 2000 (putting the legislative powers of the WHO into perspective); and D.P. Fodler, “Global Challenges to Public Health: SARS: The Political Pathology of the First Post-Westphalian Pathogen”, J. Med. & Ethics, 2004 (on the possible implications of WHO regulations for national sovereignty). For the environmental sector see R.R. Churchill and G. Ulfstein, “Autonomous Institutional Arrangements in Multilateral Environmental Agreements: A LittleNoticed Phenomenon in International Law”, AJIL, Vol. 4 2000, pp. 623-659. 29

Multilevel Regulation and the EU

to the international institutions that promoted the establishment of the new organization.”84 Martini’s study reveals that the loss of States’ inﬂuence – and hence the autonomous position of international agencies – is reﬂected in at least three phenomena:85 (i) the fact that the new entities emerge from the regular decisions of other organisations, rather than through the treaty-making process, compromises States’ ability to inﬂuence not only their creation but also their further development; (ii) States may lose some powers to the parent organisations, such as the power to appoint the new entity’s executive heads; moreover, they might have to share the power to deﬁne and manage the organisation’s activities; and (iii) in the non-State-created organisations the international secretariat plays a greater role. This is not to say that all these international bodies can readily be compared with each another: “In fact, these institutions are established in different ways, have different institutional structures and relationships with their parent organizations, and different areas of activity and functions”.86 However, the need for collaboration between international agencies and the subsequent creation of common organisations has resulted in a global regulatory sphere in which States are more often confronted with a decrease in the inﬂuence they have on global normative processes. 2.4. The Case Studies in this Book The different case studies contained in the second part of this book aim to illustrate and analyse – obviously not exhaustively – the diversity of the phenomenon of multilevel regulation and the interactions between global, European and national regulatory spheres. In a ﬁrst, in-depth contribution, Bärbel-Dorbeck Jung analyses the challenges to the legitimacy of international regulation in the area of pharmaceuticals by studying the standardisation activities of the International Conference on Harmonisation of Technical Requirements for the Registration of Pharmaceutical for Human use (ICH). She provides a fascinating case study of the increasing interactions between the regulatory activities of the EU, its Member States, other countries and international organisations. Secondly, Caroline Bradley examines ﬁnancial trade associations and the impact of their activities on multilevel regulation of ﬁnancial services, thereby likewise pointing out important issues of legitimacy in such standard-setting processes and very clearly laying out some of the causes of legitimacy deﬁcits in multilevel regulation. In a third contribution, Bart De Meester examines

84 85 86

30

Martini, op. cit., p. 25. Ibid., p. 24. Ibid., p. 2.

The Phenomenon of Multilevel Regulation

the phenomenon of multilevel regulation in the area of banking services from an EC perspective, thereby considering not only the interactions between the rules developed at the international level (in particular in the context of the Basel Committee referred to supra, 2.3.) and the European one, but also the mechanisms through which the EC tries to inﬂuence the standard setting at the international level. This raises a variety of questions related to the input from the various stakeholders, whether democratic control is ensured and whether the policy preferences of the EC at international level enjoy sufﬁcient legitimacy. Fourthly, Robert Uerpmann analyses multilevel regulatory governance of the internet and in doing so investigates the respective roles of the EU, nation states and private actors. As indicated above (supra, 2.3.), internet regulation provides a fascinating ﬁeld of involvement of purely private organisations and, increasingly, national and EU authorities, though in a setting governed by the law of California. Uerpmann’s contribution demonstrates the complex interactions between private and public authorities and other actors with regulatory clout in multilevel governance, but it also reveals some of the problems to which a “participatory” and “consensus oriented” approach gives rise. In a ﬁfth case study, Erling Johannes Husabø looks at an entirely different example of multilevel regulation, viz. the interactions between the international, macro-regional (both Council of Europe and EU) and national normative processes that serve to deﬁne the notion of terrorism. His contribution offers an interesting illustration of the “power of ideas/concepts” as a mode of inﬂuence among the various governance levels. It likewise points to the role played by epistemic communities in helping to deﬁne such concepts. Finally, in a sixth contribution, Mirjam Kars and Helen Stout take a closer look at the transatlantic common aviation area as a case study of multilevel regulation, situating the EU’s efforts at liberalisation in its broader international framework and highlighting the various (bilateral and multilateral) tracks used for this purpose, as well as the manner in which such actors as the European Commission and the EU Member States make use of the room for manoeuvre left under international rules in order to further the European or the national interest, respectively.

3. The Response from the Legal Community Legal studies have only recently started to recognise the phenomena described above. After all, the international legal system is formed on the basis of legally autonomous national legal orders, which are in principle exclusively competent to create, implement and enforce legal norms. Nevertheless, an increasing number of studies depart from the notion that the national legal order is part of a multilevel international legal order and that the creation, application and 31

Multilevel Regulation and the EU

interpretation of national as well as international norms should take account of the multilevel structure of the system. With the development of the international legal order we have grown accustomed to legal norms being developed outside the national legal orders. The proliferation of rule makers at the international level poses new challenges to the coherence of this order. While treaties and custom remain the primary sources of international law, we have seen above that decisions of international organisations are playing an ever larger part in the development of international law. As national governments have become increasingly dependent on international institutions, a large part of national policy is inﬂuenced by and depends on international decisions. Although States do not cease to exist by becoming a member of an international (integration) organisation, it becomes very difﬁcult to regard their national legal order as existing in complete isolation from the legal system of the organisation. The “constitutional setting” in which they operate may depend in large part on general international law, and at least clearly includes the arrangements to which they agreed in the context of the international organisation in question. Conversely, the international organisation has to deal with the Janus-faced identity of Member States: on the one hand Member States are an integral part of the international organisation they set up among themselves; on the other hand the States are the counterparts of the same international organisation, in the sense that both occupy independent positions within the international legal order and even have obligations towards each other. The legal community has developed a variety of approaches to deal with this complexity: (i) constitutionalism, (ii) global administrative law, (iii) fragmentation of international law.87 3.1. Constitutionalism The combination of the phenomenon of multilevel governance and the related declining ability of States to achieve the realisation of human rights, fundamental freedoms and democratic procedures, has led a number of legal scholars to view constitutionalism in multilevel terms. On the one hand it is

87

32

Interestingly, almost all the legal scholars in question have a background in international law. Scholars active in the areas of constitutional law and legal theory seem to be more prone to adopt a comparative approach, continuing to see the State as the central reality and not really focussing on normative processes in the international legal order. See e.g. W. Twining, Globalization and Legal Theory, 2000, Cambridge UK: Cambridge University Press. An author who does pay attention to developments at the global level is B. Tamanaha, On the Rule of Law: History, Politics, Theory, Cambridge: Cambridge University Press, 2004.

The Phenomenon of Multilevel Regulation

assumed that globalisation may strengthen the protection of fundamental values at the national level, e.g. through a constitutionalisation of human rights (as experienced for instance in Europe with the European Convention on Human Rights and Fundamental Freedoms and the extensive case law of the European Court of Human Rights). On the other hand, global processes may undermine these values, as a result, for instance of the limited (democratic or otherwise) legitimacy of international decisions88 and deﬁcits in accountability, the rule of law (e.g. the lack of a possibility for review by an independent judiciary89) and transparency. In the words of Petersmann, “the inevitable ‘democratic deﬁcit’ of worldwide organisations for the collective supply of ‘global public goods’ must be compensated for by subjecting their multilevel governance to multilevel constitutional restraints at both international and domestic levels.”90 While the trend towards approaching international organisations from a constitutional perspective started in relation to the European Union,91 other international 88

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See also M. Kumm, “The Legitimacy of International Law: A Constitutionalist Framework of Analysis”, EJIL, Vol. 5 2004, pp. 907-931. On a number of these issues see also J.-M. Coicaud and V. Heiskanen, (eds), The Legitimacy of International Organizations, Tokyo: United Nations University Press, 2001. Already a classic is E. Stein, “International Integration and Democracy: No Love at First Sight”, AJIL, 2001, pp. 489-534. See also S. Wheatley, “Democratic Governance Beyond the State: The Legitimacy of Non-State Actors as Standard Setters”, in: The Role of Non-State Actors in Standard Setting, Basel Institute on Governance (forthcoming, 2008). See, e.g., on the problems related to judicial review of UN Security Council decisions, E. de Wet, The Chapter VII Powers of the United Nations Security Council, Oxford: Hart Publishing, 2005; K. Manusama, The United Nations in the Post-Cold War Era: Applying the Principle of Legality, Leiden: Nijhoff, 2006. E.-U. Petersmann, “Multilevel Trade Governance in the WTO Requires Multilevel Constitutionalism”, in: C. Joerges and E.-U. Petersmann, (eds), Constitutionalism, Multilevel Trade Governance and Social Regulation, Oxford: Hart Publishing, 2006; J.P. Trachtman, “The World Trading System, the International Legal System and Multilevel Choice”, ELJ, 2006, p. 469; and R. Uerpmann-Wittzack, “The Constitutional Role of Multilateral Treaty Systems”, in: A. von Bogdandy and J. Bast, Principles of European Constitutional Law, Oxford: Hart Publishing, 2006, pp. 145-181. See also I. Pernice, “Multilevel Constitutionalism in the European Union”, European Law Review, 2002, pp. 511-529; and R.A. Wessel, “The Multilevel Constitution of European Foreign Relations”, in: N. Tsagourias, (ed.), Transnational Constitutionalism: International and European Perspectives, Cambridge: University Press, 2007. See for instance G. Frankenberg, “The Return of the Contract: Problems and Pitfalls of European Constitutionalism”, ELJ Vol. 3 2000, pp. 257-76; J. Schwartze, (ed.), The 33

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organisations have become subject to academic constitutional scrutiny as well.92 In fact, as one observer holds: “If anyone were to propose a pairing of phrases to characterize current developments in international law, the smart money would surely be on constitutionalisation and fragmentation. [M]any international lawyers propose that treaty regimes be constitutionalized, and voice such proposals in particular in the context of international organizations”.93 Important parts of the changing nature of the international legal order are studied in what is frequently referred to as “international constitutional law”.94 One of the questions in international constitutional law is whether a so-called domestic analogy95 is useful and to what extent one has to take account of the

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Birth of a European Constitutional Order: The Interaction of National and European Constitutional Law, London: Sweet & Maxwell, 2001; A. von Bogdandy and J. Bast, (eds), Principles of European Constitutional Law, Oxford: Hart Publishing, 2006; J.H.H. Weiler, The Constitution of Europe, Cambridge: Cambridge University Press, 1999. See for instance E.-U. Petersmann, “Constitutionalism and International Organisations”, Northwestern Journal of International Law & Business, 1996, p. 398; as well as his “Human Rights, Constitutionalism and the World Trade Organization: Challenges for World Trade Organization Jurisprudence and Civil Society”, Leiden Journal of International Law, 2006, pp. 633-667; D.Z. Cass, The Constitutionalization of the WTO, Oxford: Oxford University Press, 2005 (claiming, however, that the WTO is not and should not be constitutionalised); B. Fassbender, “The United Nations Charter as Constitution of the International Community”, Col. J. Tran’l L., Vol. 36 1998, pp. 529 et seq.; and his “The Meaning of International Constitutional Law”, in: R.St.J. MacDonald and D.M. Johnston, (see supra n. 26), p. 837. J. Klabbers, “Constitutionalism Lite”, International Organizations Law Review, 2004, pp. 31-58, who also points to some of the inherent paradoxes of constitutionalism. E. de Wet, “The International Constitutional Order”, ICLQ, 2006, pp. 51-76; R. St.J. MacDonald and D.M. Johnston, (see supra n. 26); N. Tsagourias, (see supra n. 90); B. Ackerman, “The Rise of World Constitutionalism”, Virginia Law Review, 1997, p. 771; S. Kadelbach and Th. Kleinlein, “Überstaatliches Verfassungsrecht: Zur Konstitutionalisierung im Völkerrecht” [Supranational Constitutional Law: On the Constitutionalisation of International Law], Archiv des Völkerrechts, 2006, pp. 235-266. For an earlier reference see A. Verdross, Die Verfassung der Völkerrechtsgemeinschaft, Vienna: Springer Verlag, 1926. For a (US) critique: E.A. Young, “The Trouble with Global Constitutionalism”, Texas International Law Journal, 2003, p. 527. As for instance propagated by R.B. Stewart, “U.S. Administrative Law: A Model for Global Administrative Law”, IILJ Working Paper, Vol. 7 2005, available at <www. iilj.org>.

The Phenomenon of Multilevel Regulation

fact that global governance acknowledges no single government96 but rather numerous different actors at various levels, all in their own manner inﬂuencing policy making and, for our purpose, rule making through complex, often interrelated processes. 3.2. Global Administrative Law Another manner in which global governance and regulation is being tackled by legal scholarship is the so-called “global administrative law” approach. The term was introduced by Kingsbury, Krisch and Stewart when they launched a project under this title at New York University. They deﬁne global administrative law as “comprising the structures, procedures and normative standards for regulatory decision-making, including transparency, participation, and review, and the rule-governed mechanisms for implementing these standards, that are applicable to formal intergovernmental regulatory bodies; to informal intergovernmental regulatory networks; to regulatory decisions of national governments where these are part of or constrained by an intergovernmental regime; and to hybrid public-private or private transnational bodies.”97 The focus in the global administrative law project is on the administrative components and functions of international and transnational regulatory regimes. At the same time, however, quite a broad scope is adopted as “much of global governance can be understood and analyzed as administrative action: rule making, administrative adjudication between competing interests, and other forms of regulatory and administrative decisions and management.”98 The project thus addresses many of the questions posed in the present contribution with a view to a possible emergence of global administrative law. In doing so, many contributions focus on speciﬁc regulatory regimes, ranging from the OECD to accounting, the global garment industry, investment treaty arbitration, procurement rules, urban water service delivery, development co-operation, the environment, or the UNHCR.99 At the same time,

96

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98 99

The discussion on global governance does, however, fuel the older debate on a possible world government. See recently for instance B.S. Chimni, “International Institutions Today: An Imperial Global State in the Making”, EJIL, 2004, pp. 1-37. B. Kingsbury, N. Krisch and R.B. Stewart, “The Emergence of Global Administrative Law”, IILJ Working Paper, Vol. 1 2004, available at <www.iilj.org/global_adlaw/>, p. 5; also published in Law and Contemporary Problems, Vol. 3 & 4 2005, pp. 15-62. Ibid., p. 5. For an extensive overview see the Global Administrative Law Bibliography available at <www.iilj.org/global_adlaw/> as well as the special issues of the EJIL on Global 35

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contributions draw a comparison with domestic administrative law systems.100 The domestic analogy ﬂows from the fact that the “real addressees of … global regulatory regimes are now increasingly the same as in domestic law: namely, individuals …, and collective entities in regulated spheres including corporations and in some cases NGOs”.101 This calls for the recognition of a global administrative space in which international and transnational administrative bodies interact in complex ways. The notion that this global administrative space can be distinguished from both the space of inter-state relations governed by international law and from the domestic regulatory space governed by domestic administrative law is underlined by the ﬁndings in the present contribution in relation to multilevel regulation. In fact, one may state that nowadays the term “global law” better represents the characteristics of the international (global) legal order than “international law”.102

100

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Governance and Global Administrative Law in the International Legal Order, Vol. 1 2006; Law and Contemporary Problems, Vol. 3 & 4 2005; and the NYU Journal of International law and Politics, No. 4. 2005. For the relevance to environmental law see: D.-Th. Avgerinopoulou, “The Rise of Global Environmental Administrative Law – Improving Implementation and Compliance through the Means of Global Governance”, Proceedings of the 7th International Conference on Environmental Compliance and Enforcement (INECE), 9-15 April 2005, Marrakech, Morocco, available at <www.inece.org/ conference/7/vol1/21_Avgerinopoulou.pdf>. See for instance R.B. Stewart, “U.S. Administrative Law: A Model for Global Administrative Law”, IILJ Working Paper 2005/7, available at <www.iilj.org/ global_adlaw/>. In this contribution we leave aside the consequences of globalisation for national administrative law as a result of the changing role of the State due to both the increasing interplay between national and international law and between the public and private sector. On this topic see for instance: A.C. Aman, Administrative Law in a Global Context, Ithaca: Cornell University Press, 1992; A.C. Aman, “Administrative Law for a New Century”, in: M. Taggert, (ed.), The Province of Administrative Law, Oxford: Hart Publishing, 1997; and J. Delbrück, “Globalization of Law, Politics and Markets – Implications for Domestic Law – A European Perspective”, Ind. J. Global Legal Studies, 1993, p. 9. For the consequences of the constitutional order of (in this case) the United States: M. Tushnet, The New Constitutional Order, 2003, Princeton: Princeton University Press, Ch. 5: Globalization and the New Constitutional Order. B. Kingsbury, N. Krisch and R.B. Stewart, (see supra n. 97), p. 10. Cf. also D. Lewis, (ed.), Global Governance and the Quest of Justice. Volume I: International and Regional Organizations, Oxford: Hart Publishers, 2006. That this could also be seen as a step towards a “world government” was recently argued by B.S. Chimni, (see supra n. 96).

The Phenomenon of Multilevel Regulation

3.3. Fragmentation The discussions of the “fragmentation of international law” took a high ﬂight at the end of the 20th and the beginning of the 21st century. The International Law Commission considered the issue serious enough to be taken up and its study group dealing with this matter recently issued a report on the matter.103 A great variety of scholars have meanwhile written on the phenomenon of the fragmentation of international law.104 The name refers to the increasing

103

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Report of the Work of the Study Group of the International Law Commission, ﬁnalized by Martti Koskenniemi, A/CN.4/L.682, 18 July 2006. The literature on this subject abounds. See inter alia Canadian Council on International Law, Fragmentation: Diversiﬁcation and Expansion of International Law: Proceedings of the 34th Annual Conference of the Canadian Council of International Law, Ottawa, Canadian Council on International Law 2006; M. Craven, “Unity, Diversity and Fragmentation of International Law”, The Finnish Yearbook of International Law, 2003, pp. 3-34; A. Del Vecchio, Giurisdizione internazionale e globalizzazione: i tribunali internazionali tra globalizzazione e frammentazione, Milan, Giuffrè, 2003; A. Fischer-Lescano and G. Teubner, “Regime-Collisions: the Vain Search for Legal Unity in the Fragmentation of Global Law”, Michigan Journal of International Law, 2004, pp. 999-1046; A. Gattini, “Un regard procédural sur la fragmentation du droit international”, Revue générale de droit international publique, 2006, pp. 303-336; G. Hafner, “Pros and Cons Ensuing from Fragmentation of International Law”, Michigan Journal of International Law, 2004, pp. 849-863; R. Huese Vinaixa and K. Wellens, (eds), L’inﬂuence des sources sur l’unité et la fragmentation du droit international, Brussels, Bruylant, 2006; M. Koskenniemi, “Fragmentation of International Law? Postmodern Anxieties”, Leiden Journal of International Law, 2002, pp. 553-579; J. Pauwelyn, “Bridging Fragmentation and Unity: International Law as a Universe of Inter-Connected Islands”, Michigan Journal of International Law, 2004, pp. 903-916; E.-U. Petersmann, “Justice as Conﬂict Resolution: Proliferation, Fragmentation and Decentralisation of Dispute Settlement in International Trade Law”, University of Pennsylvania Journal of International Economic Law, 2006, pp. 273-366; M. Prost and P. Kingsley Clark, “Unity, Diversity and Fragmentation of International Law: How Much Does the Multiplication of International Organizations Really Matter?”, Chinese Journal of International Law, 2006, pp. 641-370; P. Rao, “Multiple International Judicial Forums: A Reﬂection of the Growing Strength of International Law or its Fragmentation”, Michigan Journal of International Law, 2004, pp. 929-961; S. Salinas Alcega and C. Tirado Robles, (eds), Adaptabilidad y Fragmentacion del Derecho Internacional: la Crisis da la Sectorialización, Zaragoza, Real Instituto de Estudios Europeos, 1999; B. Simma, “Fragmentation in a Positive Light”, Michigan Journal of International Law, 2004, pp. 849-863; T. Stephens, “Multiple International Courts and the ‘Fragmentation of International Environmental Law’”, Australian Yearbook of International Law, 37

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multitude of regulatory regimes and international dispute settlement systems, the jurisdiction of which may be partly overlapping or at least in conﬂict with other specialized ﬁelds of international law and policy. Although the notion of fragmentation is also closely connected to an international regulatory order in which “an ever-increasing number of regulatory institutions with overlapping jurisdictions compete for inﬂuence”,105 the scholarly research on this phenomenon is mainly conducted at a horizontal and global level. The fragmentation debate focuses on possible or real inconsistencies and conﬂicts between the various international regulatory regimes and dispute settlement mechanisms. It does not therefore speciﬁcally consider the legal and political consequences of multilevel governance and regulatory activities, as is the case in this book. This having been said, the fragmentation debate provides us with valuable insights as far as the problem of conﬂicting norms is concerned. The aforementioned report of the study group on fragmentation of the International Law Commission addresses this problem, which it sees as a normal result of the development of “new rules and legal regimes as responses to new preferences, and sometimes out of conscious effort to deviate from preferences that existed under old regimes”.106 One of the general conclusions of the report is that there is “no homogenous, hierarchical meta-system realistically available to do away with such problems [of coordination at the international level]”.107 Therefore, “increasing attention will have to be given to the collision of norms and regimes and the rules, methods and techniques for dealing with such collisions”.108 The report notes that further attention needs to be paid to these methods and techniques. The use of conﬂict clauses may be one technique, but these clauses are often unclear and ambivalent. Furthermore, conﬂict rules like lex posterior and lex specialis may need further study and may be insufﬁciently

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2004, pp. 227-271; T. Treves, “Judicial Law-Making in an Era of “Proliferation” of International Courts and Tribunals: Development or Fragmentation of International Law?”, in: R. Wolfrum and V. Röben, pp. 587-620; K. Wellens, “Fragmentation of International Law and Establishing an Accountability Regime for International Organizations: the Role of the Judiciary in Closing the Gap”, Michigan Journal of International Law, 2004, pp. 1159-1181. E. Benvenisti and G.W. Downs, “The Empire’s New Clothes: Political Economy and the Fragmentation of International Law”, Stanford Law Review, 2007 (forthcoming, available at <ssrn.com/abstract =976930>). Report of the Work of the Study Group of the International Law Commission, para. 484. Ibid., para. 493. Ibid.

The Phenomenon of Multilevel Regulation

sophisticated to address the conﬂicts that can occur in the present international legal order.109 If the ordinary conﬂict rules are already inadequate in the present international legal order, this applies a fortiori to multilevel regulation: the rules of international treaty law on the relationship between various treaties are not adjusted to the complex interactions between global, macro-regional and domestic legal systems. Rather, one could hold with Fischer-Lescano and Teubner that “… the unity of global law is no longer structure-based, as in the case of the Nation-State, within institutionally secured normative consistency; but is rather process-based, deriving simply from the modes of connection between legal operations, which transfer binding legality between even highly heterogeneous legal orders”.110

3.4. The Contributions in this Book The third part of this book focuses on the implications of multilevel regulation for human rights, judicial control and the rule of law. Asking himself the question of how judges cope with multilevel regulation, Rory Stephen Brown provides us with a thorough analysis of three human rights cases which feature multilevel regulatory regimes. In so doing he illustrates the challenges, not just of competing courts and/or the absence of jurisdiction for courts, but also the need for judges to be vigilant in the face of changing and ever more densely layered and unwieldy governmental powers and to reconceive their role in the contemporary legal order. In his contribution on legal protection against UN Security Council resolutions, Clemens A. Feinäugle depicts the problems involved with multiple jurisdictions for human rights review of Security Council sanctions in Europe, pointing at the possible tensions between the jurisprudence of the Luxembourg and Strasbourg European courts, and highlighting the various options open to the United Nations with a view to improving due process and legal protection of affected individuals. Christina Eckes’s contribution, too, brings to the fore the divergent ways in which the different European courts maintain human rights protection for terrorist suspects and the problem of lack of judicial

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For an illustration, examining the compatibility between WTO law and the new Unesco Convention on the Protection and Promotion of the Diversity of Cultural Expressions, see J. Wouters and B. De Meester, “The Unesco Convention on Cultural Diversity and WTO Law: A Case-Study in Fragmentation of International Law”, forthcoming in: Journal of World Trade, Vol. 42(1) 2008. A. Fischer-Lescano and G. Teubner, “Regime-Collisions: The Vain Search for Legal Unity in the Fragmentation of Global Law,” Michigan Journal of International Law, 2004, pp. 999-1046. 39

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protection in certain policy areas, in this case the EU’s Common Foreign and Security Policy. Similar concerns arise in Mielle Bulterman’s contribution, albeit from the viewpoint of multilevel economic regulation and the manner in which international economic legal rules impact individual rights under European Community law. Andrea Keessen takes a closer look at the question of how to reduce the judicial deﬁcit in multilevel environmental regulation, taking the example of plant protection products. Andrea Ott’s contribution on multilevel regulations reviewed by multilevel jurisdictions (the European Court of Justice, national courts and the European Court of Human Rights) analyses the manner in which European and national courts are trying to come to grips with the phenomenon of multilevel regulation. She is a convincing advocate for a system of pluralism of jurisdictions, or multilevel jurisdiction, requiring a shift away from a strict hierarchy of norms or legislative systems to the prevention of conﬂicts and preventing gaps in the legal protection of individuals against infringements of their individual rights: such pluralism may result in parallel legal orders which overlap and interconnect but without clear hierarchies established between them. Finally, Nikos Lavranos makes the point that a system of hierarchy of norms, as practised in European Community law, is not static but ﬂexible and differs depending on the area of the law and the speciﬁc circumstances of the case under consideration.

4. An Agenda for Research 4.1. Combining Different Legal Perspectives: Accountability, Democracy, Legitimacy, Rule of Law An interesting further contribution to the study of multilevel regulation, in line with the global administrative law project outlined above (supra, 3.2.), could be the emphasis on the need to rethink domestically based notions of democracy, legitimacy and the rule of law. After all, “[e]very European system acknowledges the primary function of administrative law as being the control of public power”,111 or “bounded government”.112 Harlow lists a number of principles as forming the basis for administrative law: accountability, transparency and access to information, participation, the right of access to an

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C. Harlow, “Global Administrative Law: The Quest for Principles and Values”, EJIL, 2006, pp. 187-214, at p. 191. M. Shapiro, “Administrative Law Unbounded: Reﬂections of Government and Governance”, Ind. J. Global Legal Studies, 2001, pp. 369-377.

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independent court, due process rights, including the right to be heard and the right to reasoned decisions and reasonableness. European legal systems have added proportionality and legitimate expectations to this list. This calls for a linking of procedural and substantive norms.113 We submit that a further conceptual reﬁnement and extensive comparative research into these concepts and principles should be high on the research agenda. In this context, it is particularly the subject of accountability that seems to us to be of major importance, since it feeds back into issues of legitimacy and democracy.114 Little is known about accountability systems in international organisations and the similarities and differences between international organisations inter se and between them and national agencies.115 Even less research has been conducted on accountability in other international bodies and forums. Especially crucial issues – such as control over executive decisions, leadership selection mechanisms, control over the formulation of strategic and operational goals of international organizations and control over standard-setting competences – are in need of further investigation and analysis. With regard to the latter, more research should be devoted to the question of what regulatory standards should be focused on by different levels of governance and actors in the policy arena (standards of physical design, standards of performance or organisational decision procedures). The aforementioned research, albeit legal in nature, can contribute to a more comprehensive analysis of the quality of regulatory work by international organisations and bodies (including the use of regulatory tools designed to achieve better regulation, such as regulatory impact assessments) and an assessment of the concept of (international) rule precision. Colin S. Diver116 distinguished three qualities of regulatory rules, namely transparency, accessibility and congruence, and has developed criteria to determine the appropriate degree of regulatory precision. An assessment of international rules from this perspective

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Arguments against decoupling institutional, procedural, law from substantive law may for instance be found in B.S. Chimni, “Cooption and Resistance: Two Faces of Global Administrative Law”, IILJ Working Paper 2005/16, available at <www. iilj.org>. C. Graham, “Is there a Crisis in Regulatory Accountability”, in: R. Baldwin, et al., (eds), A Reader on Regulation, Oxford: Oxford University Press, 1998, pp. 482-522. With regard to the EU see D. Curtin, “Holding (Quasi-) Autonomous EU Administrative Actors to Public Account”, European Law Journal, 2007, pp. 523-541. C. Diver, “The Optimal Precision of Administrative Rules”, in, Yale Law Journal, Vol. 93 1983, pp. 65-109. 41

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could contribute to a better understanding of the impact of international rules on lower levels of regulation. 4.2. A Public Policy Perspective on Multilevel Regulation A second set of questions that is assuming increasing importance with regard to multilevel regulation concerns the evaluation of these multilevel regulatory interventions from a public policy perspective.117 In assessing multilevel regulation from a public policy perspective, several theoretical arguments have been developed related to its possible beneﬁts and drawbacks. Many of these arguments need further investigation. For example, some authors argue that dispersion of governance and regulatory practices across multiple jurisdictions is more ﬂexible than the concentration of governance in one jurisdiction. This allows decision makers to adjust to diversity, reﬂect heterogeneity and stimulate competitive standard-setting dynamics.118 These arguments are closely related to the evolution from government to governance discussed above (supra, 2.2.). Identiﬁed drawbacks of multilevel regulation include incomplete information, inter-jurisdictional co-ordination, interest-group capture and corruption due to ineffective systems of checks and balances.119 Most of these arguments about the drawbacks and beneﬁts are, however, more hypotheses than established facts. Hence, more empirical research should focus on whether these claims are valid and, if so, under what conditions. Much of this research can build on existing studies that focus on intra-state dynamics or intra-regional dynamics with regard to regulation. Let us brieﬂy explore each aspect. 4.3. Rule Dynamics, Co-ordination and Co-operation in Multilevel Regulation First, with regard to the issue of the beneﬁcial consequences of ﬂexibility and competitive dynamics in regulatory standard setting, research can build on existing studies that focus on lowest common denominator outcomes in collaborative standard setting. Some authors, in the context of international environmental policy making, have argued that the fears of lowest common

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E. Ostrom, “Institutional Rational Choice: An Assessment of the Institutional Analysis and Development Framework”, in: P. Sabatier (ed.), Theories of the Policy Process, Oxford: Westview Press, 1999, pp. 35-72. L. Hooghe and G. Marks, “Unraveling the Central State but How? Types of Multilevel Governance”, in: American Political Science Review, Vol. 97(2) 2003, pp. 233-243, especially pp. 235-236. Ibid., especially p. 236.

The Phenomenon of Multilevel Regulation

denominator outcomes (“race to the bottom”) are sometimes unwarranted in international collaborative standard setting and that under certain conditions a “race to the top” can occur.120 In this context, other authors have pointed to the problem of being stuck at the bottom and the inability and/or reluctance of weak actors to participate in dynamic, co-operative standard setting initiatives.121 Most research in this context has been conducted on environmental or pollution control standards.122 This line of research can be extended to other areas. The present book clearly illustrates that multilevel regulatory standard setting is expanding into a great variety of policy areas such as, inter alia, pharmaceuticals, banking and aviation. Additional research should focus more on the dynamics of multilevel regulation at the international and national levels. A dynamic research perspective on standard setting should focus on questions related to the emergence of new rules (lowest common denominators), the development of new and existing related rules (convergence versus divergence; upward or downward dynamics) and the impact of these rules (implementation and effectiveness of rules). Secondly, with regard to possible drawbacks, several issues need further investigation. The issues of imperfect information and inter-jurisdictional coordination are best placed in the overall context of co-ordination and co-operation problems in policy making. With regard to co-ordination problems, game theorists, institutional economists and political scientists have devoted much attention to the issue (and sometimes dilemma of) co-ordination.123 Multilevel regulation further extends and complicates this issue. As Hooghe and Marks observe, the co-ordination and transaction costs increase exponentially as the

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D. Esty and D. Geradin, (eds), Regulatory Competition and Economic Integration: Comparative Perspectives, Oxford: Oxford University Press, 2001; J. Swinnen, (ed.), Global Supply Chains, Standards and the Poor: How the Globalization of Food Systems and Standards Affects Rural Development and Poverty, Leuven: CABI Publishing, 2007. G. Porter, “Trade Competition and Pollution Standards: ‘Race to the Bottom’ or ‘Stuck at the Bottom’?”, The Journal of Environment and Development, Vol. 8(2) 1999, pp. 133-151. G. Spaargaren, A.P.J. Mol and H. Bruyninckx, “Introduction: Governing Environmental Flows in Global Modernity”, in: G. Spaargaren, et al., (eds), Governing Environmental Flows Global Challenges to Social Theory, Massachutes: MIT Press, 2006, pp. 1-39. M. Olson, The Logic of Collective Action: Public Goods and the Theory of Groups, Harvard: Harvard University Press, 1965; E. Ostrom, Understanding Institutional Diversity, Princeton: Princeton University Press, 2005. 43

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number of relevant jurisdictions increases.124 Several strategies can be followed to deal with the problem of co-ordination. The most prominent one is to limit the number of autonomous actors who have to be co-ordinated.125 Reducing the number of actors can be done via pooling actors in core groups or by excluding actors from negotiations on rules. The ﬁrst is increasingly happening and research should focus on the issue of international core group formation,126 comparing different multilevel policy arenas in this respect. The latter strategy – excluding actors – can generate problems of co-operation. In his classic work Exit, Voice and Loyalty. Responses to Decline in Firms, Organisations and States, Hirschman introduced two types of responses or strategies related to problems arising in collaborative settings, namely exit or voice. Exit occurs when an actor’s response to problems with other actors is to withdraw. Voice occurs when an actor’s response to problems with other actors is to work with the other actors until the problem is corrected. An interesting question about multilevel regulation is which strategy is used by actors in different multilevel policy arenas. Secondly, research can focus on explaining differences in the use of these strategies. Especially interesting in this context is linking the use of strategies to the design of multilevel governance institutions with regard to the design of co-ordination procedures. For example, in the context of international automobile ﬁrms, Helper found that ﬁrms used different strategies (exit/voice) towards suppliers (other actors). This was partially explained by the degree of administrative co-ordination that existed between parties. Administrative co-ordination, in essence, referred to the nature and amount of information that ﬂowed between actors.127 As a result, depending on the design of co-ordination infrastructure (supra) multilevel regulation might nurture exit or voice strategies. In other words, the interrelated issues of

124

125 126

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L. Hooghe and G. Marks, (see supra n. 118), pp. 233-243, especially p. 239. See also F. Scharpf, Games Real Actors Play. Actor-Centered Institutionalism in Policy Research, Boulder: Westview Press, 1997. Ibid., especially p. 239 A clear example of the core group formation issue concerns the involvement of the EU as one actor in WTO trade negotiations. The issue of core group formation is gaining ground in the EU itself, too. On this see S. Keukeleire, “EU Core Groups. Specialisation and Division of Labour in EU Foreign Policy”, CEPS Working Document, No. 252, 2006. S. Helper, “Strategy and Irreversibility in Supplier Relations – The Case of the United States Automobile Industry”, Business History Review, Vol. 65(4) 1991, pp. 781-824.

The Phenomenon of Multilevel Regulation

co-ordination and co-operation deserve special research attention in the context of multilevel governance. 4.4. Accountability, Democracy and Social Justice in Multilevel Regulation Another set of issues, related to possible drawbacks of multilevel regulation, draws attention to issues related to accountability; and ultimately democracy and the ability of States to govern according to autonomously chosen, fundamental principles of governance (e.g. on issues of social justice and culture). With regard to accountability, a crucial issue for research concerns the question of who is held responsible for actions and by whom. In a recent review article Bovens deﬁned accountability as “a relationship between an actor and a forum, in which the actor has an obligation to explain and to justify his or her conduct, the forum can pose questions and pass judgement, and the actor may face consequences.”128 This deﬁnition builds on a principal-agent approach to accountability and highlights this important challenge to research on multilevel governance.129 In a simple principal-agent model an agent reports directly to the principal who delegated to the agent the freedom to act on his/her behalf. However, as Benz, Harlow and Papadopoulos stress, systems of multilevel governance do not easily ﬁt into this conceptual framework. “By complicating and obscuring straightforward ‘chains of delegation’ … they make it hard to identify a principal.”130 The latter, the identiﬁcation of principals in multilevel systems, constitutes a major research topic for scholars studying international organisations. Comparative research designs might highlight striking differences between and within international organisations across policy domains/arenas. The issue of accountability feeds into the issue of democracy and democratic control of multilevel governance. The issue of democracy poses another challenge: research needs to be conducted into the underlying models of democracy that underpin multilevel governance.131 It is important that this type of research focuses not only on a comparison of multilevel regulation arrangements vis-à-vis normative ideal types of democracy, but also takes into account the day-to-day

128

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M. Bovens, “Analysing and Assessing Accountability: A Conceptual Framework”, European Law Journal, Vol. 13(4) 2007, pp. 447-468, at p. 450 D. Hawkins, D. Lake, D. Nielson and M. Tierney, Delegation and Agency in International Organizations, Cambridge: Cambridge University Press, 2006. A. Benz, C. Harlow and Y. Papadopoulos, “Introduction”, European Law Journal, Vol. 13(4) 2007, pp. 441-446, at p. 444; Special Issue: Accountability in EU Multilevel Governance, edited by: Arthur Benz, Carol Harlow and Yannis Papadopoulos. D. Held, Models of Democracy 2nd Edition, Cambridge UK: Polity Press, 1997. 45

Multilevel Regulation and the EU

reality of democracy. As Moravcsik argues, with regard to the democratic deﬁcit debate in the European Union, purely philosophical assessments can be interesting but run the danger of narrowing down conceptions of democracy: “Comparisons are drawn between the EU and an ancient, Westminster-style or frankly utopian form of deliberative democracy. While perhaps useful for philosophical purposes, the use of idealistic standards no modern government can meet obscures the social context of contemporary European policy-making – the real-world practices of existing governments and the multilevel political system in which they act. This leads many analysts to overlook the extent to which delegation and insulation are widespread trends in modern democracies, which must be acknowledged on their own terms. The fact that governments delegate to bodies such as constitutional courts, central banks, regulatory agencies, criminal prosecutors, and insulated executive negotiators is a fact of life, one with a great deal of normative and pragmatic justiﬁcation.”132

Besides models of democracy underpinning multilevel governance, a related set of questions points to the issue of what models of social justice and cultural diversity are incorporated in international rules. In the context of social justice models it is important to assess whether international rulemaking follows standard economic optimisation rules or includes more egalitarian perspectives. The analysis of social justice models embedded in policy making and governance structures at the level of the nation State has a very long tradition.133 In the context of the EU, too, some attention has been paid to this topic in the context of the debate on the European social model. Issues of convergence or divergence between governance structures promoting market efﬁciencies vis-à-vis governance structures promoting social protection and equality have been analysed.134 However, less research is being conducted on what models of justice are incorporated, implicitly and explicitly, in international rule making and what the effect is on national models of justice. This requires an assessment of the redistributional equity principal in international policy making (who pays, who gains and what compensating measures are in place). For example,

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A. Moravcsik, “In Defense of the Democratic Deﬁcit: Reassessing Legitimacy in the European Union”, Journal of Common Market Studies, Vol. 40(4) 2002, pp. 603-624, especially pp. 605-606. G. Esping-Andersen, The Three Worlds of Welfare Capitalism, Cambridge: Polity Press and Princeton: Princeton University Press, 1990. G. Esping-Andersen, D. Gallie, A. Hemerijck and J. Myles, Why We Need a New Welfare State (with D. Gallie, A. Hemerijck and J. Myles), Oxford: Oxford University Press, 2003. F. Scharpf, “The European Social Model: Coping with the Challenges of Diversity”, Journal of Common Market Studies, Vol. 40(4) 2002, pp. 645-670.

The Phenomenon of Multilevel Regulation

international rules on pharmaceuticals might stipulate the degrees of freedom for national healthcare policies with regard to medication and in this way feed back into policies closely related to social protection and redistributive sensitivities. Finally, in a globalising context, a cultural assessment – i.e. the conformity of rules to general morality within different countries – becomes increasingly important. The late Clifford Geertz135 highlighted the importance of the cultural context in which rules are made and implemented. As a result, problems arising from a mismatch between international rules and cultural norms need further investigation.

5. Concluding Observations The phenomenon of multilevel regulatory processes and, more particularly, the various interactions between global, EU and national levels of policy and rule making are gradually becoming recognised in both the legal and political scientiﬁc communities. However, knowledge remains scattered, fragmentary and in many cases punctual or even anecdotal. There is clearly a need for a more comprehensive, thorough analysis of multilevel regulation and its ramiﬁcations. In the present contribution we have both tried to identify and sketch the phenomenon with a variety of illustrations, go through the responses of legal scholarship thus far, and set out an agenda for further research, including both legal and non-legal approaches. One thing seems certain: we are confronted with an arena with plentiful, rich themes for interdisciplinary research for many years to come. Faced with multilevel regulation, the old categories and dividing lines between international, European and national legal orders no longer work satisfactorily. The shifts may not yet be clear, nor may they come to full fruition, but a number of criteria on how to adapt, such as transparency, democratic control of regulatory power, legitimacy, rule of law and judicial protection of fundamental human rights, become apparent in the contributions to this book.

135

C. Geertz, Local Knowledge: Further Essays in Interpretive Anthropology, London: Fontana Press, 1993. 47

PART II MAPPING THE UNMAPPABLE: CASE-STUDIES OF MULTILEVEL REGULATION

Challenges to the Legitimacy of International Regulation: The Case of Pharmaceuticals Standardisation Bärbel R. Dorbeck-Jung

1. Introduction This volume explores the inﬂuence international regulation exerts on EU and national regulation. It also examines the impact of such international regulatory activities on citizens and businesses. In pharmaceuticals regulation the standardisation activities of the International Conference on Harmonisation of Technical Requirements for the Registration of Pharmaceutical for Human use (ICH) is an interesting example of multilevel regulation. The ICH standardisation is a fascinating case of an increasing interrelation between the regulatory activities of the EU, its Member States, other countries, and International Organisations. Widely supported by the World Health Organisation, the ICH was established in 1990 as a joint regulatory/industry project of the EU, Japan and the United States. The main task of the ICH is to improve, through harmonisation, the efﬁciency of the process for developing and registering new medicinal products in Europe, Japan and the United States, in order to make these products available to patients with a minimum of delay. In the past years the inﬂuence of the ICH standardisation activities on regional and national drugs law seems to have increased remarkably. Regarding the approval of medicinal products for human use, we observe that after a period of incremental evolution of substantive standards the ICH issued a so-called Common Technical Document in 2000.1 Since then this voluntary agreement has been integrated into regulatory implementation by the competent agencies of the EU, USA and

1

This document deﬁnes the standards that application data and application documents have to satisfy.

Follesdal, Wessel and Wouters (eds), Multilevel Regulation and the EU, 51–71 ©2008 Koninklijke Brill NV. ISBN 978 90 04 16438 3. Printed in the Netherlands.

Multilevel Regulation and the EU

Japan.2 Up to now, the EU has endorsed round 50 ICH guidelines related to the quality, safety and efﬁcacy of pharmaceuticals, on which the relevant regulatory decisions in the pre-marketing and approval stage of medicinal products are based. The inﬂuence of the ICH guidelines seems to be on the increase thanks to the current activities of the ICH Globalisation Group and collaboration with other international standards development organisations. As the globalised market of the pharmaceutical industry is dominated by American, European and Japanese ﬁrms, ICH guidelines are probably on the way to becoming de facto international standards.3 The ICH standardisation process raises questions about the legitimacy of the guidelines. If the guidelines have not been incorporated into law, a core question is whether ICH standards undermine the principle of legality. Another question concerns democratic control. In the standardisation process regulatory power is executed by experts in the pharmaceutical industry and the competent regional authorities. Guidelines are developed in an interactive process of cooperation and coordination based on the professional experts’ authoritative claim to knowledge rather than on some basis of formal authority. Does this erode traditional checks and balances and is accountability provided to reduce regulatory capture? In addition to these normative aspects, an important empirical question is whether the ICH guidelines are followed in the practice of clinical trials and drug approvals. This question is about the inﬂuence of the ICH standards at the “shop ﬂoor” of regulatory organisations and pharmaceutical companies. Do the competent regional and national authorities use the ICH standards or do they apply other standards in the process of marketing pharmaceuticals? It is striking that there is hardly any investigation of the empirical and normative implications of the regulatory activities of the ICH. We do not know what inﬂuence the ICH guidelines exert on regional and national pharmaceutical legislation. Here we focus on the legitimacy of the ICH standardisation. The central question is:

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In 2001 the ICH Guidance on Good Clinical Practice was incorporated in the EU Clinical Trials Directive (2001/20/EC) and adopted as binding law; see T.K. Hervey and J.V. McHale, Health Law in the European Union, Cambridge: Cambridge University Press, 2004. The ICH Guidance on Good Clinical Practice (CPMP/ICH 135/95) replaced the respective EU Guidelines of 1991. Until the incorporation in the Clinical Trials Directive these guidelines functioned as soft law, see L. Senden, Soft Law in European Community Law, Cambridge: Hart Publishing, 2004. D. Vogel, “The Globalization of Pharmaceutical Regulation”, Governance: An International Journal of Policy and Administration, Vol. 11 1998, pp. 1-22.

Challenges to the Legitimacy of International Regulation

“How can the regulatory activities of the ICH be evaluated from the viewpoint of legitimacy?”

To answer this question I ﬁrst set out an evaluation frame (second section). What do we understand by the empirical and normative requirements of legitimacy? Having regard to the focus of this volume on the inﬂuence of international regulation on regional and national regulation, I also pay attention to the workings of the ICH guidelines in regulatory practice. The third section describes the regulatory activities of the ICH. The fourth section deals with the evaluation of these activities in light of the requirements of legitimacy. Finally, legitimacy problems are discussed at the end of the contribution.

2. Theoretical Framework 2.1. Notion of Legitimacy In legal and social theory the notion of legitimacy connotes the acceptability and acceptance of collective action. Ideas about the acceptability of human action cover the normative aspects of legitimacy, while the conception of acceptance refers to empirical aspects. In the narrow deﬁnition of legal positivism, acceptability means that collective action is authorised by written law.4 According to the broader view of jurisprudence, legitimacy includes written law and certain principles on which a constitutional state is based. As Senden put it: “Governing sub lege does not only mean governing on the basis of the law, i.e. that there is a competence conferring legal basis (the principle of legality), it also means governing within the boundaries of the law, that is conformity with certain principles on which a constitutional state is based and which indicate the limits to the powers to be exercised, with a view to ensuring the freedom and liberty of citizens. Governing per lege means that power should

4

A.J. Hoekema, Legitimiteit door legaliteit, over het recht van de overheid, [Legitimacy through legality, over the law of the government] Nijmegen: Ars Aequi Libri, 1991, p. 9. See also E. Vos, Institutional Frameworks of Community Health and Safety Regulation – Committees, Agencies and Private Bodies, Oxford: Hart Publishing, 1999, p. 94. Vos refers to Winter when she points out that “legitimus” means “following a law”, or, interpreted more generally, “following a rule or a principles”. She adds that these rules must ﬁnd a degree of social acceptance. See G. Winter, “Drei Arten gemeinschaftlicher Rechtsetzung und ihre Legitimation”, in: G. Brüggemeier, (ed.), Verfassungen für ein ziviles Europa, Baden-Baden: Nomos, 1994, p. 48. 53

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be exercised through the adaptation of laws, inter alia with a view to ensuring legal certainty and equality.”5

In this view the notion of acceptability refers to the moral or ethical justiﬁcation of collective action.6 An interesting empirical approach to legitimacy can be found in the deﬁnition offered by Schmitter: “Legitimacy is a shared expectation among actors in an arrangement of asymmetric power, such that the actions of those who rule are accepted voluntarily by those who are ruled because the latter are convinced that the actions of the former conform to pre-established norms. Put simply, legitimacy converts power into authority – Macht into Herrschaft – and, thereby establishes simultaneously an obligation to obey and a right to rule.”7

This view is based on Weber’s ideas about authority, which also include the belief in the legitimacy of action in the sense that the ruled have to be convinced (or trust) that the rulers abide by the shared norms.8 It is important to note that there is much variety within the shared norms that provide the basis for legitimacy.9 Shared norms refer to procedures of decision making, written law, as well as to substantive criteria of justice, and the effectiveness and efﬁciency of regulatory measures. Legitimacy is attained when the ruled are convinced that the rulers have lived up to their expectations, that they interpreted the rules correctly, and that they implemented them in an effective and efﬁcient manner. In this approach, empirical aspects (acceptance) are intertwined with normative aspects of legitimacy (acceptability). This is also the case with Scharpf’s well known

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L. Senden (see supra n. 2), pp. 6, 7. B.R. Dorbeck-Jung and H.M. de Jong, “Legitimate Governance with the State”, in: H. Wagenaar, (ed.), Government Institutions: Effects, Changes and Normative Foundations, Dordrecht: Kluwer Academic Publishers, 2000, pp. 109-127. P. Schmitter, “What is There to Legitimize in the European Union … And How Might this be Accomplished?” Max Planck Projektgruppe Recht der Gemeinschaftsgüter, Bonn, 2001, p. 2. M. Weber, Wirtschaft und Gesellschaft, 5th edn, Tübingen: Mohr, 1980, p. 122. Translation by Winkelmann. K. van Kersbergen and F. van Waarden, Shifts in Governance: Problems of Legitimacy and Accountability, The Hague: Social Science Research Council of the Netherlands – NWO-MaGW, 2000, p. 27; K. van Kersbergen and F. van Waarden, “Governance as a bridge between disciplines: cross-disciplinary inspiration regarding shifts in governance and problems of governability, accountability and legitimacy”, European Journal of Political Research, Vol. 43 2004, pp. 143-171.

Challenges to the Legitimacy of International Regulation

distinction between input and output legitimacy.10 According to Scharpf, input legitimacy implies that a political system and special policies are legitimated by the rules-of-the-game and the processes by which they have come about. Output legitimacy refers to the success of the system and its policies. The next section develops an evaluation framework for the acceptability and acceptance of state rules. 2.2. Acceptability of Rules – Evaluation Framework Above, we have seen that the acceptability of state rules can be determined by the constitutional principles of the state. In the Western tradition of the democratic legal state these principles are: legality, constitutional rights, democratic decision making and control, checks and balances of power, and judicial review.11 These principles are regarded as requirements for the realisation of the basic values of freedom, equality, legal certainty, democracy, and effectiveness.12 In the multilevel and multi-actor context of governance, however, the approach to legitimacy cannot merely reproduce the model of the nation state.13 In most national concepts of the rule of law, citizens can only be bound by laws, and these laws derive their legitimacy from the representative character of the legislature, which is directly elected. However, the notion of parliamentary sovereignty is challenged by the development of multilevel, multi-actor governance, which implies co-operation between public and private actors in regulation, as well as the involvement of different actors in different stages of regulation.14 For example, in the multilevel context of pharmaceutical regulation, technical experts, who are unelected, conduct an increasing portion of regulation. In this case, according to most commentators, legitimacy is provided through a “surrogate” political process. Such additional measures include stronger participation of citizens in the regulation process, increased transparency of regulation, as well as increased accountability and control of regulators.15 Democratic account-

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13 14 15

F.W. Scharpf, Governing in Europe: Effective and Democratic?, Oxford: Oxford University Press, 1999. B.R. Dorbeck-Jung and H.M. de Jong (see supra n. 6). M. Scheltema, “De rechtsstaat” [The constitutional state] in: J.W.M. Engels (ed.) De rechtsstaat herdacht [Thoughts about the constitutional state], The Hague: Tjeenk Willink, 1989. E. Vos (see supra n. 4), p. 94. Føllesdal, Wessel and Wouters, this volume. According to the White Paper on European Governance, crucial principles of good governance are openness, participation and accountability. See European Commis55

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ability is viewed as crucial to legitimacy and as paramount to governance.16 It is regarded as a precondition to convince the ruled that the rulers have lived up to justiﬁed expectations. Other additional measures of legitimacy concern the objectivity and impartiality of decision making. Since there exists some divergence between private and public interests, regulatory capture is said to be a signiﬁcant pitfall of multi-actor, multilevel governance.17 When experts with an interest in the pharmaceutical industry are involved in public decision making on the marketing of drugs, impartiality is at risk. In the discussion of the legitimacy of multilevel regulation related to pharmaceuticals, key issues are the participation of consumers and medical professionals, the transparency of regulation, accountability and control of the regulators involved.18 With regard to participation, a general prerequisite of democracy is the plurality of decision makers. More speciﬁcally, the participation of consumers and medical professionals requires representation in the bodies that lay down the regulations. Participation of consumers will be effective only if their representatives can rely on the relevant expertise and ﬁnancial sources. Transparency of regulation requires information about the regulation process concerned and its outcomes.19 Transparency is provided effectively only if the information is accessible, intelligible, all-embracing and objective. When regulation is frequently revised, transparency requires clear information about the rules that are actually valid. In this context, transparency also serves to safeguard legal certainty. Accountability calls for clear formulation

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sion, European Governance. White Paper. 2001, p. 10. See also A. Føllesdal, “The Political Theory of the White Paper on Governance: Hidden and Fascinating”, European Public Law, Vol. 9 2003, pp. 73-86. K. van Kersbergen and F. van Waarden (see supra n. 9), p. 27. These authors also stress that accountability is part of the very deﬁnition of what is considered to be “good governance”, both in government and corporate affairs. M. Bernstein, Regulating Business by Independent Commission, Princeton NJ: Princeton University Press, 1955; J. Abraham, and G. Lewis (eds), Regulating Medicines in Europe: Competition, Expertise and Public Health, London: Routledge, 2000. J. Abraham and G. Lewis, Regulating Medicines in Europe: Competition, Expertise and Public Health, London: Routledge, 2000; B.R. Dorbeck-Jung and M. Oude Vrielink-van Heffen, “European ways of governing the marketing of pharmaceuticals – a shift towards more integration, better consumer protection and better regulation?”, forthcoming in V. Gessner and D. Nelken, (eds), European and American Ways of Law, Oxford: Hart Publishing, 2007; E. Vos (see supra n. 4). C. Hood and D. Heald, (eds), Transparency. The Key to Better Governance? Oxford: Oxford University Press, 2006.

Challenges to the Legitimacy of International Regulation

and adequate distribution of the responsibilities of the regulators.20 Control requires the independence of regulators. Independence is safeguarded through a prohibition on having any ﬁnancial or other interests in the pharmaceutical industry that could affect impartiality. It is supported by a public declaration of interests. Impartiality also requires that the management board of the regulatory organisation respects the independence of the experts involved. Regulatory capture can be reduced through job rotation. 2.3. Acceptance of Rules – Exploring the Inﬂuence of International Regulation In this volume one core issue is the inﬂuence of international regulation on national law. Insights into this inﬂuence can be provided through an investigation of institutional changes in the practice of national law. Has national law changed as a consequence of particular international regulations? Institutional change occurs when the “ruled” are following the new international standards. Compliance refers to the acceptance of rules. The “ruled” are following the international rules because they accept them. In the discussion of new modes of governance it is said that certain modes of governance foster the acceptance of regulation, while others are rather detrimental to acceptance.21 Voluntary accords between public and private actors (“negotiated rule making”), for example, are regarded as more effective than hierarchic, mandatory regulation. Publicly enforced self-regulation is viewed as an approach that leads to high compliance, while the opposite is said of “command and control” legislation.22 According to social theory, the acceptance of rules increases when they leave room for interpretation and self-regulation, and when they incorporate rules that already

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M.A.P. Bovens, “Public Accountability” in: E. Ferlie, et al., (eds) The Oxford Handbook of Public Management, Oxford: Oxford University Press, 2005. G. De Burca and J. Scott, Law and New Governance in the EU and the US, Oxford: Hart Publishing, 2006; M. Rhodes, “Employment Policy: Between Efﬁcacy versus Experimentation in New Modes of Governance” in: H. Wallace, et al., (eds) PolicyMaking in the European Union, 5th edn, Oxford: Oxford University Press, 2005, pp. 279-304. I. Ayres and J. Braithwaite, Responsive Regulation: Transcending the Deregulation Debate, Oxford, Oxford University Press, 1992; J. Grifﬁths, “The Social Working of Legal Rules”, Journal of Legal Pluralism and Unofﬁcial Law, Vol. 48 2003; N. Gunningham and P. Grabovsky, Smart Regulation. Designing Environmental Policy, Oxford: Clarendon Press, 1998. 57

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have been established by the “ruled”.23 In these cases the “ruled” accept the standards because they can be tailored to their own interests and requirements. The acceptance of rules may also depend on the costs of compliance. It is likely that acceptance increases with low compliance costs, while this is not the case with high costs.24

3. Regulatory Activities of the ICH 3.1. A Brief History of the ICH; Organisation Model The necessity for international regulatory guidance with regard to pharmaceuticals was recognised in the 1980s, with the successful single market created by the European Community at that time setting an example of what could be achieved.25 Speciﬁc plans of co-operation between the EU, Japan and the USA were launched at a conference in 1989, organised by the WHO. The ICH was established in 1990 and its ﬁrst meeting was arranged in 1991. Since then conferences have been held on at two or, latterly, three-years intervals, together with regional workshops. The ICH brings together the regulatory authorities and experts from the pharmaceutical industry in the three regions, to discuss scientiﬁc and technical aspects of the regulation of pharmaceuticals. The ICH makes recommendations with respect to greater harmonisation of such technical requirements, with a view to avoiding duplication in the testing needed for new pharmaceuticals, as well as reducing regulatory costs and regulatory bureaucracy in the approval procedures. Such harmonisation is important to the pharmaceutical industry as it reduces the cost of research and development. It may allow patients faster access to new medicines while ensuring that the medicines themselves are safe, efﬁcacious and of suitable quality. Viewed in retrospect, the ICH is an inﬂuential harmonisation initiative, which has produced about 50 guidelines, a dictionary of medical terms, electronic standards and a

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J. Grifﬁths, “Self-regulating by the Dutch medical profession of medical behaviour that potentially shortens life”, in: H. Krabbendam and H.M. ten Napel, (eds), Regulating Morality, Antwerpen: Maklu, 2000. C. Coglianese and D. Lazer, “Management-Based Regulation: Prescribing Private Management to Achieve Public Goals”, Law & Society Review, Vol. 37 2003, pp. 691-728. S.K. Branch, “Guidelines from the International Conference on Harmonisation (ICH)”, Journal of Pharmaceutical and Biomedical Analysis, Vol. 38 2005, pp. 798-805.

Challenges to the Legitimacy of International Regulation

common format for drug registration.26 The ICH approach is regarded as unique due to the joint effort invested in it by regulators and associated pharmaceutical industry trade associations. The ICH initiative was originally intended to be limited to the evaluation and registration of new drugs. In the course of time the guidelines started to exert an inﬂuence in the ICH countries in relation to existing products, especially in respect of the quality of generic products. Obviously, the ICH has continuously extended its inﬂuence on the marketing of pharmaceuticals.27 The organisation model of the ICH follows an approach used by pharmaceutical manufacturers. As such, the ICH is a series of conferences. Operational bodies are the Steering Committee and the Expert Working Groups. There are six parties to the ICH: The European Commission, the European Federation of Pharmaceutical Industries’ Associations, the Ministry of Health and Welfare in Japan, the Japanese Pharmaceutical Manufacturers’ Association, the US Food and Drug Administration and the Pharmaceutical Research and Manufacturers of America. The Steering Committee also includes ofﬁcial observers from the WHO, Health Canada and the European Free Trade Association (EFTA, represented by Switzerland). The Secretariat of the Steering Committee is provided by the International Federation of Pharmaceutical Manufacturers Association (IFPMA). Each of the six parties and IFPMA has two seats on the Steering Committee.28 While the Steering Committee determines the policies and procedures, endorses the guidelines and monitors the regulatory progress, the Working Groups review the differences in requirements between the three regions and develop scientiﬁc consensus to reconcile those differences. The Working Groups do not have a ﬁxed membership, but each of the six parties has nominated a Topic Leader as the contact for the topic. The ofﬁcial observers to the ICH and other observers (representatives from industry) have been invited to participate in various Working Groups. An ofﬁcial meeting requires that there is at least one nominated expert from each of the six co-sponsors.

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To give an idea of the participation of stakeholders in the ICH conferences I refer to the 5th International Conference in 2000, in which more than 1,400 people participated, including around 200 representatives from government or drug licensing bodies, See A.E. Slater, “Time to reform ICH?”, Good Clinical Practice Journal, Vol. 9 2002, p. 28. <www.essentialdrugs.org>. The six parties nominate an ICH coordinator as the main point of contact with the ICH Secretariat. 59

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3.2. Regulatory Activities: The Formal Procedures The ICH harmonisation activities fall into four categories: (1) the formal procedure; (2) the questions and answers procedure; (3) the revision procedure; and (4) the maintenance procedure.29 The formal procedure follows the steps of consensus building, conﬁrmation of the consensus, regional regulatory consultation, adoption and implementation. When the Steering Committee adopts a Concept Paper as a new topic, the process of consensus building begins. First, an Expert Working Group (hereafter, EWG) is established, and a Rapporteur is appointed. The Rapporteur prepares an initial draft of the guidelines, based on the objectives set out in the Concept Paper, and in consultation with experts designated to the EWG. The initial draft and successive revisions are circulated for comments within the EWG, giving ﬁxed deadlines for receipt of comments. When consensus is reached within the six ICH parties, the so-called Final Document is submitted to the Steering Committee with a request for adoption under step two of the formal procedure. The consensus is conﬁrmed by at least one of the Steering Committee members for each of the six ICH parties signing their assent. At the stage of regulatory consultation and discussion, the guideline embodying the scientiﬁc consensus becomes the subject of normal, wide-ranging regulatory consultation in the three regions. In the EU it is published as a draft guideline of the Committee for Medicinal Products for Human Use (CHMP); in Japan it is translated and issued by the Ministry of Health and Welfare (MHLW) for internal and external consultation; and in the US it is published as draft guidance in the Federal Register. It is important to note the differences from normal national or regional procedures for consultation. One such difference is that the regulatory parties exchange information on the comments they have received. Furthermore, there is an opportunity for industry associations and regulatory authorities in non-ICH regions to make comments. After obtaining all regulatory consultation results, the Expert Working Group resumes. If the Rapporteur was designated from an industry party until step two, then a new Rapporteur is appointed from the regulatory party, preferably from the same region as the previous Rapporteur. The EWG follows the same procedure as described in step 1. The Experts Document with the EWG members’ signatures is submitted to the Steering Committee with a request for adoption. Where complete consensus has not been achieved within the agreed time frame, a report will be sent to the Steering Committee which may then allow an extension of the time frame, or decide to abandon the current draft or to suspend the harmonisation

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<www.ich.org/cache/html/2828-272-l.html>.

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project. In the adoption step the Steering Committee agrees, on the basis of the report from the regulatory Rapporteur of the EWG, that there is sufﬁcient scientiﬁc consensus on the technical issues. This endorsement is based on the signatures from the three regulatory parties to ICH, afﬁrming that the guideline is recommended for adoption by the regulatory bodies of the three regions. In the event that one or more parties representing the industry have strong objections to the adoption of the guideline, on the grounds that the revised draft departs substantially from the original consensus, or introduces new issues, the regulatory parties may agree that a revised document should be the subject of further discussion. In this case, the Expert Working Group discussion may be resumed. The Step 4 Final Document is signed off by the Steering Committee signatories for the regulatory parties as an ICH Harmonised Tripartite Guideline. After that the guideline moves immediately to regulatory implementation. This ﬁnal step is taken according to national/regional procedures. Information on the regulatory action taken and implementation dates are reported back to the Steering Committee and published by the ICH Secretariat on the ICH Website. The regionally approved guidelines are made public in the ofﬁcial media. The second category of the ICH regulatory activities, the questions and answers procedure, is intended to provide additional implementation guidance and advice. The question and answers (hereafter, Q&A) process is a mechanism by which questions received from stakeholders are collected, analysed, reformulated and ultimately used as model questions for which standard answers are developed and posted on the ICH website ﬁve working days after the ﬁnal Steering Committee meeting. This means that the incoming questions will not be answered individually, but used as indications of areas that need additional clariﬁcation. The steps of this procedure are: Any question received will be brought to the attention of the appropriate Implementation Working Group (hereafter, IWG). The regional questions and issues should ﬁrst be handled by the regulatory party of the region concerned, then shared and evaluated within the IWG. The IWG rapporteur will send the questions to the members of her/ his IWG. Based on this information, the IWG will prepare model questions and their responses at the Steering Committee meeting. It also makes recommendations regarding the status of the document (whether published for further comments or ﬁnal).30 Finally, the proposed answers are presented to the Steering

30

The status depends on the degree of changes the document sets forth. In the event of substantial new interpretation of the guidelines, the document shall be published for further comments (see step 2 of the formal procedure). If the document sets forth existing practices or minor changes, it shall be published as ﬁnal (see step 4 of the formal procedure). 61

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Committee for approval/endorsement. Next, the Steering Committee concurs with the Q&A document and its status. The document then follows the normal path of the formal procedure. The revision procedure is almost identical to the formal ICH procedure. The maintenance procedure is an exceptional one, which is applicable to two types of guidelines. 3.3. Future of ICH Harmonisation Although the ICH was intended to be a limited initiative, it has broadened its regulatory activities in the past six years. According to inﬂuential commentators, in the near future the ICH is expected to become a global player in the harmonisation of safety, quality, efﬁcacy and other guidelines related to medicinal products. The formation of the Global Cooperation Group within the Steering Committee in 1999 is an major step in this direction. Ofﬁcially, the purpose of this Group is to make available information on the ICH regulatory activities to any country or company on request. In practice this means an expansion of the use of ICH recommendation to non ICH-countries.31 Another step in this direction is the introduction of the ICH guidelines into the World Trade Organization. In 2002 a strategy was developed to remove technical trade barriers for pharmaceutical products.32 Another important initiative is the collaboration with accredited Standard Development Organisations, which was launched at the last ICH Conference meeting in Chicago, 2006. It is likely that this co-operation, together with an increasing use of guidelines by nonICH countries and a more proactive role of the WHO representatives in the ICH, will encourage other non-ICH countries to adopt the resulting standards, thereby elevating ICH standards to global standards. A growing perception is that ICH guidelines represent international standards, partly because the key regulators feel increasingly committed to them. Vogel sketched this growing commitment: “Once international cooperation got underway, it created its own momentum. In the course of working together through the ICH, both European and American regulatory ofﬁcials not only gradually learned to trust each other more, but came to appreciate the extent to which duplicative speciﬁcation standards, rather than enabling them to better protect the health and safety of their citizens, were in fact, undermining their ability to do so.”33

31 32 33

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<www.essentialdrugs.org>. <www.commercialdiplomacy.org>. D. Vogel (see supra n. 3), p. 18.

Challenges to the Legitimacy of International Regulation

4. Evaluation34 4.1. Acceptability of the ICH Regulatory Activities a. Questions of Evaluation In this section we deal with the question whether ICH regulatory activities meet the requirements of acceptability. Concerning the principle of legality, the common view is that the ICH guidelines are legally binding only when they are incorporated in regional/national law.35 Many guidelines have been adopted as rules of the regional regulatory bodies.36 When these policy rules are addressed to actors outside the state they can be regarded as “hard” law because of their external workings. One example of these policy rules is the ICH guideline related to the Common Technical Document, which is mandatory in the EU and Japan. Pharmaceutical companies seeking authorization of drugs are bound to the particular policy rules these two regulatory authorities established on the basis of the ICH document. In cases when the guidelines function only as internal organisational rules of the regional regulatory bodies they can be characterised as not legally binding, “soft” law. Though not legally binding, soft law can have certain legal effects and may produce effects on the working of law.37 When ICH guidelines are in conﬂict with national legal requirements, national law prevails. 34

35

36

37

This evaluation is mainly based on the analysis of policy documents (available via the relevant websites) and the literature. There is not much literature about the ICH. In the evaluation of the acceptance of the ICH regulatory activities I refer to interviews with two key representatives of the Dutch Medicines Evaluation Authority. The interviews were held in September 2006. B. Sickmüller, “International Conference Harmonisation – ICH”, PZ Prisma, Vol. 7 2000, p. 114. This view focuses on technical standardisation. See also A.E. Slater (see supra n. 26) and D.M. Trubeck, et al., “Soft law, hard law and EU integration, in: G. De Burca and J. Scott (see supra n. 21), pp. 65-94. The legal status of the guidelines can be different in the three regions. For example, the Common Technical Document structure for registration dossiers is mandatory in Japan and in the EU for new drug registration, but is only highly recommended in the US. F. Synder, “The Effectiveness of EC Law”, in: T. Daintith, (ed.), Implementing EC Law in the UK, Chichester: Wiley & Sons, 1995; L. Senden (see supra n. 2), pp. 111-113; L. Senden, “Soft law, self-regulation and co-regulation in European Law”, Electronic Journal of Comparative Law, Vol. 9 2005, p. 15. Senden distinguishes between three categories of soft law. These are: 1. preparatory and informative instruments, 2. interpretative and decisional instruments, and 3. steering instruments. 63

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In the second section we concluded that the principle of legality/rule of law cannot strictly be applied in the context multilevel governance. We discussed additional measures to provide the legitimacy of international standards: the participation of consumers and medical professionals, the transparency of regulation, and the accountability and control of the regulators. In our evaluation of the ICH regulatory activities we explore the following questions related to these criteria and their prerequisites.38 Participation of consumers and medical profession 1. Is there a plurality of interests provided in the ICH decision making? 2. Are consumers and medical professionals represented on the operational bodies of the ICH? 3. Do these representatives have the relevant expertise? 4. Can they rely on appropriate ﬁnancial support? Transparency of regulation and regulators 5. Is information provided about the regulation processes of the guidelines and their outcomes? 6. Is information provided about the ﬁnancial resources of the ICH? 7. Is that information accessible, intelligible, all-embracing and objective? Accountability and control of regulators 8. Have the responsibilities of the members of the Steering Committee and Expert Working Groups been clearly formulated? 9. Has the ICH adopted a system of job rotation? 10. Are the members of the Steering Committee and Expert Working Groups obliged to sign a declaration of interest and is this declaration made public? 11. Are the members of the Steering Committee obliged to refrain from inﬂuencing the experts involved in the working groups?

38

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However, soft coordination also refers to non-hierarchical instruments like partnership (“co-regulation”), peer pressures, social dialogue, and the “open method of coordination”, which are not covered by soft law. A large range of non-hierarchical tools are involved. See above, section 2.2.

Challenges to the Legitimacy of International Regulation

12. Is ﬁnancial reporting provided according to an agreed international standard? b. Evaluation Participation of stakeholders (questions 1 to 4) Above we saw that only representatives from the organisations of the participating branches of the pharmaceutical industry and representatives of the participating regulatory authorities take part in the Steering Committee. Up to now, patients and medical professionals have not been ofﬁcially represented on this Committee and in the expert working groups. It is striking that the International Federation of Pharmaceutical Manufacturers Association (IFPMA), which provides the Secretariat, does have two seats on this body. Representatives from the generic manufacturing industry and from the self-medication industry have been participating in expert working groups.39 Since some members of the Steering Committee and the expert working groups have a medical background, we could speak of an implicit involvement of the medical profession in the ICH standardisation process. According to the ICH documents and commentators, this is not the case with patients. We do not know whether consumers are participating in ICH conferences and whether patients’ views have been implicitly involved in regulatory activities (for example, in the harmonisation of guidelines related to clinical trials). Up to now, the guidelines have been produced solely by groups of eminent specialists. Transparency (questions 5 to 7) Information about the formal procedures of the ICH regulatory activities is provided on the ICH Website.40 This information includes a list of the members of the Steering Committee. In the EU the adopted ICH guidelines are published in Eudralex41 and on the website of the European Medicines Agency.42 As some of the guidelines have been revised frequently, the question arises whether adequate transparency is provided on the actual state of standardisation.43 It is not clear whether the new codiﬁcation system which the ICH adopted in 2005

39 40 41 42 43

A. Franken and E. Kroth, “ICH 2003”, Pharm. Ind., Vol. 65 2003, pp. 93-98. <www.ich.org/cache/html/2828-272-l.html>. <europa.eu.int/comm/enterprise/pharmaceutical/eudralex/homev3.htm>. <www.emea.org/>. An example of frequent revision is the quality guidance, topics Q3A, Q3B. S.K. Branch (see supra n. 25), p. 802. 65

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is appropriate to identify the actually valid standards. No information about the informal procedures and ﬁnancial resources is provided by the ICH. It is not possible to obtain a copy of the ICH annual ﬁnancial report.44 Regarding the informal process of harmonisation, no information is provided about the foundations of guidelines. It is not clear what evidence the regulators take into account when they assess the efﬁcacy, safety and quality, nor what the criteria are for accepting and rejecting evidence.45 Remaining questions are: how are decisions made in practice, who is participating in the expert working groups, what competences and experience do the members of the committees and working groups actually have, how are conﬂicts of interests identiﬁed and dealt with, and how is voting organised? Accountability and control of regulators (questions 8 to 12) The responsibilities of the members of the Steering Committee and the expert working groups have been formulated in the ICH document on the harmonisation activities, which has been published on the Website. Job rotation is provided in the work of the expert working groups. At step 4 of the formal procedure another rapporteur is appointed than the one who was designated up to step two. However, job rotation – in the sense of appointment of members of the Steering Committee for a ﬁxed period – is not provided. Furthermore, it seems that the members of the operational bodies are not required to sign a declaration of interest. It is not clear whether the members of the Steering Committee are obliged to respect the impartiality of experts. Financial returns of the ICH activities have not been made public. Hence, we do not know whether they are set out according to an agreed international standard of ﬁnancial reporting.46 4.2. Acceptance of the Guidelines a. Questions of Evaluation In the second section we mentioned four factors that contribute to the acceptance of rules: cooperative governance approach, room for self-regulation, correspondence with regional/national rules, low compliance costs. This section examines whether these aspects are present in the ICH regulatory approach and in its guidelines. Additionally, we explore whether regional regulators seem to accept the ICH guidelines. Do the European Medicines Agency, national

44 45 46

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A.E. Slater (see supra n. 26), p. 29. Ibid. See supra n. 45.

Challenges to the Legitimacy of International Regulation

authorities, the Japanese Ministry of Health and Welfare, and the US Food and Drug Administration adopt and follow these guidelines? According to our evaluation framework, we deal with the following questions: – Does the ICH use a governance approach that fosters/hardly fosters/ inhibits compliance? – Do the ICH guidelines leave room for interpretation and self-regulation of the three regulatory bodies? – Do the ICH guidelines correspond with regional regulation? – Are the implementation costs low/moderate/high? b. Evaluation Governance approach The ICH governance approach is an interesting example of consensual governance. Scientiﬁc consensus is the main goal of the ICH procedures and the formal standardisation procedures of the ICH are based on consensus building. The ICH approach includes a conﬁrmation of the consensus. Consensus is built in a sophisticated way; ﬁrst in the “inner circle” of the ICH working groups, then in the “wider circle” of the three participating regions, and lastly in the “outer circle” of the non-participating area. Consensus is strengthened through wideranging consultation, which contributes to emerging commitment. This is also the case with the procedure provided for the event that no complete consensus has been achieved. In this situation there are three options: the Steering Committee still tries to reach a consensus or abandons the current draft or suspends the harmonisation project. This approach to consensus building indicates that the comments of the involved parties are taken seriously. Obviously, the ICH’s aim is that every participating party should agree on a proposed guideline. It is likely that the three ICH sponsors will accept a guideline that has been discussed so intensively, and when it has possibly been revised in light of certain comments received in the consultation process, and where there was an opportunity for further discussion on the scope of the revision, including the necessity of a new draft. By giving room to questions about the implementation of a guideline in the three regions and by providing general (“model”) answers, compliance with guidelines seems to be maximally supported. In sum, the ICH governance approach appears strongly to foster compliance with the guidelines.

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Room for interpretation and self-regulation in implementation The acceptance of the guidelines is also supported by the ﬂexibility they provide. ICH guidelines are formulated as recommendations that leave room for further regulation of the participating regions. They are regarded as “blueprint” guidelines that deﬁne conditions that are acceptable in the three regions.47 ICH standards leave room for interpretation and application, tailored to regional needs. National competent authorities and pharmaceutical companies can use different standards if they have good reasons to do so.48 For example, although the Common Technical Document provides detailed instructions regarding the nature of the registration dossier’s contents, the actual contents may vary in order to satisfy regional requirements.49 Another interesting example is the ICH guideline dealing with good clinical practice, which was converted into the EU 2001 Clinical Trials Directive.50 This Directive leaves room to the EU Member States to introduce national requirements that may be more demanding than those included in the ICH recommendations.51 In sum, the ICH guidelines leave much room for regional regulatory activities. Correspondence with regional regulation and policy According to the ICH policy documents, Steering Committee and expert working groups shall take existing guidance in the participating regions into account.52 In the EU, most guidelines largely overlap with current EC legislation, so the ICH guidelines do not imply major changes to this region. According to Vogel, the experience the Europeans gained in harmonising regulations has both enabled 47 48 49 50

51

52

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D. Vogel (see supra n. 3), p. 11. B. Sickmüller (see supra n. 35), p. 114. S.K. Branch (see supra n. 25), p. 799. Consensus is deﬁned as a general agreement, characterised by the absence of sustained opposition to substantial issues by any important part of the concerned interests and by a process that involves seeking to take into account the view of all parties concerned and to reconcile conﬂicting arguments (see, note 2). Generally, consensus does not signify that everyone has to agree upon a proposed guideline, but rather that there is broad support for the standard. This support indicates that the “ruled” accept the standard and that they will probably follow it. J. Revuelta, et.al., “A Survey of Danish, German and Spanish Ethics Committees Prior to the 2004 Implementation of the European Directive Covering the International Conference of Harmonisation – Good Clinical Practices (ICH-GCP)”, Int J Pharm Med, Vol. 19 2005, pp. 29-36. Examples of incorporation of existing guidance are mentioned by S.K. Branch (see supra n. 25), p. 800.

Challenges to the Legitimacy of International Regulation

and encouraged it to play a leading role in promoting international regulatory co-operation.53 Simultaneously, the ICH standards have contributed to the harmonisation within the EU. By contrast, Japan has experienced the most difﬁculty adjusting to the ICH. As Vogel states, of particular concern to the Japanese are racial differences that can lead to different reactions to the same dose of the same drug across populations. This is one of the reasons why this country has been reluctant to accept ICH guidelines. Concerning the US, the ICH promise to speed up the approval process has complemented and assisted FDA policy.54 In sum, there is an alliance between the ICH guidelines and regional regulation policy. This relation appears to be different in the three regions. Implementation costs Hitherto, the implementation impact of the ICH guidelines has only been investigated in two small studies focusing on the implementation of efﬁcacy guidelines through pharmaceutical companies.55 In the study of the Centre for Medicines Research International (hereafter, CMR), up to half of the companies experienced an increase in costs. This experience could be detrimental to the acceptance of the guidelines. Since no information is available about the implementation costs of the regional and local stakeholders, we cannot evaluate the implications of compliance costs.

5. Conclusions and Recommendations In our exploration of the legitimacy of the ICH guidelines we have discovered deﬁciencies regarding all requirements of acceptability (stakeholder participation, transparency, accountability and control). The ICH decision making process provides no plurality of the interests involved. Since the pharmaceutical industry has eight representatives in the Steering Committee (as against six representatives of the regulatory bodies), we conclude that the distribution of seats in this important operational body seems to be biased. The information the ICH

53 54 55

D. Vogel (see supra n. 3), p. 14. D. Vogel (see supra n. 3), p. 15. CMR, The Impact of ICH efﬁcacy Guidelines on the clinical development of medicines, Centre for Medicines Research International, Carshalton, 1998; C. Nutley, “The value and beneﬁts of the ICH to industry”, IFPMA, 2000. A.E. Slater (see supra n. 26). Up to now, the implementation of the participating regulatory authorities has not been investigated. Some speciﬁc remarks about differences in implementation have been made by A. Franken and E. Kroth (see supra n. 39), pp. 93-98. 69

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provides on the results of its harmonisation efforts it not sufﬁcient to meet the requirements of democratic participation and control. If they are to participate in the regulation process of the marketing of pharmaceuticals, consumers must receive more intelligible information on the harmonisation process, including information about the background and competences of the experts involved. Consumers have an interest in knowing the reasons why a consensus was difﬁcult to achieve in certain cases and why the Steering Committee decided to abandon a current draft or to suspend the harmonisation project, as well as whether problems of quality and efﬁcacy of drugs have played a role in the Committee’s decision. Obviously, the ICH has taken hardly any measures to provide accountability and control. For the sake of democratic control the ICH must be more open regarding the inﬂuence of experts in the harmonisation process. It is not clear whether and how the experts’ opinions determine the decisions in this process. An important question is whether the participating regulatory authorities decide on normative (policy) aspects of safety, quality and efﬁcacy governance or whether they either do not devote attention to these subjects or leave the decisions to the experts involved. Considering the large share of the pharmaceutical industry within the ICH harmonisation activities vis-à-vis the lack of consumer and medical professional participation, the prevention of regulatory capture deserves more attention. In the prevention of regulatory capture a ﬁrst step is to make the entire harmonisation process and the ﬁnancial resources more transparent. A second step should be to publish declarations of interest and to establish a system of job rotation. To catch up with present EU drugs regulations, which are enhancing participation and transparency, accountability and control, the ICH should seriously reform its standardisation process.56 Rules should be established on these issues, so that participation and transparency do not primarily depend on the willingness of the ICH authorities. Why should the EU, which has so far, according to many commentators, taken the lead in the ICH co-operation, not be ready to take an initiative to promote its own achievements? According to our deﬁnition of legitimacy, more participation, more transparency and better accountability and control would probably increase trust in the competent pharmaceuticals authorities abiding by the shared norms. As concerns the acceptance of the guidelines, the ICH strategy of encouraging a regular, continuous debate between the regional authorities and experts, as well as its pragmatic approach, seem to have created mutual trust and commitment, which is essential for compliance.57 One of the accomplishments of the ICH

56 57

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B.R. Dorbeck-Jung and M. Oude Vrielink-van Heffen (see supra n. 18). B. Sickmüller (see supra n. 35). See also, E. Vos (supra n. 4), p. 228.

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approach is that it commits publicly all participating sponsors to the principle of harmonisation.58 With its sophisticated consensus approach the ICH has created an important stimulus to compliance in the stage of implementation. The same conclusion holds for the room the ICH guidelines leave for further regulation. Apparently, the high degree of correspondence with regional regulations and policies has broadened the use of the guidelines. However, the differences in adoption in the US on the one side, and in the EU and Japan on the other, raise the question whether the inﬂuence of the ICH guidelines is different in the three regions.59 Do the guidelines have less inﬂuence in the US than in the EU and Japan, or is the US approach of “high recommendation” as effective as the approach of the EU and Japan, because a mandatory method would not be effective in the US regulatory culture? Other important questions of compliance refer to other levels of pharmaceuticals governance. Do the competent authorities of the EU Member States and the pharmaceutical companies follow the rules that the European Commission established on the basis of the ICH guidelines? Since these questions have not yet been answered, our ﬁnal conclusion is that Vogel’s statement that the ICH has helped make national drugs regulation more efﬁcient and effective still has to be conﬁrmed.60 As the ICH regulatory inﬂuence will probably increase in the near future, major challenges are to enhance the legitimacy of its standardisation activities and to reveal the secrecy of its inﬂuence and power in regulatory practice.

58 59

60

D. Vogel, (see supra n. 3), p. 12. Some speciﬁc remarks about differences in implementation have been made by A. Franken and E. Kroth (see supra n. 39). D. Vogel (see supra n. 3), 20. 71

Financial Trade Associations and Multilevel Regulation Caroline Bradley

1. Introduction Financial market activity is increasingly international. Commentators have identiﬁed internationalization as a trend in the ﬁnancial markets since at least the 1980s,1 but in the 21st century even retail domestic ﬁnancial markets, such as markets for housing ﬁnance2 and remittances,3 have developed signiﬁcant foreign and international aspects that raise issues for both domestic and international policy makers.4 However, although developments in the international ﬁnancial markets affect increasing numbers of consumers of ﬁnancial services, consumers are to a signiﬁcant extent excluded from the processes which produce harmonized rules to regulate these markets. The rate and volume of harmonization of ﬁnancial regulation continue to increase thanks to multiple initiatives. Major international efforts include the

1

2

3

4

C.C. Cox and D.C. Michael, “The Market for Markets: Development of International Securities and Commodities Trading”, Catholic University Law Review, Vol. 36 1987, p. 833. Bank for International Settlements (BIS), Committee on the Global Financial System, Housing Finance in the Global Financial Market, CGFS Publications No. 26, Basel: BIS, 2006. BIS, Committee on Payment and Settlement Systems, General Principles for International Remittance Services – Consultative Report, CPSS Publications No. 73, Basel: BIS, 2006. In the ﬁrst half of 2006 central bankers noted these developments. (See supra n. 2 and 3).

Follesdal, Wessel and Wouters (eds), Multilevel Regulation and the EU, 73–100 ©2008 Koninklijke Brill NV. ISBN 978 90 04 16438 3. Printed in the Netherlands.

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work of the International Organization of Securities Commissions (IOSCO),5 the Basle Committee on Banking Supervision (hereafter, Basle Committee),6 the International Association of Insurance Supervisors (IAIS)7 to develop harmonized principles of ﬁnancial regulation, and the European Union’s (EU) effort to achieve a single market in ﬁnancial services.8 Over time, supranational standard-setters have begun to formalize the processes by which they set standards, developing their practices for consulting on proposed standards, and even establishing consultation policies.9 However, the different organizations adopt different approaches to consultation and the way they report the results of consultation;10 there is as yet no harmonized, supranational administrative law.11 Consultation processes that exclude groups affected by harmonized rules because of a lack of transparency,12 or because the issues are framed in ways that make the views of affected groups seem irrelevant, lack legitimacy. Consumers and the organizations that represent their interests are more likely than ﬁnancial ﬁrms to be excluded from effective participation in supranational standard-setting due to the combined effects of opaque processes, framing, and lack of resources. Some harmonized rules are set out in binding legal instruments, others are only hortatory. Even the EU’s binding harmonization measures sometimes leave

5

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7 8

9

10

11

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For a discussion of IOSCO’s Principles of Securities Regulation see e.g., K. Pistor, “The Standardization of Law and Its Effect on Developing Economies”, AJCL, Vol. 50 2002, p. 97. J. Braithwaite and P. Drahos, Global Business Regulation, Cambridge: Cambridge University Press, 2000, p. 104 (describing how central bank governors established what is now the Basle Committee on Banking Supervision in response to the failures of the Herstaat Bank and Franklin National Bank in 1974). K. Pistor (see supra n. 5), pp. 120-1. EU Commission, Financial Services: Implementing the Framework for Financial Markets: Action Plan, COM (1999) 232, 11 May 1999. IOSCO, Executive Committee, IOSCO Consultation Policy And Procedure, Madrid: IOSCO, 2005. R.D. Kelemen and E.C. Sibbitt, “The Globalization of American Law”, Int’l Org., Vol. 58 2004, p. 103. See generally e.g. C. Bradley, “Private International Law-Making for the Financial Markets”, Fordham International Law Journal, Vol. 29 2005, p. 127. B. Kingsbury, N. Krisch and R.B. Stewart, “The Emergence of Global Administrative Law”, Law and Contemporary Problems, Vol. 68 2005, p. 16 (noting “an accountability deﬁcit in the growing exercise of transnational regulatory power”). EU Commission, Green Paper: European Transparency Initiative, COM (2006) 194, 3 May 2006.

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to the Member States some discretion about how to implement the directives within their domestic legal systems.13 Non-binding standards developed by bodies such as IOSCO may be implemented differently by different states, or may not be implemented at all.14 However, even formally hortatory standards derive greater force, and become harder for domestic legislators and regulators to ignore, because international ﬁnancial institutions (hereafter, IFIs) such as the IMF encourage governments to adopt them.15 Financial regulation involves complex issues of regulatory jurisdiction, in which jurisdiction is allocated horizontally between authorities in different territorial areas,16 and vertically between authorities at different hierarchical levels within states, and at the supranational (regional or global) levels.17 Within a domestic legal system the source for a rule of ﬁnancial regulation may be sub-national, national, or supranational. Rules for the allocation of regulatory jurisdiction are established in statutes and treaties, but there can be uncertainty about the proper interpretation of the rules.18 Standards that are formally harmonized at the supranational level usually need to be implemented within domestic regulatory systems. Implementation

13

14

15 16

17

18

Firms have suggested that the UK is too prone to “gold-plate” its rules: going further than is required by the directives. Cf. Financial Services Authority (FSA), Better Regulation Action Plan, London: FSA, 2005, p. 6 (“Our basic approach is to ‘copy out’ the text in our Handbook, adding interpretive guidance where that will be helpful. This avoids placing unintended additional obligations on ﬁrms. We will not gold-plate EU requirements. We will only add additional requirements when these are justiﬁed in their own right”). D.E. Alford, “Core Principles for Effective Banking Supervision: an Enforceable International Financial Standard?”, Boston College International and Comparative Law Review, Vol. 28 2005, p. 286 (“because the agreements are not legally enforceable, nations can vary in their own interpretation and implementation of the standards”). D.E. Alford (see supra n. 14), pp. 286-289. In some states, such as the US, jurisdiction is also splintered among different functional regulators. H.M. Schooner and M. Taylor, “United Kingdom and United States Responses To the Regulatory Challenges of Modern Financial Markets”, Texas International Law Journal, Vol. 38 2003, p. 317. The complex web of regulation includes a signiﬁcant component of privately generated standards and codes and contracts, which may have quasi-regulatory effects. C. Bradley (see supra n. 10), pp. 158-179. S. Issacharoff and C.M. Sharkey, “Backdoor Federalization”, UCLA Law Review, Vol. 53 2006, p. 1366 (“preemption battles have been largely conﬁned to the realm of statutory interpretation”). 75

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is sometimes multilayered and indirect. For example, the Basle Committee has developed capital adequacy standards for banks involved in international banking.19 Within the EU, capital adequacy requirements are an aspect of harmonized regulation of credit institutions, and the EU’s capital adequacy rules are being amended to reﬂect the new Basle standards.20 Competent authorities within the Member States are responsible for adjusting domestic capital adequacy requirements to reﬂect the new Basle standards as reﬂected in EU implementing measures.21 Where domestic legislators and regulators have discretion about how they carry out implementation, there are usually multiple points at which the regulatory process can be inﬂuenced. Many different actors have a stake in the outcomes of these multilevel or multi-stage regulatory processes, from ﬁnancial ﬁrms and their advisors to corporate and individual consumers of ﬁnancial services.22 But some stakeholders are in a better position to inﬂuence regulatory outcomes thanks to their superior ﬁnancial and other resources. Financial trade associations (hereafter, FTAs) and their members now take advantage of opportunities to inﬂuence regulatory policy within multilevel systems. In particular, FTAs use two rhetorical strategies that tend to promote the interests of their members and which work against the interests of consumers. The ﬁrst of these strategies is “market protection rhetoric”. In relation to rule-making at the domestic or supranational level, FTAs often invoke arguments that particular proposals will interfere with the proper functioning of the ﬁnancial markets. Market protection rhetoric is based on claims of expertise and usually implies that those invoking it are in a unique position to understand

19

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BIS, Basel Committee on Banking Supervision, International Convergence of Capital Measurement and Capital Standards: A Revised Framework – Comprehensive Version, Basel: BIS, 2006. Directive 2006/49/EC of the European Parliament and of the Council of 14 June 2006 on the capital adequacy of investment ﬁrms and credit institutions, OJ No. L177/1, 30 June 2006. The Committee of European Banking Supervisors (hereafter, CEBS) has sought comments on details of the implementation of the new rules. CEBS, Consultation Paper on the Guidelines for a Common Approach to the Recognition of External Credit Assessment Institutions (ECAIS), CP07, London: CEBS, 2005. FSA, Strengthening Capital Standards, CP 05/03, London: FSA, 2005. The decision makers in the supranational bodies also have a stake in the regulatory process, as do legislators and regulators. Cf. J. Braithwaite & P. Drahos (see supra n. 6), p. 23 (“Each regulatory domain has a distinct range of actors contending for victory at different sites”).

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the market. Market protection rhetoric includes arguments for self-regulation based on expertise. The FTAs’ other routine strategy relies on “harmonization rhetoric”, which is invoked in the context of domestic regulatory action.23 Harmonization rhetoric involves an argument that the rules in one domestic jurisdiction should not be stricter than those in another. The argument appears in the context of implementation of supranational standards or rules (for example, arguments against gold-plating when implementing EU directives),24 and also arises in opposition to rules proposed by domestic regulators that lack a supranational source. Harmonization rhetoric can be seen as a subset of market protection rhetoric because those who invoke it would argue that more onerous rules in one jurisdiction limit the ability of ﬁrms established there to compete with ﬁrms established elsewhere. Harmonization rhetoric may also include arguments for self-regulation, on the basis that self-regulatory standards and codes may be able to operate more effectively across territorial boundaries than state-based regulation.25 FTAs use market protection and harmonization rhetoric to frame debates around proposed rules and standards. This rhetoric, as much as lack of resources, helps to distance consumers from the regulatory process at all levels because consumers are not generally in a position to claim the same levels of expertise

23

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25

Harmonization rhetoric is only necessary in the context of the development of supranational rules and standards in order to limit the discretion of the implementing authorities. S. Schaefer and E. Young, Burdened by Brussels or the UK? Improving the Implementation of EU Directives, London: Foreign Policy Centre, 2006, pp. 10-11 (“Rules agreed at the EU level are vital for the proper functioning of the single market. But they can also hamper competitiveness and productivity if they add a differently sized burden in individual member states because they have been implemented in different ways. Gold-plating, as deﬁned by an ongoing audit by HM Treasury, is part of a larger category of over-implementation which also includes double-banking or regulatory creep”). N.S. Poser, “The Stock Exchanges of the United States and Europe: Automation, Globalization and Consolidation”, University of Pennsylvania Journal of International Economic Law, Vol. 22 2001, p. 538 (“These are not rules promulgated by a government agency, but by contractual arrangements among the participants. This suggests that self-regulation has the ability to ﬁnesse the problems of national sovereignty and differing legal systems that stand in the way of developing and enforcing common governmental regulatory standards”). 77

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as the FTAs.26 Consumers are protected by law because they are likely to be vulnerable when dealing with businesses.27 Indeed, consumers are often deﬁned by reference to their lack of expertise.28 Individual consumers tend to care more about some rules than others.29 Consumers have only indirect interests in some areas of ﬁnancial regulation, and thus only a remote claim to be consulted on the substance of rules and required procedures in those areas. For example, consumers are affected by failures of the systems used by ﬁnancial ﬁrms,30 but most consumers do not have the

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In some contexts policy makers do seek the input of consumer representatives. See e.g. HM Treasury, Government Response to the Treasury Committee’s Seventh Report for Session 2005-06 (HC 778) European Financial Services Regulation, London: HM Treasury, 2006 (“In the UK, the FSA Consumer Panel provides an excellent and necessary input to policy formation in the UK, particularly in respect of EU proposals where it is difﬁcult to secure evidence based user input”). The UK’s Financial Services and Markets Act 2000 (hereafter, FSMA) deﬁnes consumers as persons: “(a) who use, have used, or are or may be contemplating using, any of the services provided by (i) authorised persons in carrying on regulated activities; or (ii) persons acting as appointed representatives; (b) who have rights or interests which are derived from, or are otherwise attributable to, the use of any such services by other persons; or (c) who have rights or interests which may be adversely affected by the use of any such services by persons acting on their behalf or in a ﬁduciary capacity in relation to them.” Financial Services and Markets Act, 2000, ch. 8, s. 138(7). FSA, Better Informed Consumers, Consumer Research 1, London: FSA, 2000, p. 3 (distinguishing between the most receptive and least receptive ﬁnancial decision makers). FSA, What Consumers Know about Financial Regulation, Consumer Research 29, London: FSA, 2004, p. 5 (“Some issues, products or organizations may be fundamentally more appealing than others and ﬁnancial regulation is perhaps not the most interesting of subjects for many in the general population. Awareness of the FSA and ﬁnancial regulation may be more meaningful for many when it is contextual, for example at a time when they are buying a product or have some ﬁnancial query”). Board of Governors of the Federal Reserve System (hereafter, Federal Reserve), Ofﬁce of the Comptroller of the Currency (hereafter, OCC), and SEC, Interagency Paper on Sound Practices To Strengthen the Resilience of the U.S. Financial System, Fed. Reg. 17809, Vol. 68 2003. This paper followed a draft published in 2002. Federal Reserve, OCC, and SEC, Draft Interagency White Paper on Sound Practices to Strengthen the Resilience of the US Financial System, Fed. Reg. 56835, Vol. 67 2002. Comments on the original proposal are available at <www.sec.gov/ rules/concept/s73202.shtml>.

Financial Trade Associations and Multilevel Regulation

expertise needed to determine the best rules for ensuring that ﬁnancial ﬁrms’ systems are protected from threats from terrorism or pandemic disease.31 On the other hand, consumers do have expertise about how they perceive disclosures about the readiness of ﬁnancial ﬁrms to face such threats. Thus, many areas of ﬁnancial regulation involve amalgams of issues that are technical and of little interest to consumers, and issues that are directly relevant to consumers.32And whether supranational standard-setters emphasize the technical aspects or the consumer aspects may have a signiﬁcant impact on consumers’ interests. Thus, if market protection rhetoric successfully induces the standard-setters to view their standards as technical standards, consumer interests are less likely to be taken into account and the interests of consumers may be prejudiced. Domestic regulators who adopted this perspective might have it altered by a subsequent change of government, but it would be very difﬁcult for consumers/voters to produce the necessary changes in IOSCO or the Basle Committee or the EU Commission or CESR.

2. Regulating Local, National and International Financial Markets Financial regulators based in different jurisdictions increasingly work together to regulate transnational ﬁnancial activity, through Memoranda of Understanding (hereafter, MOUs), through transnational standard-setting organizations, and in the context of supervision and enforcement.33 Securities regulators collaborate to enforce laws against fraudsters who seek to operate across national borders.34

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Federal Reserve, Federal Deposit Insurance Corporation (hereafter, FDIC), OCC and Ofﬁce of Thrift Supervision, Interagency Advisory on Inﬂuenza Pandemic Preparedness, 2006, available at <www.federalreserve.gov/boarddocs/press/bcreg/2006/ 20060315/attachment.pdf>. Some issues are of high salience for consumers. Federal Reserve, Notice of Study and Request for Information, Fed. Reg. 29308, Vol. 69 2004, and the comments submitted in response to this request for information about debit card fees, which are available at <www.federalreserve.gov/generalinfo/foia/index.cfm?doc_id =OP%2D1196&doc_ver=1&ShowAll=Yes>. Robert Adieh uses the term “intersystemic regulation” to describe interactions between regulators. R. Adieh, “Dialectical Regulation”, Connecticut Law Review, Vol. 38 2006, p. 863. M.D. Mann and W.P. Barry, “Developments in the Internationalization of Securities Enforcement”, International Lawyer, Vol. 39 2005, p. 667. 79

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Banking regulators work together to supervise transnational banking organizations and ensure consolidated supervision.35 For regulators, therefore, ﬁnancial regulation operates at multiple, different levels. Financial regulators operate together at the supranational level when they agree on terms of co-operation with regulators from speciﬁc other jurisdictions,36 or when they meet generally with regulators from other jurisdictions in bodies such as IOSCO, the Basle Committee and CESR37 to agree standards for ﬁnancial regulation. But they also work at the national (and sometimes sub-national) level, sometimes in collaboration with regulators from other jurisdictions and sometimes not. The development of multilevel regulatory processes provides opportunities for domestic regulators, but also makes their roles more complex. Domestic ﬁnancial regulators are answerable to the domestic authorities who appoint them, rather than to regulators in other jurisdictions or to supranational bureaucrats, and they may tend to see (or at least characterize) their role as primarily a domestic one, with some inevitable supranational and transnational elements.38 On the other hand, ﬁnancial regulators may use supranational agreements as an excuse to implement policies at home that they regard as desirable but which are politically unpopular, or to serve their own interests in other ways.39 In 2005, the UK’s Financial Services Authority (FSA) began to publish a document entitled International Regulatory Outlook (IRO).40 Initially, the FSA described the purpose of the publication as being to “help stakeholders plan for forthcoming regulatory change.”41 However, the FSA’s IRO publications

35 36

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A.E. Alford (see supra n. 14), pp. 250-259. Securities and Exchange Commission (hereafter, SEC) Press Release, SEC-CESR Set Out the Shape of Future Collaboration, 2004, available at <www.sec.gov/news/ press/2004-75.htm>. A.M. Slaughter, A New World Order, Princeton, N.J.: Princeton University Press, 2004, p. 36 (describing regulators as “the new diplomats”). The character of regulatory states “is contingent on national setting”, M. Moran, “Understanding the Regulatory State”, British Journal of Political Science, Vol. 32 2002, p. 412. J.R. Macey, “Regulatory Globalization as a Response to Regulatory Competition”, Emory Law Journal, Vol. 52 2003, p. 1353. FSA, International Regulatory Outlook 2005, London: FSA, 2005 (hereafter, IRO); FSA, International Regulatory Outlook November 2005, London: FSA, 2005 (hereafter, IRO Nov. 2005). FSA, Press Release, FSA Publishes its Financial Risk Outlook, 2005, available at <www.fsa.gov.uk/Pages/Library/Communication/PR/2005/005.shtml>.

Financial Trade Associations and Multilevel Regulation

themselves suggest that they are not only designed to help UK ﬁrms adjust to regulatory change but also to help ﬁnancial ﬁrms to inﬂuence supranational developments. In the November 2005 issue of the IRO, John Tiner, the FSA’s Chief Executive, wrote: “if stakeholders wish to inﬂuence the development of international policy initiatives, it is important that they do so as early in the process as possible and are alert to consultation documents as they are published.” He added, “to maximize the scope for effective policy-making, stakeholders should support calls for international bodies to develop a better regulation agenda focused on transparent, evidence-based policy-making that incorporates adequate time for consultation and market failure analyses and cost-beneﬁt analyses.”42 The FSA seems to suggest that its role in the context of transnational rule-making is partly to promote the interests of the UK market and of ﬁrms doing business in the UK market.43 The FSA is in an unusual position with respect to supranational rule-making because it regulates a ﬁnancial market that has for a long time been more international than most other domestic ﬁnancial markets.44 In the late 1960s and the 1970s the UK’s relaxed approach to ﬁnancial regulation facilitated the development of the Eurobond market.45 As the UK has developed its system of ﬁnancial regulation since the 1980s, regulators and market participants alike have recognized the importance of not imposing rules on the UK markets which would drive business away.46 London is one of the leading global ﬁnancial 42 43

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FSA, IRO Nov. 2005 (see supra n. 40), p. 5. The FSA’s approach reﬂects that of the Treasury. See e.g., HM Treasury, Departmental Report, Cm. 6830, London: HM Treasury, 2006, p. 37 (“The Treasury will continue to ensure that the methodology for measuring administrative burdens is integrated into the regulatory simpliﬁcation programme; prioritize a risk-based approach to implementation and enforcement of EU legislation; and strengthen stakeholder consultation, including business input to the process of regulatory design”). It is worth noting that many of the ﬁnancial ﬁrms doing business in the UK are multinational rather than UK ﬁrms. Corporation of London, The Competitive Position of London as a Global Financial Centre, London: Z/Yen Limited, 2005, p. 7. On London’s history as an international ﬁnancial center see e.g., D. Kynaston, The City of London, Vol. 1, London: Chatto & Windus, 1994. P. McGuire, “A Shift in London’s Eurodollar Market”, BIS Quarterly Review, 2004, p. 68. Corporation of London, (see supra n. 44) p. 7 (discussing regulation as a factor in the competitiveness of London as a ﬁnancial center); C. McCarthy, Chairman, FSA, Speech at the Muslim Council of Britain Islamic Finance and Trade Conference, 13 June 2006, available at <www.fsa.gov.uk/pages/Library/Communication/ 81

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centers47 and policy makers in the UK would like it to retain that status.48 London does, however, face competition from other ﬁnancial centers within the EU and outside the EU.49 Whereas policy makers in the UK have focused on nurturing the UK ﬁnancial markets and protecting them from foreign competition for some time, until recently the US ﬁnancial markets often seemed to operate as if market participants and regulators did not need to worry too much about the rest of the world, except, perhaps, to persuade the rest of the world to adopt American standards.50 The SEC’s Ofﬁce of International Affairs (OIA) states that it “promotes investor protection and cross-border securities transactions by advancing international regulatory and enforcement cooperation, promoting the adoption of high regulatory standards worldwide, and formulating technical assistance programs to strengthen the regulatory infrastructure in global securities markets.”51 The OIA characterizes its role in part as being to ensure that ﬁnancial market participants cannot engage in regulatory arbitrage: “OIA works with a global network of securities regulators and law enforcement authorities to facilitate cross-border

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Speeches/2006/0613_cm.shtml> (discussing the importance of ensuring that London provides an accommodating environment for Islamic ﬁnance: “It is reasonable to regard London as a centre for a full range of Sharia compliant wholesale products – an important objective if London is to retain its international character”). S. Sassen, “Global Financial Centers”, Foreign Affairs, Vol. 78 1999, p. 75. See also idem, p. 83 (“London is the preeminent city for global ﬁnance today, in good part due to the numerous ﬁnancial ﬁrms that have located key operations and resources in the City, London’s ﬁnancial district”). HM Treasury, The UK Financial Services Sector: Rising to the Challenges and Opportunities of Globalisation, London: HM Treasury, 2005. Autorité des Marchés Financiers (hereafter, AMF), Document de Consultation: Pour Une Meilleure Régulation, Paris: AMF, 2006, p. 1 (“Une des priorités de l’AMF, dans la négociation et la transposition des textes européens, est donc de contribuer à assurer l’égalité des conditions de la concurrence entre les acteurs”). J. Braithwaite & P. Drahos (see supra n. 6), p. 157 (“Since the New Deal the US, through the agency of the SEC, has usually been the state that has dictated terms”). More recently academic commentators and policy makers have expressed concerns that the US ﬁnancial markets are not sufﬁciently competitive with other markets. Committee on Capital Markets Regulation, Interim Report of the Committee on Capital Markets Regulation, 2006, available at <www.capmktsreg.org/ pdfs/11.30Committee_Interim_ReportREV2.pdf>. SEC, Ofﬁce of International Affairs, at <www.sec.gov/about/ofﬁces/oia.htm> (modiﬁed 2 March 2007).

Financial Trade Associations and Multilevel Regulation

regulatory compliance and ensure that international borders are not used to escape detection and prosecution of fraudulent securities activities.”52 Domestic political conditions may disrupt the ability of ﬁnancial regulators to work with or compete with regulators in other jurisdictions. In 2002, after the collapse of Enron, the US Congress enacted the Sarbanes-Oxley Act, which imposed a range of new requirements on public companies in the US.53 The public companies affected by these new rules included foreign issuers that had decided to enter the US market, some of which were faced with conﬂicts between the new requirements of US law and their own domestic laws. The SEC has mitigated some of the rigors of Sarbanes-Oxley by implementing regulations that allow foreign issuers to comply with their own domestic rules of corporate law,54 and allow foreign banks that have issued securities in the US to make loans to their directors under the same conditions as US banks may make loans to their directors.55 An SEC proposal to adjust the rules regulating circumstances in which foreign issuers can avoid the need to comply with many of the SEC’s disclosure rules56 was originally criticized by some commentators as unduly restrictive57 and complex.58 The SEC published a revised proposal in response to these criticisms,59 and new rules were ﬁnally adopted in

52

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SEC, Ofﬁce of International Affairs, at <www.sec.gov/about/ofﬁces/oia.htm> (modiﬁed 2 March 2007). Sarbanes-Oxley Act of 2002, Pub. L. 107-204, 116 Stat. 745, 2002. SEC, Standards Relating to Listed Company Audit Committees, Fed. Red. 18788, Vol. 68 2003. SEC, Foreign Bank Exemption from the Insider Lending Prohibition of Exchange Act Section 13(k), Fed. Reg. 24016, Vol. 69 2004. SEC, Proposed Rule on Termination of a Foreign Private Issuer’s Registration of a Class of Securities under Section 12(g), Fed. Reg. 77688, Vol. 70 2005. The 100 Group of Finance Directors and of the General Counsel 100 Group, Comments on Proposed Rule Permitting Foreign Private Issuers to Deregister and Terminate Their Reporting Obligations under the Securities Exchange Act of 1934, 2006, available at <www.sec.gov/rules/proposed/s71205/100 group022806.pdf>. PricewaterhouseCoopers LLP, Comments on Termination of a Foreign Private Issuer’s Registration of a Class of Securities under Section 12(g) and Duty to File Reports under Section 15(d) of the Securities Exchange Act of 1934, 2006, available at <www.sec.gov/rules/proposed/s71205/ pricewaterhouse030306.pdf>. SEC, Termination of a Foreign Private Issuer’s Registration of a Class of Securities Under Section 12(G) and Duty to File Reports Under Section 13(A) or 15(D) of the Securities Exchange Act of 1934, Final Rule, Fed. Reg. 1384, Vol. 72 2007. 83

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2007.60 Foreign issuers are keen for the SEC to allow issuers to publish ﬁnancial disclosures in the US that comply with International Financial Reporting Standards without the need for reconciliation to US GAAP.61 The SEC and the EU’s CESR have agreed to work together in the future to minimize frictions between their different regulatory schemes for the ﬁnancial markets.62 Financial regulators in countries with smaller ﬁnancial markets also focus on competition with markets based in other jurisdictions. However, some options for competition are constrained by initiatives such as the IMF’s Assessment Program for Offshore Financial Centers.63 Within federal states statutes may allocate ﬁnancial regulatory responsibilities to different levels. For example, the US has a dual system of banking regulation under which banks may elect to be chartered by state banking regulators or by the Ofﬁce of the Comptroller of the Currency, which is a federal agency.64

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SEC, Reproposed Rule on Termination of a Foreign Private Issuer’s Registration of a Class of Securities Under Section 12(G) and Duty to File Reports Under Section 13(A) or 15(D) of the Securities Exchange Act of 1934, Fed. Reg. 16934, Vol. 72 2007. Comments of the 100 Group of Finance Directors and of the GC 100 Group (see supra n. 57), (“We believe that, in order to maintain the attractiveness of the U.S. markets, the Commission and its staff should be working more quickly to ease the burden of duplicative regulation on foreign private issuers that remain – or wish to become – Exchange Act reporting companies. We are conﬁdent that the Commission can do much in this regard without compromising its basic mission of protecting U.S. investors. The single most important issue of this type is mutual recognition of IFRS and U.S. GAAP”). See supra n. 36. IMF, Offshore Financial Centers: The Assessment Program—A Progress Report, Washington, DC: IMF, 2006. M.W. Olson, Governor of the Federal Reserve, The Dual Banking System and the Current Condition of the Banking Industry, Speech at the Annual Meeting and Conference of the Conference of State Bank Supervisors, Salt Lake City, Utah, 31 May 2002, available at <www.federalreserve.gov/boarddocs/speeches/2002/20020531/ default.htm> (“In typically American fashion, the compromise that has been worked out over time is to have it both ways. We have nationally chartered banks supervised by the federal government and state-chartered banks supervised by both state and federal regulators. The Federal Reserve System itself also reﬂects this American preference for dispersal of authority”). For a suggestion that the system of dual banking regulation does not produce competitive rule-making see e.g., H.N. Butler and J.R. Macey, “The Myth of Competition in the Dual Banking System”, Cornell Law Review, Vol. 73 1988, p. 678.

Financial Trade Associations and Multilevel Regulation

State and municipal ofﬁcials may decide that they need to take action to protect the people they represent, and their claims to be able to exercise rule-making or enforcement jurisdiction may conﬂict with claims of national regulators. In the US three visible, recent examples of conﬂicts between state and federal authorities are Eliot Spitzer’s enforcement of state rules against ﬁnancial ﬁrms and the resulting criticisms,65 the Sarbanes-Oxley Act, which has been criticized for may reasons, including claims that it is problematic because it federalizes corporate law,66 and the debate about predatory lending and how it should be regulated.67 Increasing internationalization of ﬁnancial activity combined with incomplete regulatory harmonization means that ﬁnancial ﬁrms run into conﬂicts between domestic rules in different jurisdictions. Firms also encounter conﬂicts between domestic rules and international market practices, whether established or developing. Sometimes ﬁnancial ﬁrms see differences between rules in different jurisdictions as creating opportunities for regulatory arbitrage.68 At other times

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Shadow Financial Regulatory Committee, Statement No. 186, 2003, available at <www.aei.org/publications/pubID.16041/pub_detail.asp> (“Security analysts and the large security ﬁrms form part of a nationwide distribution and trading market, which should be regulated in its essential aspects by federal and not state authority. In Attorney General Spitzer’s view, the SEC had initially abdicated its role, justifying his stepping into the breach. Even if that were true in this instance, however, in general it is undesirable for one or several states to undertake to impose operating regulations on national securities ﬁrms. The current settlement arrangements should not be viewed as a precedent to the contrary; if necessary, legislation should be enacted to prevent a repetition.”), E. Spitzer, Business Ethics, Regulation and The “Ownership Society”, Remarks at the National Press Club, Washington, DC, 31 January 2005, available at <www.oag.state.ny.us/press/statements/Business_Ethics.pdf> (“there has been an enormous effort sponsored by some in the business community to preempt the states and my ofﬁce in particular. The goal of this effort is to prevent us from bringing the types of cases that we have been bringing for the past number of years”). But see e.g. R. Adieh, “From ‘Federalization’ to ‘Mixed Governance’ in Corporate Law: A Defense of Sarbanes-Oxley”, Buffalo Law Review, Vol. 53 2005, p. 741 (“I posit a ‘nationalization’ of corporate regulation, with enabling, market-driven constraints displaced by mandatory, state-deﬁned rules. This, I believe, is what critics of Sarbanes-Oxley truly condemn. Though couched within a rubric of ‘federalization,’ it is such ‘nationalization’ that motivates their concerns”). K.C. Engel and P.A. McCoy, “A Tale of Three Markets: The Law and Economics of Predatory Lending”, Texas Law Review, Vol. 80 2002, p. 1255.

68

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ﬁnancial ﬁrms argue for harmonization. However, within supranational regulatory processes there is an inevitable tension between local and supra-local interests, just as there is within federal states such as the US. In their interventions in supranational and domestic regulatory processes, ﬁnancial trade associations often argue against local rule-making authority, in the same way as FTAs argue against state (rather than federal) control within the US. National regulators, like state regulators in the US, may argue that they need to retain an ability to protect local consumers of ﬁnancial services, and even that they protect consumers more effectively.69 The sharing of regulatory power among and within nations and their ﬁnancial regulators creates a complex web of power and numerous possibilities for well-resourced, knowledgeable ﬁrms and their advisers to inﬂuence outcomes. Yet another source of complexity in ﬁnancial regulation at all levels is the relationship between formal regulation and standards adopted by governmental and intergovernmental or supranational authorities and informal regulation and standards adopted by non-governmental organizations. There is an ongoing debate among ﬁnancial regulators and market participants about the extent to which rules of ﬁnancial regulation should be imposed on the markets by governmental authorities or should be generated by market participants themselves. The debate has been fueled by scandals in the ﬁnancial markets, and by changes in the legal structures through which some self-regulatory organizations operate.70 Domestic71 and supra-national standard

69

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J.P. Burke, Commissioner of Banking, State of Connecticut, Comments to the National Conference of State Legislatures Annual Meeting, Salt Lake City, Utah, 2004, available at <www.csbs.org/Content/NavigationMenu/PublicRelations/ PresentationsSpeeches/JackBurke_NCSL_Address_072204.pdf> (“Our primary role as deﬁned by our mission statement is to protect the citizens of our state, the users of those ﬁnancial services, from unlawful and improper practices by our regulated entities. We are often the last refuge of the maligned consumer trying to cope with an industry that focuses on volume and proﬁt, while establishing call centers that put you through a ﬁve page menu before they even let you talk to a real person. If in fact, there is one at the end of the line”). On exchange transformations see e.g. C. Bradley, “Demutualization of Financial Exchanges: Business as Usual?”, Northwestern Journal of International Law and Business, Vol. 21 2001, p. 657; R.S. Karmel, “Turning Seats Into Shares: Causes and Implications of Demutualization of Stock and Futures Exchanges”, Hastings Law Journal, Vol. 53 2002, p. 367. SEC, “Concept Release Concerning Self-Regulation”, Fed. Reg. 71256, Vol. 69 2004; SEC, Fair Administration and Governance of Self-Regulatory Organizations; Disclosure and Regulatory Reporting by Self-Regulatory Organizations; Record-

Financial Trade Associations and Multilevel Regulation

setters72 have raised questions about the extent to which formal regulation should incorporate or defer to standards set by private bodies, and under what conditions. Securities exchanges are often privileged within domestic regulatory systems, and the threat of loss of some of this privilege has led exchanges to think carefully about their governance arrangements. In response to some of the focused attention of regulators, some exchanges have emphasized the involvement of non-industry members.73 In the US, exchange rule-making proposals are subject to review by the SEC and they are published in the Federal Register and on the SEC’s website.74 In the UK, the Banking Code and the Business Banking Code are developed under the auspices of the British Bankers’ Association, reviewed by an independent reviewer,75 and monitored by the Banking Code Standards Board.76 However, many other private standard-setters that develop standards, codes and contracts do not engage in consultation with non-member constituencies and operate in realms of limited transparency. The work of some of these private standard-setters may have an impact on the position of consumers. For example, credit rating agencies establish criteria for securitizations that may ultimately affect the terms on which consumers can borrow money.77

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keeping Requirements for Self-Regulatory Organizations; Ownership and Voting Limitations for Members of Self-Regulatory Organizations; Ownership Reporting Requirements for Members of Self-Regulatory Organizations; Listing and Trading of Afﬁliated Securities by a Self-Regulatory Organization, Fed. Reg. 71126, Vol. 69 2004. See also SEC, Proposed Rule Changes of Self-Regulatory Organizations, Fed. Reg. 60287, Vol. 69 2004. IOSCO Technical Committee, Consultation Report – Regulatory Issues Arising From Exchange Evolution, Madrid: IOSCO, 2006. The Nasdaq Stock Market, Inc. and The Nasdaq Stock Market LLC, Corporate Governance Guidelines for the Board of Directors, April 2007. <www.sec.gov/rules/sro.shtml>. E. Kempson, “Personal Finance Research Centre, Independent Review of the Banking Code: Report to Code Sponsors”, 2004, available at <www.bba.org.uk/ content/1/c4/47/59/Full_Kempson_review1.pdf>. <www.bankingcode.org.uk/home.htm>. On the role of credit rating agencies in structured ﬁnance see e.g. BIS, Committee on the Global Financial System, The Role of Ratings in Structured Finance: Issues and Implications, Basel: BIS, 2005, <www.bis.org/publ/cgfs23.pdf>. Note that the BIS says that credit rating agencies are not really standard setters. p. 23. 87

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The next section of the paper discusses evolving arrangements for consultation of stakeholders in multilevel ﬁnancial regulation.

3. Consultation in Multilevel Regulation The regulatory state was designed to ensure that regulations were promulgated by specialized agencies and based on expertise.78 More recently, stakeholder models of governance assume that ensuring the participation of different stakeholder groups will ensure the legitimacy of the process and, implicitly, the legitimacy of the result.79 In Jamaica, good governance now means pushing “the public service away from the tradition of top-down solutions and more toward creating a community of participation and a new culture of governance that embraces differentiated polity.”80 Codes of Consultation often mandate wide consultation and may encourage policy makers to seek out interested parties and people who may be affected by a proposed policy.81 For example, the UK’s Cabinet Ofﬁce Code of Practice on Consultation notes that: “small businesses, children, consumers and those from minority communities, may be particularly difﬁcult to reach.”82 Techniques for consulting interested parties may include focus groups, public meetings and web forums.83

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For an ideal description of the administrative state see e,g. D.C. Esty, “Good Governance at the Supranational Scale: Globalizing Administrative Law”, Yale Law Journal, Vol. 115 2006, p. 1496 (“Although administrative law cannot completely compensate for the absence of an electoral connection between the governed and their ofﬁcials, a reﬁned system of procedures can promote decisionmaking based on the rule of law, participation, rationality, clarity, stability, neutrality, fairness, efﬁcacy, deliberation, efﬁciency, and accountability. If properly developed and implemented, administrative procedures promote careful rulemaking, efﬁcient delivery of public goods, and fair treatment of both individuals and economic entities”). But see e.g. E. Rubin, The Myth of Accountability and the Anti-Administrative Impulse, Michigan Law Review, Vol. 103 2005, p. 2073 (critiquing “the current fashion for accountability” in the US). Cabinet Ofﬁce (Jamaica), Consultation Code of Practice for The Public Sector, Kingston: Cabinet Ofﬁce, 2005, p. i. Cabinet Ofﬁce (UK), Better Regulation Executive, Code of Practice on Consultation, London: Cabinet Ofﬁce, 2004, p. 6. Ibid., The following sentence reads: “It is important to engage proactively with individuals, organizations and trade associations.” Ibid.

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Supranational standard-setters are evolving their own governance principles and codes of consultation. The EU, with its complex institutional structures, has a closer resemblance to a federal government than other supranational standard-setters, and has focused greater attention on issues of governance84 and consultation.85 Consultation is a signiﬁcant element of policy-making in the EU: “Wide consultation of stakeholders and in-depth impact assessments prior to legislative proposals … help to ensure that proper account is taken of the concerns of citizens and of all interested parties. They make essential contributions to implementing the Commission’s ‘better lawmaking’ policy.”86

However, commentators have often suggested that businesses have had a greater inﬂuence than other groups on the development of policy in the EU. In 2006 the Commission began to seek views about the idea of regulating lobbying in the EU,87 and on the Commission’s consultation standards.88 Other supranational standard setters publish proposed rules and standards and also publish comments on those standards.89 IOSCO has developed a Code of Consultation,90 which resembles those published by national governmental authorities. Multilevel ﬁnancial regulation involves very high levels of participation by groups that represent the interests of ﬁnancial ﬁrms,91 but much lower levels

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EU Commission, White Paper on European Governance, COM (2001) 428 ﬁnal, 25 July 2001. EU Commission, Communication from the Commission, Towards a reinforced culture of consultation and dialogue – General principles and minimum standards for consultation of interested parties by the Commission, COM (2002) 704 ﬁnal, 11 December 2002, p. 10, available at <eur-lex.europa.eu/LexUriServ/site/en/ com/2002/com2002_0704en01.pdf>. EU Commission, Green Paper, (see supra n. 12), p. 2. Ibid., p. 3. For this purpose “lobbying” means: “all activities carried out with the objective of inﬂuencing the policy formulation and decision-making processes of the European institutions” and not just activities by people who self-identify as lobbyists. Idem, p. 5. Idem p. 4. C. Bradley (see supra n. 10), pp. 140-146. See supra n. 9. Green Paper (see supra n. 6), “according to many NGOs, there is no level playing ﬁeld in lobbying because the corporate sector is able to invest more ﬁnancial resources in lobbying”. 89

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of participation by groups that represent the interests of consumers of ﬁnancial services. FTAs co-ordinate their actions with other FTAs and develop crossborder strategic linkages. The unbalanced levels of participation of business and non-business groups in consultations about ﬁnancial standard-setting contrasts with some other policy areas where non-business stakeholder groups are very active. It is clear that FTAs dedicate signiﬁcant resources to inﬂuencing the outcomes of regulatory processes, but non-business groups can promote different agendas than those promoted by the FTAs, using the same technologies.92 For example, environmental organizations have been extremely successful in raising general awareness of environmental policy issues. The consumer equivalents of charismatic megafauna93 might be vulnerable consumers: older consumers or members of minorities.94 One solution to a perceived imbalance in the participation of different groups is to make a particular effort to encourage the participation of otherwise non-participating groups.95 Policy-makers can take extra steps to ensure that consumer groups have real opportunities to make their voices heard in the context of ﬁnancial regulation. Regulators sometimes express surprise that consumers are not more vocal.96 Governments do sometimes seek to involve voluntary groups

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J. Taylor and E. Burt, “Voluntary Organisations as E-democratic Actors: Political Identity, Legitimacy and Accountability and the Need for New Research”, Policy & Politics, Vol. 33 2005, pp. 606-611 (describing how some voluntary organizations are effectively using ICT to strengthen their voices). J. Lobel and G. Loewenstein, “Emote Control: the Substitution of Symbol for Substance in Foreign Policy and International Law”, Chicago-Kent Law Review, Vol. 80 2005, p. 1073 (“As many commentators have noted, people tend to respond powerfully to the plight of large, cute animals – ‘charismatic megafauna’ – that are easy to visualize and to anthropomorphize”). However, strategies that emphasize consumer vulnerability and may thus be potentially effective in political terms also tend to undermine arguments that regulators should listen to what those vulnerable consumers say about proposed regulations. The EU Commission established a forum to reﬂect the views of consumers and small businesses in 2004. FIN-USE Expert Forum of Financial Services, FIN-USE Annual Report 2004/5, 26 April 2005 (“FIN-USE was set-up by the European Commission in 2004 as an independent expert forum to help meet the pressing need to improve policy-making in the ﬁeld of ﬁnancial services through a more structured dialogue with consumers and small business in the European Union”). J.L. Williams, Acting Comptroller of the Currency, Remarks Before Women in Housing and Finance and The Exchequer Club, 2005, p. 7, available at <www. occ.treas.gov/ftp/release/2005-1a.pdf> (“… why aren’t consumer organizations

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more actively in developing policy, but commentators sometimes caution that voluntary groups are not likely to be neutral.97 In the domestic context, statutes may require ﬁnancial regulators to make special efforts to consult stakeholders who would not otherwise actively comment on regulatory proposals. For example, the UK’s FSA is required by statute to establish a Consumer Panel.98 Where regulators who are required to pay particular attention to consumer voices participate in supranational standard-setting, they may provide an indirect channel for those voices. Consumers individually are distracted by a range of issues that demand their attention. Similarly, the groups that represent the interest of consumers tend to have a broader and more complex remit than FTAs.99 Some groups focus on a broad range of consumer issues, including ﬁnancial services. Others represent the interests of retired persons, including their ﬁnancial interests.100 Yet other groups concentrate on informing investors rather than on advocacy and lobbying.101 Consumer groups that do focus on ﬁnancial services tend to focus on consumers’ relationships with lending institutions rather than with securities and investment

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berating us to do consumer testing to ﬁnd out what consumers really want and think is important?”). J. Taylor and E. Burt (see supra n. 92), p. 604 (“It is our contention, which we develop later in this article, that the underlying assumption of government is that VSOs, while delivering such services, can operate in politically neutral ways. However, our research shows that VSOs are developing their information and knowledge management through the adoption and use of ICTs in ways that will strengthen their political and democratic ‘voice’ within the polity … a position that secures them not as neutral political actors but as ones intent on shaping political discourse to the advantage of their cause and the interests that they represent”). FSMA (see supra n. 27), s. 10. See also the Financial Services Consumer Panel’s website at <www.fs-cp.org.uk>. D. Miliband MP, Speech at the Annual Conference of the National Council for Voluntary Organisations, 21 February 2006, available at <www.davidmiliband. info/sarchive/speech06_06.htm>, (“The whole point about voluntary organisations is that they defy neat categorisations. They cross conventional boundaries between social care, education and health; between consumer and producer; and between service delivery and citizen advocacy”). An example is the AARP. See <www.aarp.org>. An example is the American Association of Individual Investors. See <www.aaii. com/index.cfm>. 91

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ﬁrms.102 Many of these groups focus on local communities, and their advocacy activities at the national level grow out of local community work.103 The following section of the paper examines some uses by ﬁnancial trade associations of market protection and harmonization rhetoric.

4. Rhetoric and Financial Regulation in Multilevel Systems Focusing on the processes of standard setting ensures that consumer groups can have a seat at the table, or at least can enter the rooms where policy decisions are made. But even if they are present at policy discussions, consumers and their representatives may be disadvantaged by framing of the issues by other groups in advance.104 In part, this is a process issue: if consumers were consulted at a sufﬁciently early stage in the process they could participate in decisions about how issues should be framed.105 But in part this is an issue that goes deeper than 102

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Cf. FIN-USE Expert Forum of Financial Services, The Implications For Users of Solvency II, An Assessment by FIN-USE, 15 January 2007, p. 2 (“FIN-USE’s ﬁnal general observation is that it does not know of any consumer body in Europe which has followed the ongoing debate about Solvency II and contributed in a meaningful way to the debate. The whole subject of prudential supervision is, of course, highly technical and calls for resources which go far beyond those available to consumer bodies. Therefore, FIN-USE has to recognise that it is venturing into uncharted waters”). One such group is the Center for Responsible Lending which “began as a coalition of groups in North Carolina that shared a concern about the rise of predatory lending.”, M.D. Calhoun, Center for Responsible Lending, Testimony Before the U.S. House Committee on Financial Services Subcommittee on Financial Institutions and Consumer Credit, The Role of the Secondary Market in Subprime Mortgage Lending, 8 May 2007, available at <www.responsiblelending.org/pdfs/ Sec_Market_Testimy-Calhoun-FINAL-_2_.pdf>. On framing see e.g. P. Brown, “Naming and Framing: The Social Construction of Diagnosis and Illness”, Journal of Health and Social Behavior, Vol. 35 (extra issue) 1995, p. 34. For a recent discussion of the importance of framing in the context of genetic biobank research, see e.g. K. Hoeyer, “Studying Ethics as Policy: The Naming and Framing of Moral Problems in Genetic Research”, Current Anthropology, Vol. 46 2005, p. S71. Ibid., p. S80 (“The focus was on the negotiation of solutions rather than the discussion of ethical problems. It is almost as if only moral problems that already had a solution which was readily translatable into action – that is, into the language of policy work – were successfully articulated. Furthermore, the framing of problems reﬂected the institutions involved in the process”).

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process,106 implicating structural issues at the heart of legal harmonization. Legal standards that are developed at the supranational level are often drafted in very abstract, general terms. IOSCO’s general principles of securities regulation are expressed in very general language. The EU consciously decided to move towards a system combining more general, high level rules with more detailed, second level implementing rules so that ﬁnancial regulation could adapt more easily to changing circumstances.107 On the other hand, the problems consumers face are not abstract at all, but highly contextual, and likely to be affected by characteristics of the consumers and where they live.108 The FTAs use rhetoric consistent with the abstract, general focus of supranational standard setting rather than with the speciﬁc focus of most consumers. This section of the paper illustrates how far removed the FTAs’ rhetoric is from the local, contextualized environment in which consumers operate. 4.1. Market Protection Rhetoric Market protection rhetoric takes many forms. Comments by FTAs on regulatory proposals often contain statements about the FTAs and their activities which are designed to emphasize that the comments are based on knowledge

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J.R. Wedel, et al., “Toward an Anthropology of Public Policy”, Annals of The American Academy of Political and Social Science, Vol. 600 2005, p. 37 (“the ﬁeld of policy studies has often evaded serious critique because it has not adequately explored how policy narratives mobilize the language of science, reason, and ‘common sense.’ Policy can be presented as apolitical because it appeals to seemingly neutral scientiﬁc reasoning or incontestable assertions about human nature. In this way, policy makers can mute opposition not through crafty Machiavellian maneuvers but by simply casting counter-arguments as ‘irrational’ or ‘impractical.’ Thus, a key task for the anthropology of policy is to expose the political effects of allegedly neutral statements about reality”). Committee of Wise Men, Final Report on the Regulation of European Securities Markets, 2001, available at <ec.europa.eu/internal_market/securities/docs/lamfalussy/ wisemen/ﬁnal-report-wise-men_en.pdf> (Lamfalussy Report). R. Austin, “Of Predatory Lending and the Democratization of Credit: Preserving the Social Safety Net of Informality in Small-Loan Transactions”, American University Law Review, Vol. 53 2004, p. 1221 (arguing for a contextual analysis of predatory lending: “More contextual data about the sources of the borrowers’ economic vulnerability, as well as the ﬁnancial practices, preferences, and perceptions both they and the lenders bring to ﬁnancial transactions, would be very useful in formulating legal reforms or supporting alternative sources of credit that might enable borrowers to accomplish their economic goals”). 93

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and expertise.109 ISDA emphasizes that no other organization has the level of expertise it possesses in relation to derivatives thanks to its role in developing standard form documentation for derivatives transactions: “ISDA is the global trade association representing leading participants in the privately negotiated derivatives industry. ISDA was chartered in 1985, and today has more than 700 member institutions from 50 countries, including Russia. These members include most of the world’s major ﬁnancial institutions that deal in privately negotiated derivatives, as well as many corporations, governmental entities and other end-users that use over-the-counter derivatives to manage efﬁciently the ﬁnancial market risks inherent in our business activities. As you know, ISDA documentation is the standard for OTC derivatives transactions globally.”110

FTAs strengthen their credibility as advocates by developing standard form documentation and codes of conduct and by organizing conferences for their members. FTAs commonly argue that proposed rules or court decisions would undermine legal certainty, and that this would damage the ﬁnancial markets.111 These arguments have been accepted in some jurisdictions as meriting serious attention. In the UK, ﬁnancial market participants’ concerns about legal certainty

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When the FTAs ﬁle amicus briefs, the briefs also describe the FTAs’ expertise. See e.g. Amicus Brief for Securities Industry and Financial Markets Association and the Chamber of Commerce of the USA in Tellabs v. Makor, December 2006, available at <www.sifma.org/regulatory/ briefs/Tellabs_20Amicus.pdf>, pp. 1-2. ISDA, Comments on Proposed Amendment to Article 1062 of the Second Part of the Civil Code of the Russian Federation, 2006, available at <www.isda.org/ speeches/pdf/RUS-Comments-Art1062-08June06.pdf>. The language of this comment is highly deferential: “As in our previous discussions, we defer completely to national legal and regulatory policy experts in Russia as to the appropriateness of the proposed amendment and its relation to other substantive areas of Russian ﬁnancial and commodity law and regulation. We offer these comments exclusively from an international ﬁnancial market perspective as respectful suggestions for your consideration.” M. Weber, Economy and Society, G. Roth and C. Wittich, (eds), Berkeley, California: University of California Press, 1978, p. 813 (“Formal justice and the ‘freedom’ which it guarantees are indeed rejected by all groups ideologically interested in substantive justice”), R. Pound, “Liberty of Contract”, Yale Law Journal, Vol. 18 1909, p. 461 (“The absolute certainty which is one of our legal ideals, an ideal responsible for much that is irritatingly mechanical in our legal system, is demanded chieﬂy to protect property.” ).

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persuaded the Bank of England to appoint a Legal Risk Review Committee112 and subsequently a Financial Law Panel to address issues of legal risk.113 The Bank of England replaced the Financial Law Panel with a Financial Markets Law Committee in 2002.114 In Japan and New York, ﬁnancial lawyers have established groups that focus on issues of ﬁnancial law and are supported by the Bank of Japan115 and the New York Federal Reserve Bank116 respectively. Derivatives seem far removed from the lives of most consumers,117 but FTAs invoke market protection rhetoric in other areas that are clearly much closer to consumers’ interests. For example, FTAs in the US have invoked market protection rhetoric to argue that state predatory lending regulation threatens consumers’ access to credit because it risks foreclosing opportunities for securitization of loans.118 Consumer groups argue that many of the state laws that regulate predatory lending do not in fact seem to limit borrowers’ access to

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Legal Risk Review Committee, Final Report of the Legal Risk Review Committee, 1992 (copy on ﬁle with author). The Committee noted that “markets cannot function efﬁciently without a strong legal foundation. Promoting legal certainty, even though it is not the only relevant concern, is therefore of fundamental medium- to long-term importance.”, idem p. 1.2. The Financial Law Panel ceased operations in March 2002. The Bank of England decided that it could not indeﬁnitely provide open-ended support to the Panel. Bank of England, Annual Report 2002, May 2002, p. 5. The Financial Markets Law Committee’s web site is at <www.fmlc.org>. <www.ﬂb.gr.jp/epage/eabout.htm>. <www.ny.frb.org/fmlg>. The increasing use of derivatives, and the increasing complexity of derivatives transactions, do involve issues of the stability of the ﬁnancial system, and have implications for the design of insolvency law, both of which may ultimately affect consumers. Moreover, ﬁnancial ﬁrms are encouraging consumers to use derivatives. For example, in 2004 the CFTC approved the designation of HedgeStreet as a contract market. CFTC, Application of HedgeStreet Inc, for designation as a Contract Market, 2004, available at <www.cftc.gov/ﬁles/opa/press04/opahedgestreet_ designation_order.pdf>; CFTC Designation Memorandum, Application of HedgeStreet, Inc. for Designation as a Contract Market pursuant to Sections 5 and 6(a) of the Commodity Exchange Act, 2004, available at <www.cftc.gov/ﬁles/opa/press04/ opahedgestreetdesignationmemo_web.pdf>. D.J. Weiner, Assignee Liability in State Predatory Lending Laws: How Uncapped Punitive Damages Threaten the Secondary Mortgage Market, Emory Law Journal, Vol. 55 2006, p. 536. 95

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credit.119 The debates about predatory lending in the US are politically highly charged, in part because race is a factor.120 Predatory lending and its regulation involve complex issues. When ﬁnancial institutions lend money to sub-prime borrowers they charge higher interest rates than they would to borrowers with lower credit risk proﬁles. However, in some cases consumers are misled into borrowing as if they were sub-prime borrowers when they are not, and sub-prime borrowers are induced to enter into agreements with onerous terms, which are not adequately explained to them.121 The state laws that seek to address the problems vary. Some state laws have imposed liabilities on assignees of loans, and it is these laws in particular that threaten securitizations. However, FTA and ﬁnancial ﬁrms’ opposition to state predatory lending statutes does not focus only on the speciﬁc types of statutory provision that pose the greatest risks to securitizations, but rather on the idea that different states might regulate predatory lending with different rules. National banks urged the OCC to pre-empt the application and enforcement of state rules against national banks, and the OCC complied.122 The example of predatory lending in the US illustrates that ﬁnancial ﬁrms and their FTAs prefer national rather than local rules, or at least national level rather than local level enforcement. The ﬁrms and FTAs use abstract market protection rhetoric to advocate national rules and national enforcement. The rhetoric of the consumer groups that advocate on behalf of sub-prime borrowers focuses in contrast on the stories of people who lost their homes because they

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W. Li and K.S. Ernst, The Best Value in the Subprime Market: State Predatory Lending Reforms, Center for Responsible Lending, 2006, available at <www. responsiblelending.org/pdfs/rr010-State_Effects-0206.pdf>, p. 3. R. Austin (see supra n. 118); D.G. Bocian, K.S. Ernst and W. Li, Unfair Lending: The Effect of Race and Ethnicity on the Price of Subprime Mortgages, Center for Responsible Lending, 2006, available at <www.responsiblelending.org/pdfs/ rr011-Unfair_Lending-0506.pdf>. Ibid, p. 4 (“Most abusive lending takes place in the sub prime market, where unscrupulous lenders target vulnerable borrowers, including those with weak or blemished credit histories. Predatory lending can take different forms, but includes steering borrowers into a higher priced loan when they could qualify for a loan on better terms, stripping equity from a borrower by charging exorbitant fees or by levying abusive sub prime prepayment penalties, and engaging in practices that increase the risk of foreclosure, such as making a loan without regard to the borrower’s ability to repay the mortgage”). OCC, “Bank Activities and Operations; Real Estate Lending and Appraisals”, Fed. Reg. 1904, Vol. 69 2004; OCC, “Bank Activities and Operations”, Fed. Reg. 1895, Vol. 69 2004.

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fell into the grips of predatory lenders. On the national political stage these stories are powerful, and national political interest may affect the behavior of domestic regulators. The OCC emphasizes in public statements that abusive lending violates its own rules.123 However, it is doubtful whether the OCC has sufﬁcient resources to protect vulnerable consumers throughout the US.124 At the national level, politics can remedy some of the consequences of regulatory processes that emphasize abstract concepts of market protection. As supranational standard setting develops it will be important to ensure that similar possibilities are provided at the supranational level. 4.2. Harmonization Rhetoric FTAs argue that differences between rules in different jurisdictions impose costs on their members. They may argue, expressly or implicitly, that subjecting domestic ﬁrms to more stringent rules than those that apply to foreign ﬁrms will make it harder for the domestic ﬁrms to compete abroad. Harmonization rhetoric is invoked in the context of rule-making proposals of domestic origin and where domestic regulators seek to implement supranational standards within their own systems. The rhetoric has echoes of mutual recognition. For example, FTAs argue that multinational groups that are subject to effective regulation in their home jurisdictions should not be subjected to unnecessary additional requirements in other jurisdictions.125

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OCC, Consumer Protection News: Combating Abusive Lending, available at <www. occ.treas.gov/Consumer/combat.htm>. J.P. Burke (see supra n. 69). The Bond Market Association, International Swaps and Derivatives Association, Inc. & Securities Industry Association, Comments on Revised Interagency Statement on Sound Practices Concerning Elevated Risk Complex Structured Finance Activities, 2006, available at <www.isda.org/speeches/pdf/Joint-Comment-Letter-061506. pdf> (“The Associations believe, however, that the second sentence in footnote 7 of the Revised Guidance17 may be construed as obligating U.S. branches and agencies of foreign banks to establish a control infrastructure that is additional to, rather than an integral part of, the foreign bank’s global control framework. The Associations respectfully request that the Agencies clarify that the Revised Guidance is not intended to require U.S. branches and agencies of foreign banks to establish separate control infrastructures where adequate institutional controls are otherwise in place and apply to the branch or agency”). 97

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Vague, general supranational standards invite domestic regulators to exercise discretion when interpreting and applying them.126 But discrepancies between different national implementations of harmonized standards can give rise to two sets of problem: ﬁrst, from the perspective of ﬁnancial ﬁrms, much of the beneﬁt of harmonization will be lost if they have to comply with different rules in different jurisdictions. And second, ﬁrms that are subject to stricter requirements in some jurisdictions may suffer competitive disadvantages compared to ﬁrms subject to more relaxed requirements. Capital adequacy requirements are costly for ﬁnancial ﬁrms, and ﬁrms and their FTAs have been concerned for some time about revisions to the Basle standards. US banking regulators have suggested that they are conscious of the need not to impose rules on US-based banks which have a negative impact on their competitiveness with banks based in other jurisdictions.127 In the UK ﬁnancial ﬁrms have adopted the term “gold-plating” to refer to domestic rules implementing EU directives which add requirements over and above those set out in the directive. The FSA has accepted this idea and now refers in its own publications to the need not to “gold-plate” directives.128 FTAs also use harmonization rhetoric as a means to underline the importance of legal certainty in ﬁnancial markets. For example, ISDA recently commented on Russian legislative proposals intended to facilitate derivatives transactions and suggested that some of the proposed restrictions did not apply in other jurisdictions: “Many countries, when implementing legislation to exempt ﬁnancial and commodity market activity from anti-gambling rules, have not felt the need to restrict the scope of the exemption so that at least one party is a licensed or regulated institution. The key point is that the policy that underlies anti-gambling rules is not relevant to legitimate investment and risk management activities carried out in the ﬁnancial and commodity markets.”129

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ISDA, Press Release, ISDA Commends Basel Committee on New Capital Accord, 2004, available at <www.isda.org/press/press062804.html> (noting, for example that the Revised framework contains much scope for the exercise of national discretion, which could result in inconsistent approaches in different jurisdictions). OCC, Federal Reserve and FDIC, “Risk-Based Capital Guidelines; Market Risk Measure; Securities Borrowing Transactions”, Fed. Reg. 8932, Vol. 71 2006. See supra n. 13. ISDA, Comments on Proposed Amendments to Russian Civil Code, (see supra n. 110), p. 3.

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This statement suggests that ISDA’s interest is primarily in facilitating derivatives business, but ISDA would also like to level the playing ﬁeld for non-Russian ﬁrms: “Nonetheless, to the extent that you conclude that this limitation should remain, we strongly believe that it is in the interest of the future stability, efﬁciency and liquidity of the Russian ﬁnancial markets that the limitation be clariﬁed to include non-Russian ﬁnancial institutions.”130

Harmonization rhetoric, used in the context of domestic rule-making or domestic implementation of supranational standards, is likely to reinforce market protection rhetoric. Harmonization rhetoric emphasizes the abstract and the general over the localized and contextual. Thus successful harmonization rhetoric can reduce consumer protection.

5. Even Better Regulation: Ensuring Consumer Protection in Markets with Harmonized Rules Two possibilities for further study emerge from this discussion. First, if framing of the issues is signiﬁcant to the ultimate development of policy it is important to involve consumers, or people who have focused on consumer needs at the very early stages in policy development where the issues are identiﬁed. In order to decide whether it is necessary to protect a particular market activity from regulation, we should understand whether that market activity imposes externalities. And sometimes what may best serve the interests of consumers is not new regulation but new approaches to old problems.131 Second, it is possible to mitigate some of the effects of harmonization by separating responsibilities for rulemaking and enforcement. Such a separation is characteristic of the EU at present as EU rules of ﬁnancial regulation are enforced by national authorities (subject to the Commission’s power to take enforcement action against Member States that do not comply with their obligations under Community Law). However, in the US, allowing state authorities to enforce uniform standards on predatory lending would be an improvement

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Ibid. R. Austin (see supra n. 108), p. 1256 (stating that if “the democratization of credit were truly the goal, the reform agenda would extend beyond usury regulation and suitability requirements” and suggesting that ”[p]romoting savings and strengthening pro-debtor sources of credit that preserve the beneﬁts of informality” would be preferable”). 99

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over either large numbers of potentially inconsistent and/or unclear standards or one standard that is never enforced.132

6. Conclusion The increasing signiﬁcance of regulatory harmonization through supranational and transnational channels means that it is increasingly important to consider the impact of harmonization on different stakeholder interests. Financial ﬁrms and FTAs are better positioned than consumers to participate in harmonization processes at all levels because of their superior ﬁnancial and other resources. In particular, FTAs invoke abstract rhetorical strategies that are particularly well suited to the abstract nature of supranational standard-setting. And FTAs reinforce their market protection arguments by invoking harmonization rhetoric at the domestic and local levels to argue against rules that would protect local interests. Thus FTAs help to frame the issues in ways that tend to put consumers at a disadvantage. In the interest of enhancing the legitimacy of multilevel regulatory processes it is necessary to consider how to ensure that consumers are able to participate at all levels – not just to be present but also to be heard.

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J.P. Burke (see supra n. 69), (“I am personally in favor of federal preemption in regard to Fair Credit Reporting and have even proposed that state laws governing predatory lending need to be preempted but only by a strongly deﬁned federal or even legislative action tied to authority being delegated to the states for the enforcement of such a mandate”).

Multilevel Banking Regulation: An Assessment of the Role of the EC in the Light of Coherence and Democratic Legitimacy Bart De Meester

“Increasingly, standards and best practices are set and deﬁned at global level, for example on accounting, auditing and banking capital requirements. Considering the size of the EU market and Europe’s experience in pragmatically uniting the legitimate call for harmonised rules and the diverging needs of different markets/cultures/players the EU must have a leading role in standard setting at global level.”1

1. Introduction The regulation of banking services within the European Union has increasingly moved outside the realm of the Member States and is now clearly a major focus of the European Community (EC). The EC is today the source of rule-making for diverse aspects of European banking regulation (such as minimum capital requirements, prudential supervision, accounting standards, etc.). Nevertheless, the globalization of the market for banking services leads to far-reaching efforts at banking regulation within standard-setting agencies at the international level. The Basel Committee on Banking Supervision (hereafter, Basel Committee) develops standards and principles on minimum capital requirements and banking supervision. The International Accounting Standards Board (IASB) drafts international accounting standards. These international principles and standards have a signiﬁcant impact on the European regulation. Nevertheless, the EC is not a member of the Basel Committee, nor is it represented on the IASB.

1

European Commission, White Paper on Financial Services Policy 2005-2010, COM (2005) 629 ﬁnal, 5 December 2005, p. 14.

Follesdal, Wessel and Wouters (eds), Multilevel Regulation and the EU, 101–143 ©2008 Koninklijke Brill NV. ISBN 978 90 04 16438 3. Printed in the Netherlands.

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The multilevel nature of banking regulation provides a good illustration of two dynamics that play when the European and international levels interact. (1) First, incoherencies that may exist only potentially at the international level between standards that are developed in separate institutions may manifest themselves in reality once they are implemented at the European level. While the Basel Committee and the IASB are different in nature and have different mandates, the standards that they develop nevertheless have an impact on each other. This impact may be signalled and remedied at the European level, which again may inﬂuence the international level. (2) Second, while international institutions may often face the criticism that they lack democratic legitimacy, effective systems of democratic control and stakeholder consultation at lower levels, which try to reconcile efﬁciency and legitimacy, may enhance the legitimacy of the standards developed. The sophisticated European regulatory system for implementing standards developed by the Basel Committee and the IASB may be an important factor in this regard. In the discussion that follows I ﬁrst brieﬂy delineate the concepts of coherence and democratic legitimacy (section 2). Thereafter I address the two international institutions that play a central role in developing banking regulation (section 3). I discuss the development of the new Basel capital accord in the Basel Committee and the development of accounting standards in the IASB. Speciﬁc attention is paid to the potential impact of Basel II and the international accounting standards. I then go on to consider for both institutions the mechanisms through which the EC tries to inﬂuence the standard-setting at the international level (section 4). The European Commission claims that it should play a prominent role in international standard-setting, but it is not evident how the EC could legally adopt such role. Finally, I consider how the international standards are implemented in the EC (section 5). A complex system of adopting banking regulation has been in place since 2005. Basel II and international accounting standards need to be channelled through this system when they are implemented in the EC.

2. Coherence and Democratic Legitimacy Since the role of the EC in multilevel banking regulation is here considered in the light of coherence and democratic legitimacy, it is necessary to explain brieﬂy how I understand these concepts. This is not the place for an extensive analysis of the meaning and use of coherence and democratic legitimacy: I only provide working deﬁnitions for the purpose of the analysis.

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2.1 Coherence I ﬁrst of all approach the multilevel character of banking regulation from the perspective of “coherence”, which is considered to be a key value in current national legal systems. Dworkin speaks in this respect of “integrity” and states that “government [needs to] speak with one voice, to act in a principled and coherent manner toward all its citizens, to extend to everyone the substantive standards of justice or fairness it uses for some.”2 It also seems to be a recurring element in the European legal order, even if it is less obvious in this context.3 Indeed, the EC promotes “unity in diversity” and thus is a system in which different sovereign powers co-exist and interact. It is thus not the case that for the EC, one single view of what is just would always need to be applicable. Individual European Member States may, subject to some limits set by EC law,4 have disagreements and different approaches to what is just. However, a much more limited concept of coherence is also applicable within the European legal order. For the purposes of the following discussion, I deﬁne coherence as the absence of conﬂicts between rules that apply to the same situation. In turn, conﬂicts are deﬁned broadly, as done by Vranes: “There is a conﬂict between two norms, one of which may be permissive, if in obeying or applying one

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R. Dworkin, Law’s Empire, Oxford: Hart Publishing, 1998, p. 165, see also further pp. 166-167 and pp. 176-224. See also J. Raz, The Concept of a Legal System, Oxford: Claredon, 1980, p. 245. S. Bertea, “Looking for Coherence within the European Community”, European Law Journal, 2005, pp. 154-172, at p. 155 and S. Besson, “From European Integration to European Integrity: Should European Law Speak with Just One Voice?”, European Law Journal, 2004, pp. 257-281. A clear example may be the principle of non-absolute mutual recognition, as set out by the European Court of Justice in its famous Cassis de Dijon decision. In principle, products that are lawfully produced in one Member State should also be allowed to be introduced into another Member State. Nevertheless, a Member State is allowed to apply its own national laws to these products (thus creating obstacles to trade) if no common European rules have been adopted and as far as these provisions may be recognised as being necessary in order to satisfy mandatory requirements in the public interest. See ECJ, Case 120/78, Rewe-Zentral AG v. Bundesmonopolverwaltung für Branntwein, [1979] ECR 649. See for instance, Chalmers, who argues for a regulatory balance between local and European values. D. Chalmers, “Food for Thought: Reconciling European Risks and Traditional Ways of Life”, The Modern Law Review, 2003, pp. 532-562. 103

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norm, another norm is necessarily or potentially violated” [italics in original].5 The European Court of Justice has indeed developed the doctrine of supremacy of EC law. In case of conﬂict between a national norm of a Member State and a European norm, the European norm will prevail.6 Another example of the importance of coherence in the European legal order is the fact that an opinion can be asked of the European Court of Justice on the compatibility of an international agreement that the EC is about to conclude and the Treaty establishing the European Community (TEC).7 Conﬂicts would thus be resolved by applying a “super-rule” that clariﬁes which rule prevails over the other in case of conﬂict.8 The lack of such a “superrule” in the international legal order (which is decentralised and horizontal)9 makes it less evident that here, too, coherence would be an essential value. What is more, in the ﬁeld under discussion, the international standards that are developed are non-binding, so no direct norm-conﬂict would seem to occur. Nevertheless, the calls for endeavours to achieve greater coherence in global

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E. Vranes, “The Deﬁnition of ‘Norm Conﬂict’ in International Law and Legal Theory”, The European Journal of International Law, 2006, pp. 395-418 at p. 415. Recently, a Study Group of the International Law Commission concluded that there is a conﬂict “where two norms that are both valid and applicable point to incompatible decisions so that a choice must be made between them.” See Fragmentation of International Law: Difﬁculties arising from the Diversiﬁcation and Expansion of International Law. Conclusions of the Work of the Study Group of the International Law Commission, A/CN.4/L.702, 18 July 2006, p. 8. It should be noted that these are statements of the Study Group and not of the International Law Commission itself. ECJ, Case 26/62, N.V. Algemene Transporten Expeditie Onderneming van Gend en Loos v. Nederlandse Administratie der Belastingen, [1963] ECR 1, p. 12. See Art. 300.6 of the Consolidated Version of the Treaty Establishing the European Community, OJ 2002 C 325/33, (hereafter, TEC). T. Hartley, “International Law and the Law of the European Union – A Reassessment”, British Yearbook of International Law, 2001, pp. 1-35 at p. 2. To be sure, there are the “maxims of interpretation” to address incoherencies: lex specialis derogate legi generali and lex posterior derogat legi priori. While these principles are relevant for the resolution of conﬂicts between norms, they provide only a limited response. See Fragmentation of International Law: Difﬁculties arising from the Diversiﬁcation and Expansion of International Law. Report of the Work of the Study Group of the International Law Commission, Finalized by Martti Koskenniemi, A/CN.4/L.682, 18 July 2006, para. 488.

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economic-policy making10 show that coherence within the international legal order is at least an aspiration. Moreover, even if there is no ﬁrm requirement of coherence at the international level, frictions between the rules and principles that exist only potentially at that level can create practical incoherencies at the lower levels, where the international norms are implemented. 2.2. Democratic Legitimacy Secondly, the role of the EC in multilevel banking regulation will be approached from the perspective of democratic legitimacy. It is becoming increasingly clear that international interdependence is shifting policy-making to the international level.11 Nevertheless, it is a recurring criticism that international and supranational policy-making lacks legitimacy: the distance between the government ofﬁcials that are active on the international level and the parliamentary assembly that is supposed to control them leads to inadequate control of international policy-making.12 Furthermore, remote policy-making at the international level may be prone to capture by special interests.13 While different categorisations of legitimacy may be made,14 I apply a narrow concept of legitimacy, focusing only on democratic legitimacy. I consider the

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See e.g. the call for coherence in global economic policy-making in Art. III.5 of the Agreement Establishing the World Trade Organization, done in Marrakesh on 15 April 1994, UNTS No. 31874. The diversity of initiatives and the large number of different bodies at the international level that got involved in regulating and supervising ﬁnancial markets, lead to the call for a new international ﬁnancial architecture. See M. Giovanoli, “Architecture for the Global Financial Market: Legal Aspects of International Standard Setting”, in M. Giovanoli (ed.), International Monetary Law. Issues for the New Millennium, Oxford: Oxford University Press, 2000, pp. 3-59 at p. 6. J. A. Scholte, Globalization. A Critical Introduction, Houndmills: Palgrave, 2000, pp. 16-15. J. Wouters, B. De Meester and C. Ryngaert, “Democracy and International Law”, Netherlands Yearbook of International Law, 2003, pp. 137-198 at p. 179. H. Morais, “The Quest for International Standards: Global Governance vs. Sovereignty”, University of Kansas Law Review, 2002, pp. 779-821 at p. 782. A traditional distinction made within legitimacy is the distinction between input and output legitimacy. Input legitimacy means that all stakeholders have the chance to get involved in the policy-making process. This implies parliamentary involvement, but also consultations with stakeholders beyond the parliament. Output legitimacy means that the policy-making process is able to produce in an efﬁcient manner high quality rules. See F. Scharpf, Governing Europe: Effective and Democratic?, 105

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extent to which the democratically elected parliamentary delegates (especially the European Parliament) are able to participate in standard-setting for banking services. Involvement of stakeholders beyond the Parliament – another aspect of legitimacy of policy-making – is discussed elsewhere in this book.15 After having set out the working deﬁnitions of coherence and democratic legitimacy for the purpose of our discussion, we can now turn to the institutions that are engaged in multilevel banking regulation.

3. The Basel Committee, the IASB and their Mutual Inﬂuence 3.1. Basel Committee on Banking Supervision and Basel II The Basel Committee on Banking Supervision seeks to “enhance understanding of key supervisory issues and improve the quality of banking supervision worldwide.”16 It is arguably the single most important international body for developing international standards on the regulation and supervision of banking services. It is composed of senior ofﬁcials responsible for banking supervision or ﬁnancial stability issues in central banks and banking supervisory authorities (if the banking supervision is not performed by the central bank) of Belgium, Canada, France, Germany, Italy, Japan, Luxembourg, the Netherlands, Spain, Sweden, Switzerland, the United Kingdom and the United States. In fact, the Basel Committee has no formal founding document. This founding mandate can be found only in a press communiqué from the central bank governors of the Group of 10, issued in the context of the Bank for International Settlements

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Oxford: Oxford University Press, 1999, pp. 6-23. On the other hand, Esty discerns six types of legitimacy that interrelate: (a) democratic legitimacy means that the right to exercise power is connected to the expression of majority will; (b) resultsbased legitimacy means that the policy-making institution is able to generate social welfare gains; (c) order-based legitimacy means that policy-making processes must be public, understandable, stable and predictable; (d) systemic legitimacy means that the policy-making responsibilities are spread over several institutions, thus creating a system of checks and balances; (e) deliberative legitimacy means that political dialogue that accompanies policy-making creates a sense of ownership; and (f) procedural legitimacy means that the policy-makers follow the right processes. See D. Esty, “Good Governance at the Supranational Scale: Globalizing Administrative law”, Yale Law Journal, 2006, pp. 1490-1562 at pp. 1515-1523. See the contribution by Bradley in this volume. Basel Committee on Banking Supervision, “About the Basel Committee”, available at <www.bis.org/bcbs/index.htm>.

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on 12 February 1975.17 This makes its status under international law unsure. It is not a public international organisation with international legal personality, but rather an informally constituted group, whose members are not States, but representatives of their central banks or supervisory authorities. Its Secretariat is located in the Bank of International Settlements.18 Decision-making in the Basel Committee is informal and consensus-based. The standards that are developed are not binding, but mere recommendations. The most recent achievement of the Basel Committee is the revised capital framework for banks (hereafter, Basel II).19 The ﬁrst capital framework was adopted in 1988. It called for a minimum capital requirement of 8 percent of the “risk-weighted assets”20 of a bank. Yet this capital framework was gradually showing major problems. The main criticism of the framework was that it applied a “one size ﬁts all” approach.21 The capital requirement was said to take insufﬁcient account of the very diverse risk proﬁles of banks.22 Basel II sets out a number of more sophisticated principles to ensure that banks maintain an adequate amount of capital. This would in turn improve bank soundness and stability of the global ﬁnancial system.23 The new capital framework consists

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D. Zaring, “International Law by other Means: The Twilight Existence of International Financial Regulatory Organizations”, Texas International Law Journal, 1998, pp. 281-329 at p. 287. S. Ghosh, “Evolving International Supervisory Architecture: Design, Rationale and Policy Reform”, Journal of Banking Regulation, 2005, pp. 246-260 at pp. 248-249. Basel Committee on Banking Supervision, “International Convergence of Capital Measurement and Capital Standards. A Revised Framework”, June 2004, Basel, Bank for International Settlements, 2004, p. 239, available at <www.bis.org/publ/ bcbs128.pdf>. The “risk-weighted assets” of a bank are calculated by multiplying the outstanding credits by certain risk weights. These weights ranged from 0 to 100 percent. E. Wu, “Basel II: A Revised Framework”, Annual Review of Banking and Financial Law, 2005, pp. 150-160 at p. 151. European Central Bank, “The New Basel Capital Framework and Its Implementation in the European Union”, ECB Occasional Paper Series No. 42, 2005, p. 8. D. Heremans, “Financial Regulation and Supervision of Banks. The Basel II Capital Framework”, in D. Heremans, et al., (eds), Current Developments in European Integration: Financial Services, Transport Policy: Legal and Economic Contributions to the Fortis Bank Chair 2001-2003, Leuven: Universitaire Pers Leuven, 2004, pp. 115-133 at p. 115. See also M. Malloy, “Emerging International Regime of Financial Services Regulation”, Transnational Lawyer, 2005, pp. 329-349. 107

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of three aspects (“Pillars”). The ﬁrst Pillar of Basel II concerns the minimum capital requirements themselves. Improved techniques for risk measurement have now been elaborated.24 The second Pillar concerns the supervisory review process. National supervisors are expected to review how well banks are assessing their capital needs. In order to create a level playing ﬁeld among States, it was necessary to pursue convergence in these national supervisory practices. Finally, the third Pillar deals with market discipline. In order to allow market forces to play and to reward banks that adopt a prudent risk proﬁle, it is necessary to ensure sufﬁcient disclosure of a bank’s business proﬁle, risk exposure and risk management. Disclosure would enable market participants to compare banks. While the informal decision-making in the Basel Committee has undoubtedly contributed to its effectiveness, many criticisms were raised about the lack of legitimacy and accountability of this “Central Bankers’ Club”. The fact that a Committee, on which only ofﬁcials from the 13 richest economies are represented, is issuing standards that are intended to be adopted worldwide has given rise to serious concerns.25 Moreover, the opaque process within the Basel Committee could increase the chance of capture by special interests.26 Nonetheless, recent developments may require an adjustment of this image. The Basel Committee has set up an International Liaison Group, which allows consultations with ofﬁcials from States beyond the members of the Committee.27 Furthermore,

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Banks can choose between a standardised approach, which is set out in Basel II, or an internal ratings-based approach. The latter approach allows banks themselves to determine a number of key elements of the calculation of the capital requirements. For instance, it is argued that these standards, even though they are not binding, are effectively imposed on developing countries as a condition for ﬁnancial and technical assistance. In contrast, the States that are represented in the Basel Committee are able to disregard these standards whenever they think this is desirable. See K. Alexander, R. Dhumale and J. Eatwell, Global Governance of Financial Systems. The International Regulation of Systemic Risk, Oxford: Oxford University Press, 2006, pp. 44-46. G. Underhill and X. Zhang, “Norms, Legitimacy, and Global Financial Governance”, World Economy & Finance Working Paper, Vol. 13 2006, p. 26. Besides eight members of the Basel Committee (France, Germany, Italy, Japan, the Netherlands, Spain, the United Kingdom and the United States), 16 supervisory authorities from States that are not Members of the Committee are also included in the International Liaison Group (Argentina, Australia, Brazil, Chile, China, the Czech Republic, Hong Kong, India, Korea, Mexico, Poland, Russia, Saudi Arabia, Singapore, South Africa, and the West African Monetary Union).

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the European Commission, the International Monetary Fund, the World Bank and the Financial Stability Institute are also involved in this Group. The Basel Committee has also opened up its work, by issuing consultative papers during the preparation process leading to Basel II. Governments, academics, international organisations, community banks and credit unions thus had the opportunity to provide comments on the work that was being effectuated.28 What is more, the fact that the standards are not binding and thus need to be transformed by States into national legislation allowed further adjustment of the standard according to national preferences. In addition, this implementation process could further allow for democratic participation and stakeholder consultation, which would contribute to the legitimacy of the Basel process.29 3.2. International Accounting Standards Board and IFRS The International Accounting Standards Board is the board of the International Accounting Standards Committee Foundation, a not-for-proﬁt corporation incorporated in the United States, in the State of Delaware. The IASB, established on 1 April 2001, is based in London. The IASB is thus not an intergovernmental organisation.30 On the contrary, it is a privately funded standard-setter, composed of professionals with a variety of backgrounds (academic, business, national regulatory authorities, etc.). Nevertheless, they do not represent their ex-employers or governments, but are private members of the board. The trustees of the International Accounting Standards Committee Foundation appoint the 14 members of the IASB. The IASB develops International Financial Reporting Standards (IFRS). The predecessor of the IASB, the International Accounting Standards Committee, developed International Accounting Standards (IAS), which still apply.31 These standards involve a number of agreements on how the annual

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M. Barr and G. Miller, “Global Administrative Law: The View from Basel”, European Journal of International Law, 2006, pp. 15-46 at p. 25. M. Barr and G. Miller, “Global Administrative Law: The View from Basel”, European Journal of International Law, 2006, pp. 15-46 at p. 28. See on the European implementation process, infra. Section 5.1. Most studies consider that International Organisations “are limited to public international organizations, and exclude non-governmental organizations”. H. Schermers and N. Blokker, International Institutional Law. Unity within Diversity, The Hague: Martinus Nijhoff Publishers, 1995, Part 1, para. 32. The IASB is in fact the successor of the International Accounting Standards Committee, which was established in London in June 1973, the result of an agreement between accounting bodies from 10 countries. The standards developed by the International Accounting Standards Committee are called International Accounting 109

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ﬁnancial statements of a corporation should be drafted. These standards are not binding, though. States are free to implement them in national legislation. The EC has indeed decided to do so and has adopted a Regulation that sets out a procedure and conditions for Commission regulations that would adopt international accounting standards.32 The Commission has indeed adopted Regulations that endorse a large number of these standards.33 The IASB has also been facing criticism with regard to the legitimacy and accountability of the process by which it develops accounting standards. The fact that a private standard-setter is developing standards with such an important impact imposes a signiﬁcant responsibility on the IASB. It needs to strike the right balance between understanding and accommodating the interests of its stakeholders and guaranteeing an efﬁcient, independent standard-setting process.34 On 4 November 2003, the trustees of the International Accounting Standards Committee Foundation announced a review of their Constitution. They issued an invitation to comment35 and, about a year later, a Consultation Document was issued on the revision of the Constitution, The revised Constitution was approved by the trustees on 21 June 2005.36 The Constitution sets out a number of “due process” steps to improve transparency in decision-making. Documents for discussion need to be published, the basis for conclusions

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Standards (hereafter, IAS). The standards the IASB issues since 2001 are called International Financial Reporting Standards (hereafter, IFRS). Regulation (EC) No. 1606/2002 of the European Parliament and of the Council of 19 July 2002 on the application of international accounting standards, OJ 2002 L 243/1. For instance, on 4 February 2005 the Commission adopted a Regulation to approve a number of standards that are of particular relevance to ﬁnancial reporting by credit institutions. See Commission Regulation (EC) No. 211/2005 of 4 February 2005, amending Regulation (EC) No. 1725/2003 adopting certain international accounting standards in accordance with Regulation (EC) No. 1606/2002 of the European Parliament and of the Council as regards International Financial Reporting Standards (IFRS) 1 and 2 and International Accounting Standards (IASs) No. 12, 16, 19, 32, 33, 38 and 39, OJ 2005 L 41/1. N. Véron, “The Global Accounting Experiment”, Brueghel Blueprint Series, Vol. 2 2007, pp. 35-40. International Accounting Standards Committee Foundation, “Identifying Issues for the IASC Foundation Constitution Review. An invitation to comment”, 2003, available at <www.iasplus.com/restruct/0311constrevitc.pdf>. Revised Constitution of the International Accounting Standards Committee Foundation, 21 July 2005, available at <www.iasplus.com/resource/2005july1revised constitution.pdf>.

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needs to be published, and public hearings must be held.37 This lead in March 2006 to a “due process handbook” for the IASB.38 An important aspect of this handbook is the establishment of liaison activities between the IASB and parties interested in standard-setting (such as formal national standard-setters).39 The European Financial Reporting Advisory Group (EFRAG), which is composed of European ﬁnancial reporting interest groups, has such a liaison status in the IASB. EFRAG also has an important role in the process by which international accounting standards are endorsed in the EC and thus forms an important link between the EC and the IASB.40 Since no government ofﬁcials are represented on the IASB, democratic accountability of the decision-making process cannot be ensured through parliamentary control on the decision-makers. Parliaments may only become involved when the international accounting standard is implemented into the national legal order. As with the Basel Committee, legitimacy thus once again has to be further ensured “from the bottom up”. It should be noted that parliaments may also try to become informed on the activities of the IASB by inviting Board members to present explanations. 3.3. Mutual Inﬂuence of Basel II and IAS/IFRS Despite the heterogeneous nature and speciﬁc focus of the Basel Committee and the IASB, the principles and standards developed in these forums may potentially impact each other. Accounting standards are ﬁrst of all relevant for the deﬁnition of capital, required for the ﬁrst Pillar of Basel II.41 When banks are preparing their ﬁnancial statements according to the IAS/IFRS, they may want to rely on these ﬁgures to calculate their minimum capital requirements. Furthermore, accounting standards are essential for providing information to economic agents on the ﬁnancial situation of the company. In this sense, they are closely related to the third Pillar of Basel II. Market discipline can indeed only work if the ﬁnancial information in the bank’s reports is correct.

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Ibid. para. 15 (h). International Accounting Standards Committee Foundation, Due Process Handbook for the IASB, approved by the Trustees in March 2006, available at <www.iasplus. com/resource/0604dueprocess.pdf>. Ibid. paras 82-85. See infra Section 5.1. European Central Bank, “The New Basel Capital Framework and Its Implementation in the European Union”, ECB Occasional Paper Series, Vol. 42 2005, p. 44. 111

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Nevertheless, the objectives of IAS/IFRS and Basel II are different. While the IAS/IFRS have as their objective the clear presentation, on each reporting date, of the losses suffered by the company, Basel II rather focuses on ensuring that a bank has sufﬁcient capital to offset possible losses in the future.42 Banking supervisors are therefore said to take a more prudent approach towards the measurement of capital. If such different goals are pursued by these two standard-setters, this will be reﬂected in the content of the rules. Since the IAS/ IFRS want to ensure that a company’s ﬁnancial reports give a representation of the instantaneous value of the company, measurement will be done according to market prices and estimates, which implies that values will be adjusted in some cases, even though the gains will not yet be effectively realised. For instance, an asset will be revalued, even though it may not yet have been sold. This is contrary to the principle of prudence, which does not recognise unrealised gains. Moreover, the estimates used to calculate the unrealised gain may be based on assumptions that are difﬁcult to check.43 Measurement according to IAS/IFRS is also said to be leading to more volatile reporting.44 This would mean that the capital, calculated on the basis of these ﬁgures, would not comply with the characteristics attached to capital for prudential reasons: (a) capital should be permanent; (b) capital should be readily available to absorb losses; and (c) capital should be reliable and indisputable as to the amounts.45

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C. Borio and K. Tsatsaronis, “Accounting, prudential regulation and ﬁnancial stability: elements of a synthesis”, BIS Working Papers Vol. 180 2005, p. 2 and pp. 12-15, available at <www.bis.org/publ/work180.pdf> and Price Waterhouse Coopers, IFRS and Basel II – Similarities and Differences, PriceWaterhouseCoopers 2005, p. 9, available at <www.pwc.com/pl/eng/ins-sol/publ/2005/fs_ifrs_basel2.pdf>. P. Amis and E. Rospars, “Prudential supervision and the evolution of accounting standards: the stakes for ﬁnancial stability”, Banque de France Financial Stability Review, Vol. 7 2005, pp. 47-58 at pp. 49-53, also available at <www.banque-france. fr/gb/publications/telechar/rsf/2005/etud1_1105.pdf>. See also European Central Bank, “The impact of fair value accounting on the European Banking Sector – A Financial Stability Perspective”, ECB Monthly Bulletin, Febuary 2004, pp. 69-81 at pp. 70-71. J. Day, P. Ormrod and P. Taylor, “The adoption of International Financial Reporting Standards: Implications for volatility and uncertainty in relation to accounting earnings and valuation”, Journal of International Banking Law and Regulation, 2005, pp. 120-128. Committee of European Banking Supervisors, The impact of IAS/IFRS on bank’s regulatory capital and main balance sheet items, 14 February 2006, available at <www.iasplus.com/europe/0602cebs.pdf>.

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This therefore leads to a problem of coherence, in the sense deﬁned above. Without any technical adjustments, it seems difﬁcult for a bank to represent its ﬁnancial statement according to IAS/IFRS while at the same time using this representation to calculate minimum capital requirements under the ﬁrst Pillar of Basel II or to comply with the transparency requirements under the second Pillar of Basel II. The two different objectives and philosophies underlying the standards seem to cause frictions. When developing minimum capital requirements, the Basel Committee was aware of these interactions, which might be caused by the parallel development of IAS/IFRS within the IASB. As early as April 2000, the Basel Committee issued a report on the importance of international accounting standards for banking supervisors.46 In the preparation process leading to Basel II, the Committee stated that “the interactions between regulatory and accounting approaches at both the national and international level can have signiﬁcant consequences for the comparability of the resulting measures of capital adequacy and for the costs associated with the implementation of these approaches”.47 The Basel Committee also announced that it would play a pro-active role in the dialogue with accounting authorities to remove possible incoherencies.48 To this end, it has set up an Accounting Task Force. But it seems that this dialogue did not provide for sufﬁcient adjustments within the IASB. Indeed, it was the Basel Committee that recommended using prudential ﬁlters to adjust the ﬁgures provided by the use of IAS/IFRS.49 In June 2006 it issued Supervisory Guidance on the use of the fair value option for ﬁnancial instruments by banks.50

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Basel Committee on Banking Supervision, Report to the G7 Finance Ministers and Central Bank Governors on International Accounting Standards, Basel, Bank for International Settlements, April 2000, available at <www.bis.org/publ/bcbs70. pdf>. Basel Committee on Banking Supervision, Basel II: International Convergence of Capital Measurement and Capital Standards: a Revised Framework, Basel, Bank for International Settlements, June 2004, available at <www.bis.org/publ/bcbs107. htm>. See for instance: Basel Committee on Banking Supervision, Comments on the IAS 39 fair value option proposal, 30 July 2004, available at <www.bis.org/bcbs/ commentletters/iasb14.pdf>. These prudential ﬁlters are incorporated in the Basel II capital framework. Basel Committee on Banking Supervision, Supervisory Guidance on the use of the fair value option for ﬁnancial instruments by banks, Basel, Bank for International Settlements, June 2006, available at <www.bis.org/publ/bcbs127.pdf>. 113

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This would ensure that the ﬁgures would also meet the speciﬁc objectives of prudential regulations.

4. Inﬂuence of the EC in International Standard-setting for Banks 4.1. Inﬂuence of the EC in the Basel Committee a. European Commission and the ECB as Observers Efforts to draft a new capital accord started in 1999 and the ﬁnal version of Basel II was issued on 26 June 2004. From the beginning, the European Commission took an interest in the matter.51 It had been engaged in consultation with interested parties on a review of its Directives on minimum capital requirements for credit institutions (hereafter, Capital Requirements Directives)52 since November 1999, in parallel with the work that took place in the Basel Committee.53 Nevertheless, the European Commission could not directly inﬂuence the decisions in the Basel Committee. Neither the European Commission nor the European Central Bank (ECB) is a member of the Basel Committee. Both, however, are observers on the Committee and under this status they participate in the task forces and working groups working on capital review. Since direct involvement of the Commission and the ECB was not possible, inﬂuence thus had to be exercised through the provision of expertise input and collecting and presenting European views on the proposed framework. The main contribution

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In fact, even before the beginning of the review process of the Basel Capital Accord in the Basel Committee, the European Commission had started to discuss a revision of the European Directives that were at that time applicable with regard to capital requirements for banks. Indeed, in the Spring of 1998, the Directive on Solvency Ratio (Dir 89/647/EEC) and on Own Funds (Dir 89/299/EEC) had come under revision. The new Directives are: Directive 2006/48/EC of the European Parliament and of the Council of 14 June 2006 relating to the taking up and pursuit of the business of credit institutions (recast), OJ 2006 L 177/1 and Directive 2006/49/EC of the European Parliament and of the Council of 14 June 2006 relating to the capital adequacy of investment ﬁrms and credit institutions (recast), OJ 2006 L 177/201. European Commission, Proposal for Directives of the European Parliament and of the Council Recasting Directive 2000/12/EC of 20 March 2000 relating to the taking up and pursuit of the business of credit institutions and Council Directive 93/6/EEC of 15 March 1993 on the capital adequacy of investment ﬁrms and credit institutions, COM(2004) 486 ﬁnal, Volume I, p. 3.

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of the ECB to the process leading to Basel II was to provide comments on the consultative papers issued by the Basel Committee.54 The Commission was engaged in a consultation process in parallel with the Basel Committee and issued three consultative papers.55 The Commission believed that this would allow “the EC to beneﬁt from the discussions in Basel without the need to replicate an important amount of technical work in order to ensure that the EU ﬁnancial institutions are subject to a state-of-the-art prudential framework” and that it allowed “the EU to inﬂuence the Basel process.” Moreover, the EC would be able to deviate from the Basel solutions where it found that there were strong reasons to do so.56 b. Regulatory Dialogue The Commission may also try to inﬂuence the consequences of the Basel process through its regulatory dialogue with the United States: since 2002, the European Community and the United States have been consulting informally to work towards a more efﬁcient transnational ﬁnancial market and foster further integration of global ﬁnancial markets.57 These high-level discussions take place

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European Central Bank, The New Basel Capital Accord. Comments of the European Central Bank on the Second Consultative Paper, 31 May 2001 and European Central Bank, The New Basel Capital Accord, Reply of the European Central Bank to the Third Consultative Proposals, 19 September 2003. See also European Central Bank, “The ECB’s Relations with International Organizations and Fora”, ECB Monthly Bulletin, January 2001, pp. 57-76 at p. 66. European Commission, A Review of the Regulatory Capital Requirements for EU Credit Institutions and Investment Firms. Consultation Document, MARKT/1123/99EN, 22 November 1999, available at <ec.europa.eu/internal_market/bank/docs/ regcapital/1999-consult/1999-consult_en.pdf>; European Commission, Commission Services’ Second Consultative Document on Review of Regulatory Capital for Credit Institutions and Investment Firms, MARKT/1000/01-EN, 5 February 2001, available at <ec.europa.eu/internal_market/bank/docs/regcapital/capitaladequacy/2001consultation_en.pdf> and European Commission, Commission Services Third Consultation Paper on Review of Capital Requirements for Banks and Investment Firms, 1 July 2003, available at <ec.europa.eu/internal_market/bank/docs/regcapital/ cp3/200307-workingdoc/explanatory-doc_en.pdf>. Commission staff working paper – Proposal for a Directive of the European Parliament and of the Council on the capital adequacy of investment ﬁrms and credit institutions (recast) – Extended Impact Assessment, COM (2004) 486 ﬁnal, 14 July 2004. EU and US Agree Priorities for Future Cooperation on Financial Markets Regulation, UK Treasury Press Release 105/05, 2 December 2005, available at <www.iasplus. 115

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several times per year between the European Commission, the US Treasury, the US Securities and Exchange Commission (SEC) and the US Federal Reserve Board. They are complemented by further policy and technical dialogue between the Committee of European Securities Regulators (CESR)58 and the SEC as well as the US Commodities Futures Trading Commission. With regard to Basel II, the dialogue currently focuses on the consistent implementation of Basel II in the European Community and the United States.59 The European Community also conducts dialogues with Japan, another Member of the Basel Committee. Nevertheless, this dialogue is less developed than that with the United States.60 c. Aspirations for a More Important Role of the EC The European Commission aspires to a more important role for the EC in the Basel Committee, or at least an enhanced coordination of the actions of the nine European Member States that are represented on it.61 In the Commission’s White Paper on Financial Services Policy 2005-2010, it was clearly stated that the EU “must have a leading role in standard-setting at the global level” and that “European coordination in international fora such as the Basel Committee, IAIS, IOSCO, UNIDROIT needs to be stepped up prior to meetings in order to

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com/europe/0512useudialogue.pdf>, p. 3. The CESR is one of the Lamfalussy “level 3” committees supporting the policymaking of the European Commission in the ﬁeld of banking regulation, see infra Section 5.1 (a). See C. McCreevy, European Commissioner for Internal Market and Services, Shifting Up a Gear – Transatlantic cooperation on ﬁnancial services, Speech before the US Chamber of Commerce on 6 March 2007, Speech 07/125, available at <europa.eu/ rapid/pressReleasesAction.do?reference=SPEECH/07/125&format=HTML&age d=0&language=EN&guiLanguage=en>. The EC and Japan have stated their wish to deepen this cooperation. See 14th EUJapan Summit, Luxemburg, 2 May 2005, Joint Press Statement, Annex, Objective 1, Second Bullet, available at <www.deljpn.ec.europa.eu/home/news_en_newsobj1121>. php. The main focus of this dialogue is the convergence of accounting standards. See EU-Japan High Level Meeting on Financial Issues, Brussels, 18 January 2006, Press Release, available at <www.mof.go.jp/english/if/060118EU-Japan. high_level_meeting.htm>. These are Belgium, France, Germany, Italy, Luxemburg, the Netherlands, Spain, Sweden and the United Kingdom.

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deﬁne precise European negotiation positions.”62 Nevertheless, such a “leading role” is not self-evident. Besides political issues concerning whether European Member States that are Members of the Basel Committee would consider that the beneﬁts of such a European role would outweigh the costs of losing their autonomy,63 there are also legal questions about the capacity of the European Community to act in the Basel Committee. Indeed, from the international point of view, the EC must be allowed by the Basel Committee to participate. Second, from the European point of view, there needs to be a competence for the EC to participate in the Basel Committee. In general, there seems to be no possibility for the EC to become a real Member of the Basel Committee and, arguably, the EC also has no desire for such full membership. Nevertheless, when considering the inﬂuence of the EC and possible democratic control, it is necessary to focus on the legal basis for such an external role. With regard to the question of whether the EC is allowed to participate in the Basel Committee, it should be noted that the absence of a founding statute of the Basel Committee and the informality of its functioning may imply that there are in fact no formal-legal objections to the accession of representatives of a regional organisation. In this sense, the participation of the EC in the Basel Committee would thus mainly be a political question: whether the present Members would allow its participation. On the other hand, though, it is clear that only authorities that are responsible for the supervision of banking institutions are meant to be represented on the Committee.64 As long as the EC has no legal competence for banking supervision, there would be no place for the ECB or the European Commission as a full Member of the Basel Committee.65 Hence, in

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European Commission, White Paper on Financial Services Policy 2005-2010 (see supra n. 1), p. 14. IAIS stands for the International Association of Insurance Supervisors, IOSCO for the International Organisation of Securities Commissions and UNIDROIT for the International Institute for the Uniﬁcation of Private Law. J. Frieden, “One Europe, One Vote? The Political Economy of European Union Representation in International Organizations”, European Union Politics, 2004, pp. 261-276. See supra Section 3.1. Yet, as we will explain, Art. 105.6 TEC provides for a simpliﬁed procedure that makes it possible, without amending the Treaty, to entrust speciﬁc supervisory tasks to the ECB. The ECB may only provide advice to and be consulted by the Council, the Commission and the competent authorities of the Member States on the scope and implementation of the Community legislation relating to the prudential supervision of credit institutions and the stability of the ﬁnancial system. See Art. 25.1 Protocol on the Statute of the European System of Central Banks and of the 117

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order to deﬁne the possibility of external representation of the EC on the Basel Committee, one also has to consider the internal European legal provisions on the competences of the European Commission and the ECB. This brings us to the question of whether the EC has a legal competence to act within the Basel Committee. It is well known that the EC has no other competences than those that have been granted to it in the Treaty establishing the European Community.66 There is no explicit external competence of the EC to become involved in international negotiations to develop capital standards. Art. 133 TEC, which provides an explicit external competence in the ﬁeld of the common commercial policy of the EC, will most likely provide insufﬁcient legal basis for involvement by the EC. Indeed, the European Court of Justice has stated that this provision can be a legal basis for the involvement of the EC in the negotiation and adoption of international measures concerning trade in services, only as far as these measures affect cross-border supply.67 Yet the standards that are developed in the Basel Committee go beyond this and also affect other modes of provision of banking services (inter alia service provision through commercial presence of a foreign bank in a territory). One thus has to consider whether the EC has an implied competence to act within the Basel Committee. Indeed, the European Court of Justice has also recognised that there is a parallel between internal and external competences of the EC. Insofar as the EC has been granted internal powers to act, it can also act externally.68 The present Capital Requirements Directives were adopted on the basis of Art. 47.2 TEC. This would thus mean that Art. 47.2 juncto Art. 300 TEC (which sets out the procedure for external action by the EC) could form the basis for external legal action by the EC. Yet this would give the EC competence for prudential regulation and not for prudential supervision. Thus, even though the EC has a competence for prudential regulation, and the actions within the

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European Central Bank, Protocol annexed to the Treaty establishing the European Community, OJ 2004 C 310/225. See Art. 5 TEC. ECJ, Opinion 1/94, Competence of the Community to conclude international agreements concerning services and the protection of intellectual property [1994] ECR I-5267, para. 53. This is the case when the EC has already exercised this internal competence (See ECJ, Case 22/70, European Agreement on Road Transport [1971] ECR 263), as well as when the EC has not yet exercised this internal competence and thus, by acting externally, simultaneously exercises the internal and external competences (See ECJ, Opinion 1/76, Draft agreement establishing a European laying-up fund for inland waterway vessels [1977] ECR 741).

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Basel Committee affect this regulatory competence, the EC would still not be able to participate because the Basel Committee only allows the participation of entities that are responsible for regulatory supervision. The competence of the EC in the ﬁeld of prudential supervision of European banking institutions seems quite limited. The European System of Central Banks (composed of the ECB and the National Central Banks) must “contribute to the smooth conduct of policies pursued by the competent authorities relating to the prudential supervision of credit institutions and the stability of the ﬁnancial system.” In this regard, the ECB may offer advice or be consulted by the Council, the Commission and the competent authorities of the Member States on the scope and implementation of Community legislation relating to prudential supervision.69 The present function of the ECB therefore does not go beyond consultation. Nevertheless, Art. 105.6 TEC provides for a simpliﬁed procedure that makes it possible, without amending the Treaty, to entrust speciﬁc tasks to the ECB concerning prudential supervision. This has until now not been done because of the unanimity voting requirement. If such tasks were to be entrusted to the ECB, it would be possible for the ECB to become a Member of the Basel Committee. Such a decision is at present highly unlikely, though, because of the divergent opinions on whether prudential supervision in the EC should be centralised.70 The split between regulation (centralised) and supervision (decentralised) in the EC thus makes it difﬁcult for the EC to participate as a full member of the Basel Committee. Therefore, the EC is obliged rather to focus on coordinating the actions of the European Member States that are represented on the Basel Committee. d. Coordinating the Actions of the European Members of the Basel Committee Since the effective involvement of the EC as a Member is in fact merely theoretical (the Commission is not a “supervisory authority” and the ECB has not yet been entrusted with further supervisory tasks), the main role of the EC thus clearly lies in coordinating the actions of its Member States. According to the European Court of Justice, insofar as the actions by these Members would endanger the unity of common market and the uniform application of 69

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Art. 25.1 Protocol on the Statute of the European System of Central Banks and of the European Central Bank, Protocol annexed to the Treaty establishing the European Community, OJ 2004 C 310/225. E. Wymeersch, “The future of ﬁnancial regulation and supervision in Europe”, Common Market Law Review, 2005, pp. 987-1010 at pp. 994-1009. 119

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Community Law, the Member States would in fact legally be precluded from exercising their standard-setting competence on the international level.71 As has been explained, the EC has indeed adopted extensive legislation on capital requirements. The European Court of Justice has noted that it is not necessary for the areas covered by the international agreement and the Community legislation to coincide fully in order for the Members States to be precluded from acting. When deﬁning whether an area is already covered to a large extent by Community rules, the assessment must be based not only on the scope of the rules in question but also on their nature and content. It is also necessary to take into account not only the current state of Community law in the area in question but also its future development, insofar as that is foreseeable at the time of the analysis.72 Nevertheless, it is not entirely clear whether the actions by the nine European Member States in the Basel Committee would endanger the uniform application of the Capital Requirements Directives. As explained, the standards developed in the Basel Committee are not binding, so may seem to be without prejudice to the European Directives. On the other hand, economic and political processes give important incentives to States to implement the Basel Committee standards. If a large number of States implement Basel standards, the business community in other States will put pressure on their governments also to implement these standards to ensure they too can beneﬁt from the level-playing ﬁeld that is being created. The actions by the European Member States in the Basel Committee may thus indeed threaten the uniform application of the European Capital Requirements Directives. In that case, the Member States that are represented on the Basel Committee must act as “trustees” of the EC, under a duty of close cooperation between the EC and the Member States.73

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See ECJ, Case 22/70, European Agreement on Road Transport, [1971] ECR, 263, para. 31. ECJ, Opinion 1/03, Competence of the Community to Conclude the New Lugano Convention on jurisdiction and the recognition and enforcement of judgements in civil and commercial matters, [2006] ECR I-1145, para. 126. This duty of close cooperation is based on the need for unity in external representation of the EC. See ECJ, Opinion 2/91, Convention No. 170 of the International Labour Organization concerning safety in the use of chemicals at work, [1993] ECR I-1061, paras 36-38.

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e. Involvement of the European Parliament in Inﬂuencing the Basel Committee Deﬁning the legal basis for European inﬂuence in the Basel Committee also has consequences for democratic legitimacy. The legal basis deﬁnes the European decision-making procedure for such actions, and thus the degree of involvement of the European Parliament. Normally, the European parliament only has a role to play at the end of the negotiation process,74 namely when the Council approves an international agreement to which the EC becomes a party. The Council can do this only after consulting the European Parliament.75 Only when the external action would amount to an amendment of an internal EC act adopted according to the so-called co-decision procedure laid out in Art. 251 TEC76 would the explicit assent of European Parliament be required. Nevertheless, given the fact that the standards developed within the Basel Committee are not binding international agreements, this stage will never be reached, and thus no parliamentary involvement will occur. The European parliament would become involved only later, when the international standard is implemented in European legislation. Yet, at that point, many policy options may already have been taken. This concern was indeed voiced by the Committee on Legal Affairs of the European Parliament with regard to the implementation of Basel II. The rapporteur stated that “it must be noted that Basel II was agreed outside the legislative procedures of the European Community, which might justify doubts about the democratic mandate of the proposal.”77

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It should be noted, however, that an inter-institutional agreement between the Commission and the European Parliament provides for information exchange between these two institutions during the conduct and conclusion of international negotiations. Moreover, when the Commission represents the EC, the Parliament can request to send Members of Parliament as observers, who cannot, however, take part directly in the negotiation sessions. See Framework Agreement between the European Parliament and the Commission, Brussels, 26 May 2005, paras 19 and 21. Art. 300.3 TEC. The Capital Requirements Directives are indeed adopted according to this procedure, see infra Section 5.1. European Parliament, Report on the proposal for a directive of the European Parliament and of the Council recasting Directive 2000/12/EC of the Parliament and of the Council of 20 March 2000 relating to the taking up and pursuit of the business of credit institutions and 2. on the proposal for a directive of the European Parliament and of the Council recasting Council Directive 93/6/EEC of 15 March 1993 121

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It should be noted that Art. 111.4 TEC states that the Council can decide, by qualiﬁed majority on a proposal of the Commission and after consulting the ECB, on the position of the EC at the international level as regards consultations and negotiations on issues of particular relevance to economic and monetary union and on its representation. This concerns mainly the representation of the EC in the IMF and the World Bank, but if ever supervisory tasks would be granted to the ECB, this may also be relevant for the Basel Committee. In 1998, the Commission proposed such a Council decision:78 it proposed that the EC would be represented by the Presidency of the Euro area, the Commission and the ECB. Yet the European Parliament was mentioned nowhere in this Commission Proposal, which was realised by the European Parliament. It noted that the EC did indeed have to speak with one voice, but that this voice had to be politically accountable.79 The Parliament did indeed adopt a Resolution proposing amendments that would require the Country that is representing the EC in the international institution to inform the European Parliament on the outcome of meetings of this institution. It also proposed a requirement to inform the Parliament each time a common EC position would be deﬁned for presentation at international meetings. Nevertheless, the Commission proposal was never adopted by the Council. The European Council of Vienna in 1998 only made a number of rather vague declarations on the external representation of the EC in the IMF and the G7. It afﬁrmed the role the Presidency of the Euro area had to play, but was less clear on the role of the Commission, which would merely be one of assistance. The ECB would be an observer. The Commission, Council and Member States would also have to cooperate to deﬁne common positions in other international ﬁnancial forums, which may indeed include the Basel Committee. No mention of the European Parliament was made.80

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on the capital adequacy of investment ﬁrms and credit institutions, A6-0257/2005, 29 August 2005, p. 239. See European Commission, Proposal for a Council Decision on the Representation and Position Taking of the Community at International Level in the context of Economic and Monetary Union, COM (1998) 637 ﬁnal, 9 November 1998. The Proposal referred explicitly to the G10, which is, as explained, the origin of the Basel Committee. See Art. 3 of the Proposal. Resolution of the European Parliament on a proposal for a Council Decision on the representation and position taking of the Community at international level in the context of Economic and Monetary Union, C4-0638/98, OJ 1998 C 398/61. Presidency Conclusions of the Vienna European Council of 11 and 12 December 1998, paras 14 and 15, available at .

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The European Parliament still attempts to have its voice heard on the international level concerning Basel II, albeit in bilateral relations. In the Parliament Resolution of 27 April 2007, the Parliament highlighted the importance of US implementation of the Basel II Accord on Capital Requirements and of recognition, by the Securities and Exchange Commission, of International Financial Reporting Standards.81 Yet it is clear that this inﬂuence is very limited. Members of the Economic and Monetary Affairs Committee of the European Parliament may also have meetings with the responsible Members of the US Congress. In theory, this may exert an indirect inﬂuence on the actions of the US in the Basel Committee, but much will depend on the expertise that is effectively available with the persons involved in these meetings. In sum, at present, it seems unlikely that the EC could play a more important role in the Basel Committee. The only way the European inﬂuence could be further enhanced would be through an effective application of the duty of loyal cooperation. Moreover, the role of the European parliament is quite limited on the international level, most likely because the technical nature of the international standards rather requires involvement of experts in the negotiation processes. 4.2. Inﬂuence of the EC in the IASB a. No Direct Inﬂuence of the EC in the IASB The inﬂuence the EC can exercise within the IASB seems quite limited. Since the members of the IASB do not represent their employers or governments, the inﬂuence of the EC can only be indirect.82 The European Commission is an observer in the Standards Advisory Council (SAC) of the IASB. In contrast, the ECB is a member of this Standards Advisory Council. This is a forum where the IASB consults with individuals and representatives of organisations that are affected by its work. The Standards Advisory Council gives advice on practical implementation and application issues of projects of the IASB and is in fact set up to ensure that as many stakeholders as possible are consulted in the process of preparing accounting standards. The European Commission is also an observer in the International Financial Reporting Interpretations Committee (IFRIC) of the IASB, which develops interpretations of the international accounting standards. These two instances are in fact the only presence of the EC in the IASB. To be sure, the 81

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European Parliament Resolution of 25 April 2007 on Transatlantic Relations, para. 25. Before 1 April 2001, i.e., before the IASB was established, the European Commission was observer on the Board of the International Accounting Standards Committee. 123

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European Financial Reporting Advisory Group (EFRAG), which is composed of accounting professionals and provides advice to the Commission,83 also has a “liaison” with the IASB, as provided for in the “Due Process Handbook” of the IASB. Yet EFRAG is not composed of European ofﬁcials but of private European organisations prominent in the European capital market. Nevertheless, it constitutes an important link between the EC and the IASB. In fact, the EFRAG plays a proactive role and cooperates with the European Commission as new standards are being developed in the IASB. When EFRAG makes use of its “liaison” with the IASB, it will keep the European Commission informed on discussions it has with the IASB. The European Commission will keep EFRAG informed on bilateral consultations the Commission has with the IASB and on the discussions in which it participates as an observer in the SAC and IFRIC.84 A further step in creating links between the EC and the IASB was taken in 2004, when a European consultative group was created that considers accounting issues speciﬁcally concerning ﬁnancial institutions.85 This group, composed of senior ofﬁcials of European accounting, banking and insurance regulators, advises the IASB. The European Commission is an observer in this group. It then seems that real inﬂuence by the EC on the IASB would again be exercised upon endorsement of the accounting standards in the European legal order. It is also at this moment that European stakeholders may become further involved. The most recent example is the discussion that emerged when the European Commission considered the endorsement of International Accounting Standard No. 39 (hereafter, IAS 39), which contains principles on the representation and valuation of ﬁnancial assets and liabilities. Among other issues, it enables companies to book these assets and liabilities at “fair value”, i.e. a rational and unbiased estimate of the potential market value of the asset or liability. This “fair value” option is opposed to valuation based on historic costs. According to its supporters, it would have as an advantage that this measurement is more transparent and is more in tune with economic reality. Nevertheless, if the market value of the asset or liability is not known, this method of measurement requires difﬁcult estimates. Within the EC, concerns were raised, amongst others by the ECB, that this method of measurement was

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See infra Section 5.2 (a). Working Arrangement between the European Commission and EFRAG, done in Brussels on 23 March 2006, paras 3.1-3.2, available at <www.efrag.org/images/ Efrag/EFRAG-EC%20Working%20 Arrangement.pdf>. International Accounting Standards Committee Foundation Press Release, European Consultative Group on Accounting Issues affecting Financial Institutions to be created, 10 February 2004, available at <www.iasplus.com/pressrel/2004tr02.pdf>.

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undesirable from a prudential perspective. It was suggested that weak banks with deteriorating credit conditions may use the fair value option to write down their liabilities, which would in turn help them to meet the minimum capital requirements.86 It was also feared that these measurements would make the balance sheets and income statements of companies much more volatile.87 This resistance manifested itself within the Accounting Regulatory Committee of the EC, on which all European Member States are represented and which has to approve the Commission Regulation that would endorse IAS 39. In the end, the Commission proposed endorsement of IAS 39, but with an exception (or “carve-out”) for the aspect on the “fair value” option.88 This allowed further discussion on how to implement IAS 39 in the European legal order. The ECB indeed sent a letter to the IASB in September 2004, suggesting modiﬁcations to IAS 39.89 In June 2005, the IASB did indeed amend IAS 39, limiting the use of the “fair value” option to situations where this value is veriﬁable.90 This episode shows how the EC, even though not directly involved in the IASB, may still exert an important inﬂuence on it.91 It may be questioned, however, how exceptional the reaction against IAS 39 was and whether the implementation

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K. Brackney and Ph. Witmer, “The European Union’s Role in International Standards Setting. Will Bumps in the Road to Convergence Affect the SEC’s Plans?”, The CPA Journal, 2005, pp. 18-27. Banque de France, Annual Report Commission Bancaire 2005, Paris: Sécretariat général de la Commission bancaire, 2006, p. 145, available at <www.banque-france. fr/gb/supervi/telechar/ cbreport/2005/study1.pdf>. A second carve-out was also made for hedge accounting. Under IAS 39, hedges (ﬁnancial derivatives that are used to offset the risks of the ﬁnancial instruments from which they are derived) would be booked at fair-value. By contrast, the ﬁnancial instrument that is hedged would still be booked at nominal value. European Banks complained that this would also introduce too much volatility into the ﬁnancial reporting. Letter of Jean-Claude Trichet, President of the ECB to David Tweedie, Chairman of the IASB, Exposure Draft of proposed amendments to IAS 39 – The Fair Value Option, 6 September 2004, available at <www.ecb.int/pub/pdf/other/378_04_09_06_letter_ iasb_signeden.pdf>. IASB Press Release, IASB issues amendment to the fair value option in ﬁnancial instruments standard, 16 June 2005, available at <www.iasplus.com/pressrel/ 0506prfairvalueoption.pdf>. N. Moloney, “Financial Market Regulation ain the Post-Financial Services Action Plan Era”, International and Comparative Law Quarterly 2006, pp. 982-992, at p. 983. 125

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process may in future cases also lead to such two-way interactions between the EC and the IASB. b. Regulatory Dialogue An important issue for European corporations and especially European credit institutions at the present time is the equivalence of European accounting standards and accounting standards of the United States (hereafter, the Generally Accepted Accounting Practices or GAAP). Within the EC, banks are required to use IAS/IFRS if their shares are listed on regulated European markets. If they want to offer their services in the United States, they are faced with the fact that the United States has different accounting rules. The United States requires companies that use other accounting rules than the GAAP to comply with a number of reconciliation requirements.92 As the Securities and Exchange Commission of the United States realised that countries were increasingly implementing international accounting standards, it considered whether these standards would be acceptable and was worried that such standards would not be of the same level of quality as the GAAP.93 It is therefore no surprise that the equivalence of IFRS and GAAP forms part of the regulatory dialogues between the United States and the EC94 and that this dialogue also inﬂuences work in the IASB. Indeed, in February 2006, the Financial Accounting Standards Board (the private standard-setter that is developing the GAAP) and the IASB concluded a Memorandum of Understanding to cooperate towards convergence of IFRS and GAAP.95 A shared work programme was drafted after discussion with ofﬁcials from the European Commission and the Securities and Exchange Commission.

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J. Trachtman, “Accounting Standards and Trade Disciplines. Irreconcilable Differences?”, Journal of World Trade, 1997, pp. 63-98 at p. 73. S. Zeff, “U.S. GAAP Confronts the IASB: Roles of the SEC and the European Commission”, North Carolina Journal of International Law and Commercial Regulation, 2003, pp. 879-892 at pp. 882-885. C. McReevy, European Commissioner for Internal Market and Services, On the Road towards Convergence and Equivalence – State of Play in International Accounting SEC Roundtable, Speech in Washington on 6 March 2007, Speech 07/124, available at <europa.eu/rapid/pressReleasesAction.do?reference=SPEECH/07/124&format =HTML&aged=0&language=EN&guiLanguage=en>. A Roadmap for Convergence between IFRSs and US GAAP – 2006-2008, Memorandum of Understanding between the FASB and the IASB, 27 February 2006, available at <www.iasb.org/NR/rdonlyres/874B63FB-56DB-4B78-B7AF-49BBA18C98D9/0/ MoU.pdf>.

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c. Aspirations for a More Inﬂuential Role of the EC With regard to the IASB, too, the EC is seeking to increase its inﬂuence. This has been a concern of the European Commission since 1995.96 Later, during the discussions on the reform of the Constitution of the International Accounting Standards Committee Foundation, the EC sent a letter to the Director of this Foundation, stressing the fact that the EC was “by far the biggest user of international accounting standards in the world”.97 It noted that the consultative ties between the IASB and the EFRAG had to be improved and that the composition of the IASB and the Board of Trustees of the Foundation had to correspond more to all the jurisdictions that apply the standards or have declared that they would make IAS/IFRS mandatory in the near future. There was thus clearly a suggestion that the practitioners from the EC should become more involved in these forums. The revised constitution indeed indicated such improved liaison with national standard-setters and other bodies with a standard-setting function. A more recent report by the European Commission called for further cooperation of the IASB and the European institutions (Commission, the Committee of European Banking Supervisors, the ECB, etc.). Combined with consultations with other international institutions (like the Basel Committee), this would, according to the Commission, ensure that the accounting standards that are developed by the IASB take more account of business needs and market reality in the EC.98 The Report further reiterated the point that a sufﬁcient number of

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Commission Communication, Accounting Harmonization: A new strategy vis-à-vis international harmonization, COM 95 (508), paras 1.4 and 5.4, available at <ec. europa.eu/internal_market/accounting/docs/com-95-508/com-95-508_en.pdf>. Consultation paper on the review of the IASCF Constitution “Proposals for Change”, letter by the European Commission to Tom Seidenstein, Director of the IASCF, Brussels 7 March 2005, available at <ec.europa.eu/internal_market/accounting/ docs/ias/ias-cf-consultation_en.pdf>. Commission services working paper on governance developments in the IASB (International Accounting Standards Board) and IASCF (International Accounting Standards Committee Foundation), 12 January 2007, available at <ec.europa.eu/ internal_market/accounting/docs/ias/iasb_ governance_report_working_paper_ en.pdf>. To a certain extent, the position of the Commission is remarkable. When efforts to harmonise accounting rules across Europe during the 1970s and 1980s failed, the Commission took a different path at the end of the 1990s and decided to make use of the IAS/IFRS for harmonisation. If the Commission now wants to enhance its inﬂuence in the IASB to make standards more in tune with European desires, it in fact aims to do what it failed to do in the ﬁrst place: develop European accounting standards. 127

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the IASB members had to have an understanding of ﬁnancial reporting needs in the EC. Yet it also noted with approval the appointment of Philippe Danjou, former director of accounting affairs at the French securities supervisor, as a new member of the Board. Despite these arguments, it is clear that because of the non-governmental nature of the IASB, the EC will never itself be able to become directly involved into IASB, even if it were to have the internal competence to do so.99 d. Involvement of the European Parliament in Inﬂuencing the IASB Since the European Commission has no direct role in the IASB, the European Parliament also does not become involved in the phase of preparing international standards. The involvement of the Parliament in the process leading up to the new IFRSs and revised IAS 39 has been very limited. At most, the Parliament may attempt to become updated about the work of the IASB by inviting the Chairman of the IASB to the Economic and Monetary Affairs Committee of the European Parliament. This was indeed the case on 12 April 2007. When addressing the Economic and Monetary Affairs Committee of the Parliament, the IASB Chairman stated that the IASB had not established regular contact with the members of the Economic and Monetary Affairs committee and the IASB wanted to rectify this. It was also indicated that the Trustees of the International Accounting Standards Committee Foundation and the Members of the IASB hoped to be invited to appear before this Committee.100 Democratic control of the measures themselves, though, would only be exercised at the moment of implementation of the international standards in the European legal order.

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This internal competence could then possibly be based on Art. 95 TEC, which is also the legal basis for the Regulation that established the procedure for endorsing international accounting standards by the Commission or Art. 44.2(g) TEC (concerning safeguards required by EC Member States from companies or ﬁrms). The EC thus has an internal competence for taking regulatory action in the ﬁeld of accounting. On the basis of the principle parallelism between internal and external competences of the EC, the EC may thus have an implied competence to act on the international level in this matter. IASB Chairman Addresses European Parliament, 12 April 2007, available at <www. iasb.org/News/IASB+Chairman+Addresses+European+Parliament.htm>.

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5. Implementation of International Standards by the EC 5.1. Implementation of Basel II into the EC a. Co-decision and the Lamfalussy Process The implementation of Basel II in the European legal order occurs through the legislative process of the EC. Since this implementation ﬁnds its legal basis in Art. 47.2 TEC, the co-decision procedure applies. The technical adjustments would happen through the so-called “Lamfalussy process”.101 In the framework of the Financial Services Action Plan, launched in 1999 to improve the liberalisation of ﬁnancial services markets in the EC, the European Council asked a number of prominent policy-makers to report on the reasons for the lack of integration of securities markets in Europe. In the Report of the Committee of Wise Men under the chairmanship of Baron Alexandre Lamfalussy, the lack of efﬁciency in adopting and implementing European legislation with regard to ﬁnancial services liberalisation was found to be the most important reason for the slow development of European securities markets.102 The Report therefore included a proposal to create a more rapid and efﬁcient regulatory process for securities regulation (“Lamfalussy process”).103 The suggested process involved decisionmaking that would be split up over four different levels where speciﬁc bodies would become involved. The European Council at Stockholm on 23 and 24 March 2001 called for the implementation of this process104 and the Commission

101 102

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Art. 150-151 Directive 2006/48/EC (see supra n. 52). Final Report of the Committee of Wise Men on the Regulation of European Securities Markets, Brussels, 15 February 2001, pp. 13-15, available at <ec.europa.eu/internal_ market/securities/docs/lamfalussy/wisemen/ﬁnal-report-wise-men_en.pdf>. D. Alford, “The Lamfalussy Process and EU Bank Regulation: Preliminary Assessment and Future Prospects”, Journal of International Banking Law and Regulation, 2006, pp. 59-68; D. Chalmers, C. Hadjiemmanuil, G. Monti and A. Tomkins, European Union Law. Text and Materials, Cambridge: Cambridge University Press, 2006, pp. 804-818; M. Nieto and J. Peñasola, “The European architecture of regulation, supervision and ﬁnancial stability: A central bank perspective”, Journal of International Banking Regulation, 2004, pp. 228-242 and B. Vaccari, “Le processus Lamfalussy: une réussite pour la comitologie et un exemple de ‘bonne gouvernance européenne’”, Revue du Droit de l’Union Européenne, 2005, pp. 803-821. Presidency Conclusion of the Stockholm European Council of 23 and 24 March 2001, para. 19. 129

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set up the necessary committees.105 Since the efﬁciency problems of regulation were not limited to securities markets, it was decided in 2005 to extend this system also to banking, insurance and occupational pensions.106 Fundamental norms have to be adopted at Level 1. This means that the Commission would need to make a proposal to the Council and the European Parliament, who have to decide according to the co-decision procedure of Art. 251 TEC. Because this procedure is often time consuming, only the “framework principles” will be laid down in such Level 1 decisions. More detailed and technical measures would then be adopted at Level 2. In order to implement these “framework principles” into more detailed measures, the Commission would ask a Level 3 committee to start work on the technical aspects of the implementation. With regard to banking regulation, this is the Committee of European Banking Supervisors (CEBS), in which the banking supervisors and central banks of all European Member States are represented.107 After having consulted with industry participants, the CEBS will advise the Commission and the Commission will draft a proposal. This proposal will then be sent to a Level 2 committee, which for banking regulation is the European Banking Committee (EBC). 108 The EBC, composed of high level representatives of the Members States and chaired by the Commission, will have to approve the proposed Directive or Regulation by qualiﬁed majority vote. The EBC is in fact a regulatory committee to which powers of the Council are delegated, as made possible by Art. 202, third indent TEC. However, the EBC has to act according to the comitology procedure that guides regulatory processes that are delegated to the Commission.109 If the EBC does not approve the proposal, the

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Commission Decision 2001/527 EC of 6 June 2001 establishing the Committee of European Securities Regulators, OJ 2001 L 191/43 and Commission Decision 2001/528 of 6 June 2001 establishing the European Securities Committee, OJ 2001 L 191/45. Directive 2005/1/EC of the European Parliament and of the Council of 9 March 2005, amending Council Directives 73/239/EEC, 85/611/EEC, 91/675/EEC, 92/49/ EEC and 93/6/EEC and Directives 94/19/EC, 98/78/EC, 2000/12/EC, 2001/34/EC, 2002/83/EC and 2002/87/EC in order to establish a new organisational structure for ﬁnancial services committees, OJ 2005 L 79/9. Art. 3, Commission Decision 2004/5/EC of 5 November 2003 establishing the Committee of European Banking Supervisors, OJ 2004 L3/28. Commission Decision 2004/10/EC of 5 November 2003 establishing European Banking Committee, OJ 2004 L 3/36. Consolidated version of the Council Decision 1999/468/EC of 28 June 1999 laying down the procedures for the exercise of implementing powers conferred on the

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Commission has to submit the proposal to the Council and should inform the European Parliament. The Council has then a period of at most three months to oppose the proposal by qualiﬁed majority. In that case, the Commission must re-examine the proposal. It may then amend the proposal, re-submit it, or use the normal legislative procedure of the TEC.110 Level 3 of the Lamfalussy process concerns the implementation of European Directives and Regulations that are developed at Level 1 and 2 into national legislation. To improve the consistent implementation of these measures into the national law of the Member States, the Level 3 Committees (for banking regulation: CEBS) have the responsibility to issue guidelines, produce joint interpretations, or conduct peer review of regulatory practices. Finally, Level 4 concerns the control by the Commission of the implementation of European legislation. The three pillars of Basel II were implemented by amending the Capital Requirements Directives. In doing so, the provisions of Basel II were scrutinised by the Commission, the European Economic and Social Committee111 and the ECB112 and intensive consultations took place with stakeholders in order to make the Directive reﬂect the speciﬁc features of the European context. If necessary, the provisions thus had to be differentiated.113 The EC indeed decided to apply the capital requirements to all credit institutions and investment ﬁrms within the EC and not solely to internationally active banks. This required adjustments to reduce the regulatory burden of Basel II for Small and Medium-sized Enterprises.

110 111

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Commission, as amended by Decision 2006/512/EC, OJ 2006 C 255/4 (“Comitology Decision”). Art. 5.4 and 5.6 Comitology Decision. Opinion of the European Economic and Social Committee on the Proposal for Directives of the European Parliament and Council re-casting Directive 2000/12/EC of the European Parliament and Council of 20 March 2000 relating to the take up and pursuit of the business of credit institutions and Council Directive 93/6/EEC of 15 March 1993 on the capital adequacy of investment ﬁrms and credit institutions, 2005/C 234/02, OJ 2005 C 234/8. Opinion of the European Central Bank of 17 February 2005 at the request of the Council of the European Union on a proposal for directives of the European Parliament and of the Council recasting Directive 2000/12/EC of the European Parliament and of the Council of 20 March 2000 relating to the taking up and pursuit of the business of credit institutions and Council Directive 93/6/EEC of 15 March 1993 on the capital adequacy of investment ﬁrms and credit institutions, 2005/C 52/10, OJ 2005 C 52/37. European Commission, Proposal for Capital Requirement Directives, (see supra n. 53), p. 4. 131

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b. Parliamentary Involvement in the Implementation Process Since the implementation of Basel II is based on Art. 47.2 TEC, the co-decision procedure of Art. 251 TEC applies.114 This meant that the European Parliament, as a co-legislator in the process, had the possibility to amend the proposal115 and the adoption of the new Capital Requirements Directives was dependent on the approval of both the Council and the European Parliament. However, under the Lamfalussy process, only the “framework principles” would be adopted according to the normal legislative procedure. Further technical implementation would be done through the comitology procedure involving the EBC and CEBS. The European Parliament has a limited role in this procedure. To be sure, the Parliament is a co-legislator when the Level 1 measure is adopted, in which the limits of the delegation are also deﬁned. Yet, once the Level 2 process starts, the Parliament may want to control whether the Commission is not exceeding its delegated powers. Some limited possibilities were available to the Parliament: in case the EBC (the Level 2 regulatory committee) were to oppose a proposal by the Commission, and the Parliament were to consider that a legislative proposal by the Commission would exceed the implementing powers that were delegated to the Commission in a Level 1 instrument, the Parliament shall inform the Council of this. The procedure is then halted for a period of at most three months, during which time the Council will decide whether it will oppose the proposal by qualiﬁed majority. If the Council opposes, the Commission is required to re-examine the proposal. It may then amend the proposal or present a proposal according to the normal legislative procedure of the TEC.116 If there is no reaction by the Council, the Commission shall adopt the measure. The inﬂuence of the Parliament is depends on (a) the rejection of the proposal by the EBC and (b) a qualiﬁed majority in the Council to oppose the Commission proposal. However, it is always possible that the European Parliament adopts a Resolution indicating that it believes that the Commission proposal would exceed the implementing powers that were delegated to the Commission in the basic instrument. This would send a signal to the Commission. The Commission is then required to review the

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K. Lenaerts and P. Van Nuffel, Constitutional Law of the European Union, London: Sweet & Maxwell, 2005, pp. 591-598. Art. 251.2, para. 2 (c) TEC. See European Parliament legislative resolution on the proposal for a directive of the European Parliament and of the Council recasting Council Directive 93/6/EEC of 15 March 1993 on the capital adequacy of investment ﬁrms and credit institutions, OJ 2006 C 227 E/371. Art. 5.5-5.6 Comitology Decision.

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draft measure and shall inform the Parliament of the action it intends to take.117 The Commission may then submit a new draft measure, continue, or submit a proposal. Even though the Parliament is here not dependent on the Council, the Parliament cannot again oblige the Commission to revise its proposal. Nor is the procedure suspended when the Parliament opposes the exercise of the delegated powers. The European Parliament was dissatisﬁed with the Lamfalussy process. It felt that democratic control was undermined by excluding effective parliamentary involvement when Level 2 measures were adopted. The European Parliament thus demanded a “call back” opportunity with regard to these measures.118 Because the Parliament threatened to block the adoption of the Capital Requirements Directives, it was ﬁnally agreed to include a sunset clause in the new Directives.119 The implementing powers by use of the Lamfalussy process could be applied by the Commission until 1 April 2008. Thereafter, a decision, taken following the co-decision procedure, would be required to renew these implementing provisions.120 The Parliament agreed to this compromise because the draft Constitution for Europe provided that the basic instrument delegating power to the Commission could include the condition that the European Parliament or the Council could withdraw the delegation at any time, or that the delegated regulation could only enter into force if no objection was expressed by the European Parliament or the Council.121 117 118

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Art. 8 of the Comitology Decision. European Parliament Resolution on the ﬁnal report of the Committee of Wise Men on the regulation of European securities markets, B5-0173/2001, para. 12, available at <www.europarl.europa.eu/comparl/econ/lamfalussy_process/ep_position/ b5_173_2001.pdf>. R. Ayadi, “The Game’s not over yet for the Capital Requirements Directive …”, CEPS Policy Brief, Vol. 91 2006. Art. 150.4 Directive 2006/48/EC (see supra n. 52) and Art. 42.3 Directive 2006/49/ EC, (see supra n. 52). Such sunset clauses were also included in other Directives relating to ﬁnancial markets: see Art. 17.4 Directive 2003/5/EC on insider dealing and market manipulation (market abuse), OJ 2003 L96/16; Art. 24.4 Directive 2003/71/EC on the prospectus to be published when securities are offered to the public or admitted to trading, OJ 2003 L 345/64; Art. 64.3 Directive 2004/39/ EC on markets in ﬁnancial instruments, OJ 2004 L 145/1 and Art. 23.4 Directive 2004/109/EC on the harmonization of transparency requirements in relation to the information about issuers whose securities are admitted to trading on a regulated market, OJ 2004 L 390/38. Art. I-36.2 Treaty Establishing a Constitution for Europe, done at Rome on 29 October 2004, OJ 2004 C 310/1. 133

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Nevertheless, as the ratiﬁcation of the Constitution became increasingly unsure, there was a fear that the Parliament would refuse to extend the delegation powers in the Capital Requirements Directives after 1 April 2008. Therefore, a compromise was sought and reached by July 2006. The Comitology Decision was amended and a new “regulatory procedure with scrutiny” was introduced.122 In return, the Parliament agreed no longer to include any sunset clauses when approving delegation of implementing powers.123 This procedure must be applied each time an implementing measure of general scope is drafted that will amend (i.e. by deleting or supplementing) non-essential elements of the basic instrument.124 In contrast to the “normal” regulatory procedure, even if the Regulatory Committee (for banking: EBC) opposes the Commission proposal, there is a chance that the proposal will have to be submitted to the European Parliament. If the EBC issues a positive opinion on the proposal, the Commission has to submit the proposal to the Council and Parliament for scrutiny. Both institutions then have three months to oppose, on the basis of three grounds: (a) the proposed measure exceeds the delegated powers (a ground that is also available for the “normal” regulatory procedure); (b) if the proposal is not compatible with the aim or content of the basic instrument; or (c) the proposal does not respect the principles of subsidiarity and proportionality.125 If the Council or the Parliament oppose, the Commission is not allowed to adopt the draft measures. It has to amend them or follow the normal legislative procedure. In the case where the EBC would issue a negative opinion or no opinion at all on the Commission proposal, the Parliament also has an opportunity to get involved, but only after the Council has had the opportunity to oppose. The Council has two months to do so. Moreover, if the Council opposes, the European Parliament is excluded from further scrutiny of the proposal. Only if the Council tends to approve the proposed implementing measure, despite the negative opinion of the EBC, will the European Parliament become involved. The Parliament then has four months to oppose on the three grounds mentioned above. In any case where the Council or the Parliament oppose, the Commission is not allowed to adopt the measure.

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T. Christiansen and B. Vaccari, “The 2006 Reform of Comitology: Problem Solved or Dispute Postponed?”, Eipascope, Vol. 3 2006, pp. 9-17. See para. 2 of the Statement by the European Parliament, the Council and the Commission concerning the Council Decision of 17 July 2006 amending Decision 1999/468/EC laying down the procedures for the exercise of implementing powers conferred to the Commission, OJ 2006 C 255/01. Art. 2.2 Comitology Decision. Art. 5a.3 (b) Comitology Decision.

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In cases where the “regulatory procedure with scrutiny” is used for technical amendments and implementation of the Capital Requirements Directives, the scrutiny is thus much more pressing than in case of the “ordinary” regulatory procedure. Under the ordinary procedure, the Parliament could only give a political signal, but could not require the Commission to amend its proposal. Nor does the Parliament depend on the Council any longer, except when the EBC has provided a negative opinion and the Council also intends to oppose. In that situation, the Parliament cannot scrutinise the proposal, except on the basis of the general power of the Parliament to adopt a resolution that argues that the implementing measures exceed the delegated powers.126 Yet this ground is more limited than in the case of the regulatory procedure with scrutiny. Moreover, the Parliament can then not oblige the Committee to amend the proposal. This new procedure thus greatly enhances the legitimacy of the implementation of (possible future amendments to) Basel II. The Parliament has an opportunity to oppose the draft implementing measures (except in one case) and can block the process for three months (in case of a positive opinion of the EBC) or four months (in case of a negative opinion of the EBC). However, the fact that the regulatory process can be delayed for such a period of time may be a serious concern from the perspective of efﬁciency, especially since in the ﬁeld of ﬁnancial services, the reality of the market is often far ahead of legislative developments. Nonetheless, everything depends on the deﬁnition of the cases where the regulatory process with scrutiny needs to be used. Each time, one will have to deﬁne whether the implementing measure is of general scope and whether it will amend non-essential elements of the basic instrument (adopted by use of the co-decision procedure).127 The measures are of a general scope when they “are addressed in abstract terms to undeﬁned classes of persons and apply to objectively determined situations.”128 Essential elements of a basic instrument are “provisions which are intended to give concrete shape to the fundamental guidelines of Community policy.”129 The Commission is indeed developing

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Art. 8 Comitology Decision. Such resolution will be adopted by an absolute majority of the votes cast (Art. 198 TEC). On the contrary, opposing a draft implementing measure under the regulatory procedure with scrutiny requires a majority of the component members of the Parliament, which is thus a higher threshold to reach. Such measures are “quasi-legislative”. See M. Szapiro, “Comitologie: rétrospective et prospective après la réforme de 2006”, Revue du Droit de l’Union Européenne, 2006, pp. 545-586 at p. 571. ECJ, Case C-263/02, Commission v. Jégo-Quéré [2002] ECR I-3425, para. 43. ECJ, Case C-240/90, Germany v. Commission [1992] ECR I-5383, para. 37. 135

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Guidelines for identifying such measures.130 When the implementing measure formally amends non-essential elements, by deleting, modifying, or replacing articles or annexes, it is clear that the regulatory procedure with scrutiny applies. If an implementing measure will supplement the basic instrument, this is less clear.131 There then has to be further scrutiny of whether the proposed measures have a compulsory effect or whether they help to create a new set of rules, on top of the corpus formed by the basic instrument. Further elements to be taken into account are whether the Commission enjoys a large measure of discretion in the basic instrument to add new elements and whether it would be possible to envisage a scenario in which the legislative authority would itself adopt the measure by co-decision. What is more, the possible application of the regulatory procedure with scrutiny also depends on whether this has been provided for in the basic instruments that delegate powers to the Commission. At present, these instruments (e.g. the Capital Requirements Directives) still refer to the provision of the Comitology Decision before the amendments. The Commission has proposed an amendment to the Capital Requirement Directives, stating that all implementation measures with regard to these Directives shall be adopted by use of the regulatory procedure with scrutiny.132 The regulatory procedure with scrutiny will thus greatly enhance parliamentary control, but, depending on the use that will be made of this procedure, may threaten the efﬁciency of market regulation of banking services in the EC. This enhanced parliamentary control may also contribute to improving the legitimacy of the Basel Committee. Nevertheless, it remains to be seen what use will be made of the “regulatory procedure with scrutiny”. If applied wisely, this procedure may provide a commendable balance between the need for

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Proposed checklist for identifying the measures covered by Art. 2(2) of Decision 2006/512/EC in basic instruments (criteria for application of the regulatory procedure with scrutiny – Article 5a) (on ﬁle with author). See the questions raised by M. Szapiro (see supra n. 127), p. 573. Proposal for a Directive of the European Parliament and of the Council amending Directive 2006/48/EC relating to the taking up and pursuit of the business of credit institutions, as regards the implementing powers conferred to the Commission, COM(2006) 902 ﬁnal, available at <eur-lex.europa.eu/LexUriServ/site/en/com/2006/ com2006_0902en01.pdf> and Proposal for a Directive of the European Parliament and of the Council amending Directive 2006/49/EC on the capital adequacy of investment ﬁrms and credit institutions, as regards the implementing powers conferred to the Commission, COM(2006) 901 ﬁnal, available at <eur-lex.europa. eu/LexUriServ/site/en/com /2006/com2006_0901en01.pdf>.

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democratic legitimacy on the one hand, and efﬁcient rule-making for banking services on the other hand. 5.2. Implementation of IAS/IFRS into the EC a. Implementation Process As has been explained, the international accounting standards that are developed within the IASB are merely guidelines. Whether or not they will be applied depends on the national implementation. The EC has adopted by co-decision a regulation that directs the implementation and application of international accounting standards.133 Implementation of international accounting standards always occurs through a speciﬁc procedure involving the Commission and a regulatory committee. The Commission decides on the applicability of the international standards on the basis of two criteria: (a) they have to facilitate a “true and fair view” of a company’s assets, liabilities, ﬁnancial position and proﬁt or loss and must be conducive to the European public good; and (b) they must meet the criteria of understandability, relevance, reliability and comparability.134 The reference to the “European public good” in particular may suggest that the accounting standards will need to ﬁt in with the European context. However, one may speculate on how inﬂuential these criteria will be in the implementation process and whether their application may really result in a full rejection of a standard. In order to prepare a proposal for acceptance of the standards, the Commission is assisted by the European Financial Reporting Advisory Group (EFRAG). This is a private body, established in March 2001 by a number of European ﬁnancial reporting interest groups, which provides opinions to the Commission on the international standard that the Commission is considering

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Regulation (EC) No. 1606/2002 of the European Parliament and of the Council of 19 July 2002 on the application of international accounting standards, OJ 2002 L 243/1. The Commission noted that “The establishment of an endorsement mechanism at EU level is necessary because it is not possible politically, nor legally, to delegate accounting standard setting unconditionally and irrevocably to a private organisation over which the EU has no inﬂuence.” See European Commission, Financial reporting: the IAS Regulation – Frequently Asked Questions, MEMO/01/04, 13 February 2001, available at <europa.eu/rapid/pressReleasesAction.do?reference= MEMO/01/40&format=HTML& aged=1&language=EN&guiLanguage=en>. Regulation (EC) No. 1606/2002 (see supra n. 133), Art. 3.2. 137

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for implementation.135 These opinions, to be given within two months,136 assess whether the standard complies with the two criteria mentioned.137 EFRAG operates through a Technical Expert Group (TEG), which has in turn set up a number of working groups. As explained above, the EFRAG also plays a proactive role and already cooperates with the European Commission as new standards are being developed in the IASB. If EFRAG can actively inﬂuence the standard when it is being developed by the IASB, it is likely that the EC will afterwards implement the standard without modiﬁcation.138 Once EFRAG has provided the Commission with an opinion on the international accounting standard, the Commission will formulate a draft regulation. This Regulation will need to be approved by the Accounting Regulatory Committee (ARC), according to the comitology procedure set out above.139 Hence, if the ARC (on which all Member States are represented) were to issue a negative opinion or issue no opinion at all on the adoption of the international standard, the Commission would have to refer the matter to the Council. The Council has three months to consider the proposal. It can then adopt the proposal or reject it by qualiﬁed majority. If the Council rejects it, the Commission may amend the proposal, re-submit it, or use the ordinary legislative procedure. Only in case the Council does not issue an opinion in time can the Commission adopt the implementing act. The inﬂuence of this endorsement mechanism on the IASB has already been discussed above, with regard to IAS 39. When the Commission proposed the implementation of the standard, discussions within the ARC already indicated

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Working Arrangement between the European Commission and EFRAG, done in Brussels on 23 March 2006, available at <www.efrag.org/images/Efrag/EFRAG-EC %20Working%20Arrangement.pdf>. Ibid. para. 2.2. Since EFRAG is composed of representatives of the ﬁnancial industry, the advice it gives may be one-sided. Therefore, in 2006 the Commission established a Standards Advice Review Group that assesses whether the EFRAG advice is well-balanced and objective. This Standards Advice Review Group is composed of seven experts who serve in their personal capacity. See Commission Decision of 14 July 2006 setting up a Standards Advice Review Group to advise the Commission on the objectivity and neutrality of the European Financial Reporting Advisory Group’s (EFRAG’s) opinions, 2006/505/EC, OJ 2006 L 199/33. K. Brackney and P. Witmer (see supra n. 86), p. 20. Regulation (EC) No. 1606/2002 (see supra n. 133), Art. 6.2.

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that a positive opinion of ARC on IAS 39 would be highly uncertain.140 Within EFRAG, too, many concerns were raised with regard to this standard, especially concerning the use of the “fair value” option.141 Therefore, the Commission proposed to temporarily carve-out IAS 39, inter alia with regard to “fair value”. The ARC issued a positive opinion on this proposal142 and on 19 November 2004 the Commission adopted a Regulation adopting IAS 39, with exceptions.143 It was only after the IASB amended IAS 39 that the Commission proposed to remove the carve-out with regard to fair value. EFRAG issued a positive opinion on the amendments by the IASB, even before these were ofﬁcially published. The ARC also voted in favour of these amendments to the Regulation relating to IAS 39.144 Eventually, the Regulation removing the “fair value” carve-out in the Regulation concerning IAS 39 was adopted on 15 November 2005.145

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Summary Record of the Meeting of the Accounting Regulatory Committee of 16 July 2003, ARC/2003-07-16/2, available at <ec.europa.eu/internal_market/accounting/ docs/arc/200307-summary-record_en.pdf>. See also K. Brackney and P. Witmer (see supra n. 133), p. 24. However, the two-thirds majority, necessary to issue an opinion by TEG to reject the proposed implementation, could not be reached. See EFRAG, Adoption of the amended IAS 39 Financial Instruments: Recognition and Measurement, 8 July 2004, p. 2, available at <ec.europa.eu/internal_market/accounting/docs/ias/efrag/ efrag-2004-07a-endorsement-letter_en.pdf>. EU Accounting Regulatory Committee Opinion on IAS 39, 1 October 2004, ARC/ 2004-10-01, available at <ec.europa.eu/internal_market/accounting/docs/ias/200410-arc-opinion_en.pdf>. Art. 1 Commission Regulation (EC) No. 2086/2004 of 19 November 2004 amending Regulation (EC) No. 1725/2003 on the adoption of certain international accounting standards in accordance with Regulation (EC) No. 1606/2002 of the European Parliament and of the Council as regards the insertion of IAS 39, OJ 2004 L 363/1. Summary Record of the Meeting of the Accounting Regulatory Committee and Contact Committee of 8 July 2005, ARC/2005-07-08, available at <ec.europa.eu/ internal_market/accounting/docs/arc/2005-07-08-summary-record-rev_en.pdf>. Commission Regulation (EC) No. 1864/2005 of 15 November 2005 amending Regulation (EC) No. 1725/2003 adopting certain international accounting standards in accordance with Regulation (EC) No. 1606/2002 of the European Parliament and of the Council, as regards International Financial Reporting Standard No. 1 and International Accounting Standards Nos 32 and 39, OJ 2005, L 299/45. 139

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b. Involvement of the European Parliament Since the implementation of international accounting standards always occurs through a speciﬁc procedure involving the Commission and a regulatory committee, the European Parliament does not seem to get deeply involved in the implementation of these standards into the European legal order. This was the case until 2006, at least, before the Comitology Decision was amended. Indeed, until then, the European Parliament would only get involved in the regulatory procedure if the ARC issued a negative opinion on the proposed implementation measure. The Parliament would then be allowed to consider whether the implementation does not exceed the powers that were delegated in the Commission in the Regulation on the application of international accounting standards.146 Even if the ARC did not give a negative opinion, the Parliament could also adopt a Resolution claiming that the delegated powers would be exceeded. Yet, in that case, the Parliament has no guarantee that it will be informed on the draft implementing measure, nor is the procedure halted for three months.147 Nevertheless, this is what the European Parliament is considering doing with regard to the implementation of IFRS 8 into the EC.148 The Parliament would call upon the Commission to ﬁrst perform an impact assessment of the introduction of IFRS 8. Through the incorporation of the “regulatory procedure with scrutiny” into the Comitology Decision, the Parliament obtained the right to scrutinise the proposed implementation measure, under the conditions set out above.149 A proposal by the Commission for a Regulation to amend the Regulation on the application of the international accounting standards indeed suggests making this procedure the standard procedure for implementing international accounting standards.150 146 147 148

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Art. 5.5 Comitology Decision. Art. 8 Comitology Decision. Motion for a Resolution pursuant to Rule 81 of the Rules of Procedure, by the Committee on Economic and Monetary Affairs on the draft Commission regulation amending Regulation (EC) No. 1725/2003 adopting certain international accounting standards in accordance with Regulation (EC) No. 1606/2002 of the European Parliament and of the Council as regards: International Financial Reporting Standard (IFRS) 8 concerning disclosure of operating segments, B6-0157/2007, available at <www.iasplus.com/europe/0704resolutionifrs8.pdf>. See supra section 5.1.b. Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EC) No. 1606/2002 on the application of the international accounting standards as regards the implementing powers conferred to the Commission,

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5.3. Coherence in Implementation of Basel II and IAS/IFRS Within the EC, too, the interaction between accounting standards and minimum capital requirements was noted. As early as November 2001, the ECB expressed its worries with regard to the accounting standards that were developed at the international level.151 In reaction to the proposals by the IASB to introduce a “fair value” option, EFRAG sent a letter to the IASB communicating its concerns.152 CEBS provided similar comments.153 As explained above, this lead to a number of limitations on the use of the IAS 39 fair value option. Yet it seems that these amendments were not considered sufﬁcient from a prudential perspective. When preparing the implementation of Basel II into the European legal order, the Commission proposed inclusion of an Art. 64.4 in the Capital Requirements Directive 2006/48. This “prudential ﬁlter”, which is indeed now part of the Directive, provides that gains and losses on certain liabilities that are valued at fair value cannot be included in the calculation of the minimum capital requirements.154 Before the new Capital Requirements Directive entered into force, CEBS already suggested introducing further prudential ﬁlters155 and indeed adopted Guidelines on Prudential Filters in December 2005.156 In an impact analysis in February 2006, the CEBS found

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COM(2006) 918 ﬁnal, Art. 1, available at <eur-lex.europa.eu/LexUriServ/site/en/ com/2006/com2006_0918en01.pdf>. European Central Bank, Fair value accounting in the banking sector: ECB comments on the “Draft standard and basis for conclusions – ﬁnancial instruments and similar items” issued by the Financial Instruments Joint Working Group of Standard Setters, 8 November 2001, available at <www.ecb.int/pub/pdf/other/ notefairvalueacc011108en.pdf>. European Financial Reporting Advisory Group, Exposure Draft of proposed amendments to IAS 39 Financial Instruments Recognition and Measurement: the Fair Value Option, 23 July 2004, available at <www.iasplus.com/efrag/0407ias39fvoption. pdf>. Committee of European Banking Supervisors, Comments to the IASB Exposure Draft on the fair value option, 28 July 2004, available at <www.c-ebs.org/pdfs/ comments/2004_07_28% 20EGAA%20letter%20from%20IASB_amendments%20 to%20IAS%2039_annex.pdf>. Art. 64.4 Directive 2006/48/EC (see supra n. 52). Committee of European Banking Supervisors, CEBS Guidelines on Prudential Filters for Regulatory Capital, 21 December 2004, available at <www.c-ebs.org/ prudential_ﬁlters.htm>. Committee of European Banking Supervisors, Framework for Consolidated Financial Reporting, (Revised version of December 2006), available at <www.c-ebs.org/ 141

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that the ﬁlters had neutralised possible negative prudential effects of the introduction of IAS/IFRS.157 Recently, in April 2007, the CEBS has issued a consultation document on a possible revision of these Guidelines, in response to some modiﬁcations of the IAS/IFRS.158 The practical implementation of Basel II and IAS/IFRS in the EC thus ensured that potential incoherencies between these norms at the international level were avoided in practice.

6. Conclusion This contribution aimed to discuss two dynamics that play in multilevel regulation of banking services. By means of an explanation of the regulatory processes that play at the international and European level, I have tried to illustrate how these two levels interact to the beneﬁt of coherence and democratic legitimacy. The mutual inﬂuence of Basel II and IAS/IFRS and the possible incoherencies between them have been directly addressed through horizontal interactions between the Basel Committee (inﬂuenced by the CEBS) and the IASB and, on a technical level, by the EC by developing “prudential ﬁlters”. Moreover, the doubts which became clear during the European endorsement process, with regard to the “fair value” option in IAS 39 and the fear that this would be undesirable from a prudential perspective, had an inﬂuence on the international level. Indeed, the IASB eventually amended IAS 39. Intensive interaction between these two levels of policy-making can thus enhance coherence at the international level from the “bottom-up” and complement “top-down” efforts to coordinate the actions by ﬁnancial standard-setters and international ﬁnancial institutions.159 Nevertheless, it remains to be seen how exceptional the episode

157

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documents/ GL06Finrep122006.pdf> and Guidelines for the Implementation of the Framework for Consolidated Financial Reporting, December 2005, available at <www.c-ebs.org/pdfs/GL06.pdf>. Committee of European Banking Supervisors, The impact of IAS/IFRS on bank’s regulatory capital and main balance sheet items, 14 February 2006, available at <www.iasplus.com/europe/0602cebs.pdf>. Committee of European Banking Supervisors, Consultation Paper on amendments to the Guidelines on ﬁnancial reporting, April 2007, available at <www.iasplus. com/europe/0704cebsconsultation.pdf>. Such as the Financial Stability Forum, which was created to improve coordination between the various national and international authorities responsible for ﬁnancial stability. M. Giovanoli (see supra n. 10), p. 25 and J. Liberi, “The Financial Stability

Multilevel Banking Regulation

on IAS 39 was and whether this bottom-up inﬂuence will also manifest itself in the future. The complex European mechanism for implementing international standards concerning bank regulation is an important balancing exercise between the need for more efﬁciency in the adoption of banking regulation on the one hand, and the requirement to ensure adequate democratic legitimacy of these rules on the other. Even if parliaments cannot get involved at the international level, they have a role to play on the moment of implementation. The introduction of the “regulatory procedure with scrutiny”, together with the fact that this procedure will be made the standard procedure for implementing measures for banking regulation and accounting standards, strengthens the democratic legitimacy of these measures. However, a careful application of this procedure seems necessary to avoid undermining the efﬁciency of the adoption procedure. If wisely applied, for instance by avoiding undue delay to the procedures and by keeping the parliament informed from the beginning of new initiatives at the international level, the procedure may be an important element in strengthening the democratic legitimacy of the international standard-setting for banking services.

Forum: A Step in the Right Direction … Not Far Enough”, University of Pennsylvania Journal of International Economic Law, 2003, pp. 549-575. 143

Multilevel Internet Governance Involving the European Union, Nation States and NGOs Robert Uerpmann-Wittzack

1. Introduction Numbers, names and addresses are an essential element for the functioning of any electronic communications network. It is therefore consistent that Article 10 of the so-called Framework Directive 2002/21/EC1 (hereafter, Framework Directive) stresses the responsibility of governments for issues relating to numbering, naming and addressing. Under the Framework Directive, national regulatory authorities shall control all national numbering resources and the national numbering plans. What is true of telephone numbers, however, does not apply to internet addresses. Rather, the internet domain name system (DNS) is managed by the Internet Corporation for Assigned Names and Numbers (ICANN), which is a non-proﬁt organisation established under Californian law, and by Top Level Domain (TLD) registries, which are also private organisations. This paper takes the recent creation of the country code Top Level Domain (ccTLD) .eu as a starting point for an analysis of the complex interaction between the European Union, governments and private actors in the ﬁeld of internet governance. Section 5.2 shows how the European Union created the .eu ccTLD and how ICANN inﬂuenced this process. Section 5.3 focuses on the role and legitimacy of ICANN as a major actor in internet governance. Section 5.4 attempts to explain why states chose an international regulatory regime anchored within domestic private law and not within public international law. Section 5.5 summarises the main results.

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Directive 2002/21/EC of the European Parliament and the Council of 7 March 2002 on a common regulatory framework for electronic communications networks and services (Framework Directive), OJ No. L 108/33.

Follesdal, Wessel and Wouters (eds), Multilevel Regulation and the EU, 145–168 ©2008 Koninklijke Brill NV. ISBN 978 90 04 16438 3. Printed in the Netherlands.

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Around the year 2000 many persons believed that ICANN would be a model for governance beyond the nation state or even for world democracy. Seven years later, these expectations have to be reviewed.

2. The Creation of the .eu ccTLD 2.1. EU Regulation The creation of the country code Top Level Domain (ccTLD) .eu was, ﬁrst of all, a process within the European Union. The European Commission took the initiative in 2000,2 and two years later, on 22 April 2002, the European Parliament and the Council adopted the Regulation (EC) 733/2002 on the implementation of the .eu Top Level Domain.3 By creating this European ccTLD, the EU seeks to promote e-commerce in Europe and to offer European enterprises a ccTLD which reﬂects their European identity. The new ccTLD does not replace the existing ccTLDs of the EU Member States. Rather, the .eu ccTLD exists alongside the ccTLDs of the Member States and other states. The organisation, administration and management of the new ccTLD has not been conferred on the European Commission or a Community agency. Rather, recital 9 of the Regulation Preamble refers to the principles of self-management and self-regulation which traditionally apply to internet governance. Therefore, the task of organising and managing the .eu ccTLD has been conferred on a so-called registry, which shall be a non-proﬁt organisation established under the law of a Member State.4 The responsibilities of the registry include, inter alia, the registration of domain names, the maintenance of the corresponding databases and the operation of the .eu ccTLD name servers. In order to ﬁnd a registry, the Commission published a call for expressions of interests5 in accordance with Article 3(1)(b) Regulation (EC) 733/2002. After an evaluation of the applications, the Commission designated the European Registry for Internet Domains (EURid), which is a consortium of the Belgian, Italian and Swedish ccTLD registries, by Decision 2003/375/EC of 21 May 2003.6 The Commission

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European Commission, The Creation of the .eu Top Level Domain, Working Paper, Doc. COM/2000/153 of 2 February 2000, available at <ec.europa.eu/archives/ISPO/ eif/ InternetPoliciesSite/DotEU/dotEU-en.pdf> (2 May 2007). OJ No. L 113, 1. Art. 3(2) Regulation (EC) 733/2002 (see supra n. 3). OJ 2002 C 208/6. OJ L 2002 128/29.

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then concluded a service concession contract with EURid in accordance with Article 3(1)(c) Regulation (EC) 733/2002. The contract expires after ﬁve years and may be renewed.7 2.2. EU Law-Making under the Rule of ICANN EU regulation, however, is only one side of the coin. In fact, the EU lacks the technical means to make a .eu ccTLD operational. The internet domain name system has a hierarchical structure. In order to be operational, a TLD and the corresponding TLD name servers must be inscribed on the root zone ﬁles of the internet root servers. Decisions on the creation of new TLDs are taken by ICANN, which also decides on the delegation of a TLD to a registry. Therefore, Recital (15)(1) of the Preamble of Regulation 733/2002 rightly refers to the authority of ICANN. Creating the .eu ccTLD required close co-operation between the EU and ICANN. Country code Top Level Domains are, as a rule, reserved for states. According to ICANN’s principles, the corporation does not unilaterally decide on the question of which entities amount to states. Rather, ICANN refers to a list of two-letter codes for states issued by the International Organisation for Standardisation (ISO), called ISO 3166.8 Like ICANN, ISO is a non-governmental organisation. As the EU is not a state, it does not ﬁgure on the ISO 3166 list, but only on an additional list containing other reserved geographical codes. Until 1999, the two-letter code “eu” was reserved only for the European currency Euro and for purposes of the international ﬁnancial bond market. Thus, the European Commission ﬁrst had to contact the International Organisation for Standardisation, which it did as early as May 1999.9 By the end of the year, the ISO 3166 Maintenance Agency extended the reserved code “eu” to cover all applications for which a coded representation of the name European Union is needed, including its use as a TLD.10 In this early stage of the proceedings, EU regulation already depended on the decision of a private body acting outside the EU, viz., the International Organisation for Standardisation.

7

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Art. 3 of the Draft Service Concession Contract annexed to the Call for Expressions of Interests, (see supra n. 5), p. 14. <www.iso.org/iso/en/prods-services/iso3166ma/02iso-3166-code-lists/list-en1. html>. Commission Working Paper, (see supra n. 2), p. 4. IANA, Report on the Delegation of the .eu Top-Level Domain, 2005, available at <www.iana.org/reports/eu-report-05aug05.pdf>, p. 1; Commission Working Paper, (see supra n. 2), p. 4. 147

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On this basis, the competent EU Commissioner, Erkki Liikanen, addressed a letter to the President of ICANN on 6 July 2000, signalling the Commission’s intention to introduce the ccTLD .eu.11 In August the Commission received a reply, which was in principle favourable,12 and one month later, the ICANN Board of Directors, which is the main body of ICANN, decided that a two letter code such as “eu” was delegable after the ISO 3166 Maintenance Agency had issued a corresponding reservation of this code.13 ICANN’s principles for the delegation of ccTLDs are laid down in the document “Internet Domain Name System Structure and Delegation” of May 1999.14 According to this document, “[t]he desires of the government of a country with regard to delegation of a ccTLD are taken very seriously,” and they constitute “a major consideration in any TLD delegation … discussions.” According to an ICANN resolution of 25 September 2000 a new ccTLD shall only be delegated after a contract has been concluded between ICANN and the national registry.15 Article 3 Regulation (EC) 733/2002 takes up these conditions. According to Article 3(3) of the Regulation “the Registry shall enter into the appropriate contract providing for the delegation of the .eu ccTLD code.” The text does not indicate who the appropriate contracting partner is. ICANN is not mentioned throughout the operative part of Regulation (EC) 733/2002. Recital (15)(3) of the Regulation’s Preamble makes it clear, however, that the contract has to be concluded with ICANN. Once designated by the European Commission,16 EURid therefore entered into contact with ICANN. Only after EURid had indicated its willingness to enter into a so-called framework of accountability with ICANN did the ICANN Board decide to delegate the .eu

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<ec.europa.eu/archives/ISPO/eif/InternetPoliciesSite/DotEU/LetterLiikanen Roberts. html>. Letter from Michael M. Roberts to Erkki Liikanen regarding .eu Top-Level Domain of 10 August 2000, available at <www.icann.org/correspondence/roberts-letter-toliikanen-10aug00.htm>. ICANN, Preliminary Report, Special Meeting of the Board, 25 September 2000, available at <www.icann.org/minutes/prelim-report-25sep00.htm#00.74>. <www.icann.org/icp/icp-1.htm>. ICANN, Preliminary Report, Special Meeting of the Board, 25 September 2000, available at <www.icann.org/minutes/prelim-report-25sep00.htm#00.75> (2 May 2007), at Res. 00.75. See supra n. 6, text accompanying.

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ccTLD to the European consortium on 21 March 2005.17 ICANN and EURid actually concluded a ccTLD Registry Agreement on 23 June 2005.18 It can already be seen at this point that internet governance relies on a complex partnership between public authorities and private entities. Whereas in traditional telecommunications, numbers are, as a rule, assigned by public authorities, the internet domain name system is managed by private, non-proﬁt organisations. ICANN has, in fact, regulatory powers. It creates and implements, inter alia, principles and rules for the creation and the delegation of TLDs. This is reﬂected by the aforementioned Framework Directive.19 Article 10 Framework Directive obliges national regulatory authorities to control all national numbering resources and the national numbering plans. The deﬁnition of electronic communications networks contained in Article 2(a) Framework Directive shows that Article 10 should also apply to the internet. Recital 20 of the Preamble nevertheless states that the provisions of the Framework Directive “do not establish any new areas of responsibility for the national regulatory authorities in the ﬁeld of the Internet naming and addressing.” Here again, Community legislation accepts that internet governance largely evades regulation by public authorities. In consequence, EURid, the private body managing the .eu ccTLD, ﬁnds itself in a position of double dependence. Designation by the European Commission must go hand in hand with a corresponding delegation by ICANN. Figure 1 shows this. Figure 1: Double dependence of EURid

EU

ICANN Board

EURid

17 18 19

Legend : contract cont ract

IANA Report (see supra n. 6), p. 2. <www.icann.org/cctlds/eu/eu-icann-ra-23jun05.pdf>. Directive 2002/21/EC; OJ No. L 108/33 (see supra n. 1). 149

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3. Internet Governance: From Self-Regulation to Public-Private Partnership 3.1. ICANN a. The Creation of ICANN As ICANN holds a crucial position within the system of internet governance, the internal structure of ICANN assumes some importance. Over a period of some 20 years, the internet evolved without ICANN. The internet was, in its beginning, a research project supported by the USA. Research was ﬁnanced by the US government, ﬁrst through the Department of Defence and later through the National Science Foundation.20 Rules, including the domain name system, were established by the scientiﬁc community, which developed the internet. In fact, the early domain name system was managed quasi-exclusively by Jon Postel, a researcher from the University of Southern California.21 In the beginning, ccTLDs were often informally delegated to research institutes or other institutions in the respective countries which were willing to manage them. It should be born in mind that in the 1970s the internet had no economic importance, and it did not touch upon the interests of states. Therefore, selfregulation within the scientiﬁc community did not encounter obstacles. Thus history explains the initial self-regulation of the internet. The US government, however, which ﬁnanced internet research, has had a special inﬂuence on the internet right from the start. By the mid 1990s, both the economic and the political importance of the internet had become obvious. Governments outside the USA, in particular the European Commission, started to take questions of internet governance seriously. So, in 1997, the European Commission addressed questions of internet regulation in its Green Paper on the “Convergence of the Telecommunications, Media and Information Technology Sectors, and the Implications for the Regulation Towards an Information Society Approach”.22 It became evident that the management of the domain name system had to be institutionalised. Efforts of 20

21 22

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W. Kleinwächter, “From Self-Governance to Public-Private Partnership: The Changing Role of Governments in the Management of the Internet’s Core Resources”, Loyola of Los Angeles Law Review, Vol. 36 2003, p. 1106. Ibid., pp. 1106-1108. European Commission, Convergence of the Telecommunications, Media and Information Technology Sectors, and the Implications for the Regulation Towards an Information Society Approach, Green Paper, Doc. COM(97)623 of 3 December 1997, available at <europa.eu/ISPO/convergencegp 97623.html>.

Multilevel Internet Governance Involving the European Union, Nation States and NGOs

the scientiﬁc community surrounding Jon Postel to internationalise the domain name system in co-operation with the International Telecommunication Union (ITU)23 alerted the US government, which then took the initiative.24 In 1998, the publication of a Green Paper by the US Department of Commerce (DoC) was followed by intensive discussions,25 in which the European Commission took an important role.26 In this situation, Jon Postel proposed to create ICANN, which was accepted by the US government. The European Commission also agreed in principle.27 So ICANN was established as a private non-proﬁt organisation under Californian Law by the end of 1998. ICANN and the US Department of Commerce concluded a Memorandum of Understanding, which entrusts ICANN with the management of the domain name system.28 It was envisaged that the supervisory functions of the Department of Commerce would end after two years.29 Since then, the Memorandum of Understanding has been extended ﬁve times and it is now due to expire on 30 September 2009.30 For the time being, it is quite clear that the USA does not intend to give up its ultimate responsibility for the management of the domain name system. According to the “U.S. Principles on the Internet’s Domain Name and Addressing System” released by the US Department of Commerce National Telecommunications and Information Administration on 30 June 2005,31 the US will “maintain its

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W. Kleinwächter (see supra n. 20), pp. 1108-1109. D.W. Drezner, “The Gobal Governance of the Internet: Bringing the State Back In”, Political Science Quarterly, Vol. 119 2004), pp. 494 et seq.; W. Kleinwächter, (See supra n. 20), pp. 1109-1110. W. Kleinwächter (see supra n. 20), p. 1111. H. Burkert, “About a Different Kind of Water: An Attempt at Describing and Understanding some Elements of the European Union Approach to ICANN”, Loyola of Los Angeles Law Review, Vol. 36 2003, pp. 1190 et seq; F.C. Mayer, “Europe and the Internet: The Old World Order and the New Medium”, EJIL, Vol. 11 2000, pp. 163 et seq. W. Kleinwächter (see supra n. 20), p. 1115. Memorandum of Understanding between the U.S. Department of Commerce and ICANN (MoU), 25 November 1998, available at <www.icann.org/general/icannmou-25nov98.htm> (2 May 2007). See ss. II(B) and VII of the MoU (see supra n. 27). S. VII of the MoU as revised by Amendment 7 of 29 September 2006, available at <www.ntia.doc.gov/ntiahome/domainname/agreements/jpa/ICANNJPA_0929 2006>.htm; see also W. Kleinwächter (see supra n. 20), p. 1118. <www.ntia.doc.gov/ntiahome/domainname/USDNSprinciples_06302005.htm>; see also US Doc National Telecommunications and Information Administration, Notice 151

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historic role in authorizing changes or modiﬁcations to the authoritative root zone ﬁle.”32 b. Open Deliberation, Community Consensus and Internet Elections 2000 When dealing with the legitimacy of multilevel governance, Andreas Føllesdal distinguishes three types of input legitimacy: Legitimacy through participation, legitimacy through democratic rule and legitimacy through actual consent.33 ICANN has tried to make use of all three types. The principle of open deliberation aims at legitimacy through participation, while the principle of community consensus will assure actual consent. Moreover, world wide internet elections, which were actually held in 2000, introduced a genuinely democratic element. Until the end of 2002, Article III of the ICANN Bylaws dealt with “Transparency and Procedures”.34 Article III(1)(b) obliged the Board to give public information on any plan to adopt a policy. According to the same Article, all interested parties should have the opportunity to comment on such plans, to see the comments of others and to reply to those comments. The Article’s aim was to allow an open deliberation about any policy that should be adopted by the board. Under Article III(1)(b)(iii) the Board could only adopt the proposed policy after a reasonable period for comment, and it had to publish the reasons for its action. The procedure has been further elaborated in Article III(6) of the actual Bylaws.35 In fact, the Board has developed and is still using a procedure of notice and comment that comes close to the procedure followed by US federal administrative agencies.36 In addition to that, ICANN has been guided by the idea of community consensus. The European Commission referred to this idea when it initiated

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of Inquiry of 22 May 2006, Federal Register Vol. 71 2006, pp. 30388 et seq., available at <www.ntia.doc.gov/ntiahome/frnotices/ 2006/NOI_DNS_Transition_0506.pdf> (2 May 2007). See also Tamar Frankel, “Governing by Negotiation: The Internet Naming System”, Cardozo Journal of International and Comparative Law, Vol. 12 2004, p. 455. See his contribution to this book. Art. III of the original Bylaws of 6 November 1998, available at <www.icann.org/ general/archive-bylaws/bylaws-06nov98.htm>. Bylaws as effective of 28 February 2006, <www.icann.org/general/archive-bylaws/ bylaws-28feb06.htm>. J. Weinberg, “ICANN and the Problem of Legitimacy”, Duke Law Journal, Vol. 50 2000, pp. 225-226.

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an open consultation on the creation of an .eu ccTLD. In its Working Paper of 2000 the Commission declared: “Furthermore, ICANN itself is bound by its own Bylaws and procedures to develop policies on the basis of the consensus of the Internet community, broadly deﬁned. Thus the identiﬁcation of the potential consensus of Internet operators and users through this public consultation is an important step in the decision taking process.”37

The concept of community consensus results, inter alia38, from the Registrar Accreditation Agreement of 17 May 200139 to be concluded between ICANN and registrars for gTLDs. Section 4.3.1 of the Registrar Accreditation Agreement deﬁnes so-called “Consensus Policies” that shall be “based on a consensus among Internet stakeholders represented in the ICANN process.” Such consensus shall be “demonstrated by (a) action of the ICANN Board of Directors establishing the speciﬁcation or policy, (b) a recommendation, adopted by at least a twothirds vote of the council of the ICANN Supporting Organization to which the matter is delegated, that the speciﬁcation or policy should be established, and (c) a written report and supporting materials … that (i) documents the extent of agreement and disagreement among impacted groups, (ii) documents the outreach process used to seek to achieve adequate representation of the views of groups that are likely to be impacted, and (iii) documents the nature and intensity of reasoned support and opposition to the proposed policy.”

In practice, the efforts to reach a community consensus have met two major obstacles. First of all, it has been impossible to represent all internet stakeholders in the ICANN process.40 The representation of civil society in general and of individual internet users in particular remains poor. Moreover, opinions of different stakeholders were generally so divergent that the supporting organisations were not able to identify any meaningful consensus.41 The creation of the

37 38

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Commission Working Paper, (see supra n. 2), p. 2. For another example see s. I(1) of the .com Registry Agreement between ICANN and Veri Sign, 25 May 2001, available at <www.icann.org/tlds/agreements/verisign/ com-index.htm>. <www.icann.org/registrars/ra-agreement-17may01.htm>. J. Weinberg (see supra n. 36), pp. 237-242. Ibid., p. 242; pp. 252-253. 153

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.eu ccTLD was handled by ICANN staff without participation of the relevant supporting organisation.42 Finally, the composition of the ICANN Board should contain a democratic element. In 2000, the ICANN Board decided the direct selection of ﬁve out of then 19 ICANN directors in a global election. The election was open to all interested e-mail address holders subject to a simple registration procedure. About 176,000 e-mail address holders registered and 34,000 actually voted.43 The election encountered technical problems and turned out to be very expensive. In addition to that, it proved impossible to avoid fraud, abuse or capture by determined minorities.44 One response could have been to improve the election mechanism. The At Large Study Committee, which had been installed by the ICANN Board, actually proposed such improvements in 2001. It recommended, above all, to abandon the e-mail based approach and to create an at-large membership open to all domain name holders.45 Thus, only individuals who had registered a domain with one of the ccTLD or gTLD registries should have the right to vote. The Board, however, did not follow these proposals. On 24 February 2002, the ICANN President published a report on necessary reforms,46 which clearly departed from previous ideas of input legitimacy. The report abandoned the idea of at-large membership. Rather, it highlighted the importance of national governments. According to the President, “active national government participation in ICANN is critical to its success.” In this context, the President addressed the question of legitimacy: “Although governments vary around the world, for better or worse they are the most evolved and best legitimated representatives of their populations – that is, of the public interest. As such, their greater participation … could better ﬁll the need for public accountability without the serious practical and resource problems of global elections in which only a relatively few self-selected voters are likely to participate.”

The President became even clearer: “[G]overnments or bodies appointed with government involvement can … certainly stake a better claim to truly reﬂect

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Ibid., p. 243. ICANN, At Large Study Committee, Final Report on ICANN At-Large Membership of 5 November 2001 sub “Membership Registration/Election Process”, available at <www.atlargestudy.org/ ﬁnal_report.shtml>. Final Report (see supra n. 42), sub “E-mail-bades Membership Lacks Support”. Ibid., sub “Recommended Membership Approach” et seq. ICANN, President’s Report: ICANN – The Case for Reform of 24 February 2002, available at <www.icann.org/general/lynn-reform-proposal-24feb02.htm>.

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the public interest than a few thousands of self-selected voters scattered around the world.” At the same time, the President’s report is quite reserved with regard to the principles of open deliberation and community consensus. While transparency is still an important goal, the President urges that the Board “must be able to make policy decisions, not simply ratify or reject those proposed by subordinate bodies,” and that the Board “must have the ability to deliberate in private.” Thus, the decision-making power of the Board should be strengthened at the expense of participation and, even more, at the expense of actual consent. Summing up, ICANN gave up the challenge of improving new modes of governance and of inventing something like world democracy and returned to traditional, state-centred modes of legitimacy. The subsequent reform of 2002 reﬂects this.47 Since then, all directors are nominated in a complicated procedure through different ICANN bodies. No direct elections by the internet community are foreseen any longer. While Article III(1)(b) of the original Bylaws,48 which dealt with open deliberation, is taken up, in essence, in Article III(6) of the present Bylaws, a signiﬁcant element was added in 2002: In “those cases where the policy action affects public policy concerns,” Article III(6)(1)(c) now obliges the Board “to request the opinion of the Governmental Advisory Committee and take duly into account any advice timely presented by the Governmental Advisory Committee on its own initiative or at the Board’s request.” Even though the plan to have some of the directors appointed by governments was not realised, the governmental inﬂuence exercised via the Governmental Advisory Committee has now become crucial for ICANN. c. The Governmental Advisory Committee (GAC) In fact, the structure of ICANN is quite complicated. The Board is assisted in its functions by three supporting organisations,49 which represent mainly internet domain name registries, and by four statutory advisory committees, i.e. the Governmental Advisory Committee (GAC), the Security and Stability Advisory Committee, the Root Server System Advisory Committee and the At-Large Advisory Committee, the latter representing individual internet users.50 All supporting organisations and advisory committees advise the Board with

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Bylaws as effective of 15 December 2002, available at <www.icann.org/general/ archive-bylaws/bylaws-15dec02.htm>. See supra n. 34. Art.VIII-X of the Bylaws, loc. cit. (n. 35). Art. XI of the Bylaws, loc. cit. (n. 35). 155

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respect to questions that fall within their speciﬁc mandates. Moreover, each of the four advisory committees is represented on the Board by a non-voting liaison.51 Here again, governments are, at ﬁrst glance, only one group of stakeholders among others. Initially this was indeed true.52 Meanwhile, however, the GAC has gained an outstanding position within the structures of ICANN. The reform of December 2002 has introduced a list of 11 core values in Article I(2) of the Bylaws.53 Core value No. 11 reads: “11. While remaining rooted in the private sector, recognizing that governments and public authorities are responsible for public policy and duly taking into account governments’ or public authorities’ recommendations.” Accordingly, the GAC is not only one advisory body among others. Whereas the Board generally has full freedom to disregard any advice given by the advisory committees, Article XI(2)(1) sets special rules for the relationship between the GAC and the Board. If the Board decides to disregard the GAC’s advice, it shall inform the GAC and state reasons. Article XI(2)(1)(j) then obliges the GAC and the Board to try to ﬁnd a mutually acceptable solution. Litera k addresses the situation that no mutually acceptable solution can be found. In this event, the Board will not only have to state the reasons why the GAC advice was not followed, but the “rights or obligations of Governmental Advisory Committee members with regard to public policy issues falling within their responsibilities” are expressly reserved. They could, for instance, take full control over internet activities within their territory, including the activities of their domestic ccTLD registry. Such a measure would both impair the powers of ICANN and seriously threaten the “operational stability, reliability, security, and global interoperability of the Internet,” the preservation and enhancement of which is ICANN’s ﬁrst core value.54 It is a self-evident truth that ICANN Bylaws cannot hinder governments from taking any measures they deem necessary. Governments are only bound by their respective domestic laws and by public international law. Article XI(2)(1)(k) of ICANN Bylaws nevertheless shows that ICANN is aware of and respects the primordial role of governments. In essence, Article XI(2)(1)(j, k) of the Bylaws provides the GAC with a de facto veto.55

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Art. VI(9) of the Bylaws, loc. cit. (n. 35). Art. VII(3) of the original Bylaws (see supra n. 34). See supra n. 47. Art. I(1) of the Bylaws (see supra n. 35). Also W. Kleinwächter (see supra n. 20), pp. 1121-1122.

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The veto position presupposes, however, that states can reach a consensus within the GAC. The GAC is open to all interested governments. The number of participants is constantly growing. By the beginning of 2006, 101 states were represented within the GAC, including the USA, all EU Member States and China.56 In Europe 37 of 54 UN member states have joined the GAC, whereas in Africa a mere 16 of 47 UN member states have done so. Among the ﬁve permanent members of the UN Security Council, only Russia has not yet joined the GAC. While no more than 50 members actually participate in GAC meetings,57 the GAC has emphasised its commitment “to increasing its membership, in particular from developing countries and ensure their active participation in the GAC.”58 The European Commission is a full member of the GAC, its status being that of a government. Some International Organisations such as the ITU have observer status. According to Principle 47 of the GAC Operating Principles59 any advice to the Board is decided on by consensus, i.e. governments refrain from formal voting. Under general principles of international institutional law, the chair can state a consensus provided that no state formally objects.60 If no consensus is possible, the GAC will convey to the Board “the full range of views expressed by Members.”61 The more governments disagree, the more freedom will remain for the Board to realise its own policy. Governments will only be strong if they agree on a common position. The institutional design of ICANN further highlights the importance and the independence of the GAC. According to Article XI (2)(c) of the Bylaws, the GAC operates under its own charter and internal operating principles. With a view to strengthening its independence, the GAC decided to host its secretariat outside ICANN. The secretariat was run by the competent General

56

57

58

59

60

61

See the list available at ; not updated since the beginning of 2006. See e.g. GAC, Communiqué – Lisbon of 28 March 2007, p. 1: 46 members, available at . GAC, Communiqué – Vancouver of December 2005, p. 3, available at . As amended of April 2005, available at . E. Suy, “Consensus”, in: R. Bernhardt (ed.), Encyclopedia of Public International Law, Amsterdam: North-Holland Publishing, 1992, p. 759; see also the deﬁnition contained in note 1 to Art. IX(1)(1) of the WTO Agreement. Operating Principle 47 (see supra n. 56). 157

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Directorate of the European Commission from 1 November 200262 until India took over this role on 1 July 2006.63 The status of the GAC non-voting liaison to the Board is likewise peculiar. Whereas the Board can, in principle, remove any director or non-voting liaison by a 3/4 majority of all directors,64 it has no competence to remove the GAC non-voting liaison. Under Article VI (9)(2) (1) of the Bylaws, the Board may at the most “request” the GAC “to consider the replacement of the non-voting liaison of that Committee.” This non-voting liaison is only accountable to governments. With regard to the creation of the .eu ccTLD, the inﬂuence of governments via the GAC becomes particularly visible. As seen above, the delegation of the .eu ccTLD to EURid depends on a contract to be concluded between ICANN and the national registry. In fact, most ccTLD were delegated before ICANN came into existence. In the early days of the internet, delegation was generally an informal act.65 Therefore, most ccTLD registries had not concluded any contract with ICANN. ICANN soon tried to remedy this situation. It published a draft contract of delegation which would have given ICANN far reaching competences with regard to the national registries.66 In particular, ccTLD registries would have been obliged to give ICANN access to their data bases for veriﬁcation purposes.67 As ccTLD registries strongly opposed these plans, ICANN hinted at the possibility of re-delegating a ccTLD to a more cooperative administrator.68 In the cases of Australia, Japan, Burundi and Malawi, ICANN actually succeeded in imposing quite strict contracts of delegation, when the respective ccTLDs were re-delegated to new registries.69 ICANN was on the way to establishing a strong hierarchy, which would have given ICANN effective power over ccTLDs registries.

62

63

64 65 66

67 68 69

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GAC, Communiqué – Marrakech of 28 June 2006, p. 4, available at . GAC, Communiqué – Shanghai of October 2002, p. 3, available at . Art. VI(11) of the Bylaws (see supra n. 35). See supra s. 5.3.1.1. Model ICANN-ccTLD Manager Memorandum of Understanding of 2 September 2001, available at <www.icann.org/cctlds/model-legacy-mou-02sep01.htm>. s. 4.2 of the Model Memorandum of Understanding (see supra n. 61) President’s Report (see supra n. 45), sub “ccTLDs”. K.G. von Arx and G.R. Hagen, “A Declaration of Idependence of ccTLDs from Foreign Control”, Richmond Journal of Law and Technology, Vol. 9 2002, p. 35.

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This perspective, however, disturbed not only ccTLD managers; it also ran counter to state interests. Therefore, the GAC came into play, and it adopted “Principles and Guidelines for the Delegation and Administration of Country Code Top Level Domains” as early as on 23 February 2000,70 which were replaced by “Principles and Guidelines for the Delegation and Administration of Country Code Top Level Domains” on 5 April 2005.71 These principles accept that ccTLD registries should enter into agreements with ICANN and that they should contribute, in particular, to ICANN’s budget.72 At the same time, however, they afﬁrm the autonomy of the national registries, which are ultimately responsible only to their national governments. The struggle between ICANN, ccTLDs managers and governments is reﬂected by a series of draft agreements proposed by ICANN.73 The most recent documents, a draft accountability framework of 12 February 200674 and a corresponding exchange of letters,75 fully comply with the GAC principles. They contain mutual commitments of both parties without giving ICANN any supervisory functions with regard to the national registry. Under the draft agreements, ICANN and ccTLD registries meet on an equal footing. As this solution satisﬁes both ccTLD managers and governments, the German .de ccTLD registry DENIC was the ﬁrst old registry to enter into a contract with ICANN in March 2006.76 Several others have followed since.77 The Regulation (EC) 733/200278 has to be viewed within this context. After having stated and accepted the responsibility of ICANN for coordinating the delegation of ccTLDs, Recital 15 of the Preamble refers to the GAC Principles as the relevant framework for the establishment of the .eu ccTLD. Recital 15(3) urges the registry to enter into a contract with ICANN, but makes it clear that this contract must respect the GAC Principles. In consequence, Article 3(3) (2) of the Regulation provides that the contract to be concluded by EURid shall take into account “the relevant principles adopted by the Governmental

70 71 72 73 74 75 76

77 78

<www.icann.org/committees/gac/gac-cctldprinciples-23feb00.htm>. . s. 10 of the Principles (see supra n. 71). See the different versions available at <www.icann.org/cctlds/model-mou.html>. <www.icann.org/cctlds/accountability-framework-12feb06.pdf>. <www.icann.org/cctlds/exchange-of-letters-12feb06.pdf>. Exchange of Letters of 22/29 March 2006, available at <www.icann.org/cctlds/de/ denic-icann-letters-31may06.pdf>. See the documents available at <www.icann.org/cctlds/agreements.html>. See supra n. 3. 159

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Advisory Committee”. While ICANN is not mentioned in the operative part, the GAC as an inter-governmental body is. This further shows the independent role of the GAC, which evolves from a body within the Californian non-proﬁt incorporation ICANN to an inter-governmental organisation.79 It is true that the .eu ccTLD Registry Agreement of 23 June 200580 goes beyond the obligations contained in the draft accountability framework of 2006.81 Under Section 4.4 of the 2005 Registry Agreement EURid shall abide by new or revised ICANN policies. Section 5.2 speciﬁes, however, that EURid is free not to comply with ICANN policies that conﬂict with EU laws, agreements or other written instruments regulating the relationship between EURid and the European Union. In sum, the European Union accepts ICANN, but it does so only within the margin accorded to ICANN by governments. Figure 2 sketches the complex interaction between the different levels of internet regulation with regard to the .eu ccTLD. A major difﬁculty lies in the fact that it is actually impossible to establish a clear hierarchy between different actors. Elements of hierarchy are combined with elements of co-operation. Taking up the concept of a global administrative space as set out by Nico Krisch and Benedict Kingsbury82 might help to describe the situation better than an effort to distinguish different levels of regulation. Returning to the principles of democracy, accountability and legitimacy, the lessons of ICANN’s reform are quite clear. As then President of ICANN M. Stuart Lynn put it in his 2002 proposals,83 governments “are the most evolved and best legitimated representatives of their populations.” Lynn concluded that participation of governments can “better ﬁll the need for public accountability without the serious practical and resource problems of global elections in which only a relatively few self-selected voters are likely to participate.” The dream that ICANN could be a model for global governance beyond the nation state was deﬁnitively deceived in 2002.

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80 81 82

83

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See also W. Kleinwächter, “Beyond ICANN vs. ITU: Will WSIS Open New Territory for Internet Governance?”, in: D. McLean (ed.), Internet Governance: A Grand Collaboration, New York: United Nations Publications, 2004, p. 45. See supra n. 18. See supra n. 74. N. Krisch and B. Kingsbury, “Introduction: Global Governance and Global Administrative Law in the International Legal Order”, EJIL, Vol. 17 2006, pp. 1 et seq. See supra n. 46.

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Figure 2: Multilevel Internet Governance with Regard to the .eu ccTLD

US DoC

GAC EU

ICANN Board Legend: contract cont ract inﬂuence influe nc e

EURid

3.2. The World Summit on the Information Society Meanwhile, issues of internet governance have reached the traditional forums of inter-state diplomacy. A World Summit on the Information Society was organised by the United Nations and held in two phases in Geneva 2003 and in Tunis 2005. Internet governance turned out to be one of the most controversial issues. The World Summit followed a multi-stakeholder approach, encompassing governments, the private sector and civil society. The involvement of the private sector and, above all, of organisations representing the civil society, exceeded all precedents from earlier inter-governmental conferences. This notwithstanding, the outcome documents reafﬁrm the trend towards a re-nationalisation of internet governance. a. National Sovereignty over ccTLDs The ﬁrst issue to be dealt with under the aspect of re-nationalisation is the relationship of a state to the ccTLD that represents this state. A draft of 30 September 2005 recognised “that each government shall have sovereignty over its respective country code top level domains.”84 It is astonishing to see that

84

Doc. WSIS-II/PC-3/DT/10 (Rev.4)-E, para. 54; available at <www.itu.int/wsis/docs2/ pc3/working/dt10rev4.pdf>; for further details concerning the drafting history: W. Kleinwächter (see supra n. 74), pp. 40 et seq. 161

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the traditional concept of state sovereignty is here associated with what had for a long time been considered an area beyond national borders. Even though the Tunis Agenda for the Information Society of 18 November 200585 does not refer to state sovereignty in this context, paragraph 63 holds that “Countries should not be involved in decisions regarding another country’s country code Top-Level Domain (ccTLD). Their legitimate interests, as expressed and deﬁned by each country, in diverse ways, regarding decisions affecting their ccTLDs, need to be respected, upheld and addressed via a ﬂexible and improved framework and mechanisms.”

It is remarkable, ﬁrst of all, how the concept of exclusive state rights, which goes along with the notion of sovereignty, is now applied to internet governance. Even though states accept that the national domain spaces are managed by private entities, they request supervisory functions and they are able to enforce their will. While the traditional principle of territorial jurisdiction is seriously challenged by the internet, states now claim their cyber-territories, which are constituted by their respective ccTLDs. By this means they acquire territorial jurisdiction over important parts of the internet, which ceases to be a space without borders or beyond national borders. At the same time, paragraph 63 of the Tunis Agenda sets limits to the US claim of historic inﬂuence on the internet. Without mentioning the historic role of the US, the Tunis Agenda nevertheless is a compromise. The international community acknowledges in paragraph 55 of the Tunis Agenda that “existing arrangements have worked effectively.” This implicitly refers both to ICANN and to the US role in general. The question of how internet governance should evolve in future is left open to further debate. Paragraph 63 of the Tunis Agenda urges the USA not to use its historic inﬂuence against other states when their respective ccTLDs are at issue. Obviously, the USA is willing to accept this. The abovementioned US Principles on the Internet’s Domain Name and Addressing System of 200586 recognise that “Governments have legitimate interests in the management of their” ccTLDs. The WSIS documents are fully in line with the 2005 GAC Principles on ccTLDs.87 The GAC principles ﬁrst deﬁne the role of governments, then the role of ccTLD Registries and only thereafter the role of ICANN.88 According

85

86 87 88

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Doc. WSIS-05/TUNIS/DOC/6(Rev.1)-E, available at <www.itu.int/wsis/docs2/ tunis/off/6rev1.pdf>. See supra n. 31. See supra n. 71. See s. 4-6.

Multilevel Internet Governance Involving the European Union, Nation States and NGOs

to Section 4.1.1, “[u]ltimate public policy authority over the relevant ccTLD rests with the relevant government or public authority; how this authority is exercised is determined by applicable law.” The delegation and re-delegation of ccTLDs is considered to be “a national issue and should be resolved nationally and in accordance with national laws.”89 b. States as Primordial Stake-Holders The establishment of national sovereignty over ccTLDs goes hand in hand with a general re-afﬁrmation of governments’ fundamental role in international relations. The mere fact that an inter-governmental conference was held under the auspices of the United Nations shows this shift back to traditional inter-state relations. It is true that the WSIS followed a multi-stakeholder approach and that neither the private sector nor the civil society had ever previously been so involved in an inter-governmental conference. Ultimately, though, states remain the principal actors. According to paragraph 49 of the WSIS Geneva Declaration of Principles of 12 December 200390 “[p]olicy authority for Internetrelated public policy issues is the sovereign right of States,” while the private sector and civil society only have “important role[s]” to play. Paragraph 35 of the Tunis Agenda for the Information Society of 200591 reafﬁrms this. In this context, both declarations make express reference to the concept of state sovereignty, which paragraph 63 of the Tunis Agenda cautiously avoids when it comes to ccTLDs.92

4. International Regulation in the Absence of Public International Law 4.1. Public-Private Partnership The ICANN report, which initiated the reform of 2002, called for a “truly effective public-private partnership.”93 In describing the reform, scholars took up this

89 90

91 92 93

S. 7.1. Doc. WSIS-03/GENEVA/DOC/4-E, available at <www.itu.int/wsis/documents/ doc_multi.asp?lang=en&id=1161|0>. See supra n. 85. See supra n. 85, text accompanying. See supra n. 46. 163

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term.94 In fact, the ICANN arrangement and, more generally, the management of the internet domain name system as a whole, show strong features of a publicprivate partnership. Instead of cooperating with private organisations, states could have entrusted national regulatory authorities to manage their respective ccTLDs. For instance, a European agency could have taken the place of EURid. In fact, the European Commission considered the option that a department of the Commission itself might take on the task of managing the .eu TLD, but it strongly favoured the creation of a non-proﬁt organisation.95 In accordance with this, Recital 9 of Regulation (EC) 733/2002 refers to non-interference, self-management and self-regulation as the underlying principles of internet management. In its Working Paper of 2002 the Commission stated that the EU would only retain “reserve powers” with a view to “ultimate oversight of the domain.”96 In a similar way, the functions of ICANN could have been taken over by an International Organisation such as the ITU. This is, indeed, the solution favoured by third world governments.97 One of the greatest advantages of a public-private partnership with ICANN lies in its ﬂexibility.98 The Bylaws of ICANN have been modiﬁed 19 times within eight years.99 A fundamental reform occurred just four years after ICANN had been established.100 It would have been impossible to amend an international treaty as quickly and as often within such a short period of time. Internet governance is still a new ﬁeld. Institutional structures are to a large degree experimental, and they are evolving rapidly. Fixing structures in an international treaty would risk cutting off further improvements. 4.2. Delegation to Private Actors The notion of public-private partnership implies the idea of a certain equilibrium between states and private actors. In political science, public-private partnership

94 95 96 97

98

99 100

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E.g. W. Kleinwächter (see supra n. 20). Commission Working Paper (see supra n. 2), pp. 7-9. Commission Working Paper (see supra n. 2), p. 5. W. Kleinwächter, “Globalisierung und Cyberspace”, Vereinte Nationen, Vol. 54 2006, p. 42. See also V. Mayer-Schönberger, “The Shape of Governance: Analyzing the World of Internet Regulation”, Virginia Journal of International Law, Vol. 43 2003, p. 661. See the different versions available at <www.icann.org/general/corporate.html>. See supra n. 47.

Multilevel Internet Governance Involving the European Union, Nation States and NGOs

is considered to be a non-hierarchical steering mode.101 In the ﬁeld of internet governance, the relationship between governments and non-state actors does not fully correspond to this concept. As seen above,102 the WSIS Geneva Declaration of Principles and the Tunis Agenda give states a primordial role. ICANN is not simply a non-state actor cooperating with the US Department of Commerce. Rather, states also exercise their inﬂuence within the institutional framework of ICANN. The GAC displays features of a supervisory board.103 These structures are better explained by the concept of delegation. As Daniel W. Drezner argues, great powers such as the USA may have a particular interest in delegating regulating competences to private actors.104 Nico Krisch concurs that states may strengthen their hegemonical powers by means of privatisation and cites ICANN as an example.105 Indeed, delegation blurs state responsibility while government retains ultimate control. In the context of internet regulation, the advantages of delegation become particularly clear. Actually, there seems to be a double delegation, ﬁrst of all by the US Department of Commerce through its Memorandum of Understanding and, to a lesser degree, by the international community of states as a whole operating through the GAC. Delegation is particularly attractive for the United States. Management of the world wide internet domain name system by a US authority would run counter to the very idea of sovereign equality as laid down in Article 2(4) of the Charter of the United Nations. An attempt to do so would encounter powerful opposition from other governments, including the European Commission. The diplomatic costs would be high. Other actors might challenge the hierarchical structure of the domain name system and implement peer-to-peer solutions that elude the competences of a central DNS authority.106 The stability and security of the internet would be in danger, and the USA would risk losing ultimate control over the internet. ICANN, by contrast, offers a ﬂexible structure, which allows

101

102 103 104 105

106

T. Risse, Transnational Governance and Legitimacy, 2004, pp. 4 et seq.; online paper available at <www.atasp.de/downloads/tn_governance_benz.pdf>. See supra s. 5.3.2. See supra s. 5.3.1.3. D.W. Drezner (see supra n. 24), p. 478. N. Krisch, “International Law in Times of Hegemony: Unequal Power and the Shaping of the International Legal Order”, EJIL, Vol. 16 2005, pp. 405 et seq. The technical feasibility of such an approach is sketched out by K.G. von Arx and G.R. Hagen (see supra n. 69), pp. 76-81. 165

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the integration of different stake-holders from all over the world.107 Even foreign governments can be integrated via the GAC. Thus, the domestic private law solution permits the domain name management to be internationalised without binding the US by an international treaty and, above all, without losing overall control. The US Department of Commerce can still impose the terms of delegation through its Memorandum of Understanding with ICANN. As long as the US government does not interfere too ﬂagrantly with ICANN’s management functions, and as long as it respects the interests of other states with regard to their respective ccTLDs, there are good reasons to believe that the international community will continue to accept the current institutional arrangement. The U.S. Principles on the Internet’s Domain Name and Addressing System, which recognise the legitimate interest of governments in the management of their respective ccTLDs,108 suggest that the US has understood this. Beyond this, delegation also presents interesting features for the international community of states as a whole. The ICANN reform process illustrates how attractive delegation actually is. In his 2002 report on reform,109 the President of ICANN proposed to have ﬁve directors nominated by governments. Such a direct representation of governments within the Board would have made state responsibility for the management of the DNS much more visible. Neither the USA nor the European Commission was interested. While strengthening the GAC,110 governments preferred to remain in the background. In fact, the now 15 directors of the ICANN Board are nominated in a complex procedure involving technical experts, the private sector and the civil society; directors must not be government ofﬁcials.111 Both Drezner112 and Krisch113 in essence agree that having recourse to private actors is a means to international dominance. Consequently, the US government chose a private organisation for the management of the DNS, whereas third world governments would rather entrust an International Organisation with ICANN’s tasks.114 It is noteworthy, however, that the European Commission

107 108 109 110 111 112 113 114

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See also V. Mayer-Schönberger (see supra n. 98), pp. 661-663. See supra note n. 86 and text accompanying. See supra n. 46. See supra s. 5.3.1.3. Art. VI(2) and Art. VI(4)(1) of the Bylaws (see supra n. 35). D.W. Drezner (see supra n. 24), p. 478. N. Krisch (see supra n. 105), pp. 404-407. See supra n. 97.

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now shares the US view.115 This might suggest that the European Commission belongs to the great powers in the ﬁeld of internet governance. In fact, the European Commission is commonly seen to be the second important state actor with regard to internet governance, the USA being the ﬁrst.116 It seems that EU inﬂuence, be it formally via the GAC or informally through diplomatic relations with the US government, has reached such a degree that for the EU the advantages of delegation prevail. Given that more than half of the states of the world are represented within the GAC,117 one might even go one step further and suggest that the international community of states as such might turn out to be a hegemonical actor with regard to other stakeholders, i.e. the private sector and civil society.

5. Conclusions Summing up, internet regulation is to a large degree consensus based and involves both public authorities and non-state actors. Horizontal structures have been combined, however, with signiﬁcant hierarchical elements. The European Union is the second important state actor in the ﬁeld of internet governance.118 It is a full member of the GAC and hosted the GAC secretariat until 2006119. The European Commission acts, in essence, like a national government. The European Union has not, however, supplanted its Member States in the ﬁeld of internet governance. In other areas, such as world trade law, where the European Community possesses exclusive competences, the European Union replaces its Member States on the international level. Member States are reduced to acting through the competent EU bodies. With regard to internet governance the EU does not stand above Member States. It is an important state-like actor, acting alongside its Member States and other nation states. Consequently, the new .eu ccTLD exists alongside the Member States’ ccTLDs. As ICANN is a major actor in internet governance, its legitimacy is a matter of concern.120 Expectations that the internet could be regulated by civil society, 115 116

117 118 119 120

W. Kleinwächter (see supra n. 97), at p. 43. M. Froomkin, “ICANN 2.0: Meet the New Boss”, Loyola of Los Angeles Law Review, Vol. 36 2003, p. 1094. See supra n. 56, text accompanying. See supra n. 116, text accompanying. See supra n. 63. See supra s. 5.3. 167

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the private sector and technical experts alone have not become true. There is a trend to reintroduce more and more elements of traditional inter-state cooperation. Above all, ICANN has largely abandoned the concepts of legitimacy by participation, by actual consent and by democratic rule. Rather, it now clearly relies on a concept of legitimacy by state involvement. Given the primordial role of state actors in the ﬁeld of international internet domain name regulation, it is astonishing to see that states operate within the framework of domestic, US private law. For powerful states at least, this is a deliberate choice.121

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See supra s. 5.4.

The Interaction between Global, Regional and National Regulation in the Definition of Terrorism Erling Johannes Husabø

1. Introduction Many states have long had provisions intended to discourage terrorism through criminalisation and effective prosecution. Throughout the last few decades, the international community has also developed instruments of international law in order to strengthen cross-border cooperation against international terrorism. Under the auspices of the United Nations, a number of conventions have been adopted that address certain acts typically involved in terrorism, such as hijacking, terrorist bombing and the ﬁnancing of terrorism.1 However, states have not been able to agree on a deﬁnition of terrorism, and so far this disagreement has obstructed the adoption of a comprehensive UN convention on the subject.2 The terrorist attacks in the USA on 11 September 2001, and subsequent attacks in other countries, have reinforced the states’ determination to overcome defects

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These conventions and protocols can be found at <www.unodc.org/unodc/terrorism_conventions.html>. B.T. v. Ginkel, “The United Nations: Towards a Comprehensive Convention on Combating Terrorism”, in: M. v. Leeuwen (ed.), Confronting Terrorism, The Hague: Kluwer Law International, 2003, pp. 207-225; M. Halberstam, “The Evolution of the United Nations Position on Terrorism: From Exempting National Liberation Movements to Criminalizing Terrorism Wherever”, Columbia Journal of Transnational Law, 2003, pp. 579-584, P. Rietjens, “The Role and Attitude of the EU Regarding a Comprehensive Terrorism Convention”, in: J. Wouters, et al., (eds), Legal Instruments in the Fight against International Terrorism: A Transatlantic Dialogue, Leiden: Nijhoff, 2004, pp. 589-602 and B. Saul, Deﬁning Terrorism in International Law, Oxford: Oxford University Press, 2006 pp. 184-190.

Follesdal, Wessel and Wouters (eds), Multilevel Regulation and the EU, 169–184 ©2008 Koninklijke Brill NV. ISBN 978 90 04 16438 3. Printed in the Netherlands.

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in previous attempts at regulation and introduce more effective counter-terrorism legislation. Both the Security Council (UNSC) and regional bodies such as the European Union and the Council of Europe have adopted more offensive tactics. The result is a comprehensive framework of obligations to criminalise and prosecute terrorism, which the states are committed to implement and enforce in national law.3 Along with the growth of the multilevel regulation of terrorism, the development of the deﬁnition of this crime has progressed rapidly. As the further analysis will show, this is a prime example of how the interaction between international institutions and national authorities may contribute to the development of a deﬁnition of a legal concept of crucial importance at the global as well as the regional and national levels.

2. Multiple Deﬁnitions at the Global Level In UNSC Resolution 1373, adopted on 28 September 2001, the Security Council declared “any act of international terrorism” a threat to international peace and security, and thereby made active use of its powers under Chapter VII of the UN Charter. The Resolution imposed on all states a far-reaching duty to criminalise the planning, preparation, ﬁnancing, support and perpetration of international terrorism. The obligations also included a duty to deny terrorists safe haven and to freeze all assets belonging to both physical and legal persons linked to international terrorism. Due to the combination of the Council’s exclusive process of adoption, the Resolution’s binding effect and the obligations’ general and lasting character, Resolution 1373 was a novel example of “world legislation” enacted by the UNSC.4

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Other international bodies have engaged in this ﬁeld too, especially the Financial Action Task Force (hereafter, FATF), which has developed nine special recommendations on terrorist ﬁnancing, available at <www.fatf-gaﬁ.org/document/9/0,2 340,en_32250379_32236920_34032073_1_1_1_1,00.html>. See, inter alia, P. C. Szasz, “The Security Council Starts Legislating”, American Journal of International Law, 2002, pp. 901-905; J. A. Frowein and N. Krisch, in: B. Simma, The Charter of the United Nations: A Commentary, Oxford: Oxford University Press, 2002 pp. 709 and 741; M. Happold, “Security Council Resolution 1373 and the Constitution of the United Nations”, Leiden Journal of International Law, 2003, pp. 593-610; B. Elberling, “The Ultra Vires Character of Legislative Action by the Security Council”, International Organizations Law Review, 2005, pp. 337-360; J. E. Alvarez, International Organizations as Law-makers, Oxford: Oxford University Press, 2005, pp. 196-197; and J. D. Aston, Sekundärgesetzgebung

The Interaction between Global, Regional and National Regulation in the Deﬁnition of Terrorism

In spite of the extensiveness of the obligations it imposes, the Resolution does not provide a deﬁnition or explanation of the concept of international terrorism. In the preceding years, however, the UN General Assembly (UNGA) had attempted to characterise acts of terrorism. In resolutions on terrorism carried by the UNGA since 1994,5 it has been described as: “criminal acts intended or calculated to provoke a state of terror in the general public, a group of persons or particular persons for political purposes …”

This very brief deﬁnition makes use of terms more familiar to social and political science than to law. It does not specify which criminal acts can be predicate offences for terrorism, and, as a result, the subjective elements form the backbone of the deﬁnition. The ﬁrst of these is the required intention or calculation to provoke a state of terror and the second that this must be done “for political purposes.” According to the wording, the causation of fear in the general public must be used as a means of achieving a political aim. Consequently, this UNGA deﬁnition requires double instrumentality.6 The International Convention for the Suppression of the Financing of Terrorism,7 adopted by the UNGA in 1999, is also of particular interest. It served as the most important model for the operative part of Resolution 1373, which also calls on the states to ratify the Convention. Although the Convention does not use the concept of “terrorism”, it does in fact deﬁne it indirectly,8 as it identiﬁes the acts that it shall be an offence to ﬁnance. Article 2 (1) litera (a) states that the convention covers all acts that constitute an offence pursuant to

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6

7 8

internationaler Organisationen zwischen mitgliedstaatlicher Souveränität und Gemeinschaftdisziplin, Berlin: Dunker Humbolt GmbH, 2005, pp. 62-119. Art. I par. 3 of the declaration annexed to GA Res. 49/60 (1994). See also GA Res. 50/53 (1995), 51/210 (1996), 52/165 (1997), 53/108 (1998), 54/110 (1999), 55/188 (2000), 56/88 (2001), as well as GA Res, 57/27 (2002), 58/81 (2003), 59/46 (2004) and 60/43 (2005). The aspect of double instrumentality is also commonly recognised in deﬁnitions of terrorism in social science, see H. G. Van der Wilt, “Het terroristische oogmerk” [The terrorist aim], in: M. M. Dolman (ed.), Terrorisme, Europa en strafrecht [Terrorism, Europe and Penal Law], Amsterdam: Amsterdam University Press, 2003, pp. 39-54, 58-59 and 72. 39 ILM 270 (2000). A. Aust, “Counter-Terrorism – A New Approach. The International Convention for the Suppression of the Financing of Terrorism”, Max Planck Yearbook of United Nations Law, 2001, pp. 285-306. 171

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one of the many UN conventions and protocols on speciﬁc types of terrorist acts. Pursuant to litera (b) it also includes: “Any other act intended to cause death or serious bodily injury to a civilian, or to any other person not taking an active part in the hostilities in a situation of armed conﬂict, when the purpose of such act, by its nature or context, is to intimidate a population, or to compel a government or an international organization to do or to abstain from doing any act.”

Compared with the UNGA resolutions, the 1999 Convention limits slightly the range of crimes that may constitute terrorism. The predicate offence must either be one of those regulated in the preceding terrorist conventions, or be committed with the intention of killing or seriously injuring another person. On the other hand, the requirement of a speciﬁc subjective motivation is broader, as the UNGA resolutions’ requirement of double instrumentality is replaced by two alternative purposes. The perpetrator must either have the purpose of provoking terror (intimidate a population) or a political purpose (compel a government etc.).9 The differences between these two deﬁnitions illustrate the lack of precise content that characterised the concept of international terrorism at the time Resolution 1373 was adopted. Although a more common understanding was evolving, neither the objective nor the subjective elements of the crime were ﬁrmly established. Considering this, the conceptual silence of Resolution 1373 could indicate that each state was awarded ﬂexibility to deﬁne terrorism in more detail when implementing Resolution 1373.10 With UNSC Resolution 1566 (2004), however, the Security Council took a signiﬁcant step towards clarifying the concept of terrorism. Acting under Chapter VII of the UN Charter, the Council recalled in paragraph 3 that: “criminal acts, including against civilians, committed with the intent to cause death or serious bodily injury, or taking of hostages, with the purpose to provoke a state of terror in the general public or in a group of persons or particular persons, intimidate a population or compel a government or an international organization to do or to abstain from doing any act, which constitute offences within the scope of and as deﬁned in the international conventions and protocols

9

10

172

The same two alternative purposes are proposed in the draft of a comprehensive UN convention on terrorism. However, it is proposed that the reference to former conventions be replaced by a genuine list of offences formulated in general terms. See the draft Art. 2(1), UN Doc. A/59/894 Appendix II. See E. Rosand, “Security Council Resolution 1373, the Counter-Terrorism Committee, and the Fight Against Terrorism”, The American Journal of International Law, 2003, pp. 339-340.

The Interaction between Global, Regional and National Regulation in the Deﬁnition of Terrorism

relating to terrorism are under no circumstances justiﬁable by considerations of a political, philosophical, ideological, racial, ethnic, religious or other similar nature.”

This deﬁnition resembles that of the 1999 Convention on Financing Terrorism insofar as it describes the acts that may constitute terrorism by referring to the previous international conventions. However, whereas the 1999 Convention adds an alternative category of acts, namely those that are intended to cause death or serious bodily injury to a civilian, Resolution 1566 uses the same kind of intention as a supplementary (and thereby limiting) requirement to the acts that are described in the respective conventions and protocols. Another interesting feature of the Resolution is the threefold formulation of terrorist purposes. The ﬁrst two purposes formulated in Resolution 1566 actually pertain to the same issue, namely the spreading of fear among people, while the third alternative concerning coercion of governments is parallel to the second alternative in the 1999 Convention.

3. Two Deﬁnitions at the Regional Level Implementing Resolution 1373 and the 1999 Convention in national criminal legislation would have been difﬁcult without the concept of terrorism being operationalised in one way or another. The agreement on a common deﬁnition of “terrorist offences” in the EU Framework Decision on Combating Terrorism (2002)11 was therefore an important step towards regional coordination. In this Framework Decision, the EU Member States undertook an obligation to criminalise terrorist offences and deem them to be such, as well as to criminalise offences relating to a terrorist group (Art. 2), certain other terrorist-linked offences (Art. 3) and aiding and abetting attempts to commit, and incitement to commit such offences (Art. 4). The deﬁnition in Article 1 is not only a key element of the Framework Decision; it also functions as a common point of reference for blacklisting suspected terrorists12 and a range of other counter-terrorism instruments and initiatives within the EU.13 11 12

13

OJ 2002 L 164/1 (adopted 13.06.02). Common Position 931/2001, which uses the same deﬁnition as the draft Framework Decision. S. Peers, “EU Responses to Terrorism”, International and Comparative Law Quarterly, 2003, p. 237 ff. and E. Dumitriu, “The E.U.’s Deﬁnition of Terrorism: The Council Framework Decision on Combating Terrorism”, German Law Journal, 2004, p. 590. 173

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Article 1 paragraph 1 of the Framework Decision states that: “Each Member State shall take the necessary measures to ensure that the intentional acts referred to below in points (a) to (i), as deﬁned as offences under national law, which, given their nature or context, may seriously damage a country or an international organisation where committed with the aim of: – seriously intimidating a population, or – unduly compelling a Government or international organisation to perform or abstain from performing any act, or – seriously destabilising or destroying the fundamental political, constitutional, economic or social structures of a country or an international organisation, shall be deemed to be terrorist offences: (a) (b) (c) (d)

(e) (f)

(g) (h)

(i)

attacks upon a person’s life which may cause death; attacks upon the physical integrity of a person; kidnapping or hostage taking; causing extensive destruction to a Government or public facility, a transport system, an infrastructure facility, including an information system, a ﬁxed platform located on the continental shelf, a public place or private property likely to endanger human life or result in major economic loss; seizure of aircraft, ships or other means of public or goods transport; manufacture, possession, acquisition, transport, supply or use of weapons, explosives or of nuclear, biological or chemical weapons, as well as research into, and development of, biological and chemical weapons; release of dangerous substances, or causing ﬁres, ﬂoods or explosions the effect of which is to endanger human life; interfering with or disrupting the supply of water, power or any other fundamental natural resource the effect of which is to endanger human life; threatening to commit any of the acts listed in (a) to (h).”

This deﬁnition is greatly inﬂuenced by the 1999 Convention on Financing Terrorism and the previous UN conventions, but it also has many individual characteristics. The list of predicate offences is largely modelled on the UN conventions, but instead of making formal references to the conventions, the Framework Decision describes the offences with its own, general terms. The scope of the list has thereby become much broader than the scope of the conventions, which e.g. is limited to violence against certain person or at certain places. The subjective condition is also more extensive because of the addition of a third alternative aim that is formulated in particularly general terms (“seriously 174

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destabilising or destroying the fundamental … structures …”). Moreover, a third condition is added in order to limit the scope of the deﬁnition, namely that the act “may seriously damage a country or an international organisation.” Despite the importance of the Framework Decision’s deﬁnition of terrorism to the regulation in the Member States, this deﬁnition has not had any perceptible effect on the global level so far. The deﬁnition launched in Security Council Resolution 1566 (2004) does have three alternative terrorist purposes, however, two of them corresponding to a single terrorist aim in the Framework Decision, namely the intimidation of a population. The Framework Decision’s third alternative aim, concerning the destabilisation of the fundamental structures of a country or international organisation, is still absent at the UN level. Neither has the EU’s deﬁnition of terrorist offences had much impact on the concept of terrorism in the Council of Europe Convention on the Prevention of Terrorism (2005).14 This convention was initiated and prepared by the Committee of Experts on terrorism (CODEXTER), whose task was to consider the need for supplementary regulation of terrorism at the European level.15 The Committee identiﬁed three kinds of preparatory acts to terrorism on which new treaty obligations (to criminalize) would add value to the already existing international instruments: public provocation to commit a terrorist offence, recruitment to terrorism, and training for terrorism. In order to deﬁne these crimes, however, the Convention also had to deﬁne the concept of terrorism itself. In line with the approach of the ﬁrst part of the deﬁnition of the 1999 Convention on Financing Terrorism, the 2005 Council of Europe Convention deﬁnes terrorist offences by formal references to the previous UN conventions and protocols (including the 1999 Convention). Thus, it lacks the independent description of the predicate offences found in the EU Framework Decision. Even more remarkably, the text of the Convention does not in itself provide for speciﬁc subjective conditions. This gives the Council of Europe’s concept of terrorist offences a much wider scope than the EU deﬁnition. In the negotiations leading to the 2005 Convention, some delegations worked to include a requirement of a speciﬁc intent, in line with the EU Framework Decision. However, the outcome was limited to a passage in the preamble, where the state parties recall that “acts of terrorism have the purpose by their nature or context to seriously intimidate a population …”. The words used in the preamble are the exact same that are used in the three-fold deﬁnition of the

14 15

ETS No. 196. For further information, see J. Vestergaard, “Strafferetlig lovgivning om bekæmpelse af terrorisme” [Criminal Legislation on Combating Terrorism], Tidsskrift for Kriminalret [Journal of Criminal Law], 2006, pp. 246-260. 175

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terrorist aim in the EU Framework Decision, except that (the English version of) the Convention uses the term “purpose” instead of “aim”. The reason why the concept of terrorist offences in the 2005 Council of Europe Convention has more in common with the conventions at the global level than with the EU deﬁnition is probably that the Council of Europe has a broader membership, which extends to e.g. Russia.16 As the EU Framework Decision was already implemented in most EU Member States, these divergences at the regional level nevertheless pose great challenges to national legislation.

4. Deﬁnitions at the National Level The EU Framework Decision on combating terrorism obliged the Member States to take the necessary implementation measures until the end of 2002.17 Although initially only a few of them have met the deadline,18 by now all have taken legislative measures to adhere to the Framework Decision and its deﬁnition of terrorist offences. This includes most of the 10 states that joined the EU in 2004.19 Even a non-member state like Norway has adjusted its legislation to the EU deﬁnition, considering this important to the cooperation with other European states in the ﬁght against terrorism.20 However, the level of detail by which national legislation is brought in line with the Framework Decision varies considerably. In general, Member States that already had a speciﬁc regulation of terrorism in their criminal law, such as Germany and the UK, seem to have been more reluctant to adjust their regulations to the conceptual frame of the EU Framework Decision.

16

17 18

19

20

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Russia has signed and ratiﬁed the 2005 Convention. The Convention is open for signature even for the European Communities, but the organisation has not signed it so far, although most Member States have. The list of signatories and ratiﬁcations can be found at . Art. 11 of the Framework Decision. See the Report from the Commission on the implementation of the Framework Decision, COM (2004) 409 ﬁnal, and the annexed staff working paper, SEC (2004) 688. By March 2007, 22 Member States had reported completion of implementation measures, see the EU Action Plan on combating terrorism of 9 March 2007, Council doc. 7233/07 p. 17. See the Norwegian Penal Code Section 147a and the reasons given by the Government in the Norwegian bill (Ot.prp.) No. 61 (2001-2002) p. 22.

The Interaction between Global, Regional and National Regulation in the Deﬁnition of Terrorism

As the function of the EU Framework Decision is to establish “minimum rules” relating to the constituent elements of the offences,21 it does not prevent the Member States from adopting wider deﬁnitions of terrorist offences. There are several examples of this in the national legislation.22 The Dutch regulation, for example, lacks the limiting endangerment condition.23 However, it remains unclear whether this was a deliberate choice. In many countries, some of the predicate offences have a wider scope than required by the Framework Decision. Sometimes this is due to a genuine interest in extending the national deﬁnition, but most often the reason seems to have been that the Framework Decision’s description of the predicate offence did not ﬁt with a single crime at the national level. Instead of adjusting an existing offence to the Framework Decisions formula, the states have chosen to include under the umbrella of terrorism an existing offence that covers a wider range of activities than the Framework Decision strictly requires. A total harmonisation of the regulation of terrorism in the EU is in any case not possible as long as criminal law is primarily a task of the national states. Due to the linguistic and legal context of each legal system, the national regulations will inevitably have their own distinctive features. The national particularities of general concepts of criminal law contribute in particular to this. A criminalisation of aiding and abetting, for instance, as Article 4 of the Framework Decision provides for, has rather different effects in a legal system that places all participators to a crime on an equal footing (“Einheitstäterschaft”, e.g. Denmark) than in legal systems that consider complicity as a kind of derived liability (e.g. the German “Teilnahmesystem”).24 More or less simultaneously with the EU Framework Decision, the states had to implement Security Council Resolution 1373 and the 1999 Convention on Financing Terrorism (which most states ratiﬁed in the aftermath of 11 September 2001). The fact that the latter contains its own deﬁnition of terrorism, distinct from the EU deﬁnition, caused some problems for the national legislators. Sweden, for instance, implemented the 1999 Convention in 2002 by making the “ﬁnancing of particular serious crimes” a new criminal offence. The deﬁnition of particular serious crimes includes a list of offences that corresponded to the

21 22

23 24

The Treaty on European Union Art. 31 (1) litera (e). See the further analysis in E. J. Husabø and I. Bruce, Fighting Terrorism through Multilevel Criminal Legislation (forthcoming). See the Dutch Penal Code Art. 83 and 83a. See the further analysis in E. J. Husabø and I. Bruce (see supra n. 22). 177

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conventions that the 1999 Convention refers to.25 When Sweden implemented the EU Framework Decision a year later, they included a separate list of predicate offences in the deﬁnition of terrorist offences.26 Although the two lists of offences have much in common, they are not identical. Moreover, the new crime of terrorism was added to the list of offences in the statute on the ﬁnancing of particular serious crimes. Such complexities in the descriptions of crimes make the content of the law difﬁcult of access, even to experts. The 2005 Council of Europe Convention on the Prevention of Terrorism has so far only been ratiﬁed by a minority of European states, and thus only a few states have started the process of implementation of the Convention at the time of writing. The national deﬁnitions of terrorism that are established in the implementation of the Framework Decision do not ﬁt well with that of the Convention (which refers to previous conventions instead of having a list of offences described in their own terms), which potentially further complicates the national legislation. As an example, Denmark has already partially amended the rules that implemented the EU Framework Decision in order to implement the 2005 Convention.27 A new Section 114a of the Criminal Code that refers directly to the different UN conventions and protocols is made subsidiary to section 114 that corresponds to the EU deﬁnition of terrorist offences. This means that an act that falls outside the EU deﬁnition, but is nevertheless comprised by one of the UN instruments, can be punished under section 114a. Even in Norway, the Government has now proposed to supplement the present provision on terrorism, which largely correspond to that of the EU Framework Decision, with a series of provisions on terrorist-related offences that largely corresponds to the respective UN conventions on speciﬁc types of terrorist acts.28

25

26

27

28

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Act on Criminal Responsibility for the Financing of Particularly Serious Crime in some cases, etc. [Lag om straff för ﬁnansiering av särskilt allvarlig brottslighet i vissa fall, m.m.], 29 May 2002, SFS 2002:444, section 2. Act on Criminal Responsibility for Terrorist Offences [Lag om straff för terrorist brott], 24 April 2003, SFS 2003:148, section 3. Act amending the Criminal Code, the Administration of Justice Act and different other Acts [Lov om ændring af straffeloven, retsplejeloven og forskellige andre love], 3 June 2006, L 217. Green Paper [høringsnotat] of 16 April 2007 from the Norwegian Ministry of Justice.

The Interaction between Global, Regional and National Regulation in the Deﬁnition of Terrorism

5. Controversies Concerning “Freedom Fighters” Notwithstanding the considerable progress in developing counter-terrorism instruments in international law, an ideological split concerning the permissible use of violence for political purposes has proven difﬁcult to overcome. At the global level, this controversy is particularly manifested in the discussion of whether, or to what extent, the principle of self-determination, recognised inter alia in Article 1 of the UN Charter,29 in certain situations may legitimise armed struggle. The General Assembly resolutions concerning terrorism adopted during the 1970s and 1980s expressly uphold the legitimacy of the struggle for self-determination by national liberation movements. More recent resolutions, however, stress that terrorism is criminal and unjustiﬁable, wherever and by whomever it is committed.30 This unconditional approach is also reﬂected in Security Council Resolution 1566 (2004), where the deﬁnition of terrorism (see above) is part of an unconditional condemnation of terrorism, and in the recommendations of the Secretary General’s High-level Panel on Threats, Challenges and Change (2004).31 However, a large number of states, primarily the Member States of the Organisation of the Islamic Conference, still insist on making an exception for freedom ﬁghters. For these states, Article 2 a) of the 1999 Convention of the Organisation of the Islamic Conference on Combating International Terrorism serves as a model:32 “Peoples’ struggle including armed struggle against foreign occupation, aggression, colonialism, and hegemony, aimed at liberation and self-determination in accordance with the principles of international law shall not be considered a terrorist crime.”

The lack of consensus on this particular issue has been one of the main problems in the negotiations on a comprehensive UN convention on terrorism. The same issue has caused lively debate at the European level, both with regard to the EU Framework Decision and in the national implementation processes. 29

30 31

32

See also Article 1 common to the 1966 UN Covenant on Civil and Political Rights, 999 UNTS 171, and the 1966 UN Covenant on Economic, Social and Cultural Rights, 993 UNTS 3, as well as the 1970 Declaration on Friendly Relations, GA Res 2625 (XXV), 24. October 1970. The principle is also recognised in customary international law. M. Halberstam (see supra n. 2), pp. 573-584 with further references. A More Secure World: Our Shared Responsibility, New York: United Nations, Vol. 129, 2004, pp. 51-52. The text of the Convention can be found at <www.oic-un.org/26icfm/c.html>. 179

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In the negotiations leading up to the adoption of the Framework Decision, the EU Member States tried to solve the issue by inserting a delimiting clause in preamble paragraph 11: “Actions by armed forces during periods of armed conﬂict, which are governed by international humanitarian law within the meaning of these terms under that law, and, inasmuch as they are governed by other rules of international law, actions by the armed forces of a State in the exercise of their ofﬁcial duties are not governed by this Framework Decision.”

This complex provision largely coincides with Article 19 (2) of the International Convention for the Suppression of Terrorist Bombings (1997),33 later also adopted in Article 4 (2) of the International Convention for the Suppression of Acts of Nuclear Terrorism (2005).34 Its main function is to exclude all actions by legal combatants in armed conﬂict, whether the acts are legal or illegal pursuant to international humanitarian law.35 In this particular context, it is worth noting that, pursuant to the 1977 Additional Protocol I to the 1949 Geneva Conventions,36 armed conﬂicts “which peoples are ﬁghting against colonial domination and alien occupation and against racist regimes in the exercise of their right of self-determination,” are regarded as international armed conﬂicts. The saving clause in the preamble of the Framework Decision therefore implies that the question whether acts of terrorism may be legitimate means in the ﬁght for self-determination, is transferred from being a question of interpretation of the Framework Decision to being a question under international humanitarian law. The saving clause in the preamble was, however, not sufﬁcient to satisfy the anxiety of some Member States that the scope of the Framework Decision was too extensive. Against this background, the Council delivered the following Statement on the same day as the Framework Decision was agreed:37 “The Council states that the Framework Decision on the ﬁght against terrorism covers acts which are considered by all Member States of the European Union

33 34 35 36

37

180

37 ILM 249 (1998). U.N. Doc. A/59/766 (April 4, 2005). See the further analysis in E.J. Husabø and I. Bruce (see supra n. 22). Protocol Additional to the Geneva Conventions of 12 August 1949, and Relating to the Protection of Victims of International Armed Conﬂicts (Protocol I) 1125 UNTS 3, Art. 1 (4). Council Doc. 14845/1/01 REV 1 p. 15. The statement also has a passage on offences committed in the course of the exercise of the fundamental right to manifest one’s opinions, but this question is not discussed here.

The Interaction between Global, Regional and National Regulation in the Deﬁnition of Terrorism

as serious infringements of their criminal laws committed by individuals whose objectives constitute a threat to their democratic societies respecting the rule of law and the civilisation upon which these societies are founded. It has to be understood in this sense and cannot be construed so as to argue that the conduct of those who have acted in the interest of preserving or restoring these democratic values, as was notably the case in some Member States during the Second World War, could now be considered as ‘terrorist’ acts.”

With this statement, the EU clearly recognises that acts that fulﬁl the requirements for terrorism may, under exceptional circumstances, be justiﬁable and legitimate. What distinguishes this statement from the delimitations of the preamble is that it is not made dependent on the concepts and limitations of international humanitarian law, e.g. whether the situation has yet passed the threshold of armed conﬂict. Instead, the Council Statement focuses closely on the basic values of the European legal culture: democracy and the rule of law. The reference to actions carried out “in the interest of preserving or restoring these democratic values” evokes associations with the idea of a “right of resistance”, which has deep historical roots in European legal philosophy,38 and is even recognised in some states’ constitutions (e.g. the German Constitution section 20 (4)).39 That the Council Statement gives the Second World War as an example indicates that such an emergency situation is unlikely within the EU for the time being. As the Framework Decision in Article 9 obliges the Member states to provide extraterritorial jurisdiction in many cases, and allows even wider national rules on jurisdiction, the question of a right to resistance may nevertheless appear on the desks of national prosecutors. The controversy on freedom ﬁghters was also much debated during domestic implementation of the Framework Decision. Although a Council statement has no formal status in EU law, it gave, together with the saving clause of the preamble, the Member States political approval for excluding certain kinds of acts falling within the literal deﬁnition of terrorist offences from the scope of the national rules. The Swedish Ministry of Justice, for instance, initially proposed to insert parts of the Council Statement into the ﬁrst paragraph of the

38

39

C. Link, “Jus resistendi, Zum Wiederstandsrecht im deutschen Staatsdenken”, in: R. Weiler, et al., Convivium utriusque iuris Alexander Dordett zum 60. Geburtstag, Vienna: 1976, pp. 55-68 and H. Koch, “Motstandsretten – en europeisk demokratiforestilling”, in H. Koch and A.L. Kjær, Europæisk retskultur – på dansk, Copenhagen: Forlaget Thomson, 2004, pp. 85-121. R. Gröschner in H. Dreier, Grundgesetz Kommentar, Band II, II, Tübingen: Mohr Siebeck, 1998, p. 214. 181

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proposed new statute.40 Although this proposal was omitted in the ﬁnal bill, the Government regarded the Statement as an argument in favour of subjecting the national rules to a restrictive interpretation.41 In Denmark, the political parties in parliament made a joint statement in the preparatory acts, based to a great extent on the Council Statement.42 The Council Statement and similar statements contained in the motives for the national legislation may give rise to the argument that the national criminal law provisions on terrorism must also be interpreted in a way that excludes certain particularly honourable acts committed in the struggle for democratic values. At least, the idea of a right to resistance may inﬂuence the use of the discretion that is left to many national prosecutors in exercising extraterritorial jurisdiction.43 The European experiences of the need to protect democracy and the rule of law, by violent means as a last resort, is hardly the only reason why the EU Council seems to be taking a less unconditional approach to freedom ﬁghters than e.g. the UNSC. The EU deﬁnition contains a much more detailed and extensive list of offences, including, for example, breaches of the national weapons regulations and threats to commit terrorist offences, and this presumably makes it problematic to exclude the possibility of justiﬁcation in exceptional situations. The deﬁnition in SC Resolution 1566, on the other hand, is limited to more serious crimes (offences committed with the intention of causing death or serious bodily injury or the taking of hostages), which lessens the need for exception clauses. Another important reason for the difference is probably the object and purpose of the deﬁnition. The Security Council’s main focus has presumably been to obtain a politically applicable deﬁnition of terrorism rather than a technical deﬁnition appropriate for national criminal legislation, which was the main purpose of the EU Framework Decision.

40 41 42 43

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Report of the Swedish Ministry of Justice, Ds 2002:35, p. 11 (Section 1). See the Swedish bill (Prop.) 2002/03:38, p. 86. See the records of the Danish parliament, 2001/2 LSV 35 annex 141. See e.g. the German Penal Code Section 129b i.f.: “Bei der Entscheidung über die Ermächtigung zieht das Ministerium in Betracht, ob die Bestrebungen der Vereinigung gegen die Grundwerte einer die Würde des Menschen achtende staatlichen Ordnung oder gegen das friedliche Zusammenleben der Völker gerichtet sind und bei der Abwägung aller Umstände als verwerﬂich erscheinen.”

The Interaction between Global, Regional and National Regulation in the Deﬁnition of Terrorism

6. Conclusion: Interaction, Controversy and Increased Complexity During the last few years, terrorism has been one of the subjects that international politics has focused on most closely. On the one hand, it visualises a tension between civilisations. On the other hand, the international community has devoted much effort to meeting the threat of terrorism with civilised countermeasures among which are the attempts to deﬁne the crime of terrorism. This survey of various deﬁnitions has illustrated that different international institutions and national authorities both interact and compete in the development of a more comprehensive deﬁnition of terrorism. The interaction consists in a reciprocal process in which elements of the crime developed at one level are adopted and elaborated further at another level, very similar to the way in which “legal transplants” take place between national legal systems.44 So far, the most visible inﬂuence has been “vertically downward,” from the global, via the regional to the national level. However, as each international organisation has its own membership and agenda, they have all proﬁled themselves by a certain independence and originality in the deﬁnition of terrorism, while even between instruments within the same region (Europe) the differences are considerable. An inﬂuence from below, from the national states to the regional instruments, can also be seen. Existing offence descriptions in some Member States have, for instance, through the negotiations in the Council, inﬂuenced some of the formulations in the list of offences in Article 1 (1) of the EU Framework Decision. Moreover, the recognition of a right of resistance in the EU Council Statement is certainly inﬂuenced by the legal traditions of some Member States, and may in turn inﬂuence other states to recognise this as a ground of justiﬁcation. Concerning the regulation of the use of violence by freedom ﬁghters, different states have for decades competed to inﬂuence the international legal instruments on terrorism. The outcome has been a variety of compromises. Some recent instruments, such as UNSC Resolution 1566, contain an unconditional rejection of grounds of justiﬁcation, without any reference to armed forces. Other instruments, both at the global and regional level, exclude actions of armed forces as far as they are governed by other rules of international law, from the scope of the instrument. Yet another approach is to have a more outspoken exception for freedom ﬁghters, with reference to either the right to self-determination of peoples (the Islamic Convention) or the principle of democracy (the EU Council

44

A. Watson, Legal Transplants: An Approach to Comparative Law, Charlottesville: University Press of Virginia, 1974. 183

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Statement). As terrorism remains a sensitive topic in international politics, these controversies have proved difﬁcult to solve, e.g. in the negotiations on a comprehensive UN convention.45 The existing diversity of deﬁnitions of terrorism at the global and regional level is especially challenging to the national states, which carry the ultimate responsibility of enforcing criminal law against individuals involved in terrorism. According to the principle of legality, recognised both in Article 7 ECHR and in many states’ constitutions, an offence must be deﬁned in a clear and concise manner. The multitude of international obligations concerning the criminalisation of terrorism, and especially the variety of deﬁnitions of the crime, makes this a far from easy task. The risk is that global and regional intergovernmental organisations, in their eagerness to regulate terrorism in their own separate ways, contribute to making national rules so complicated that it threatens the coherence, and thus the legitimacy of those rules. We should therefore hope that the experiences of complexity at the level of national law may have an impact on future negotiations at the regional and global level, strengthening the efforts to develop a more coherent, multilevel concept of terrorism.

45

184

The fact that the wording of preamble paragraph 11 of the Framework Decision is nearly identical to a compromise proposal launched in October 2001 during negotiations on a comprehensive UN convention (B. T. v. Ginkel (see supra n. 2), p. 223 and P. Rietjens (see supra n. 2), pp. 599-601), illustrates the close interaction between the different levels of regulation. However, as the Islamic states have proposed new amendments, this question remains (at the time of writing) unresolved in the negotiations on a comprehensive UN convention.

The Transatlantic Common Aviation Area: Competing Legal Orders and State SelfInterest Mirjam Kars and Helen Stout

1. Introduction 1.1. The Multilevel Regulation Perspective This chapter discusses the interaction between the international and the supranational legal order on the basis of the establishment of the Transatlantic Common Aviation Area through the Open Skies Treaty 2007 (hereafter, OST 2007). From the multilevel regulation perspective, three remarkable observations can be made: (1) the interaction is structured by law only to a limited degree; (2) the actors are the same in the two decision-making processes; (3) as a result of (1) and (2) the interaction is structured by the self-interest of dominant individual actors. In this chapter we use the battle for the transatlantic aviation market as a means of exploring the processes which determine the eventual effects of multilevel regulation. 1.2. Aviation as an International and Supranational Issue Aviation cuts across national borders and has therefore been an international issue more or less since its inception. Air transport – regardless of whether it involves passengers or freight – would be impossible without international coordination. As air law forms part of international law, aviation is subject to the regulations and principles of international law. Given the prominent position that international law accords to the sovereignty principle, it is hardly surprising that aviation has traditionally been the preserve of nation states whose primary concern during treaty negotiations is to serve the national interest – which also includes the interest of the national airline industry. Aviation now falls within

Follesdal, Wessel and Wouters (eds), Multilevel Regulation and the EU, 185–209 ©2008 Koninklijke Brill NV. ISBN 978 90 04 16438 3. Printed in the Netherlands.

Multilevel Regulation and the EU

the remit of the EU, ushering in a totally new set-up which could seriously upset the deeply entrenched hegemony of the Member States in this area. On 1 April 1997 the EU introduced a single market in air transport services, which gave every European provider the right to ﬂy intra-EU routes provided it met the legal requirements. So far it has been impossible to realise a level playing ﬁeld for European carriers because long-standing bilateral Air Service Agreements between Member States and third countries accord privileges to national airlines. The European Commission, faced with the tough challenge of removing all impediments to fair competition between European carriers, needs to ﬁnd a way of bringing an end to these bilateral agreements. The Member States are, of course, reluctant to terminate them of their own accord. To complicate things further, EU law does not take precedence over international law. There is no “natural” order for precedence between EU law and international law, in the same way that EU law, for example, takes precedence over the national law of Member States. However, as the EC Treaty is silent on the matter, there is no ready solution. The jurisprudence of the European Court does provide some openings, but it is up to the Commission to decide whether to use them. What is more, everything that the Commission embarks on takes time – and time is of the essence. The international treaty – in the form of the Open Skies Treaty 2007 – may be the Commission’s best chance of breaking the deadlock. Open Skies, which was signed by EU and US ofﬁcials at an EU-US transatlantic summit on 30 April 2007, may well have signalled the fulﬁlment of a long cherished wish of the European Commission to end anti-competitive Air Service Agreements and establish a Transatlantic Common Aviation Area, and hence realise its free-market ambitions outside EU borders as well. 1.3. Outline of this Chapter Section 2 discusses the main legal instruments for regulating the aviation services of states. It concentrates speciﬁcally on the way in which legal relations between the EU Member States and the USA are deﬁned. Section 3 discusses EU policy and the infringement proceedings that can be initiated against Member States that refuse to terminate bilateral Air Service Agreements. The case of OST 2007 shows how the key actors (in particular the European Commission and the EU Member States) deal with regulations from different levels of governance and the subsequent contradictions and uncertainties. It also shows how the Member States manipulate the loopholes in the situation to secure secular, national interests. Section 4 traces the formation of OST 2007, which the Commission intends to use to realise the aims it hoped to achieve 186

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with the infringement procedures. The formation of OST 2007 was so laborious that one might safely infer that the Member States are nowhere near ready to abandon their national agendas, despite the threat of infringement proceedings and the rulings of the European Court. Section 5 looks at the events in the light of competing legal orders. As there are no systematic external rules of precedence for resolving conﬂicts between international and EU law, there are no uniform and deﬁnitive norms for Member States. The more devious Member States seem to be exploiting this vacuum to promote their own national interest above the regional or global interest.

2. Bilateralism: Air Transport Agreements under International Law 2.1. The Chicago Convention The steady development of aviation in the 1930s and 1940s created a need for a forum where countries could agree on ﬂight routes, frequencies, arrival and departure times, interconnections, etc. On 7 December 1944 the Convention on International Civil Aviation (the Chicago Convention) was agreed. This Convention sets out regulations on airspace, aircraft registration and safety, and speciﬁes the air travel rights of the signatories. It has been revised several times since its inception. The Chicago Convention paved the way for the establishment of the International Civil Aviation Organization (ICAO) on 4 April 1947, a permanent body that serves the interests of the aviation sector at global level. The conference which led to the Chicago Convention and the subsequent establishment of the ICAO delivered another important result: the ﬁrst version of Freedoms of the Air – a standardised set of separate air rights. Freedoms of the Air eased negotiations between states as it prevented misconceptions of the other party’s intentions. The convention managed to draw up a multilateral agreement which accorded the ﬁrst two freedoms, known as the International Air Service Transit Agreement (or the Two Freedoms Agreement), for all signatories. Though it was agreed that the third, fourth and ﬁfth freedoms would be negotiated between the states, the International Air Transport Agreement (or the Five Freedoms Agreement), encompassing the ﬁrst ﬁve freedoms, was also opened for signatories. Several other “freedoms” have since been added, but they are not ofﬁcially recognised under international treaty. The ﬁrst freedom is the right to overﬂy a country without landing. The second is the right to stop over in a country for refuelling or maintenance on the way to another country without transferring passengers or cargo. The third 187

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is the right to carry passengers or cargo from one’s own country to another, while the fourth is the right to carry passengers or cargo from another country to one’s own. Rights under the third and fourth freedom are nearly always granted simultaneously in bilateral agreements between countries. The ﬁfth freedom is the right to carry passengers from one’s own country to a second country, and then to a third country. The eighth freedom – more commonly referred to as cabotage – is the right to carry passengers or cargo within the borders of a foreign country. 2.2. Air Service Agreements As the Chicago Convention sets out only a few basic principles of international air law, the details need to be ﬂeshed out in bilateral treaties, known as Air Service Agreements, which regulate the supply of air transport services. As a result, countless ASAs are currently in force which, literally, guide the air trafﬁc on a global scale. The content of these ASAs can vary widely. Freedoms of the Air can be embedded in the treaty in line with the wishes of the parties. Some ASAs protect markets, while others allow scope for competition (the latter category is relatively small). The states try to allocate the transport rights granted to their airlines on the basis of equal exchange of economic beneﬁts, i.e., quid pro quo. The key role played by ASAs in commercial civil aviation is illustrated by the fact that, at the time of writing, each EU member state has, on average, 60-70 ASAs with other countries.1 2.3. The EU Member States and their Bilateral Air Service Agreements with the US: Bilaterals and Open Skies Agreements Strictly speaking, there are two types of bilateral Air Service Agreements between EU Member States and the USA: the traditional restrictive bilaterals and the free, modern Open Skies Agreements. The traditional bilaterals establish a tightly regulated market in which the power of the airline industry is severely curtailed by, for example, pre-stipulated prices and ﬂight frequencies for each route. The Open Skies Agreements, which establish a market with scope for competition, have become increasingly popular in recent years. The degree of liberalisation varies from one agreement to another. Since 1992, the USA has signed Open Skies Agreements with 15 of the 25 EU countries. Table 1 shows the Member States with a traditional bilateral agreement with the US and the Member States with an Open Skies Agreement. Table 2 shows the main differences between a bilateral agreement and an Open Skies Agreement.

1

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COM (2002) 649, p. 4.

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Table 1: Air Service Agreements between EU Member States and the US 2 EU members with a traditional bilateral agreement with the US

Spain, United Kingdom, Ireland, Greece, Hungary

EU members with an Open Skies Agreement with the US

Portugal, France, Luxembourg, the Netherlands, Belgium, Germany, Denmark, Sweden, Finland, Poland, Czech Republic, Slovakia, Austria, Italy, Malta

EU members with no agreement with the US

Cyprus, Lithuania, Latvia, Estonia, Slovenia

Table 2: Differences between bilateral and Open Skies Agreement 3 Type of agreement

Service provider

Service frequency

Fares

Traditional bilateral agreement

Restrictions on which airlines can operate

Restrictions on which markets airlines may serve

Restrictions on pricing

Restrictions on operations to and from additional countries

No restrictions

No restrictions

Restrictions on the number of ﬂights that can be ﬂown Open Skies Agreement

No restrictions

No restrictions

Extended trafﬁc right

3. Gradual Phase-out of Bilateralism in Europe 3.1. The Single EU Aviation Market In the early 1980s, after the wave of deregulation in the USA, competition in the aviation sector was added to the European agenda, as a result of the obligations that the EC Treaty signatories had assumed with regard to the realisation of a single transport market. In 1986 it was decided that the European aviation market would be liberalised in phases. The single market has been in existence since 1 April 1997. Each airline with an EU licence is free to operate national and international routes within the Community. Under Regulation 2407/92, issued by the Council of Ministers 2 3

Bulgaria and Romania are not included in the table. <www.gao.gov>. 189

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on 23 July 1992, the Member States are obliged to grant an operating licence to each European airline that meets the ﬁxed criteria.4 Pricing is addressed by Regulation 2409/92, also issued by the Council of Ministers on 23 July 1992.5 The thrust of this regulation is that the rates for air transport services provided within the Community must be determined by market forces. With the establishment of the internal market in 1997, the European Commission felt that bilateral aviation treaties – both traditional and Open Skies – were no longer desirable. The multifarious conditions were not only creating a tangled web of rules and regulations; they were also – and most importantly – causing inequality between Community airlines. One particularly sharp thorn in the ﬂesh of the European Commission was treaties that allow only national airlines to offer transport services between two countries, thereby excluding foreign competition. The term “national airlines” is understood as airlines which are owned and controlled by subjects of the two states who are signatory to the treaty. The Commission takes the view that advantages like these can seriously undermine the market. It means that: – Community airlines which are majority-owned by parties from outside the member state have no access to international routes to and from that state; – Community airlines which are ofﬁcially registered in one member state and have a base in another member state cannot utilise their Community Treaty rights to operate international routes from both states; – Mergers and takeovers whereby EC airlines become involved with international networks are virtually impossible; – It is extremely difﬁcult to develop Community airlines with multi-hub systems, such as those operated by US airlines. Article 307 of the EC Treaty regulates the relationship between EU law and agreements between Member States and third parties. The starting point is that the EC Treaty leaves intact any agreement that was entered into before the EC Treaty came into force, unless the agreement is irreconcilable with the EC Treaty. In the latter case the member state is obliged to use all appropriate means to resolve the problem as soon as possible. As the Member States were unwilling to terminate these lucrative bilaterals, the Commission had no choice but to initiate actions for infringement of

4 5

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Ofﬁcial Journal of the European Union 1992, L 240/1. Ofﬁcial Journal of the European Union 1992, L 240/15.

The Transatlantic Common Aviation Area

Community law by Member States under Article 226 of the EC Treaty. In 1998 the Commission entered into court proceedings against eight Member States which had entered bilateral agreements with the US. Seven of these (Belgium, Denmark, Germany, Luxembourg, Austria, Finland and Sweden) have an “open skies” agreement as described in section 2.3. One (the United Kingdom) has a more restrictive traditional agreement.6 3.2. The Commission Intervenes with the Aid of the European Court of Justice In a decision of 5 November 2002 the European Court of Justice ruled unequivocally that the nationality conditions in the agreements constitute an infringement of the freedom of establishment principle as set out in Article 43 of the EC Treaty.7 The Court found that the eight agreements in question contain elements which deprive Community air carriers of their rights under the Treaty, the nationality clauses in the agreements being a clear violation of the right of establishment enshrined in Article 43. Therefore, although the Court could not have invalidated the agreements under international law, they still constitute an infringement of Community law under which Member States have a responsibility towards the beneﬁciaries of the right of establishment. The agreements that were challenged have strict clauses covering ownership and control which ensure that only airlines that are owned and controlled by nationals of the two parties to the agreement can beneﬁt from the trafﬁc rights granted. This means that Community carriers which are majority-owned by interests from outside their home member state are shut out of international routes to and from that country. Moreover, Community carriers which are ofﬁcially registered in one member state and have a base in another cannot exercise their rights under the Treaty to ﬂy international routes from both locations. These clauses therefore prevent any mergers and acquisitions involving Community carriers with international networks. They also prevent the development of Community carriers with multiple hub systems, similar to those operated by American carriers. Under Community law, such discrimination must now be considered illegal and all Community carriers, as long as they have a base in a member state, must be

6

7

In 2004 the European Commission also started court proceedings against the Netherlands (Case C-523/04). ECJ, Cases C-466/98, C-467/98, C-468/98, C-469/98, C-471/98, C-472/98, C-475/98 and C-476/98 versus United Kingdom, Denmark, Sweden, Finland, Belgium, Luxemburg, Austria, Germany. In a decision of 24 April 2007 the European Court of Justice ruled on similar grounds that the open skies deal between the US and the Netherlands was in violation of EU law (ECJ, Case C-523/04). 191

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able to ﬂy international routes from there, regardless of where their principle place of business is in the Community or where the owners come from in the Community. The beneﬁciaries of an international air transport agreement at Community level are “Community carriers”. This is the sole deﬁnition of airlines within the Community as laid down in EC Regulation 2407/92 of 23 July 1992 on the licensing of air carriers8 and EC Regulation 2408/92 of 23 July 1992 on Community carrier access to intra-Community air routes. In the same decision the Court ruled that the Community alone is empowered to regulate aviation issues with third countries which (might) have implications for the development of the European market. The Court’s judgments ﬁrmly establish the “AETR”9 principle in aviation by which the Community acquires an external competence by reason of the exercise of its internal competence, “where the international commitments fall within the scope of the common rules,” or “in any event within an area that is already covered by such rules.” The Court speciﬁes in this instance that “whenever the Community had included in its internal legislative acts provisions relating to the treatment of nationals of non-member countries, it acquires an exclusive external competence in the spheres covered by those acts.” What this means is that the EC’s powers to enter international treaties are founded not only on explicit authorisation in the EC Treaty (as in the case of trade policy (Art. 133)), but also on other provisions in the EC Treaty and subsequent decisions of the Community institutions implementing these provisions. These implicit external powers can soon become exclusive: Member States are not entitled to enter individual or collective agreements with other countries which undermine or change the meaning of any rules that the EC has introduced to enforce a common policy in the EC Treaty. When any such internal community rules are in force, the EC alone may enter and implement agreements with third countries. In this context it should be noted that, even in instances where Member States sought to reﬂect Community law directly in the text of their bilateral agreements, the Court found that they nonetheless had failed in their obligations, because Member States no longer have the competence to assume any undertakings on these issues. The Court identiﬁed three speciﬁc areas of Community-exclusive competence: airport slots, computerised reservation systems and intra-Community fares and rates. Landing rights do not fall under the exclusive external competence of the EC. As a result of the Court’s judgments, neither the Community nor the Member States are free to enter air transport agreements. Though the Court

8 9

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Ofﬁcial Journal of the European Union 1992, L 240/1. ECJ, Case 22/70, AETR.

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ruled that the EC has exclusive external powers regarding rates, computerised reservation systems and slots, but not regarding landing rights, the Member States are more or less compelled to give a mandate to the Commission to start negotiations with all the third countries which are party to existing aviation agreements in order to establish new bilateral treaties on landing rights and other matters between the countries in question and the EC as a whole. As the negotiations are bound to produce results with a mixed character, the new agreements will have to be ratiﬁed by all national parliaments. 3.3. Mixed Agreements Agreements on the question of trafﬁc rights should also offer guarantees of safety, competition and the environment. Empowerment for this wide range of issues is divided between Member States and the Community. In a transition to a new legal order it is moreover imperative that ownership and control clauses be renegotiated in a coherent manner to ensure that Community carriers can enjoy their full rights. According to the Commission, the only way to proceed is in a coordinated manner, via the Community institutions. In view of the adverse effects of a fragmented approach on the development of our airline industry, “Time to Decide” – the 2001 White Paper on European Transport Policy10 for 2010 – explicitly stressed the need for a coherent external aviation policy. In its Communication of 19 November 200211 in response to the Court judgments, the Commission set out a number of policy priorities. First among its concerns was to bring the relationship between the Member States and the US into conformity with Community law. The Commission therefore asked Member States to activate procedures for terminating their agreements with the United States and asked the Council for authorisation to open Community negotiations with the US on the creation of a new EC-US agreement in accordance with Article 300 of the Treaty.12 The Commission believes that such action is the only way to build a ﬁrm legal foundation for the EU-US relationship in air transport. After receiving a mandate from the Council of Ministers in June 2003, the European Commission opened negotiations in October of the same year on the creation of an Open Aviation Area between the EU and US. This would create a single market for air transport between the EU and US in which investment could ﬂow freely and which would allow European and US airlines to provide unrestricted air services, including the domestic markets of both parties.

10 11 12

COM (2001) 0370. COM (2002) 649 ﬁnal. COM (2003) 94 ﬁnal. 193

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Signiﬁcant legislative changes would be required in the US to achieve the mandate in full, especially when it came to removing the legal restrictions on foreign ownership and control of US airlines and on cabotage – all extremely politically sensitive issues in the US. Hence, the mandate explicitly recognises the possibility of implementing a phased agreement, but with proper mechanisms to ensure progression to subsequent phases.

4. The Formation of OST 200713 4.1. Access to Heathrow On 25 June 2003, the EU and US agreed to open negotiations on a community-wide ASA. The ﬁrst round of talks was held in Washington DC on 1 and 2 October 2003. It was already clear at this early stage that the path to an agreement would be long and arduous. Though progress was made on questions like ground handling and computerised reservation systems, the talks became deadlocked on the question of ownership rules. The main sticking points were: – Granting rights to EU carriers to offer services in the US (cabotage); – The EU demand that the US scrap the “Fly American” rule for US government employees and armed forces; – The level of foreign investment.14 The European Commission’s trump card in the negotiations was access to London Heathrow, the EU’s busiest airport for transatlantic ﬂights.15 At that time, under the Bermuda 2 Agreement, only four airlines were licensed to ﬂy

13

14

15

194

For a discussion of the negotiations on an EU-US open skies treaty, see also K.J. Button, “Opening U.S. Skies to Global Airline Competition”, Trade Policy Analysis, Vol. 5 1998, pp. 1-17. Center for Trade Policy Studies. Retrieved from <www. freetrade.org/pub5>; K.J. Button, “Toward truly open skies”, Regulation, 2002, pp. 12-16; M. Staniland, “Open skies – fewer planes? Public policy and corporate strategy in EU-US aviation relations”, European Policy Paper Series, Vol. 3 1996; A. Stober, “Who soars in open skies? A review of the impacts of anti-trust immunity, and international market deregulation on global alliances, consumers, and policy makers”, Journal of Air Transportation, Vol. 8 2003, pp. 111-133. G. Goeteyn and T. Soames, “Towards Airline Consolidation in the EU?”, Aviation Law Committee Newsletter, 2005, pp. 15-27. Ibid.

The Transatlantic Common Aviation Area

between Heathrow and the US: Virgin Atlantic and British Airways from the UK and United Airlines and American Airlines from the US.16 The negotiations resumed in Washington from 17 to 20 February 2004. At that moment, the US proposal offered unlimited ﬁfth freedom rights in the EU for all American passenger and cargo airlines, but it denied European airlines access to the US domestic market.17 In a speech on 6 April 2004, the US Transport Secretary, Norman Mineta, repeated in no uncertain terms that cabotage was a no-go area for European carriers in the US and that it was most unlikely that the US would accept a foreign investment level higher than 49 percent.18 The negotiations suffered another severe blow when the EU Transport Council rejected a proposal on 10 and 11 June 2004. The Transport Council, notably Britain, argued that the US had not made enough concessions. At that moment, after almost a year of negotiations between the European Commission and the United States, a draft agreement lay on the table. This agreement managed to reconcile the EU-US deal with Community Law by removing all discrimination between EU airlines, thus affording them equal opportunities to ﬂy on any transatlantic route between the EU and the US. However, the Transport Council was not happy with the concessions and continued to maintain that the EU airlines should get better access to the American domestic market.19 20 The proposal that was rejected in June 2004 included, for the ﬁrst time, US recognition of the concept of the “EU carrier” – a gesture which the US saw as more than generous. In general, bilateral Air Service Agreements, including Open Skies Agreements, give the airlines of each party the right to operate air services from any point in one country to any point in the other country. This “nationality clause” prevented EU air carriers from doing what every US carrier was able to do, i.e., ﬂy from any point in the United States to any point in the EU, apart from a few exceptions such as Heathrow. It is the nationality clause

16

17

18

19

20

BBC News, “EU-US in ‘open skies’ talks”, 1 October 2003, available at . TCM, “BA chief advises EC on open skies negotiations”, TCM archives breaking news, 2004, available at <archives.tcm.ie/breakingnews/2004/02/12/story133944. asp>. G. Goeteyn and T. Soames, “Towards Airline Consolidation in the EU?”, Aviation Law Committee Newsletter, 2005, pp. 15-27. European Commission, “Commission takes action to enforce ‘Open skies’ Court rulings”, European Commission Press Release, 20 July 2004, Reference IP/04/967. D. Gow, “EU and US resume talks on open sky aviation deal”, The Guardian, 18 October 2005, available at <www.guardian.co.uk/print/0,3858,5311727-110878,00. html>. 195

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that the European Court of Justice deemed incompatible with the EC Treaty. According to the US, recognition of the concept of EU carrier would generate a great many beneﬁts for the European airlines, as they would no longer be subject to nationality restrictions. Hence, from that moment on, every EU carrier could ﬂy from any city in the EU to the United States. By offering to recognise the concept of the “EU carrier”, the US cashed in on the legal situation in Europe which had arisen as a result of an announcement by the European Court of Justice that nationality clauses in the bilateral treaties were incompatible with the EC Treaty. The offer was not as generous as it appeared, given the pressure that the Commission was exerting on the Member States to terminate the bilaterals and the self-interest of the US. In exchange for recognition of the EU carrier concept, the US wanted to retain the rights under existing ASAs and to extend them to EU countries with which it had (as yet) no bilateral agreement (see Table 1).21 The British felt that increased US access to Heathrow was too high a price, particularly as the Americans were not prepared to open the US domestic market.22 A move by the European Commission on 20 July 2004 signiﬁcantly stepped up the pressure on the EU and the US to reach an Open Skies Agreement. On that date the Commission formally called upon eight EU Member States to terminate their bilateral aviation agreements with the US in response to the ruling by the European Court of Justice in November 2002. According to the Commission, this action would not have any direct consequences for the airlines, as these bilateral agreements were subject to 12 months’ notice and left enough time for the US and the EU to arrive at an open skies deal. But the US and the airlines were not so sure that the EC’s action would have no adverse effects. The Secretary General of the Association of European Airlines (AEA) said: “Once termination of the agreements becomes effective, airlines will have no legal certainty; capacity planning and pricing will be subject to governmental ad hoc approval.”23

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22

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United States Embassy in London, U.S. enters talks with EU on liberal aviation service pact, 17 October 2005. Retrieved on 22 December 2005 from <www. usembassy.org.uk/euro308.html>. A. White, “British Airways Exec slams EU-U.S. talks”, Airport Business Online, 29 November 2005. Retrieved on 22 December 2005 from <www.airportbusiness. com/article/printer.jsp?id=4430>. Euractiv, “Commission pressures US and Member states to agree ‘open skies’ deal”, European Union Information Website, 22 July 2004. Retrieved on 31 March 2005 from <www.euractiv.com/Article?tcmuri=tcm:29-128683-16&type=News>.

The Transatlantic Common Aviation Area

On 21 and 22 March 2005, the EU Transport Commissioner Jacques Barrot was due to visit Washington to relaunch the open skies negotiations. Following its action in July 2004, and prior to this visit, the European Commission instructed twelve EU Member States to terminate their bilateral agreements with the US.24 The pressure on the US and the EU to reach agreement was raised again in a joint letter sent by the associations of EU and US airports (hereafter, ACI Europe and ACI North America) to the EU and US administrations, urging EU Commissioner Jacques Barrot, and US Transport Secretary, Norman Y. Mineta, to make progress on EU-US air service negotiations. The ACIs wrote that an agreement would deliver huge economic beneﬁts for both the airports and the communities they serve by increasing business, tourism, investment and jobs.25 4.2. Ownership and Control The negotiations were re-opened in Brussels on 17 October 2005.26 Three days earlier, on 14 October, the U.S. Deputy Secretary of State for Transport at the Bureau of Economic and Business Affairs, John Byerly, delivered a conference speech in which he made a number of statements about the status of the open skies negotiations. He stressed the need for progress by referring to the uncertain legal position of the EU Member States: “The negotiations this fall are the last clear chance to achieve an historic breakthrough in transatlantic aviation before storm clouds gather on the European legal horizon in 2006.” He repeated, inter alia, that the US was still prepared to accept the concept of the EU carrier. Perhaps more interesting were his comments on the issue of ownership and control: “The possible expansion of opportunities for foreign participation in the US airline industry is, from my perspective, an issue that we Americans must examine based on whether it makes sense for us, balancing the clear advantages of increased access to capital and business know-how against concerns about safety, security, and the essential role that US carriers play in the national

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Euractiv, “EU members told to scrap US bilateral airline deals”, European Union Information Website, 17 March 2005. Retrieved on 31 March 2005 from <www. euractiv.com/Article?tcmuri=tcm:29-136887-16&type=News>. ACI Europe, “European, US airports call for urgent progress on open skies negotiations”, ACI Europe Press Release, 21 March 2005. Embassy of the United States in London, “U.S. enters talks with EU on liberal aviation service pact”, Documents and texts from the Washington ﬁle, 17 October 2005. Retrieved on 22 December 2005 from <www.usembassy.org.uk/euro308. html>. 197

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defense. … The Administration is aware of the keen interest of European parties in this issue. What is important, however, is to emphasize that this issue is being considered by the Administration on its own merits and cannot be linked to air services negotiations.”27

What Byerly, in effect, did was to exclude ownership and control from the negotiations on an EU-US open skies agreement. On 3 November 2005, in the run-up to the next round of negotiations scheduled for 14-18 November 2005 in Washington, the US Department of Transportation (US DOT) submitted proposals on the deregulation of foreign ownership of US-domiciled airlines. DOT proposed easing the restrictions on overseas investment in US airlines, giving foreign investors more input in marketing, routing and ﬂeet planning.28 The proposal did not ease restrictions on foreign ownership – foreigners would not be allowed to own more than 25 percent of the shares in a United States carrier – but the interpretation of the rules of control would be relaxed. As long as American citizens remained in charge of safety and other key aspects of airline operations, foreigners would be allowed control.29 This proposal ran into a barrage of criticism in both the US and the EU. Some felt that it went too far while others felt that it did not go far enough. The US trades unions argued that it gave too much scope for foreign control over the domestic airline industry and that such a proposal should be approved by Congress and not introduced via a change in the regulations. The proposal also proved highly controversial among British airlines. BA and Virgin complained that it did not go far enough and took the view that a true open skies agreement would abandon all ownership and control restrictions. BMI, a British rival of BA and Virgin, responded by saying that BA and Virgin were simply protecting their own privileged positions.30

27

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J.R. Byerly, Liberalizing transatlantic aviation: the case for stability, expansion, and vision. Speech, USA-BIAS conference, Washington, D.C., October 14, 2005, available at <www.state.gov//e/eb/rls/rm/2005/55129.htm>. J. Crawley, “Update 3 – US-EU reach tentative deal on ‘open skies’ pact”, Reuters, 18 November 2005, available at . Sunday Times, “EU steps in to end open skies impasse”, Sunday Times, 6 November 2005, available at <www.timesonline.co.uk/printFriendly/0,,1-528-1858944-528,00. html>. Ibid.

The Transatlantic Common Aviation Area

4.3. A Tentative Agreement The next round of negotiations went ahead as planned on 14-18 November 2005. On 18 November the negotiators announced that a tentative agreement had been reached. The deal, which still needed approval by the EU Council of Transport Ministers, was conditional on the outcome of the rulemaking process initiated by US DOT to expand opportunities for foreign citizens to invest and participate in the management of US air carriers.31 If approved, the tentative agreement of 18 November 2005 would authorise every EU and US airline: – To ﬂy between every city in the EU and every city in the US; – To operate without restrictions on the number of ﬂights, the aircraft type, or the routes, including unlimited rights to ﬂy beyond the EU and US to points in third countries; – To set fares freely in accordance with market demand; – To enter into cooperative agreements with other airlines, including code-sharing and leasing. The agreement, if approved, would come into force at the end of October 2006. It was hailed as the ﬁrst step towards opening markets and enhancing co-operation. The EU and US had agreed to begin a second round of negotiations within sixty days of implementation of the Agreement.32 The tentative agreement met with ﬁerce criticism from many quarters. Various airlines and trades unions in the US feared the impact of an increase in foreign competition and threatened to take legal action to block it. The US Congress also raised objections, particularly against the DOT proposal to give foreign investors greater control without seeking ofﬁcial approval. Some members of Congress expressed concern that giving foreign nationals more power in the managerial decisions of airlines could pose a risk to national defence and security. The tentative agreement also met with criticism from the four carriers that were licensed to ﬂy between Heathrow and the United States. The agreement meant that the lucrative market between Heathrow and the US would be opened up

31

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Euractiv, “Breakthrough in EU-US ‘open skies’ aviation talks”, European Union Information Website, 21 November 2005, available at <www.euractiv.com/ Article?tcmuri=tcm:29-149138-16&type=News>. United States Mission to the European Union, United States, European Union reach tentative air transport pact, 21 November 2005, available at <useu.usmission.gov/ Article.asp?ID=4CBDF9E6-D97A-4F1D 9F3F-C81F0C00FFD6>. 199

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to dozens of carriers. BA pointed out that the agreement would not give EU carriers cabotage rights for the US domestic market. And EU carriers would still be denied access to the segment of the US market controlled by the Fly America programme. Fly America embraces no less than one ﬁfth of the US market. The tentative agreement of 18 November 2005 did, however, get support from France as it would get rid of the nationality clause (see above) which denied European airlines US landing rights if they merged. The nationality clause had already led to fragmentation and inefﬁciency in the European industry. At that time, France desperately wanted US approval for the merger between Air France and KLM and for alliances with North West and Delta. The agreement was also supported by most of the other EU Member States, so the UK found itself increasingly out on a limb by insisting that opening up Heathrow to all US and EU airlines had to be accompanied by genuine liberalisation. The future of the negotiations now depended on what Washington decided about foreign ownership of US carriers.33 On 3 May 2006, US DOT issued a revised proposal, largely in response to the criticism from Congress. In the original DOT proposal, foreign investors would be allowed to enter into deals with US airlines, which would empower them to take operational decisions on, for instance, carrier rates and routes. In the revised proposal, US citizens with voting stock in an airline or a seat on the board would be able to veto any decision made by non-US stockholders or their representatives. The revised proposal would also lend weight to the demand that US citizens have full control over all policies and decisions relating to safety, security and national defence. Under the current regulations, foreign investors could exert no inﬂuence on any of the operations of a US airline in which they invest. According to the proposal of 3 May, the majority US investors could delegate some commercial decisions to foreign investors, such as which routes to ﬂy and which aircraft to buy and sell. The proposal of 3 May 2006 also allowed

33

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Daily Tribune, “Emulate open skies negotiators of US-EU, Filipino execs urged”, Daily Tribune, 2005, Available at <www.tribune.et.ph/metro/20051212.met03. html>. United States Mission to the European Union, Airline foreign control rule might be delayed, U.S. ofﬁcial says, 25 April 2006, available at <useu.usmission. gov/Article.asp?ID=CE1729F4-EFBB-451F-ABA7-163A2766A059>. B. Webster, “Clouds gather over the future of ‘open skies’”, Times Online, 2005, available at . A. White, “British Airways Exec slams EU-US talks”, Airport Business Online, 29 November 2005, available at <www.airportbusiness.com/article/printer.jsp? id=4430>.

The Transatlantic Common Aviation Area

foreign investors to hold up to 49 percent of the equity in a US airline even though they could control no more than 25 percent of the voting rights.34 The US Congress had 60 days to consider the revised DOT proposal. At ﬁrst, there was strong criticism from Democrats and Republicans alike. The greatest fear was that US safety, security, or national defence might be compromised. Some senators also expressed concern that foreign investors might decide to halt low-proﬁt services to rural areas of the US, such as Montana. But, even if the proposal did get through Congress, the question of EU approval was still far from certain. Daniel Calleja, Director at the EC Transport Directorate, said that he could not prejudge the decision of the EU transport ministers and pointed out that they would approve the deal if the new rule was clear, meaningful, and legally safe. One crucial element in the Council’s decision was whether the European companies were actually given more scope to invest in US airlines.35 However, in December 2006, US DOT decided to withdraw its proposal regarding the American policy on the control of airlines under pressure from some members of Congress, which threatened to block its implementation. These members of Congress argued that increased foreign inﬂuence over US airlines could pose a threat to national security.36 As EU approval for the tentative agreement depended on US concessions regarding foreign control of US airlines, the negotiations had to start again.

34

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36

United States Mission to the European Union, U.S. revised proposed rule on airlines might delay EU deal, 4 May 2006, available at <useu.usmission.gov/ Article.asp?ID=5EEBAFDA-5644-4713-838D-531E98241C2A>. United States Mission to the European Union, Ofﬁcial defends proposal on foreign investment in U.S. airlines, 9 May 2006, available at available at <useu.usmission.gov/Article. asp?ID=AD0FB082-37AE-486F-A779-DC64BCE55088>. Euractiv, “EU renew push for ‘Open skies’ deal”, European Union Information Website, 12 May 2006, available at <www.euractiv.com>. United States Mission to the European Union, Ofﬁcial defends proposal on foreign investment in U.S. airlines, 9 May 2006, available at <useu.usmission.gov/Article. asp?ID=AD0FB082-37AE-486F-A779-DC64BCE55088>. Euractiv, “EU renew push for ‘Open skies’ deal”, European Union Information Website, 12 May 2006, available at <www.euractiv.com>. The United States Mission to the European Union, U.S., EU to look at options to ﬁnalize open skies deal, 17 January 2007, available at <usinfo.state.gov/xarchives/ display.html?p=washﬁle-english&y=2007&m=January&x=20070117150349saikc einawz8.289737e-02>. 201

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4.4. A First-Stage Agreement Eventually, the negotiations resulted in a ﬁrst-stage aviation agreement drafted on 2 March 2007 by EU and US negotiators. The draft was unanimously approved by the EU Transport Council on 22 March 2007. It did not require the approval of the American Congress. The EU-US aviation agreement was signed on 30 April 2007 at an EU-US summit in Washington. It will take effect on 30 March 2008. The deadline for the start of the second stage of the negotiations is 30 May 2008.37 Under this agreement Britain will have to open the lucrative route between Heathrow and the United States to other airlines besides the four that are currently licensed to ﬂy it.38 Moreover, any EU-based airline will be allowed to ﬂy from any city in the EU to any city in the US, and vice-versa. However, although US airlines will gain free access to EU airports, EU carriers will not be allowed free access to domestic routes in the US.39 Ownership of US airlines will remain restricted. The US has insisted on precluding any foreign company from owning more than 25 percent of the voting rights in a US airline.40 US investors can invest in EU airlines if they are majority-owned by Europeans.41 The agreement includes a “suspension clause” that commits the United States to opening up more of its domestic market and relaxing its rules on foreign investment and ownership by mid-2010.42 The European Commission has threatened to cancel the deal if the United States

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European Union, press and public diplomacy delegation of the European Commission, “Open skies: Jacques Barrot in Washington to sign historic aviation deal at the EU-US transatlantic summit”, News Release, No. 44/07, 30 April 2007, available at . International Herald Tribune, “U.S. and Europe sign ‘Open Skies’ deal”, International Herald Tribune, 30 April 2007, available at <www.iht.com/bin/print.php?id=5508563>. Euractiv, “UK wins delay in EU-US ‘open skies’ pact”, European Union Information Website, 28 March 2007,available at <www.euractiv.com/en/transport/uk-winsdelay-eu-us-open-skies-pact/article-162699>. BBC News, “EU backing for ‘open skies’ deal”, BBC News, 22 March 2007, available at . Ibid. International Herald Tribune, “U.S. and Europe sign ‘Open Skies’ deal”, International Herald Tribune, 30 April 2007, available at <www.iht.com/bin/print. php?id=5508563>. Euractiv, “UK wins delay in EU-US ‘open skies’ pact”, European Union Information Website, 28 March 2007,available at <www.euractiv.com/en/transport/uk-winsdelay-eu-us-open-skies-pact/article-162699>.

The Transatlantic Common Aviation Area

does not make more concessions on foreign operators of domestic routes and foreign ownership by 2010.43 Originally, the agreement was to become effective in October 2007, but this was postponed till March 2008 at the insistence of the UK government. This gave Heathrow more time to ﬁnish building a new terminal, which would give it more capacity, and gave BA extra time to prepare itself for tougher competition in transatlantic aviation.44 The current EU-US ﬁrst-stage agreement is seen as largely favouring the United States. EU carriers in general will probably beneﬁt from it, but BA and Virgin Atlantic will face much more severe competition. A lot will depend on future negotiations between the EU and the US and the American position on opening the US market to Europe. It will probably be harder to win concessions in this area, as any attempts in this direction will generate ﬁerce political opposition in Washington.45 Indeed, BA Chief Executive Willie Walsh said that the EU had been “naive to believe the US will deliver on the next stage of liberalisation without sanctions.” He also said: “With the EU having given away their most valuable negotiating asset – Heathrow – the UK government must stand by its pledge to withdraw trafﬁc rights if the US does not deliver further liberalisation by 2010.”46 On 14 March 2007 the European Parliament passed a resolution calling on the Transport Council to approve the draft agreement. The wording of the resolution suggests that the Parliament would also have preferred more concessions from the US: “Parliament emphasises that a new EU-US aviation agreement should be balanced in terms of market access, considering also such issues as cabotage, right of establishment, ownership and de facto control and state aid. MEPs, therefore, prefer the inclusion of cabotage in the agreement, as without cabotage an agreement will tend to be in favour of US carriers, who are allowed ﬂights

43

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International Herald Tribune, “EU/US: Open skies talks face challenging second round”, International Herald Tribune, 26 March 2007, available at <www.iht.com/ bin/print.php?id=5026657>. Euractiv, “UK wins delay in EU-US ‘open skies’ pact”, European Union Information Website, 28 March 2007,available at <www.euractiv.com/en/transport/uk-winsdelay-eu-us-open-skies-pact/article-162699>. International Herald Tribune, “EU/US: Open skies talks face challenging second round”, International Herald Tribune, 26 March 2007, available at <www.iht.com/ bin/print.php?id=5026657>. BBC News, “EU backing for ‘open skies’ deal”, BBC News, 22 March 2007, available at . 203

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between points in different EU Member states, whereas EU carriers are not allowed ﬂights between points in the US. MEPs regret that no progress has been made on cabotage and that the possibility for EU carriers to exercise effective control over a US airline is still limited, even with the extended ownership clauses.”47

5. The Perspective of Competing Legal Orders 5.1. Competing Legal Orders As illustrated by the negotiations on OST 2007, international law and EU law are separate and autonomous systems. Diagram 1 shows the interrelationships between actors and legal orders relevant to OST 2007. Though separate institutionalised internal connections exist between the two legal orders, such as Article 307 of the EC Treaty, which requires Member States to align existing treaties with EU law, these connections – which are entirely explainable within the internal logic of the EC legal system – relate to the Member States and not to rights and obligations enshrined in treaties. Hence, Member States are left a great deal of room to manoeuvre in relation to time or content. The situation would be different if the conﬂicts between the two legal orders were resolved by an external judicial institution, such as a treaty that lays down only rules of precedence that systematically indicate how to deal with conﬂicts between international and EU law. Only then will there be uniform norms for Member States. At present, devious Member States can use this vacuum to promote their own national interests at the expense of the shared regional or global interest. Two legal orders with no institutional relationship constitute a unique phenomenon. The situation cannot be compared with international private law, which provides openings for resolving conﬂicts between competing national legal systems. International private law is the branch of international law and interstate law that regulates all lawsuits involving a “foreign” law element, where the outcome will differ depending on the law that is applied as the lex causae. First, it determines whether the proposed forum has the jurisdiction to adjudicate and is the appropriate venue for dealing with the dispute, and

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European Parliament, Open skies EU-US agreement – MEPs call for it to be endorsed, 14 March 2007, available at <www.europarl.europa.eu/news/expert/ infopress_page/062-4174-071-03-11-910-20070314IPR04173-12-03-2007-2007true/default_en.htm>.

The Transatlantic Common Aviation Area

Diagram 1: Interrelationships between actors and legal orders

WTO

International legal order: Bilateral ASAs, OST

EU: Comm., ECJ, CTM

MS

EU legal order: Decision ECJ 2002

National legal order: MS

USA: DOT, Congress

Legal order state

State T A

T

T A

ASA A Comm. CTM DOT ECJ EU MS OST T

Federal legal order: USA

A

Air Service Agreement between the USA and Member State EU Airlines (e.g., Virgin Atlantic, BA, North West, American Airlines) European Commission EU, Council of Transport Ministers US Department of Transportation European Court of Justice European Union Member State Open Skies Treaty USA-EU Trade Union Actor Legal order Strong relationship Weak relationship

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secondly, it determines which of the competing state laws are to be applied. It also deals with the enforcement of foreign judgments. 5.2. A Second Look at the Formation of OST 2007 As international law and EU law are not governed by any system of precedence, coordination is a question of voluntary co-operation and shared (self-) interest. This gives Member States the space to pursue their own secular interests, with the separate legal systems serving, as it were, as repertoires of arguments which Member States can apply ad inﬁnitum to push through their own aims and obstruct the aims of others. This can only take place in a context in which the Member States are leading actors in the international and EU law arenas in which the decision-making processes take place. This background goes some way to explaining why the formation of OST 2007 was such a laborious process. The following tensions dominated the formation of OST 2007: a. European Commission versus Member States who violate EC regulations by engaging in bilaterals with nationality clauses, and b. EU Member States versus USA. These two tensions are described in detail below. a. European Commission versus Member States who Violate EC Regulations by Engaging in Bilaterals with Nationality Clauses The European Commission wants to establish a level playing ﬁeld for air-transport services and is taking certain steps to achieve this: – Forcing Member States to terminate their bilaterals; – Starting infringement procedures against Member States; – Obtaining a negotiation mandate from Member States; – Signing OST 2007; – Pressing Member States to ratify OST 2007. Some Member States are trying to save the privileged position of their own national carriers, an evident example being the UK which, in collusion with British Airways and Virgin Atlantic, is trying to protect the privileged positions at Heathrow. The British are trying to prevent or impede the European Commission by procrastinating on: – The termination of bilateral agreements; – Compliance with the Court’s decision; – The ratiﬁcation of OST 2007.

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The Commission does, of course, have enforcement powers but it must exercise them judiciously and has to allow the Member States sufﬁcient time to act voluntarily and independently. It is, however, using the decision by the European Court of Justice on the conﬂict between the nationality clauses in the bilateral treaties and the EC Treaty to put pressure on the EU Member States. The Member States in question will almost certainly play for time so that they can draw maximum beneﬁt from the lucrative bilaterals, which they are fully entitled to enter into under international law. On the one hand, some EU Member States – notably the United Kingdom – have done their best to postpone an OST, perhaps in a bid to push for better conditions. On the other hand, for a long time, the same Member States have challenged the European Commission and the European Court of Justice by arguing that as there is still no overarching EU-US open skies treaty, the termination of the bilateral agreements can be postponed. Under established jurisprudence, the Commission’s powers to enter into international treaties are conﬁned to matters that are already regulated under internal EU law. What this means in the case of the aviation treaty with the USA is that the Commission can only negotiate if it has a mandate from the Member States and that it is obliged to present the results to the national parliaments for ratiﬁcation before it can fulﬁl the terms of any agreement. Inevitably, the Member States will grasp opportunities during the negotiations to obstruct and delay the process and to prevent the outcome from being incorporated as a whole in the national legislation. b. EU Member States versus USA The EU member states are trying to optimise their own interest by gaining unlimited access to the US air transport market and are therefore pushing the Americans to: – Provide cabotage rights in the US, arguing that the US already has de facto cabotage rights in Europe; – Relax foreign investment regulations; – Establish strategic alliances with US carriers; – Obtain antitrust immunity in the USA; – Relax foreign ownership and control regulations; – Abandon the Fly American Program; – Link approval for OST with US proposals on foreign ownership and control.

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The US Government is trying to open the transatlantic market in a way that enables other US carriers besides United Airlines and American Airlines to beneﬁt from the lucrative connection with London Heathrow. At the same time, it is trying to protect its own airline industry by: – Gaining access to Heathrow in exchange for “EU carrier” recognition; – Rejecting claims for cabotage rights. Arguments: safety, security and national defence, lack of reciprocity; – Concluding bilateral agreements; – Excluding foreign ownership and control from the negotiations on an EU-US open skies agreement. One striking aspect of the OST negotiations is the way in which the US appears to exploit the ambiguous legal position of the EU Member States. The European Commission is putting pressure on the Member States to terminate the bilateral agreements. The US is cleverly manipulating this situation by presenting recognition of the concept of the EU carrier as the solution to the problem of the discriminatory nationality clauses. The US is also stressing the need for progress in the OST negotiations, in light of the uncertainty regarding how long the European Commission will continue to tolerate the bilateral agreements. The Member States are important discussion partners who have at least as much clout as the European Commission in the negotiations with the USA. The theory of implicit powers of the EC only marginally restricts the negotiating freedom of the Member States, which is embedded in the sovereignty principle of international law. Parity between EU law and international law means that approval by the Member States is essential if a valid and comprehensive treaty is to be realised. This reciprocal dependence may create favourable conditions for coordinating actions at actor level (Commission and Member States), but the standpoint of the UK shows that this need not even happen.

6. Conclusion The previous sections described the interaction between international law and supranational EU law. As demonstrated by the negotiations on the establishment of a Transatlantic Common Aviation Area via OST 2007, this interaction is diffuse and ﬁtful and is neither sequential nor concurrent. This is largely due to the impossibility of hierarchical coordination between the two systems. Coordination can take place only voluntarily and through shared (self-)interest.

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This creates a vacuum which shrewd Member States can use to promote their own national interests at the expense of regional or global interests. The OST 2007 case demonstrates that they can do this; in the process, the interaction between international law and supranational EU law is shaped by the interests of dominant individual actors. As this constellation is unlikely to change, it is doubtful whether the pending negotiations on a second-stage agreement will reach a successful conclusion within a reasonable timescale.

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PART III CHALLENGES FLOWING FROM MULTILEVEL REGULATION

How Do Judges Cope with Multilevel Regulation? Rory Stephen Brown*

“And so the vision granted to your world Can no more fathom Justice Everlasting Than eyes can see down to the ocean ﬂoor. While you can see the bottom near the shore, You cannot out at sea; but nonetheless It is still there, concealed by the depths too deep.” Dante Alighieri, La Divina Commedia, Paradisio, Canto XIX, 58 (trans. by M. Musa, Penguin Classics, 1986).

1. Introduction This short analysis diagnoses a jurisprudential disease, which has manifested itself in several symptoms perceptible in judicial reasoning. The cause of this painful malady is a bureaucratic bug, innocuously called “multilevel regulation”. And it appears that the courts may not be in possession of an immune system hardy enough to defend their competences. As a result, this new virus is eating away at judicial credibility. The prognosis is bad for human rights claims too, which are fatally imperilled by a stratiﬁed executive that wields enormous power without coextensive accountability. The author, without being so bold as to speculate as to a nostrum, sets out some preventative insights designed to arrest the further deterioration of judicial reasoning and halt the concomitant dwindling of the chances of human rights claimants. Now, the central contention of this collection is that the regulatory, governmental process must now be recognised for what it is, a multilevel phenomenon that

* My warmest thanks go to the editors, to all conference participants and to Alan Gibbs for their constructive criticism. Responsibility for all opinions and errors remains my own. Follesdal, Wessel and Wouters (eds), Multilevel Regulation and the EU, 213–230 ©2008 Koninklijke Brill NV. ISBN 978 90 04 16438 3. Printed in the Netherlands.

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may render anachronistic the classical mechanisms for ensuring accountability, legitimacy and the protection of human rights. The focus of this contribution is on the (inadequate) responses provided by the courts to the new challenges posed by the interplay between global, European and National normative regimes. This paper proceeds by examining three case studies, pointing out along the way the symptoms of multilevel regulation that have begun to manifest themselves in judicial decision-making. It is not the contention here that judges are ill-equipped (or unwilling) to deal with and confront the various trappings of multilevel regulation. Rather the concern is to alert the reader to the inherent dangers to the courts posed by multilayered executive stratiﬁcation. In so doing it is hoped that benchers and members of the academy will be able to avoid (rather than unwittingly topple into) some potential pitfalls of the new global terrain. The three case studies emanate from different European Courts. They have been chosen not because they represent trends (a much more extensive empirical study would be required for this contention), but by virtue of the fact that they are exemplary in that they demonstrate how unfortunate juridical techniques may operate to the detriment of claimants asserting their fundamental freedoms. The cases are linked by two major themes. First, in each case the court is presented with a trade-off between human rights and a public interest; and second, each court must confront the interplay between national, supranational and international normative imperatives. Unavoidably therefore, each case, though it involves a very personal story of individual rights, also makes claims about the world in which we live, or, more precisely, about the nature, content and structure of the global legal order.

2. Case Study I: Human Rights on a Global Plane In Bosphorus Airways v. Ireland,1 the European Court of Human Rights was landed with a Yugoslav-owned, Turkish-chartered aircraft that had been impounded by Irish authorities. The Irish Government had denied the aircraft ﬂight clearance for three years pursuant to obligations owed under European Community (EC) Regulation 990/93; a measure adopted to implement United Nations (UN) Security Council Resolution 820 designed to expedite the cessation of violence in the former Federal Republic of Yugoslavia, (FRY). The Resolution required states to impound, inter alia, all aircraft in their territories, “in which a majority or controlling interest is held by a person or undertaking

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Bosphorus Airways v. Ireland [2005] [GC] Application no. 45036/98.

How Do Judges Cope with Multilevel Regulation?

in or operating” out of the FRY. The applicant, Bosphorus Hava Yollari Turizm, a Turkish airline charter company, alleged a breach of its right under Article 1 of Protocol No. 1 of the European Convention on Human Rights (ECHR) to the “peaceful enjoyment of its possessions”. This case is therefore of interest to us because it involves three levels of regulation: The original norm came from the UN, was copied-and-pasted into Community law and, ﬁnally, executed by the national authorities. Against this backdrop, the European Court of Human Rights was seized of a dispute where a private interest in property had to be balanced with the public interest in international security. Dismissing the airline’s application, the Court held that if, “equivalent protection [of human rights] is considered to be provided by the [international] organisation, there will be a presumption that a State has not departed from the requirements of the Convention when it does no more than implement legal obligations ﬂowing from its membership of the organisation.”2 [Emphasis added]

The Court was conﬁdent that the EC was an organisation affording “equivalent”, meaning, “comparable” protection of human rights. Consequently, its novel presumption applied to the actions of the Irish government. The Strasbourg judicial organ said that its presumption was rebuttable if it considered that the protection of Convention rights in an individual case was “manifestly deﬁcient”.3 However, it was held that, “it cannot be said that the protection of the applicant’s Convention rights was manifestly deﬁcient with the consequence that the relevant presumption of Convention compliance by the respondent State has not been rebutted.”4 As a result, the airline’s claim failed. This judgment is problematic. One’s suspicion is awakened by the fact that the text is almost unrecognisable as Strasbourg case law. Instead of the usual balancing of private right breached against public interest pursued, we are treated to a comprehensive and somewhat abstracted review of the structure of EC law.5 It is almost as if the ECtHR is struggling to understand the problem at hand; grappling in the dark for the correct rule to be applied; or attempting to reassure the reader that the EC is a system of government by law. In the place of the usual proportionality test, the rigorous scrutiny of the nature and extent of the rights violation versus the importance of the public interest at stake, the Court devotes much of the judgment to a description of the EC legal order.

2 3 4 5

Ibid., at para. 156. Ibid., at para. 150. Ibid., at para. 166. Ibid., at paras 72-99. 215

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That said, the ﬁrst clear evidence that something is amiss is perceptible in paragraph 150, where the Court states that, “the general interest pursued by the impugned action [the impounding of the plane] was compliance with legal obligations ﬂowing from the Irish State’s membership of the EC.”6 Clearly, the real interest pursued by the Irish groundstaff was the cessation of violence in the FRY. But, instead of engaging in a meaningful consideration of this interest and weighing it against the infringement of the airline’s private right to property, the Court positioned itself behind the Security Council and the European Community legal order by identifying compliance with a legal obligation as the general interest at stake. A more generous, though much more improbable reading would be that the Court, confused and dazzled by the many layers of regulation, could not discern the real interest at stake. Now, notwithstanding the importance of promoting the international rule of law, paragraph 150 seems to rest on the fallacious (or at least controversial) jurisprudential supposition that there is inherent value in the fulﬁlment of legal duties, that there is something of moral signiﬁcance in obedience to law.7 But, as we all know, the execution of a legal duty is not per se desirable because the content of that duty may be morally repugnant. An example would be the deportation laws passed by the Nazi regime in order to transport Jews to ghettos and concentration camps. Now, though there may be an interest in the development of a coherent international legal order, this interest must be measured taking into account the nature and quality of the law promulgated by the various actors in that order. It is readily arguable that the development of the international rule of law is better served by meaningful judicial scrutiny of executive action than it is by obfuscation of (or intellectual dishonesty as to) the real trade-off with human rights. Moreover, the ECtHR’s traditional role has been the scrutiny of the quality of laws by reference to legally enshrined human rights standards. It would be odd if the identiﬁcation of a norm’s mere character as “law” were considered by such a tribunal to substitute such scrutiny. The determination that a norm is law or has been promulgated by a Union established by law tells us nothing of its concordance or otherwise with human rights. The second indication of judicial reluctance to evaluate an action that resulted from multilayered executive decision making is the application of the aforementioned “equivalent protection” test. Here, the ﬁrst point to make

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Emphasis added. For ample evidence of the controversy of this proposition, see, e.g. L. L. Fuller, The Morality of Law, rev. edn, New Haven: Yale University Press, 1977; M. H. Kramer, In Defense of Legal Positivism: Law without Trimmings, New York: Cambridge University Press, 1999.

How Do Judges Cope with Multilevel Regulation?

is that the presumption raised by this test is not necessarily objectionable if the Court solicitously examines, ﬁrst, whether or not “equivalent protection” is available as a result of rights guarantees and judicial control built into the international organisation; and second, whether or not the protection of rights in a particular case was “manifestly deﬁcient”. However, the consideration of whether or not the presumption had been confuted in this case was one short and, one might say (if sarcastically inclined), “manifestly deﬁcient” paragraph long.8 It certainly did not constitute a meaningful rights review or the type of diligent analysis customarily associated with the Strasbourg court. Second, it is now possible to say that most of the Contracting States of the ECHR have a standard of rights protection that is “comparable” to that of the Convention in the sense of offering “equivalent protection” to individuals. Indeed, though fundamental human rights have long been part of EC law, it would not be controversial to say that the rights protection in some of the Contracting States is better (in the sense of procedural avenues for review and remedies available for plaintiffs) than that offered by the EC. Has the Strasbourg judiciary painted itself into the corner of the Grand Chamber? A casual observer might question what the ECtHR adds to human rights protection after this delegation of responsibility to the EC? The inadequacy of the procedural avenues for individual claimants in applications before the European judicature is well-documented and need not be overemphasised here.9 Sufﬁce to say that the jointly concurring judges isolated the main problem with Community rights protection. Put simply, “individual’s access to the Community court is limited.”10 If this is the case, why should a less rigorous test be applied to acts taken by states pursuant to European Community obligations than to acts taken by states qua national executives? As the Court afﬁrmed in Mamatkulov and Askarov v. Turkey,11 the basic right of individual petition “is one of the keystones in the machinery for the enforcement of the rights and freedoms set forth in the Convention.” It is difﬁcult to disagree with Rees J.’s assertion that Bosphorus demonstrates just

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Bosphorus Airways v. Ireland [2005] [GC] Application no. 45036/98, at para. 166. See generally, and for a good introduction to the opposing viewpoints, P. P. Craig and G. De Búrca, EU Law: Text, Cases, and Materials, 3rd edn, Oxford: Oxford University Press, 2002. Bosphorus Airways v. Ireland [2005] [GC] Application no. 45036/98, Joint Concurring Opinion Mamatkulov and Askarov v. Turkey [1999] [GC], Nos 46827/99 and 46951/99. 217

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how important it is for the EU to accede to the Convention “in order to make the control mechanism of the Convention complete.”12 Why did the ECtHR abdicate its human rights throne (or, at least, refrain from exercising its regal powers) where EC law forms the overarching normative order? Rees J.’s concurring judgment shares this concern. Though he attempts to put a positive spin on the result, the learned judge seems to rebuke the Court for adopting a test that is deferential to the Community institutions, particularly when the same result could have been achieved by way of a meaningful analysis of the interests in play. He suggests that the presumption of equivalent protection might even be “dangerous for the future protection of human rights in the Contracting States when they transfer parts of their sovereign power to an international organisation.”13 As he rightly points out, this approach is at odds with the recognition in Matthews v. United Kingdom14 that international treaties between the Contracting Parties to the ECHR have to be consistent with the provisions of the Convention. Consequently, Rees J.’s judgment slices through the layers of multilevel regulation in order to balance the relevant competing interests in a manner that is eminently more satisfactory than the majority’s overly obsequious approach to the EC. What does the judgment tell us about our general inquiry into the health of judicial reasoning and the prognosis for human rights claimants? Well, ﬁrst of all, Rees J. correctly identiﬁed the short-term danger posed by Bosphorus, that the case is “seen as an open door through which any future cases where State authorities apply Community law can pass without any further scrutiny.”15 Secondly, it seems that the long-term danger is an increasing emasculation of individual human rights claimants caused by a judicial disinclination epistemologically to penetrate the complex stratiﬁcation of executive agency in order to weigh up rights claims against public interests. Thirdly, we are left guessing as to the ECtHR’s view of the international legal order. On the one hand, international treaties entered into by the Contracting parties must be consistent with the ECHR. On the other hand, the Court does not seem inclined

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Indeed, paradoxically, this regrettable judgment may have a positive result if it adds impetus to that process. Bosphorus Airways v. Ireland [2005] [GC] Application no. 45036/98, Rees J., Concurring Opinion Matthews v. United Kingdom [1999] (ECtHR [GC], No. 248833/94, ECHR 1999-I). Bosphorus Airways v. Ireland [2005] [GC] Application no. 45036/98, Rees J., Concurring Opinion.

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keenly to examine whether or not those international accords are consonant with the rights enshrined in the Convention.

3. Case Study II: Torturous, Tortuous, or Just Tortious Reasoning? This case study considers the United Kingdom House of Lords judgment in the recent case of Jones v. The Kingdom of Saudi Arabia.16 In contradistinction to the complex gamut of case law and the welter of international instruments to which the House of Lords had reference, the facts of the case were relatively simple. The claimants “pleaded particulars of severe, systematic and injurious torture,” which they claim to have suffered at the hands of the Kingdom of Saudi Arabia.17 The facts had “not yet been investigated” and the stage had not been reached for a hearing of the merits. Rather, the House of Lords had to determine whether or not the UK courts could exercise jurisdiction in civil proceedings for torture against a foreign state and/or its ofﬁcials. The Court reinstated the immunity of the Saudi ofﬁcials (which had been removed by the inferior tribunal)18 and reafﬁrmed that of the Saudi Arabian State.19 This case is of interest in an article about multilevel regulation because it goes to the very heart of the structure of international law. The jus cogens prohibition against torture, the symbol and apex of a supposedly vertical hierarchy of international norms, was pitted against the principle of state immunity, a guardian of the crown jewel of a horizontal international system, namely; the sovereignty of nation states. The decision made by the House of Lords was deeply personal, it was a decision about the right of a man to have his claim for damages for torture heard in court. But Jones was also much more than that; it was a decision that at the same time described and prescribed how the contemporary system of modern, global, multilevel regulation is to be understood. There is no room here for a full scale analysis of the case. In what follows, sections of the judgment are exposed, upon which the combined weight of multilevel ordinances has perhaps exerted a negative inﬂuence.

16 17 18

19

Jones v. The Kingdom of Saudi Arabia [2006] UKHL 26. Ibid., para. 4. For the Appeal Court decision, see Jones v. Kingdom of Saudi Arabia [2004] EWCA Civ 1394 Jones v. The Kingdom of Saudi Arabia [2006] UKHL 26. 219

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The ﬁrst dubious section of the judgment is the very ﬁrst paragraph, where Lord Bingham, delivering the lead opinion, frames the case, stating that “the House must consider the balance currently struck in international law between the condemnation of torture as an international crime against humanity and the principle that states must treat each other as equals not to be subjected to each other’s jurisdiction.”20 With respect, this was less than accurate. The case had nothing to do with crime.21 Indeed, later in the judgment Lord Bingham acknowledged the “categorically different” nature of Mr. Jones’s tortious claim to criminal proceedings.22 In truth, Jones concerned civil proceedings for the vindication of a plaintiff’s right not to be tortured combined with his right of access to justice. It cannot be said whether Lord Bingham’s obscure presentation of the competing goods at stake was intellectual obfuscation or genuine confusion. In any event, this is of no consequence. The effect remains the same. Through camouﬂaging the claimant’s true interest, the Court failed properly to acknowledge the real substance of the claimant’s case. From the very ﬁrst paragraph of the judgment the cards were stacked against human rights because, despite access to justice being absolutely central to the case, apparently it was not one of the interests to be weighed in the judicial scales. Secondly, as soon as Lord Bingham begins to consider “the law”, his Lordship turns straight to the provisions of the British statutory scheme from 1978 and though he considers many foreign cases and international instruments,23 his Lordship tells us later in his judgment that, in “the ordinary way, the duty of the English court is to apply the plain terms of the domestic statute.” 24 Apparently, this is the case even if the statute predates all relevant international developments in this area of the law. Lord Bingham also observed that the majority in Al-Adsani v. United Kingdom,25 “were unable to discern in the international instruments, judicial authorities or other materials … any ﬁrm basis for concluding that, as a matter of international

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Jones v. The Kingdom of Saudi Arabia [2006] UKHL 26, at para. 1, quoting from Bouzari v. Iran [2002] 2002 OJ No. 1624, at para. 95 (quotation marks removed). On the development of torture as a tort, see, e.g. C. Scott, Torture as Tort: Comparative Perspectives on the Development of Transnational Human Rights Litigation, Oxford: Hart Publishing, 2001. Jones v. The Kingdom of Saudi Arabia [2006] UKHL 26, at para. 18. E.g., ibid., at para. 9. Ibid., at para. 13. Al-Adsani v. The United Kingdom [2001] Application No. 35763/97.

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law, a state no longer enjoyed immunity from civil suit in the courts of another state where acts of torture were alleged.”26

Lord Hoffman also reasserted a positivist, horizontal approach to global legal authority, stating that, “it is impossible to order competing principles according to the importance of the values which they embody” in international law because it is “based on the common consent of nations.”27 Now, what is wrong with this approach? Why should we object to a court, as a matter of course, consulting a domestic statute? Naturally we should not, particularly when domestic statutes lustre with democratic legitimacy. What is objectionable, however, particularly in a case with obvious international dimensions (here, in terms of the jurisdiction of the tort, the regulatory framework and the nationality of the parties), is reliance on an outmoded domestic provision to the effective exclusion of other, more directly relevant, more contemporary, and more equitable sources of law. When a court adopts an overly positivistic, parochial or provincial approach to sources of legal authority, it fails in its analysis to capture or pay homage to the global, transnational character of law in an “increasingly interconnected world.”28 Relatedly, it is folly to ﬁx too narrow a focus on the rule(s) without broadening the lens to include the reason for the rule(s). Judges are not parrots. We can all read statutes. The modern judge must steer a purposive, constructive and integrative course. Where a “statute for the world”, a univocal expression of the will of the world community, like the UN Convention against Torture has, as one of its core aims, the provision of remedies for plaintiffs, and a court ﬁnds that the prevailing overly complex legislative structure has neglected to provide an avenue for the vindication of this goal, it should not be outside the bounds of the judicial imagination to supply the omission of the global legislature with off-the-shelf domestic remedies.29 Judges must take care not miss the bigger picture by concentrating too hard on a particular statutory pixel. As Mayo Moran argues, there has been a departure from the model of “discrete mutually exclusive spheres of binding law” towards “a more multi-faceted integrative understanding

26 27

28

29

Ibid., at para. 61. Jones v. The Kingdom of Saudi Arabia [2006] UKHL 26, at para. 63 per Lord Hoffman. M. Moran, “An Uncivil Action: The Tort of Torture and Cosmopolitan Private Law”, in: C. Scott, (ed.), Torture as Tort: Comparative Perspectives on the Development of Transnational Human Rights Litigation, Oxford: Hart Publishing, 2001, p. 662. At the time of writing, the UN Convention Against Torture had 74 signatories and 144 parties. 221

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of sources and a broader persuasive approach to authority.”30 In sum, the judicial role must be redeﬁned to correspond to the change in executive and legislative structures. If legislative and executive power is diffuse, the judicial lens must open in order to capture the regulatory picture as a whole. The judge must be wary of a village mentality in the modern legal metropolis. Thirdly, there is a noticeable discrepancy between the Court’s enthusiastic usage of the UN State Immunity Convention as an authority supporting the proposition that there was no exception to immunity for violations of the jus cogens prohibition on torture31 and its perfunctory dismissal of the recommendations of the Committee Against Torture as to the effect of Article 14 of the UN Convention Against Torture, which mandates that Convention States (including of course the UK), “shall ensure in its legal system that the victim of an act of torture obtains redress and has an enforceable right to fair and adequate compensation.” As a result of a Canadian Court’s denial of a civil claim for redress for torture suffered abroad, the Committee Against Torture recommended that Canada “review its position under Article 14 of the Convention to ensure the provision of compensation through its civil jurisdiction to all victims of torture”.32 If ever there had been any doubt as to the extraterritorial effect of Article 14, was it not obliterated by this comment? There are several reasons why this preference for the Convention over the Committee and Article 14 is topsy turvy. First, though the House of Lords rightly observes that the Convention contains no exception for tortious violations of jus cogens, it pays only lip service to the facts that the UK has not ratiﬁed the UN Convention and that the Convention is not yet in force. Further, though Lord Bingham asserts that the UN Convention “powerfully demonstrates international thinking”,33 the Court has absolutely no regard for the fact that the Working Group on Jurisdictional Immunities of States and their Properties, having considered developments up until 1999, regarded the relationship between jus cogens norms and state immunity as too underdeveloped for inclusion in a convention designed to be “codiﬁcatory” of existing law.34 The kernel of the 30 31

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33 34

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M. Moran (see supra n. 28), p. 683. Lord Bingham calling it “wholly inimical to the claimant’s contention” Jones v. The Kingdom of Saudi Arabia [2006] UKHL 26 at para. 26. Committee Against Torture, “34th Session, Consideration of Article 19 Reports, CAT/C/CO/CAN”, (2005), at para. D(5)(f), (emphasis added). Jones v. The Kingdom of Saudi Arabia [2006] UKHL 26, at para. 8. General Assembly, Sixth Committee, “Convention on Jurisdictional Immunity of States and their Property: Report of the Chairman of the Working Group”, (1999),

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problem is that the UN Convention did not consider this infantile issue and, as a result, is ten years out-of-date in terms of the development of the law on exceptions to immunity for breaches of jus cogens rules. It is therefore entirely unsuitable for providing normative guidance and of no persuasive weight. What one might imagine would be of great persuasive weight is the recommendation of the Committee Against Torture which is recent, stems from the advisory body of a Convention to which the UK is a prominent party, and concerned the self-same issue as the Jones litigation, except, of course, in the Canadian context. Irrespective of the fact that the Committee has no legislative function, it is well within its compass to advise on the legal effect of the UN Convention Against Torture. Consequently, with respect, it is unfortunate that the House of Lords rated the legal authority of this unequivocal serious and reasonable advice as “slight”.35 Although Lord Bingham expressed his sympathy for the claimants in the event that their complaints were true, his Lordship considered that had the House of Lords heard the claim, opening the doors to the Court, it would have “represented a unilateral assumption of jurisdiction by one legal system.”36 Lord Hoffman noted the desirability of a rule requiring states to assume civil jurisdiction over proceedings for torture meted out abroad and even stated that “since international law changes,” such a rule “may have developed.”37 This notwithstanding, his Lordship went on to say that such a rule would be “contrary to customary international law, and the [UN] Immunity Convention and not in accordance with the law of England.”38 How are we to rate this reluctant conclusion? Well, ﬁrst of all, we have already established that both the law of England and the Immunity Convention are out of date. And, secondly, though Lord Hoffman considered in paragraph 45 that a rule requiring the exercise of jurisdiction may have developed, by paragraph 99 he had changed his mind, reporting that such a rule would be contrary to customary international law. Convincing stuff it is not. Confusion is also detectable in the Court’s approach to foreign case law. The Court spoke of the authority of foreign jurisprudence whilst washing its hands of its responsibility and leading role in the develop-

35 36

37 38

at paras 46-48; L. McGregor, “State Immunity and Jus Cogens”, IaCL Quarterly, Vol 51 2006. Jones v. The Kingdom of Saudi Arabia [2006] UKHL 26, at para. 23. Ibid., at para. 34, quoting from H. Fox, “Where Does the Buck Stop? State Immunity from Civil Jurisdiction and Torture?” LQ Review, Vol. 121 2006, p. 359 (quotation marks removed). Jones v. The Kingdom of Saudi Arabia [2006] UKHL 26, at para. 45. Ibid., at para. 99. 223

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ment of international rules. This is inconsistent. Courts now regularly consult foreign case law for guidance and although such decisions may not enjoy formal, binding authority, it is an indisputable source of law. The obverse of the same coin is that courts must acknowledge their responsibility both as cartographers and sculptors of the international legal landscape. If judgments are referred to as sources of law, then judges must realise the creative character of the judicial role. This conclusion is nothing more than a restatement of the truism that law is created not only by rule-makers but also by rule-interpreters, that the content of rules lies as much in their elaboration as in their design. What do these insights tell us about judges, human rights and the demands of the modern inquiry into the nature of the law and the multilevel legal order? Now, all of the conclusions here are based on a view of the judicial role upon which reasonable men can disagree. One would be forgiven for thinking that the above text is guided by idealism and notions of justice. This, however, is not the case. The argument is more sophisticated than that. It is not disputed that a judge’s job is to apply the law. Rather, the intention here is to draw attention to the fact that this job has become more difﬁcult and more nuanced. In essence, it is submitted that the phenomenon of the diffusion of sovereignty, legislative and executive authority into manifold levels and the variegated intensity the diverse normative provisions that emanate from these new organs of power, require that judges take a similarly ﬂexible, cumulative, equitable approach to sources of law and to law itself, always mindful in human rights cases of the consequences of their judgments for the public and private interests at stake. This is not justice-based rhetoric, it is a practical and prudential suggestion for contemporary lawyering.

4. Case Study III: The Terrorisation of a Terrorist? This ﬁnal case study examines the controversial decision of the Court of First Instance (CFI) in the case of Kadi v. Council and Commission,39 pertaining to measures taken by European governmental institutions to implement UN resolutions that mandated the freezing of the funds of suspected terrorists. One of the victims of these orders, Yassin Abdullah Kadi, brought an action for annulment of the European regulations, alleging breaches of his right to property, his right to be heard and his right to effective judicial review. Whilst

39

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Yassin Abdullah Kadi v. Council and Commission, ECJ, Case T-315/01 [2005]. Kadi was decided with ECJ, Case T-306/01, Ahmed Ali Yusuf and Al Barakaat International Foundation v. Council and Commission.

How Do Judges Cope with Multilevel Regulation?

mulling over the correct balance to be struck between the public interest in quashing terrorism and the judicial protection of the human rights of a plaintiff who maintained that he was an innocent businessman; and whilst contemplating how to exercise judicial control over an executive act that involved the EU, the UN and national governments, the CFI ﬂy became caught up in the sticky, dense and multilayered web of modern governance.40 Greatly simpliﬁed, the CFI held that the Community institutions had the competence to mandate the freezing of the assets of natural persons. It then declared itself incompetent to review acts of the Community institutions made pursuant to UN resolutions but reserved for itself the power to check the lawfulness of the resolutions of the Security Council on the basis of peremptory norms of international law. Though the vision of the international order described (and, indeed, prescribed) by the CFI is not necessarily unattractive, there are several serious problems with its reasoning. First, the Court feigns ﬁdelity to the treaty provisions but, in the result, is loyal only on a selective basis. Questionable logic becomes conspicuous where the CFI derived a power for the Council and Commission to adopt urgent restrictive measures affecting individuals’ funds from two treaty provisions that only conferred power to tamper with economic relations with “third countries”.41 The Court, no doubt aware of the eyebrow-raising potential of this textual trickery, attempted to justify its conclusion by holding that, “nothing in those provisions makes it possible to exclude the adoption of restrictive measures directly affecting individuals … in so far as such measures actually seek to reduce economic relations with third countries.”42 This is of course correct, but the problem with such a broad interpretation of the treaty is that the Community has power only to the extent to which that power is transferred to it by the Member States. The competence-conferring provisions are contained in the treaties and if the treaties do not contain a particular license, then it simply does not exist. One might retort, on behalf of the court, that the authority to meddle with individuals’ ﬁnancial affairs was implied in the two paragraphs that referred only to third countries. But on the basis of this reasoning, the Community could block the bank accounts of every citizen of a country so long

40

41 42

The reader interested in the approach taken by the European Court of Justice to the modalities of multi-level governance might wish to refer to ECJ, Case C-84/95, Bosphorous [1996] ECR I-3953 and ECJ, Case T-184/95, Dorsch Consult [1998] ECR II-667. Articles 60(1) and 301 EC. Yassin Abdullah Kadi v. Council and Commission, ECJ, Case T-315/01[2005], at para. 89, (emphasis added). 225

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as the intention was “to seek to reduce economic relations” with that country. This, surely, is not what the Court intended. Secondly, still addressing the question of whether or not the Community had the competence to adopt ﬁnancial sanctions against individuals, the Court decided to combine Articles 60 and 301 EC, (the aforementioned provisions permitting the Community to take economic sanctions against third countries), with Article 308 EC, which reads: “If action by the Community should prove necessary to attain, in the course of the operation of the common market, one of the objectives of the Community, and this Treaty has not provided the necessary powers, the Council shall, acting unanimously on a proposal from the Commission and after consulting the European Parliament, take the appropriate measures.”43

Then, in perhaps the most problematic part of the judgment, the Court held that, blended in this fashion, Articles 60, 301 and 308 EC gave the Community the power to impose ﬁnancial sanctions on individuals relating to the battle against the ﬁnancing of terrorism. In a nutshell, the Court derived an intrusive Community power to meddle with the ﬁnancial affairs of individuals pursuing a Union objective (the battle against terror) from three provisions that contain reference only to measures affecting third countries and objectives of the Community. The Court reached its conclusion by acknowledging a “bridge” established at Maastricht between economic sanctions under Articles 60 and 301 EC and the external relations goals of the Union.44 By way of support for this argument, the Court also mentioned the requirement of “consistency” in Article 3 TEU which instructs the Council and Commission to ensure the implementation of Union policies. It came to this conclusion despite having: (a) recognised that the battle against terrorism was not one of the Community’s objectives; (b) recalled the importance of faithfulness to the Treaty texts; and (c) ruled out the usage of Article 308 to “mitigate the fact that the Community lacks the competence necessary for achievement of one of the Union’s objectives.”45 How are we to rate this facilitative approach of the Court towards executive powers? Before pointing out the deﬁciencies here, it is worth keeping in mind that the Court was confronted here not only with a vertically stratiﬁed

43 44

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Emphasis added. Yassin Abdullah Kadi v. Council and Commission, ECJ, Case T-315/01 [2005], p. 123. Ibid., at para. 120.

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executive, involving the UN, the EU and the Member States, but also with the inconvenient, horizontal division of competences between the Union and the Community. Such complexities notwithstanding, it is submitted that this section of the judgment is deﬁcient in the following ways: First, the CFI’s loyalty to the text of the Treaties is highly selective. In order to rubber stamp the actions of the institutions with the seal of “legality”, the Court constructed a power out of three articles and, ﬁnding its own construction shaky, invented a semantic “bridge” between the Union’s battle against terror and the Community’s economic competences. Secondly, though the Court was happy to direct us to the requirement of consistency contained in Article 3 TEU, it conveniently omitted the further requirement in that article, that the Community institutions act according to their “respective powers”. As we have have seen, the Community simply did not have the power to meddle in the ﬁnancial affairs of individuals in the ﬁght against the terrorist ﬁnanciers. Why is the court disloyal to the treaty provisions? The CFI did not attempt to hide its motivations: “[S]tates are no longer to be regarded as the only source of threats to international peace and security [and] the Union and its Community pillar are not to be prevented from adapting to those new threats.”46 With these strong sentiments, Christian Tomuschat agrees. Otherwise, he tells us, the Union would be impeded from discharging its obligations vis-à-vis the United Nations, a consequence that would unleash a new institutional crisis.47 It is typical and commendable for an international lawyer to take this stance, supportive as it is of a harmonious, integrated, global legal system. The present struggle against terrorism requires swift, not hasty co-coordinated international responses.48 However, though we may accept and even applaud the cohesion-promoting pragmatism of the CFI’s broad-brush approach to community competences, we must retain a perspective on the price at which we buy this multileveled institutional efﬁcacy. It must be recalled that institutions exist for the beneﬁt of human beings and not vice versa. We must also be mindful of the fact that the

46 47

48

Ibid., at para. 133. C. Tomuschat, “Case T-306/01, Ahmed Ali Yusuf and Al Barakaat International Foundation v. Council and Commission (judgment of the Court of First Instance of 21 September 2005); Case T-315/01, Yassin Abdullah Kadi v. Council of the European Union and Commission of the European Communities (judgment of the Court of First Instance of 21 September 2005)”, CMLRev., Vol. 42 2006. R. S. Brown, “Executive Power and Judicial Supervision at European Level: A Case Study of Yassin Abdullah Kadi v. Council of the European Union and Commission of the European Communities”, EHRL Review, Vol. 4 2006, p. 463. 227

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executive tends to reserve for itself the power to decide when there is a threat, the nature and gravity of that threat, and the type and severity of the response required. Without meaningful judicial control, in the absence of accountability such powers are nothing short of tyrannical. It is odd, therefore, for a court proprio motu – the competence of the institutions to interfere with individual ﬁnances formed no part of Mr. Kadi’s pleadings – to elaborate such an expansive understanding of executive prerogatives. In the second part of the judgment, having denied that it was competent to review Security Council resolutions on the basis of Community law, the Court declares that it may adjudicate on the lawfulness of resolutions of the Security Council against jus cogens norms, “understood as a body of higher rules of public international law binding on all subjects of international law, including the bodies of the United Nations, and from which no derogation is possible.”49 As the present author has noted elsewhere, “Kadi is profound in that it asserts a right of judicial control over measures taken by the Security Council based on inalienable human rights.”50 Presumably, this right of review is enjoyed by all courts, opening up the entire legal system to human rights claimants. Again, this is not necessarily problematic, but the pretty picture painted by the CFI was marred by the next part of the judgment in which the Court simply omits to elucidate how it arrived at the conclusion that the right to be heard, the right to property, and the right to judicial control have attained the status of non-derogable jus cogens norms of international law. In fact, it is debatable whether or not these rights have matured into general principles of customary international law, let alone peremptory norms, a status which only very few rights enjoy.51 This part of the judgment is deprived of persuasive clout by virtue of the fact that the origin of the rights promised is not explained. Consequently, the jus cogens rights take on an ethereal, rhetorical or chimerical aspect and a plaintiff could be forgiven for complaining that his freedoms are merely illusory or theoretical whilst the encroachments thereupon are real and substantial. Needless to say, the Court attempted to achieve a morally, politically and legally palatable result. And though the vision of decentralised review that the CFI dreams up is progressive and idealistic, the enormous pressure on the intellectual capacity of the Court to come up with a solution that is consonant

49 50

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ECJ, Case T-315/01, at para. 226. R. S. Brown, “Executive Power and Judicial Supervision at European Level: A Case Study of Yassin Abdullah Kadi v. Council of the European Union and Commission of the European Communities”, EHRL Review, Vol. 4 2006, p. 466. See, e.g. F. Francioni, “The Rights of Access to Justice under Customary International Law”, in Access to Justice, (Forthcoming in Oxford University Press, 2007).

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with a, discordant, embryonic, international “unsociety”52 caused cracks in the reasoning, visible for all to see. In conclusion, although the CFI was at pains to present a world view and discover a stratiﬁed global legal order that is principled, politically prudent and pragmatic, where the UN and the EU legal orders are not separate but part of an integrated international legal system,53 multilevel regulation puts the Court’s logic under great strain. Furthermore, as Kadi testiﬁes, the likely losers are judicial credibility and human rights claimants.

5. Conclusion Through analysis of three human rights cases which featured multilevel regulatory structures and normative codes, this paper has hopefully served to warn of some of the deleterious effects of multilevel governance on judicial reasoning, and, correspondingly, on human rights. Perhaps the above can be distilled into three main messages. The ﬁrst message is that judges must be vigilant to changes in the shape and contours of governmental power. The transfer of law-making power from the legislative to the executive is a step on the well-trodden path to totalitarianism.54 The upsurge in the perception of terrorist threats has seen governments wresting power from legislatures all over the world. To give but three examples: In the East, a martial government in Bangladesh is sweeping citizens and ex-Prime Ministers into jail in a so-called “corruption purge”. In Europe, London police have shot a man for the heinous crime of looking “Muslim” and jumping on a tube train. In the West, US citizens can be indeﬁnitely detained on presidential say-so. The list is long and undistinguished. If courts also crumble under pressure from government, all power, though distributed in many levels, becomes pooled in the executive branch. Surely if power affecting individuals is exercised at different levels, checks and balances should obtain at each of those levels. Otherwise, without judicial control at any level, we are faced with a large, multilevel executive wielding enormous power and accountable to no-one. Hannah Arendt deserves great credit for observing that, “rule by Nobody is

52

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To borrow Professor Allott’s quaint phrase from P. Allott, Eunomia: New Order for a New World, Oxford: Oxford University Press, 1990. Yassin Abdullah Kadi v. Council and Commission, ECJ, Case T-315/01[2005], at para. 208. For an eclectic analysis of this phenomenon in the German and Italian contexts, see G. Agamben, State of Exception, Chicago: University of Chicago Press, 2005. 229

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clearly the most tyrannical of all, since there is no-one left who could even be asked to answer for what is being done.”55 The second message is that critical reﬂection on the nature of government is imperative. In order properly to protect human rights, and to strike the correct balance between private and public interests, courts must reconceive their role in the contemporary legal order. In order for this to happen, members of the judiciary and the academy must reﬂect on the nature of that order. The dogmatic incantation of horizontal or vertical models of the global legal system is gravely myopic. The real picture is more nuanced and complex. Thirdly, the executive cannot be expected to exercise self-control. It is precisely the complexity of the present day notion of law and regulation that may lead to fears that we cannot expect our judge to break through the densely-layered executive armour with his puny gavel. Perhaps judicial abdication, or, better, resignation, should signal that the executive has become too complex, too large, too unwieldy, too difﬁcult to comprehend and hold to account. Perhaps our attention should turn to the merits and demerits of multilayered, global governmental structures as opposed to small geopolitical spheres where the notion of self-government is not a sedative lie and where the separation of powers is clearly deﬁned. The modern global governance is not necessarily a paradigmatic system of rule for its depths may be too deep for us to fathom justice. It is hoped that this article goes some way to preventing courts from digging holes too deep from which to escape, from painting themselves into corners of their dimly lit chambers. To the extent that this collection is an attempt to subject multilevel regulation to critical scrutiny, it is a step in the right direction.

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H. Arendt, On Violence, Harvest, 1969, p. 38.

Legal Protection of the Individual Against UN Sanctions in a Multilevel System Clemens A. Feinäugle

1. Introduction Multilevel regulation in the ﬁeld of “international security law” has developed quickly in the last decade (and even quicker after 11 September 2001). There is a desideratum to regulate international problems like terrorism in an international setting on the UN level. This makes sense since it is a way to tackle such problems with a coordinated and coherent approach by the international community. However, alongside the adoption of such international regulatory instruments, complications have surfaced, most strikingly with regard to the position of the individual in this international regulatory context. This paper endeavours to give some insight into the problems of one of the most interesting cases of the impact of international regulation on the individual. Some time has passed since smart sanctions came into vogue to serve as a means to maintain or restore international peace and security. But the debate over this practice of the United Nations (UN) Security Council has resurfaced recently in the context of the legal protection of the individual against such action. The issue of individuals affected by UN sanctions not only raises questions of legal protection, it also touches on some typical problems of the multilevel system, especially the question of which courts should entertain such cases and how to reconcile the court action on the different levels. Under these aspects, the paper analyses the Yusuf 1

1

CFI, T-306/01, Yusuf and Al Barakaat International Foundation v. Council of the European Union and Commission of the European Communities, judgment of 21 September 2005, (hereafter, Yusuf ). Another case decided the same day on the same matter by the CFI, T-315/01, Kadi v. Council and Commission, will not be dealt with separately here since there are only minor differences from the Yusuf case.

Follesdal, Wessel and Wouters (eds), Multilevel Regulation and the EU, 231–259 ©2008 Koninklijke Brill NV. ISBN 978 90 04 16438 3. Printed in the Netherlands.

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Ayadi 2 and Möllendorf 3 cases of the European Court of First Instance (CFI) and the European Court of Justice (ECJ), respectively, as well as the Bosphorus 4 judgment of the European Court of Human Rights (ECtHR).5 Subsequently, the latest developments in the listing and delisting procedures of the 1267 Sanctions Committee on the UN level are dealt with.6 After an assessment of this status quo of legal protection against UN sanctions7, the paper looks at possible future developments in regional court action in its conclusion.8

2. Status Quo of Jurisprudence 2.1. Yusuf (T-306/01) a. The Facts The sanctions regime calling for sanctions against the Taliban was initiated by UN Security Council Resolution 1267 (1999).9 It was later extended to cover Osama bin Laden as well as persons and entities associated with him and listed in a UN list.10 The EC Council then adopted a Regulation.11 Its Art. 2 required

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6 7 8 9 10

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CFI, T-253/02, Chaﬁq Ayadi v. Council of the European Union, judgment of 12 July 2006, (hereafter, Ayadi). ECJ, C-117/06 – Möllendorf and others, pending. European Court of Human Rights (ECtHR), judgment of 30 June 2005 of Bosphorus Hava Yollari Turizm Ve Ticdaret Anonim Sirketi v. Ireland, (hereafter, Bosphorus). See infra, section 2; the paper conﬁnes itself to examining the case law on the UN sanctions regime under UN resolutions 1267 (1999) et seq. under which individuals are directly listed on the UN level and does not deal with UN resolutions 1373 (2001) et seq. under which states are encouraged to ﬁght terrorism but no list of individuals is maintained on the UN level. On this second sanctions regime and also the respective case law, see C. Eckes, “Trapped between Courts or how European Terrorist Suspects Lost their Right to a Remedy”, also in this volume. See infra, section 3. See infra, section 4. See infra, section 5. UN Security Council Resolution 1267 (1999) of 15 October 1999. UN Security Council Resolution 1333 (2000) of 19 December 2000, paras 8 (c) and 12. EC Council Regulation No. 467/2001 of 6 March 2001. The adoption of this

Legal Protection of the Individual Against UN Sanctions in a Multilevel System

the freezing of all funds and other ﬁnancial resources belonging to any natural or legal person, entity or organisation listed in an Annex to that Regulation. As a result of the amendment of its list by the UN Sanctions Committee12, the Commission decided to add a number of other persons and organisations to the Regulation’s Annex, including the applicants.13 In their application to the CFI for the annulment of the latter EC Regulation14, the applicants put forward, inter alia, the breach of their human rights by this Regulation.15 b. Substance of the Application: Scope of Review and Human Rights Violations The applicants maintained that the contested regulation infringed their right to property, the right to a fair hearing and the right to judicial review.16 In its judgment the Court ﬁrst determined its scope of review – due to the Security Council Resolutions involved.17 Thus, – in the context of a multilevel system – the Court gave its opinion on the relation of the UN legal order to the national and Community legal orders.18 As to the scope of review, the Court argued that the EC was bound by the obligations under the UN Charter19 and that therefore there was basically no review of EC regulations based on Security Council Resolutions.20 However, in case of an infringement of ius cogens, judicial review was possible.21

12

13

14 15 16 17 18 19 20 21

regulation followed the previous adoption of Common Position 2001/154/CFSP of 5 November 2001. The UN Sanctions Committee is a committee of the Security Council composed of all its members, responsible in particular for ensuring that the states implement the measures imposed, for designating the funds or other ﬁnancial resources concerned and for considering requests for exemptions from the measures imposed, see UN Security Council Resolution 1267 (1999), at para. 6. EC Regulation 2199/2001 of 12 November 2001, amending EC Regulation 467/2001. Ibid. See CFI, Yusuf, at para. 190. Ibid., at para. 190. Ibid., at paras 260-283. Ibid., at paras 231-259. Ibid., at para. 243. Ibid., at para. 276. Ibid., at para. 277. 233

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These ﬁndings can be brieﬂy 22 assessed as follows: ﬁrst, the fact that the Court held that UN obligations were binding on the EC was probably based more on political reasons than on sound legal reasoning, since the argument that the EC is not a member of the UN would seem to suggest a conclusion to the contrary. Secondly, the standard of ius cogens seems of little help: it is disputed which norms form part of ius cogens and which human rights qualify as peremptory.23 In any case, human rights protection was thus limited to a minimum standard. By this, the Court seems to support the trend in multilevel court action to develop standards of “emergency” review with preconditions so vague that the Court retains great ﬂexibility to entertain similar cases in the future.24 In its argumentation the Court denied the violation of human rights: The infringement of the right to property is seen to be justiﬁed by the ﬁght against terrorism.25 As to the violation of the right to a fair hearing, the Court argued that the applicants may resort to the UN sanctions committee with an application for a delisting procedure26, i.e. the procedure for the removal of individuals and entities from the list. The Court held that even if an opportunity to be heard was deﬁnitively excluded, this would not violate the fundamental rights, if the Security Council found that there were grounds that militated against a communication of the facts and evidence adduced against the persons listed.27 With the right to an

22

23

24

25 26 27

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An analysis in greater depth can be found in C. Eckes, “Trapped between Courts or how European Terrorist Suspects Lost their Right to a Remedy”, also in this volume. See Hobe in: S. Hobe and O. Kimminich, Einführung in das Völkerrecht, 8th edn, Tübingen: A. Franke, 2004, p. 174. See in this regard the Bosphorus case for the reviewability of Convention’s states’ acts based on an EC Regulation originating from a UN Security Council resolution under the European Convention on Human Rights (ECHR) standards (“manifestly deﬁcient protection of Convention’s rights” at para. 156) or the “Solange II” decision of the German Federal Constitutional Court, collection of the decisions of the Federal Constitutional Court Vol. 73, p. 155 for the reviewability of EC law under German constitutional law. See CFI, Yusuf, at paras 296, 298, 303. Ibid., at para. 309. Ibid., at para. 320.

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effective remedy, according to the Court, the immanent limitation of immunity of international organisations applied.28 At no point does the Court seriously consider whether the invoked rights may be classiﬁed as ius cogens.29 The ﬁght against terrorism is used here as the ultimate reason to justify human rights infringements. That indicates that there is not even a weighing of interests30 in cases of individual sanctions but the argument “war against terrorism” always prevails. An application for delisting no longer requires that the person concerned petitions his/her government of residence or citizenship to bring the case to the Committee.31 However, the person listed must still provide justiﬁcation for the delisting request and offer relevant information.32 Instead of legal protection, this is the presumption of innocence reversed. If we agree that the UN is at least bound by ius cogens, it is not consistent to deprive the individual of even this small legal protection by granting international organisations immunity. The overall result of the CFI’s judgment is poor human rights protection against UN sanctions.33 2.2. Ayadi (T-253/02): Please Do It at the National Level! The development of legal protection against UN sanctions took a new turn when the CFI decided the cases Ayadi and Hassan.34 With regard to the relationship of the different levels (UN, EC, national level) the Court played the ball back to the national level: according to the court’s ﬁndings, it was for the national courts to enforce the granting of diplomatic protection to the individual seeking to be removed from the Sanctions Committee’s list on the UN level.

28 29 30

31 32 33

34

Ibid., at para. 323. C. Tomuschat, “Case Note”, CMLRev., 2006, pp. 547, 549. The necessity of such a weighing of interests is also stressed by Christian Tomuschat (see supra n. 29), p. 539: “Obviously, adequate solutions can only be found by carefully weighing the interests in issue. Society must be protected against terrorist threats, but the rights and interest of persons in the focus of intelligence services may not be sacriﬁced arbitrarily.” See infra section 3. Committee Guidelines in the amended version of 29 November 2006, para. 8 (a). E. Cannizzaro speaks of “technical ﬂaws of the decisions” and “scarce judicial wisdom”, “A Machiavellian Moment? The UN Security Council and the Rule of Law”, International Organizations Law Review, 2006, p. 204. CFI, T-49/04, Faraj Hassan v. Council of the European Union and Commission of the European Communities, judgment of 12 July 2006, (hereafter, Hassan). 235

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a. The Facts After the respective amendment of its list by the UN Sanctions Committee, the EU Commission updated the list annexed to the regulation implementing the UN sanctions regime by inserting the name of the applicant.35 The applicant asked the CFI to annul that part of the EC Regulation that regulates the freezing of assets.36 The applicant claimed, inter alia,37 that there was a breach of the fundamental principles of subsidiarity, proportionality and respect for human rights.38 b. Substance of the Application: Upholding Yusuf and Pledging the National Level to Grant Diplomatic Protection Concerning the alleged breach of the principles of proportionality and of observance of human rights, the Court simply points to its decisions in the Yusuf 39 and Kadi 40 cases, stating that it had already answered all the related legal questions there.41 To the applicant’s criticism of the ineffectiveness of the exemptions and derogations from the freezing of funds, the Court adds that the respective UN Resolution 1452 (2002) and the implementing EC Regulation 561/2003 had a wording that allowed, to a large extent, for the ﬂexible determination of exemption cases by the competent national authority.42 The Court then takes reference to the Bosphorus case of the ECtHR,43 arguing that even in that case where the property of an “innocent” external operator was affected by the measures taken, this was seen as justiﬁed in order to achieve the goals pursued by the sanctions.44 Thus, in the case under examination the measures taken would a fortiori be justiﬁed.45

35 36 37

38 39 40 41 42 43 44 45

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EC Regulation 2062/2001 of 19 October 2001. Ayadi, para. 57. The question of a competence to adopt the respective provision and procedural problems is not dealt with here; rather, the focus is on the violation of human rights. Ayadi, para. 82. See supra Yusuf at 2.1. See supra n. 1. Ayadi, para. 115. Ibid., para. 119. See infra at 2.4. Ayadi, para. 124. Ibid. para. 125.

Legal Protection of the Individual Against UN Sanctions in a Multilevel System

The Court then turns to the applicant’s argument that the lacuna in judicial protection of the individual was incompatible with the ius cogens standard found in the Yusuf case due to the ineffectiveness of the machinery for review. In this regard, the Court refers to the delisting procedure of the Sanctions Committee.46 However, the new aspects for the legal protection of the individual against UN sanctions are placed at the end of the judgment47: Here, the court refers the applicant to the use of diplomatic protection in order to be removed from the list.48 The Court considers the right to present a request for removal from the list to the Sanctions Committee as a right which forms part of the Community legal order.49 It therefore sees the Member States as bound by the fundamental rights guaranteed on the EU level,50 which produce several standards that remind of fair trial standards. The Member States must observe the following standards when deciding on grants of diplomatic protection: they must ensure that the persons concerned are enabled to argue their point of view effectively before the competent national authorities.51 At the same time, Member States may not refuse to hand the request to the Sanctions Committee due only to the fact that the person concerned could not provide precise information because conﬁdentiality barred him/her from discovering the precise reasons for his/her inclusion in the list.52 Furthermore, the Member States must act promptly and present the request to the Sanctions Committee, without delay and fairly and impartially.53 If the applicant was not granted diplomatic protection he/she should bring the case to a national court and invoke the right to present a request for removal from the list there.54 The national courts have to apply the European law principles of equivalence and effectiveness,55 which forbid, for example, granting the national government total immunity with a view to diplomatic protection.56 46 47 48 49 50 51 52 53 54 55 56

Ibid. para. 137. Ibid. paras 141-153. Ibid. paras 141, 153. Ibid. para. 145. Ibid. para. 146. Ibid. para. 147. Ibid. para. 148. Ibid. para. 149. Ibid. para. 150. Ibid. para. 151. Ibid. para. 152. 237

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In the Ayadi case, the CFI creates some supranational fair trial principles that serve to guide member states’ decisions on granting diplomatic protection in cases of delisting requests. The member states’ obligation to enable their citizens to argue their point of view effectively before the competent national authorities can be likened to the right to be heard and to defend oneself. The obligation not to refuse the promotion of the request too hastily due to a lack of precise information provided might be seen as a facilitation of defence, although it is far from the presumption of innocence. The CFI tries to (ab)use the supranational character of the EC law to get rid of the difﬁcult question of legal protection against UN sanctions: The member states have to observe the guidelines of the Court representing supranational law and the Court may declare the next application for annulment of a listing regulation inadmissible if the applicant did not go for diplomatic protection ﬁrst. Thus, in multilevel terms, the EU level binds the national level to behave in a certain way on the international level. 2.3. Möllendorf (C-117/06) This case, which has its origin in Germany, has not yet been decided upon by the ECJ. But since the Advocate General’s opinion57 usually plays a major role in the decisions taken by the Court, it is worthwhile looking at what Advocate General Paolo Mengozzi recommends in this case, which deals with the transfer of real property. a. The Facts58 The two applicants in the proceedings before the national courts wanted to sell their real property to three buyers. The parties concluded a contract, the buyers paid the price and were already allowed to use the land. It was only the entry of the names of the buyers in the cadastral register that was lacking as a last step for the transfer of the property under German law. When the notary made the application for the appropriate entry in the register, the competent body refused to undertake the entry on the grounds that one of the buyers had in the meantime been listed in the Consolidated list of the Sanctions Committee

57

58

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ECJ, Case C-117/06 – Möllendorf and others, (hereafter, Möllendorf ); Opinion of the Advocate General Paolo Mengozzi of 8 May 2007; to be found at <www.curia. europa.eu/en/content/juris/c2.htm>, see Case C-117/06. Ibid., paras 27-49.

Legal Protection of the Individual Against UN Sanctions in a Multilevel System

of the UN and the implementing EC Regulation 881/2002, which had been amended accordingly.59 The notary took the case to court on behalf of the sellers, who wanted to perform their contractual obligation of transferring the property and on appeal invoked a violation of the sellers’ right to property. The Higher Regional Court under the preliminary ruling procedure of Art. 234 ECT submitted the case to the ECJ, asking whether Art. 2 para. 360 and Art. 4 para. 161 of EC Regulation 881/2002 prohibited the performance of a contractual obligation to transfer real property to a person listed in Annex I to this Regulation. If the answer to this ﬁrst question was in the afﬁrmative, the German court as a second point wanted to know whether the named provisions of the Regulation prohibited the transfer of property rights even if the contract had been concluded and the purchase price had been paid before the listing of the buyer was published in the Ofﬁcial Journal of the EC. b. Opinion of Advocate General Mengozzi62 The Advocate General recommends the ECJ to answer both questions in the afﬁrmative, i.e. in the sense of a prohibition of a transfer of the property to the listed person. The Advocate General arrives at this result by constructing the EC Regulation grammatically, systematically and teleologically, whereas this interpretation is seen as being guided by the wording and aim of the UN Resolution 1390 (2002) on which the EC Regulation is based. Since the wording of operating para. 2 (a) of the named Resolution was clear on including each and every “making available” of funds, ﬁnancial assets and economic resources, the transfer of the property in the present case was covered by the prohibition. So far, the Opinion reminds of the decisions in Yusuf and Kadi with the strict implementation of the UN sanctions supported by the CFI. The Advocate General

59 60

61

62

OJ 2004 L 241/12. EC Regulation 881/2002 of 22 May 2002, Art. 2 para. 3. “3. No economic resources shall be made available, directly or indirectly, to, or for the beneﬁt of, a natural or legal person, group or entity designated by the Sanctions Committee and listed in Annex I, so as to enable that person, group or entity to obtain funds, goods or services.” EC Regulation 881/2002, Art. 4 para. 1: “1. The participation, knowingly and intentionally, in activities, the object or effect of which is, directly or indirectly, to circumvent Article 2 or to promote the transactions referred to in Article 3, shall be prohibited.” Möllendorf, paras 50-108. 239

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then proceeds, however, to take into account the sellers right to property which would, according to the sellers, be negatively affected since under German law they were obliged to pay damages or refund the purchase price if they failed to perform the property transfer. This disadvantage was a consequence of the national law but the national authorities had to respect the human rights acknowledged in the EC when they applied the civil statutes. Doubts could only arise in the present case with a view to the already allowed use of the land which raised the question if there were indeed economic resources made available to the listed buyer when the transfer of property was granted. The transfer of property to the listed buyer could then be seen, or as the case may be not be seen, as a prohibited advantage. With regard to the sellers’ right to property the prohibition was rather violating the general principle of proportionality, instead. But since the evidence was not sufﬁcient to arrive at this conclusion, it was up to the national court to decide on the proportionality in the present case. The opinion of the Advocate General in the Möllendorf case adds further tesserae to an ever more complete picture of the 1267 UN sanctions regime’s effects on the European and national level in a system of multilevel regulation as it is drawn and suggested by the EU level itself. One novelty in the case law on this sanctions’ regime is that this case does not deal with the question of the listing itself but with the application of the sanctions foreseen in the UN Resolutions and the implementing EC Regulation to a concrete case.63 That makes a big difference when it comes to human rights protection in this multilevel system: whereas in the cases Yusuf and Kadi the CFI could – even with some convincing argument, as is admitted – conﬁne itself to the statement that there was no discretion on the EU level with regard to the listing of the applicants which took place on the UN level, in the Möllendorf case, which does not deal with a simple asset freeze but with more complex details, questions of interpretation of the respective EU Regulation forced the Advocate General to take the right to property of the sellers into account. While putting persons on the list is examined by the CFI by using the slim standard of a breach of ius cogens, the sanctions’ application that follows the listing is a matter subject to EC human rights standards. Before praising the entry of human rights protection into the UN smart sanctions realm, however, mention should be made of the fact that the present case deals with a collateral damage: the applied protection of the right to property concerns the right of the sellers who are negatively affected but not listed. Nevertheless, it is the ﬁrst example where a weighing of interests is indicated in a 1267 sanctions case.

63

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This was also the case in Bosphorus, but in Bosphorus there was no list maintained at UN level.

Legal Protection of the Individual Against UN Sanctions in a Multilevel System

Another striking point is that the Advocate General does not hesitate to interpret the EC Regulation in the light of the UN Resolutions. Although he does not infer deeper or remote meanings into the UN Resolutions’ paragraphs, it is interesting to see that the EC level feels free to interpret UN acts. This is multilevel regulation adopted at one level (UN) and applied and interpreted at another level (EC). 2.4. Bosphorus Airways a. The Facts The applicant was a Turkish airline charter company, Bosphorus Airways, that had leased an aircraft from Yugoslav Airlines.64 During maintenance services in Ireland, the aircraft was seized by the Irish authorities65 under an EC Regulation.66 This regulation had implemented the UN sanctions regime against Yugoslavia.67 This regime obliged states on their territories, inter alia, to impound all aircraft controlled by persons and undertakings in or operating from Yugoslavia.68 During court action, the ECJ in an Art. 234 EC preliminary reference procedure found that the aircraft was covered by the named EC Regulation so that the impoundment was lawful.69 The Irish Supreme Court considered itself bound by the preliminary ruling and thus implemented it by declaring the impoundment lawful.70 Bosphorus Airways complained that the

64 65 66 67

68 69

70

Bosphorus, paras 11, 12. Ibid., para. 23. EC Regulation 990/93 of 26 April 1993. EC Regulation 990/93 implemented UN Security Council Resolution 820 (1993) of 17 April 1993; other resolutions of this sanctions regime against Yugoslavia included UN Security Council Resolution 713 (1991) of 25 September 1991 implementing a weapons and military embargo, UN Security Council Resolution 724 (1991) of 15 December 1991 establishing a Sanctions Committee, UN Security Council Resolution 757 (1992) of 30 May 1992 regulating sanctions and UN Security Council Resolution 787 (1992) of 16 November 1992 tightening sanctions against Yugoslavia. UN Security Council Resolution 820 (1993) of 17 April 1993, para. 24. ECJ, Case C-84/95, Bosphorus v. Minister for Transport, Energy and Communications and others [1996] ECR I-3953. See Bosphorus, paras 58, 59. 241

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manner in which Ireland implemented the sanctions regime to impound its aircraft amounted to a violation of its right to property.71 b. Substance of the Application The Court approved its jurisdiction ratione materiae although the impoundment as a national act by Ireland was based on the EC regulation. Judge Ress stated in his concurring opinion that this deviated far from the Court’s former approach, which was to consider the EC immune from even indirect review by the ECHR.72 And in fact, the Court stated – with respect to the Community judicial organs as well – that it examines whether the effects of their adjudication are compatible with the Convention.73 As to the violation of the right to property in this case, the Court ﬁnds that compliance with legal obligations ﬂowing from Ireland’s membership in the EC was a legitimate interest of considerable weight.74 Reconciling the convention states’ position of being bound by the Convention and the EC’s position of not being bound thereby, the court applied the following scheme of examination: it held that the protection of fundamental rights by EC law could be considered to be “equivalent” to that of the Convention system.75 Consequently, the presumption arose that Ireland did not depart from the requirements of the Convention when it implemented legal obligations ﬂowing from its membership in the EC.76 Such a presumption could be rebutted if, in a particular case, it was determined that the protection of Convention rights was “manifestly deﬁcient.”77 In the Bosphorus case, the Court argued that the protection of Convention rights was not manifestly deﬁcient.78 The Court stated that compliance with legal obligations ﬂowing from the membership in the EC was a legitimate interest.79 This inclusion of a multilevel

71 72 73 74 75

76 77 78 79

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Ibid., para. 107. Bosphorus, concurring opinion of Judge Ress, para. 1. Bosphorus, para. 143. Ibid., para. 150. Ibid., para. 165. For the “equivalent protection” doctrine see C. Costello, “The Bosphorus Ruling of the European Court of Human Rights: Fundamental Rights and Blurred Boundaries in Europe”, Human Rights Law Review 2006, p. 107. Bosphorus, para. 165. Ibid., para. 156. Ibid., para. 166. Ibid., para. 150; G. Gaja, “‘Solange’ Yet Again?”, in: B. Fassbender, et al., (eds), Völkerrecht als Wertordnung. Common Values in International Law. Festschrift

Legal Protection of the Individual Against UN Sanctions in a Multilevel System

problem into the examination of proportionality seems a wise move since the Court thereby becomes very ﬂexible in developing the preconditions of review in similar cases. The construction of a rebuttable presumption leaves the EC lawmaker virtually free from judicial review, whereas at the same time the Court still retains a certain competence to review such cases. It remains unclear in which cases the protection of human rights will be considered as “manifestly deﬁcient.” Judge Ress in his concurring opinion suggested that this would be the case if the ECJ departed from “well-established Strasbourg case-law.”80 By examining whether the effects of the adjudication of the Community judicial organs are compatible with the Convention the ECtHR becomes a control organ for the EC level. 2.5. Comparison of the Judgments After this look at the three judgments and the Advocate General’s Opinion the status quo of legal protection of the individual against UN sanctions in Europe can be summed up as follows: legal protection of the individual in the EC is already procedurally restricted by Art. 230, IV EG. Now, the Court of First Instance further limits legal protection – due to the binding nature of UN Resolutions – to an examination of violations of ius cogens. These ﬁndings were conﬁrmed by the judgment in the Ayadi case.81 Instead of granting legal protection itself, the Court tries to oblige the national level to bring more delisting requests before the Sanctions Committee by establishing supranational rules that guide the member states in granting diplomatic protection. Möllendorf shows ﬁrst indications of the application of EC human rights protection and the principle of proportionality, but regarding collaterally damaged third parties. This amounts to human rights protection for the listed individual in all cases, but only in respect of very few human rights (namely those of a ius cogens nature). The European Court of HR clearly states that it also scrutinizes the decisions of the European courts. A limitation of legal protection results from the compliance of the international organisation with the Convention standards, which generates a presumption that can only be rebutted if human rights protection

80 81

für/Essays in Honour of Christian Tomuschat, Kehl: Engel, 2006, p. 523 marks this statement of the Court as strange since he would have expected the Court to assess the general interest pursued by the EC measure rather than to consider that compliance with EC law was per se an “important general interest.” Bosphorus, concurring opinion of Judge Ress, para. 3. Ayadi case; see above 2.2. 243

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was “manifestly deﬁcient.” This amounts to protection of all human rights, but only in the cases of manifestly deﬁcient protection in a particular case. However, the Court’s solution would only be satisfactory if the EC courts afforded human rights protection equivalent to that of the Convention. But only a few months after the Bosphorus judgment the CFI in the Yusuf case proved the opposite.

3. Latest Developments on the UN Level: Focal Point and Revised Listing and Delisting Procedure Although it is not a court, it is worthwhile examining if and how the Sanctions Committee of the UN, which administers the Consolidated list, is contributing to the protection of the individual against UN sanctions through the listing and delisting procedure which it is conducting. An appropriate procedure respecting human rights could be one step towards improving human rights protection of the individual in the multilevel system. The latest developments of protection mechanisms for the individual against being incuded on the list of the 1267 Sanctions Committee were brought by the two new UN Security Resolutions 1730 (2006) of 19 December and 1735 (2006) of 22 December 2006. Resolution 1730 (2006) establishes rules that are valid for all active Sanctions Committees82 of the UN. A revised version of the delisting procedure is introduced as well as the wholly new, so-called “focal point”. Resolution 1735 (2006) solely addresses the 1267 Sanctions Committee and conﬁrms the previous measures imposed by Resolutions 1267 (1999), 1333 (2000) and 1390 (2002). But in addition to that, the Resolution provides amendments and new preconditions for the listing procedure, i.e. preconditions which must be fulﬁlled before a new name is included in the list of the Sanctions Committee. These contents of the new UN Security Council Resolutions are analyzed here in order to discover if there is an improvement of the legal protection of the individual against UN sanctions on the UN level. 3.1. Innovations brought about by UN Resolution 1735 (2006) It is worthwhile looking at UN Resolution 1735 (2006) since it particularly provides for several new aspects of the listing procedure. One would not necessarily expect these aspects to be of relevance to the topic of legal protection since such protection would seem to address mainly the question of how to 82

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For a survey of these committees see <www.un.org/Docs/sc/committees/INTRO. htm>.

Legal Protection of the Individual Against UN Sanctions in a Multilevel System

be removed from the list. But the goal of the respective individual or entity, to avoid being listed by the Sanctions Committee, is even better attained if in the forefront of the listing a procedure applies that helps prevent the listing of innocent persons. a. The Previous Listing Procedure The previous listing procedure83 as it was laid down in the guidelines of the 1267 Sanctions Committee in the revised version of 21 December 2005, addressed the concerns of the individual only to a minor extent84: The Committee should update the list regularly when it received relevant information.85 The proposed additions to the list should include, to the extent possible, a description of the information that formed the basis or justiﬁcation86 for the listing.87 The proposed additions should also include relevant and speciﬁc information to facilitate the identiﬁcation by competent authorities of the persons and entities concerned, such as – in the case of individuals – the name, date of birth, place of birth, nationality etc. and in case of groups, undertakings or entities the name, acronyms, address, headquarters, subsidiaries etc.88 The Committee had to consider expeditiously requests to update the list on the basis of relevant information received and had to communicate any modiﬁcation to the list immediately to the member states and to make the updated list available on the internet.89

83

84

85 86

87 88 89

J.A. Frowein, “The UN Anti-Terrorism Administration and the Rule of Law”, in: P.-M. Dupuy, et al., (eds), Völkerrecht als Wertordnung. Common Values in International Law. Festschrift für/Essays in Honour of Christian Tomuschat, Kehl, Engel, p. 785, at p. 790 et seq. S. Dewulf and D Pacquée, “Protecting Human Rights in the War on Terror: Challenging the Sanctions Regime Originating From Resolution 1267 (1999)”, Netherlands Quarterly of Human Rights, 2006, p. 619 are naming the criticized points of the listing procedure: obscure procedure, closed sessions but most notably the silence of the guidelines as to the criteria the Committee uses to make its decision: “This staggering briefness is utterly disproportionate with the consequences of being blacklisted.” Committee Guidelines in the revised version of 21 December 2005, para. 6(a). J.A. Frowein, (see supra n. 83), p. 794 suggests that “[w]here somebody has been listed without proper justiﬁcation, the decision by the 1267 Committee must be considered to be an ultra vires decision.” Committee Guidelines in the revised version of 21 December 2005, para. 6(b). Ibid., para. 6(c). Ibid., para. 6(d) and (e). 245

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b. The Amended Listing Procedure UN Resolution 1735 (2006) introduces several amendments to the listing procedure.90 Pursuant to the Committee guidelines, which were amended on 12 February 2007 according to the Resolution’s contents, the Committee will regularly update the Consolidated List when it has agreed to include relevant information received from member states or international or regional organisations.91 The member states are encouraged to establish a national mechanism or procedure to identify and assess appropriate candidates for listing.92 They are further encouraged to seek additional information from the state(s) of residence and/or citizenship of the individual or entity concerned.93 Member states shall provide a statement of case with as much detail as possible on the basis(es) for the listing, including speciﬁc ﬁndings demonstrating the association or activities alleged, the nature of the supporting evidence (e.g. intelligence, media etc.), other supporting evidence and details of any connection with an already listed individual or entity.94 Member states are called upon to use the cover sheet attached to the Resolution when proposing names for the list.95 The respective information should now, in addition to the information requested by the former guidelines, include – for the purpose of accurate identiﬁcation – for individuals all available names, citizenship, gender, employment/occupation, national identiﬁcation number, addresses and current location.96 For entities, the tax or other identiﬁcation number and other names by which it is known or was formerly known are to be submitted.97 The Committee will then consider the proposed listings on the basis of the “associated with” examination standard

90

91

92 93 94 95 96 97

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Interestingly, some of the amendments provided for in the Resolution, which was only adopted on 22 December 2006, were already included – partly verbatim – in the revised version of the Committee guidelines of 29 November 2006. See for example paras 5 and 6 of UN Res. 1735 (2006) and para. 6(d) of Committee Guidelines in the amended version of 29 November 2006. Committee Guidelines in the amended version of 12 February 2007 to be found at <www.un.org/sc/committees/1267/pdf/1267_guidelines.pdf>, para. 6 (a). Ibid., para. 6 (b). Ibid., para. 6 (c). Ibid., para. 6 (d). Ibid., para. 6 (e). Ibid. Ibid.

Legal Protection of the Individual Against UN Sanctions in a Multilevel System

described in Resolution 1617 (2005).98 The Committee takes the decision by consensus.99 If consensus cannot be reached – not even after further consultations – the matter may be submitted to the Security Council.100 In case of new entries to the Consolidated List the publicly releasable portion of the statement of case shall be included in the communication to the member states.101 It is for the designating States to identify those parts of the statement of case which may be released publicly.102 The Secretariat shall, after publication but within two weeks after a name is added to the Consolidated List, notify the Permanent Mission of the country or countries where the individual or entity is believed to be located and, in the case of individuals, the country of which the person is a national and include the publicly releasable portion of the statement of case, a description of the effects of designation, as set forth in the relevant Resolutions, the Committee’s procedures for considering the delisting requests, and the provisions of Resolution 1452 (2002) which regulates the possible exceptions from the asset freeze.103 After having received this notiﬁcation the states are called upon to take reasonable steps to inform the listed individual or entity of the measures imposed on them, the Committee’s guidelines, the listing and delisting procedures and the provisions of Resolution 1452 (2002) regulating exceptions.104

98

99 100 101 102 103 104

According to para. 2 of UN Res. 1617 (2005) acts or activities indicating that an individual, group, undertaking, or entity is “associated with” Al-Qaida, Usama bin Laden or the Taliban include: – participating in the ﬁnancing, planning, facilitating, preparing, or perpetrating of acts or activities by, in conjunction with, under the name of, on behalf of, or in support of; – supplying, selling or transferring arms and related matériel to; – recruiting for; or – otherwise supporting acts or activities of; Al-Qaida, Usama bin Laden or the Taliban, or any cell, afﬁliate, splinter group or derivative thereof. Committee Guidelines in the amended version of 12 February 2007, para. 4 (a). Ibid. Ibid., para. 6 (g). Ibid., para. 6 (d). Ibid., para. 6 (h). Ibid. 247

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c. Assessment Although the new requirements for being listed are not in a chronological order but rather in a confusing array in the text of the latest version of the Sanctions Committees guidelines,105 the different aspects make up a picture of an evolving administrative procedure which can improve the protection of the individual already about to be listed. The main elements of such a protection of the individual are the requirements of a statement of case and a cover sheet, the express introduction of the “associated with” examination standard and of short time periods for notiﬁcations as well as the prescription of detailed informating of the individual. Moreover, it is expressly mentioned that the Committee must agree to include someone in the list. The statement of case imposes a duty of explanation on the proposing state. The proposing state must justify the proposal not only by a narrative description of the relevant information but by a detailed collection of evidence that allows the Committee to assess the case objectively and to apply its “associated with” examination standard. The requirement of a cover sheet, which is prescribed by the Resolution and annexed as a form, guarantees the necessary factual background: all the information is collected in the same way so that nothing is forgotten and the prescribed written form makes sure that nothing gets lost. The extension of the details asked for reduces the risk that wrong persons are listed and that errors concerning names occur. After the listing the more detailed data facilitate the identiﬁcation of the individual or entity against which measures shall be taken by the competent national authority. The application of the “associated with” examination standard gives the decision-ﬁnding of the Committee an impetus away from a political decision towards a decision according to objective legal standards. The mandate of the Secretariat to notify the Permanent Mission within two weeks after a name is added to the list avoids an unlimited uncertainty of the individual about his/her listing and the remedies available against this listing. Although declaratory in nature, the rule according to which the Committee must agree to any inclusion in the list shows that listing new individuals or entities is not merely to be thought of as being an automatic procedure after the information of the proposing state is submitted to the Committee. The call upon states to inform the listed individual or entity of the designation immediately after a new listing, is at the same time the ﬁrst 105

248

For example, in para. 6 (c) of the Guidelines, the Committee’s “associated with” examination standard for listing proposals is sandwiched between member states’ obligations to approach the state of residence/citizenship for additional information and also to propose the names of individuals responsible for the decisions of a proposed entity.

Legal Protection of the Individual Against UN Sanctions in a Multilevel System

and most important step for a delisting: the individual or entity is informed about the public part of the statement of case, the effects of the designation and – most importantly – the Committee’s procedures for considering delisting requests as well as the rules on potential exemptions. These details, added to the plain information of the listing itself, make the person or entity concerned aware of what such a listing means and enable him/her to challenge, on the basis of the publicly released portion of the statement of case, the listing by pursuing a delisting procedure or at least by applying for an exception from the asset freeze. Thus, the protection of the individual is clearly improved by the new amendments to the listing procedure. Nevertheless, it is far from a judicial review. 3.2. Innovations brought about by UN Resolution 1730 (2006) a. The Focal Point The innovation that strikes the eye most when going through this new Resolution is the establishment of the so-called “focal point” which can receive delisting requests directly from individuals, entities etc.106 The focal point was introduced as part of the Security Council’s endeavour to ensure “fair and clear procedures” for removing individuals and entities from sanctions lists.107 It is an administrative body which the Secretary-General was requested to establish within the Secretariat (Security Council Subsidiary Organs Branch108). The focal point is “focal” because it works for all active Sanctions Committees.109 Its main tasks are to receive delisting requests from petitioners, i.e. individual(s), groups, undertakings, and/or entities on the Sanctions Committee’s lists,110 to detect repeated requests,111 to acknowledge receipt of the request and to inform the 106

107

108 109 110

111

UN Security Council Resolution 1730 (2006), para. 1; the focal point is now included in the latest version of the Committee Guidelines of 12 February 2007, see its para. 8. UN Security Council Resolution 1730 (2006), 5th recital; see also the statement of the President of the Security Council of 22 June 2006 (S/PRST/2006/28) and the respective call upon the Security Council of the Heads of State and Government in the World Summit Outcome Document of 16 September 2005 (UN General assembly Res. 60/1, para. 109). UN Security Council Resolution 1730 (2006), para. 1. See UN Security Council Resolution 1730 (2006), para. 2. Committee Guidelines in the amended version of 12 February 2007, para. 8 (d) (i). Ibid., paras 8 (d) (i) and 8 (d) (ii). 249

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petitioner on the general procedure for processing that request,112 to forward the request for information and possible comments to the designating government(s) and to the government(s) of citizenship and residence.113 Furthermore, the focal point shall convey all communications from member states to the Committee114 and inform the petitioner of the decision of the Committee to grant the delisting petition or to dismiss it.115 This enumeration of tasks makes clear that the function of the focal point is purely administrative in nature. Under the aspect of legal protection, it is far from fulﬁlling the task of an independent judicial body – not even that of an Ombudsman who would investigate the incoming petitions himself/herself. Instead, it is simply an administrative body forwarding requests and other information from individuals, entities and member states to other member states or the Committee and vice versa. b. The Amendments to the Delisting Procedure The previous delisting procedure as it was laid down in the Committee Guidelines had to be initiated by the petitioner (individual, groups, undertakings, entities on the Committee’s list), who had to ask the government of residence and/or citizenship to request review of the case in the Sanctions Committee.116 At the same time, the petitioner should provide justiﬁcation for the delisting request, offer relevant information and request support for delisting.117 The petitioned government should then approach bilaterally the government originally proposing designation (the designating government(s)) to seek additional information and to hold consultations on the request.118 Furthermore, the designating government(s) could request additional information from the petitioned government. The governments involved could also consult with the Chairman of the Committee during their bilateral consultations.119 If the petitioned government, having reviewed eventual additional information, wished to pursue a delisting request, it should seek to persuade the designating government(s) to submit jointly or separately a request for delisting to the Committee. However, the petitioned 112 113 114 115 116 117 118 119

250

Ibid., para. 8 (d) (iv). Ibid., para. 8 (d) (v). Ibid., para. 8 (d) (vii). Ibid., para. 8 (d) (viii). Committee Guidelines in the amended version of 29 November 2006, para. 8 (a). Ibid., para. 8 (a). Ibid., para. 8 (b). Ibid., para. 8 (c).

Legal Protection of the Individual Against UN Sanctions in a Multilevel System

government could also submit a delisting request without an accompanying one from the designating government.120 The Committee decided by consensus. If consensus could not be reached, further consultations were undertaken. If consensus then still could not be reached, the matter should be submitted to the Security Council.121 The main difference brought about by UN Resolution 1730 (2006) for the delisting procedure is the establishment of the focal point described above. This focal point can receive delisting requests directly from a petitioner.122 However, the petitioner is free to choose instead the previous procedure via his/her government of residence or citizenship.123 If the focal point receives the delisting request, it forwards the request for their information and possible comments to the designating government(s) and to the governments(s) of citizenship and residence.124 Those governments are encouraged to consult with the designating government(s) before recommending delisting.125 If, after these consultations, any of these governments recommends delisting, that government will forward its recommendation with an explanation either through the focal point or directly to the Chairman of the Sanctions Committee, who then places the request on the Committee’s agenda.126 If any of the consulted governments opposes the request, the focal point will so inform the Committee.127 Any Committee member is encouraged to share with the designating government(s) and the government(s) of residence and citizenship any information it possesses in support of the delisting request.128 If, after a reasonable time (three months), none of the consulting governments comments or indicates that it is still working on the request and need additional time, the focal point will so notify all members of the Committee and provide copies of the delisting request.129 Any Committee member may then, after consultation with the designating

120 121 122

123 124 125 126 127 128 129

Ibid., para. 8 (d). Ibid., para. 8 (e). Committee Guidelines in the amended version of 12 February 2007, para. 8 (d) (i). Ibid. 8 (b). Ibid. para. 8 (d) (v). Ibid. Ibid., para. 8 (d) (vi) (a). Ibid., para. 8 (d) (vi) (b). Ibid. Ibid., para. 8 (d) (vi) (c). 251

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Chart 1: The new delisting procedure after UN Security Council Resolution 1730(2006). Individual; group, entity etc. delisting request

optionally

Focal point; – acknowledges receipt; – forwards request

Government(s) of citizenship and residence

forwarding for information and comment Government(s) of citizenship and residence

Designating government(s)

Previous procedure (via diplom. protection)

Consultations (encouraged)

Decision

One or all governments recommend delisting recommendation with explanation

Focal point or directly Sanctions Committee (Consensus princ.)

One government objects

All governments object

Focal point

Focal point

informs Sanctions Committee (Consensus principle)

informs Procedure ﬁnished

If no consensus: consultation; if still no consensus: decision by the Sec. Council Focal point informs petitioner

252

No answer of the govs. within three months

Sanctions Committee: Any (!) member may after consultation with the designating government(s) recommend delisting; Consensus principle applies; After one month without such recommendation the request is deemed rejected.

Legal Protection of the Individual Against UN Sanctions in a Multilevel System

government, recommend delisting.130 If, after one month, no Committee member recommends delisting, the request shall be deemed rejected. The Chairman of the Committee shall inform the focal point accordingly.131 In any case, the focal point informs the petitioner about the decision.132 c. Assessment The fact that the focal point can receive delisting requests directly from a petitioner provides the individual with the opportunity to access the UN level directly instead of resorting to his/her state of residence or citizenship in the classic procedure of asking for diplomatic protection. This request for diplomatic protection always involves many uncertainties: the petitioned state has a wide discretion133 when deciding on such a request and there are often political considerations which leave the petitioned state reluctant to grant diplomatic protection. Moreover, it usually takes some time until the decision is taken. This is particularly awkward when such drastic measures as an asset freeze apply, as is the case under the sanctions regime examined here. Furthermore, the individual does not have an opportunity to invoke a right to diplomatic protection before a national court.134 In this regard, the amendment of the delisting procedure is no doubt an advantage for the individual and an improvement of his/her protection. But whatever the positive effect for the individual may be, it is weakened by the fact that the focal point does not pass the delisting request on to the Sanctions Committee for decision. Instead, the designating government(s) and the government(s) of residence and citizenship remain the “guards at the doors to the Committee.” If they object the request unanimously, there will be no delisting decision by the Committee. If, however, at least one of these states “opens the door to the Committee” by recommending delisting, the Committee can decide on it. That is an improvement insofar as the state of residence and/ or citizenship which was the ﬁrst and single point to be addressed under the previous procedure can no longer on its own block the request of the individual. This is because a request directly addressed to the focal point is forwarded to the

130 131 132 133

134

Ibid. Ibid. Ibid., para. 8 (d) (viii). W.K. Geck, “Diplomatic Protection”, in: R. Bernhardt (ed.), Encyclopedia of Public International Law, Vol. I/2, Amsterdam: North-Holland, 1992, p. 1051. Ibid., p. 1052. 253

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government(s) of residence and citizenship and the designating government(s) at the same time and each of them may recommend delisting. In case the request ﬁnally makes it to the Committee, little has changed there:135 The Committee still consists of all members of the Security Council, which means that the same persons who decided on the listing of the petitioner also decide on the delisting request. Thus, the Committee is iudex in causa sua, i.e. deciding on its own case and therefore not independently. Furthermore, the Resolutions do not prescribe an objective standard of examination valid in the delisting procedure, which means that the decision remains a political one.136

4. Overall Assessment of the Status Quo of Jurisprudence and of the New Options on the Level of the UN Having assessed the three recent judgments of the CFI, the Advocate General’s opinion in Möllendorf, the decision of the ECHR as well as the revised listing and delisting procedure on the UN level, one is lost in the awkward feeling that this status quo grants only inadequate means of legal protection against UN sanctions.137 To reassure oneself on this ﬁnding one must turn to the question of what the standard of examination is with regard to such listings. This leads the further question: Are the UN Sanctions Committee and the Security Council bound by human rights standards such as the right to due process? 4.1. The Binding Nature of the International Human Rights for the UN Security Council This ﬁrst aspect of the binding nature of the international human rights for the UN Security Council is not the focus of this paper. To put it brieﬂy, there are two

135

136

137

254

See also S. Dewulf and D. Pacquée (see supra n. 84), p. 637 who specify the deﬁciencies of the delisting procedure. UN Security Council Resolution 1735 (2006), para. 14 only says that the Committee “may” consider, among other things, whether the individual or entity was placed on the list due to a mistake of identity, or whether the individual or entity no longer meets the relevant criteria for being listed, especially whether the individual is deceased or whether the individual or entity has severed all association with Al-Qaida, Usama bin Laden, the Taliban and their supporters, including all individuals and entities on the list. As Christian Tomuschat puts it (see supra n. 29), p. 551: “It remains, however, that the mechanism established to protect the human rights of persons targeted individually by the Security Council does not live up to legitimate expectations.”

Legal Protection of the Individual Against UN Sanctions in a Multilevel System

main positions: one position argues that the Security Council is – at least when acting under Chapter VII – free of control in the interest of the maintenance of international peace and security.138 The other position takes the view that the UN Security Council is bound in its actions by international human rights.139 Although not a party to the respective human rights instruments, the UN has to respect the UN Charter140 and also the right of due process.141 Others argue that the UN, by contributing to the development of international human rights law, created the legitimate expectation that the UN itself will observe standards of due process.142 4.2. The Contents of a Right of “Due Process” If we assume at this point that the UN Security Council in its actions is bound by international human rights, including the right of due process, the question arises what the contents of this right are. A recent study commissioned by the UN Ofﬁce of Legal Affairs143 on targeted sanctions imposed by the UN Security Council and due process rights argues that the exact scope and intensity of the right of due process was not generally predeﬁned but dependent on the respective circumstances of a particular situation.144 As a minimum standard of “fair and clear procedures” the right of due process should include among other elements the right of a listed person or entity to an effective remedy against an individual measure before an impartial institution or body previously established.145 This minimum standard would appear from a comparative analysis of the respective guarantees in international human rights treaties and national constitutional law.146

138

139 140

141 142

143 144 145 146

See as an early holder of that position H. Kelsen, The Law of the United Nations, London: Stevens, 1951, p. 735; see also A. Reinisch, “Developing Human Rights and Humanitarian Law Accountability of the Securtiy Council for the Imposition of Economic Sanctions”, AJIL, 2001, p. 855 for a more detailed discussion. See for different lines of argument A. Reinisch, supra n. 138, p. 855. B. Fassbender, “Targeted Sanctions Imposed by the UN Security Council and Due Process Rights”, International Organizations Law Review, 2006, p. 446. Ibid. p. 447. See E. de Wet and A. Nollkaemper, “Review of Security Council Decisions by National Courts”, GYIL, 2002, p. 173. B. Fassbender (see supra n. 140), pp. 437-485. Ibid., p. 446. Ibid., p. 476. Ibid. 255

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Specifying the single elements of the right to an effective remedy, in Fassbender’s view “remedy” means the establishment of any of several different options available to the Security Council, such as an international tribunal, an ombudsman ofﬁce, an inspection panel, a commission of inquiry or a committee of experts.147 “Effectiveness” includes considerations such as accessibility and speed of procedure, the fair opportunity to put forward one’s case, a good reasoning and compliance with the decision.148 A strict interpretation argues that an effective remedy requires that the competent body has the power to take binding decisions.149 “Impartiality” means that matters are decided impartially, on the basis of facts and in accordance with the law, without any restrictions, improper inﬂuences etc.150 4.3. Application of these Standards to the Status Quo of Legal Protection against UN Sanctions If these standards are applied to the status quo of legal protection discussed above, the assumption of the inadequacy of current legal protection against UN sanctions is corroborated: the “remedy” is still the request for a delisting addressed to the Sanctions Committee. The newly established “focal point” does not change anything in this respect: it is only a body that administers a request but does not have the power to decide on the delisting. In spite of the improvement that the individual does not have to ask for diplomatic protection but can resort directly to the UN level, the state(s) of residence and/or citizenship and the designating state(s) remain “guards at the door to the Sanctions Committee” since they can still prevent a delisting request from reaching the Sanctions Committee. With regard to the “effectiveness” the accessibility is slightly improved by the establishment of the focal point, but the Sanctions Committee is still not directly accessible to individuals or entities. Even if the delisting request reaches the Committee, the decision is not taken “impartially”, i.e. in accordance with the law and without any inﬂuences, since the Sanctions Committee, with members identical to those of the Security Council, remains a political body driven by individual states’ interests instead of applying existent,

147 148 149

150

256

Ibid., p. 479-480. Ibid., p. 480. See White Paper “Strengthening Targeted Sanctions Through Fair and Clear Procedures”, prepared by the Watson Institute Targeted Sanctions Project, Brown University of 30 March 2006, 55 n. 94. The paper is available at: <watsoninstitute. org/pub/Strengthening_Targeted_Sanctions.pdf>. Ibid., p. 485.

Legal Protection of the Individual Against UN Sanctions in a Multilevel System

objective legal rules. Thus, legal protection with due process standards is still not available on the UN level. On the EU level, the CFI features a remedy and is accessible and impartial. However, with its decisions the CFI limits the legal protection against UN sanctions to violations of ius cogens and denies such a violation after a superﬁcial examination.

5. Conclusion and Outlook The results adduced in the last two sections show that in the ﬁeld of multilevel regulation on individual sanctions, much needs to be done to adapt this ﬁeld of law to the needs of the affected individual. To this end, it is particularly necessary to establish appropriate legal protection for the individual and to coordinate the actions of the courts on the different levels which may be considered competent to entertain such cases. On the UN level, neither the new focal point nor the revised delisting procedure provide for satisfactory protection of the individual in line with the right of due process. On the EU level, the individual has the opportunity to approach independent courts but these courts deny justice with reference to the binding nature of UN Resolutions and to the narrow margin of examination, viz., ius cogens. A centralised legal protection against UN sanctions on the international level is desirable but still unavailable.151 Among the suggestions is the setting up of ad hoc judicial or quasi-judicial bodies, applying the core provisions of the universal convention of human rights or the provision of the possibility for individuals to ﬁle a claim with existing human rights bodies alleging that their conventional rights have been violated by a SC Resolution.152 But as long as this is not achieved, litigation must start at the national level.153 In Europe, the existing regional legal protection under the ECJ and the ECtHR

151

152 153

See in this regard C. Tomuschat (see supra n. 29), p. 538: “[The ICJ] has not been entrusted with powers enabling it to review the lawfulness of the acts of the political organs of the world organization upon being seized by way of direct action … individuals may not even appear before the ICJ …”; in the same sense E. Cannizzaro (see supra n. 33), p. 197. E. Cannizzaro (see supra n. 33), p. 220. I. Tappeiner, “Multilevel Fight against Terrorism. The lists and the gaps”, in: A. van Hoek, et al., (eds): Multilevel Governance in Enforcement and Adjudication, Antwerpen: Intersentia, 2006, p. 127: “If it will appear that indeed there is no legal procedure and also no legal examination possible at both EU level and national 257

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must be reconciled with each other in order to make the multilevel system work. In this regard, as long as the EC is not a member of the European Convention of Human Rights (ECHR), one solution could be that the EC lives up to what Strasbourg says and grants human rights protection equivalent to the convention.154 For Yusuf and Ayadi this was not the case, assuming the ECJ only afﬁrms the judgment of the CFI – because effective legal protection by court decisions and due process (Art. 6 ECHR) are not guaranteed within the terror sanctions regime on the UN level. Thus, Strasbourg’s presumption is rebutted because the protection of Art. 6 of the Convention is manifestly deﬁcient.155 Should the ECJ uphold the CFI judgment anyway, then it was incumbent on the ECtHR to be consistent with its own ﬁndings and to declare Sweden’s freezing measure in violation of Art. 6 ECHR.156 At ﬁrst sight, such a judgment by the ECtHR, which is not a regulatory level itself in the narrow sense, may seem to effect little at best vis-à-vis the nation state compared to the established regulatory structures of the UN and EC level. But such a judgment conﬁrming the human rights standards in Europe in sanctions cases could be a document to which the European states could refer when it comes to a guideline for their behavior in the implementation work within the UN sanctions regime. This could support new developments on the EU and UN level so that the protection of the individual on those levels is also amended and improved accordingly.157 Thus, in a multilevel system of courts, the different players still stand on their own and their relationship is not yet deﬁnitely deﬁned nor established. But there

154

155

156

157

258

level because of the mutual demarcation of competences, then a plea for a role for the national courts is justiﬁed.” S. Dewulf and D Pacquée (see supra n. 84), p. 633, who hold the equivalent protection standard applicable also in cases of international obligations ﬂowing from Security Council resolutions. In this sense for example H.-G. Dederer, “Die Architektonik des europäischen Grundrechtsraums”, ZaöRV, 2006, p. 602. C. Costello (see supra n. 75), p. 127 predicts that the ECtHR could conceivably treat the “equivalent protection” doctrine as inapplicable in light of the (self-)limited jurisdiction of the Community courts over the issue, and then turn to consider its applicability to actions of the Security Council; F. Hoffmeister, “International Decisions: Boshpous Hava Yollari Turizm Ve Ticaret Anonim Sirket v. Ireland. Ap. No. 45036/98”, AJIL, 2006, p. 448 suggests that the ECtHR would then have to assess whether the measures can be justiﬁed under the Convention as a “rebuttable presumption” that compliance with UN obligations implies that the EC regulation is in conformity with the Convention. But this argumentation would let the UN level get away untested. In the same sense E. Cannizzaro (see supra n. 33), p. 191.

Legal Protection of the Individual Against UN Sanctions in a Multilevel System

are signs of cooperation and respect as, for example, the recent consideration of the Bosphorus judgment of the ECtHR by the CFI158 or the statement of the ECtHR, that it was a legitimate interest to comply with obligations ﬂowing from the membership in international organisations.159 These developments may indicate the emergence of a “global community of courts” as conceived by Anne-Marie Slaughter.160 For such a community, she suggests that it must share a rough conception of checks and balances, both vertical and horizontal, allow for positive conﬂict among the judges, embrace a principle of pluralism and legitimate difference and accept the value of persuasive rather than coercive authority with the judges from different legal systems learning from each other.161 Such ﬁrst steps towards each other may lead the different courts with their different jurisdictions on a path to a peaceful and maybe even fruitful co-existence that may also result in a better legal protection of the individual in the future. Options for Legal Protection against UN Sanctions after UN Security Council Resolution 1730 (2006). UN level: Focal Point, Sanctions Committee (aim: delisting) ECHR: (aim: ﬁnding of a violation of the Convention by a national measure); Criteria of Bosphorus decision

National level: National courts (aim: annulment of the national measure)

158 159 160 161

EU level: ECJ; CFI (aim: delisting from EC list implementing UN Resolutions)

In some countries: Constitutional court

Ayadi, para. 124. Bosphorus, para. 150. A.-M. Slaughter, “A Global Community of Courts”, Harv. ILJ, 2003. p. 191. A.-M. Slaughter (see supra n. 160), p. 217. 259

Trapped between Courts or How Terrorist Suspects Lost Their Right to a Remedy Christina Eckes*

1. Introduction This paper analyses how the European courts refrain from providing full judicial review of lists of terrorist suspects adopted under European law. In a second part, the paper demonstrates that judicial protection could be offered under the law as it stands. In the ﬁght against terrorism individuals are directly made objects of international sanctioning measures. On the one hand, the United Nations (UN) draws up lists setting out individual persons as being involved with terrorism.1 On the other, the European Union (EU) draws up its own lists of alleged terrorists following a general call from the Security Council to ﬁght terrorism.2 Both types of sanctions are examples of regulation at the UN level, which is binding on the Member States of the UN and, hence, not directly on the European Union. Yet it is accepted practice to implement the UN law obligations at the European level. Pursuant to Art. 301 EC the implementation consists of two instruments: a common position under the Common Foreign and Security Policy (CFSP) and a European Community (EC) regulation. The former is a cross-pillar instrument requiring the Community to take action under the ﬁrst pillar and Member States to take action under the second and third pillar (CFSP and Police and Judicial Cooperation in Criminal matters – PJCC).

* With the usual disclaimer, I thank Dr Martin Karlsson, Itai Rabinowitz and Anne Thies for their helpful comments on an earlier draft. 1

2

Security Council Resolution 1267 of 15 October 1999 and 1333 of 19 December 2000. Security Council Resolution 1373 of 28 September 2001.

Follesdal, Wessel and Wouters (eds), Multilevel Regulation and the EU, 261–299 ©2008 Koninklijke Brill NV. ISBN 978 90 04 16438 3. Printed in the Netherlands.

Multilevel Regulation and the EU

The EC regulation is directly applicable in its entirety; it freezes the ﬁnancial assets of those listed. The CFSP listing alleging that the individual is involved in terrorism has a strongly stigmatising effect. The Community instrument further interferes with the individual’s right to property. Both measures raise the issue of the right of access to justice.3 Yet a number of judgments in Strasbourg and Luxembourg indicate that at least at the European level it will not be easy for those listed as alleged terrorists to obtain full judicial review, irrespective of whether they are ﬁrst listed by the UN or by the EU. Whether national courts can and will provide for judicial protection from UN and European measures remains to be seen. Individuals directly listed on one of the United Nations lists do not have any judicial remedy at their disposal at the UN level.4 These lists are then transposed into European law without passing through an examination of whether the listing is in compliance with the principles of European law, neither ex ante, nor ex post. This means the listings are at no point reviewed to see whether they comply with fundamental rights as guaranteed by European law.5 Review of the EC regulation is available in principle. However, both the European Court of Human Rights (ECtHR) and the Court of First Instance (CFI) have reduced the standard of protection. Neither of the two courts offers the human rights protection guaranteed to the individual in their respective constitutional bases. As a result, the individual ﬁnds himself/herself caught between two different forms of review of whether the sanctions infringe a minimum standard of human rights protection, deliberately chosen by each of the two European Courts.

3

4

5

262

The right to reputation of those listed could be violated by the CFSP listing. The right to reputation is a recognised civil right for the purpose of Art. 6 (1) ECHR [Helmers v. Sweden, of 29 October 1991, Series A, No. 212; 15 EHRR 285 and Golder v. UK, 21 February 1975, Series A, No. 18, I EHRR 524]. Guidelines of the Security Council Sanctions Committee 1267, adopted on 7 November 2002, para. 6 (d) only provide for a request via the government of the affected individual, available at <www.un.org/Docs/sc/committees/1267/1267_guidelines.pdf>; see more comprehensively on the right to access to justice: I. Cameron, “Report to the Swedish Foreign Ofﬁce on Legal Safeguards and Targeted Sanctions”, available at , p. 19; see in detail the contribution of C. Feinäugle, “Legal protection against UN Security Council Resolutions” in this volume. The Court of First Instance (CFI) provided a review on the basis of jus cogens. It did not have access to the information which led to the listing [CFI, Case T-306/01, Yusuf and others v. Council and Commission, judgment of 21 September 2005; CFI, Case T-315/01, Yassin Abdullah Kadi v. Council and Commission, judgment of 21 September 2005].

Trapped between Courts or How Terrorist Suspects Lost Their Right to a Remedy

For those who are listed for the ﬁrst time in a European legal instrument, judicial protection depends on the type of instrument in which the allegation is made.6 Lists adopted in the second and the third pillar remain outside the scope of jurisdiction of the European Courts. While the CFI denies jurisdiction on grounds of lack of competence,7 the Strasbourg Court refuses to examine the merits of the case because the listing is not sufﬁcient to give the individual standing.8 It has been suggested that national courts should step in to assure judicial protection from third pillar measures,9 and some national courts seem to be willing to review third pillar measures.10 However, the ECJ did not follow this suggestion,11 and it remains to be seen what level of protection could be provided by national courts. Those listed in Community instruments are in a better position from a procedural point of view. Recently, the CFI found an infringement of procedural rights of those listed in an EC regulation; it annulled the listing challenged by the applicants in that case.12 The remaining problem is that the initial identiﬁcation takes place in the second and third pillar, where again no access to justice is available. The underlying question for both types of sanctions is whether a court is competent to review all legally relevant acts within its jurisdiction, or whether it is kept from reviewing those acts which are predetermined by an external legal obligation. This paper is divided into four parts. Part two brieﬂy introduces the two different types of sanctions. Part three analyses the judicial protection from

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CFI, Case T-338/02, Segi and others v. Council, order of 7 June 2004, [2004] ECR II-01647; CFI, Case T-299/04, Selmani v. Council and Commission, order of 18 November 2005. CFI, Case T-338/02, Segi (see supra n. 6). ECtHR, Segi and others v. 15 Member States, No 6422/02 of 23 May 2002. AG Mengozzi, in: Case C-354/04 P Gestoras Pro Amnistia v. Council and Case C-355/04 P Segi v. Council, opinion of 26 October 2006, paras 98 et seq. Bundesverfassungsgericht (German Constitutional Court), Decision of 18 July 2005 (2 BvR 2236/04) on the German European Arrest Warrant Law: The applicant appealed against a court decision to extradite him [see the commentary of A. Hinarejos Parga at: CMLRev., 2006, pp. 583-595]; Polish Constitutional Tribunal, Judgement of 27 April 2005, No. P 1/05. ECJ, Case C-354/04 P, Gestoras Pro Amnistia v. Council and ECJ, Case C-355/04 P, Segi v. Council, judgment of 27 February 2007. CFI, Case T-228/02, Organisation des Modjahedines du peuple d’Iran (OMPI) v. Council and UK, judgment of 12 December 2006; still pending: CFI, Case T-47/03 Sison v. Council, see application at OJ 2003 C 101/41; CFI, Case T-327/03 Al-Aqsa v. Council, see application at OJ 2003 C 289/30. 263

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sanctions originating at the UN level. Part four does the same for individual sanctions originating at the European level. Both types of sanctions are examples of multi-layered regulation originating at the UN level, followed by implementation measures at both the European and at the national level. It is argued that judicial protection should be provided before the Luxembourg and the Strasbourg courts, as well as in the national courts. Special attention is given to the question of whether the lack of judicial protection in the Luxembourg courts is in line with the settled case law of the ECJ. Part ﬁve looks brieﬂy at the interplay between the ECtHR, the Luxembourg courts and the national courts.

2. The Two Different Types of Sanctions Restrictive measures against individuals under European law can be divided into two groups: those adopted against individuals identiﬁed at the UN level and those based on autonomous European lists. This section brieﬂy introduces both types. 2.1. Sanctions Based on UN Lists On 15 October 1999, the UN Security Council adopted Resolution 1267. On an institutional level, the resolution established a Security Council Sanctions Committee13 with the mandate to oversee the implementation of the sanctions against individuals and entities related to the Taliban, Usama Bin Laden and the Al-Qaida organisation and to maintain a list of those individuals and entities for this purpose.14 At the substantial level, it ordered states to freeze the funds controlled directly or indirectly by the Taliban regime, “as designated by the Committee.”15 The lists of entities and individuals drawn up by the Sanctions Committee are constantly reviewed and extended. Especially the al-Qaida section of the list has undergone numerous amendments.16 The names and the appending

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First called the 1267 Committee; since September 2003 ofﬁcially titled “The Al-Qaida and Taliban Sanctions Committee”, see: UN Security Council document SC/7865, of 4 September 2003; for the purpose of this paper it will be simply called “Sanctions Committee”. Resolution 1267, para. 6; sanction committees as such had been established previously. Resolution 1267, para. 4 (b). Since the last entry of 12 December 2006 there are 142 individuals and one entity on the Taliban list and 220 individuals and 124 entities on the Al-Qaida list. So far

Trapped between Courts or How Terrorist Suspects Lost Their Right to a Remedy

information have been submitted to the Committee by Member States of the United Nations. The designating state does not share the information that leads to the proposal of a certain person with the Committee.17 Hence, the Committee lists the proposed person without being in the position to judge whether the evidence that the person is involved in terrorism is sufﬁcient and convincing. It adopts a purely administrative role. A number of UN resolutions that followed Resolution 1267 reinforced the obligations of the Member States and renewed the lists.18 Further, exemption possibilities were introduced,19 and a monitoring team was set up.20 Most recently the so-called focal point was introduced.21 The focal point is an administrative ofﬁce at the UN level to which individuals can directly address their delisting requests.22 However, in principle the system has remained the same. UN Member States designate individuals and entities, which are then put on a list maintained by the Sanctions Committee. Considering that action by the Community was necessary in order to implement those resolutions, the Council adopted restrictive measures pursuant to Art. 301 EC. The procedure is two-tiered: ﬁrst the Council adopts a CFSP common position, which is then implemented by a Community regulation.23 The former contains a carbon copy of the UN list. The latter either contains the (identical) list itself, or relies on an EC Council decision or a Commission regulation to set out the circle of persons affected. Member States adopt so-called “secondary sanctions” against those who do not comply with the Community measures. Using third pillar mechanisms Member States also assist each other in gathering information and exchange information regarding those listed.

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9 individuals and 11 entities have been removed from those lists. I. Cameron, “The European Convention on Human Rights, Due Process and United Nations Security Council Counter-Terrorism Sanctions”, Report to the Council of Europe, of 6 February 2006, available at: <www.coe.int>. Res 1333 (19 December 2000); Res 1390 (16 January 2002); Res 1455 (17 January 2003); and Res 1526 (30 January 2004). Resolution 1452 (20 December 2002). Resolution 1363 (30 July 2001) and Res 1617 (29 July 2005). Resolution 1730 (19 December 2006) and Res 1735 (22 December 2006). See for more details the contribution of C. Feinäugle, “Legal Protection against UN Security Council Resolutions” in this volume. Individual sanctions are adopted according to the same procedure as state sanctions; they are based on Arts 301, 60 and 308 TEC. 265

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2.2. Lists Originating at the European Level The attacks of 11 September 2001 opened a new chapter on sanctions against individuals. The new anti-terrorism measures adopted by the Security Council do not ﬁt into the traditional pattern of sanctions resolutions.24 A more general and consequently an even more open-ended ﬁght against terrorism started. On 28 September 2001 the Security Council adopted Resolution 1373 creating the counter-terrorism committee (CTC) and imposing the obligation – besides criminalizing the ﬁnancing of terrorism – to freeze and seize funds associated with terrorism.25 The most important difference between Resolution 1373 and Resolutions 1267, 1333 and 1390 is that the former does not contain an annexed list, and the CTC is not mandated to draw up a list. It only sets out the general objective of ﬁghting terrorism without identifying the particular targets itself. However, it could be considered the most sweeping sanctioning measure ever adopted by the Security Council.26 This general obligation to freeze ﬁnancial assets of persons who are involved in terrorism was implemented by the Council of the European Union in Common Position 2001/931/CFSP27 and EC Regulation 2580/2001.28 In contrast to the instruments above, these instruments contain lists drawn up autonomously by the European institutions. The latter freezes the ﬁnancial assets of those listed as international terrorists on that list, which is copied into the Community law instrument. Yet some of those listed in the CFSP common position were not

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V. Gowlland-Debbas, “Sanctions Regimes Under Art. 41 of the UN Charter”, in: V. Gowlland-Debbas (ed.), National Implementation of Non-Military Security Council Sanctions: A Comparative Study, 2004, p. 6. Resolution 1373, para. 1. It was considered to be evidence that the Security Council assumes the role of a legislator: H.E.G. Guillaume (Judge and former President of the International Court of Justice), “Terrorism and International Law”, Grotius Lecture at the British Institute of International and Comparative Law, 13 November 2003; P.C. Szasz, Notes and Comments, “The Security Council starts legislating”, AJIL, Vol. 96 2002, 901; C. Olivier, “Human rights law and international ﬁght against terrorism: could security council regulations impact on states’ obligations under international human right law?”, Nordic Journal of International Law, Vol. 73(4) 2004, p. 399, 410: “the Security Council is not supposed to legislate”, “there exists a border-line between enforcement and law-making”. OJ 2001 L 344/93. OJ 2001 L 344/70.

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made subject to Community asset freezes, but remained subject to operational measures under the third pillar only.29 2.3. Concluding Remarks The most important difference distinguishing the two types of European antiterrorism sanctions is the locus of the identiﬁcation of alleged terrorists. Those identiﬁed at the UN level are publicly named as terrorists and supporters of terrorism before the EU takes action. In those cases the European institutions do not take a discretionary decision, but merely copy the UN lists into European legal instruments and impose sanctions. For the judicial protection of those listed this makes a decisive difference. It raises the question of whether the European courts are competent to review a non-discretionary decision of the institutions predetermined by the UN Security Council. For those identiﬁed by the European institutions themselves the situation is different. The problem here is the limitation of competences of the European Courts within the European legal system. Is it legitimate to identify individual persons as terrorists in a legal sphere which is excluded from judicial review by the European Courts? Could review of European legal instruments by national courts be a solution? These are the issues that will be analysed more closely in the rest of this paper.

3. Judicial Protection from UN Lists This section examines the opportunities to ﬁnd protection in the European judicial system from European sanctions based on UN lists.30 The ﬁrst lists of private individuals adopted by the EU were verbatim reproductions of the UN lists. They were adopted in order to implement UN Resolutions 1267, 1333, and 1390.31

29 30

31

For example: CFI, Case T-338/02 Segi (see supra n. 6). This matter was also explored in the previous contribution: C. Feinäugle, “Legal Protection against UN Security Council Resolutions”. The ﬁrst resolution containing lists of private persons unrelated to a state government was adopted as late as 2002: Resolution 1390 targets individuals no longer linked to a state government; for the secret change from sanctions against Afghanistan to sanctions against Osama Bin Laden and his supporters see N. Vennemann, “Country Report on the EU”, <edoc.mpil.de/conference-on-terrorism/index.cfm>, p. 28. 267

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European sanctions directly originating at the UN level have been challenged before the CFI in numerous cases.32 They pose considerable problems with regard to the right of access to justice. As already mentioned, no judicial protection to those sanctioned is available at the UN level.33 At the European level, the CFI gave a number of rulings; yet, the actual protection available to the individual remains far below the Community standard. The Strasbourg court has not been consulted on the matter yet. In principle, however, it should protect those listed if the conditions for full judicial review are met. Few national courts have demonstrated that they will admit challenges to national implementation measures.34 Whether they could provide protection from European sanctions is even more doubtful.35 3.1. Cases Before the CFI The most famous cases dealing with sanctions directly implicated by UN law are the Yusuf and Kadi judgments of 21 September 2005.36 Before these cases the CFI had only dealt with individual sanctions originating at the UN level in interim proceedings.37 In Yusuf and Kadi the CFI was asked to annul Regulation 881/2002, which directly contained an annex with the applicants’ names.38 In the

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CFI, Case T-306/01, Aden; CFI, Case T-315/01, Kadi, (see supra n. 5); CFI, Case T-49/04, Faraj Hassan v. Council and Commission, judgment of 12 July 2006; CFI, Case T-253/02, Chaﬁq Ayadi v. Council, judgment of 12 July 2006; CFI, Case T-318/01, Omar Mohamed Othman v. Council and Commission, Order of 27 October 2006; pending application: OJ 2002 C 68/13. I. Cameron, “Report to the Swedish Foreign Ofﬁce”, (see supra n. 4), and Report to the Council of Europe (see supra n. 17); G. Biehler, “Individuelle Sanktionen der Vereinten Nationen und Grundrechte”, Archiv des Völkerrechtes, 2003, pp. 169-181. Thirteen actions were ﬁled in national courts on behalf of persons and entities listed by the UN Sanctions Committee as belonging to or supporting Al-Qaida or the Taliban: one per country in Belgium and Italy, seven cases in the United States, and two in both Pakistan and Turkey. See S/2006/750, annex III; S/2006/154, annex; S/2005/572, annex II; S/2005/83, annex II. See below at: 4.3. CFI, Case T-315/01 Kadi; CFI, Case T-306/01 Yusuf (see supra n. 5). CFI, Case T-306/01, R. Aden and others, [2002] ECR II-2387; CFI, Case T-229/02, Kurdistan Workers’ Party (PKK) and Kurdistan National Congress (KNK) v. Council, [2005] ECR II-539. Regulation 467/2001, the predecessor of Regulation 881/2002 relied on the Commission for the drafting of the list.

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applications it was essentially argued that the Community lacked competence to adopt the contested regulation, and that the regulation was in breach of the applicants’ fundamental rights, inter alia their right of access to justice. On the issue of Community competence, the CFI held that the regulation was correctly adopted on “the joint basis of Arts 60, 301 and 308 EC.”39 Though the Court’s conclusion is contested, a further analysis of the Community competence to adopt individual sanctions would go beyond the scope of this paper. The CFI’s ﬁndings on the scope of its own jurisdiction are of greater interest in the present context. In deferral to the UN Security Council, the CFI limited its judicial review to an examination on the basis of jus cogens.40 It hereby stripped those sanctioned of any meaningful judicial remedy. a. Primacy of UN law The Court deduced from a combination of Arts 27 of the Vienna Convention on the Law of Treaties (VCLT) and 103 of the UN Charter (UNC) that the UN Charter, as well as SC resolutions, including the lists drawn up by the Sanctions Committee,41 prevail over domestic law.42 Art. 27 VCLT excludes internal law as justiﬁcation for a state’s failure to perform its duties under an international agreement;43 it reﬂects the well established rule of customary international law: pacta sunt servanda. Art. 103 UNC44 gives UN law primacy over all other international treaty obligations. It is uncontested that the UN enjoys a special status in the international legal order. According to the International Court of Justice (ICJ), all international agreements, whether

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CFI, Case T-315/01 Kadi, para. 135; CFI, Case T-306/01 Yusuf, para. 170 (see supra n. 5). T-315/01 Kadi and T-306/01 Yusuf (see supra n. 5). CFI, Case T-315/01 Kadi (see supra n. 5), para. 184. The CFI deals only with EU law. It does not address the question of whether UN law also prevails over the national law of the Member States. Art. 27 VCLT – Internal law and observance of treaties: A party may not invoke the provisions of its internal law as justiﬁcation for its failure to perform a treaty. This rule is without prejudice to Art. 46 EC. Art. 103 UNC – In the event of a conﬂict between the obligations of the Members of the United Nations under the present Charter and their obligations under any other international agreement, their obligations under the present Charter shall prevail. 269

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regional, bilateral, and even multilateral, which the parties have entered into must always be made subject to the provisions of Art. 103 UNC.45 Both rules, however, are rules of the international legal order and not of the domestic European legal order which the CFI is meant to apply. Traditionally, two schools can be distinguished concerning the status of international law in domestic law: the monist and the dualist school.46 Even if this distinction does not adequately reﬂect state practice47 and both schools had to move away from their diametrically opposed positions,48 they still express a tendency in how the relationship between international and domestic law is seen49 and provide a point of reference for the analysis of the effects of international law in the national legal order. Dualism refers to the view that international and domestic law belong to two different, not hierarchically related spheres. Monism50 holds that domestic and international law belong to a single universal legal order, usually assuming that international law takes precedence.51 The European Treaties are traditionally seen as adherent to a rather monist view.52 Art. 300 EC regulates the conclusion of international agreements. Its

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ICJ judgment of 26 November 1984, Nicaragua v. United States of America), ICJ Reports, 1984, p. 392, para. 107 (case concerning military and paramilitary activities in and against Nicaragua). With ample references A. Cassese, International Law, Oxford: Oxford University Press, 2005, ch. 12, pp. 213 et seq. L. Henkin, International Law: Politics and Values, Dordrecht: Martinus Nijhoff Publishers, 1995, pp. 63 et seq. C. Santulli, Le statut international de l’ordre juridique étatique: étude du traitement du droit interne par le droit international, Paris: Pedonne, 2001, p. 281; V. Heiskanen, Internaitonal Legal Topics, Helsinki: Lakimiesliiton Kustannus Finnish Lawyers’ Publishing Company, 1992, pp. 5-42. See on dualist and monist theories: P. Malanczuk, Akehurst’s Modern Introduction to International Law, London: Routledge, 1997, ch. 4. Monism is here understood as maintaining the primacy of international law (since the monistic view maintaining the supremacy of municipal law is today “devoid of scientiﬁc value” [A. Cassese (see supra n. 46), p. 216]. A. Cassese (see supra n. 46), pp. 213 et seq; further with references to the case law of different European states: L. Henkin, R. Crawford Pugh, O. Schachter, and H. Smit, International Law, Cases and Materials, 3rd edn, St. Paul, Minn.: West Publishing, 1993, ch. 3, sect. 2, pp. 153 et seq. V. Constantinesco and D. Simon, “Quelques problèmes des relations extérieures des Communautés européennes”, RTDE, Vol. 11 1975, pp. 440-443, Paris: Jacqué,

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paragraph 7 follows a monist approach in the sense that no additional act of transposition is required. An international agreement directly becomes binding law within the Community after the Community has entered into it. However, Art. 300 sets out the conditions which must be satisﬁed for international agreements to be validly concluded. Hence, the European Treaties – as any other constitutional system53 – determine the value given to international law in the domestic legal order. The validity of international law obligations in the European legal order is decided by and depends on the Treaties. Further, according to the interpretation of the ECJ, international law obligations of the Community rank in between Primary and Secondary European law.54 Hence, rules of international law do not automatically carry the same signiﬁcance in European law as they do in international law. They depend for their validity and effect in European law on the Treaties. In applying European law the Luxembourg Courts must consequently give to international law the effect as it is determined by the Treaties and not by international law. Contrary to that understanding, the CFI blurred the dividing line between external-international and internal-European law and gave precedence to UN law obligations over any other obligation of both domestic law and other international law.55 After establishing the primacy of UN law even from a standpoint of internal law, the Court then extended its binding force to the Community. It found the Community to be “bound by the obligations under the Charter of the United Nations in the same way as its Member States, by virtue of the Treaty establishing it.”56 The CFI based its view on the argument that Member States cannot transfer more powers to the Community than they have and that they were all bound by

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Droits institutionnel de L’Union Européenne, Dalloz, 2nd edn, 2004, 498. Compare F.D. Alland, “Jurisprudence en matière de droit international public”, RGDIP, 1998, p. 220. Alland argues that “… il est tentant d’envisager la pratique constitutionnelle des Etats sur un fond de dualisme généralisé, plein de nuances, comme une échelle d’internationalité croissante jusqu’au monisme avec primauté du droit international. L’opposition des mots peut-être trompeuse et l’explication dualiste rend, selon nous, mieux compte de la pratique.” G.M. Zagel, in: H. Smit and P. Herzog, et al., “The law of the European Union: a commentary”, Art. 300 EC Treaty, Rel.2-4/06 Pub. 623, pp. 401-442 with references to the settled case law of the ECJ. CFI, Case T-315/01 Kadi (see supra n. 5), para. 181. CFI, Case T-306/01 Yusuf, para. 243; CFI, Case T-315/01 Kadi, para. 193, (see supra n. 5). 271

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UN law when they adopted, respectively acceded to, the European Treaties.57 The primary precedent it referred to is the case of International Fruit Company.58 Though this conclusion can be questioned, the subject of this paper is limited to the primacy of UN law from the standpoint of European law. The CFI’s interpretation of the case law of the ECJ is otherwise ﬂawed: the ECJ has never accepted that within the EC legal order, international law prevails over Primary European Law. This includes the GATT, WTO law,59 and UN law.60 In International Fruit Company the ECJ looked at its mandate under Art. 234 EC and ruled that “the jurisdiction of the court cannot be limited by the grounds on which the validity of those measures may be contested.”61 Hence, international law cannot determine the scope of jurisdiction of the European Courts to review European law. Admitting that direct effect and primacy are two separate concepts, it must be further noticed, though, that by denying GATT/WTO law direct effect the ECJ has in practice avoided submitting the Community to the dictate of international law. Hence, International Fruit hardly supports the CFI’s ﬁnding of primacy of UN law. b. The ECJ’s Case Law The ECJ has acknowledged that the Community can be bound by international law.62 This depends, however, on the status given by Community law to a particular rule of international law. Irrespective of whether the Community could be bound by UN law by virtue of the EC Treaty, neither the Treaty nor the case law of the ECJ gives UN law primacy over Community law.

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CFI, Case T-306/01 Yusuf, (see supra n. 5), paras 231 et seq. ECJ, Joined Cases 21-24/72 International Fruit Company [1972] ECR 1219. Quite to the contrary, it took a position of deference to the political institutions, see only: ECJ, Case C-149/96 Portugal v. Council [1999] ECR I-8395, paras 34-52 and also more recently: ECJ, Case C-377/02 Van Parys [2005] ECR I-1465; CFI, Case T-19/01 Chiquita [2005] ECR II-315. See below at: 3.1.2. Joined Cases 21-24/72 International Fruit Company, (see supra n. 58), para. 5. ECJ, Case C-162/96 Racke GmdH & Co. v. Hauptzollamt Mainz [1998] ECR I-3655, para. 45; ECJ, Case C-286/90 Poulsen and Diva Navigation Corp. [1992] ECR I-6019, para. 8; ECJ, Case C-146/89 Commission v. UK [1991] ECR I-3533, para. 36; ECJ, Case C-61/94 Commission v. Germany [1996] ECR I-3989, para. 30.

Trapped between Courts or How Terrorist Suspects Lost Their Right to a Remedy

As early as the Haegemann case63 the ECJ made it clear that from the standpoint of Community law the binding force of international agreements does not depend on whether they have been validly concluded according to the rules of international law, but on whether they have been entered into in compliance with the rules of Community law. The Court has made this point even clearer in later case law, in which it declared the acts of conclusion of international agreements void.64 This conﬁrms that international legal obligations, including the principle of pacta sunt servanda, do not simply prevail over European Primary law. Further, when ruling on Community measures implementing UN sanction regimes the ECJ has shown respect for international law, but no more than for the Primary law of the Community.65 The Court agreed to rule on the validity and interpretation of Community measures as a matter of European law. While referring to the underlying UN sanctions resolution as a source for interpretation66 and, more generally, accepting that Community competences must be exercised in accordance with international law,67 it has not, at any point, indicated an absolute deference to UN law or the Security Council. In the Bosphorus case68 Ireland had impounded an airplane in order to comply with an EC Council regulation which implemented a number of Security Council resolutions. The Irish Supreme Court asked ECJ in the preliminary ruling procedure whether the EC regulation applied to the seized aircraft. The ECJ held that in interpreting EC regulation, “account must … be taken of the text and the aim of those [the Security Council] resolutions.”69 It interpreted the wording of the EC regulation with reference to the wording of the UN Security Council resolution; it did not deny jurisdiction because of the

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ECJ, Case C-181/73 Haegemann v. Belgium [1974] ECR 449, para. 5. ECJ, Case C-122/95 Germany v. Council [1998] ECR I-973, para. 42; ECJ, Case C-360/93 Parliament v. Council [1996] ECR 1145; ECJ, Case C-327/91 France v. Commission [1994] ECR 3641, para. 45. ECJ, Case C-124/95 The Queen, ex parte Centro-Com Srl v. HM Treasury and Bank of England [1997] ECR I-81; ECJ, Case C-177/95 Ebony Maritime SA and Loten Navigation Co. Ltd v. Prefetto della Provincia di Brindisi and others [1997] ECR I-1111; ECJ, Case C-84/95 Bosphorus Airways [1996] ECR I-3953. See e.g.: the reference to Resolution 820 (1993) in ECJ, Case C-84/95 Bosphorus Airways (see supra n. 65), para. 12. ECJ, Joined Cases 21-24/72 International Fruit Company, (see supra n. 58), paras 4 et seq; ECJ, Case 162/96 Racke, (see supra n. 62), paras 26 et seq. ECJ, Case C-84/95 Bosphorus Airways (see supra n. 65). Ibid., para. 14. 273

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existence of the latter. It invoked its earlier case law, in which it accepted that the exercise of fundamental rights can be “subject to restrictions justiﬁed by objectives of general interest pursued by the Community.”70 By referring to “objectives pursued by the Community” the ECJ did not accept the existence of a UN law obligation as an absolute justiﬁcation to limit fundamental rights. One could of course argue that the cooperation within the UN is as such an objective of the Community.71 However, restricting the exercise of fundamental rights because of the Community objective of complying with UN law is not the same as granting UN law absolute primacy. On the contrary, only because the ECJ does not consider UN law supreme is it necessary to take compliance with UN law into account as an objective of Community law. It must be conceded, though, that the ECJ, without stating its deference openly, in practical terms demonstrated a considerable reluctance to review the merits in the Bosphorus case. The Court chose a textual approach instead of its regular teleological method of interpretation.72 This approach allowed the Court to interpret the EC regulation literally in the meaning of the Security Council resolution. Further, the ECJ conducted only a limited test of proportionality. It pointed out “the importance of the aims pursued by the regulation”73 and argued that it could “justify negative consequences, even of a substantial nature.”74 It concluded that in the light of “an objective of general interest so fundamental for the international community, which consists in putting an end to the state of war…” the interference with the applicant’s human rights cannot be regarded as disproportionate.75 The Court did not explain its approach conceptually. It did not expound the problem of judging a highly political measure such as sanctions or the question of whether reviewing the proportionality of an individual implementation measure could undermine the Security Council’s monopoly to deﬁne and deal 70 71

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Ibid., para. 21. On the basis of the preamble and Arts 177 (3), 302 and arguably 297 EC, as well as Art. 11 (1) TEU. I. Canor, “Can Two Walk Together, Except They be Agreed? – The Relationship Between International Law and European Law: The Incorporation of United Nations Sanctions Against Yugoslavia Into European Community Law Through the Perspective of the European Court of Justice”, CMLRev., Vol. 35 1998, pp. 172-173, pp. 137-187. ECJ, Case C-84/95 Bosphorus Airways (see supra n. 65), para. 22-23. Ibid., para. 22-23. Ibid., para. 26.

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with threats to international peace and security. Yet it tried to avoid any possible conﬂict between UN law and Community law by interpreting the latter in the literal meaning of the former. A further example of the ECJ’s approach to UN law is the Centro-Com case.76 The CFI referred to this case as an authority that “the EC Treaty does not affect the duty of the Member State concerned to respect the rights of third countries under a prior agreement and to perform its obligations thereunder.”77 Yet in Centro-Com the ECJ ruled in essence that the Member States retain powers in the ﬁeld of foreign and security policy, which they must exercise consistently with Community law. The Court then conceptually analysed78 whether Member States can rely on Art. 307 EC to justify measures contrary to the Common Commercial Policy (CCP). The argument does not confer on UN law a general primacy over Community law. On the contrary, it allows derogation from the latter based on Community rules only. The conclusion is similar to the conclusion from the ECJ’s ruling in Bosphorus. If the ECJ had conferred primacy on UN law, it would not have to rely on Community law to allow Member States to derogate from the latter in order to comply with the former. The existence of a UN law obligation as such would have sufﬁced to justify the non-compliance of Member States with Community law. c. The Transfer of the ECJ’s Position to Individual Sanctions An analysis of the ECJ’s position towards European sanctions adopted to implement UN sanction regimes must take into account that the ECJ has so far only been asked to rule on state sanctions. Its minimalist approach of focusing on the wording of the regulation and reading it in view of the Security Council resolution cannot easily be transferred to sanctions against individuals. The implementation of state sanctions leaves the Community and the Member States a margin of discretion which allows a material distinction between the UN sanctions regime and the individual decision applying it under European or national law. In the case of individual sanctions no such substantive distinction can be made. UN sanctions lists are copied name by name without any further examination of the individual case. The only choice left to the EU institutions regards the method of implementation and the exact form of the measures. Hence, the ECJ’s silent deference cannot be transferred to the identiﬁcation

76 77 78

ECJ, Case C-124/95 Centro-Com (see supra n. 65), para. 54 et seq. CFI, Case T-315/01 Kadi (see supra n. 5), para. 186. It left to the national courts the decision of whether the conditions of Art. 307 EC were fulﬁlled. 275

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of those targeted by individual sanctions. Two identical lists of names do not leave room for interpretation. The rejection of formal primacy is more likely to result in an open conﬂict between Community and UN law. d. Rejection of the CFI’s Assumption of Indirect Review The CFI argued that the review of a Community sanctions regulation in the light of the principles of European law would amount to an indirect review of the original UN sanctions.79 This would severely undermine the authority of the Security Council. In the academic debate it was claimed that the review by the European Courts of the European implementation of individual sanctions would amount to making the Security Council “accountable for any possible legal ﬂaws of its actions.”80 A parallel to the Tadic case81 was drawn,82 in which the Appeals Chamber of the International Criminal Tribunal for the former Yugoslavia scrutinized whether the Security Council possessed the powers to establish an international judicial body for the prosecution of war crimes. This view is contested. It is clear that the UN sanctions cannot be – and were not directly – challenged in the European Courts. The issue at stake before the European Courts is the legality of the European legal instrument. Any review by a European Court is only a judgment of the legal situation under European law. It does not imply a judgment on the legality of the activity of the Security Council under international law. Hence, the comparison with Tadic is misleading. There is no doubt an extraordinary legitimacy attached to decisions taken at the UN level. The actions taken by the international community through the United Nations have to be judged in a different light than actions of states or supranational organisations. The Security Council is not directly bound by the large number of widely ratiﬁed human rights treaties,83 irrespective of whether 79 80

81

82 83

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CFI, Case T-306/01 Yusuf (see supra n. 5), para. 268. C. Tomuschat, “Case law: Case T-306/01, Ahmed Ali Yusuf and Al Barakaat International Foundation v. Council and Commission, judgment of the Court of First Instance of 21 September 2005; Case T-315/01, Yassin Abdullah Kadi v. Council and Commission, judgment of the Court of First Instance of 21 September 2005, nyr”, CMLRev., 2006, pp. 537-551, p. 538. Judgment of 2 October 1995, ILM, Vol. 35 1996, p. 35. The ICTY found eventually that the Security Council had not acted ultra vires. C. Tomuschat (see supra n. 80), p. 545. Even if most authors agree that there are some limits to the actions of the Security Council. E.g.: Dissenting Opinion of President Schwebel, Lockerbie (Preliminary Objections), ICJ Rep. 1998, p. 8; T Franck, “Fairness in the International Legal and Institutional System”, RdC, Vol. 240 1993-III, p. 9, at s. 190. K. Doehring,

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those treaties are ratiﬁed by (all) permanent members of the Security Council and independently of the reservations made. They are not imported into the Charter by Art. 1 (3) UNC.84 Having the power to determine what constitutes a “threat to the peace”, the Security Council can do what Member States cannot when acting alone.85 Hence, even if a domestic court came to the conclusion that an implementation measure which is a carbon copy of a UN resolution is contrary to principles of domestic law this does not permit any conclusions on the validity of the UN resolution. The validity of the decisions of the Security Council simply does not depend on their compliance with European law. However, despite the great legitimacy of UN law, the sole involvement of more international actors cannot justify considering an obligation as of a hierarchically higher rank. Even if we accept that the form of cooperation and the number of international actors involved are relevant factors for legitimacy, international law is not hierarchical in the way purported. In principle, international courts cannot review the domestic legal order of states, nor can national courts directly review international law. The review of any legal instrument is either for the courts of the legal sphere where the instrument originates, or for courts of a legal sphere which relates to the former in an hierarchical way and which occupies a superior position in this hierarchy. European Courts cannot judge on the legality of UN law. On the other hand, the European Courts have a comprehensive mandate to ensure the observance of the law within their legal order (Art. 220 TEC). This extends in principle to all legal obligations created within and according to the rules of this legal order. Further, judicial scrutiny could easily be avoided by signing up to any form of international cooperation and therewith entering into obligations external to the domestic legal order, if every obligation originating outside of the

84

85

“Unlawful Resolutions of the Security Council and their Legal Consequences”, Max Planck Yearbook of United Nations Law, Vol. 1 1997, pp. 91-109, p. 92; E Cannizzaro, “Machiavelli, the UN Security Council and the Rule of Law”, Hauser Global Law School Program, Global Law Working Paper 11/05; R. Bernhardt, Art. 103, in: Simma (ed.), Charter of the United Nations – A Commentary, 2002, p. 23; Frowein and Krisch speak of humanitarian law and human rights norms as forming “guidelines,” rather than “precise limits” [J. Frowein and N. Krisch, “Introduction to Chapter VII”, in: Simma, (ed.), ibid., p. 705 et seq]. Agreeing: J.E. Alvarez, “The Security Council’s war on terrorism: problems and policy options”, in: E. De Wet and A. Nollcaemper, Review of the Security Council by Member States, Antwerp: Intersentia, 2003, pp. 119-145, p. 125. Compare the discussion in: J.E. Alvarez, ibid., p. 124. 277

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speciﬁc legal order resulted in a denial of its judicial review.86 The limitation is not that measures implementing obligations originating outside of the internal legal order cannot be reviewed. The limitation is that they are only reviewed in the light of the principles of the internal order. Such a judgment does not give reason for conclusions about the legality of the external obligation as such. Indeed, it is the CFI’s decision to apply jus cogens instead of European Law that could give the impression the Court reviewed the legality of UN resolutions. On the one hand, the Court argued that it cannot review EC law in the light of the principles of European law because this would amount to a review of the underlying UN Security Council resolution. On the other it examined the contested legal measures in the light of jus cogens. However, the choice of jus cogens as basis of review is what results in an implicit scrutiny of UN law. The CFI took the role of an interpreter of generally accepted legal norms, applying them to an act of an institution outside its judicial reach. On this note, it could even be argued that an assessment of the EC regulation in the light of European principles would have been a more humble approach. If the CFI had reached the conclusion that the EC regulation copying the UN Security Council resolution had been incompatible with jus cogens according to a majority of scholars, this would have amounted to a declaration that the Security Council had acted ultra vires.87 The CFI’s approach should therefore be rejected. 3.2. Concluding Remarks It must be conceded that despite asserting primacy of UN law the CFI did not ﬁnally refrain from judicial review completely. It saw itself under the duty to 86

87

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Compare also the settled case law of the ECtHR, that Contracting Parties cannot escape their Convention obligations through international cooperation: ECtHR, Bosphorus Airways, Grand Chamber, Application no. 45036/98 of 30 June 2005, page 44, para. 153; but also earlier the Commission on Human Rights: M. v. Germany, No. 13258/87, 64 DR 138 (1990). See above all: K. Doehring, “Unlawful Resolutions of the Security Council and their Legal Consequences”, Max Planck Yearbook of United Nations Law, 1997, pp. 91, 104-108 and, going even further: E. De Wet and A. Nollcaemper, “Review of the Security Council Decisions by National Courts”, GYIL, Vol. 45 2002, pp. 166; or: E. De Wet and A. Nollcaemper, “The Role of Human Rights in Limiting the Enforcement Power of the Security Council”, in: E. De Wet and A. Nollcaemper, (ed.) (see supra n. 84); further on the “constitutional limitations” of the SC through the purposes and principles and through the end of the measure itself: T.D. Gill, “Legal and some political limitations of the power of the UN Security Council to exercise its enforcement powers under Chapter VII of the Charter”, NYIL, 1995, pp. 73-106.

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scrutinise the UN resolution in the light of jus cogens. This is, on the one hand, a clear deference to the political power of the Security Council. On the other, it extends the CFI’s role beyond being the guardian of the Treaties to be the judge of the more fundamental question of whether a UN resolution complies with jus cogens.88 This practice is questionable for two reasons: First, the review of the CFI is not in line with the case law of the ECJ. Secondly, from the perspective of the applicants the CFI “cynically”89 reduced human rights protection from individual sanctions originating at the UN level. Even those praising the Yusuf and Kadi judgments concede that the review on the basis of jus cogens is “devoid of any actual substance.”90 3.3. The Strasbourg Court a. Protection of the Individual After the Bosphorus case had been decided by the ECJ91 it was brought before the ECtHR.92 In this case the ECtHR clariﬁed its position as to whether it would provide protection from human rights violations under Community law. However, the issue did not concern sanctions directly targeted at an individual person, but a concrete implementation measure in the framework of a state sanctions regime. The Strasbourg Court was asked to declare the seizure by Ireland of an airplane leased by the Turkish applicant from a Yugoslavian company a breach of the applicant’s right to property.93 The Court, however, held unanimously that there had been no violation.94 The national measure was adopted in order to comply with an EC regulation,95 which in turn implemented the UN sanctions regime96 against former Yugoslavia.

88 89

90 91 92 93 94

95 96

CFI, Case T-315/01 Kadi (see supra n. 5), para. 226. I. Cameron, “Rapports, European Court of Human Rights: January 2005 – March 2006”, European Public Law, Vol. 13 2007, p. 8. C. Tomuschat (see supra n. 80), p. 551. ECJ, Case C-84/95 Bosphorus Airways (see supra n. 65). ECtHR, Bosphorus Airways (see supra n. 86). Art. 1 of Protocol No. 1 to the Convention. Ten of the 17 judges sitting in the Grand Chamber signed on to the majority opinion and seven submitted concurring opinions. EC Council Regulation 990/93. Set up by Security Council Resolution 820 (1993). 279

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Earlier, the EC law obligation had been conﬁrmed by an ECJ decision, which was consequently also subject to the ECtHR’s review. The Strasbourg Court accepted that EC law compelled the Irish authorities to impound the aircraft of the applicant. The ECtHR introduced an absolute line of deference to the Community Courts.97 It ﬁrst established a presumption of equivalent protection of fundamental rights in the Community. It then concluded that any act taken in order to comply with obligations from a membership of an international organisation, which beneﬁts from the presumption of equivalent protection, will be presumed not to have violated the Convention. This does not constitute an absolute justiﬁcation, but it establishes a presumption which must be explicitly rebutted. A rebuttal, however, appears to be very difﬁcult. The Court lowered the standard of examination to two points: ﬁrst, whether a systemic procedural dysfunction within the legal system of the organisation occurred98 and secondly, whether the protection was manifestly deﬁcient in the particular case before the ECtHR.99 The latter question would be answered in the positive if the organisation failed to provide the remedies obviously required by the Convention. Only in cases where one of the two examinations comes to a positive result will the ECtHR exercise full review. Hence, the Court introduced a high threshold for a full examination of alleged violations induced by EC law. In the Bosphorus case itself the Strasbourg Court refrained from conducting any convincing review of the merits. By means of its presumption it accepted compliance with Community obligations as an overriding interest, which justiﬁed comprehensively any measures taken by the Contracting Parties. Prima facie, this was the case irrespective of their impact on the applicant’s human rights. 97

98

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ECJ, Case C-84/95 Bosphorus Airways (see supra n. 65), in particular: para. 159 et seq. The Court establishes its presumtion on the basis of a lengthy examination of the judicial system of the Community [ECtHR, Bosphorus Airways (see supra n. 86), pp. 17-27, para. 72-101]. In spite of the fact that the discussion of a possible rebuttal focuses on the individual case, it must be possible to prove the entire presumption as no longer correct. The ECtHR even conceded that “any such ﬁnding of equivalence could not be ﬁnal and would be susceptible to review in the light of any relevant change in fundamental rights’ protection” [ECtHR, Bosphorus Airways (see supra n. 86), para. 155.]. The ECtHR explained that “any such presumption can be rebutted if, in the circumstances of a particular case, it is considered that the protection of Convention rights was manifestly deﬁcient.” [ECtHR, Bosphorus Airways, (see supra n. 86), para. 156, emphasis added.].

Trapped between Courts or How Terrorist Suspects Lost Their Right to a Remedy

Even though Bosphorus did not concern individual sanctions, the presumption applies to all Community law, including restrictive measures against individuals. Hence, the protection of the individual from Community measures in the Strasbourg Court is reduced to an examination of whether the general presumption of equivalent protection can be rebutted in the speciﬁc case. This is far from the usual examination of whether the Convention rights of the applicant are breached. Hence, judicial protection is only exercised by the Strasbourg Court in cases of grave violations, not for any infringement of Convention rights.100 This, in the words of AG Mengozzi, results in a “marginal” review only.101 b. The Supremacy of UN Law The ECtHR’s analysis which led to the presumption of equivalent protection was mainly based on the remedies available to individuals in the Community court system. Hence, it is clear that this presumption cannot be transferred to the UN. Contrary to the CFI, the ECtHR has so far not relied on the obligations of the Member States under Art. 103 UNC in order to absolve their actions. Indeed, the ECtHR has avoided taking an explicit stand on the hierarchy between UN law and the ECHR. In fact, the Strasbourg Court did not mention Art. 103 UNC at all. According to the parameters of UN law, Security Council resolutions claim supremacy over all other forms of international law, including the ECHR. On the basis of that understanding the Strasbourg Court would not have been able to examine Ireland’s actions in Bosphorus any further. The underlying Security Council resolution would work like a joker, allowing any action, irrespective of Convention rights. Yet, by reviewing Ireland’s non-discretionary implementation, the ECtHR indirectly took a stand on the hierarchy of norms. The Court made it clear that it will scrutinise the actions of Contracting Parties as to their compatibility with the ECHR, irrespective of any existing UN law obligation. This implies that, at least in the Strasbourg Court, a binding Security Council resolution is not the end of the discussion. The ﬁnding that a Member State has violated the Convention by complying with a UN resolution remains possible.

100

101

See for more detail: C. Eckes, “Does the European Court of Human Rights provide protection from the European Community? – The Case of Bosphorus Airways”, European Public Law, 2007, pp. 47 et seq. AG Mengozzi, in: Case C-354/04 P Gestoras Pro Amnistia and Case C-355/04 P Segi (see supra n. 9), para. 86. 281

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c. National Courts The conferral of primacy on UN law leads the CFI to deny judicial review at the European level. In the academic debate it was suggested that the applicants might ﬁnd protection in the national judiciaries.102 Further, in the Ayadi case the CFI pointed out that those listed by the UN Sanctions Committee, and consequently by the Community, could bring an action in national courts for judicial review of “the wrongful refusal … to submit their cases to the Sanctions Committee,”103 relying on both national and European law. The Court referred to a judgment of the Court of First Instance, Brussels,104 in which the latter ordered the Belgian State to request to remove the names of two persons from the list in question. However, the delisting procedure before the UN Sanctions Committee relies on diplomatic protection and does not confer any rights on the individual. Hence, an action aimed at compelling a government to table a delisting request cannot substitute judicial review of the listing. According to paragraph 8 of the guidelines of the Sanctions Committee,105 the affected individual can petition his/her government of residence or citizenship. The petitioned government can then turn to the government that proposed the listing, ﬁrst to seek additional information, and secondly to ask it to submit a delisting request. A person can be taken off the list in two ways: Either the designating government agrees to submit a delisting request jointly with the petitioned government, or it refuses and the latter launches a unilateral request.106 In the latter case it is almost impossible to achieve a removal, particularly if the suggesting government is one of the permanent members of the Security Council. The removal procedure is decided in a silent non-objection procedure, which means that none of the members of the Sanction Committee, which are identical to those of the Security Council,107 must object. Hence, the government that refused to request the Sanctions Committee to revise the list, must not vote against the delisting. In short, whether a person is delisted is entirely at the discretion of

102

103 104

105 106 107

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I. Tappeneiner, “The Fight against Terrorism. The Lists and the Gaps”, Utrecht Law Review, 2005, pp. 97-125. CFI, Case T-253/02 Ayadi (see supra n. 32), para. 150. Tribunal de première instance de Bruxelles, Nabil Sayadi and Patricia Vinck v. Belgian State, Fourth Chamber, judgment of 11 February 2005. Guidelines of the Committee (see supra n. 4). Ibid., para. 8 (d). <www.un.org>.

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the designating government. Hence, review of a wrongful refusal to table a delisting request cannot replace judicial review of the listing.108 Further, from the standpoint of European law, national courts are not competent to review the legality of Community law.109 With very limited but well-known exceptions,110 national courts have accepted this view. Hence, the primacy of Community law requires the national authorities, including the courts,111 in principle to comply with the (unreviewed) European legal instrument. The rulings of the CFI consequently create a chain of prevailing legal obligations, which in principle also excludes judicial review by the national courts. The German Constitutional Court (GCC) has proved in the past that it does not accept the supremacy of European law at its full length.112 Cases like Yusuf and Kadi might lead it to conclude that, at least in the area of anti-terrorism measures, the European judicial system does not guarantee that the core values of the German Constitution are respected. This recognition should lead it to

108

109 110 111

112

See for more details on the delisting procedure: I. Cameron, (see supra n. 17), p. 6. ECJ, Case 314/85 Foto-Frost [1987] ECR 4199. See the case law of the German Constitutional Court (see below n. 112). Ordinary courts are generally not in a position to review European legal instruments and Supreme or Constitutional Courts have limited their residual control to very exceptional situations. Solange II-decision of the German Federal Constitutional Court, BVerfGE 73, 339; Maastricht decision of 12 October 1993, BVerfGE 89, 155; Alcan decision of 17 Feb. 2000, EuZW, 2000, 445; Banana decision of 7 June 2000, EuZW, 2000, 702; for a translation of the Maastricht decision see: Brunner v. European Union Treaty, CMLRev., Vol. 57 1994, for annotations: see: U. Everling, “The Maastricht Judgment of the German Federal Constitutional Court and its signiﬁcance for the development of the European Union”, YEL, Vol. 14 1994, p. 1; K. Hailbronner, “The European Union from the perspective of the German Constitutional Court”, GYIL, Vol. 37 1994, p. 93; M. Herdegen, “Maastricht and the Constitutional Court: Constitutional restraints for an Ever Closer Union”, CMLRev., Vol. 31 1994, p. 235; S. Hobe, “The German State in Europe after the Maastricht Decision of the German Constitutional Court”, GYIL, Vol. 37 1994, p. 113; B. Wieland, “Germany in the European Union – The Maastricht Decision of the Bundesverfassungsgericht”, EJIL, Vol. 5 1994, p. 259; J. Kokott, “German constitutional jurisprudence and European integration II”, EPL, Vol. 2 1996, pp. 428 et seq. For a broader discussion see A. von Bogdandy, “The European Union as a human rights organization? Human Rights and the Core of the European Union”, CMLRev., Vol. 37 2000, pp. 1322 et seq; J.H.H. Weiler, The State “über alles”: Demos, Telos and the German Maastricht Decision, Harvard Jean Monnet Working Paper No. 6/95. 283

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exercise its reserve control. However, in practice it appears unlikely that the GCC would seriously challenge the European Courts. Additionally, national courts themselves have been reluctant to challenge the authority of UN resolutions. Even if most national systems do not accord primacy to UN resolutions,113 they try to avoid open conﬂict.114 d. Concluding Remarks In its recent judgments the CFI demonstrated reluctance to fully review individual sanctions. It reduced the review of Community sanctions originating at the UN level to the question of whether they violated jus cogens, while the underlying CFSP list was not even mentioned. The CFI’s position can be distinguished from the more differentiated approach of the ECJ. The ECJ has not yet reviewed individual sanctions; it has, however, reviewed Community measures implementing UN state sanctions, which are equally dependent on a decision under the CFSP. It must be conceded that the ECJ’s soft way of showing deference by means of its literal interpretation is not transferable to individual sanctions. Since those sanctions do not leave any margin of discretion to the European institutions but require a verbatim transposition, it is hardly possible to interpret an identical copy of a list of names based on a literal interpretation of the original UN list. However, even in the absence of a pertinent precedence it remains to be seen whether the ECJ will keep up the CFI’s judgments in the cases of Yusuf and Kadi. As in any other multi-layered legal system there can be no doubt that the absolute primacy of the higher layers will contribute to the effectiveness of the system. This is true also for UN law. If we confer absolute primacy not only on the UN Charter but also on all Security Council resolutions, this will deﬁnitely increase the effectiveness of the UN system. Any other interpretation could amount to a threat to the effective implementation of UN law. However, international co-operation, as well as the effectiveness of international law, also depends on the good will of the parties involved. Numerous UN Member States do not implement the Security Council resolutions (effectively).115 The political costs of refusing to implement Security Council resolutions for those 113 114

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A. Cassese (see supra n. 46), pp. 232 et seq. See for an account of individual sanctions cases decided or pending in national courts: S/2006/750, annex III; S/2006/154, annex; S/2005/572, annex II; S/2005/83, annex II. Fifth report of the Analytical Support and Sanctions Monitoring Team appointed pursuant to resolutions 1526 (2004) and 1617 (2005) concerning Al-Qaida and the Taliban and associated individuals and entities [S/2006/750], paras 30 et seq.

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states, which rely on their trustworthiness in international relations, should not be underestimated. Yet, on the other hand, Security Council resolutions lose their legitimacy if they oblige Member States to continuously infringe their own domestic human rights guarantees. Even if one disagrees with the CFI’s position that a review of European sanctions would result in an indirect review of UN Security Council resolutions, a review is not without implications in the international sphere. The ﬁnding that a European terrorist list, which is a carbon copy of the UN lists, violates fundamental rights protected under EU law undermines the political credibility of the UN sanctions. The European institutions could no longer implement them. The Member States, on the other hand, could in principle adopt national measures to comply with UN law. However, they would face the difﬁcult task of justifying why they take measures that were found to breach fundamental rights as guaranteed by the ECHR and as they result from the constitutional traditions common to the Member States.116

4. Judicial Protection from EU Lists While European copies of UN lists are nearly exempt from judicial review, persons included in a list drawn up by the European Union in an autonomous identiﬁcation procedure ﬁnd protection from Community law, but not from Union law. 4.1. Cases before the EU Courts Following Resolution 1373, on 27 December 2001 the European Union adopted Common Positions 2001/930/CFSP and 2001/931/CFSP allowing it to develop its own list of terrorist-related persons and entities whose assets are frozen by the Community and the Member States. The autonomous listing of the European Union following the more general UN request to freeze terrorist assets was challenged in various cases.117 In the Case of Sison the actual identiﬁcation of the applicant to be among “certain persons” subject to “speciﬁc restrictive measures with a view to combat-

116 117

See Art. 6 TEU. CFI, Case T-228/02 OMPI (see supra n. 12); CFI, Case T-333/02 Gestoras pro Amnistia; CFI, Case T-338/02 Segi, (see supra n. 6); CFI, Case T-47/03 Sison v; CFI, Case T-253/04 Zubeyir Aydar on behalf of Kongra-Gel others v. Council (partially claims of damages under Art. 288 TEC). 285

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ing terrorism” was challenged.118 The applicant was listed both in a common position119 and in a Council decision.120 However, he limited his action to the Community instrument. The case is still pending in the main proceedings; yet Sison additionally launched an application for interim relief, which was rejected due to failure to establish urgency.121 He also brought an action for annulment of several Council decisions denying him access to documents containing the information that led to his listing.122 The latter action was dismissed as unfounded. In both rulings the CFI dealt exclusively with the ﬁrst pillar. In the interim proceedings the issue was limited to whether Sison’s rights were infringed by the Community asset freeze. The action for access to documents was discussed exclusively with regard to those documents that led to the listing in the Community instrument. It must be assumed, however, that the information was the same for both the CFSP common position and the Community measure, which were adopted on the same day. In the recent case of OMPI 123 the applicant organisation sought annulment both of the common position and of the Council decision, as far as they concern it; which means it sought to have its name deleted from all the European terrorist lists. The CFI declined jurisdiction for the common position. It referred to Art. 46 TEU, stating that this article does not foresee review of second pillar instruments. With regard to the EC Council decision the Court held that it infringed the applicant’s procedural rights and annulled the measure in so far as it concerned the applicant.124 The CFI ruled that the Community list did not satisfy the requirements of the rule of law in the Community. In particular, the decision did not contain an adequate statement of reasons, and its adoption procedure did not comply with the applicant’s right to a fair hearing; ﬁnally, and probably most importantly, the Court found the right of access to justice infringed. It did not consider itself in a position to review the lawfulness of the

118 119

120 121 122

123 124

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CFI, Case T-47/03 Sison. 2002/847/CFSP; Sison continues to be listed in Common Position 2006/380/CFSP of 29 May 2006. Council Decision 2002/848/EC, OJ 2002 L 295/12–13. CFI, Case T-47/03 R, Sison v. Council, ECR [2003] p. II-02047. CFI, Joined Cases T-110/03, T-150/03 and T-405/03, Jose Maria Sison v. Council [2005] ECR II-1429; conﬁrmed by the ECJ: ECJ, Case C-266/05 P. Sison, judgment of 1 February 2007, n.y.r. CFI, Case T 228/02 OMPI (see supra n. 12). Ibid., para. 174.

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contested decision.125 The secretive procedure pursuant to which the allegations are brought forward and the listing decision is taken does not allow the European Courts to take an informed decision.126 The CFI rightly rejected the general nature of the Council decision127 and ruled as a matter of principle that full procedural rights must be offered to those affected;128 even if it conceded that they might be considerably restricted for national security reasons in an area as sensitive as anti-terrorism measures.129 Until the OMPI judgment, secrecy was maintained about which “competent authority”130 had submitted the evidence for the listing; it was not even disclosed to the defence lawyers of the listed person. The judgment will force the European institutions to issue statements of motivation for each person listed. Even if the quality of information in those statements still has to be seen, the Court seems to have set out some minimum criteria to be met. It required “precise information,” indicating that “a decision has been taken by a competent authority” in respect of the speciﬁc person “based on serious and credible evidence or clues, or condemnation for such deeds,”131 “unless precluded by overriding considerations concerning the security.”132 The Court must be given sufﬁcient information to be in a position to review the latter in the particular case. Further, in the Case of Segi, the Court accepted an application for damages for a misuse of powers in the second and third pillar; it examined whether the measure encroached on the competences of the Community.133 The applicants in this case directly attacked Common Position 2001/931/CFSP, which contains an annexed list with their name on it. A footnote at the bottom of the list clariﬁes that Segi and a number of other persons, all of whom are apparently European citizens or legal persons constituted within the European Union,134 “shall be the

125 126 127 128 129

130 131 132 133 134

Ibid., para. 173. Ibid., para. 155 et seq. Ibid., para. 98. Ibid., paras 108-113. Ibid., paras 127 et seq for the right to fair hearing; paras 147 et seq for the obligation to state reason; paras 156 for the right to effective judicial protection. According to Art. 1 (4) of CP 2001/931/CFSP. CFI, Case T-228/02 OMPI (see supra n. 12), para. 144 referring to para. 116. Ibid., para. 151. CFI, Case T-338/02, Segi (see supra n. 6), para. 41-2. T. Andersson, I. Cameron and K. Nordback, “EU blacklisting: the renaissance of imperial power, but on a global scale”, European Business Law Review 2003, p. 118. 287

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subject of Art. 4 only.” Art. 4 of Common Position 2001/931/CFSP is addressed to the Member States and calls upon them to assist each other through police and judicial cooperation. The CFI explicitly points out that none of the applicants mentioned a Community measure in their action.135 This, however, is only a logical consequence, since the applicants are not affected by any Community instrument. In contrast to Sison and OMPI, Segi was exclusively listed in Common Position 2001/931/ CFSP, which remains the initial and only public allegation that Segi is associated with terrorism. As a result, it is the only possible cause of a fundamental rights violation. In the appeal, Advocate-General Mengozzi suggested that Member States should stand in to ﬁll the gap of judicial protection arising from European lists adopted in the Union pillars.136 He based such a competence – or even obligation – on the principle of loyal cooperation in Art. 10 EC. However, his opinion raised more questions than it answered: Does the person listed have to raise the matter in all 27 Member States? Would adverse judgments of national courts on the legality of a Union list not undermine the institutions’ authority? Who is liable for the wrongful listing? Even if the Union is found to have legal personality, could a national court order the Union to pay damages? The ECJ did not follow its AG in Segi.137 It relied on review by the national courts of “any decision or other national measure relating to the drawing up of an act of the European Union or to its application,” supplemented by their possibility of seeking a preliminary ruling.138 The Court remained vague on how the right to judicial protection could be effectively exercised at the national level. In any event, the ECJ did not depart from the Foto-Frost doctrine that national courts cannot review the validity of European law. Hence, based on Segi any review of Union lists of terrorist suspects can only take place in the European Courts after a national court has sent a preliminary ruling request. This is possible both for “national measures relating to the drawing up of” the list or

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CFI, Case T-338/02 Segi (see supra n. 6), para. 7. The applicants did not turn against Council Regulation 2580/2001, executing Common Position 2001/931/CFSP; nor did they mention Council Decision 2001/927/CE, drawing up the list pursuant to Art. 2 (3) of this regulation. AG Mengozzi, in: Case C-354/04 P Gestoras Pro Amnistia and Case C-355/04 P Segi, supra n. 9, paras 98 et seq. ECJ, Case C-355/04 P, Segi v. Council, judgment of 27 February 2007, n.y.r., see in particular paras 49 et seq. Ibid., para. 56, emphasis added.

Trapped between Courts or How Terrorist Suspects Lost Their Right to a Remedy

to “its application.”139 This means that a Union listing could be challenged in the ECJ, through a preliminary ruling request, in the course of a challenge of the decision of the competent national authority to initially request the listing of a particular name.140 No additional act of implementation at the national level is necessary. So far, however, individuals were not even made aware which country requested their listing. Now, in OMPI the CFI ruled that the statement of reason must include the identiﬁcation of the requesting country.141 Hence, the decision in Segi and OMPI could open a new way to challenge Union lists of terrorist suspects, not directly, but through the preliminary ruling procedure. In conclusion, with regard to autonomous European sanctions one must distinguish two different issues: ﬁrst, the judicial protection from human rights infringements by a Community instrument, and, secondly, the protection from infringements by the CFSP listing. While the former appears to be in place,142 the latter does not exist at all. In Segi the CFI came to the rather uneasy conclusion that the applicant does not have any remedy at its disposal against the CFSP measure.143 It even discussed whether the choice of instrument intentionally deprived the applicants of their judicial protection. a. Judicial Review of CFSP Measures From a textual point of view there are several obstacles to direct judicial review of CFSP measures. Art. 46 TEU imposes strict limitations, arguably justiﬁed by the wide range of often sensitive issues and the short periods of time for which CFSP measures are usually set up. A further problem for judicial review lies in the broad and open nature of the TEU objectives for which the ECJ denied jurisdiction.144

139 140

141 142 143

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Ibid. Pursuant to the inscription procedure in Art. 1 (4) of Common Position 2001/931/ CFSP; the “competent authority” in the Member States can request a listing. CFI, Case T-228/02 OMPI, (see supra n. 12), para. 143. CFI, Case T-228/02 OMPI, (see supra n. 12). CFI, Case T-338/02, Segi (see supra n. 6), para. 38: “Concerning the absence of an effective remedy invoked by the applicants, it must be noted that indeed probably no effective judicial remedy is available to them, whether before the Community Courts or national courts, with regard to the inclusion of Segi on the list of persons, groups or entities involved in terrorist acts.” The ECJ excluded the review of Art. 2 TEU for preliminary rulings in ECJ, Case C-167/94 Grau Gomis [1995] ECR I-1023, para. 6: “clearly no jurisdiction to interpret that art. in the context of such proceedings.” 289

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The ECJ has outlined “its role as the constitutional guarantor of the principles underpinning the structure of the European Union.”145 It has drawn lines between the pillars, but at the same time accepted that those lines are not absolute. The exclusion of direct judicial review in the second pillar, however, limits the ECJ to an indirect review of TEU provisions.146 However, in spite of these limitations the CFSP does not escape judicial supervision entirely.147 First, in principle there is no provision equivalent to Art. 292 EC which excludes the recourse to the ICJ. However, in practice it appears inconceivable that a Member State would address the ICJ in order to enforce CFSP agreements. Secondly, and more likely in practice, the ECJ might offer limited judicial review of CFSP measures. It had done so already. For instance in the Svenska Journalistförbundet case the Court did not shy away from reviewing the legality of the denial to grant access to third pillar documents.148 Further, in the Airport Transit Visa case149 the ECJ reviewed second pillar measures as to whether they encroach upon Community competences.150 Judicial review is in line with the European Treaties in those cases. The Treaties in principle exclude the CFSP from the jurisdiction of the Court; yet they confer on the Court the task of delimiting what is covered by the Community pillar and hence cannot be dealt with under the CFSP. Art. 47 TEU, which aims to preserve the integrity of the acquis communautaire, is deemed to lie within the jurisdiction of the Court.151 In the past the Court has taken a rather generous position on whether a speciﬁc measure is covered by Community competences. For instance, the Court has found economic measures with strong political implications to be covered by the CCP.152 In Airport Transit 145

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P. Koutrakos, Trade, Foreign Policy & Defence in EU Constitutional Law, Oxford: Hart Publishing, 2001, pp. 131-163. U. Everling, “Reﬂections on the Structure of the European Union”, CMLRev., Vol. 29 1992, p. 1063. M.-G. Garbagnati Ketvel, “The Jurisdiction of the European Court of Justice in Respect of the Common Foreign and Security Policy”, International and Comparative Law Quarterly, Vol. 55 2006, pp. 82 et seq. CFI, Case T-174/95 Svenska Journalistförbundet [1998] ECR II-2289. Airport Transit Visa case: ECJ, Case C-170/96 Commission v. Council [1998] ECR I-2763. As did the CFI in CFI, Case T-338/02 Segi (see supra n. 6). M.-G. Garbagnati Ketvel (see supra n. 147), pp. 86 et seq.; see also the Airport Transit Visa case (see supra n. 149). ECJ, Case C-70/94 Werner and ECJ, Case C-83/94 Leifer [1995] ECR I-3189.

Trapped between Courts or How Terrorist Suspects Lost Their Right to a Remedy

Visa the ECJ even appeared to imply that if a subject matter can be governed by Community measures, it must be dealt with under the ﬁrst pillar.153 Eeckhout compared the Court’s approach to the delimitation between the pillars with its approach to the delimitation between Member States and Community action. He came to the conclusion that while Member States could continuously act alongside the Community in the area of concurrent competences, any possible competence of the Community ruled out actions under the second and third pillar. 154 The assumption of Community competence in principle gives rise to an acceptance of jurisdiction. In conclusion, the Treaty, as well as the ECJ’s case law, leaves room for judicial review of CFSP measures. This review is, however, largely limited to the question of whether Member States have interfered with Community competences. b. Review of Individual Sanctions Cross-pillar measures or hybrid acts such as sanctions are not excluded from judicial review of the European Courts. In the past, the ECJ has reviewed Community sanctions adopted pursuant to Art. 301 EC;155 it did not question whether the existence of a CFSP common position could exclude its jurisdiction.156 Generally, judicial review of Community instruments adopted to implement policies under the second pillar entails the danger that the Court intervenes in spheres in which the Member States have retained their competences. With regard to sanctions against individuals, the situation is particularly delicate. When individual sanctions are adopted, both instruments – the CFSP common position and the EC regulation – contain exactly the same lists of persons. Declaring a Community list that is a carbon copy of a list adopted under the second pillar, contrary to European law would undermine the authority of the Member States.

153

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M.-G. Garbagnati Ketvel (see supra n. 147), p. 91; see also the Airport Transit Visa case (see supra n. 149). P. Eeckhout, External Relations of the European Union, Oxford: Oxford University Press, 2004, p. 150 with references to: ECJ, Joint Cases C-181/91 and C-248/91 Parliament v. Council and Commission [1993] ECR I-365. See ECJ, Case C-124/95 Centro-Com and ECJ, Case C-177/95 Ebony Maritime (see supra n. 65); yet in neither case does the Court refer to Art. 301 TEC. In the earlier case of Bosphorus Airways the regulation was still adopted on the basis of a decision within the framework of European Political Co-operation (EPC) [ECJ, Case C-84/95 Bosphorus Airways (see supra n. 65)]. P. Koutrakos, Trade, Foreign Policy & Defence in EU Constitutional Law, Oxford: Hart Publishing, 2001, p. 149. 291

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It would imply that the second pillar instrument also breaches principles of European law. The situation is different from the scenario described above.157 In contrast to UN Security Council resolutions, CFSP common positions must comply with European law. State sanctions, for which Art. 301 EC was introduced, do not pose the same problems in this regard. Here, the CFSP decision establishes a speciﬁc sanction regime; it is the political decision to take action. The following Community instrument then adopts the operational measures. An interpretation and examination by the European Courts of the validity of a Community instrument does not imply that the political decision to take action was wrong. The problem does not lie in the combined use of ﬁrst and second pillar instruments as such; it lies in the meticulous method by which the CFSP common position predetermines the circle of affected persons in such detail, so that the Community does not retain the least margin of discretion. Yet an adoption process in which the adoption of a Community instrument depends on a prior decision under the CFSP contains the risk that the role of the Community is reduced to a subordinate, merely implementing the Member States’ will.158 This risk is particularly great where the Community must copy name-by-name the lists adopted under the CFSP. Here, in particular, the Court must fulﬁl its mandate to protect the acquis communautaire in Arts 46 (f) and 47 TEU. Allowing Member States to make use of Community instruments outside of the Community pillar by meticulously determining in a CFSP common position what the Community should do in the ﬁrst pillar conﬂicts with the pillar structure of the European Union. It would be an easy way to exclude the Commission and the European Parliament. Even if CFSP instruments in principle bind only the Member States,159 in the Pupino case the ECJ acknowledged that the principle of sincere cooperation referred to in Art. 10 EC is applicable to Union law.160 This principle not only obliges the Member States to assure the effectiveness of European law; the ECJ has read into Art. 10 EC a general obligation of cooperation, which is also addressed to the European institutions.161 Hence, even if CFSP instruments are not binding on

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See section 3. R. Rummel and J. Wiedemann, “Identifying Institutional Paradoxes of CFSP”, EUI Working Paper RSC No. 97/67, p. 55. P. Eeckhout (see supra n. 154), pp. 396 et seq. ECJ, Case C-105/03 Pupino [2005] ECR I-5285, para. 42. P.E. Herzog, in: H. Smit and P. Herzog (see supra n. 54), Rel.1-12/05 Pub. 623, p. 86-12.

Trapped between Courts or How Terrorist Suspects Lost Their Right to a Remedy

the European institutions in strict legal terms, they entail a certain legal effect: the Community is bound to cooperate. In the European Union the CFSP is a compromise solution between international and European law, which does not draw clear lines between Community and international law. The adoption of laws under the CFSP itself is hybrid in nature. On the one hand, it involves the European institutions, albeit in a limited way.162 On the other, it does not produce laws of the same characteristics as Community instruments, such as direct applicability. Furthermore, the jurisdiction of the European Courts is largely excluded. The Treaties do not provide an exact distinction between the second and ﬁrst pillar.163 In practice, it is for the Member States and the Court to allocate measures among the pillars. Yet, since in principle the CFSP is outside the scope of jurisdiction of the European Courts, allocating a measure to one of pillars determines whether this measure is subject to the jurisdiction of the Luxembourg courts. The adoption of individual sanctions poses new problems in this regard. It is a new form of cross-pillar activity, which by its verbatim predetermination of the content of the Community measure by the CFSP decision cannot easily be divided into a general “political decision” to take action and an operational instrument putting this decision into practice. The traditional allocation of powers between the CFSP and the Community in the ﬁeld of sanctions is therefore not transferable one-to-one. Furthermore, the adoption of individual sanctions is arguably not covered by a literal interpretation of the Treaties.164 It is based on an inventive mixture of legal bases,165 which allows the Council to combine its powers under the ﬁrst and the second pillar.

162

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D.M. Curtin, I.F. Dekker, “The EU as a Layered International Organisation: Institutional Unity in Disguise”, in: P. Craig and G. de Búrca, (eds), The Evolution of EU Law, Oxford: Oxford University Press, 1999. R. Baratta, “Overlaps between European Community Competence and European Union Foreign Policy Activity”, in: E. Cannizzaro (ed.), The European Union as an Actor in International Relations, The Hague: Kluwer Law International 2002, pp. 70-71. The CFI only stated that the Council’s use of Art. 301 and 308 TEC is not contrary to the letter of the Treaty [CFI, Case T-315/01 Kadi (see supra n. 5), para. 91]. The combined use of Arts 301, 60 and 308 EC made it possible for the Community to pursue Union aims with Community means: Art. 301 EC was given the function of a general “bridge” between the EC Treaty and the TEU. Art. 308 EC then expanded the possible scope of action to all measures necessary to attain Union objectives. 293

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It is submitted that the exact predetermination of the Community lists by a CFSP measure interferes with the competences of the Community. It unlawfully allows the Union to make use of Community instruments. The ECJ’s position on whether this requires the Luxembourg Courts to directly review the CFSP lists remains to be seen. Yet, in the past the ECJ has been rather protective as regards Community competences. 4.2. The ECtHR The ECtHR’s presumption of equivalent protection is based on the judicial protection in the Community pillar. Hence, because of the limited jurisdiction of the Luxembourg Courts in the Union pillars, the presumption cannot be transferred to Union law.166 The ECtHR is consequently expected to undertake a full review of Union measures in the light of the Convention guarantees. In the Segi case167 the ECtHR was asked to ﬁnd a violation of the applicants’ rights because Segi was included in a CFSP list, requiring Member States to take action under the third pillar. Yet the Court did not rule on the merits; it declared the application inadmissible on the grounds that the applicant organisation failed to establish that it was a victim in the meaning of Art. 34 ECHR. The Court’s main line of argument was that second pillar instruments still require implementation and therefore do not affect the position of individuals sufﬁciently for them to have a right of access to justice against those instruments. Hence, those alleged to be terrorists in a CFSP list do not ﬁnd a ruling on the substance in Strasbourg, because they fail to satisfy the standing requirements. 4.3. National Courts AG Mengozzi suggested that “in the present state of Union law” national courts are entrusted with ensuring judicial protection from Union measures.168 They are called upon to ensure that the fundamental rights recognised by the Union are respected,169 as opposed to those recognised by national constitutional law.

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This opinion was shared by AG Mengozzi, in: Case C-354/04 P Gestoras Pro Amnistia and Case C-355/04 P Segi (see supra n. 9), para. 86. ECtHR, Segi, (see supra n. 8). AG Mengozzi, in: Case C-354/04 P Gestoras Pro Amnistia and Case C-355/04 P Segi (see supra n. 9), para. 99. Ibid., para. 110.

Trapped between Courts or How Terrorist Suspects Lost Their Right to a Remedy

This could be interpreted as a reaction to two recent judgments of the Polish170 and German Constitutional Courts (GCC).171 The national constitutional courts were asked to rule on the validity of the implementation of the Framework decision on the European Arrest Warrant (EAW) in their respective country. In particular the judgment of the GFCC demonstrates a readiness to deviate from Union law if it is found to be irreconcilable with fundamental rights and principles as set out in the German Constitution. While the Polish Constitutional Court allowed the implementation legislation to remain in force in order to avoid putting Poland in breach of European Union law obligations, the majority opinion in the GCC did not consider in detail the obligations arising from EU law.172 The GCC did not rule on the applicant’s allegations that the European framework itself was contrary to the German Constitution.173 However, at least indirectly the Court addressed the claim of the complainant that the framework decision lacked democratic legitimacy. It pointed out that the European Parliament is merely consulted during the lawmaking process, but emphasised the role of the national parliaments in the implementation process.174 The Court explicitly stated that one legitimising force is the national parliaments’ legal power to breach European law by not implementing it.175 This can almost be read as a warning to the European Union. Even though the majority opinion did not mention the Maastricht decision, in its argument it became perfectly clear that the Court did not consider Union law from the same angle.176 While the Maastricht decision did not rule out that the GCC declares Community law contrary to the core principles of the German Constitution,177 the EAW decision goes even further in defending national 170 171 172

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Judgment of 27 April 2005, No. P 1/05. German Constitutional Court, Decision of 18 July 2005 (2 BvR 2236/04). The applicant alleged that not only the implementing law but also the framework decision itself were in breach of the German Constitution. The Court, however, limited its considerations to the charges against national law. See for the applicant’s claims ibid., para. 21 and for the Court’s reply para. 60 et seq. Ibid., para. 81. Judge Lübbe-Wolf critically remarked that the freedom to infringe the law could not legitimately be an endorsement of democracy in the EU [ibid., para. 177]. The majority did not mention the earlier Pupino judgement of the ECJ either [ECJ, Case C-105/03 Pupino, (see supra n. 160)], in which the ECJ strengthened third pillar law by extending the principle of sincere cooperation to that area. See above section 3.3. 295

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standards. Without addressing the constitutionality of the framework decision directly, the Court discussed the possibility of national bodies breaching EU law obligations where compliance is irreconcilable with the German Constitution. This implies that the Court places national constitutional standards above obligations arising from European Union law and that it would be willing to incidentally declare a European law instrument unconstitutional. AG Mengozzi’s suggestion is an attempt to ensure a minimum of uniformity and avoid review of Union law in national courts on the basis of national law. Yet it is not a solution to the lack of judicial protection at the EU level. National courts are not in a position to annul Union law. They can only annul the national implementation measures in their Member States. Hence, the European lists with all their stigmatising effect178 would remain in force, even after a national court declared them to be contrary to the principles of European law. Therefore, national courts cannot provide judicial protection in the meaning of Art. 6 ECHR.179 The same is true for the ECJ’s ruling in Segi; allowing for preliminary ruling requests is only insufﬁcient judicial protection from CFSP anti-terrorism lists. 4.4. Concluding Remarks In the case of autonomous EU sanctions the CFI was willing to review the Community instrument. Yet the CFSP lists already affect those listed to such an extent that effective judicial review must be provided,180 and they are continuously excluded from direct judicial review. The case law of the ECJ appears to offer a more differentiated approach, based on the argument that Union instruments adopting individual sanctions prescribe the necessary Community action in so much detail that they interfere with the competences of the latter. Further, in the recent case of Segi the ECJ has opened the possibility of using a preliminary ruling request in order to challenge Union lists.181 Despite the fact that the preliminary ruling procedure 178

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C. Eckes, “How not being sanctioned by a Community instrument infringes a person’s fundamental rights: the case of Segi”, King’s College Law Journal, 2006, pp. 144-154. See the ECtHR’s case law on which competences the tribunal in the meaning of Art. 6 ECHR must have: ECtHR, Sporrong and Lönnroth v. Sweden case, judgment of 23 September 1982, Series A no. 52. This opinion is shared by AG Mengozzi, in: Case C-354/04 P Gestoras Pro Amnistia and Case C-355/04 P Segi (see supra n. 9), para. 82. In Case C-355/04 P Segi (see supra n. 9), the listing was considered to fall under the third pillar. However, the ECJ appeared to extend the possibility of referring a

Trapped between Courts or How Terrorist Suspects Lost Their Right to a Remedy

does not provide full judicial protection, national courts must use the possibility of sending a request in order to challenge the Union lists of terrorist suspects. The ECtHR and the CFI have denied judicial protection from CFSP/JHA measures on different grounds.

5. Interplay between the Two Courts The last two sections have demonstrated that judicial review of individual sanctions is far from satisfactory. Yet in its later judgments the CFI appeared more cautious about the consequences of its denial of judicial protection. In the ﬁrst pillar it offered protection from autonomous European sanctions. Further, AG Mengozzi showed his concern about the lack of judicial protection in the second pillar. The different courts in Europe complement each other. Because there is a potential overlap of jurisdiction they also act as watchdogs of what the others do. An exchange of warning signs has taken place, which could in the end strengthen judicial review of individual sanctions in Europe. The ECJ’s attitude towards the ECHR has developed much throughout its case law. After refusing to rule on the compliance with human rights at all, the ECJ then developed its own system of protection by relying on general principles of Community law, which it derived from the constitutional traditions common to the Member States and from the ECHR. In its current jurisprudence the Court relies on the ECHR in an extended manner, even if it still reverts to its construction of “inspiration” taken from the Convention.182 It has been argued that this would also result in a direct application of the ECtHR’s case law.183 Continuing down this road, the ECJ should repeal the CFI’s judgments; both those on lists originating at the UN and on CFSP lists.

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preliminary question to both Union pillars. ECJ, Case C-413/99 Baumbast [2002] ECR I-7091; ECJ, Case C-60/00 Carpenter [2002] ECR I-6279; ECJ, Case C-200/02 Chen [2004] ECR I-9925. It was even claimed that “the ECHR and the rulings of the ECtHR are brought into the ‘orbit’ of Community law” [N. Lavranos, “Concurrence of Jurisdiction between the ECJ and other international courts and tribunals”, EUSA Ninth BIennial International Conference, 31 March – 2 April 2005, Austin, Texas, p. 30, available at ; yet the ECHR remains a source of persuasion (Rechtserkenntnisquelle) as opposed to a source of law (Rechtsquelle). 297

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The ECtHR recognised the ECJ’s position on human rights in its Bosphorus judgment.184 However, it has not yet explicitly ruled on the question of whether the European system of judicial protection is compatible with Art. 6 ECHR. Compliance could be questionable not only because of the high hurdles of direct and individual concern in the ﬁrst pillar, but also because of the lack of jurisdiction in the second pillar and the limited jurisdiction in the third pillar. In Bosphorus the Strasbourg Court accepted – at least indirectly – the latter limitation by ﬁnding that the judicial protection in the Community is equivalent to the protection under the Convention. It showed a high level of respect for the Luxembourg Courts. The ECJ has the privilege to ensure compliance with human rights in the area of Community law. According to its settled case law, this entails a review of national measures of implementation.185 It could be argued that a potential, unconﬁrmed review of Community law by the ECtHR might have done better to discipline European and national courts, as well as legislators. Instead, Bosphorus established an explicitly declared “marginal” review of Community law by the ECtHR. On the other hand, the ECtHR took a stricter approach than the European Commission of Human Rights in its earlier case law.186 The latter did not provide for the possibility of a rebuttal in the individual case. Bosphorus was even interpreted as a warning to the European institutions, including the ECJ.187 In Bosphorus, the ECtHR asserted that the Community Courts protect fundamental rights under Community law at a level equivalent to the Convention. With the exception of an explicit rebuttal of the presumption of equivalent protection, one should not expect the Strasbourg Court to step in and protect the rights of individuals against infringements by Community law. However, the ﬁnding of a violation sufﬁciently grave to rebut the general presumption of equivalent protection is tenable. Much can be said about the insufﬁcient judicial protection with regard to individual sanctions in the Community. The argument is made that the halfhearted review on the basis of jus cogens provided by the CFI reduces the state of law to a “politicised system of justice.” This is a disregard of human rights so ﬂagrant that it should lead the ECtHR to intervene. However, the Segi judgment of the ECtHR gives reason to worry. It demonstrates that the ECtHR is to a certain extent willing to go along with the reduction of 184 185

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See above section 3.2. ECJ, Case 5/88 Wachauf v. Bundesamt für Ernährung und Forstwirtschaft [1989] ECR 2609, para. 19. M. v. Germany, Application no. 13258/87. I. Cameron, Rapports (see supra n. 89), p. 7.

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human rights protection when states deal with “international terrorism.” Even if the ECtHR did not rule on the substance of the case, Segi makes a ﬁnding by the ECtHR unlikely that the lack of judicial protection in the Union pillars is a violation of Art. 6 (1) ECHR. Yet, as AG Mengozzi correctly observed, this has no implications for the assessment of the case in the Community Courts and under Community law.188 There is another ray of hope in the Bosphorus judgment of the ECtHR. The Strasbourg Court did not accept the existence of a Security Council resolution as an absolute reason for justiﬁcation. Contrary to the CFI, it did not exclude from scrutiny Member State action that implements a UN resolution. This implies an incidental control of UN resolutions as to their compliance with the Convention. The role of national courts in providing fundamental rights protection from individual sanctions is problematic. National courts are on the one hand obliged to apply EU law, including general principles of Community law, and on the other, the ECHR as interpreted by the ECtHR. Will they apply Community law if it does not satisfy the Convention standard of access to justice as interpreted by the ECtHR? What will be the implications for the relationship between national courts and the ECJ if the former declare Union law to violate principles of Community law? The multilevel-review structure of the ECtHR, the Luxembourg Courts and the courts in the Member States suffers from certain limitations, which could result in a limitation of the individual’s judicial protection. At the same time, the interaction between the different layers could strengthen in the end judicial protection and call individual courts back in line. It remains to be seen whether the ECJ will take a stand for fundamental rights as it has in the past. If the ECJ will really sacriﬁce Community human rights standards and bow to the Security Council on the one hand, and allow the legislator to continue to publicly list individuals in a judicial vacuum on the other, much will depend on the interpretation of “manifestly deﬁcient” in Strasbourg. Individual sanctions seem to be an area in which the stability of the institutional triangle developing between national courts, the ECJ and the ECtHR could be put to a test. Yet the European courts have demonstrated in the past that they are very cautious to avoid an open conﬂict. The simple threat of a conﬂict might lead to stricter review in Luxembourg.

188

AG Mengozzi, in: Case C-354/04 P Gestoras Pro Amnistia and Case C-355/04 P Segi, supra n. 9, para. 88. 299

Multilevel Economic Regulation and the EC Protection of Fundamental Rights Mielle Bulterman

1. Introduction Increasingly, economic actors are being confronted with regulatory rules that ﬁnd their origin in decisions of international organizations or bodies operating on a regional or global level. The daily life of economic actors in the European Union, for instance, is greatly inﬂuenced by economic regulatory rules decided in Brussels. These rules may differ as to their origin, objective and scope. Some of them are adopted unilaterally by the European Community; while others arise in pursuance of the Community’s international obligations. Some rules are adopted to ensure the proper functioning of the market or a speciﬁc sector; others are adopted for non-economic reasons, such as consumer protection and public health. Some rules are general in their scope and are applicable to all entities engaged in a speciﬁc economic activity; others are addressed to speciﬁc entities. What all these rules have in common, however, is that they may have signiﬁcant repercussions for individual enterprises. Not surprisingly, therefore, economic regulatory rules have been (and are being) challenged in the courts. This contribution examines the consequences of the phenomenon of multilevel economic regulation for the protection of the human rights of individuals and entities. When States transfer (part of) their authority to regulate economic activities to such international organizations as the European Community, it gives rise to questions concerning the consequence of this transfer of power for the human rights protection of economic actors. Are they still able to rely upon the judicial protection offered to them under national laws? And if not, what legal protection is available to them? The purpose of this paper is to ﬁnd an answer to these questions by examining the legal protection offered to economic actors under Community law.

Follesdal, Wessel and Wouters (eds), Multilevel Regulation and the EU, 301–321 ©2008 Koninklijke Brill NV. ISBN 978 90 04 16438 3. Printed in the Netherlands.

Multilevel Regulation and the EU

For two reasons, it is interesting to examine the impact of multilevel economic regulation on fundamental rights protection from the perspective of European Community law. First of all, a very advanced form of economic cooperation has been established within the EC. In contrast to many other international organizations, the EC has a very broad mandate: its action covers various ﬁelds of law and policy. In addition, an advanced system of legal protection has been established within the EC legal order. As a consequence, legal remedies are available under EC law to challenge European economic regulatory rules in court. In the second place, there is a two-fold, multilevel dimension to the issue of fundamental rights protection in the context of European economic regulation. On the one hand, there is a multilevel dimension to the substantive law concerned: European economic regulatory rules may ﬁnd their origin in decisions of international organizations or bodies on a regional or global level. Moreover, their effectuation in practice very often requires further action on the part of the Member States. On the other hand, there is an evident multilevel dimension to fundamental rights protection in the EC legal order. This human rights protection does not operate in a vacuum, but interacts with the human rights protection at two other levels: the national level and the ECHR. It falls outside the scope and purpose of this contribution to include all human rights that may be affected by economic regulatory rules and to examine all aspects of the interplay between the various levels of economic regulation, as well as human rights protection. Of necessity there are some restrictions to the scope of this contribution. First of all, its main focus is the impact of multilevel economic regulation on human rights protection in the EC legal order. It does not contain a systematic analysis of the impact of EC law on regional and global regulation, and human rights protection. In the second place, the analysis is conﬁned to one fundamental right with evident importance for economic actors: the right to property.

2. The Protection of Fundamental Rights in the EC Legal Order 2.1. The Protection of Fundamental Rights in the Community Legal Order – General Overview The European Union is not a party to any human rights treaty, nor is it formally bound by an EU bill of rights. In the absence of an arrangement in the founding Treaties and in response to the challenge of the supremacy of Community law

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over national constitutional law by the constitutional courts of Germany1 and Italy,2 the Court of Justice took the lead in integrating human rights within the Community legal order. Article 6(2) EU codiﬁes the human rights protection as established in the case-law of the Court of Justice: “The Union shall respect fundamental rights, as guaranteed by the European Convention for the Protection of Human Rights and Fundamental Freedoms signed in Rome on 4 November 1950 and as they result from the constitutional traditions common to the Member States, as general principles of Community law.”

The reference to the ECHR in Article 6(2) EU does not entail that the European Union is legally bound by the individual provisions of the ECHR and the interpretation given to them by the ECtHR.3 The European Union is not a party to the ECHR. According to well-established case-law, however, the ECHR has “special signiﬁcance” for the fundamental rights protection in the Community legal order.4 This means that the ECJ takes account of relevant case law of the ECtHR in order to ensure that the EC fundamental rights protection is in conformity with the requirements of the ECHR. In addition to the ECHR, the EU Charter of Fundamental Rights is signiﬁcant for the fundamental rights protection offered within the EC legal order. The EU Charter reafﬁrms “rights as they result, in particular, from the constitutional traditions and international obligations common to the Member States, the Treaty on European Union, the Community Treaties, the [ECHR], the Social Charters adopted by the Community and by the Council of Europe and the case-law of the Court … and of the European Court of Human Rights.”

The EU Charter is clearly inspired by the ECHR. Many of its provisions echo the wording of the ECHR. Article 52 Charter states that in so far as the Charter contains rights which correspond to rights guaranteed by the ECHR, the mean1

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The most important decision is the ﬁrst “solange” case, where the German Constitutional Court (Bundesverfassungsgericht) held that as long as there does not exist at Community level a system of human rights protection equivalent to that under the German constitution (Grundgesetz), German courts should not apply Community law conﬂicting with the Grundgesetz. German Handelsgesellschaft Case. Bundesverfassungsgericht 29 May 1974 [1974] 2 CMLR 551. Frontini Case (No. 183) Corte Costitutionale 27 Dec. 1973, CMLR, Vol. 2 1974, p. 386. G. Gaja, CMLRev., Vol. 33 1996, p. 985. See e.g. ECJ 28 March 1996, Opinion 2/94, [1996] ECR I-1759, para. 33. 303

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ing and scope of those rights shall be the same as those laid down by the said convention. This does not, however, prevent Union law from providing more extensive protection. Furthermore, the EU Charter contains rights which are not included in the ECHR, such as the right to good administration and social rights. The EU Charter was formally proclaimed on 7 December 2000 by the presidents of the European Parliament, the European Commission, and the European Council. For a long time, the status of the Charter in the Community legal order was unclear. Until June 2006, the EU Charter had been referred to by the Court of First Instance in various cases and in several opinions of the Advocates General, but never by the ECJ. On 26 June 2006, however, in Parliament v. Council,5 the ECJ made its ﬁrst explicit reference to the EU Charter. It seems that the ECJ has accepted that the EU Charter is relevant to the human rights protection in the Community legal order.6 The Treaty Establishing a Constitution for Europe (TCE) would have brought about two important changes with respect to the fundamental rights protection within the Community legal order. First, it would integrate the EU Charter of Fundamental Rights in the Treaty. Secondly, it would explicitly endow the European Union with the competence to accede to the ECHR. While the constitutional project has been abandoned in response to the voting down of the TCE in referenda in France and The Netherlands, there still seems to be consensus on the beed to improvise the EU’s human rights framework. The “Reform Treaty” will probably include a provision on EU accession to the ECHR as well as provision which makes the EU Charter legally binding. 2.2. Protection of the Right to Property The ﬁrst reference to the right to property in the case law of the ECJ is to be found in the case of Hauer.7 In this case, the ECJ had to rule on a three year prohibition on the new planting of vines in order to put an end to the continued increase in production surpluses. Hauer claimed that this prohibition infringed her right to property as she could not make use of her land for the purpose of viticulture. The ECJ ﬁrst observed that the contested measure restricted the use of property and therefore the second paragraph of Article 1 of Protocol 1 to the ECHR applied. However, it held that this provision did not provide a sufﬁciently precise answer to the question as to the lawfulness of the contested

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ECJ, Case C-540/03, Parliament v. Council, [2006] ECR I-5769. See e.g. ECJ, Case C-303/05, Advocaten voor de Wereld, n.y.r., para. 46. ECJ, Case 44/79, Hauer v. Land Rheinland-Pfalz, [1979] ECR 3727.

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Community measure. Subsequently, the ECJ examined the constitutional rules and practices of the nine Member States and observed that those rules and practices permit the legislature to control the use of private property in accordance with the general interest. Furthermore, the ECJ observed that all wine-producing countries of the Community had restrictive legislation concerning the planting of vines and that in none of these countries are these provisions considered to be incompatible with the right to property. The ECJ concluded that the fact that the contested Community measure imposed restriction on the new planting of vines could not be challenged in principle. However, the ECJ’s review did not end there, as it subsequently examined whether the restrictions introduced by the contested measure “in fact correspond to objectives of general interest pursued by the community or whether, with regard to the aim pursued, they constitute a disproportionate and intolerable interference with the rights of the owner, impinging upon the very substance of the right to property.” According to the ECJ, these requirements were also fulﬁlled. In Hauer, the ECJ very systematically examined whether the contested Community measure violated the right to property. First it examined in what way the right to property was impaired (deprivation of property or regulation of property). Subsequently, it examined the rules deriving from Article 1 of Protocol 1 to the ECHR in this respect. Finally, it examined the constitutional rules and traditions of the Member States. In later cases, the ECJ has never again examined an alleged violation of the right to property as systematically as it did in Hauer. According to established case law, the fundamental right to property is not absolute and its exercise may be subject to restrictions justiﬁed by objectives of general interest pursued by the Community.8 The right to property is also included in the EU Charter of Fundamental Rights. Article 17 of the Charter provides: “1. Everyone has the right to own, use, dispose of and bequeath his or her lawfully acquired possessions. No one may be deprived of his or her possessions, except in the public interest and in the cases and under the conditions provided for by law, subject to fair compensation being paid in good time for their loss. The use of property may be regulated by law in so far as is necessary for the general interest. 2. Intellectual property shall be protected.”

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See ECJ, Case 44/79, Hauer v. Land Rheinland-Pfalz, [1979] ECR 3727; ECJ, Case 5/88, Wachauf v. Bundesamt fuer Ernaehrung und Forstwirtschaft, [1989] ECR 2609; and ECJ, Case C-280/93, Germany v. Council, [1994] ECR I-4973. 305

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So far, the ECJ has not referred to the right to property as included in the Charter in its case law. 2.3. Right to Pursue a Business Activity In many cases where the right to property is invoked, reference is also made to the freedom to pursue a business activity. This right is also recognized in the EU Charter of Fundamental Rights: “The freedom to conduct a business in accordance with Community law and national law and practices is recognized.” Within the case law of the ECJ, the freedom to pursue a business has also been recognized as a general principle of Community law: “Both the right to property and the freedom to pursue a trade or business form part of the general principles of Community law. However, those principles are not absolute, but must be viewed in relation to their social function. Consequently, the exercise of the right to property and the freedom to pursue a trade or profession may be restricted, particularly in the context of a common organization of a market, provided that those restrictions in fact correspond to objectives of general interest pursued by the Community and do not constitute a disproportionate and intolerable interference, impairing the very substance of the rights guaranteed (Case 265/87 Schraeder v Hauptzollamt Gronau [1989] ECR 2237, paragraph 15, Case 5/88 Wachauf [1989] ECR 2609, paragraph 18, and Kuehn, cited above, paragraph 16).”9

As is the case in this quote, the ECJ in general does not apply a separate test to see whether the right to pursue a business activity is infringed by a speciﬁc Community measure. 2.4. Principle of Proportionality A second general principle of Community law that requires examination because of its correlation to the right to property is the principle of proportionality, which requires that a measure is appropriate to attain the objective pursued and does not go beyond what is necessary to achieve it.10 In many cases, however, the requirement that the disadvantages caused must not be disproportionate to the aims pursued is mentioned as an additional requirement.11 An evaluation of the latter requirement entails that all the protected interests involved, including

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ECJ, Case C-280/93, Germany v. Council, [1994] ECR I-4973, para. 78. See e.g. ECJ, Case C-210/00, Käserei Champignon Hofmeister, [2002] ECR I-6453, para. 59; ECJ, C-210/03, Swedish Match, [2004] ECR I-11893, para. 47. See e.g. ECJ, Case C-504/04, Agrarproduktion Staebelow v. Landrat des Landkreises Bad Doberan, n.y.r., para. 35; ECJ, C-310/04, Spain v. Council, n.y.r., para. 97.

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where relevant the right to property, need to be taken into account.12 In that case, the conclusion that a measure complies with the principle of proportionality necessarily entails that the right to property is also complied with. However, the case law on this point is not very consistent.13

3. Right to Property and Community Economic Regulation The European Community’s competence to regulate the internal market may have important repercussions for individual enterprises. Not surprisingly therefore, economic regulatory rules have been (and are being) challenged before the European courts. The following survey does not aim to provide an exhaustive inventory of the relevant decisions of the ECJ and CFI. Its purpose is rather to illustrate the functioning of the right to property in the context of European economic regulation. 3.1. Market Regulation and Fundamental Rights Protection One of the Community instruments that has been the subject of several court proceedings is the Community regulation on the organization of the market in bananas.14 This regulation had important repercussions for (the market share) of banana importers, who could no longer rely upon more beneﬁcial national regimes on the import of bananas. Germany has tried to challenge the Regulation before the ECJ, and one of the grounds Germany relied on was the right to property. This claim was dismissed by the ECJ, as it did not see any interference with the right to property: “The right to property of traders in third-country bananas is not called into question by the introduction of the Community quota and the rules for its subdivision. No economic operator can claim a right to property in a market share which he held at a time before the establishment of a common organization

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ECJ, Cases C-96/03 and C-97/03, Tempelman and Van Schaijk v. Directeur van de Rijksdienst voor de keuring van Vee en Vlees, [2005] ECR 1895, para. 48. See for a detailed analysis of the Court’s case law, J. Gerards, “Het evenredigheidsbeginsel van art. 3:4 lid 2 Awb en het Europese recht”, [The proportionality principle of Sect. 3:4 para. 2, Civil Code and European Law], in: T. Barkhuysen, et al., (eds), Europa en de Awb (werktitel), forthcoming 2007. Council Regulation 404/93 on the common organization of the market in bananas, OJ [1993] L 47/1. 307

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of a market, since such a market share constitutes only a momentary economic position exposed to the risks of changing circumstances.”15

This ruling is in line with other ECJ case law where individual undertakings complain that Community instruments of market regulation interfere with their right to property. In Eridiana, for instance, the ECJ ruled with respect to the introduction of a tariff quota for sugar that an undertaking cannot claim a vested right to the maintenance of an advantage which it obtained from the establishment of the common organization of the market. Consequently, the reduction in such an advantage cannot be considered as constituting an infringement of a fundamental right.16 The right to property has also been invoked in order to challenge the lawfulness of measures adopted in the context of the Community’s organization of the market in milk and milk products. For instance, the ECJ has had to rule on a permanent withdrawal of the reference quantities without compensation;17on the power of a Member State to claim back of part of the reference quantity and to add it to the national reserve in case of the transfer of a holding to a new owner (hereafter, clawback measure).18 A recurring issue in these cases is the question whether these reference quantities qualify as property. In Bostock, the ECJ observed in this respect: “The right to property safeguarded by the Community legal order does not include the right to dispose, for proﬁt, of an advantage, such as the reference quantities allocated in the context of the common organization of a market, which does not derive from the assets or occupational activity of the person concerned.”19

One of the exceptional cases where the ECJ did ﬁnd a human rights violation is the case Jean Neu, which concerned the application of the clawback measure in case a milk producer decided to choose another dairy. The ECJ observed:

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ECJ, Case C-280/03, Germany v. Council, [1994] ECR I-4973, para. 79. ECJ, Case 230/78, Spa Eridiana a.o. v. Minister of Agriculture and Forestry, [1979] ECR 2749, para. 22. See e.g. ECJ, Case C-22/94, Irish Farmers Association a.o. v. Minister for Agriculture, Food and Forestry, [1997] ECR I-1809, para. 27; ECJ, Case C-186/96, Demand v. Hauptzollamt Trier, [1998] ECR I-8529. ECJ, Case 313/99, Mulligan v. Minister for Agriculture and Food, [2002] ECR I-5719, para. 37. ECJ, Case C-2/92, Bostock v. Ministry for Agriculture, Fisheries and Food, [1994] ECR I-995, para. 19.

Multilevel Economic Regulation and the EC Protection of Fundamental Rights

“In that respect, it must be stated that the freedom to pursue a trade or profession, … includes, as a speciﬁc expression of that freedom, the freedom to choose whom to do business with. That freedom of choice would not be guaranteed if a change of dairy by a producer, of his own volition, were capable of leading to a reduction in his individual reference quantity as a result of the allocation of a part thereof to the national reserve, when no such reduction can be made where the producer continues to supply the same dairy. Rules to that effect would be such as to discourage producers from changing purchaser in order to supply the dairy offering them the most favourable conditions.”20

3.2. Economic Sanctions and Fundamental Rights Protection In Bosphorus, the ECJ ruled that the impounding of an aircraft leased from the Yugoslavian Airline company JAT by the Turkish Airline company Bosphorus in pursuance of the economic sanctions imposed upon Yugoslavia did not amount to a breach of the right to property.21 In that case the Turkish air charter ﬁrm Bosphorus complained of infringement of its right to property when one of the aircraft it had leased from the Yugoslavian airline company JAT was impounded by the Irish authorities while the aircraft was in Dublin for maintenance. The aircraft was impounded because it was owned by the Yugoslavian airline company JAT and thus fell within the scope of Regulation 990/93, implementing the UN economic sanctions against Yugoslavia. Article 8 of this Regulation provided that all aircraft in which a majority or controlling interest is held by a person or undertaking in or operating from the Federal Republic of Yugoslavia (Serbia and Montenegro) should be impounded by the competent authorities of the Member States. As the lease agreement between Bosphorus had been entered into bona ﬁda long before the outbreak of civil war in Yugoslavia and as the rent due under the lease was paid into blocked accounts, Bosphorus claimed that the impoundment constituted an infringements of its fundamental rights, in particular of its right to peaceful enjoyment of its property. It challenged the impoundment on this ground before the Irish national court, which decided to refer the matter to the Court of Justice by means of preliminary questions. The Court of Justice held that the airplane fell within the scope of Article 8 Regulation 990/93. With respect to Bosphorus’ claim that its right to peaceful enjoyment of its property had been violated, the ECJ observed that “any measure imposing sanctions has, by deﬁnition, consequences which affect the right to property and the freedom to pursue a trade or business, thereby causing harm to persons

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ECJ, Joined Cases C-90/90 and C-91/90, Jean Neu a.o. v. Secrétaire d’Etat à l’Agriculture et à la Viticulture [1991] ECR I-3617, para. 13. ECJ, Case C-84/95, Bosphorus [1996] ECR I-3953. 309

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who are in no way responsible for the situation which led to the adoption of the sanctions.” It continued that the importance of the aims pursued by the regulation, viz., putting an end to the state of war in the region and the violation of human rights in the Republic of Bosnia-Herzegovina, justiﬁed the negative consequences for some operators. What is noteworthy about this decision for present purposes is that the ECJ did not go into the speciﬁc circumstances of the case. It conducted a general balancing exercise between the different interests at stake: protecting the property rights of the individual and putting an end to the war in Yugoslavia. It did not go into the question whether it was proportional to impound an aircraft owned by a Yugoslavian undertaking in pursuance of the UN sanction regime against Yugoslavia, when this aircraft had been leased bona ﬁde by a Turkish company before the outbreak of hostilities in Yugoslavia. Moreover, nor was the fact that rent paid to JAT was put into a frozen bank account addressed by the ECJ. The approach of the ECJ in the case of Bosphorus is in line with other cases where economic actors try to challenge the detrimental consequences of economic sanctions by invoking the Community’s fundamental rights protection.22 3.3. Protective Measures and Fundamental Rights Protection In a third group of cases before the European courts, affected economic actors have invoked the right to property in order to challenge Community protective measures. In Schröder the CFI proceeded along the lines of the ECJ’s ruling in Bosphorus with respect to a Community measure to control classical swine fever. Schröder invoked the right to property and the right to pursue a business of occupation to challenge the lawfulness of a Commission decision prohibiting the dispatch of live pigs or fresh pig meat. The CFI ruled: “By deﬁnition, any protective measure involves effects which impinge on rights to property and freedom to pursue a trade or business, thus causing damage to parties which bear no responsibility for the situation which led to the adoption of protective measures (see, to this effect, the judgment in Case C-84/95 Bosphorus [1996] ECR I-3953, paragraph 22). It follows that the mere fact that the dispatch bans had adverse repercussions on the applicants when their holding was not, according to them, affected or threatened by the disease outbreak cannot on its own imply that the bans were unlawful restrictions. ”

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See e.g. CFI, Case T-184/95, Dorsch Consult v. Council and Commission [1998] ECR II-667; ECJ, Case C-317/00 P(R), Invest Import und Export v. Commission [2000] ECR I-9541.

Multilevel Economic Regulation and the EC Protection of Fundamental Rights

The CFI subsequently ruled that the aims pursued by the contested decisions justiﬁed accepting considerable adverse consequences for certain traders. In the appeal before the ECJ, Schröder not only challenged the decision of the CFI, but complained – without any success – about the case law of the ECJ in more general terms, stating that in general the European courts do not take sufﬁciently into consideration the individual’s subjective fundamental right to observance of his individual fundamental rights. Recent case law seems to suggest that the ECJ has taken this criticism to heart, though. In the case of Booker Aquaculture, the ECJ – after having repeated its mantra that fundamental rights are not absolute – examined the speciﬁc circumstances of the case in great detail. This case concerned the application of Directive 93/55 to the company of Booker Aquaculture. This Directive prescribed the destruction of all ﬁsh at enterprises contaminated with ﬁsh diseases listed in an annex to the Directive. The Directive did not contain any arrangement of the compensation of companies in case of destruction of its ﬁsh. Booker claimed that the right to compensation in such a situation follows from the right to property as protected in Article 1 Protocol 1. The ECJ held that the Directive was compatible with the fundamental rights protected in the Community legal order. It came to this conclusion by taking into account the following circumstances: – The measures were urgent and were intended to guarantee that effective action was implemented as soon as the presence of a disease was conﬁrmed. – The measures did not deprive farm owners of the use of their ﬁsh farms, but enable them to continue to carry on their activities there. – The measures enabled the resumption of the transportation and placing on the market in the Community of species of live ﬁsh susceptible to diseases listed in the annex to the directive, which was also in the interest of farm owners. – The carrying out of a business as an owner of a ﬁsh farm carries commercial risks. A ﬁsh disease may break out at any moment and cause them loss. – As to the extent of any loss, by reason of their condition, ﬁsh which show clinical signs of disease have no marketable value. As far as the other ﬁsh at the farm is concerned, it is not possible to establish whether they

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have any marketable value either, because of the risk that in the future they will develop clinical signs of disease. The Court’s ruling in Regione Autonome Friuli-Venezia Giulia 23 seems to conﬁrm that there is a trend at the ECJ to look in more detail into the speciﬁc circumstances of the situation. This case concerned the prohibition on making use of the name “Tokai” by Italian wine producers, since this term was reserved for wine produced in a speciﬁc region of Hungary. The Italian wine producers claimed that the prohibition on making use of the name “Tokai” was an infringement of their right to property. In its decision, the ECJ explicitly referred to the relevant case law of the ECtHR: “The case-law of the European Court of Human Rights shows that, in order to be justiﬁed, a measure controlling the use of property must comply with the principle of lawfulness and pursue a legitimate aim by means reasonably proportionate to that aim (see, inter alia, Eur. Court HR, Jokela v Finland judgment of 21 May 2002, Reports of Judgments and Decisions 2002-IV, § 48).”

Subsequently, the ECJ examined whether the measure was proportional. In that context it referred to an earlier decision on the prohibition on making use of the term “méthode champenoise” for wines not entitled to the registered designation “Champagne”.24 The ECJ noted that the Italian quality wines in question could continue to be produced from the vine variety “Tocai friulano” and to be marketed under their respective geographical names, although without the addition of the name of the vine variety from which they are produced. Furthermore, a transitional period of 13 years was provided for and there were alternative terms available to replace the name “Tocai friulano”. In those circumstances, the ECJ concluded, the right to property was not violated.

4. Impact of the ECHR When discussing the relevance of the ECHR for the protection of the right to property in the context of European economic regulation, two issues need to be distinguished. First of all, the question arises of the extent to which the human rights protection of the ECJ is in conformity with the requirements of the ECHR, as interpreted by the ECtHR. Secondly, the question arises of the

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ECJ, Case C-347/03, Regione autonoma Friuli-Vemezoa Giulia v. Ministero delle Politiche Agricole e Forestali [2005] ECR I-3785. ECJ, Case C-306/93, SMW Winzersekt [1994] ECR I-5555.

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extent to which the Strasbourg supervisory mechanism may be called upon to challenge the lawfulness of Community economic regulatory rules. 4.1. Right to Property as Guaranteed in the ECHR The right to property is protected in Article 1 Protocol 1 to the ECHR in the following terms: “Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law. The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.”

According to established case law Article (P1-1) comprises three distinct rules: “The ﬁrst rule, which is of a general nature, enounces the principle of peaceful enjoyment of property; it is set out in the ﬁrst sentence of the ﬁrst paragraph. The second rule covers deprivation of possessions and subjects it to certain conditions; it appears in the second sentence of the same paragraph. The third rule recognises that the States are entitled, amongst other things, to control the use of property in accordance with the general interest, by enforcing such laws as they deem necessary for the purpose; it is contained in the second paragraph.”25

Strasbourg case law on the relevance of the right to property in the context of economic regulation is scarce. On the basis of the case law that is available, it can safely be concluded that the ECtHR leaves a wide margin of appreciation to the Member States when a restriction on the right to property is the result of the application of national regulatory rules adopted in order to pursue an objective of general interest.26

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ECrHR 23 September 1982, Sporrong and Lönnroth. See for a more thorough analysis of the relevant Strasbourg case law, M.K. Bulterman, “Het economisch bestuursrecht en het EVRM” [Economic administrative law and the ECHR], in: T. Barkhuysen, et al., (eds), De betekenis van het EVRM voor het materiële bestuursrecht [The signiﬁcance of the EVRM for material governance law], VAR-reeks 132, Den Haag: Boom Juridische Uitgevers 2004, pp. 192-252. 313

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In Denmark Limited,27 for instance, several shooting centers and other operators connected with the ﬁrearms industry complained about the introduction of a ban on handguns in the Firearms Act 1997 in the UK. The UK legislator had also provided for a compensation scheme. This scheme provided for compensation for the handguns themselves, but did not foresee in any compensation for businesses affected by the introduction of the ban on handguns. According to the ECtHR the UK had not violated the fair balance that needs to be struck between the demands of the general interest of the community and the requirements of the protection of the applicants’ property rights. It came to this conclusion taking into account the following considerations. First of all, legislative control on the ﬁrearms industry had existed in the UK since 1920 and had become progressively more restrictive as the years passed. In addition, the ECtHR observed that it is inevitable that legislative measures introducing controls on the ownership or use of particular articles in the interests of public health or safety will have an adverse ﬁnancial impact on businesses which are dependent on the continued use of the articles in question. Finally, the ECtHR left a wide margin of appreciation to the national authorities. In Procola, the European Commission of Human Rights had to rule on the implementing measures adopted by Luxemburg in pursuance of Community Regulation 856/84. This regulation introduced an additional levy in respect of quantities of milk exceeding the reference quantity. The Commission considered that the obligation to pay a levy constituted a deprivation of possession in the sense of Article 1 Protocol 1 and therefore there was a need to examine whether the conditions mentioned in the second sentence of Article 1 Protocol 1 were fulﬁlled. It observed that the measure was provided for by law (the relevant Community regulation and the Luxemburg implementing measures); that the stabilization of the market for milk was a matter of public interest; that the measure was proportionate. In this context it took into account that the applicants directly beneﬁted from the stabilization of the market of milk. The assignment of a reference quantity, the exceeding of which results in the application of an additional levy, was categorized by the ECHR as a measure to control the use of property. It is interesting to note that in the many cases concerning the application of the right to property, the decision of Procola has never been referred to by the ECJ. This is to be regretted, as it would have made it clear that the ECJ’s interpretation of the right to property in these cases ﬁnds support in the Strasbourg case law.

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ECtHR 26 September 2000, Denimark Limited a.o. v. United Kingdom (admissibility decision).

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4.2. Challenging Economic Regulation before the ECtHR The EC is not a party to the ECHR. Consequently, individuals cannot bring proceedings before the ECtHR against the EC if they are not satisﬁed with the human rights protection offered by the ECJ. Furthermore, it follows from the ECrtH decision in the case of Bosphorus28 that in general national measures implementing Community economic regulatory norms will not be submitted to the regular review of the Strasbourg court. In Bosporus, the ECtHR for the ﬁrst time gave an answer to the very principle question of the extent to which the EU Member States can be held accountable for violating the ECHR when they adopt national measures in order to comply with an obligation deriving from EU Membership. In its decision the ECtHR introduced a general approach, which may also be applied with respect to other international organizations. It held that State action taken in compliance with obligations ﬂowing from that State’s membership of an international organization is justiﬁed as long as the human rights protection offered by the relevant organization is considered to be “equivalent” to that of the ECHR. If the international organization offers equivalent protection there is a presumption that the State has not violated the ECHR when it implements obligations ﬂowing from its membership of the organization. This presumption may be rebutted if in a particular case the protection of the Convention rights was manifestly deﬁcient. The ECtHR then referred to the procedural and substantive guarantees of human rights protection within the Community legal order and concluded that the protection of fundamental rights by the EC is “equivalent” to that of the Convention system. There thus was a presumption that the Irish authorities did not violate the Convention by impounding the aircraft leased by Bosphorus. As the ECtHR also considered that there was no manifest deﬁciency in the protection of Bosphorus rights under the ECHR, it concluded that the impoundment did not amount to a violation to the right to property. It may be assumed that if the interpretation of the right to property of the ECJ is in clear violation of relevant Strasbourg case law, the presumption of equivalent protection is rebutted and the Strasbourg court would exercise its full review. From the perspective of protection of human rights in the context of economic regulation, this is to be regretted. In many areas of economic regulations the fundamental rights protection offered by national courts in the European Union has become a matter of European Community law. This

28

ECtHR 30 May 2005, Bosphorus v. Ireland. For comment, see S. Douglas-Scott, CMLRev., 2006, pp. 243-254. 315

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process of “communautarization” of fundamental rights protection also entails that there is only a marginal review by the Strasbourg court.

5. Impact of the Global Regulatory Dimension To what extent does the global regulatory dimension of a speciﬁc Community measure alter the fundamental rights protection offered under EC law, as described in the preceding paragraphs? In answering this question, two situations must be distinguished. First, it happens that Community law is not in conformity with international economic regulatory rules. In such a situation, the question arises whether individuals can rely on these international rules in order to challenge a Community decision. Secondly, in situations where Community law has been adopted in pursuance of – and in accordance with – international regulatory norms, the question arises whether it is possible to challenge the Community measure by relying upon EC fundamental rights protection. We now examine both situations in turn. 5.1. Enforcing Global Regulatory Norms before the European Court Provisions of an agreement concluded by the Community are an integral part of the Community legal order.29 The provisions of an agreement concluded by the Community rank above national law30 and they also have priority over secondary Community law.31 It is generally assumed that provisions of an agreement concluded by the Community do not precede the provisions of the Treaties.32 An important consequence of being an integral part of Community law is the potential direct effect of agreements concluded by the European Community. Direct effect concerns the question whether a legal rule creates rights in favour of individuals which can be upheld before a court.33 As regards the direct effect of provisions of an international agreement or decision in the Community legal 29

30

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ECJ, Case 181/73, Haegeman v. Belgium (Haegeman II) [1974] ECR, 449, para. 3. ECJ, Joined Cases 21-24/72, International Fruit Company NV v. Produktschap voor Groenten en Fruit [1972] ECR 1219, paras 6 and 8. Ibid. I. Macleod, I.D. Hendry and Stephen Hyett, The External Relations of the European Communities, Oxford: Clarendon Press, 1996, p. 134. H.G. Schermers and D. Waelbroeck, Judicial Protection in the European Communities, Deventer: Kluwer, 1992, p. 319.

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order, it is important to distinguish between the capacity of an agreement or decision to contain directly effective rights and the direct effect of a particular provision.34 Like provisions of Community law, in order to have direct effect, a provision of an international agreement or decision must contain a clear and precise obligation which is not subject, in its implementation or effects, to the adoption of any subsequent measure.35 However, for a provision of an international agreement or decision, it is not sufﬁcient that these technical requirements for direct effect are fulﬁlled. In addition, the agreement or decision as such must be capable of containing provisions having a direct effect.36 If the agreement or decision explicitly provides for its effect in the legal order of the contracting parties, this will be decisive for its effect in the Community legal order.37 In the absence of such a provision, the spirit, general scheme and terms (wording, purpose and nature) of the international agreement or decision have to be examined in order to determine its capacity to have a direct effect.38 This additional requirement reﬂects the difference between the Community legal order and the international legal system. For Community law, the capacity to have a direct effect was established for the ﬁrst time in Van Gend en Loos,39 where the Court referred to the special features of Community law to justify its direct effect. So far, the WTO agreements are the only international agreements that have been denied direct effect by the Court. Individuals may also rely on the rules of international (treaty) law binding upon the European Community to challenge the lawfulness of Community measure violating these rules of international law. A practical example constitutes the suspension of the Cooperation Agreement between the European

34

35

36

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See for a more thorough analysis of these two types of direct effect, P. Eeckhout, “The Domestic Legal Status of the WTO Agreement: Interconnecting Legal Systems”, CMLRev., 1997, pp. 27-28. ECJ, Case 12/86, Demirel v. Stadt Schwäbisch Gmünd, [1987] ECR 3719, para. 14. In Chiquita (Case C-469/93, Amministrazione delle Finanze dello Stato v. Chiquita Italia SpA [1995] ECR I-4533) the Court clearly distinguishes between both types of direct effect. ECJ, Case 104/81, Hauptzollamt Mainz v. C.A. Kupferberg & Cie KG a.A [1982] ECR 3641, para. 20. ECJ Joined Cases 21-24/72, International Fruit Company NV v. Produktschap voor Groenten en Fruit [1972] ECR 1219, para. 19-20; ECJ, Case 12/86, Demirel v. Stadt Schwäbisch Gmünd [1987] ECR 3719, para. 14; ECJ, Case C-280/93, Germany v. Council [1994] ECR I-4973, at I-5073, para. 110. ECJ, Case 26/62, Van Gend en Loos v. Netherlands [1963] ECR 1, at 11-13. 317

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Economic Community and the Socialist Federal Republic of Yugoslavia.40 In November 1991 the Community decided to suspend the Cooperation Agreement in response to the crises in Yugoslavia in the area.41 In the Racke case, the ECJ examined whether the suspension of the Cooperation Agreement had taken place in conformity with the rules of customary international law governing the termination and suspension of treaty obligations by reason of a fundamental change of circumstance. The Court ﬁrst observed that the rules of customary international law concerning the termination and the suspension of treaty relations by reason of a fundamental change of circumstances are binding on the Community institutions.42 Subsequently, the Court examined whether the suspension complied with the conditions laid down in Article 62(2) VCLT. It concluded that this was the case, taking into account the margin of discretion left to the institutions in this respect in view of complexity of the rules in question.43 In Opel Austria44 the international law principle of good faith was relied on in order to challenge the lawfulness of a Community regulation which had been adopted contrary to the EEA agreement with Switzerland, before the entry into force of this agreement. The Court held that, when the Communities have deposited their instruments of approval, traders may rely on the principle of protection of legitimate expectations in order to challenge the legality of the contest Community regulation “in the light of the provisions of the EEA Agreement which will have direct effect after its entry into force.” 5.2. Challenging Global Regulatory Norms before the European Court Secondly, individuals may want to rely on EC fundamental rights protection in order to challenge the lawfulness of community measures implementing international regulatory norms. Sometimes this is not possible, as is illustrated by the decisions of the CFI in Yusuf and Kadi.45 Both cases concerned the lawfulness of Community measures

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OJ [1983] L 41/1. Decision 91/586/ECSC, EEC of 11 November 1991 suspending the application of the Agreements between the European Community, its Member States and the Socialist Federal Republic of Yugoslavia (OJ [1991] L 315/47). ECJ, Case C-162/96, Racke v. Hauptzollamt Mainz, [1998] ECR I-3655, para. 46. Id, § 52 CFI, Case T-115/94, Opel Austria v. Council [1997] ECR II-39. CFI, Case T-306/01, Yusuf and Al Barakaat International Foundation v. Council and Commission [2005] ECR II-3533, and CFI, Case T-315/02, Kadi v. Council

Multilevel Economic Regulation and the EC Protection of Fundamental Rights

adopted in pursuance of the UN sanctions regime of Resolution 1267. In this Resolution, the UN Member States are called on to freeze the assets of the Taliban, Usama bin Laden, Al-Qaida and all persons or entities associated with them, and to ensure that no funds are made available to them. A committee – Committee 1267, consisting of members of the Security Council – decides which persons and entities fall within the ambit of Resolution 1267. Consequently, the UN sanctions regime of Resolution 1267 does not leave any margin of discretion to the UN Member States in the implementation of the UN sanction regime. In those cases, the CFI observed in Yusuf and Kadi, there is no room for review of the Community regulation for compliance with the fundamental rights protected in the Community legal order. Such a review would entail an indirect review of the UN Security Council Resolution, which would run counter to Article 103 UN Charter. This provision explicitly states that the obligations deriving from the UN Charter prevail over any other international obligation. Since the decision of the CFI in Yusuf and Kadi is examined in detail in other contributions to this volume, there is no need to address all details of the decision here. For the purpose of this contribution, however, one element of the decision of the CFI is of particular relevance. While the CFI held that the Community regulation was not subject to the Court’s ordinary human rights review, it did not escape judicial review completely. According to the CFI, the UN Security Council Resolutions need to respect jus cogens and for that reason it considered itself competent to review the Community ﬁnancial sanction regulation in the light of jus cogens. Obviously, the indirect review of the UN Security Council by the CFI did not in itself bring about a change in the human rights protection at UN level. At the same time, it is evident that the ruling in Yusuf and Kadi has played an important role in the discussions of the human rights protection in the context of the UN ﬁnancial regime. In Yusuf and Kadi the human rights protection offered by the CFI was clearly circumscribed by the UN dimension to the case. The situation is different when the Community is exercising powers which are not circumscribed by a UN Security Council Resolution. For instance, in the recent PMOI case, the CFI subjected the Community measures implementing Resolution 1373(2001) to the full EC fundamental rights review. In Resolution 1373(2001), the UN Member States are called on to impose ﬁnancial sanctions on terrorists. An important difference between Resolution 1373 and Resolution 1267 is that there is no UN list of the persons and entities that fall under the former resolution. This

and Commission [2005] ECR II-3649. For a more detailed analysis of the legal protection in the context of the UN ﬁnancial sanction regime, see the contributions of Clemens Feinäugle and Eckes in this volume. 319

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means that the UN Member States determine who qualiﬁes as a terrorist and consequently falls under the scope of Resolution 1373. In the European Union this is decided at EU level, rather than by the individual Member States. In PMOI, the CFI observed that the identiﬁcation of persons falling within the scope of Resolution 1373 and the adoption of measures against these persons involve the exercise of the Community’s own powers, to which the principle of Community law apply in full. In short, even in the context of the implementation of the UN Security Council, the fundamental principles of Community law must be observed if the global regulatory norm leaves discretion for the Community.46 A fortiori this is to be the case when international regulatory norms are being implemented which do not derive from the UN Charter. The only question which then remains concerns the situation where the Community implements international regulatory norms which leave no room for discretion.47 In Metronome Musik, the introduction of an exclusive rental right for the producer of phonograms in a EC Directive was challenged for violating the freedom to pursue a trade or profession, as it impaired the economic activity of renting phonographic products. In its decision the ECJ referred to the existence of an international obligation to protect the rental right of the producer of phonograms in the context of the TRIPS agreement. It observed that the general principle of freedom to pursue a trade or profession could not be interpreted in isolation from the international obligations entered into with respect to the protection of intellectual property rights by the Community and by the Member States.48 The fact that there is an international obligation upon the Community to adopt a speciﬁc measure is not in itself sufﬁcient to justify that there is a restriction on a Community fundamental right. This is also the approach adopted by the ECJ in Bosphorus. In that case, the ECJ did not rule that there was no infringement of the right to property since the Community measure was adopted in pursuance of the UN sanction regime against the FRY. The fact that the contested regulation was adopted to implement this sanction regime only played a role in the balancing exercise carried out by the ECJ in order to determine whether the restriction of the right to property was justiﬁed. In the case of Friuli-Venezia Giulia, the ECJ examined the EC-Hungary agreement on wines in the light of the right to property as a general principle of Community law. The fact that the restriction on the fundamental rights of 46 47 48

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CFI, Case T/228/02, PMOI v. Council, n.y.r. It might not always be evident whether this is the case. ECJ, Case C-200/96, Metronome Musik v. Music Point [1998] ECR I-1953, para. 26.

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the Italian wine producers making use of the name “Tocai” found its origin in an international agreement binding on the European Community did not seem to play any role in the review of the ECJ.

6. Conclusion In this contribution the protection of the right to property in the Community legal order has been examined in order to illustrate the consequence of the phenomenon of multilevel economic regulation for the protection of human rights. The fact that many national economic regulatory rules ﬁnd their origin in Community measures decided upon in Brussels, has direct consequences for the fundamental rights protection of affected individuals and entities. In those situations the fundamental rights protection offered by national courts in the European Union has become a matter of European Community law. Article 6 EU refers to the constitutional traditions of the Member States in the context of the EC fundamental rights protection. However, an analysis of these traditions is not a systematic part of the ECJ’s review of Community measures in the light of fundamental rights, such as the right to property. Consequently, the human rights protection offered by the ECJ does not necessarily correspond to the human rights protection offered at the national level. Furthermore, the process of “communautarization” of fundamental rights protection also has consequences for the relevance of the Strasbourg human rights supervisory mechanism. In general national measures implementing Community regulatory rules are not subject to a stringent review by the ECtHR as a consequence of Bosphorus ruling. However, while the ECtHR in Bosphorus gave leeway for an autonomous human rights check by the ECJ, the latter court increasingly refers to relevant case law of the ECtHR. As far as the impact of the global regulatory dimension is concerned, it is important to note that the well-known and much debated cases of Yusuf and Kadi are not characteristic of the human rights protection offered by the European courts against Community measures adopted in pursuance of international regulatory rules. In general, the fact that there is an international dimension to a Community economic regulatory measure does not prevent the ECJ and the CFI from applying the fundamental principles of Community law in full.

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Reducing the Judicial Deficit in Multilevel Environmental Regulation: The Example of Plant Protection Products Andrea Keessen*

1. Introduction Environmental law often has an international background.1 When the EU Member States are Party to an environmental convention, its rules are transformed into European law by Community institutions. As a rule, the Member States are responsible for the implementation of European law. However, international and Community institutions and bodies can also take implementing measures. Yet environmental organisations aiming to challenge those measures depend on national courts to provide for judicial review. The national procedural rules governing these proceedings have not been designed to function in a multilevel context.2 Moreover, as a result of the procedural differences in the EU Member States, access to court for environmental organisations is not guaranteed in all EU Member States. The Aarhus Convention on Access to Information, Public Participation in Decision Making and Access to Justice in Environmental

* The author wishes to thank Rob Widdershoven, Chris Backes, Marleen van Rijswick and Adriaan van Doorn for their valuable comments. This article is a revised version of the author’s article “Reducing the Judicial Deﬁcit in Multilevel Environmental Regulation: the Example of Plant Protection Products”, EELRev., Vol. 18 2007, pp. 26-36. 1

2

See for a review: J.H. Jans, European Environmental Law, Groningen: Europa Law Publishing, 2000. A.W.H. Meij, “Toenemende complexiteit van het Europese recht” [Increasing complexity of European law], in: Raad voor de Rechtspraak, Europa en de Nederlandse rechtspraak: de praktische gevolgen, Rechtstreeks, Vol. 1 2006, p. 35.

Follesdal, Wessel and Wouters (eds), Multilevel Regulation and the EU, 323–344 ©2008 Koninklijke Brill NV. ISBN 978 90 04 16438 3. Printed in the Netherlands.

Multilevel Regulation and the EU

Matters aims to redress this issue.3 Better access to justice for environmental organisations is expected to improve the implementation of environmental law.4 The regulation of plant protection products is here used as an example in order to evaluate the impact of the Aarhus Convention in a multilevel regulatory context.5 I ﬁrst survey the decision-making procedures in this ﬁeld and discuss two judgments by the Community courts to demonstrate why the current judicial review procedure presents a judicial deﬁcit. I then evaluate the reduction of the judicial deﬁcit in this ﬁeld by the incorporation of the rules on judicial review contained in the Aarhus Convention into the European legal order.6

2. Regulation of Plant Protection Products Plant protection products are pesticides used for agricultural purposes. Their use beneﬁts farmers as they kill weed or insects. Environmental organisations take an interest in plant protection products because they are also associated with serious risks to human health, especially children’s health, and the environment. They affect people, animals and plants via their contamination of groundwater, soils, food and even the air. As early as 1962, Rachel Carson’s

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The text of the Aarhus Convention can be found at <www.unece.org/env>. H. Somsen, “The Private Enforcement of Member State Compliance with EC Environmental Law: an Unfulﬁlled Promise?”, in: H. Somsen, (ed.), The Yearbook of European Environmental Law (1) Oxford: Oxford University Press, 2000, pp. 311-360; D. Curtin, “The Decentralised Enforcement of Community Law Rights. Judicial Snakes and Ladders”, in: D. Curtin and David O’Keeffe, (eds), Constitutional Adjudication in European Community and National Law, Dublin: Butterworth, 1992, p. 34; N. de Sadeleer, et al., (eds), Access to Justice in Environmental Matters and the Role of NGOs; Empirical Findings and Legal Appraisal, Groningen: Europa Law Publishing, 2005, p. 177. See for other examples: A.S. Mathiesen, “Public Participation in Decision-making and Access to Justice in EC Environmental Law: The Case of Certain Plans and Programmes”, EELR, 2003, pp. 36-51; J. Verschuuren, “Public Participation regarding the Elaboration and Approval of Projects in the EU after the Aarhus Convention”, in: T.F.M. Etty and H. Somsen, (eds), The Yearbook of European Environmental Law, Vol. 4 2005, Oxford: Oxford University Press, pp. 29-48. As the focus of this contribution is on the judicial deﬁcit, the other two pillars of the Aarhus Convention – access to information and public participation – will not be discussed, even though they are of equal importance and contribute to effective judicial review. Access to justice related to denial of environmental information or public participation rights is also omitted.

Reducing the Judicial Deﬁcit in Multilevel Environmental Regulation

Silent Spring exposed the hazards of the pesticide DDT.7 It changed thinking about technological progress and helped set the stage for the environmental movement and for environmental legislation regulating pesticides. 2.1. International Rules and Measures Plant protection products are regulated by three international conventions. The most important piece is the 2001 Stockholm Convention on Persistent Organic Pollutants (hereafter, POPs), which entered into force in 2004.8 It aims to eliminate or at least reduce production, use, emissions and discharges of chemicals and pesticides exhibiting the characteristics of POPs. Both the European Union and the Member States are Parties to this Convention. Currently, the Stockholm Convention is of limited signiﬁcance to them, because it targets only 12 chemicals and pesticides. It does not completely ban these POPs, e.g. it allows the use of DDT to ﬁght malaria. Its relevance might increase in the coming years, because it contains criteria for the evaluation of chemicals and pesticides in use, it regulates their disposal and it obliges the Parties to prevent the development of new POPs. It may even introduce a POP review committee that would issue recommendations to the Conference of the Parties concerning the inclusion of other chemicals and pesticides on the Appendix to the Convention.9 In addition, the (1998) Rotterdam Convention on Prior Informed Consent regulates the import and export of chemicals and pesticides that have been banned or severely restricted for health or environmental reasons by Parties to the Convention.10 Finally, the (1989) Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and their Disposal applies to plant protection products when they have become waste.11

7 8

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R. Carson, Silent Spring, Boston: Houghton Mifﬂin, 1962. The Stockholm Convention on Persistent Organic Pollutants (2001). See <www. pops.int>. It was preceded by the 1979 Convention on Long-Range Transboundary Air Pollution on Persistent Organic Pollutants and the Protocol on Persistent Organic Pollutants (1998) to this Convention, to which the EC was also a Party. The international review committee will act in the context of the Strategic Approach to International Chemicals Management (SAICM) within the United Nations Framework. The Rotterdam Convention on Prior Informed Consent (1998), preceded by a voluntary prior informed consent procedure, in effect since 1989. See <www.pic. int>. The Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and their Disposal (1989). See <www.basel.int>. See for a survey of these 325

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2.2. European Rules and Measures The European Union is ahead of the international developments. It bans the POPs that the Stockholm Convention forbids from being used in plant protection products via Regulation 850/2004,12 which also lists other active substances whose presence is forbidden in plant protection products.13 Moreover the EU has general legislation in the ﬁeld of water and waste, aiming to curb pesticide pollution. What makes the EU really ahead of international developments is that it not only bans substances, but also regulates other aspects. There is European legislation regulating the marketing of pesticides14 as well as pesticide residues in food15 and the classiﬁcation, packaging and labelling of pesticides.16 For the time being, the regulation of the use of pesticides still belongs to the competences of the Member States. This situation will change as the Commission is developing a Community strategy and action plan on the sustainable use of pesticides.17

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three Conventions and their inter-relationship: <www.pops.int/documents/background/ hcwc.pdf>. Regulation 850/2004 of the European Parliament and of the Council of 29 April 2004 on persistent organic pollutants and amending Directive 79/117/EEC, OJ 2004 L 158/7. Council Directive of 21 December 1979 prohibiting the placing on the market and the use of plant protection products containing certain active substances, OJ 1978 L33/36, as amended. Council Directive 91/414 EC of 15 July 1991 concerning the placing of plant protection products on the market, OJ 1991 L 230/1, as amended and Directive 98/8/EC of the European Parliament and of the Council, concerning the placing of biocidal products on the market, OJ 1998 L 123/1. Directive 98/8/EC was modelled on Directive 91/414/EC. Directive 90/642 on the ﬁxing of maximum levels for pesticide residues in and on certain products of plant origin, including fruit and vegetables, OJ 1990 L 350/71, frequently amended. Directive 99/45 concerning the approximation of the laws, regulations and administrative provisions of the Member States relating to the classiﬁcation, packaging and labelling of dangerous preparations, OJ 1999 L 200/1. Communication from the Commission to the Council, the European Parliament, the European Economic and Social Committee and the Committee of the Regions, A Thematic Strategy on the Sustainable Use of Pesticides, COM (2006) 373 ﬁnal, as proposed in Decision 1600/2002/EC of the European Parliament and of the Council of 22 July 2002 laying down the Sixth Environmental Action Programme, OJ 2002 L242/1, Art. 8 (c) and (d). See also: Communication from the Commission to the Council, the Parliament, the Economic an Social Committee and the Committee

Reducing the Judicial Deﬁcit in Multilevel Environmental Regulation

Within the European Union the marketing of pesticides for agricultural use is regulated by Directive 91/414/EC on the placing on the market of plant protection products.18 This Directive harmonises the legal regimes of the Member States for the authorisation of plant protection products19 by introducing common authorisation criteria in a multilevel setting.20 Since 1992, the Commission reviews the active substances used in plant protection products.21 In the Community review procedure each applicant has to prove that an active substance can be used safely in respect of human and animal health and the environment. The European Food Safety Authority (EFSA) assists the Commission with this task. On the basis of the EFSA’s advice, the Commission – assisted by the Standing Committee on the Food Chain and Animal Health – decides whether an active substance may be listed on Annex I to the Directive. A positive decision is issued as a daughter directive to Directive 91/414, because it adds an active substance to the Annex. A negative decision is issued in the form of a Commission or Council decision addressed to the Member States. 2.3. National Rules and Measures The Community legislation and decisions determine the content of national decisions authorising or rejecting plant protection products containing those active substances, because the Member States are only allowed to authorise plant protection products containing active substances that have been listed on Annex I to Directive 91/414/EC. Other Member States may recognise an

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of the Regions on the sixth environmental action programme of the European Community, “Environment 2010: Our future, Our choice”, COM (2001) 31 ﬁnal, pp. 43-45. Council Directive 91/414 EC. All references are to the consolidated version: CONSLEG 1991 L0414 – 01/01/2004. In the Netherlands the Pesticides Act (Bestrijdingsmiddelenwet), which regulates plant protection products and biocides. See: Backes et al., Hoofdlijnen milieubestuursrecht [Outline of Environmental Administrative Law], Den Haag: Boom Juridische Uitgevers, 2004, pp. 252-259; E.M. Vogelezang-Stoute, Bestrijdingsmiddelenrecht. Een rechtsvergelijking [Pesticide Legislation Compared], Deventer: Kluwer, 2004. Art. 8 Dir. 91/414/EC. The review takes place in accordance with Commission Regulation 3600/92 of 11 December 1992 laying down the detailed rules for the implementation of the ﬁrst stage of the programme of work referred to in Art. 8 (3) of Directive 91/414, OJ 1992 L 366, p. 10. The regulatory comitology procedure is followed, as Art. 5 and 6, 19 and 20 Council Directive 91/414/EC refer to Arts 5 and 7 Council Decision 1999/468, OJ 1999 L 184/23. 327

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authorisation issued in accordance with this multilevel procedure by issuing an identical national authorisation.22 By contrast, a decision not to include an active substance on Annex I means that the Member States have to ban the substance as well and revoke authorisations for plant protection products containing that active substance. Even though the Directive allows the Member States to deviate from the European rules either by prohibiting plant protection products authorised by other Member States or by allowing them even if they contain banned active substances, such derogations are meant to be temporary.23 Not all plant protection products are covered by a national authorisation issued in accordance with the multilevel procedure of the Directive.24 Since the Directive entered into effect without any active substances listed on the Annex I, a transition regime allows the Member States to maintain national authorisations of plant protection products until all active substances have been evaluated at Community level.25

3. Judicial Review Judicial review is not available at the international level in reference to the regulation of plant protection products. The Stockholm Convention does not prevision judicial review of decisions taken by the Conference of the Parties to the Stockholm Convention, e.g. broadening the use of DDT or placing new chemicals on the Annexes to the Convention after evaluation by the POP review committee of the Stockholm Convention. Although the EC Treaty provides that the Court of First Instance (CFI) and the European Court of Justice (ECJ) may offer judicial protection to individuals, it restricted their access by imposing standing criteria. Therefore, as a rule, individuals depend on the national courts to obtain

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Art. 10 Dir. 91/414/EC. Respectively Art. 11 and Art. 8 (4) Dir. 91/414/EC. C-316/04 Stichting Zuid-Hollandse Milieufederatie v. College voor de toelating van bestrijdingsmiddelen, [2005] ECR I-0000. Cf C-125/88 Nijman [1989] ECR 3533. According to Art. 8 (2) and (3) Dir. 91/414/EC, the transition period was supposed to end 12 years after notiﬁcation of the Directive. It appears from the case law that the Court has accepted an extension of this period, e.g. C-443/02 Schreiber [2004] ECR I-7275. See for a critical review of the Dutch practice: J. Rutteman, “De toelating van bestrijdingsmiddelen: terug naar 1975?” [Admission of pesticides; Return to 1975?] MenR, Vol. 12 2002, pp. 312-317.

Reducing the Judicial Deﬁcit in Multilevel Environmental Regulation

judicial review. Two cases in the ﬁeld of plant protection products demonstrate why the current judicial review procedure presents a judicial deﬁcit. 3.1. Getting a Preliminary Ruling The European review of the active substance Aldicarb resulted in Council Decision 2003/199 refusing to include Aldicarb in Annex I to Council Directive 91/414/EEC. The Council ordered withdrawal of national authorisations for plant protection products containing Aldicarb within 2003, but it allowed limited uses considered as essential until 30 June 2007. Two Dutch environmental organisations brought proceedings before a Dutch court against the decision by the Dutch competent authority to allow essential uses of plant protection products containing Aldicarb, taken on the basis of the Council Decision. They contested the validity of Art. 2 of Council Decision vis-à-vis Art. 8 (2) of the Directive. The Dutch court decided to ask for a preliminary ruling.26 The Court of Justice (ECJ) reviewed the Council Decision marginally, out of respect for the room for discretion. It explained that Art. 8 (2) does not establish the period within which Member States must ensure that those authorisations are withdrawn or varied, but refers to a prescribed period, i.e. a period to be ﬁxed in an implementing measure, which is exactly what the Council did in its Decision. Art. 2 (3) of the Decision sets the time limit for the withdrawal of plant protection products containing Aldicarb. Moreover, it is not inconsistent that a decision sets different time limits, since the Directive does not contain a restriction in that regard. In the absence of efﬁcient alternatives to certain limited uses in certain Member States, it appeared necessary to allow further essential uses of those products for a limited period and under strict conditions aimed at minimising risk. The ECJ concluded that the Council had carried out a global assessment of the advantages and drawbacks of the system to be established and that that system was not on any view manifestly inappropriate in the light of the objectives pursued. This example shows how difﬁcult it is to challenge decisions taken in a multilevel regulation context. If the ECJ had ruled that the period of grace in the Council Decision was not proportionate, that would have led the national court to invalidate the national decision allowing for essential uses during a period of grace. However, since the period of grace lasted until 2007, the long duration of the proceedings diminished the relevance of the outcome. The Council Decision was taken in 2003, whereas the ECJ gave its judgment in 2006. The long 26

CBb 19 April 2005: AWB 04/300 32010; C-174/05 Stichting Zuid-Hollandse Milieufederatie, Stichting Natuur en Milieu v. College voor de toelating van bestrijdingsmiddelen [2006] ECR I-0000. 329

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duration is caused by the fact that the environmental organisations had to bring proceedings against the national implementing decision. In these proceedings they questioned the validity of the Community decision, which led the national court to ask for a preliminary ruling. This detour doubles the time spent waiting for judicial review. Nevertheless, the environmental organisations should be grateful for two reasons. First of all, they should be grateful for the reference, as the national court does not have to refer if it harbours no doubts regarding the interpretation or the validity of a Community act.27 Only if a national court seriously doubts the validity of a Community measure does it have to refer the case, since only the Community courts can declare a Community measure invalid,28 whereas only the national courts can declare a national measure invalid.29 Secondly, they should consider it a privilege to have access to court in a Member State. Until the laws of the Member States become harmonised, environmental organisations depend on the national procedural laws to be granted standing. These laws display considerable difference with regard to standing rights for environmental organisations.30 For all these reasons, the preliminary ruling does not seem the best instrument to provide for judicial review in a multilevel regulation context. Therefore, environmental organisations tried to bring proceedings against a Community decision at the European level. 3.2. Trying Direct Action In order to speed up the review of a Community decision, the European Environmental Bureau (EEB) and a Dutch environmental organisation brought proceedings before the Court of First Instance (CFI) against two Commission decisions concerning the non-inclusion on Annex I of Atrazine and Simazine (for convenience this is called the EEB case).31 The environmental organisations protested against the duration of the period of grace for essential uses granted in the Commission decisions. These decisions were addressed solely to the Member States. Therefore, the environmental organisations had to pass the

27

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C-283/81 Cilﬁt [1982] ECR 3415. See for a critical view: P.J. Wattel, et al., “We Can’t Go on Meeting Like This”, CMLRev., 2004, pp. 177-190. C-314/85 Foto Frost [1987] ECR 4199. Cf C-97/91 Borelli, [1992] ECR I-6313. N. de Sadeleer, G. Roller and M. Dross (see supra n. 4), pp. 178 et seq. Order of the CFI in Joined Cases T-236/04 and T-241/04, European Environmental Bureau, Stichting Natuur en Milieu v. Commission [2005] ECR II-0000. On the same day, the CFI delivered a similar Order in T-94/04 European Environmental Bureau (EEB) and Others v. Commission, [2005] ECR II-0000.

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hurdle of direct and individual concern of Art. 230 (4) EC. They protested in vain, as the CFI declared their action inadmissible. According to the CFI, the environmental organisations were not “individually concerned” by the Community decision, since they were not affected by reason of certain attributes peculiar to them, or by reason of a factual situation which differentiates them from all other persons and distinguishes them individually in the same way as the addressee of the act would be.32 The CFI argued that even if it were accepted that the contested provisions of the Atrazine and Simazine decisions have the effect of allowing certain Member States to maintain temporarily in force, for certain uses, the authorisation for plant protection products containing Atrazine or Simazine – active substances which, according to the applicants, harm the environment – it is clear that those provisions affect the applicants in their objective capacity as entities whose purpose is to protect the environment, in the same manner as any other person in the same situation. Therefore, they should bring proceedings in the Member States concerned. The EEB case demonstrates that it is not easy to persuade the Community courts to relax the standing requirements. This reluctance can be explained by the workload of the Community courts, which is estimated to increase as a result of the enlargement of the European Union and the developments in the communitarized third pillar.33 The argument that relaxation of the standing requirements can be based on the principle of effective judicial protection34 did not prove successful in the EEB case, as could have been assumed from earlier judgments.35 In the Greenpeace case, the ECJ held that denying the applicants the right to bring proceedings against the Commission decision granting Spain

32

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35

The famous Plaumann formula, developed in: C-25/62, Plaumann & Co v. Commission, [1963] ECR p. 95. See on the challenges ahead: B. Vesterdorf, “The Community Court System Ten Years from now and Beyond: Challenges and Possibilities”, ELRev., 2003, pp. 303-323; N. Lavranos, “The New Specialised Courts within the European Judicial System”, ELRev., 2005, pp. 261-272; L.A. Geelhoed, “The Expanding Jurisdiction of the Court of Justice of the EC”, Coll: Asser Institute October 2004, forthcoming. Statistics can be found in the Annual Reports of the Court of Justice and the Court of First Instance: <curia.europa.eu/nl/instit/presentationfr/index.html>. Landmark cases in this respect are: C-222/84 Johnston [1986] ECR 1651, C-222/86 Heylens [1987] ECR 4097 and C-213/89 Factortame [1990] ECR I-2433. In accordance with the ECJ judgments in: C-50/00 P Union de Pequenos Agricultores v. Council [2002] ECR I-6677; T-173/98 Union de Pequenos Agricultores v. Council [1999] ECR II-3357 and C-263/02 P Jégo Queré v. Commission [2004] ECR I-3425; T-177/01 Jégo Queré v. Commission [2003] ECR II-2365. 331

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ﬁnancial assistance for the building of two power stations – because concern for the environment is a collective and not an individual concern – did not infringe the principle of effective judicial protection, because they could bring proceedings against the Spanish decision to grant a building permit.36 In the EEB case, the environmental organisations found a deaf ear to the argument that the annulment of the decision in a direct action would prevent triggering a myriad of complex, lengthy and costly authorisation procedures in various Member States. The Community courts were not impressed by the argument that a Community decision may not be challenged before the national courts as effectively as before the Community courts. Apparently, the Community courts adhere to the principle that access to court – an important element of the principle of effective judicial protection – should preferably be realised at the national level.37

4. Impact of the Aarhus Convention Both the Member States and the European Union have committed themselves to change the rules on access to court in environmental matters. They did so by becoming a Party to the 1998 Convention on access to information, public participation in decision-making, and access to justice regarding environmental matters (hereafter, the Aarhus Convention) in the context of the United Nations Economic Commission for Europe.38 It provides citizens – and environmental organizations in particular39 – with minimum procedural rights on access to

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See supra n. 35. J. Manuel and C. Martín, “Ubi Ius, Ibi Remedium? – Locus Standi of Private Applicants under Art. 230(4) EC at a European Constitutional Crossroads”, MJ, Vol. 11 2004, p. 239. See also: E. Rehbinder, “Locus Standi, Community Law and the Case for Harmonization”, in: H, Somsen, (ed.), Protecting the European Environment: Enforcing EC Environmental Law, London: Blackstone Press Limited, 1996, pp. 151-166. But see also: T-33/01 Infront WM AG v. Commission [2005] ECR II-0000, para. 108 and 109. EU ratiﬁcation by Council Decision 2005/370/EC of 17 February 2005. The Member States (and other States, Members of the Economic Commission for Europe) have signed and ratiﬁed the Convention as well. The Aarhus Convention entered into force on 30 October 2001, available at <www.unece.org/env/pp/welcome.html>. This can be explained by the fact that Environmental organisations played an important role in the coming into existence of the Aarhus Convention, see: J. Waters, “The Aarhus Convention: A Driving Force for Environmental Democracy”, JEEPL, 2005, pp. 2-11, in particular pp. 9 and 10.

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documents, public participation in decision-making and access to justice in the ﬁeld of environmental law. These procedural rights should improve the enforcement of environmental rules.40 A real novelty is that these rights can be invoked not only before national authorities and national courts, but also before European authorities and courts. This is due to the broad deﬁnition of public authority in Art. 2 (2) (d) Aarhus Convention, referring speciﬁcally to the institutions of any regional economic integration organization which is a Party to the Convention, in other words, to the institutions and bodies of the EU. 41 4.1. Access to Justice at the International Level The Aarhus Convention does not aim to change judicial review of implementing decisions made by Conferences of the Parties to environmental conventions. It addresses only in vague terms the issue of judicial review of decisions of international organisations other than the European Union. The Parties should promote the application of the principles of the Aarhus Convention in international environmental decision-making processes and within the framework of international organisations in matters relating to the environment.42 Currently, individuals do not have access to court at the international level. Therefore, it would require amendments of environmental conventions in order to apply the rules of the Aarhus Convention on access to court at the international level. For instance, the Parties to the Stockholm Convention might consider amending the Stockholm Convention in order to offer administrative review to environmental organisations which enjoy observer status as a ﬁrst step towards judicial review of their decisions. If they ignore the rules on judicial review established by the Aarhus Convention, environmental organisations should seek judicial review once the international decisions are implemented into Community and national decisions.

40

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42

The Aarhus Convention focuses on procedural guarantees. This is not completely new, e.g. the Espoo Convention on Environmental Impact Assessment in a Transboundary Context (1991). See for a general survey: V. Rodenhoff, “The Aarhus Convention and its Implications for the ‘Institutions’ of the European Community”, RECIEL, 2002, pp. 343-357. See for the (desired) impact of the Aarhus Convention on situations similar to the Greenpeace case: F. de Lange, “Beyond Greenpeace, Courtesy of the Aarhus Convention”, in: H. Somsen, et al., (eds), The Yearbook of European Environmental Law, 3rd edn, Oxford: Oxford University Press, 2003, pp. 227-248. Note that the Commission, in the explanatory memorandum to its proposal for the Aarhus Regulation explicitly excluded internal and judicial review of such ﬁnancial decisions. Art. 3 (7) Aarhus Convention. 333

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4.2. Anticipating the Implementation of the Aarhus Convention at the European Level The EU signed and ratiﬁed the Aarhus Convention before ﬁnishing its implementing legislation. Since an international agreement that has been signed and ratiﬁed forms an integral part of the Community legal order,43 the environmental organisations could have asked the CFI in the EEB case to interpret Community law in accordance with international law.44 An interpretation of direct and individual concern in conformity with the Aarhus Convention means that individuals45 having a sufﬁcient interest46 may challenge the substantive and procedural legality of a decision, act or omission issued by a Community institution or body.47 The Aarhus Convention states that what constitutes a sufﬁcient interest

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E.g: C-459/03 Commission v. Ireland (MOX Plant), [2006] ECR I-0000; C-213/03, Syndicat professionnel coordination des pêcheurs de l’Étang de Berre et de la region v. Electricité de France [2004] ECR I-7357 and C-239/03 Commission v. France (Étang de Berre) [2004] ECR I-9325. See: J. Wouters and D. van Eeckhoutte, “Enforcement of Customary International Law through European Community Law” in: J.M. Prinssen and A. Schrauwen, (eds), Direct Effect. Rethinking a Classic of EC Legal Doctrine, Groningen: Europa Law Publishing, 2002, pp. 193-234; K. Lenaerts and P. Van Nuffel, Constitutional Law of the European Union, London: Sweet & Maxwell, 1999, p. 551; N. Lavranos, Decisions of International Organisations in the European and Domestic Legal Orders of Selected EU Member States, Groningen: Europa Law Publishing, 2002; P. Eeckhout, Does Europe’s Constitution stop at the Water’s Edge? Law and Policy in the EU’s External Relations, W. van Gerven Lectures, 5th edn, Groningen: Europa Law Publishing, 2005. C-84/95 Bosphorus v. Minister for Transport, Energy and Communications, Ireland and the Attorney General [1996] ECR I-3953; T-115/94 Opel Austria [1997] ECR II-39; C-162/96 Racke [1998] ECR I-3655; C-377/02 Van Parys [2005] ECR I-0000; T-19/01 Chiquita [2005] ECR II-0000; T-69/00 FIAMM and FIAMM Technologies/ Council and Commission [2005] ECR II-0000; T-306/01 Yusuf [2005] ECR II-0000; T-315/01 Kadi [2005] ECR II-0000. Note that Art. 9 (2) Aarhus Convention uses the term members of the public concerned. This means the public affected or likely to be affected by, or having an interest in, the environmental decision-making, according to the deﬁnition given in Art. 2 (5) Aarhus Convention. The members of the public include legal persons. Art. 9 (2) Aarhus Convention offers as an alternative to having a sufﬁcient interest: maintaining the impairment of a right, where the administrative procedural law of a Party requires this as a precondition. It is ignored because this is not a precondition that follows from Art. 230 (4) TEC. Art. 9 (3) of the Aarhus Convention also prescribes access to justice to challenge acts and omissions by private persons. This is not implemented through Community

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must be determined in accordance with the requirements of national law and consistently with the objective of giving the public concerned wide access to justice within the scope of the Aarhus Convention. Environmental organisations, i.e. non-governmental organizations promoting environmental protection and meeting any requirements under national law, are deemed to have an interest.48 Such an interpretation in conformity with the Aarhus Convention would have been similar to the interpretation of individual concern as proposed by Advocate General Jacobs in his Opinion in the UPA case.49 He proposed that a person is to be regarded as individually concerned by a Community measure where, by reason of his particular circumstances, the measure has, or is liable to have, a substantial adverse effect on his interests. The fact that the ECJ did not follow the approach proposed by Advocate General Jacobs might serve to explain why the CFI did not interpret direct and individual concern in conformity with the Aarhus Convention of its own volition. In the EEB case, the CFI was confronted with a different argument related to the Aarhus Convention. The environmental organisations tried to gain a grant of access to court by referring to their speciﬁc status as environmental organisations in the light of the implementation of the Aarhus Convention in the European legal order. They argued that the CFI should grant them standing because, in the statement of reasons for its proposal for a Regulation, the Commission mentioned that European environmental protection organizations which meet certain objective criteria have standing for the purposes of the fourth paragraph of Art. 230 EC, and they fulﬁl these requirements.50 However, the CFI responded frostily to this argument. It stated that the hierarchy of norms precludes secondary legislation from conferring standing on individuals who do not meet the requirements of Art. 230 (4) EC. A fortiori this rule applies to proposals for secondary legislation. Accordingly, the proposed Regulation relied on by the applicants did not release them from having to show that they are individually concerned. Moreover, even if they were acknowledged as qualiﬁed

48 49

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legislation because of the subsidiarity principle (according to the explanatory memoranda). The EU Member States have to implement this part of the Convention themselves. Arts 9 (2) and 2 (5) Aarhus Convention. Opinion AG Jacobs in case C-50/00 P Union de Pequenos Agricultores v. Council [2002] ECR I-6677. Proposal for a Regulation of the European Parliament and of the Council on the application of the provisions of the Aarhus Convention on Access to Information, Public Participation in Decision-making and Access to Justice in Environmental Matters to EC institutions and bodies, COM (2003) 622 ﬁnal. 335

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entities for the purpose of the Regulation, they had not put forward any reason why that status would lead to the conclusion that they are individually concerned by those decisions. This is impossible as long as the ECJ’s interpretation of individual concern is only related to economic concern. Environmental protection is a collective concern, defended in particular by environmental organisations. Unfortunately for them, the ECJ had already showed in the Greenpeace case that environmental interests do not deserve a different status from economic interests.51 Moreover, the CFI considered it irrelevant that this approach differs from the situation in some Member States, where environmental organisations have standing before the national courts to protect the environmental interest.52 Thus, the CFI dashed the hopes of the environmental organisations that it would anticipate the implementation of the Aarhus Convention by granting them a privileged position. 4.3. Implementing the Aarhus Convention Since the ECJ stated in the UPA case53 that it would take a Treaty change before it would change its interpretation of direct and individual concern, it is easy to agree with De Lange that it takes a Treaty change to implement the Aarhus rules on judicial review.54 Unfortunately, a Treaty change does not seem close after the French “non” and the Dutch “nee” to the Constitution in 2005.55 But even if it were to come into effect, the Constitution would not have brought about the required Treaty change.56 The Constitution changes (see below in italics) the present wording of Art. 230 (4) EC only slightly. Art. III-365 Constitution states: Any natural or legal person may, under the same conditions [on grounds of lack of competence, infringement of an essential procedural requirement, infringement of this Treaty or of any rule of law relating to its application, or misuse of power] institute proceedings against an act addressed to that person or

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P. Sands, “Is the Court of Justice an Environmental Tribunal?” in: H. Somsen, (ed.), Protecting the European Environment: Enforcing EC Environmental Law, London: Blackstone Press Ltd., 1996, pp. 23-35. M.A. Heldeweg, R. Seerden and K. Deketelaere, “Public Environmental Law in Europe: A Comparative Search for a ius commune”, EELR, 2004, p. 86. C-50/00 P Union de Pequenos Agricultores v. Council [2002] ECR I-6677. F. de Lange, “Case Note European Court of Justice, Unión de Pequenos Agricultores v Council”, RECIEL, Vol. 12 2003, p. 118. Respectively on 29 May and 1 June 2005. P. Craig, “Standing, Rights, and the Structure of Legal Argument”, European Public Law, 2003, p. 508.

Reducing the Judicial Deﬁcit in Multilevel Environmental Regulation

which is of direct and individual concern to him or her, and against a regulatory act which is of direct concern to him or her and does not entail implementing measures.57 Even though it can be assumed that a regulatory act should be understood in a broad sense,58 this does not facilitate the implementation of the Aarhus Convention at the European level, because it does not change the requirement of individual concern. It is the requirement of individual concern that makes it so difﬁcult for third parties to obtain access to the Community courts, particularly in environmental cases, because environment protection is a collective concern.59 In the absence of a Treaty change, the Commission, the Council and the European Parliament found a way to implement the Aarhus rules on judicial review in the European legal order. They took advantage of the leeway offered by Art. 230 (4) EC. It follows from this provision that individuals do not have to pass the direct and individual concern test if they are the addressees of a decision. Hence the Aarhus Regulation prescribes that judicial review is only open for environmental organisations that made a request for internal review of a decision.60 Thus, they ﬁrst ﬁle a request for review before the authorities that issued the decision. Once they have obtained a review decision addressed to them, they are entitled to judicial review.61 If the authorities do not issue a (timely) review decision, the Aarhus Regulation allows for judicial review to protest against failure to act.62 This approach is in line with the Aarhus Convention, as it explicitly allows for internal review preceding judicial review.63 Apart from the fact that this creates an opportunity for the authorities to reconsider their decision, it also results in a wider circle of addressees entitled to judicial

57

58 59 60

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R. Barents, “The Court of Justice in the Draft Constitution”, MJ 2, 2004, pp. 130134. Ibid., p. 134. F. de Lange (see supra n. 55), p. 118. Art. 10 Regulation 1367/2006 of the European Parliament and of the Council of 6 September 2006 on the application of the provisions of the Aarhus Convention on Access to Information, Public Participation and Access to Justice in Environmental Matters to Community Institutions and Bodies OJ 2006 L 264/13 (“Aarhus Regulation”). Art. 12 (1) Aarhus Regulation. Internal review should not be confounded with public participation. In the policy areas where public participation is introduced, it takes place during the decision-making, while internal review takes place on request after a decision has been issued. Art. 12 (2) Aarhus Regulation. Art. 9 (2) Aarhus Convention 337

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review at the European level. Widdershoven argues that the implementation of the internal review construction will compel the Community courts to grant standing to environmental organisations. Once they have become addressees of a Community decision, the present framework of Art. 230 (4) EC allows them to bring proceedings before the Community courts.64 That would resolve an important issue of the judicial deﬁcit for those organisations who qualify. Although internal review may offer environmental organisations access to court without having to pass the direct and individual concern test, the Aarhus Regulation still attempts to reconcile the restrictive interpretation of the ECJ of Art. 230 (4) EC with the rules of the Aarhus Convention.65 The Aarhus Regulation takes the requirement of individual concern into account by not creating an actio popularis against any measure that impacts the environment.66 The Commission considered that the establishment of a right of action for every natural and legal person is not a reasonable option because it would imply an amendment of Art. 230 EC and could hence not be introduced by secondary legislation. Therefore, access to court is limited to environmental organisations that meet a number of conditions. This is in line with Art. 9 (3) of the Aarhus Convention, which offers the possibility to limit standing by laying down criteria. The Aarhus Regulation also takes the requirement of direct concern into account, since it qualiﬁes the decisions against which judicial review will be open. Thus, the implementation of the Aarhus Regulation will only result

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R. Widdershoven, “Rechtsbescherming in het milieurecht in Europees perspectief” [Protection under the law in environmental legislation: a European perspective], MenR, Vol. 9 2004, p. 532. Contrary: J.H. Jans, “Did Baron von Munchhausen ever Visit Aarhus? Some Critical Remarks on the Proposal for a Regulation on the Application of the Provisions of the Aarhus Convention to EC Institutions and Bodies”, in: R. Macrory, (ed.), Reﬂections on 30 Years of EU Environmental Law: A High Level of Protection?, Groningen: Europa Law Publishing, 2006, pp. 483, 484. It was easier to make the rules on information and participation compatible with those of the Convention. Similar difﬁculties arise in the implementation of the Convention into Directives. The rules on information and public participation have already been implemented in respectively Directive 2003/4 and Directive 2003/35, but the rules on judicial review remain a proposal. See: Proposal for a Directive of the European Parliament and the Council on access to justice in environmental matters, COM (2003) 624 ﬁnal (“Proposal for a Directive on access to justice in environmental matters”). Art. 4 of the proposed Directive on access to justice in environmental matters does not prescribe an actio popularis. Note that the proposed Directive prescribes a minimum standard.

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in access to the Community courts for qualiﬁed environmental organisations in relation to acts and omissions by Community institutions and bodies which contravene environmental law.67 The task of providing complementary judicial review is entrusted to the Member States. 4.4. Access to Court under the Aarhus Regulation The “individuals” that will enjoy administrative and judicial review at the European level are non-governmental organisations that meet the conditions of the Aarhus Regulation. A non-governmental organisation is only entitled to make a request for internal review if: “(a) It is an independent and non-proﬁt-making legal person in accordance with a Member State’s national law or practice; (b) It has the primary stated objective of promoting environmental protection in the context of environmental law; (c) It has existed for more than two years and is actively pursuing the objective referred to under (b); (d) The subject matter in respect of which the request for internal review is made is covered by its objectives and activities.” 68

These criteria may be further deﬁned, as the Commission may adopt the provisions that are necessary to ensure their transparent and consistent application.69 Hence it follows from Art. 10 to 12 of the Aarhus Regulation that an environmental organisation is entitled to make a request for internal review, provided that the subject matter in respect of which a request for internal review is made is covered by its objectives and activities. Only after obtaining a review decision – unless the action is directed against a failure to decide on the request for internal review – is judicial review possible. It is obvious that these criteria do not permit environmental organisations to qualify. For

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Explanatory Memorandum to the Proposal for the Aarhus Regulation, pp. 15, 16. Art. 11 Aarhus Regulation slightly differs from Art. 12 of the proposal for the Aarhus Regulation, COM (2003) 622 ﬁnal. Art. 12 also demanded that a “qualiﬁed entity” be active at Community level and that it must have its annual statement of accounts for the two preceding years certiﬁed by a registered accountant. Maybe this is a re-introduction via the back door of Art. 13 of the proposed Regulation, which entitled the Commission to recognize environmental organisations. According to the proposal, only recognized environmental organisations were allowed to request internal review and subsequently bring proceedings before the Community courts. 339

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environmental organisations like those that brought the proceedings discussed above, it should be easy to qualify. Qualiﬁed environmental organisations are only entitled to internal review and hence judicial review of “administrative acts” and “omissions” taken by Community institutions and bodies contravening “environmental law”. In line with the Aarhus Convention, the Aarhus Regulation deﬁnes environmental law broadly as “Community legislation which, irrespective of its legal basis, contributes to the pursuit of the objectives of Community policy on the environment as set out in the Treaty: preserving, protecting and improving the quality of the environment, protecting human health, the prudent and rational utilisation of natural resources and promoting measures at international level to deal with regional or worldwide environmental problems.”70

A measure qualiﬁes as an administrative act in the sense of the Aarhus Regulation if it is a measure of individual scope under environmental law, taken by a Community institution or body, having legally binding and external effects.71 An omission refers to the failure of a Community institution or body to adopt an administrative act, where it is legally required to do so.72 Legally binding and external effects are familiar concepts to the ECJ and the CFI, as an act is only subject to review under Art. 230 EC if it is a measure the legal effects of which are binding on and capable of affecting the interests of the applicant by bringing about a distinct change in his legal position.73 The concept “individual scope” is new. It is not clear what it means. It could refer to the distinction between regulations and decisions. The ECJ and the CFI used to distinguish between these measures on the basis of the abstract terminology test. They considered that a measure is of general application if it is addressed in abstract terms to undeﬁned classes of persons and applies to objectively determined situations.74

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Art. 2 (f) Aarhus Regulation Art. 2 (g) Aarhus Regulation Art. 1 (h) and 10 (1) Aarhus Regulation. Cf. Explanatory memorandum to the proposal for the Aarhus Regulation, p. 10. C-8-11/66 Cimenteries Cementbedrijven et al. v. Commission [1967] ECR 75, C-60/81 IBM v. Commission [1981] ECR 2639. Recently: Joined Cases T-377/00, T-379/00, T-390/00, T-260/01 and T-272/01 Philip Morris International and Others v. Commission [2003] ECR 2639, upheld in appeal: C-131/03 P Reynolds and Others v. Commission [2006] ECR I-0000. C-789 and 790/79 Calpak SpA and Societá Emiliana Lavorazione Frutta SpA v. Commission [1980] ECR 1949. See P. Craig and G. de Burca, EU Law, Text, Cases

Reducing the Judicial Deﬁcit in Multilevel Environmental Regulation

However, the ECJ held in the Jégo Queré case that even a measure of general application such as a regulation can be of direct and individual concern to some individuals and is thus in the nature of a decision in their regard.75 Hence the distinction between decisions and acts of general application has become somewhat blurred in European case law.76 If the CFI and the ECJ prefer to interpret individual scope in a narrow sense, it would be a step backwards. 4.5. Trying a Direct Action Again Access to court under the Aarhus Regulation is only possible if the decision concerning the placing of an active substance on Annex I to Directive 91/414/ EC constitutes a measure of individual scope under environmental law, taken by a Community institution or body, having legally binding and external effects. Some of these requirements are easier to fulﬁl than others. The Community decision whether or not to place an active substance on the Annex to the Directive is taken by the Commission or – exceptionally – the Council. Hence it is certainly a measure taken by a Community institution. Whether the regulation of plant protection products belongs to environmental law should not be difﬁcult to decide. The deﬁnition of environmental law in the Aarhus Regulation does not add policy areas, like the proposal for the Aarhus Regulation. This is a pity, as the list of examples included chemicals and pesticides.77 It is not necessarily disadvantageous that the list disappeared. The deﬁnition of environmental law is sufﬁciently broad for the regulation of plant protection products to be included. It is not so easy to decide whether the listing of a substance is a decision “of individual scope under environmental law.” A listing decision could be considered to have a general scope under environmental law. The ban or approval of an active substance concerns a speciﬁc substance, but it is objectively formulated and it applies to an indeﬁnite group of market participants. Hence access to the internal review procedure could be denied on this ground. That would undermine the aim of the Aarhus Convention to guarantee wide access to court. A different interpretation would emphasise the implementing nature of the decision to list or ban an active substance and consider that these Community decisions affect the environment. The Community decision whether or not to

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and Materials, 3rd edn, Oxford: Oxford University Press, 2003, pp. 493-495. C-263/02 P Jégo Queré v. Commission [2004] ECR I-3425. A. Arnull, The European Union and its Court of Justice, 2nd edn, Oxford: Oxford University Press, 2006, pp. 70-74. Art. 2 (1) (g) of the Proposal for the Aarhus Regulation. 341

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list an active substance on the Annex to Directive 91/414 determines whether the national authorities will grant or refuse a product authorisation for products containing that active substance. If the Community decision is considered a measure of individual scope under environmental law, it also needs to have legally binding and external effects in order to qualify. The decisions are binding on the Member States to whom they are directed, so they have both binding and external effects. Thus, it seems likely that after following the internal review procedure an environmental organisation can challenge a listing decision before the Community courts without having to pass the individual and direct concern test because it has a decision directed to it. 4.6. Access to National Courts If it turns out that it is not possible for environmental organisations to bring proceedings against a Community listing decision because its scope is too general, then at least the implementation of the Aarhus Convention into the national laws of the Member States should enable them to bring proceedings against implementing measures taken at the national level and thus against the underlying Community decisions too.78 In any event, the national level is the appropriate level to bring proceedings against decisions, acts or omissions of national authorities or private individuals concerning plant protection products.79 If a national court then doubts whether a national decision is in breach of Community legislation or decisions concerning plant protection products, it may use the preliminary ruling procedure.80 The Parties to the Aarhus Convention have to implement its rules into national legislation. The Aarhus Directive on access to court, which is still a proposal, may be used as an intermediary step in the Member States. As the Directive is based on Art. 175 EC, it offers minimum harmonisation. This means that the Member States can introduce or maintain

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On the basis of a complaint from a Belgian environmental organisation, the Aarhus Convention Compliance Committee has warned Belgium in Communication ACCC/C/2005/11that if the jurisprudence of the Council of State is not altered, Belgium will fail to comply with art. 9, paragraphs 2 to 4, of the Convention by effectively blocking most, if not all, environmental organisations from access to justice with respect to town planning permits and area plans, as provided for in the Wallonian region. Respectively Art. 4 and Art. 3 Proposal for a Directive on access to justice in environmental matters. C-283/81 Cilﬁt [1982] ECR 3415.

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rules that guarantee a broader access to court.81 As the European Parliament and the Council still have the opportunity to amend the proposed Directive, this can only be a tentative description of the future (minimum) procedural rules in the Member States. Under the rules of the proposed Aarhus Directive, access to the national courts is not limited to environmental organisations. It is open for all members of the public at the national level. In line with the Aarhus Convention, the Directive does not prescribe an actio popularis. Members of the public have access to environmental proceedings to challenge the procedural and substantive legality of administrative acts and omissions where (a) they have sufﬁcient interest or (b) they maintain the impairment of a right, where the administrative procedural law requires this as a precondition. The Member States determine what constitutes a sufﬁcient interest or the impairment of a right, but they have to take the privileged position of environmental organisations into account. Hence, environmental organisations have access to court without having to prove a sufﬁcient interest or maintaining the impairment of a right, if they bring an action against a matter that is covered speciﬁcally by their statutory activities and it falls within their speciﬁc geographical area of activities.82 It must be possible for environmental organisations – and for others – to bring proceedings against decisions concerning plant protection products. These decisions clearly fall under the deﬁnition of environmental law, as they are (still) explicitly mentioned in the deﬁnition of environmental law in the Directive.83 Therefore, the implementation of the Aarhus Convention into the Aarhus Directive will safeguard access to court at the national level for concerned individuals and environmental organisations when they want to bring proceedings against plant protection product authorisations and the underlying Community or international decisions.

5. Conclusion It is argued that multilevel environmental regulation presents a judicial deﬁcit. Although environmental law is implemented at the international, European and national level, judicial review against implementing measures is not equally distributed between these three levels. It is impossible for individuals to bring proceedings at the international level. The situation is only slightly less dramatic

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Explanatory memorandum of the Proposal for a Directive on access to justice in environmental matters, para. 3.6. Art. 5 Proposal for a Directive on access to justice in environmental matters. Art. 1 (g) Proposal for a Directive on access to justice in environmental matters. 343

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at the European level. Individuals have to pass the requirement of direct and individual concern to bring proceedings against decisions that are not directed to them. This proves impossible for environmental organisations due to the restrictive interpretation the Community courts give to these requirements. As the environment is a collective and not an individual concern, they never qualify. Therefore, they depend on the national courts, which can – by asking for a preliminary ruling – move the case up to the European level. Unfortunately, not all Member States allow environmental organisations to bring proceedings. Moreover, for various reasons the national level may not be the most appropriate level at which to bring proceedings. In particular if a national decision is the pretext to challenge a Community decision, the length of proceedings and their dependence on national courts asking for a preliminary ruling do not leave an impression of effective judicial review. The Aarhus Convention should facilitate access to court in environmental matters. It has no direct effect on other environmental conventions, but it may have in the future, as its Parties have committed themselves to promote the application of the principles of the Aarhus Convention in international environmental decision-making processes and within the framework of international organisations in matters relating to the environment. The implementation of the Aarhus Convention into an EC Regulation will beneﬁt qualiﬁed environmental organisations, as they may request administrative review against decisions issued by Community institutions and bodies. The main hurdle seems to be which Community implementing measures will be considered an administrative act or omission in the sense of the Aarhus Regulation. If these concepts are broadly interpreted, environmental organisations should be able to bring proceedings against the administrative review decision before the Community courts. The implementation of the Aarhus Convention into national legislation will bring about (minimum) harmonisation of national procedural rules, as the Parties to the Aarhus Convention should ensure that environmental organisations and other interested parties can obtain judicial review of environmental decisions, including those based on Community or international measures. Thus the main contribution of the Aarhus Convention is that it reduces the current judicial protection deﬁcit in the ﬁeld of environmental multilevel regulation in the States that are Parties to the Convention, including the European Union, by facilitating access to court.

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Multilevel Regulations Reviewed by Multilevel Jurisdictions: The ECJ, the National Courts and the ECtHR Andrea Ott

1. The Bilateral Level: The EU Legal Order and International Law The relationship between national legal order and international law has in the past been determined by a hierarchy of norms whose ranking and status were determined by monist or dualist oriented legal systems. This hierarchy of norms, however, has to be seen in the context of interpretation by judges who tend to ﬁnd a more subtle way of resolving conﬂicts between norms in the form of the political questions doctrine or a restriction of legal control due to the division of powers. This relationship will ﬁrst be addressed on the bilateral level, namely between national and/or European law and international law. However, due to multilevel systems, involving the European Union, national Member States and international organisations such as the UN and the WTO, which are engaged in multilevel regulation, the question of hierarchy between courts – and not only norms – needs consideration. Judges are faced with these different levels of multilevel regulation and different judges and courts rule on related questions. While the aspects of multilevel regulation are targeted by other contributions, this contribution aims at discussing multilevel jurisdictions. This pluralism of jurisdictions might restructure the relationship from a hierarchy of norms to a hierarchy of courts or, to the contrary, into parallel legal orders which overlap and interconnect but without clear hierarchies established between them. One of the cardinal questions of legal theory in the nineteenth century was the relationship between national and international law. Two opposing concepts, monism and dualism, address the legal status given to international law in

Follesdal, Wessel and Wouters (eds), Multilevel Regulation and the EU, 345–366 ©2008 Koninklijke Brill NV. ISBN 978 90 04 16438 3. Printed in the Netherlands.

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the national legal order.1 While the dualist approach treats national law and international law as two separate sources of law,2 the monist concept relies on the theory of two normative systems with binding force and deriving from the same source and forming part of the same legal order. Consequently, especially with the monist system, this leads to a hierarchy of norms, even though the two approaches do not necessarily clarify the ranking between norms deriving from international and national law.3 It is difﬁcult to draw general conclusions as constitutional provisions relating to international law have to be seen in the context of the legal practice by judges and especially constitutional courts. However, on a more general plane, dualist countries exclude any direct effect of international treaties, while monist systems rank international law above or at the same level as national legislation, but not above the constitution. All of the constitutional legal orders of the EU Member States can be identiﬁed either as monist and dualist, despite the fact that, in practice, the lines between the two categories get blurred4 and can be mainly determined on the basis of the constitutional tradition and how international law, especially international treaty law, is integrated into the national legal order or referred to in the constitutional context and by courts. In the European Union, monist countries can be identiﬁed as Poland, the Czech Republic, the Slovak Republic, Romania, Bulgaria, Slovenia, Estonia, Lithuania, Latvia, Cyprus, Belgium, France, Luxembourg, the Netherlands, Spain, Portugal, Greece and Austria, while Hungary, Italy, Germany, UK, Ireland, Malta, Sweden, Finland and Denmark can be recognised as dualist systems.5 Along the same line, the legal order of the European Community has been categorized in the literature. The majority of authors categorises the EC legal order as a monist legal one that does not differentiate between international law or European law sources.6 However, this

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J.G. Starke, “Monism and Dualism in the Theory of International Law”, British Yearbook of International Law, Vol. 17 1936, pp. 66 et seq. Advocated by the German and Italian scholars Triepel and Anzilotti. See generally: H.Kelsen, “The Concept of the Legal Order”, The American Journal of Jurisprudence, 1982, pp 64 et seq., pp. 75 et seq. A. Ott, GATT und WTO im Gemeinschaftsrecht. Cologne: Heymanns, 1997, p. 56; Malcolm N. Shaw, International Law, 5th edn, Oxford: Oxford University Press, p. 120. F. Hoffmeister, “International Agreements in the Legal Order of the Candidate Countries”, p. 209, in: A. Ott and K. Inglis, Handbook on European Enlargement, 2002; A. Ott (see supra n. 4), p. 55. See for example: P. Pescatore, “Die Rechtsprechung des Europäischen Gerichtshofs zur gemeinschaftlichen Wirkung völkerrechtlicher Abkommen”, p. 661, in: Festschrift

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monism cannot be detected by references to international law in EC and EU Treaties. The EC Treaty makes only rudimentary references to the relationship with international law: Art. 300 (7) EC declares international agreements to be binding on the institutions of the Community and its Member States; in paras 1 and 2 it clariﬁes how an international treaty becomes legally binding on the Community. Art. 307 EC conﬁrms the pacta sunt servanda principle of international law according to which the EC has to respect its Member States’ rights and obligations deriving from international agreements and obligations concluded prior to EU accession. However, when they are in collision with EC law, the Member States have an obligation to bring inconsistencies into conformity with EC law. The practice of the Council in treaty-making, the implementation by Council decision or EC regulation, and the case law of the ECJ, can be been interpreted in a monist way. According to the case law of the ECJ, international agreements rank between primary and secondary law; their legal effect does not depend on the way they are implemented by regulation or decision; international treaty provisions have direct effect when their wording, spirit and scheme give rise to such an interpretation.7 In contrast to this monist approach, the Court’s treatment of the GATT and now the WTO Agreements has raised some doubts and given rise to the interpretation that the ECJ embraces a dualist approach, which will be discussed further below. Nevertheless, it is undisputed that – in contrast to the strict dualist national legal orders such as those of Scandinavia or the UK – the Community not only integrates international agreements but also gives individuals the right to refer to their provisions depending on a case-by-case study of the wording, purpose and nature of the agreement and whether the provision contains a clear and precise obligation. In addition, there are international agreements or arrangements that have legal effect in the EC legal order without having been published in the Ofﬁcial Journal of the European Union.8 Therefore, much can be said for the argument that EC international agreements become EC law without being completely detached from its legal basis or its roots in international law.9

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für H. Mosler, Völkerrecht als Rechtsordnung, internationale Gerichtsbarkeit Menschenrechte, Berlin, 1983, p. 680; H. Schermers, “Community Law and International Law”, CMLRev., 1975, p. 83. See for instance: ECJ, Case C-179/97 Kingdom of Spain v. Commission [1999] ECR I-1251: ECJ, Case C-162/96 Racke GmbH & Co. v. Hauptzollamt Mainz [1998] ECR I-3655, para. 45. See in this respect ECJ, Case C-327/91 French Republic v. Commission [1994] ECR I-3641, paras 12, 23. A. Epiney, “Zur Stellung des Völkerrechts in der EU”, EuZW, 1999, p. 6. 347

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1.1. Case Law of the European Courts on International Law In almost 50 years of jurisdiction, the European Court of Justice and Court of First Instance had many opportunities to clarify their treatment of international law. According to the case law of the ECJ, international law not only forms an integral part10 of the Community legal order but also ranks between primary and secondary Community law. In the judgment Spain v. Commission in 1999 the Court ruled that the primacy of international agreements by the Community over provisions of secondary Community legislation means that such provisions must be interpreted in a manner consistent with those agreements and interpreted in good faith,11 and respect is to be given to customary international law in the exercise of the Community’s powers.12 This ranking also includes secondary international law deriving from international agreements such as association council decisions.13 The ranking between these different legal sources, however, can only become relevant when there is a collision of norms and usually when an individual is relying on primary or secondary international law to challenge EC secondary law and national law implementing Community law.14 The ECJ has continuously ruled on a number of norms which have direct effect and take precedence over colliding national law and Community secondary law.15 However, from its case law it becomes apparent that the Court makes

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ECJ; Case 181/73 Haegeman v. Belgium [1974] ECR 449. ECJ, Case C-179/97 Kingdom of Spain v. Commission [1999] ECR I-1251, para. 11. ECJ, Case C-162/96 Racke [1998] ECR I-3655. See for instance: ECJ, Case C-192/89 Sevince [1990] ECR I-3461. See the overview of the case law on international treaties: A. Ott, “Thirty years of the ECJ’s case-law on international treaties and customary international law. A pragmatic approach towards its integration”, pp. 95-140, in: V. Kronenberger, (ed.), The European Union and the International Legal order – Discord and Harmony, The Hague: T.M.C. Asser Press, 2001, pp. 113 et seq. See on Free Trade Agreements with third countries, for instance: ECJ, Case C-334/93 Bonapharma [1995] I-0319 para. 14; ECJ, Joined cases 89, 104, 114, 116, 117 and 125 to 129/85 Ahlström Osakeyhtiö and others v. Commission [1988] ECR 5193. See for Association Agreements with Turkey for instance Art. 2 (1) (b) of Decision No. 2/76 direct effective: Case C-192/89, Sevince [1990] ECR I-3461, para. 26; Art. 7 of the Decision 2/76: Case C-192/89 Sevince [1990] ECR I-3461, para. 26; Art. 6 of the Decision 1/80 direct effective: Case C-192/89 Sevince [1990] ECR I-3461, para. 26; Case C-355/93 Eroglu v. Land Baden-Württemberg [1994] ECR I-5113, para. 11; Case C-171/95, Tetik v. Land Berlin [1997] ECR I-329, para. 24; Case C-386/95, Eker v. Land Baden-Würtemberg [1997] ECR I-2697, para. 18;

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a difference between bilateral agreements in form of trade agreements and Association Agreements on the one hand and multilateral agreements on the other. The ECJ has considered that bilateral agreements and their secondary law in the form of Association Council decisions are directly effective and found a justiﬁcation in the special bilateral nature of the commitment between the EC and the associated third country.16 Multilateral agreements and their secondary law fall into a different category. As the experience with WTO and GATT Agreements as primary international law and appellate body decisions as secondary international law have shown, the ECJ has continuously denied a direct effect for this multilateral agreement and its secondary law. At the beginning of its jurisdiction this was explained by the fact that the GATT and WTO system is based on reciprocal and mutually advantageous arrangements which are characterised by great ﬂexibility of their provisions.17 In later judgments, the ECJ added that the lack of reciprocity between the trading partners in regard to application of direct effect precludes a direct effect in the Community legal order. Otherwise, other trading partners of the EC would acquire an advantage and the court would deprive the legislative and executive organs of the Community of bargaining possibilities in respect to the WTO dispute settlement system.18 In consequence, individual citizens cannot rely on this agreement and apparent collisions between WTO and Community law were not resolved to the advantage of WTO law.19 Additionally, nor could Member States rely on the WTO Agreement to prevent conﬂicting EC secondary law with the arguments

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Case C-36/96, Günaydin v. Freistaat Bayern [1997], ECR, para. 61; Case C-98/96, Ertanir v. Land Hessen, [1997] ECR I-5179; Case C-1/97, Birden, [1998] ECR I-7747, para. 67; Art. 7 of Association Council Decision 1/80 direct effective: Case C-355/93, Eroglu v. Land Baden-Württemberg [1994] ECR I-5113, para. 17; Case C-210/97 Akman v. Oberkreisdirektor des Rheinisch-Bergischen Kreises [1998] ECR, n.y.r.; Case C-355/93 Eroglu [1994] ECR I-5113, para. 17; Case C-351/95, Kadiman v. Freistaat Bayern [1997] ECR I-2133; Case C-329/97 Ergat v. Stadt Ulm [2000] n.y.r., para. 34; Art. 13 of Decision No. 1/80: Case C-192/89 Sevince [1990] ECR I-3461, para. 26, Consistent case law on direct effect of free trade agreements and association agreements, see further: A. Ott, “Thirty years of the ECJ’s case-law on international treaties and customary international law. A pragmatic approach towards its integration”, pp. 95-140, in: V. Kronenberger, (ed.) (see supra n. 14). ECJ, International Fruit Company [1972] ECR 1219. ECJ, Case C-148/96 Portugal v. Council [1999] ECR I-8395. See the infamous discussion about the EC Banana Regulation: P. Eeckhout, External Relations of the European Union, Oxford: Oxford University Press, 2004, pp. 381 et seq. 349

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that according to its nature and structure, WTO law is not among the rules in the light of which the Court is to review the lawfulness of measures adopted by the Community institutions. In the same vein, the European courts denied liability of the Community for infringements of WTO secondary law.20 At the time of writing, apart from the GATT/WTO, only a few multilateral agreements have been considered by the ECJ. In a case on the Convention on Biological Diversity the ECJ argued that this Convention does not preclude the review by the courts of compliance with the obligations incumbent on the Community as a party to that agreement. However, the judgment did not elaborate further on this statement, nor did it state which consequences this entails.21 In another case the applicant Compassion in World Farming challenged a directive because they saw it as in breach of the European Convention for the Protection of Animals kept for Farming Purposes. The Court denied this with the arguments that the interpretation of that Convention would neither contain legally binding conditions nor was a deﬁnition of standards given.22 In consequence, the Court is more reluctant to assess the role in Community law of multilateral agreements than of bilateral ones.23 Recently, the Court of First Instance ruled in the two judgments Kadi and Yusuf on the relation between the UN Charter and the EC Treaty. These judgments go beyond what the ECJ expressed in the cases Racke and Bosphorus on the relationship between international law and European law. In the Racke case the termination of a bilateral agreement between the EC and former Yugoslavia came under scrutiny and the applicant argued that the termination would infringe international principles of law. The ECJ conﬁrmed that the individual can raise rules of customary international law against the validity of secondary law but due to the complexity of the rules and the imprecision of some of its concepts, the review is limited to manifest errors of assessment concerning

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Portugal v. Council [1999] ECR I-8395, see liability cases: Atlanta v. Council/ Commission [1999] ECR I-6983. Such ECJ, Case C-377/98 the Netherlands v. EP and Council [2001 ECR I-7079. On this: P. Eeckhout, External Relations of the European Union, Oxford: Oxford University Press, 2004, p. 300. ECJ, Case 1/96, R v. Maff, ex parte Compassion in World Farming [1998] ECR I-1251. Other examples are given by A. Ott (see supra n. 14), pp. 129 et seq., involving the European Convention on Human Rights, the ILO Convention and Intellectual Rights Convention but do not lead to any other conclusion.

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the conditions applying these rules.24 In Bosphorus, the applicant argued that the implementation of a UN resolution by the EC through its regulation would infringe his fundamental human rights. The court conﬁrmed the right of property and freedom to pursue an economic activity but also stated the limits in the form of the general interest which was justiﬁed in the case of sanctions to put an end to the war situation and the violation of human rights.25 In Kadi and Yusuf, and other follow-up cases,26 the CFI expressed the following: “From the standpoint of international law, the obligations of the Member States of the United Nations under the Charter of the United Nations clearly prevail over every other obligation of domestic law or of international treaty law including, for those of them that are members of the Council of Europe, their obligations under the ECHR and, for those that are also members of the Community, their obligations under the EC Treaty.”27

These judgments involved alleged terrorists whose assets were frozen by an EC Regulation which, together with a EU Common Position, implemented UN Security Council resolutions. The CFI went so far as to deny the legal review of UN Resolutions with the exception of the violation of jus cogens. The arguments given in these cases are problematic for different reasons. In particular, they are not necessarily in line with previous case law or constitutional practice. The Court argues that the Charter of the UN takes precedence over the obligations of the Member States under domestic law and international law, including the EC Treaty. This statement completely ignores the fact that state constitutions differentiate in their treatment of international law in general and depend on a monist or dualist integration of international law into their national legal system. In contrast to the Court’s arguments, most Western European constitutions28 give general principles of international law primacy over national law but not over constitutional law and in Eastern European countries, international agreements are given a status above national law but a general primacy is against any tradition

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ECJ, Case C-162/96, Racke, 1998 ECR, paras 51 to 52. See generally: J. Wouters and D. Van Eeckhoute, “Giving Effect to customary international law through European Community law”, pp. 183-234, in: J.N. Prinssen and A. Schrauwen, (eds), Direct Effect, Groningen: European Law Publishing, 2004. ECJ, Case C-84/95 Bosphorus, 1996 ECR I-3953. CFI, 12.7.2006, Ayadi v. Council Case T-253/02. See para. 231 in CFI, Ahmed Ali Yusuf v. Council and Commission, 21.9.2005, T-306/01 and Kadi v. Council and Commission T-315/01 n.y.r. Maybe the Netherlands and its constitutional provisions forms the only exception. 351

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of the relationship between national law and international law.29 In addition, an exact deﬁnition of jus cogens is absent, but also what obligations erga omnes it entails besides the prohibition of genocide or slavery.30 The extension of legal review is further clariﬁed in the Case T-228/02 OMPI v. Council in which the CFI clearly distinguishes between the abovementioned cases. The CFI further argues that the Community is bound to observe fundamental human rights because the UN Security Council Regulation gives its UN members and the EU the discretion to identify speciﬁcally the persons, groups and entities which fall under this Council Resolution. Therefore the adoption of acts falls within the ambit of the broad discretion the Council has in the area of the CFSP. 31 However, despite these restrictions in the legal review, the CFI judges realise that these new types of sanctions, in the form of smart sanction not directed against states but against individuals, require a careful look at the right to be heard,32 as the rights of individuals on a UN level – the re-examination of an individual case – are clearly limited and depend on the national review.33 These judgments are in line with a monist approach by establishing a hierarchy between norms and affording primacy to the UN Charter. However, due to the restrictions of legal control, this hierarchy is not absolute and might not lead to different results as in dualist legal orders. In conclusion, the European Courts are open to the integration of international law but integrate it into their legal order in a comparable fashion as monist national systems do; international treaty law and customary international law have legal effect in the Community legal order under certain circumstances but not without restrictions. 1.2. The ECJ in the Stream of the Political Questions Doctrine? a. The Political Questions Doctrine in National Courts While the EC might be considered a monist and open system towards international law, it still limits or restricts legal review under certain circumstances. These

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See with further critical remarks: P. Eeckhout, “Does Europe’s Constitution Stop at the Water’s Edge”, Walter van Gerven Lectures, Groningen: Europa Law Publishing, Vol. 5 2005, p. 22. This is understood as peremptory legal norms from which no derogation by agreement is permitted, see H. Thirlway, “The Source of International Law”, p. 141, in: M. D. Evans, (ed.), International Law, Oxford: Oxford University Press, 2003. CFI, Case T-228/02, OMPI v. Council 12 December 2006, n.y.r. Art. 6 of the ECHR. Kadi, para. 267.

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restrictions on legal review involving international law or politically sensitive matters are common practice in national courts.34 However, apart from this general statement, the scope and impact of restrictions in various national jurisdictions is disputed. Sometimes deﬁned as act of state or government doctrine or political questions doctrine,35 these terms are related but not necessarily similar. The act of state term is used mainly in relation to legal acts by foreign states and whether they fall under the jurisdiction or whether courts are able to refer to state immunity in light of principles of sovereignty and equality of states.36 US courts in particular have advocated a political questions doctrine but with some inconsistent approaches as to how to differ between non-judiciable matters related to national security and interest and judiciable matters involving individual rights, as US Supreme Court Judge Marshall has identiﬁed.37 Highly political cases such as the secret bombing of Cambodia by the Nixon government during the Vietnam war or the deployment of US cruise missiles in Europe38 have been evaluated by US, British and German courts on receipt of complaints by individuals. The US Supreme Court came up in Baker v. Carr with criteria to measure non-judiciability; this judgment, however came at a heavy price: dissenting opinions, such as the one by Supreme Court judge Frankfurter, indicated that such a judgment would countervene the separation of powers. Cases that are political in nature are marked in this US Supreme Court decision by: 1. Textually demonstrable constitutional commitment of the issue to a coordinate political department; as an example of this, Brennan cited issues of foreign affairs and executive war powers, arguing that cases involving such matters would be political questions;

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L. Collins, “Foreign Relations and the Judiciary”, ICLQ, 2002, p. 484; J. Charney, “Judicial Deference in Foreign Relations”, AJIL, 1989, p. 805. T. Franck, Political Questions/Judicial Answers, New Jersey: Princeton University Press, 1992. M. Shaw, International Law, 5th edn, Cambridge: Cambridge University Press, pp. 163 et seq. On this see R. Barkow, “More Supreme than Court? The Fall of the Political Question Doctrine and the Rise of Judicial Supremacy”, Columbia Law Review, 2002, pp. 237 et seq. Greenham Women against Cruise Missiles v. Reagan case and German Bundesverfassungsgericht on stationing of atomic weapons, BVerfGE 68, 1 et seq. 353

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2. A lack of judicially discoverable and manageable standards for resolving it; 3. The impossibility of deciding without an initial policy determination of a kind clearly for non-judicial discretion; 4. The impossibility of a court’s undertaking independent resolution without expressing lack of the respect due to coordinate branches of government; 5. An unusual need for unquestioning adherence to a political decision already made; 6. The potentiality of embarrassment from multifarious pronouncements by various departments on one question.39 These criteria have been criticized and no consistent approach in US courts towards political questions can be concluded from the assembly of so-called political questions cases. The literature, in consequence, suggests diverting from such a political non-review approach, especially when human rights infringements are concerned or as it has been suggested as “one needs no special doctrine to describe the ordinary respect of the courts for the political domain.”40 In European courts, French and German courts have restricted their legal review in matters of foreign relations with the argument of the division of powers and the discretion of the executive to take political decisions.41

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R. Barkow, “More Supreme than Court? The Fall of the Political Question Doctrine and the Rise of Judicial Supremacy”, Columbia Law Review, 2002, pp. 237 et seq.; L. Champlin and A. Schwarz, “Political Question Doctrine and Allocation of the Foreign Affairs Powers”, Hofstra Law Review, 1985, pp. 215 et seq. See a similar situation in Japan: T.Kamata, “Adjudication and the Govering Process: Political Questions and Legislative Discretion”, Law and Contemporary Problems, 1990, pp. 181 et seq. On the UK: L. Collins, “Foreign Relations and the Judiciary”, ICLQ, 2002, pp. 485 et seq. L. Henkin, “Is there a ‘Political Question’ Doctrine”, The Yale Law Journal, 1976, pp. 597 et seq. See for France for instance the decision by the Conseil d’Etat, CE, Ass. 9 April 1999, Chevrol-Benkeddach, available at <jurisweb.citeweb.net/ce>, for German Constitutional Court about atomic weapons stationing, BVerfGE 68, 1 et seq. J. Knechtle, “Isn’t every case political? Political questions of the Russian, German, and American High Courts”, Review of Central and East European Law, Vol. 26 2000, pp. 107-127.

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b. Comparison of National Case Law with the ECJ’s Jurisdiction: Limits to Jurisdiction? When comparing the case law of the ECJ with these judgments, there are far fewer examples to discuss and to compare. One could argue that everything is a political question when it comes to the legal effect of the European constitution, its supremacy and direct effect over national law and the relationship of European Law to national and international law. In addition, external relations matters are organised differently in the European Community than in the Member States; its system of legal review differs, depending whether individuals or institutions/ Member States ﬁle a complaint or whether a measure is concerned that involves national law or European law. Over the years, however, this special legal order too has matured into a state-like entity which not only differs as a supranational entity from international and national law but shares certain similarities with its national Member States’ systems with a division of powers and divided competences in which the courts are confronted with sensitive issues involving decision-making processes in the Community’s policies, such as agriculture and external economic relations.42 When reviewing the case law above, the approach towards international law, as already mentioned, strikes the observer as open and inspired by a monist background.43 The effect of international law in the EC legal order does not depend on its form of implementation nor whether international arrangements or agreements are published in the Ofﬁcial Journal of the European Union. However, does this preclude that the judges can follow a restriction of legal review when it comes to politically sensitive matters? This matter has only been directly addressed in one Advocate General opinion. In his opinion, the Advocate General Darmon in the case Maclaine Watson & Ltd dating from 1990 compared in extenso existing case law with national law on these matters. This discussion was already started when the case was handled by the British Court of Appeal and the House of Lords. The Maclaine Watson company, which had several contracts with the international organisation of the International Tin Council, claimed damages after the organisation stopped payments in connection with the collapse of the tin market and the company tried to get the money back from one of its members. The Advocate General’s comparative analysis comes to the conclusion that all the twelve EU Member States at that

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See further: A. Ott, “Der EuGH und das WTO-Recht: Die Entdeckung der politischen Gegenseitigkeit – altes Phänomen oder neuer Ansatz?” EUR, 2003, pp. 504 et seq. See in this regard: P. Pescatore (see supra n. 5), p. 680. 355

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time admit that a certain discretion of the government which restricts but does not completely exclude the legal review by courts. In some Member States such as Germany and Denmark it might not be as narrowly restricted as in France, Italy and Spain but by requiring the proof of a legally protected right and leaving the government a certain discretion to act, the same results will be achieved.44 As this case was removed from the register, it did not come to a decision and only in another, comparable situation did the Court give its judgment. In the Racke case the applicant complained about the suspension of the Cooperation Agreement with Yugoslavia; this suspension was not based on provisions of the Agreement which did not regulate this but referred to the UN Security Council resolution which saw the war in Yugoslavia as a threat to international peace and security. In his Opinion, Advocate General Jacobs conﬁrmed that individuals can challenge Community acts on the basis of customary international law rules which are binding on the Community but that such a challenge can be only successful if there is a manifest violation of such rules to the detriment of the individual concerned. The Court followed this opinion in its subsequent ruling by stressing that a manifest error in the assessment concerning the application of international rules would need to be proven.45 In general, and concluding from the treatment of international law above, the ECJ opens the legal review and gives an interpretation based on wording, context and purpose and when fundamental principles of human rights are concerned. This can be especially highlighted for the category of international agreements in the form of bilateral Association Agreements or Trade Agreements which have direct effect when the interpretation gives rise to this and take precedence over secondary Community law and national law. However, the legal review might be limited when it concerns the following cases, which divide into four categories. 1. The court differentiates between bilateral and multilateral agreements and their legal effect. In particular, the multilateral WTO agreements and Appellate Body Decisions are excluded from direct effect, with the exception of EC secondary law implementing WTO obligations and referring to these obligations, as in the case of the Antidumping and Trade Barriers Regulation. This exception is to be viewed as a form of indirect effect or an interpretation in conformity with international law.

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Opinion of Advocate General Darmon, C-241/87 1990 ECR I-1297 Maclaine Watson & Co LTD/Council. ECJ, Case C-162/96 Racke GmbH v. Hauptzollamt Mainz, ECR 1998 I-3655.

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2. Principles of international law and direct effect. In these cases the ECJ has conﬁrmed that the Community is bound by principles of international law but the legal review is restricted to the question whether the Council has committed a manifest error of assessment when applying these rules. 3. The validity of international law in the light of EC primary and secondary law. Fundamental human rights and EC regulation implementing UN resolution are only reviewed in the case of an infringement of jus cogens or when the EC still has discretion in its implementation. 4. Community liability for damage of individuals. In this case, the Court has ruled in cases involving WTO law that liability through infringement of international law is in principle excluded.

2. Multilateral Jurisdictions: The ECJ, the National Courts and the ECtHR This concept of restrictions on legal review has to seen against the backdrop of multilevel regulation but even more in the light of multilevel jurisdiction. Different legal orders and norms cannot be seen without the context of legal interpretation and different courts ruling on international and European norms or when collision occurs between national and international or European legal order. To determine this multilevel jurisdiction and whether this leads to collisions or gaps in the legal protection, a closer look is taken at the national courts and the ECJ and the ECJ and the ECtHR. 2.1. From Solange Doctrine to European Arrest Warrant: From Conﬂict to Cooperation on their Own Terms? At the beginning of the existence of Community law, the relationship between the ECJ and national courts was free of tensions among courts. This ﬁnds its explanation in the limited function of the preliminary rulings according to which the Community court interpret Community law and ensure the uniform application and interpretation of Community law by the Member State courts46 and the ECJ does not rule on constitutional difﬁculties in implementing European law.47 Over the years, with the extension of policies and competences by the Community and the strict determination of direct effect and supremacy of European law

46 47

ECJ, Joined cases C-297/88 and 197/89 Dzodzi v. Belgium [1990] ECR 449. ECJ, Case 100/77 Commission v. Italy [1978] ECR para. 879, para. 21. 357

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over national law, 48 it was only a question of time before national courts and especially national constitutional courts would seek the opportunity to clarify from their perspective the relationship between the courts when it involves the protection of fundamental rights. The most familiar statements have been given by the German Constitutional Court,49 but other constitutional courts, such as the Italian and Spanish, have also followed, albeit with less doctrinal zeal.50 Additionally, the implementation of the European Arrest Warrant resulted in new discussion, as the Constitutional Courts in Poland and Cyprus have shown. A more detailed look will now be taken at the judgments by the German Constitutional Courts. The judgment Solange I marked the beginning and in

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ECJ, Case 6/64 Costa v. ENEL [1964] ECR 585; ECJ, Case 26/62 van Gend & Loos v. Nederlandse Administratie der Belastingen [1963] ECR 1. See the extensive literature on this subject, for instance in English: M. Herdegen, “Maastricht and the German Constitutional Court: Constitutional Restraints for an ‘Ever Closer Union’”, CMLRev., Vol. 31 1994 pp. 235 et seq.; J.H.H. Weiler, “The State ‘über alles’”, in: Festschrift für Ulrich Everling, 1995, pp. 1651 et seq.; J. Kokott, “Report on Germany”, pp. 77-131, in: A.-M.Slaughter, et al., The European Court & National Courts – Doctrine and Jurisprudence, Oxford: Hart Publishing, 1998. See: A. Adinolﬁ, “The Judicial Application of Community Law in Italy (1981-1997)”, CMLRev., Vol. 53 1998, p. 1323; G. Gaja, “New Developments in a Continuing Story: The Relationship between EEC Law and Italian Law”, CMLRev., 1990, pp. 83-95; M. Cartabia, “Relationship between the Italian legal system and the EU”, pp. 133-146, in: A.-M. Slaughter, et al. (see supra n. 49). The Spanish Constitutional Court delivered three judgments in 1991 and 1992 which gave an interpretation relevant to the application of the EU law, the confrontation mainly centred around the Union citizenship, fundamental rights and the supremacy of EC law. In Judgement 28/1991 it declared a lack of competence to decide on questions involving the appeal of unconstitutionality. In Judgement 64/1991 it further elaborated on this declaration in regard to fundamental rights. The Spanish Constitutional Court guarantees the protection of fundamental human rights infringed by national authorities in the application of Community law, the national authorities are bound by the Spanish fundamental rights. L. Nogueras and R. Barbero, “Community law in Spain”, CMLRev., 1993, pp. 1135-1154.; J. Strube, “Völkerrecht vor Verfassungsgerichten zwischen Souveränitätsangst und Anerkennung der internationalen Bindung”, EHI-Papers, Vol. 2 1998, p. 9; available at <www.rewi.hu-berlin.de/WHI>. In the Frontini judgement of 1973, shortly before Solange I, the Italian Constitutional Court came to the conclusion that the primacy of EC law – afﬁrmed by the decision Fragd in 1989 – ﬁnds its limits in a breach of fundamental principles and Community provisions do not have the same legal status as constitutional norms.

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this judgment the Constitutional Court declared in 197451 that the transfer of rights which is mandated by Art. 24 of the German Grundgesetz ﬁnds its limits in the major principles of the German constitution, such as fundamental human rights.52 In consequence this meant that the German Constitutional Court would check the compatibility of EC secondary law with the German Constitution. This would be applicable as long as the integration process was not so far developed that the Community has agreed a catalogue of human rights.53 This judgment was only reversed twelve years later, in Solange II in 1986,54 when the German Constitutional Court admitted that in the meantime the ECJ had established in its case law that human rights belong to the general principles of Community law with the ECHR as a source of reference and which have to be guaranteed by Community organs and Member States.55 Both judgments have been severely criticised by European and national lawyers for their opposition to the supremacy principle and their supervision under suspension.56 Nevertheless, they also attracted praise in respect of the argument that the legislator cannot transfer more rights than it has been given by the German Constitution, and the need for more consistent and clearer protection of human rights was also recognised by the European institutions. Limits for changes of the constitutions for the legislation are set by Art. 79 (3) GG and these limits are the German federal structure and the principles inscribed in Art. 1 and 20 GG such as the rule of law and the principle of democracy.57 In reaction to the further developing integration by Maastricht, the German Parliament introduced the ﬁndings of Solange II into the Constitution by incorporating a new Art. 23 which clearly

51

52 53 54

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Ironically, the year when the last Member State – France – acceded to the European Human Rights Convention. Bundesverfassungsgericht, Order of 29 May 1974, BVerfGE 37, pp. 271 et seq. Bundesverfassungsgericht, Order of 29 May 1974, BVerfGE 37, pp. 271, 285. In the Vielleicht-Beschluß (Maybe order) the Court still avoided a restriction of Solange I: BVerfGE 52, p. 187; see further J. Kokott (see supra n. 49), p. 84. ECJ, Case 29/69 Stauder v. Ulm [1969] ECR 419; ECJ, Case 4/73 Nold v. Commission [1974] ECR 491; ECJ, Case C-299/95 Kremzow v. Republik Österreich [1997] ECR I-2629, para. 14. The Court is competent to address the matter, but does not execute its responsibility to rule. Bundesverfassungsgericht, Order of 22.10.1986 (Solange II), BVerfGE 73, pp. 339, 387. M. Herdegen, “Europäisches Gemeinschaftsrecht und die Bindung deutscher Verfassungsorgane an das Grundgesetz”, EuGRZ, 1989, p. 312. 359

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connects the limits of transferral of rights on the European Union to the rights given in Art. 1 GG and Art. 79 (3) GG.58 In Maastricht, the Court opened a new line of confrontation by emphasising that competences have to be attributed by the Member States as the master of the Treaties and prohibits an over-extensive use of the additive competence norm of Art. 308 EC (former Art. 235 EC). The German Constitutional Court created the term ausbrechende Rechtsakte (fugitive legal acts) which will not be considered valid in the German legal order due to illegal extension of Community powers.59 In this judgment, the German Constitutional Court brought up the highly disputed suggestion of a form of cooperation with the ECJ. It suggested in its judgement that the court exercises this on secondary Community legislation in cooperation with the ECJ; according to this concept the ECJ is responsible to guarantee the protection of basic rights in any particular case for the whole area of the European Communities, and the Constitutional Court can therefore restrict itself to a general guarantee of the constitutional standards that cannot be dispensed with.60 Due to these remarks, the hope existed that the German Constitutional Court would annul the very debated EC Banana Regulation in Germany. When the Banana Regulation was introduced in the Community in 1993 with the goal of unifying the import policies of the Member States, it immediately became the object of heated legal and economic debate. It divided the Member States and engaged the dispute settlement system under the old GATT and since 1995 under the new WTO system. Finally, it also led to a major involvement of the national courts, especially German courts which considered the Banana regulation an infringement of international and national law.61 The ECJ judged on a number of cases involving the consequences of the newly introduced import-licenses system of importers of Dollar bananas.62 The Constitutional Court took up this opportunity to clarify its jurisdiction in the Banana case in

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The federal structure, and the principles listed in Arts 1 and 20 GG. Bundesverfassungsgericht, Judgment of 12 October 1993, BVerfGE 89, p. 155; CMLRev., Vol. 1 1994, p. 57. BVerfGE 89, pp. 155, 175. M. Zuleeg, “The European Constitution under Constitutional Constraints: The German Scenario”, ELRev., Vol. 22 1997, p. 27. Summarising: N. Komuro, “The EC Banana Regime and Judicial Control”, JWT, 2000, pp. 1-88. Case C-466/93 Atlanta Fruchthandelsgesellschaft mbH and others v. Bundesamt für Ernährung und Forstwirtschaft [1995] ECR I-3799; Case C-68/95 T. Port GmbH & Co. KG v. Bundesanstalt für Landwirtschaft und Ernährung [1996] ECR I-6065; Case C-469/93 Ammistrazione delle Finanze dello Stato v. Chiquita Italia [1995]

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June 2000 in a more or less surprising manner by not accepting the case for a decision. The German Court afﬁrms its Solange II and Maastricht case law, however by shedding principle remarks on sovereignty, democracy and the limits of the European Union: it concludes in a matter-of-fact way that it has to be proven that the minimal requirements of the protection of the basic rights are generally not guaranteed. This minimal requirement of a general protection means in practice that the individual is depending on the concrete reference of the German court to the ECJ which then – after the unsuccessful outcome – will lead back to the Bundesverfassungsgericht. This judgment has also to be read in the context of another decision issued in February 2000 – Alcan – where the German Constitutional Court concluded that no “ausbrechender Rechtsakt” existed in this case because it addressed the executive application of Community law and Community law would have primacy over secondary German law.63 This decision was conﬁrmed by a decision on the import of Chinese textile products in September 2005.64 In July 2005 the Constitutional Court decided on the German law implementing the European Arrest Warrant according to Art. 34 (2) b EU Treaty in which the judges saw a violation of fundamental rights of the German constitution as no individual assessment of the situation is taken and for being disproportionate in the sense that it did not take into account the constitutional right of German nationals not to be extradited (Art. 16 (2) GG) – in principle – unless the events clearly took place abroad. Also, by excluding recourse to a German court against the grant of extradition to a European Union Member State, the German European Arrest Warrant Act infringes the German Basic Law’s guarantee of recourse to a court (Art. 19 (4) GG).65 In a similar vein, the Polish constitutional court decided by declaring the implementation of the framework decision unconstitutional.66 This framework decision on the European Arrest Warrant has now been forwarded to the ECJ in the form of a preliminary ruling

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ECR I-4533; CFI, Joined Cases T-364/95 and T-365/95 T.Port v. Hauptzollamt Hamburg-Jonas [1998] ECR I-1023. Bundesverfassungsgericht, Order of 17 February 2000, NJW, 2000, pp. 2015 et seq.; see also F. Hoffmeister, Case note on Alcan, Decision of 17 February 2000, CMLRev., 2001, pp. 791-804. BVerfG, 1 BvR 1781/05 of 9 September 2005, paras 1-18, <www.bverfg.de/ entscheidungen/ rk20050905_1bvr178105.html>. BVerfG, 2 BvR 2236/04 of 18 July 2005, paras 1-202, <www.bverfg.de/ entscheidungen/ rs20050718_2bvr223604en.html>. Case note by D. Leczykiewicz, CMLRev., 2006, pp. 1181-1191: <www.eurowarrant. net/ documents/cms_eaw_74_1_EAWrelease_270405.pdf>; <www.eurowarrant.net/ 361

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by “Advocaten voor de Wereld ”. While an early acceptance of supremacy of Community law over constitutional law can be found in the judgments by national courts in Belgium,67 Luxembourg68 and the Netherlands,69 the courts in Germany Spain, Italy, France70 Denmark,71 Greece72 and Polish reveal a degree of resentment against these principles. Explanations not only lie in the fact that the majority of these latter countries are dualist but also have strong constitutional review systems that view it as their task to protect the rights of citizens under the respective constitution. 2.2. The ECJ and the ECtHR: Two Planets in two Different Orbits? The relationship between the ECJ and the Court in Strasbourg has been going through changes over time. While the German Constitutional Court raised questions about a lack of human rights catalogue in the EC constitution, which resulted in a creative inclusion of the Convention as fundamental principles of law to be observed by the EC legal review, the ECHR opinion by the ECJ denied the legal possibility to join this Convention without a clear mandate given by the Member States to do so. To bridge the gap, the EC engaged in the drafting of the Fundamental Human Rights Charter and the Draft Constitution opened the way to joining the ECHR. On the side of the ECtHR, between 1999 and 2005, the extensive role of the EC in taking over competences from its Member

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documents/ cms_eaw_220_1_Polen(Weigend).pdf>, however, different conclusions on the same issue by a Belgian court. Decision Franco-Suisse Le Ski by the Belgian Cour de Cassation accepted the primacy of Community law: Cour de Cassation, EuGRZ, 1975, p. 310. In the Pagani judgment as early as 1954 the primacy in favour of international treaty law was solved: D. Ludet and R. Stotz, “Die neue Rechtsprechung des franzöisischen Conseil d’Etat zum Vorrang völkerrechtlicher Verträge”, EuGRZ, 1990, pp. 93 et seq. Obviously the constitution with the most international-law-friendly feature. See further references in K. Lenaerts and P, van Nuffel, Constitutional Law of the European Union, London: Sweet & Maxwell, 1999, paras 14-22. See for the French one: P. Roseren, “The Application of Community Law by French Courts from 1982 to 1993”, CMLRev., Vol. 31 1994, pp. 315-376. The Danish Supreme Court has given its own Maastricht judgment and ruled that EC acts that infringe civil rights under the Danish Basic Law are invalid: K. Hoegh, “The Danish Maastricht Judgement”, ELRev., Vol. 24 1994, pp. 80-90. The Greek court challenged the principle of supremacy: E. Maganaris, “The Principle of Supremacy of Community Law – The Greek Challenge”, ELRev., Vol. 23 1998, p. 179.

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States was recognised and led to the clariﬁcation that Member States would be still be bound by the obligations of the ECHR when delegating functions to the EC. But the ECtHR would accept, as indicated in the Bosphorus case, that when it comes to the application of EC secondary law, EC law guarantees a protection of fundamental rights which is equivalent to that of the Convention system. In the ﬁrst case, Matthews v. UK (hereafter, Matthews), Art. 3 of Protocol 1 was at stake which gives a right to free elections. Miss Matthews, a British citizen resident in Gibraltar, applied in 1994 to be registered as a voter in the elections to the European Parliament.73 She was told that under the terms of the EC Act on Direct Elections of 1976 Gibraltar was not included in the franchise for those elections. By virtue of the Treaty of Accession, Gibraltar was excluded from parts of the EC Treaty such as the customs union and the common market of agriculture; however, provisions on free movement of persons inter alia do apply.74 The Court considered whether the UK could be held responsible for the alleged violation. The Court ruled that the acts could not be challenged before the ECtHR because the EC would not be a Contracting Party. The Convention would not exclude the transfer of competencies to international organisations provided that Convention rights continue to be “secured”. Therefore, according to the Court, the UK still remains responsible and it analysed whether Art. 3 of the Protocol 1 would be applicable to the European Parliament and it could be considered a legislature in that sense. In contrast to the previous decision by the Commission, which considered the European Parliament to fall outside the ambit of Art. 3 of the Protocol, the Court considered the European Parliament as being sufﬁciently involved in the general democratic supervision of the activities of the EC. It analysed, ﬁnally, whether the absence of elections in Gibraltar gave rise to a violation of Art. 3 of Protocol 1. Even though the right would be not absolute and the State enjoys a wide margin of appreciation, the Court concluded a complete denial is violating Art. 3 of Protocol No. 1. The Matthews case left one wondering whether the Court of Human Rights is deﬁning the relationship with the ECJ anew. Under the old system the Commission of Human Rights considered applications against the European Community as inadmissible because it was not a party to the Convention. Instead, the Commission clariﬁed an ongoing responsibility of the Member States of the Convention. In the case M & Co, the Commission was confronted with the claim of the company M & Co against a ﬁne imposed by the German authorities for the infringement of competition rules. The Commission stated that

73 74

ECtHR, Case no. 24833/94, Matthews v. UK, 18 February 1999. Ibid., p. 4. 363

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the Convention does not prohibit a Member State from transferring powers to international organisations. However, the transfer of powers is only compatible with the Convention provided that within that organisation fundamental rights will receive an equivalent protection. In its conclusion, the Commission noted that the legal system of the European Communities not only secures fundamental rights but also provides for control over their observance.75 However, the Commission stated that Art. 6 ECHR could be infringed inasmuch as a request to the national court to refer to the ECJ in a preliminary proceeding is refused and this refusal appears to be arbitrary.76 While it appears less clear in Matthews whether the Court still follows this view, the judgments of Waite and Kennedy v. Germany and Beer and Regan v. Germany, issued the same day, speak clearer language.77 The cases concerned the immunity from suit of international organisation – in this case the European Space Agency (ESA). The applicants argued that due to their relocation to Darmstadt, they had acquired the status of employees of the ESA; however, ESA relied successfully on its immunity from jurisdiction before the German Labour Court.78 Repeating the Commission’s approach to the Community in these judgements, the Court stated that the ECHR does not prevent its members from transferring powers to an international organisation, but the members remain responsible for the application of the Convention and the Court controls whether the fundamental rights are secured. The Bosphorus case manifested a new approach by the ECtHR which invites a comparison with the German Constitutional Court’s latest judgments. It has been suspected that this decision is more motivated by a political background to do everything to prevent the future participation of the Union in the ECHR.79 The application was brought by Bosphorus, an airline charter company which

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Commission of Human Rights, Case no. 13258/87 M & CO, 9 February 1990. Commission on Human Rights, Case no. 31467/96, Spiele v. the Netherlands, 22 October 1997. This right has also been secured from the German Constitutional side by seeing the non-referral under certain circumstances as an infringement of Art. 101 Grundgesetz: Entzug des gesetzlichen Richters (wrongful failure to refer). Case of Beer and Regan v. Germany, no. 28934/95, Judgment 18 February 1999; Case of Waite and Kennedy v. Germany, no. 26083/94, Judgment 18 February 1999. See further: I. Cameron, “European Court of Human Rights”, EPL, 2000, pp. 151-168. F. Schorkopf, “The European Court of Human Rights’ Judgment in the Case of Bosphorus Hava Yollari Turizm v. Ireland”, German Law Journal, Vol. 9, 2005, pp. 1255 et seq.

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leased a civil aircraft from Yugoslav Airlines. This aircraft was seized by Irish authorities on the basis of an EC Regulation implementing a trade embargo on the Federal Republic of Yugoslavia. This trade embargo was mandated by the UN sanctions regime against Yugoslavia. The ECtHR stated that the Irish Supreme Court had no real discretion to exercise as it had to comply with its legal obligations under EC law. The court asked further whether Ireland complied with its ECHR commitments in fulﬁlling its EU obligations. A new approach was chosen which used almost identical wording to the German Constitutional Court by emphasising that Ireland would not comply with its ECHR commitments when in a particular case the protection of Convention rights was manifestly deﬁcient. In such cases the interest of international cooperation would be outweighed by the Convention’s role as a constitutional instrument of European public order. As the EU legal regime for the protection of fundamental rights was considered to be equivalent, Ireland did not depart from its obligations under the ECHR.

3. Conclusion As outlined above, on the bilateral level the antagonism between monism and dualism is still visible but not decisive. Generally, monist legal orders as such as the EU system are more open to international law, but, in common with all legal orders, certain restrictions of legal control in political sensitive matters are accepted and come to the fore via jurisdiction by judges. On the more complex, multilateral level, while a hierarchy between different norms is acknowledged on the surface, be it the supremacy of EU law or constitutional law, a parallelism between legal jurisdictions is advocated. As such, none of the courts analysed here – the German constitutional court, the European Court of Justice and the European Human Rights Court – compromise when considering themselves the ﬁnal arbiter over the tasks and powers assigned to them, viz., the protection of human rights or fundamental principles when the subject matters falls within their jurisdiction. In consequence, a system of plurality or a multilevel jurisdiction requires a shift from a strict hierarchy of norms or legislative systems to the prevention of conﬂicts and preventing gaps in the legal protection of individuals against infringements of their individual rights. In this regard, similar approaches in the courts in Strasbourg and Karlsruhe (the ECtHR and the German Constitutional Court) can be seen, denying a case-by-case approach but checking whether a general standard of protection of human rights is not guaranteed. This might lead under exceptional circumstances to legal gaps in protection, as can be seen in the case of the Banana Regulations and national importers, but should not lead to major frictions and gaps between legal systems. 365

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When the Kadi, Yusuf and OMPI judgments are interpreted in this light, then even these judgments could be seen under these standards of jurisdiction with the last line drawn in the violation of jus cogens by UN law or major errors of assessment as indicated in the cases Bosphorus and Racke.80 In addition, national courts might still be up to interpretation and legal control in other cases. New ways of legal control have emerged with the instruments of the intergovernmental third pillar or cross-pillar measures, specially the European Arrest Warrant, which demonstrates the different legal nature of this measure, the different levels of legal control and the restriction of legal review by the ECJ in this area.81 In practice it remains to be seen whether these checks and balances between ECJ, constitutional courts and the ECtHR will work, as it requires further ﬁne-tuning; it might, however, be the only working solution for having different interests considered in a multilevel legal orders with different constitutional charters to adhere to. Judges in national and international legal systems are careful when restricting their legal review as there is a thin line between political questions and infringements of fundamental rights, but the division of powers requires them not to interfere with the discretion in decision-making processes of the executive and legislative side. As long as no grave violation of human rights can be identiﬁed, the judges are only the last instance and most remote institution to control the making and implementation of multilevel regulation. Therefore they need to ﬁnd a balance between judicial activism and judicial restraint in a system of multilevel jurisdictions.

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ECJ, Case C-84/95 Bosphorus, 1996 ECR I-3953; ECJ, Case C-162/96 Racke GmbH & Co. v. Hauptzollamt Mainz [1998] ECR I-3655. Even though it needs to be admitted that the ECJ makes attempts to “supranationalise” measures in this area: see ECJ, Case C-105/03 Pupino, Judgment of 16 June 2005, ECR n.y.r.

Hierarchy in Multilevel Regulation Nikolaos Lavranos

1. Introduction As the contributions in this book illustrate, multilevel regulation comes in many forms and guises. The proliferation of international agreements, International Organizations as well as informal bodies that produce an increasing amount of hard and as soft law are proof of the importance of multilevel regulation and thus the necessity to study it from various perspectives. This book provides a tour d’horizon of many case studies that analyze the way multilevel regulation takes place as well as possible consequences of this development. Essentially, multilevel regulation involves the interaction between different normative levels, mostly between the international and national level. However, for the EC/EU Member States, the Community legal order comes in as an additional level that complicates the multilevel regulation paradigm. This is especially the case when the EC/EU participates in the formulation, transposition and application of rules and regulations that have been adopted at the international level.1 More speciﬁcally, the involvement of the Community legal order with its speciﬁc characteristics can lead to the creation of conﬂicting regulations for the EC/EU Member States. One way to deal with conﬂicting regulations is to examine the hierarchy of norms (broadly understood) within the multilevel regulation paradigm. Only if the hierarchy of a norm within the multilevel regulation paradigm is determined is it possible to decide which norm is supreme and thus should prevail over the other norms. This question is obviously of paramount importance for domestic courts, which are usually faced with the issue of resolving conﬂict of norms. This contribution focuses on the hierarchy of norms in the Community legal order. Three different examples are taken to show the position of international 1

See extensively: N. Lavranos, Decisions of International Organizations in the European and domestic legal order of selected EU Member States, Groningen: Europa Law Publishing, 2004.

Follesdal, Wessel and Wouters (eds), Multilevel Regulation and the EU, 367–375 ©2008 Koninklijke Brill NV. ISBN 978 90 04 16438 3. Printed in the Netherlands.

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norms in the hierarchy of the Community legal order. It is shown that this hierarchy is not static – as one would assume – but rather ﬂexible depending mainly on the policy area involved and the balance between the international norm and Community law that the European courts perform.

2. The Standard Hierarchy of Norms within the Community Legal Order The hierarchy of norms within the Community legal order is a question that somehow cannot be answered in a straightforward way. The main reason for this is that neither the EC Treaty nor the EU Treaty or, for that matter, the European Constitution provide for a clear and conclusive answer. Therefore, inevitably, the European Court of Justice (ECJ) and the Court of First Instance (CFI) have been called upon in various contexts to tackle this issue. From their jurisprudence,2 the following hierarchy of norms (referred to as standard hierarchy) can be deduced: highest

primary EC law (EC Treaty) international agreements/decisions of IOs secondary EC law (Regulations/Directives)

lowest

national (constitutional) law

So far, so good, one might be tempted to say. However, the picture has become more complicated by the rich and complex jurisprudence of the European courts. Three different areas of law illustrate that – for various reasons – the hierarchy of norms within the Community legal order is modiﬁed as compared to the standard hierarchy set out above. The ﬁrst example refers to the implementation of WTO law into the Community legal order; the second example concerns the implementation of UN Security Council Resolutions, while the third example deals with the implementation of the ECHR. These examples have been analyzed extensively in other publications and therefore will not be repeated here.3 Rather, the purpose is to draw on the previous 2

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From the famous Van Gend & Loos and Costal v. ENEL cases, the supremacy of EC law over national law can be clearly deduced, while in case C-61/94 Commission v. Germany [1996] ECR I-3989 the ECJ clearly determined that international treaties and decisions of IOs enjoy supremacy over secondary EC law. N. Lavranos, “The communitarization of WTO dispute settlement reports: An

Hierarchy in Multilevel Regulation

work and synthesize and extrapolate in compact manner a number of general conclusions that illustrate how multi-level regulation inﬂuences – and at times modiﬁes – the hierarchy of norms of the Community legal order.

3. The Example of WTO Law The question of which position and legal effect WTO law and WTO dispute settlement reports have within the Community legal order has arisen ever since the saga of the banana dispute between the EC, several Latin-American countries and the US began.4 Indeed, the hormones dispute as well as the recent GMO case illustrate that this question still looms over EC law. If one applies the generally applicable rule of law that a lower norm must always be in conformity with a higher one, i.e. the higher norm trumps the lower one in case of a conﬂict, then the EC Regulations concerning bananas and hormones that have been judged to be inconsistent with the legal obligations of the EC arising out of the WTO Agreement would have to be declared inapplicable or void as they would be trumped by the higher ranking WTO Agreement. However, the long-standing jurisprudence of the ECJ and CFI seem to underline the point that in the case of WTO obligations the normally applicable hierarchy of norms within the Community legal order does not apply.5 Rather, in this case – whether for economic and/or political reasons or because of using the lack-of-reciprocity argument – secondary EC law is placed above binding WTO law obligations. This means that the hierarchy of norms looks like this: highest

secondary EC law (Regulations) primary EC law (EC Treaty) WTO Agreement/WTO dispute settlement reports

lowest

4

5

national (constitutional) law

exception to the rule of law”, EFA Rev., 2005, pp. 313-338; idem., “Judicial Review of UN sanctions by the Court of First Instance”, EFA Rev., 2006, pp. 471-490; idem., “Das Solange-Prinzip im Verhältnis von EGMR und EuGH”, EUR, 2006, pp. 79-92; N. Lavranos (see supra n. 1). U. Everling, “Will Europe slip on bananas? The banana judgment of the Court of Justice and national courts“, CMLRev., 1996, pp. 401-437; N. Lavranos, “Die Rechtswirkung von WTO panel reports im Europäischen Gemeinschaftsrecht sowie im deutschen Verfassungsrecht”, EUR, 1999, pp. 289-308. N. Lavranos (see supra n. 3). 369

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This adjustment of the hierarchy of norms has far-reaching implications. The most important one, it seems to me, is that individuals affected by WTO law that is inconsistent with EC Regulations are unable to successfully challenge their validity because the European courts refuse to provide for judicial review – except in highly limited exceptions.6 Similarly, national courts that would like to set aside the inconsistent EC Regulations because they wish to give full effect to the WTO law obligations have so far been prevented from doing so by the binding jurisprudence of the European courts and the supremacy of EC law.

4. The Example of UN Security Council Resolutions Even before 9/11, the EC/EU – even though not a member of the UN – has consistently implemented Chapter VII UN Security Council Resolutions, in particular pertaining to the freezing of ﬁnancial assets of individuals and organizations suspected of being connected with terrorism. Obviously, sooner rather than later, the question of the position of UN sanctions implemented by European law measures would come before the European courts.7 Again, applying the standard hierarchy of norms mentioned above would mean that both the EC Regulation implementing the UN Security Council Resolution as well as the UN Security Council Resolution itself (if one were to accept that it is integral part of EC law) would have to be reviewed as to their compatibility with the highest norm, which is the EC Treaty and the fundamental rights as protected by the ECHR. Applying the generally accepted principle in law that the lower norm must always be compatible with the higher one, the CFI was simply required to examine whether the EC Regulation complies with fundamental principles of Community law, namely, that every Community act must be reviewable, and compatible with fundamental rights of the ECHR.8 So the issue of reviewing UN Security Council Resolutions themselves should not have been relevant at all for the CFI.

6

7

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CFI, Case T-19/01 Chiquita [2005] ECR II-315; ECJ, Case C-377/02 Van Parys [2005] ECR I-1465; see also: N. Lavranos, “The Chiquita and Van Parys judgments: An exception to the rule of law”, LIEI, 2005, pp. 449-459; opposite opinion by: A. Antoniadis, “The Chiquita and Van Parys Judgments: Rules, Exceptions and the Law”, LIEI, 2005, pp. 460-476. See extensively: N. Lavranos, “UN Sanctions and Judicial Review”, Nordic Journal of International Law, 2007, pp. 1-17. ECJ, Case 294/83 Les Verts v. EP [1986] ECR 1339; ECJ, Case C-260/89 ERT [1991] ECR I-2925, as well as Art. 6 (2) TEU in conjunction with Art. 46 (d) TEU.

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However, with the judgments in the Yusuf/Kadi-cases9, the CFI has apparently attempted to completely modify the hierarchy of norms in the Community legal order.10 The CFI argued that a review of UN Security Council Resolutions would trespass on the prerogatives of the UN Security Council. Indeed, the CFI stated that the EC is bound by UN sanctions in the same way as the EU Member States. However, at the same time the CFI considered itself competent to review UN Security Council Resolutions and their compatibility with jus cogens. In this way, the CFI established a new hierarchy of norms in the Community legal order. According to the CFI, the hierarchy of norms in the Community legal order looks like this: highest

Jus cogens international agreements/decisions of IOs (UN Charter, including UN SC Resolutions) secondary EC law (Regulations implementing UN SC Resolutions) primary EC law (including ECHR)

lowest

national (constitutional) law

This is indeed a very drastic modiﬁcation of the hierarchy of norms and is hardly compatible with the general system of Community law. It would mean that the EC/EU has become integral part of the UN machinery, without being able to assert the sui generis status of Community law vis-à-vis UN law. However, most recently, the CFI seems to have moved away – at least partly – from creating a special hierarchy of norms for UN sanctions. In its most recent jurisprudence the CFI has accepted that in cases in which EU Member States provide the names for the freezing list, thus having a margin of appreciation, the hierarchy of norms established in Yusuf/Kadi is not applicable.11 Consequently, the normal

9

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11

CFI, Case T-306/01 Yusuf [2005] ECR II-3533; CFI, Case T-315/01 Kadi [2005] ECR II-3649; Yusuf appealed on 23.11.2005 against the judgment of the CFI; the case is listed as C-415/05 P, OJ 2006 C 48/11. Kadi appealed on 17.11.2005 against the judgment of the CFI; the case is listed as C-402/05 P, OJ 2006 C 36/19. N. Lavranos, “Case-note on Yusuf/Kadi”, European Human Rights Cases, 2005, no. 106, pp. 1044-1062. CFI, Case T-253/02 Ayadi [2006] ECR II-2139; CFI, Case T-228/02 Organisation des Modjahedines du peuple d’Iran, judgment of the CFI of 12 December 2006, n.y.r.; see also: N. Lavranos, “Case-note on Ayadi”, European Human Rights Cases, 2006, no. 125, pp. 1171-1190; idem., “Case-note on OMPI”, European Human Rights Cases, 2007, no. 29, pp. 262-292. 371

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hierarchy of norms applies, so that these measures are fully reviewable with primary EC law and ECHR law. While the CFI must be praised for moving back to the standard hierarchy of norms model, the fact should not be overlooked that for the other cases the special Yusuf/Kadi-hierarchy still applies, resulting in an impossibility of obtaining judicial review by those affected by the sanctions. But I am conﬁdent that sooner or later the CFI or ECJ will take the last step and will do away with this unacceptable situation.

5. The Example of the ECHR As is the case with the UN, the EC/EU too is not party to the ECHR. Nonetheless, the ECJ has brought the ECHR “into the orbit” of Community law. Indeed, throughout its jurisprudence the ECJ has integrated the ECHR step-by-step into the Community legal order.12 First, the ECHR was an important source of inspiration13, more recently it has become integral part of the European legal order.14 Indeed, the ECJ and CFI apply the ECHR as if they were the ECrtHR.15 In this regard the European courts must be praised for enhancing fundamental rights protection in the EC, especially because of the lack of an own fundamental rights catalogue – though now integrated in the European Constitution and awaiting entry into force. Applying the standard model of hierarchy, the ECHR would be placed below primary EC law, i.e. EC and EU Treaties. However, with its famous Schmidberger judgment,16 the ECJ has placed the ECHR even above the EC Treaty. Although this has so far been a unique judgment, it shows once again that the hierarchy of norms within the Community legal order is ﬂexible and is modiﬁed when the ECJ considers it necessary. Accordingly, the hierarchy of norms regarding the ECHR and ECrtHR-jurisprudence within the Community legal order is as follows:

12 13

14

15

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Lavranos (see supra n. 1). ECJ, Case 4/73 Nold [1974] ECR 491; ECJ, Case C-260/89 ERT [1991] ECR I-2925. P. Alston (ed.), The EU and Human Rights, Oxford: Oxford University Press, 1999. ECJ, C-60/00 Carpenter [2002] ECR I-6279; ECJ, Case C-413/99 Baumbast [2002] ECR I-7091. ECJ, Case C-112/00 Schmidberger [2003] ECR I-5659.

Hierarchy in Multilevel Regulation highest

primary EC law (EC Treaty+ECHR+ECrHR jurisprudence) international agreements/decisions of IOs secondary EC law (Regulations/Directives)

lowest

national (constitutional) law

and in the case of Schmidberger judgment ECHR is even placed at the top of the hierarchy: highest

ECHR+ECrtHR jurisprudence primary EC law (EC Treaty) international agreements/decisions of IOs secondary EC law (Regulations/Directives)

lowest

national (constitutional) law

6. Conclusions What do these examples tell us? First and foremost, they illustrate that the determination of the hierarchy of a norm within the multilevel regulation paradigm can be a useful tool for understanding this phenomenon in all its complexity. Secondly, the examples show that the hierarchy of norms in the Community legal order is not static but rather ﬂexible and differs depending on the area of law and the speciﬁc circumstances of a case in question. This raises the question of whether the claimed sui generis status of EC law is still generally applicable. According to this sui generis status, Community law is a distinct legal order from international law, with its own hierarchy of norms. This becomes clear when the following aspect is considered.17 Essentially, international law has two components: customary international law and treaty law. While customary international law is binding on all states, treaties are binding only on the parties to them. A treaty is thus a means by which rules of customary international law may be changed, subject to the limits set by jus cogens. The EC (and the EU) was created by a treaty. Thus, all forms of Community law – including the extent of the jurisdiction of the CFI/ECJ – depend for their validity on the 17

T. Hartley, European Union Law in a Global Context, Cambridge: Cambridge University Press, 2004. 373

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EC Treaty. In turn, the validity of the EC Treaty depends on international law. However, the fact that the validity of the Community legal order depends on international law does not mean that it is subordinated to international law. Indeed, international law permits a group of states to enter into a treaty that lays down rules of law. These rules displace customary international law as far as those states are concerned. Accordingly, when the EC Member States signed the E(E)C Treaty, they had the power under international law to create a self-contained legal system that would apply under the EC Treaty (and EU Treaty). In fact, from the very beginning of the existence of the EC, the ECJ has emphasized that the EC Member States created a new legal order when the ECJ stated that “by contrast with ordinary international treaties, the EEC created its own legal system.”18 Hence, EC law must be regarded as a separate legal order that does not belong to the international or national legal order. Rather, it is a sui generis legal order. As a consequence thereof, it could not be argued that EC law is subordinate to international law, rather the Community legal order stands side by side and on the same level with the international legal order, but as a self-contained legal order that applies internally its own hierarchy of norms. Therefore the international legal order cannot superimpose itself on the Community legal order but rather has to accept the supremacy of Community law over international law that is applied within the EC and its Member States. At least, so the story goes, and so is the story still told.19 But as the examples discussed above illustrate, the ECJ and CFI have injected some ﬂexibility into the otherwise ﬁrm and static hierarchy of norms of the Community legal order. This has been done for various reasons and not always to the beneﬁt of the rule of law and in particular the rights of individuals. On a more general level, it can be concluded that increasing multilevel regulation, be it in the area of trade, UN law, environment, ﬁnance, human rights, internet, aviation, etc., leads to more ﬂexibility in the hierarchy of norms, in particular since the EC/EU itself is increasingly involved in the multilevel regulation, which means that it is obliged to implement those measures. This ﬂexibility is probably inevitable and necessary for the ECJ and CFI in order to balance them with other interests, but the danger of inconsistency, the creation

18

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ECJ, Case 26/62 Van Gend & Loos [1962] ECR 95, stating that the Community constitutes a new legal order of international law, whereas in Case 6/64 Costa v. ENEL [1964] ECR 685, the ECJ stated that the EEC Treaty has created its own legal system [emphasis added]. D. Chalmers, et al., European Union Law, chapter 2, Cambridge: Cambridge University Press, 2006.

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of certain “self-contained” regimes – as has already happened with WTO law and partly with UN sanctions – and the negative consequences associated therewith, must be taken seriously. In this context, the national courts should not be forgotten. They are able to correct the worst situations and indeed have done so recently. Consider, for instance, the German Constitutional Court with its European Arrest Warrant judgment.20 Indeed, recently AG Mengozzi argued in the same vein in his Opinion in the SEGI case, in which he argued that national courts are actually required to ﬁll any lacuna caused in the fundamental rights protection by multi-level regulation.21 In conclusion, it becomes clear that the situation for the EC/EU Member States becomes particularly complex. States are increasingly faced with a set of multi-sourced norms and regulations that carry the risk of diverging or conﬂicting contents which nevertheless obliges states to implement them. Determining the position of a norm within the multilevel regulation paradigm can assist in making the right choice about which and how the norm should be implemented at the domestic level. In short, the hierarchy of norms is an inherent part of multilevel regulation.

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BVerfG, Europäischer Haftbefehl, judgment of 18 July 2005, available at <www. bundesverfassungsgericht.de>. Opinion of AG Mengozzi in case ECJ, C-355/04 P Segi and others v. Council, delivered on 26 October 2006, n.y.r. 375

Epilogue: Toward more Legitimate Multilevel Regulation Andreas Follesdal

1. Introduction International regulations are central to the multilevel interdependence often referred to as “Globalisation”, “Europeanization” and the like.1 The rules span hard and soft law, authored by a range of intergovernmental, transnational and private organisations, including UN and EU bodies with wide or narrow mandates. Such multilevel regulation often has drastic effects on individuals’ life plans and life chances, albeit indirectly and surreptitiously.2 Their impact, and even the mere suspicion thereof, raises a fundamental issue of normative legitimacy. With what right can these multifarious authorities expect subjects to comply? More precisely: can these new modes of regulation be justiﬁed, as a whole or separately, to all subjects regarded as equal members of the political order of which they ﬁnd themselves parts? The present reﬂections address this question of normative legitimacy, and points out ways to improve multilevel regulation in this regard. After a brief discussion of the “multilevel governance” (hereafter, MLG) that gives rise to such regulations, section 2 surveys the wide ranging discussions on the legitimacy deﬁcits of the EU in order to extrapolate some insights about MLG. Section 3 lays out a particular conception of the contested concept of “legitimacy” that allows a distinction between a) whether an arrangement is

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This contribution has beneﬁted from the CONNEX and NEWGOV networks. Thanks in particular to audiences at ECPR in Budapest, a NEWGOV workshop in Florence, and CONNEX workshops at Katholieke Universiteit Leuven and at the Hague. Cf. in this volume the contributions by Bradley, De Meester, Uerpmann; Husabø, Brown, and Bulterman.

Follesdal, Wessel and Wouters (eds), Multilevel Regulation and the EU, 377–398 ©2008 Koninklijke Brill NV. ISBN 978 90 04 16438 3. Printed in the Netherlands.

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democratic and b) whether it is normatively legitimate. This account of normative legitimacy draws on the “assurance game” literature to argue three points. Justiﬁed, long term support for a political and legal order requires a) present compliance and support, but also b) long term trust in the general compliance of other citizens and ofﬁcials, and c) shared acceptance of the legality and normative legitimacy of the regime. Suggestions to enhance the legitimacy of the EU and other forms of multilevel regulation may be assessed in the light of how well they contribute to such trustworthiness. Section 4 points to seven areas where multilevel regulation might be modiﬁed or supplemented to enhance trust, trustworthiness and hence legitimacy, using the EU as an example. The institutions should – facilitate political discourse in civil society; – be simple and transparent; – be sufﬁciently effective and efﬁcient; – socialize to overarching loyalty; – monitor problem solving; – monitor compliance by citizens and authorities; – sanction non-compliance. Sections 5 and 6 brieﬂy discuss two forms of multilevel regulation: democratic hierarchical arrangements, and modes of MLG, in the forms of networks, to elaborate the challenges of trustworthiness that each of these face. Four issues in particular require attention for MLG: the jurisdiction and authority of various issue-speciﬁc regulations must be clariﬁed, both where they overlap and where they leave gaps. Greater transparency is important, partly to avoid collusion and hidden controversial choices. Monitoring mechanisms would reduce the risk that such regulations over time yield bad and ineffective solutions, and would increase their trustworthiness in this regard. To increase their normative legitimacy they may have to be supplemented by, or nested within, institutions that are democratically accountable. 1.1. Multilevel Governance “Multilevel Governance” is a term often used to describe a plurality of decision making modes, frequently referring to the EU. “Multilevel” may refer to the “vertical” dispersal of political authority from the state upward to a supranational level and/or downward to sub-national/regional levels. Bodies at geographically

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higher levels may regulate activities at lower levels,3 vice versa,4 and in complex interplay.5 “Multilevel” may also refer to “horizontal” dispersal of authority where non-state actors are brought into the process.6 “Governance” likewise has multiple uses.7 One usage is quite broad, including, ﬁrst, when organisations govern or regulate issue areas mainly based on hierarchical control by the state in the shadow of coercion – “government” – but also, secondly, on the basis of co-operation, mutual acceptance or consent without ultimate resort to force. So government is but a special case of governance. Consensus, rather than coercion, is taken to be characteristic of “non-governmental” forms of governance. Such alternatives to a hierarchy of legal norms with clear rules of supremacy “may or may not derive from legal and formally prescribed responsibilities and … do not necessarily rely on police powers to overcome deﬁance and attain compliance.”8 Such modes of governance have several alleged beneﬁts, including efﬁciency and respect for sovereignty and autonomy. These vertical and horizontal forms of governance raise different normative challenges about such issues as democratic representation and accountability. Some have argued that legitimate modes of governance must be democratically accountable. Symptomatically: “In our Western view, only democratic systems, advocating the values of liberty, equality and community, deserve the loyalty of the citizens. Hence, the notions legitimacy and democratic legitimacy must be considered as interchangeable …”9

The present contribution questions this presumption. Should modes of multilevel regulation be visibly and trustworthily subject to democratic control and human rights constraints, and if so how? This requires an answer to the more fundamental question of how to assess standards of legitimacy that should be brought to

3 4 5 6 7

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Discussed in this volume e.g. by Bradley and Bulterman. Cf. De Meester in this volume. Cf. Ott and Husabø, both in this volume. Cf. Uerpmann in this volume. Political uses of the term include Commission on Global Governance, Our Global Neighbourhood, Oxford: Oxford University Press, 1995; and European Commission, European Governance: A White Paper, Brussels, 2001. J.N. Rosenau, “Governance, Order, and Change in World Politics”, in: J.N. Rosenau and E.-O. Czempiel, (eds), Governance Without Government: Order and Change in World Politics, Cambridge: Cambridge University Press, 1992, p. 4. K. Lenaerts and M. Desomer, “New Models of Constitution-making in Europe: The Quest for Legitimacy”, CMLRev., 2002, pp. 1217-1253. 379

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bear on multilevel political orders. What are the normative requirements on these institutions as a whole, and how might institutions such as democratic rule make multilevel governance become more normatively legitimate? On the other hand, non-hierarchical modes of governance are not as unproblematic as is sometimes argued. Consent by all present might seem to provide a satisfactory answer to the question of normative legitimacy: the regulations are to be complied with because the parties agree to do so. But these beneﬁts may come at the cost of transparency, circumscribed competencies, and non-accountable uses of authority and other inﬂuence. In the following we explore these worries, arguing that institutions may enhance normative legitimacy in at least seven ways, by both democratic and “non-democratic” means.

2. Legitimacy Deﬁcit of the EU: Concepts and Issues Reﬂective, well informed authors disagree on the diagnosis of an alleged legitimacy deﬁcit in the European Union, as well as how to solve it.10 Some deny that the EU faces a legitimacy deﬁcit. Others diagnose this deﬁcit in one or more of four ways: a lack of social compliance, lack of legality, lack of problem solving ability, or lack of normative justiﬁability. The choice among these four different concepts of legitimacy naturally affects the diagnoses and recommendations. The present reﬂections take as their starting point a normative concept of legitimacy. This is now often expressed in terms of justiﬁability among political equals, for instance by appeals to hypothetical acceptance or hypothetical consent. The legitimacy of a political order such as the EU is thus an issue of whether affected parties would have or could have reason to accept it, under appropriate choice conditions.11

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The following draws on A. Follesdal, “The Legitimacy Deﬁcits of the European Union”, Journal of Political Philosophy, Vol. 14 2006, pp. 441-68. For other surveys cf. J.H.H. Weiler with U. Haltern and F. Mayer, “European Democracy and its Critique: Five Uneasy Pieces”, EUI Working Paper RSC Vol. 11 1995, and Harvard Jean Monnet Working Paper, Vol. 1 1995; A. Follesdal and S. Hix, “Why There is a Democratic Deﬁcit in the EU: A Response to Majone and Moravcsik”, Journal of Common Market Studies, Vol. 44 2006, pp. 533-62. Cf. J. Rawls (see infra n. 15); S. Choudhry, “Citizenship and Federations: Some Preliminary Reﬂections”, in: K. Nicolaidis and R. Howse (eds), The Federal Vision: Legitimacy and Levels of Governance in the US and the EU, Oxford: Oxford University Press, 2001, pp. 377-402.

Epilogue: Toward more Legitimate Multilevel Regulation

This question of legitimacy arises for those who are under an obligation to obey and whose co-operation is required for workable institutions and practices. In intergovernmental arrangements the immediate concern will be mechanisms of legitimation that can confer such legitimacy in the eyes of various governments and – when appropriate – the populations. In multilevel forms of regulation the willing compliance by citizens takes on increased urgency, especially insofar as the rules enjoy direct regulatory power over them. EU citizens must thus daily comply with legislation that originates from the EU. The normative legitimacy of the EU in the eyes of citizens is therefore a salient concern, not least because citizens and their representatives are sometimes asked to ratify new agreements. From this vantage point of normative legitimacy the three other concepts of legitimacy are all relevant, related, and often required. Legal legitimacy in the form of constitutionalism and the rule of law is often regarded as a necessary condition for a justiﬁable political order. For the inter-governmentalist, it would even appear that the sole form of legitimacy the EU can enjoy, and needs, would stem from the legal agreements among its Member States. On its own, general compliance is insufﬁcient for normative legitimacy: people may comply with unjust regulations solely out of fear of sanctions, lack of alternatives or unreﬂective habit. Yet compliance often requires a widespread belief that the institutions and regulations are normatively legitimate. Therefore, perceived normative legitimacy may also bolster the problem-solving capacity of governments, since such beliefs may increase general compliance. And vice versa: normatively legitimate institutions and regulations must often be seen to solve the problems they were created to solve. 2.1. Mechanisms of Legitimation Scholars and politicians of good faith often disagree about prescribed medications for legitimacy deﬁcits in the EU and elsewhere. Ironically, even democratic accountability mechanisms of legitimation are hotly contested since they are sometimes not regarded as part of the solution, but rather as part of the problem. Some insist on more “input” legitimacy, understood as democratic electoral accountability. They may want to strengthen the European Parliament, or want a stronger role for national parliaments.12 One reason may of course be that citizens of the Member States are accustomed to democratic accountability

12

K. Neunreither, “The Democratic Deﬁcit of the European Union: Towards Closer Cooperation between the European Parliament and the National Parliaments”, Government and Opposition, Vol. 29 1994, pp. 299-314. But G. Falkner and M. Nentwich, European Union: Democratic Perspectives After 1996, Vienna: 381

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mechanisms, and assume that similar mechanisms must be in place if the EU is also to be legitimate. While some reasons in defence of this view may be misguided, others seem sound. Arguments below will defend democratic arrangements insofar as they help ensure that the authorities remain sufﬁciently responsive to the citizens’ best interests. Some authors are more sceptical of democratic accountability, since such “input” legitimation mechanisms may hamper the EU’s “output” legitimacy, i.e. its ability to identify and implement solutions to otherwise unattainable goals. Explicitly non-accountable EU regulatory agencies may bolster the legitimacy and credibility of Member States, which can use such mechanisms to more credibly commit to common regulations.13 Examples include the single market, harmonisation of product standards and monetary policy. These are more credible because governments are isolated from domestic “majoritarian” governments, which might be tempted to cheat or free ride, partly due to suspicion of others’ noncompliance.14 Democratic accountability would reduce such credibility and threaten output legitimacy. Majone thus warns that some decisions should be insulated from majoritarian political bodies for reasons of credibility. I agree, and submit that there are similar good reasons to protect human rights by nonaccountable courts, namely to bolster the credibility of governments in the eyes of the citizenry. Yet such arguments have their limitations. Against Majone’s wholesale dismissal of democratic mechanisms in the EU, we may note that such accountability might still be suited to many areas of multilevel regulation. In particular, as section 3 argues, citizens need evidence that EU institutions reliably identify, pursue and secure the requisite output. This is one “output”oriented reason in favour of democratic mechanisms of legitimation.

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Service-Fachverlag, 1995, warn against letting national parliaments control votes of ministers in the Council of Ministers. G. Majone, “State, Market and Regulatory Competition: Lessons for the Integrating World Economy”, in: A. Moravcsik, (ed.), Centralization or Fragmentation? Europe Facing the Challenges of Deepening, Diversity, and Democracy, New York: Council on Foreign Relations, 1998, pp. 94-123. A. Moravcsik, “In Defence of the ‘Democratic Deﬁcit’: Reassessing Legitimacy in the European Union”, Journal of Common Market Studies, Vol. 40 2002, pp. 603-24; G. Majone, “Europe’s ‘Democratic Deﬁcit’: The Question of Standards”, European Law Journal, Vol. 4 1998, pp. 5-28; C. Van der Eijk and M. Franklin (eds), Choosing Europe? The European Electorate and National Politics in the Face of Union, Ann Arbor: University of Michigan Press, 1996. F.W. Scharpf, Governing in Europe: Effective and Democratic? Oxford: Oxford University Press, 1999.

Epilogue: Toward more Legitimate Multilevel Regulation

3. Legitimacy and the Need for Assurance How can multilevel governance bodies ensure that citizens have a moral duty – a political obligation – to abide by their multilevel regulations, standards and principles? Efforts to ensure and enhance such normative legitimacy may be assessed by whether they increase trustworthiness: whether they give citizens reasons to believe that the regulatory institutions will continue to remain responsive to the best interests of citizens, and that others are generally complying with these regulations. These conditions, I submit, are crucial to sustaining a political order over time. Citizens must trust their fellow citizens and authorities to comply with legitimate decisions and regulations even when such are counter to their individual interests. We should therefore welcome devices that bolster such assurance among citizens and toward their authorities. Institutions can build trustworthiness in several ways. In particular, several mechanisms of accountability can give citizens reasons to trust that their fellow citizens and authorities will comply in the future. Thus many will hold that citizens have better reason to trust a democratically accountable government and comply with its regulations. But other accountability mechanisms than democratic rule may also give citizens reason to trust their authorities and fellow citizens. Why is this? The need for trust and trustworthiness arises under circumstances of complex mutual dependence. Co-operation from each participant depends on their conscious or habitual expectation of the co-operation of others. Such mutual assurance is central to the long-term stability of any political order. A multilevel political order faces added challenges of trust, among authorities and citizens of different member units. One challenge is that such regulations require citizens and authorities to act in ways that put their own interests at risk for the sake of common beneﬁts, which may often mainly accrue to non-citizens. They must then trust others to do likewise in turn. Such assurance has become more important with increased global and regional interdependence. Consider, for instance, the gradual shift within the EU from unanimity to Qualiﬁed Majority Voting (hereafter, QMV), wrought by a shared sense that too many veto points had proved collectively irrational. Under QMV, governments can no longer protect their citizens against disadvantageous arrangements. Instead, citizens and governments must trust that a qualiﬁed majority will not abuse its power. Likewise, the rule of “Mutual Recognition of Member States’ regulations increases the need for trust and trustworthiness. Authorities and citizens must have reason to believe that the ofﬁcials in each state establish and maintain acceptable standards, and that others allow free movement of products across borders. In these cases, each state may prefer to be subject to QMV and to respect the rule of Mutual Recognition, but only if it can be conﬁdent that others do 383

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likewise. Such mistrust is sometimes visible, as when it comes to implementing EU legislation. What sort of assurance is needed to avoid mistrust and maintain such co-operation, and how can institutions provide it? We can get a helpful sense of the various forms of trustworthiness by considering game theoretical accounts of “assurance games” among “contingent compliers”. Contingent compliers are prepared to comply with common, fair rules as long as they believe that others do so as well. They may be motivated by what John Rawls called a Duty of Justice: to “comply with fair practices that exist and apply to them when they believe that the relevant others likewise do their part.”15 For contingent compliers the standard answer to when one has political obligations has two distinct conditions: 1) The commands, rulers and regime must be normatively legitimate; and 2) each person must have reason to trust in the future compliance of other citizens and authorities with these commands and regimes. I submit that many concepts of legitimacy – normative, legal, social – and various institutional arrangements of legitimation and accountability can enhance political trust and trustworthiness among people who are “contingent compliers” in this sense. In particular, institutions can provide several forms of important assurance to contingent compliers.

4. Contributions of Institutions The assurance problems among contingent compliers have already been addressed by Jean-Jacques Rousseau and James Madison.16 Recent work on the theory of games and research on social capital shed further light on the contributions of institutions. They can promote trust and trustworthiness by shifting the trusted’s incentives, or by reducing the costs of failed trust.17

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J. Rawls, A Theory of Justice, Cambridge, Mass.: Harvard University Press, 1971, p. 336; cf. also T.M. Scanlon, What We Owe to Each Other, Cambridge, Mass.: Harvard University Press, 1998, p. 339. J.-J. Rousseau, On the Social Contract, New York: St. Martin’s Press, 1978; J. Madison, “Vices of the Political System of the United States”, in: J. Madison, The Papers of James Madison, Chicago: Chicago University Press, 1787, pp. 348-57. I here modify Margaret Levi’s model of contingent consent – cf. M. Levi, Consent, Dissent and Patriotism, New York: Cambridge University Press, 1998; V. Braithwaite and M. Levi (eds), Trust and Governance, New York: Russell Sage, 1998. See also R.E. Goodin, 1992.

Epilogue: Toward more Legitimate Multilevel Regulation

Institutions can provide assurance of at least seven relevant kinds that address the two conditions mentioned above. Consider the ﬁrst condition – a perception that the government pursues normatively legitimate policies. 1. Institutions may sustain opportunity spaces for the development of a public political theory appropriate for that multilevel system of governance. Civil society and debates among political parties can foster, discuss and disseminate certain objectives and normative standards of the regulatory bodies, such as democracy, economic growth, subsidiarity, solidarity, and human rights. 2. Institutions must be simple and transparent enough to allow assessment of whether they secure these objectives and standards reasonably well. 3. The institutions must be seen to be sufﬁciently effective and efﬁcient by the normative standards of the appropriate political theory mentioned in 1 above. Institutions may also help satisfy the second condition, when they provide public assurance of general compliance. 4. Institutions may socialize individuals to be contingent compliers. This may happen intentionally in educational institutions, but also as a welcome effect of political party interaction as they seek somewhat consistent and responsive policy platforms. 5. Institutions can include mechanisms to monitor the effectiveness of a piece of regulation, to help determine whether it solves the problems as effectively as the authorities claim. 6. Institutions can monitor, or enable independent agencies to monitor whether citizens and authorities comply with the laws and regulations. 7. Institutions can sanction non-compliers, to decrease the likelihood of defection and thereby increase the likelihood that others will choose to comply.

5. Legitimacy, Assurance and Democratic Accountability Let us now consider how representative democracy can help provide these forms of assurance. In a democracy, citizens hold rulers accountable by selecting among competing candidate parties on the basis of informed discussion of their relative merits and the objectives to be pursued. Rulers must offer an account to

385

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citizens, and face the consequence of removal from ofﬁce. A modest deﬁnition of democratic rule might include:18 1. institutionally established procedures that regulate 2. competition for control over political authority, 3. on the basis of deliberation, 4. where nearly all adult citizens are permitted to participate in 5. an electoral mechanism where their expressed preferences over alternative candidates determine the outcome, 6. in such ways that the government is responsive to the majority, or to as many as possible. There are good reasons to support democratic arrangements of this kind. A central claim is that, compared to the alternatives, these arrangements are more reliably responsive to the best interests of the citizenry.19 While ﬂawed and imperfect, democratic arrangements are arguably often better than the alternatives in this regard.20 However, the seven points above suggests that these beneﬁts can be expected mainly under certain conditions. Only then will democratic accountability contribute to several of the seven forms of assurance needed among contingent compliers. One upshot is that competitive elections and free media scrutiny are crucial.21 One important factor in promoting several forms of assurance is the existence of opposition parties. With regard to opinion formation about the normative

18

19

20

21

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A. Follesdal and S. Hix, “Why there is a Democratic Deﬁcit in the EU: A Response to Majone and Moravcsik”, Journal of Common Market Studies, Vol. 44 2006, pp. 533-62. H. Pitkin, The Concept of Representation, Berkeley: University of California Press, 1967; I. Shapiro, Democracy’s Place, Ithaca: Cornell University Press, 1996; M. Levi, Consent, Dissent and Patriotism, New York: Cambridge University Press, 1998. A. Przeworski, et al., (eds), Democracy, Accountability, Representation, Cambridge: Cambridge University Press, 1999; I. Shapiro, “The State of Democratic Theory”, in: I. Katznelson and H. Milner (eds), Political Science: The State of the Discipline, Washington: APSA Press, 2001. G. Bingham Powell, Elections As Instruments of Democracy: Majoritarian and Proportional Visions, New Haven: Yale University Press, 2000; I. Shapiro (see supra n. 20).

Epilogue: Toward more Legitimate Multilevel Regulation

political theory that should guide assessment of the EU institutions (Number 1), this is part of what competing party ideologies offer. As to the requirement of transparent institutions (Number 2): to provide assurance, the decision structures must be sufﬁciently transparent, and it must be possible to place responsibility for policy decisions with sufﬁcient clarity.22 Alas, within the European Union – and even more so for international regulation generally – the plethora of decision making authorities and procedures makes for too much opacity. Party competition prompts legislatures to consider citizens’ future preferences and the risk of being turned out of ofﬁce encourages governments to account for past deeds and choices made. This mechanism makes the institutions reasonably effective (Number 3). Contestation among parties, a critical opposition, and media scrutiny are crucial to such monitoring. Another beneﬁt of opposition parties is that they help voters understand how they can affect policies. Only when there are visible, viable alternatives can people discern the impact of their votes and understand how institutions work. Party contestation is also important for socialization, especially in multilevel political orders such as federations (Number 4). Federation-wide parties foster political debate and the formation of public opinion about the best means and objectives of policies, and seek to accommodate the interests of citizens across the sub-units. These debates allow voters to form their preferences on complex policy issues on the basis of alternatives that claim to be committed to the interests of others in the union in overarching loyalty.23 The ﬁfth form of assurance concerns whether particular policies and authorities are good ways to solve the problems, as claimed. Competition among parties fosters rival policy ideas and candidates for political ofﬁce. This competition helps voters realize which choices may be made, and gives them alternatives. Assurance among citizens about the actual impact of policies requires that the information ﬂow should not be controlled by the government in power. Opposition parties, critical media and independent research help reduce the opportunities for deception about underperformance, and may alleviate the information asymmetry between the government and voters. Similar arguments support credible monitoring of authorities’ compliance, and by citizens generally (Number 6). Opposition parties vying for votes can

22

23

B. Manin, A. Przeworski, and S.C. Stokes, “Introduction”, in A. Przeworski, et al., (eds) (see supra n. 20), pp. 1-26. J.J. Linz, “Democracy, Multinationalism and Federalism”, in: W. Busch and A. Merkel (eds), Demokratie in Ost und West [Democracy in East and West], Frankfurt am Main: Suhrkamp, 1999, pp. 382-401. 387

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be expected to watch for signs of bad behaviour by government, and other indications that policies are not working well. Finally, institutions may provide credible sanctions against non-compliance (Number 7). Opposition parties and free media allow citizens to provide credible “sanctions” against a government, since it will lose ofﬁce if it fails to convince citizens of its past performance and promises. I conclude that credible responsiveness by governors to the real interests of citizens by means of democratic accountability may help provide assurance of several kinds. The EU and some other multilevel systems of regulation lack the conditions that would make democratic accountability bolster normative legitimacy.24 There is little room for a rival set of leadership candidates and a rival policy agenda, and absent meaningful electoral competition at the European level, the Commission and the governments have few incentives to change these policies. The upshot is that arrangements, even if formally democratically indirectly accountable, cannot be expected to help resolve the assurance problems facing EU citizens. Long term pessimism about European level democracy is nevertheless unwarranted. There are signs of more party organisation and competition in European Parliament, and more policy contestation within the Council of Ministers. There are therefore openings for contestation about the EU’s policy agenda, and for critical scrutiny of performance. In turn, I submit that the requisite public debates and forums are likely to develop if political contestation increases. We may draw at least two conclusions for the prospects of legitimacy of multilevel regulation in general. First, by extension, we may seek to implement more mechanisms of democratic accountability of multilevel regulation, even thought this will not do enough to enhance trustworthiness and hence normative legitimacy in the absence of political contestation and media scrutiny. Secondly, these arguments do not preclude non-democratic arrangements. Responsiveness by an accountable legislature to citizens’ expressed preferences is one feature that makes legislatures valuable. But there may be other ways to protect and further the best interests of citizens, such as “non-democratic” constraints and checks on parliament and government of various kinds. So in principle, multilevel regulation and various forms of non-democratic regulation may bolster the requisite forms of assurance. In the concluding section we turn to consider some of the central challenges to make multilevel regulation normatively legitimate in this sense of engendering trust among contingent compliers.

24

388

A. Follesdal and S. Hix (see supra n. 18).

Epilogue: Toward more Legitimate Multilevel Regulation

6. Legitimacy, Assurance and Multilevel Regulation Recall that the overriding concern is to ensure that important decisions are in accordance with justiﬁable normative standards, and that they are generally complied with – and that these features are publicly conﬁrmed. So in principle, even non-democratic arrangements might be normatively legitimate. Be that as it may, multilevel forms of governance face several challenges with regard to the seven needs for assurance. To help ﬁx ideas, consider a recent sophisticated argument in defence of networks: that they might provide both effective and legitimate multilevel regulation. Anne Marie Slaughter has defended the value of certain global or European government networks.25 She envisions, but does not aim fully to defend, networks such as that of courts that protect human rights. She argues that such international networks can solve certain dilemmas of globalisation, in particular the collective problems that require trans-border co-operation and even coercive sanctions. At the same time she suggests that such coordinated action by a network of government ofﬁcials across states avoid the risks wrought by truly global government. Some have criticized Slaughter for claiming that such networks are more effective and more legitimate than they really are: “A New World Order’s innovative uses of vertical government networks mostly – though perhaps not always – involve endowing democratically unaccountable supranational entities with the coercive powers of democratically unaccountable national institutions so as to allow such powers to be used against the democratically accountable institutions of the state.”26

What are we to make of such claims and criticisms? Let us assume for the sake of argument that such networks and other modes of multilevel governance are indeed sometimes effective, by some appropriate standard. What can we say on the basis of the account presented above of normative legitimacy related to assurance among contingent compliers? 1. With regard to the need to discuss and maintain a public political theory about such decisions. Are there arenas of the requisite kind open to contributions from all affected parties? One obvious risk of multilevel regulation, e.g. as decided

25

26

A.-M. Slaughter, A New World Order, Princeton: Princeton University Press, 2004. K. Anderson, “Squaring the Circle? Reconciling Sovereignty and Global Governance through Global Government Networks – Review of Slaughter 2004”, Harvard Law Review, 2005, p. 1282. 389

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by networks, is clearly that they often operate without transparency, so that only the participants know what is at stake. Some veto players are included, while other affected parties are left without either insight or voice on any arena that could entertain informed discussions of standards of legitimacy for such activities. In response, defenders may plausibly hold that international networks, at least of courts, may contribute precisely to domestic public debates about the normative standards appropriate for the multilevel political order, e.g. as stated in various (quasi-) constitutional agreements. 2. With regard to the simplicity and transparency of institutions, this is a challenge to (quasi-) federal arrangements in general, as well as to multilevel regulation by networks of private and public actors. It is often difﬁcult to determine who bears ultimate responsibility for a particular policy decision when more than one level is involved in making and implementing that decision, and when each level of authority can pass the blame to others. Given such a complex structure, no formal system of “multilevel diplomacy” may be capable of satisfying the democratic requisite of “accountability for acts in the public realm” and of bringing the necessary sanctions to bear on those who operate in the interstices of the various levels. 3. To determine whether the institutions are sufﬁciently effective and efﬁcient, citizens must be assured that the institutions can reliably be expected to perform better than alternative arrangements. As an example consider the beneﬁts of independent agencies. Some proposed accounts seem plausible for some cases, thus we saw above how Majone provides good reasons why certain EU policies such as competition policy or food safety regulation should be delegated to independent, non-majoritarian, institutions. This enhances the credibility of governments’ commitments. But these arguments do not apply to policies which have distributive or redistributive effects, or when several alternative decisions may be made which divide the gains differently among parties. It is not clear why these can be expected to yield fair results when isolated from contestation, democratic or otherwise, by responsive and accountable decision makers. Similar concerns might arise with regard to the multilevel regulation of ﬁnancial services where ﬁnancial trade associations are heavily involved; in the banking sector; in the pharmaceutical industry; or in internet regulation.27 Typically, consumers and other concerned citizens are effectively excluded from participation and even insight. At best, democratically accountable actors are included at such a late stage that the issues have been framed, to the possible

27

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Bradly, De Meester, and Uerpmann, this volume, respectively.

Epilogue: Toward more Legitimate Multilevel Regulation

detriment of the interests of those not around the table.28 Consider, for instance, the International Conference on Harmonization of Technical Requirements for the Registration of Pharmaceuticals for Human use (ICH).29 This is aimed at improving the speed of development and registration of new medicinal products for the beneﬁt of patients – and companies. Their regulations become de facto international standards,30 replace competing national regulations, and are often incorporated in national law without detailed national scrutiny. However, the regulatory power is largely exercised by unelected industry experts with technical expertise but no democratic authority, achieving a consensus with regional authorities. This process occurs without much in the way of transparency and democratic oversight. Patients and other payers do not participate, and are unlikely to have sufﬁcient insight and voice to protest ex post. Considerations of consistency amidst fragmentation are highly relevant here. One concern is that MLG is often issue-speciﬁc, and the competence and weight of the various bodies of regulation are not harmonized against one another. The result is multiple standards that are developed by separate institutions and that turn out to conﬂict in practice – e.g between the accounting standards of the Basel Committee and those of the International Accounting Standards Board; or conﬂicting deﬁnitions of terrorism at the global and regional levels – both of which must be enforced by states.31 One response could be multiple legal orders, existing side by side, covering separate issue areas, where no clear hierarchy is needed. However, this solution does not often work in practice. Strikingly, the same issue areas are sometimes addressed by parallel MLG regimes – such as aspects of international aviation services.32 In principle other mechanisms for securing harmony might avoid obvious conﬂicts, but at the cost of fragmentation and transparency.33 For instance, some argue that there may be a hierarchy of norms for each issue area, but that the hierarchy differs among issue areas.34

28 29 30

31 32 33 34

Cf. Bradley and De Meester, this volume. Dorbeck-Jung, this volume. D. Vogel. “The Globalization of Pharmaceutical Regulation” Governance: An International Journal of Policy and Administration, Vol. 11 1998, pp. 1-22, discussed in Dorbeck-Jung. Cf. De Meester, and Husabø, this volume, respectively. Cf. Kars and Stout, and Ott, this volume. Cf. Ott, this volume. Cf. Lavranos, this volume. 391

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So with regard to the need for transparent, simple and effective institutions, networks and other forms of MLG would seem to fall short on several points: with regard to their reason for existence, their compositions, objectives, mandate, as well as their effectiveness. In particular, there should be institutional mechanisms that ensure that network and other decision structures remain reasonably responsive to the best interests of citizens. Importantly, there must also be arrangements to provide assurance of this. To return to the network of courts: precisely these factors seem open to doubt with regard to the network of national courts within Europe and the European Court of Justice (ECJ). The ECJ seems to have a self-conception that it is the summit of a hierarchy of courts, while national constitutional courts may see themselves as part of a network. The observed centralization of competences toward the EU similarly gives rise to concern that conﬂicts about jurisdiction and supremacy must be addressed in trustworthy ways. Whatever its potential, it seems clear that the multilevel system of courts still falls short, as is also witnessed in the ﬁght against terrorism.35 4. Concerning socialisation, both arenas of coordination and networks may socialize participants through processes of learning and deliberative preference formation. Multilevel parties may also help socialize citizens toward “overarching loyalty” in multilevel forms of governance. It remains to be seen and argued whether such socialisation takes place, and that it will reliably yield normatively desirable results, rather than groupthink or “in-group” solidarity at the expense of those not included yet affected. For instance, the power of ideas may be signiﬁcant, but may still merit scrutiny. Consider, for instance, how deﬁnitions of “terrorism” affect regulatory choices far beyond the original setting, to include several international and regional bodies.36 Networks may contribute to socialization in important ways: members’ attitudes, beliefs and practices may well be shaped by such interaction. However, the networks run perennial risk of being used and abused. At best, their decisions may reﬂect the bargaining power of those around the table, and at worst the networks may be arenas for collusion for the members’ gains, rather than the beneﬁts of citizens at large. Added transparency and political or legal scrutiny would be one way to reduce such mistrust. 5. Assurance of effective and efﬁcient decisions. In several areas even “soft law” in the form of non-binding standards has great inﬂuence, simply because

35 36

392

Cf. Brown, Feinäugle, and Eckes, this volume. Husabø, and Eckes, in this volume.

Epilogue: Toward more Legitimate Multilevel Regulation

some dominant actors adopt them.37 They are thus “effective” in one sense. But a central challenge to multilevel regulation remains: to provide assurance that the decisions are indeed effective and reasonably efﬁcient with regard to legitimate objectives – as compared to other arrangements with more accountable ofﬁcials. In democratic arrangements media and opposition parties monitor and challenge such claims. Other institutional bodies may have to ﬁll this monitoring function for the multilevel networks, public-private partnerships etc. 6. Monitoring of compliance. In democratic arrangements media, police and opposition parties monitor whether other citizens and the government comply with the rules. Multilevel regulatory bodies need functionally equivalent institutions to remain trustworthy. Courts may contribute to this function, under certain conditions. For instance, the regulations must be sufﬁciently clear, as must principles for handling conﬂicts among them. Thus international human rights may be secured by supranational courts and committees, such as the European Court of Human Rights. Currently at least two limitations onf such judicial control can be discerned. First, there are competing regulations that stem from alternate legal sources – e.g. from the UN treaty bodies, the UN Security Council, international economic regulation and the EU. Their relative weight seems unclear.38 Secondly, the multiple sources of regulation may create new needs for legal protection as yet unmet, where courts will simply be insufﬁcient.39 7. Sanctions against violations of trust. A democratically accountable government may lose ofﬁce if citizens ﬁnd that it has abused their trust and fails to be sufﬁciently responsive. Public knowledge of this helps assure citizens that policy makers to some extent seek to promote the best interests of citizens. Similar assurance is harder to come by for some of the multilevel regulations insofar as neither independent agencies nor private-public partnerships are accountable. Yet the risks of abuse are obvious, and if unchecked are likely to erode trust among the citizenry. Another central issue that threatens to corrode compliance is suspicion of “variable implementation”, that only some parties are living up to their obligations. One case where this concern is acute is the EU, where implementation is largely left to Member States. This is also often the only stage at which real democratic oversight is possible, and this creates the risk that popular opposition 37

38 39

E.g. for ﬁnancial regulation see Bradley; for banking regulations see De Meester; both this volume Brown, Bulterman, and Feinäugle, all in this volume. Brown, this volume. 393

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to the regulation takes the form of non-implementation. Such suspicion is one reason to favour centralization of enforcement.40 To sum up: multilevel regulation may be created by single-issue networks with participants from many territorial levels, possibly with non-accountable parties, and without public contestation. Many exemplars of such multilevel regulation stand in dire need of clariﬁcation of their jurisdiction and authority – both when they overlap and where they leave gaps. Such non-democratic and opaque modes of decision making may easily paper over controversies and hide political choices. In the absence of monitoring mechanisms there is also a serious risk that over time they yield even worse, and even less “effective” solutions that democratic mechanisms. Moreover, even if they as a matter of fact do secure fair and effective outcomes, the absence of oversight renders them less trustworthy. To increase their normative legitimacy we should require more transparency, and require that they be supplemented by, or nested within, institutional arrangements that can provide public assurance that they are jointly sufﬁciently responsive to the best interests of citizens. 6.1. Two Constructive Suggestions One upshot of this brief survey is that for multilevel regulation to be normatively legitimate there must be mechanisms that monitor, sanction and possibly hold members to account; and arrangements that secure consideration of the interests of the less powerful. One fairly obvious, but also insufﬁcient element is to ensure that some of the participants in the multilevel regulations are democratically accountable, and that their conduct is sufﬁciently transparent to allow meaningful ex post scrutiny. The challenges of “capture”, collusion, opacity and differential bargaining power remain, but it does seem necessary to have at least some mechanism of accountability in place for some of the participants In conclusion, consider two additional arrangements that illustrate how some forms of assurance may be achieved, at least in the European Union but possibly elsewhere as well. Clearer allocation and use of competences. One of the most vexing sources of mistrust in multilevel territorial regulation concerns the formal (usually constitutional) allocation and use of competencies across levels. One way to avoid such contestation is by a very clear delineation of authority. But that still leaves conﬂicts about the principles for such allocation. Clarity about such principles may help focus and resolve these conﬂicts. Within the EU, the

40

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Bradley, this volume.

Epilogue: Toward more Legitimate Multilevel Regulation

principle of subsidiarity purports to resolve some of these issues, by placing the burden of argument with those who seek to centralize authority.41 The underlying idea seems to be that Member States pool sovereignty in certain issue areas to regain effective governing capacity. Central authorities may thus only act when they can achieve certain objectives better than the sub-units acting alone. Such a principle of subsidiarity may indeed seem to reﬂect similar normative ideals as democratic rule: that policies must be controlled by those affected, to ensure that institutions and laws reﬂect the interests of all. Only when these considerations counsel joint action is central authority warranted. The Reform Treaty for the EU42 would include a new procedure for applying a Principle of Subsidiarity that merits mention here.43 It would grant national parliaments access to legislative proposals, and let them appeal legislative proposals and suggested Treaty reforms for suspected violations of subsidiarity. This mechanism could promote assurance of several valuable kinds. It would facilitate public discussion and deliberation about the ends and alternative effective means of the European Union, thus providing assurance of types 1, 2 and 3. It does so in at least two ways: it ﬁrst of all promotes openness and arguments among Member States and the Union institutions about comparative effectiveness. Secondly, these discussions prompt public reﬂection within the Member States themselves about the ends and means of common action. Such discussions may be crucial to citizens’ long-term support for any political order, and for authorities’ ability to govern. Another form of assurance that the subsidiarity mechanism would provide concerns socialization. Discussions within political parties would occur at executive and legislative arenas at the national and European level about the common objectives of the Union and requisite measures to obtain them. This may foster the requisite “overarching loyalty” among all Europeans, to both accommodate concerns for citizens of one’s own member state, and concerns for other Union citizens. These debates would be aided by the increased transparency of the legislative process laid out by the Reform Treaty.

41

42

43

A. Follesdal, “Subsidiarity”, Journal of Political Philosophy, Vol. 6 1998, pp. 231-59. European Council. 2007. “Presidency Conclusions, Brussels European Council 21/22 June 2007, 11177/07”, at <www.consilium.europa.eu/ueDocs/cms_Data/ docs/pressData/en/ec/94932.pdf>. Protocol on Subsidiarity, Cf. I. Cooper “The Watchdogs of Subsidiarity: National Parliaments and the Logic of Arguing in the EU”, Journal of Common Market Studies, Vol. 44 2006, pp. 281-304. 395

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The Reform Treaty would also reduce the opacity surrounding EU decisions: it would require public, substantiated arguments for comparative effectiveness of central action, where opposition parties may be expected to scrutinize the claims of comparative efﬁciency. A central problem remains, namely that these objectives and their relative rank are contested. Member States presently disagree about which common ends are to be pursued by the EU, about the shared standards, and about the likely results of separate and common action. The Reform Treaty does not detail the objectives of this political project to the requisite degree. Within a more democratic EU this might be as it should, since these politically contentious issues might best be left to such democratic processes as there are. Human Rights constraints. The Reform Treaty will also underscore human rights constraints on the EU, including a statement that the EU should sign the European Convention on Human Rights.44 These human rights mechanisms are not obviously directly democratic, and thus illustrate “non-democratic” mechanisms of legitimation. The increased attention to human rights might enhance assurance of several kinds in the EU, with similar beneﬁts and weaknesses as other forms of multilevel regulation. The Reform Treaty will not include the Charter itself. A separate declaration will make clear that the Charter will have legally binding force, but only over EU institutions. While hitherto not legally binding, the Charter provided a much-needed clariﬁcation of the legal human rights obligations of Member States. The Reform Treaty also strengthens the accountability aspect of a mechanism intended to foster human rights compliance within Member States. This procedure addresses suspicions that a member state engages in systematic violations of the Union’s values (Art I-59). The procedure already includes fact-ﬁnding, but the new version would include dialogue, to allow the target government to give an account of its policies to the EU. This component was notoriously absent in the “Reactions against Austria”. The increased visibility of human rights in the Reform Treaty would bolster several forms of legal accountability that secure important forms of assurance. Indeed, the strengthening of human rights seems to have occurred in response to The German Constitutional Court. That Court found earlier treaties compatible with the constitution, but it insisted on its own right to protect fundamental rights, and its right to review whether European institutions acted within their limits. Similarly, the Danish Supreme Court also insisted that Danish courts

44

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Art I-9. Cf. Brown, this volume, and Bulterman, this volume, on current human rights protection in the EU.

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retain the authority to determine the constitutionality and hence applicability in Denmark of EC laws, regardless of the ﬁndings by the European Court of Justice. The human rights provisions make union authorities and regulations more clearly accountable to European courts, which should monitor and ensure respect for individuals’ rights. Such human rights constraints, duly enforced, provide assurance that majorities in the Union bodies will not ignore the fundamental interests of those in the minority; and that the Union’s administration will respect all citizens’ rights. This serves to bolster assurance in several ways. Human rights protections reduce the likelihood of failed trust, by altering the trusted’s incentives to make it in her interest to do what the truster expects. The protections also reduce the costs of failed trust by limiting the scope of valid majority rule. The simpliﬁcation and visibility of human rights bolsters assurance regarding condition 2, and the courts provide assurance with regard to conditions 5, 6 and 7. They may also serve a socializing effect, as some have claimed with regard to the political élites.45 At least two weaknesses of these human rights protections merit mention. They may be common to many other human rights constraints on multilevel regulations. First, it remains to be seen to what extent the European Court of Justice would grant priority to human rights obligations when such requirements conﬂict with other important objectives of the Union. Will such constraints be sufﬁcient to check executive power within MLG in general?46 Secondly, it remains to be seen how the “network” of national courts, the various European courts and UN bodies will handle the manifold human rights regulations, when they conﬂict among themselves and when they challenge other important policies such as ﬁghts against terrorism.47

7. Conclusion The present reﬂections have explored how multilevel regulation may be made more normatively legitimate. I have brought to bear an account of legitimacy that

45

46 47

T. Risse, et al., (eds), The Power of Human Rights: International Norms and Domestic Change, Cambridge: Cambridge University Press, 1999; A. Steen “Accessioning Liberal Compliance? Baltic Elites and Ethnic Politics under New International Conditions”, International Journal on Minority and Group Rights, 2006, pp. 187207. Cf. Brown, this volume. Cf. Ott, Husabø, Brown, Feinäugle, Eckes, and Bulterman, all in this volume. 397

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focuses on citizens political obligations as “contingent compliers” – willing to do their share in just schemes, if they are assured that others act likewise. First, the commands, rulers and regime must be normatively legitimate, and secondly, citizens must have reason to trust in the future compliance of other citizens and authorities with such commands and regimes. To merit obedience, institutions must address at least seven assurance problems faced by such “conditional compliers” under complex structures of interdependence. Democratic arrangements provide several mechanisms that foster such trustworthiness to some degree. I suggest that this perspective helps identify some of the areas where modes of multilevel regulation often seem to fall short. The jurisdiction and authority of various issue-speciﬁc regulations must be clariﬁed, in terms both of where they overlap and what is the status where they leave gaps. Greater transparency will also bring out collusions and hidden controversial choices. Monitoring mechanisms would reduce the risk that such regulations over time yield bad and ineffective solutions, and would increase their trustworthiness in this regard. To increase their normative legitimacy they may have to be supplemented by, or nested within, institutions that are democratically accountable. In conclusion, I suggested two kinds of mechanisms that might enhance the requisite assurance: a principle of subsidiarity – or some other principle – that helps identify the appropriate allocation and use of competences among levels of authority. And arrangements to monitor the human rights compliance of such multilevel regulations may serve to enhance their trustworthiness, that their overall effects are indeed sufﬁciently responsive to the best interests of individuals.

398

About the Contributors

Caroline Bradley is a Professor of Law at the University of Miami in Coral Gables, Florida. She studied law at Jesus College, Cambridge, and taught at the London School of Economics and Political Science before moving to the University of Miami in 1992. She directs the International LLM program at UM Law. For more information about her teaching and research see . Rory Stephen Brown, elected Russell Vick prize-winner and Scholar of Jesus College, Cambridge in 2004, is currently penning his doctoral thesis from a tower overlooking Florence. He is the founding and incumbent Editor-in-Chief of the European Journal of Legal Studies, a Lecturer in European Law at the Scuola di Lorenzo de’ Medici, and a non-practising Barrister of the Inner Temple. He has published in the ﬁelds of Philosophy, European Human Rights Law, International Law, and International Studies. Dedicated to a futile attempt to reduce the incidence of both, his current research concerns terrorism and the use of force. By the time of publication of this book, he will be have taken his campaign to New York City, thanks to the gracious hospitality of Columbia Law School and the generous bursary of the European University Institute. Mielle Bulterman is a senior lecturer at the Europa Institute of Leiden University. On 4 April 2001, she defended her PhD thesis on human rights in the external relations of the European Union. Her publications since then include articles on the position of fundamental rights within the EC legal order, on the implementation of UN ﬁnancial sanctions in European law and in national law, and on the free movement of EU citizens and the position of third country nationals under EC law. Since April 2007 she has been seconded at the European Law Department of the Dutch Ministry of Foreign Affairs. Bart De Meester is research fellow at the Institute for International Law and Centre for Global Governance Studies of the University of Leuven, Belgium. He obtained his law degree (magna cum laude) from this university in 2003. During his law education, he studied as a visiting student at NYU Law School Follesdal, Wessel and Wouters (eds), Multilevel Regulation and the EU, 399–405 ©2008 Koninklijke Brill NV. ISBN 978 90 04 16438 3. Printed in the Netherlands.

Multilevel Regulation and the EU

from August 2002 until December 2002. Since 2003 he is researcher at the University of Leuven. In July 2006, he obtained the degree of Magister Juris (distinction) at the University of Oxford (Brasenose College) as a Rotary Foundation scholar. He is currently preparing his PhD thesis on the interaction between European and international regulation and liberalization of banking services and was awarded a scholarship by the Fund for Scientiﬁc Research Flanders (Aspirant FWO Vlaanderen). In addition, he performs research on WTO law and regularly advises the Flemish government on matters of world trade law. Bärbel Dorbeck-Jung is Associate Professor of Legal Governance at the Faculty of Management and Public Administration, University of Twente. She holds a Masters degree in German law (University of München) and a PhD from the University of Twente. Subject of her PhD thesis was a comparative study of data protection regulation in health care. Before she moved to the Netherlands in 1980 she worked as an advocate and business attorney in Berlin (specialization: international computer law). From 1980 to 1992 she worked as an assistant professor of information law at the University of Twente. In 1992 she joined the Group of Legal Studies at the Faculty of Public Administration (University of Twente) as an associate profession of law and regulation. Since 1992 she has conducted and supervised national and international studies on the evaluation of legislation and alternatives to legislation (self-regulation) in various policy ﬁelds. In 2002/2003 she participated in a European research project on the institutionalization of the assessment/evaluation of legislation. On this subject she held visiting professorships at the departments of public administration of the Universities of Kassel (Germany), Orebro (Sweden) and Edinburgh (UK). In 2006 she held the ﬁrst fellowship at the International Institute of the Sociology of Law in Onati (Spain) and visited the Wissenschaftzentrum für Sozialforschung in Berlin. Her current research activities focus on multi-level legal governance (medical technologies and nanotechnological regulation) and the legitimacy of alternatives to legislation (‘self-regulation’). Christina Eckes works as a lecturer at the University of Surrey. Prior to this she wrote her PhD thesis on European sanctions against private individuals at King’s College London. Besides writing her thesis Christina has been teaching European Union law and German Public law at King’s College London and other universities in the UK. Her research interests are in particular the external relations of the European Union and judicial review of European Union law. In 2002 Christina ﬁnished her law degree in Germany with the First State Examination, followed by a master’s degree in European Community Law at the College of Europe in Bruges, Belgium. She has published several case

400

About the Contributors

commentaries and articles in the ﬁelds of European Union law and European Human Rights law. In summer 2007 Christina worked as a visiting scholar at the University of Uppsala, Sweden. Clemens A. Feinäugle is a Senior Research Fellow at the Max Planck Institute for Comparative Public Law and International Law in Heidelberg, Germany. He worked at the Chair of Public International Law at the University of Augsburg as a Research Assistant before he graduated there in 2003 in Law with a focus on International Law. In 2005 he passed the German Second State Examination in Law. As a Senior Research Fellow at the Max Planck Institute he is responsible for the areas of telecommunication and space law, Sudan and Somalia, and he serves as a team member of the Sudan Project on Sudanese Constitutional Law. Further current assignments include the work on the new edition of the Max Planck Encyclopedia of Public International Law (EPIL), the co-editorship of the GATS volume of the Max Planck Commentaries on World Trade Law and a tutorial on German Public Law held at the University of Heidelberg. One of his research focuses is the legal protection of the individual against UN sanctions. Andreas Follesdal is Professor and Director of Research at the Norwegian Centre for Human Rights at the University of Oslo. PhD 1991 in Philosophy from Harvard University. His research largely concerns political philosophy of Human Rights and of the European Union, on such topics as distributive justice, federalism, minority rights, deliberative democracy, subsidiarity, and European citizenship, in such journals as Journal of Political Philosophy, Law and Philosophy, Journal of European Public Policy, Journal of Peace Research, International Journal on Minority and Group Rights, Metaphilosophy. He has edited books on democracy, the welfare state, consultancy, and on the European constitution. He is Founding Series Editor of Themes in European Governance, Cambridge University Press. He was a Fulbright ‘New Century Scholar’ 2003, and is a repeat Visiting Scholar at the Harvard Center for European Studies. He is a member of the Council on Ethics of the Norwegian Government Pension Fund and Research Coordinator for the Centre for the Study of Mind in Nature. Erling Johannes Husabø is Professor of Law at the University of Bergen (Norway), teaching mainly criminal law and international law. His ﬁrst job was in the legislation department of the Norwegian Ministry of Justice (1986-1988). He took the doctoral degree in 1994 with a thesis on euthanasia and related topics. Since then, his main research ﬁeld has been material criminal law. In 1999, he published a book called The Periphery of Criminal Responsibility (Straffansvarets periferi), dealing especially with the subjects of complicity, attempted crimes and preparatory crimes. At present he is heading a research 401

Multilevel Regulation and the EU

project concerning the internationalisation of criminal law and challenges to the rule of law (Rechtsstaat), and he works with a comparative analysis of the implementation of new terrorism legislation in some North-European countries. He is a member of the Norwegian Biotechnology Advisory Board. Mirjam Kars is assistant professor at the Department of Policy, Organization and Management at the Faculty of Technology, Policy and Management of Delft University of Technology. She is a member of the Netherlands Institute of Government. She graduated in 1995 at the University of Groningen in Policy and Management of International Organizations, with a specialization in European Union policy-making. In 2004, she ﬁnished her PhD dissertation at the Department of Political Science of the University of Nijmegen. Her dissertation focused on the consequences of European co-operation for national telecommunication policies. Her general research interests and expertise lie in the ﬁeld of international relations, international political economy, the European Union, and multi level governance. In her current position, she does research into governance in utility sectors. In particular, she focuses on the interaction between actors on the European dimension (European Union), the national level (national governments), and the domestic level (e.g., companies). Andrea Keessen is post-doc at the Institute for Constitutional and Administrative Law at the Utrecht University and a member of the research school Ius Commune. She graduated with honours in Dutch Law (specializing in European Law) at Utrecht University in 2001. Subsequently she worked as a lawyer at the Amsterdam ofﬁce of Allen & Overy. From September 2003 to June 2007, she was PhD researcher at the Institute for Constitutional and Administrative Law at the Utrecht University. The object of her PhD research is European Administrative Cooperation: Examples from the Field of Regulated Products (to be published). She currently participates in the research project European Environmental Quality Requirements and Emission Ceilings: Towards Effective Implementation. Her general research interest lies in the ﬁeld of European administrative law, more speciﬁcally in European administrative cooperation, and in the implementation of product legislation, water law and environmental law in general. Nikos Lavranos is senior advisor European and International Strategy at the Dutch Competition Authority. Prior to that, he was Assistant Professor EU Law and Senior Researcher International Law, Law Faculty, University of Amsterdam. He was also Case-note Editor for the journal Legal Issues of Economic Integration, Kluwer Law Publishing. Nikos has been awarded a VENI Research grant by the Dutch Research Council for the project Competing jurisdiction between the ECJ and other international courts and tribunals 402

About the Contributors

(2005-2009). Main research and publication interests are EC/EU institutional law, EC/EU external relations, WTO law, competing jurisdictions. Co-editor of the book Interface between EU Law and National Law (Europa Law Publishing, 2007) and author of the book Decisions of International Organizations in the European and Domestic Legal Orders of selected EU Member States (Europa Law Publishing, 2004). Andrea Ott works since 2003 as university lecturer in European Law at Maastricht University, the Netherlands. Previously, she held a position as researcher at the Chair of International and European Law at University of Greifswald, Germany, where she obtained her PhD in 1996 on the integration of GATT/ WTO law into the EC legal order. From 1998 until 2003 she was senior research fellow in European Law and International Economic Law at the T.M.C. Asser Institute in the Hague, the Netherlands, and in 2002/2003 Jean Monnet Fellow at the European University Institute in Florence, Italy. She has wide experience in legal consultancy for Dutch ministries and the European Commission in Central and Eastern Europe and teaches regularly on European institutional law, external relations, enlargement and WTO law in the Netherlands, Central and Eastern Europe and Southeast Asia. Since 1999, she is a visiting guest professor for International Economic Law at the M.A. European Studies of the Chulalongkorn University in Bangkok, Thailand and since 2005 teaches a Jean Monnet Module on external relations at Maastricht University. Dr. Ott has published widely in her ﬁelds of interest and edited together with Kirstyn Inglis from the University of Ghent two books on EU enlargement and contributed on a commentary project on the accession treaties. Helen D. Stout is Professor of Law and Infrastructures at Delft University of Technology and Fellow of the Royal Netherlands Academy of Arts and Sciences. At the University of Amsterdam she ﬁnished her thesis on the meanings of the law, in which she elaborated on the principle of legality in a theoretical-critical sense. Helen Stout has published on legal theory and law-making theory (besides other themes like governmental steering, self regulation, public private partnership, cultural policy). Her recent research has focused on governance of infrastructures within the program of the Next Generation Infrastructures Foundation (<www.nginfra.nl>), of which she leads the subprogram Public Values. She is a member of the editorial board of Bestuurswetenschappen, member of the General Administrative Law Act Objection Commission of the Ministry of Health, Welfare and Sports, member of the General Administrative Law Act Objection Commission of Netherlands Organisation for Scientiﬁc Research and member of the board of directors of Fund for Amateur Art and Performing Arts Foundation.

403

Multilevel Regulation and the EU

Robert Uerpmann-Wittzack is Professor of Public and International Law at the University of Regensburg, Germany. He is a Member of the Research Group on Information Society Law at this University and co-editor of the Archiv des Völkerrechts. Robert Uerpmann-Wittzack studied in Berlin, Tübingen and Aix-en-Provence, where he passed the maîtrise en droit in 1988. In 1993 he obtained the doctoral degree of the Freie Universität Berlin with a dissertation concerning the inﬂuence of the European Convention on Human Rights on German jurisprudence. His publications relate, inter alia, to human rights, to the interrelationship of international, European and national law as well as to constitutional questions of telecommunication and transport. Ramses A. Wessel is Professor of the Law of the European Union and other International Organizations and Co-Director of the Centre for European Studies at the University of Twente, The Netherlands. His additional functions include: Member of the Governmental Advisory Committee on Issues of Public International Law, Editor-in-Chief and founder of the International Organizations Law Review, Editor-in-Chief of the Dutch journal and yearbook on peace and security, Vrede en Veiligheid, and member of the Editorial Board of the Netherlands Yearbook of International Law and the International Spectator. Ramses Wessel graduated in 1989 at the University of Groningen in International Law and International Relations and subsequently worked at the same university (1989-1991) and at the Department of International and European Institutional Law at Utrecht University (1991-2000). He is the author of The European Union’s Foreign and Security Policy: A Legal Institutional Perspective (Kluwer Law International, 1999) and of number of other publications in the ﬁeld of international and European law. His general research interests lie in the ﬁeld of international and European institutional law, with a focus on the law of international organizations, peace and security, European foreign, security and defence policy and EU external relations in general. Jan Wouters is professor of international law and international organizations and director of the Leuven Centre for Global Governance Studies and Institute for International Law, as well as visiting professor at the College of Europe in Bruges and Kyushu University in Japan. He is also president of the United Nations Association Flanders-Belgium and practises law as Of Counsel at Linklaters in Brussels. He studied law and philosophy in Antwerp and Yale University (LL.M. 1990), worked as a visiting researcher at Harvard Law School and defended his PhD at Katholieke Universiteit Leuven. He has held teaching positions at the Universities of Antwerp, Liège and Maastricht and worked previously as référendaire at the European Court of Justice. He is the editor of the International Encyclopedia of Intergovernmental Organizations,

404

About the Contributors

is vice-director of the Revue belge de droit international and participates in the European Network of Excellence Connex. Prof. Wouters has published widely on international, European, company and ﬁnancial law, including a recent comprehensive handbook on public international law as well as a number of edited books, including Conﬂict Prevention. Policy and Legal Aspects (T.M.C. Asser Press, 2004), Legal Instruments in the Fight Against International Terrorism (Martinus Nijhof, 2004) and The United Nations and the European Union. An Ever Stronger Partnership (T.M.C. Asser Press, 2006). Prof. Wouters is married and has 7 children.

405

Index

A Aarhus Convention 21, 323-324, 324 nn. 3, 6, 332, 332 nn. 38-39, 333, 333 nn. 40-42, 334, 334 nn. 45-47, 335, 335 nn. 48, 50, 336-337, 337 nn. 60, 63, 338, 338 n. 64, 340-342, 342 n. 78, 343-344 Aarhus Directive 342-343 Access to Justice 21 n. 47, 220, 228 n. 51, 262, 262 n. 4, 263, 268-269, 286, 294, 299, 324, 324 n. 6, 332-333, 334 n. 47, 335, 338 nn. 65-66, 342 nn. 78-79, 343 nn. 81-83

Air Service Agreement (ASA) 188-189, 194-196, 205

Airport Council International (ACI) 197, 197 n. 25 Acquis communautaire

290, 292

Armed conﬂict 18, 172, 180-181 Association of European Airlines (AEA) 196 Austria 346

189, 191, 191 n. 7, 318,

Accountability 4-5, 11, 24, 33, 40-41, 45, 52, 54 n. 9, 55, 55 n. 15, 56, 56 n. 16, 64, 66, 69-70, 74 n. 11, 88 nn. 78-79, 108, 110-111, 148, 154, 159-160, 213-214, 228, 379, 381-386, 388, 390, 394, 396

B

Accounting Regulatory Committee 125, 138

Bermuda 2 Agreement 194

Basel Convention 325, 325 n. 11 Belgium 106, 116 n. 61, 189, 191, 191 n. 7, 268 n. 34, 342 n. 78, 346, 362

Bulgaria 189 n. 2, 346

Act of state or government doctrine 353 Actio popularis 338, 338 n. 66, 343 Air law

185, 188

186,

C Capital 28, 76, 76 n. 20, 98, 101-102, 107-108, 108 n. 24, 111-113, 113 n. 49, 114, 114 nn.

Follesdal, Wessel and Wouters (eds), Multilevel Regulation and the EU, 407–420 ©2008 Koninklijke Brill NV. ISBN 978 90 04 16438 3. Printed in the Netherlands.

Multilevel Regulation and the EU

51-53, 118, 120, 122 n. 77, 124-125, 131, 131 nn. 111-112, 132 n. 115, 136 n. 132, 141, 197, 384 Charter on Fundamental Rights 303-306 Chicago Convention 187-188 Civil society 2, 24, 153, 161, 163, 166-167, 378, 385 Codex Alimentarius Commission 1, 3, 20, 20 n. 41, 27 Coherence 5, 32, 101-105, 105 n. 10, 106, 113, 141-142, 184 Committee of European Banking Supervisors 76 n. 20, 112 n. 45, 127, 130, 130 n. 107, 141 nn. 153, 155-156, 142 nn. 157-158 Committee of European Securities Regulators 116, 130 n. 105 Committee of Experts on Terrorism (CODEXTER) 175 Common Foreign and Security Policy (CFSP) 40, 261-262, 262 n. 3, 265, 266, 284, 286, 289-294, 296-297, 352 Common position 122, 157, 173 n. 12, 233 n. 11, 261, 265-266, 285-286, 286 n. 119, 287-288, 288 n. 135, 289 n. 140, 291-292, 351 Community courts 258 n. 156, 280, 289 n. 143, 298-299, 324, 330-332, 337-339, 339 n. 69, 342, 344 Community law 19, 99, 120, 191-193, 195, 215, 218, 228, 266, 408

272-275, 279, 281, 283, 285, 295, 297-299, 301-303, 303 n. 1, 306, 316-317, 320-321, 334, 348-350, 356-357, 358 n. 50, 359, 361-362, 362 n. 67, 368, 370-374 Consensus 2, 24, 31, 59-61, 67, 68 n. 50, 70-71, 152-153, 155, 157, 167, 179, 247, 251-252, 304, 379, 391 Constitution 110, 127, 133-134, 181, 184, 336, 346, 359, 362, 362 n. 69, 396 Constitutional court 46, 259, 283 n. 111, 295, 303, 346, 358-361, 366, 392 Constitutionalism 32, 34 n. 93, 381 Convention on the Prevention of Terrorism 175, 178 Council of Europe 2, 31, 170, 175-176, 178, 268 n. 33, 303, 351 Counter-Terrorism Committee (CTC) 172 n. 10, 266 Country Code Top Level Domain (ccTLD) 145-150, 153-154, 156, 158, 158 nn. 68-69, 159-164, 166-167 Court of First Instance (CFI) 19, 224-225, 227, 227 n. 47, 228-229, 231 n. 1, 232, 232 n. 2, 233, 233 n. 15, 234 n. 25, 235, 235 n. 34, 236, 238-240, 243-244, 254, 257-259, 262, 262 n. 5, 263, 263 nn. 6-7, 12, 267 n. 29, 268, 268 nn. 32, 36-37, 269, 269 nn. 39, 41-42, 270-271, 271 nn. 55-56, 272, 272 nn. 57, 59, 275, 275 n. 77, 276, 276 nn. 79-80, 278-279, 279 n. 88, 281-282, 282

Index

n. 103, 283-285, 285 n. 117, 286, 286 nn. 118, 121-123, 287, 287 nn. 131, 133, 288, 288 n. 135, 289, 289 nn. 141-143, 290 nn. 148, 150, 293 n. 164, 296-299, 304, 307, 310, 310 n. 22, 311, 318, 318 nn. 44-45, 319-320, 320 n. 46, 321, 328, 330 n. 31, 331, 331 n. 33, 334-336, 340-341, 348, 350-351, 351 nn. 26-27, 352, 352 n. 31, 361 n. 62, 368-370, 370 n. 6, 371, 371 nn. 9, 11, 372-374 Courts 6, 15, 19, 39-41, 46, 94, 191, 191 n. 6, 192-193, 206, 213-243, 243 n. 79, 244, 253, 257-258, 258 nn. 153-156, 259, 261-263, 263 n. 10, 264, 267-268, 268 n. 34, 269, 271-275, 275 n. 78, 277-280, 280 n. 98, 281-283, 283 n. 111, 284, 284 n. 114, 286-288, 289 n. 143, 290-291, 291 n. 155, 292-295, 295 nn. 172-173, 296-297, 297 n. 183, 298-299, 301-304, 307, 307 n. 13, 309, 312, 315-317, 317 n. 36, 318-319, 321, 323, 328, 328 n. 25, 329-330, 332-333, 335-336, 338-339, 341-351, 353-358, 359 nn. 54, 56, 360-367, 370, 375, 382, 389-390, 392-393, 396-397 Criminal law 176-177, 181-182, 184, 401-402 Criminalisation 169, 177, 184 Cross-pillar

261, 291, 293, 366

Customary international law 179 n. 29, 223, 228, 269, 318, 348, 350, 352, 356, 373-374 Cyprus

Czech Republic 108 n. 27, 189, 346

D Delegation 46, 132-134, 147-149, 158-159, 163-167, 175, 202 n. 37, 217 Delisting 232, 234-235, 237-238, 243-244, 247, 249-254, 254 n. 135, 256-257, 259, 265, 282-283 Democracy 5, 10, 40-41, 45-46, 55-56, 146, 155, 160, 181-183, 295 n. 175, 359, 361, 385, 388, 401, Democratic control 4, 31, 45, 47, 52, 70, 102, 117, 128, 133, 379 Denmark 177-178, 182, 189, 191, 191 n. 7, 314, 346, 356, 362, 397 Department of Commerce (DoC) 151, 161, 165-166 Department of Transport (DoT) 198-201, 205 Deutsches Information Network Center (DENIC) 159 Diplomacy 161, 202 n. 37, 390 Direct action 257 n. 151, 330, 332, 341 Direct effect 14, 19 n. 37, 20 n. 39, 272, 316-317, 317 nn. 34, 36, 318, 344, 346-349, 349 n. 16, 355-357 Division of powers 354-355, 366

29, 345,

189, 346, 358

409

Multilevel Regulation and the EU

Domain Name System (DNS) 147-148, 150-151, 164-166 Dualism

145,

15, 270, 345, 365

Dualist 270, 270 n. 49, 345-347, 351-352, 362 Duty of Loyal Cooperation 123

E EC Treaty 186, 189-192, 196, 204, 207, 271 n. 54, 272, 275, 293 n. 165, 328, 347, 350-351, 363, 368-370, 372-374, 374 n. 18 Effectiveness 43, 54-55, 108, 237, 256, 284-285, 292, 385, 392, 395-396 Environment 3, 14, 35, 36 n. 100, 82 n. 46, 93, 193, 324, 327, 331-333, 338, 340-341, 344, 374 Estonia

189, 346

EU law 14, 19, 160, 181, 186-187, 190, 191 n. 7, 204, 206-209, 269 n. 42, 285, 295-296, 299, 358 n. 50, 365 European Arrest Warrant (EAW) 295, 357-358, 361, 366, 375 European Banking Committee 130, 130 n. 108 European Banking Regulation 101 European Central Bank 107 n. 22, 111 n. 41, 112 n. 43, 114, 115 n. 54, 118 n. 65, 119 n. 65, 131 n. 112, 141 n. 151

410

European Commission 31, 59, 71, 101 n. 1, 102, 109, 114, 114 nn. 51, 53, 115 n. 55, 116, 116 n. 58, 117, 117 n. 62, 118, 122 n. 78, 123, 123 n. 82, 124, 124 n. 84, 126, 126 n. 94, 127, 127 n. 97, 128, 131 n. 113, 137 n. 133, 138, 138 n. 135, 146, 146 n. 2, 147-150, 150 n. 22, 151-152, 157-158, 164-167, 186, 190, 191 n. 6, 193-195, 195 n. 19, 196-197, 202, 202 n. 37, 205-208, 298, 304, 314, 379 n. 7, 403 European Community (EC) 6, 13, 14 n. 21, 19-20, 20 nn. 39, 41, 21, 21 n. 47, 31, 40, 58, 68, 101-104, 104 n. 7, 105, 110, 110 nn. 32-33, 111, 114-116, 116 n. 60, 117-118, 118 nn. 65, 68, 119, 119 n. 69, 120, 120 n. 73, 121, 121 n. 74, 122-128, 128 n. 99, 129, 130 n. 105, 131, 136-137, 137 nn. 133-134, 138, 138 n. 139, 139 nn. 143, 145, 140, 140 nn. 148, 150, 141-142, 146, 146 n. 4, 147-148, 159, 164, 167, 190, 192-193, 195 n. 17, 208, 214-218, 225 n. 41, 226, 233-234, 234 n. 24, 235, 238-243, 243 n. 79, 244, 258, 258 n. 156, 259, 261-263, 265, 269, 269 n. 43, 270, 272-274, 274 n. 71, 275, 275 n. 78, 278-280, 288, 290-292, 293 n. 165, 301-303, 307, 315-318, 318 n. 41, 319, 321, 325 n. 8, 326 n. 14, 327 nn. 17-18, 328, 331, 332 n. 37, 335, 335 n. 50, 336-338, 340, 342, 346-352, 355-357, 358 n. 50, 359-360, 362, 362 n. 71, 363, 365, 368, 368 n. 2, 369-374, 397

Index

European Constitution 355, 368, 372, 401 European Convention on Human Rights and Fundamental Freedoms (ECHR) 33, 184, 215, 217-218, 218 n. 14, 234 n. 24, 242, 254, 258-259, 262 n. 3, 281, 285, 294, 296, 296 n. 179, 297, 297 n. 183, 298-299, 302-305, 312-313, 313 n. 26, 314-315, 351, 352 n. 52, 359, 362-365, 368, 370-373 European Council 129, 304, 395 n. 42 European Court of Human Rights (ECtHR) 33, 40, 214-218, 218 n. 14, 232, 232 n. 4, 236, 243, 257-258, 258 n. 156, 259, 262, 263 n. 8, 264, 278 n. 86, 279, 279 n. 92, 280, 280 nn. 98-99, 281, 294, 294 n. 167, 296 n. 179, 297, 297 n. 183, 298-299, 303, 312-314, 314 n. 27, 315, 315 n. 28, 321, 345, 357, 362-363, 363 n. 73, 364-366, 393 European Court of Justice (ECJ) 19, 19 n. 37, 40, 103 n. 4, 104, 104 n. 6, 118, 118 nn. 67-68, 119-120, 120 nn. 71-73, 135 nn. 128-129, 191, 191 n. 7, 192 n. 9, 196, 205, 207, 224 n. 39, 225 nn. 40, 42, 226 n. 44, 228 n. 49, 229 n. 53, 232, 232 n. 3, 238, 238 n. 57, 239, 241, 241 n. 69, 243, 257-259, 263, 263 n. 11, 264, 271, 271 n. 54, 272, 272 nn. 58-59, 62, 273, 273 nn. 63-68, 274, 274 n. 73, 275, 275 n. 76, 279, 279 n. 91, 280, 280 n. 97, 283 n. 109, 284, 286 n. 122, 288, 288 n. 137, 289, 289 n. 144, 290, 290 nn. 149, 152, 291,

291 nn. 154-155, 292, 292 n. 160, 294, 295 n. 176, 296, 296 n. 181, 297, 297 nn. 182-183, 298, 298 n. 185, 299, 303, 303 n. 4, 304, 304 nn. 5-7, 305, 305 n. 8, 306 nn. 9-11, 307, 307 n. 12, 308, 308 nn. 15-19, 309, 309 nn.20-21, 310, 310 n. 22, 311-312, 312 nn. 23-24, 314-315, 316 nn. 29-30, 317 nn. 35, 37-39, 318, 318 n. 42, 320, 320 n. 48, 321, 328-329, 331, 331 n. 35, 335-336, 338, 340-341, 345, 347, 347 nn. 7-8, 348, 348 nn. 10-15, 349, 349 nn. 16-18, 350, 350 nn. 21-22, 351 nn. 24-25, 352, 355-356, 356 n. 45, 357, 357 nn. 46-47, 358 n. 48, 359, 359 n. 55, 360-366, 366 nn. 80-81, 368, 368 n. 2, 369, 370 nn. 6, 8, 372, 372 nn. 13, 15-16, 374, 374 n. 18, 375 n. 21, 392, 397, 405 European Environmental Bureau (EEB) 330-332, 334-335 European Financial Reporting Advisory Group 111, 124, 137, 138 n. 137, 141 n. 152 European Food Safety Authority (EFSA) 327 European Parliament 76 n. 20, 106, 110 nn. 32-33, 114 n. 52, 121, 121 nn. 74, 77, 122, 122 n. 79, 123, 123 n. 81, 128, 130, 130 n. 106, 131, 131 nn. 111-112, 132, 132 n. 115, 133, 133 n. 118, 134, 134 n. 123, 136 n. 132, 137 n. 133, 139 nn. 143, 145, 140, 140 nn. 148, 150, 145 n. 1, 146, 203, 204 n. 47, 226, 292, 295, 304, 326 nn. 12, 14, 17, 335 n. 50, 337,

411

Multilevel Regulation and the EU

337 n. 60, 338 n. 65, 343, 363, 381, 381 n. 12, 388 European Registry for Internet Domains (EURid) 146-149, 158-161, 164

F Fair value measurement 113, 124-125, 125 n. 88, 139, 141-142 Federal Republic of Yugoslavia (FRY) 214-216, 309, 320, 365

European System of Central Banks 117 n. 65, 119

Federal Reserve Board 116

European Transport Policy

Finland

193

European Union (EU) 1-5, 7, 9-10, 13 n. 16, 14, 14 n. 22, 18-20, 20 n. 39, 21, 30-31, 33, 41 n. 115, 44 n. 126, 46-47, 51-52, 58, 60, 63, 63 n. 36, 65, 68-71, 74, 75 n. 83, 76-77, 77 n. 24, 78 n. 26, 81 n. 43, 82, 89, 93, 98-99, 101, 115-116, 137 n. 133, 145-147, 149, 160-161, 164, 167, 170, 173, 175-178, 181-182, 186-190, 191 n. 7, 193-202, 202 n. 37, 203-209, 218, 225, 227, 229, 237-238, 240, 257, 257 n. 153, 258-259, 261-262, 267, 269 n. 42, 275, 285, 287-288, 290, 292-293, 295, 295 n. 175, 296, 299, 301-304, 315, 320-321, 325-327, 331, 332 n. 38, 333-334, 344-347, 352, 355, 358, 360-361, 365, 373, 377-378, 380-384, 387-388, 390, 392-396, 396 n. 44 Executive 4, 13, 30, 41, 46, 213-214, 216-218, 222, 224-230, 349, 353-354, 361, 366, 395, 397 External Competence 118, 118 n. 68, 128 n. 99, 192

412

189, 191, 191 n. 7, 346

Food and Agricultural Organization (FAO) 14, 20 Fragmentation 27 n. 72, 32, 34, 37-38, 200, 391 Framework Decision on Combating Terrorism 173, 176 France 106, 108 n. 27, 116 n. 61, 189, 200, 304, 346, 354 n. 41, 356, 359 n. 51, 362 Freedom 5, 32, 45, 47, 53, 55, 94 n. 111, 156-157, 187-188, 191, 195, 208, 214, 217, 228, 295 n. 175, 306, 309-310, 320, 351 Freedom ﬁghters

179, 181-183

Freedom of establishment 191 Freedoms of the Air

187-188

Fundamental Human Rights Charter 362 Fundamental rights 180 n. 37, 234, 237, 242, 262, 269, 274, 280, 285, 288, 294-295, 298-299, 302-306, 309-311, 315-316, 318-321, 358, 358 n. 50, 361, 363-366, 370, 372, 375, 396, 399

Index

G General Agreement on Tariffs and Trade (GATT) 272, 347, 349, 360 General principles of Community law 297, 299, 303, 306, 320, 359 General principles of international law 313, 351 Generally Accepted Accounting Practices 126 Generic Top Level Domain (gTLD) 153-154 Geneva Convention 180 German Constitutional Court (GCC) 263 n. 10, 283, 283 n. 110, 284, 295, 295 n. 171, 303 n. 1, 354 n. 41, 358-362, 365, 375, 396 Germany 106, 108 n. 27, 116 n. 61, 176, 189, 191, 191 n. 7, 238, 303, 307, 346, 356, 360, 362, 400-401, 403-404 Global administrative law 32, 35, 35 n. 99, 40 Global administrative space 36, 160 Global legal order 15, 36, 214, 229 Globalisation 9-10, 33, 36 n. 100, 377, 389 Governance 5-6, 9, 11, 14, 19, 22, 25, 27, 27 n. 68, 31, 35, 35 n. 96, 41-42, 45-46, 55, 55 n. 15, 56, 56 n. 16, 57, 66-67, 70-71, 87-89, 145-146, 149-150, 155, 160-162, 164-165, 167, 186, 225, 225 n. 40,

230, 313 n. 26, 379-380, 385, 389, 392, 402-403 Governmental Advisory Committee (GAC) 155-157, 157 nn. 57-58, 158, 158 nn. 62-63, 159-162, 165-167 Greece

189, 346, 362

Greenpeace 331, 333, 336 Guidelines 2, 14, 52, 52 n. 2, 58-61, 61 n. 30, 62-63, 63 n. 36, 64-68, 69-71, 131, 135-137, 141-142, 142 n. 156, 238, 245, 245 n. 84, 246, 246 nn. 90-91, 247-248, 248 n. 105, 249 nn. 106, 110, 250, 250 n. 116, 251 n. 122, 277 n. 83, 282, 282 n. 105

H Harmonisation 51, 58, 60, 62, 65-67, 69-71, 127 n. 98, 177, 342, 344, 382 Hierarchy 6, 19, 40, 158, 160, 219, 277, 281, 335, 345-346, 352, 365, 367-375, 379, 391-392 Human Rights 4-6, 26, 32-33, 39, 47, 213-218, 220, 224-225, 228-230, 233-236, 236 n. 37, 240, 243-244, 254, 254 n. 137, 255, 257-258, 262, 274, 276, 277 n. 83, 279-280, 285, 289, 297-299, 301-303, 303 n. 1, 304, 308, 310, 312, 315, 319, 321, 351-352, 354, 356-357, 358 n. 50, 359, 362, 365-366, 374, 379, 382, 385, 389, 393, 396-398 Hungary

189, 312, 346 413

Multilevel Regulation and the EU

I

Information society 150, 161-163

Internet Corporation for Assigned Names and Numbers (ICANN) 27, 27 n. 69, 145-148, 148 nn. 13, 15, 149-154, 154 nn. 43, 46, 155-160, 162-168

International Accounting Standards 101-102, 109-110, 110 nn. 32-33, 111, 113, 123, 126-127, 128 n. 99, 137, 137 n. 133, 138, 139 nn. 143, 145, 140, 140 nn. 148, 150

Immunity 207, 219, 221-223, 235, 237, 353, 364

International air law 188

Implementation 2, 14, 21, 25, 43, 51, 60-61, 67-69, 69 n. 55, 71, 71 n. 59, 75, 75 n. 14, 76, 76 n. 20, 77, 81 n. 43, 98-99, 109, 113, 116, 117 n. 65, 119, 121, 123, 125, 128-132, 135-138, 139 n. 141, 140-143, 146, 176, 176 n. 19, 178-179, 181, 199, 201, 226, 239, 258, 261, 264, 268, 274-277, 279, 281, 284, 289, 294-296, 298, 317, 319-320, 323-324, 327 n. 21, 335-338, 338 n. 65, 342-344, 347, 351, 355, 357-358, 361, 366, 368, 393 Indirect effect 356 Individual 3, 6, 12, 16, 18-22, 27, 36, 39-40, 76, 77 n. 24, 78, 88 nn. 78, 82, 123, 153-155, 174, 181, 184-185, 192, 209, 214-215, 217-218, 225-229, 231, 232 n. 5, 234-235, 237, 243-251, 253-254, 254 n. 136, 255-259, 261-262, 262 n. 4, 263-264, 264 n. 16, 265, 265 n. 23, 266-267, 267 n. 31, 268-269, 274-276, 279, 280 n. 98, 281-282, 284, 284 nn. 114-115, 289, 291, 293-294, 296-299, 301, 303, 307-311, 315-318, 320-321, 328, 331-332, 334-344, 347-350, 352-353, 355-357, 361, 365, 370, 374, 377, 383, 385, 397-398 414

International Air Service Transit Agreement 187 International Air Transport Agreement 187, 192 International Atomic Energy Agency (IAEA) 14 International Civil Aviation Organization (ICAO) 2, 13-14, 187 International Convention for the Suppression of Acts of Nuclear Terrorism 180 International Convention for the Suppression of Terrorist Bombings 180 International Convention for the Suppression of the Financing of Terrorism 171 International Financial Reporting Standards 84, 109, 110 nn. 31, 33, 123, 139 n. 145, 140 n. 148 International humanitarian law 180-181 International Labour Organization (ILO) 14, 26 n. 64, 27 International law 9-10, 10 n. 3, 11 n. 7, 12, 14-15, 32, 34, 36, 36 n.

Index

100, 37-38, 107, 145, 156, 169, 179, 179 n. 29, 180, 183, 185-186, 191, 204, 206-209, 219-221, 223, 225, 228, 269-270, 270 n. 50, 271-273, 276-277, 281, 284, 293, 313, 317-318, 334, 345-353, 355-357, 365, 373-374, 374 n. 18 International legal order 4, 9, 11, 18 n. 33, 27 n. 68, 31-32, 32 n. 87, 34, 39, 104-105, 216, 218, 269-270, 374 International Maritime Organization (IMO) 14 International Monetary Fund (IMF) 2, 13-14, 75, 84 n. 63, 109, 122 International Organization of Securities Commissions (IOSCO) 28, 74, 74 n. 9, 75, 79-80, 87 n. 72, 89, 93, 116, 117 n. 62 International Standardization Organization (ISO) 27, 147 International Telecommunications Union (ITU) 1, 151, 157, 164

129, 288-289, 294, 296-299, 301, 328, 331-332, 344 Judiciary

4, 33, 217, 230

Jurisdiction 6, 16-17, 38-40, 42, 44, 75, 75 n. 16, 77, 79-80, 83-85, 94, 97-98, 98 n. 126, 127, 162, 181-182, 204, 219-223, 242, 258 n. 156, 259, 263, 269, 272-273, 286, 289, 289 n. 144, 290-291, 293-294, 297-298, 345, 348-349, 353, 355, 357, 360, 364-366, 373, 378, 392, 394, 398 Jurisprudence 39, 53, 186, 207, 223, 232, 254, 297, 342 n. 78, 368-373 Jus cogens 219, 222-223, 228, 262 n. 5, 269, 278-279, 284, 298, 319, 351-352, 357, 366, 371, 373 Justice 16 n. 27, 45-46, 54, 94 n. 111, 103, 213, 220, 224, 230, 257, 262, 262 n. 4, 263, 268-269, 286, 294, 298-299, 324, 324 n. 6, 332-333, 334 n. 47, 335, 338 nn. 65-66, 342 nn. 78-79, 343 nn. 81-83

Ireland 189, 241-242, 273, 279, 281, 346, 365 Italy 106, 108 n. 27, 116 n. 61, 189, 268 n. 34, 303, 346, 356, 362

K

J

L

Judges 6, 39, 214, 217, 221, 224, 229, 259, 279 n. 94, 345-346, 352, 355, 361, 365-366

Lamfalussy Process

Judicial protection 4, 47, 225, 237, 261-264, 267-268, 281, 285, 287 n.

Legal instrument 74, 183, 186, 263, 267, 276-277, 283, 283 n. 111

Kyoto Protocol

1, 21, 21 n. 48

129, 131-133

Latvia 189, 346

415

Multilevel Regulation and the EU

Legal protection 39-40, 231-232, 235, 237-238, 243-244, 250, 254, 256-259, 301-302, 319 n. 45, 357, 365, 393 Legal review 351-357, 362, 366 Legality 19, 39, 52-53, 53 n. 4, 55, 63-64, 184, 227, 276-278, 283, 288, 290, 318, 334, 343, 378, 380 Legislation 12, 13 n. 13, 15, 21-22, 52, 57, 68, 81 n. 43, 85 n. 65, 98, 109-110, 117 n. 65, 119-121, 129, 131, 149, 170, 173, 176-178, 182, 207, 295, 305, 325-327, 334-335, 335 n. 47, 338, 338 n. 64, 340, 342, 344, 346, 348, 359-360, 381, 384 Legitimacy 4-6, 9-11, 30-31, 33, 40-41, 47, 51-54, 54 n. 9, 55-56, 64, 69-71, 74, 88, 100, 102, 105, 105 n. 14, 106, 106 n. 14, 108-111, 121, 135-137, 142-143, 145, 152, 154-155, 160, 167-168, 179, 184, 214, 221, 276-277, 285, 295, 377-384, 388-390, 394, 397-398 Listing 232, 238-240, 244-245, 245 n. 84, 246-248, 248 n. 105, 249, 254, 262, 262 nn. 3, 5, 263, 282-283, 285-289, 289 n. 140, 296 n. 181, 341-342 Lithuania 189, 346 Luxembourg 39, 106, 189, 191, 262, 299, 346, 362

Malta

189, 346

Market 18-19, 24, 28, 46, 52, 58, 73-74, 76-77, 77 n. 24, 79, 81-82, 85, 85 n. 65, 86, 92-94, 94 n. 110, 95, 95 n. 117, 95, 96 n. 121, 97-101, 108, 111-112, 115, 124, 127, 133 n. 120, 135-136, 147, 185-186, 188-190, 193, 194 n. 13, 195-196, 199-200, 202-203, 208, 226, 301, 306-307, 307 n. 14, 308, 311, 314, 326-327, 341, 355, 363, 382 Monism 365

15, 270 n. 50, 345, 347,

Monist 270, 270 n. 49, 271, 345-347, 351-352, 355, 365 Multilevel governance (MLG) 3, 5, 11, 31-33, 38, 44-46, 56, 64, 152, 229, 377-378, 380, 383, 389, 391-392, 397

N National liberation movements 179 Netherlands 106, 108 n. 27, 116 n. 61, 189, 191 nn. 6-7, 304, 327 n. 19, 346, 351 n. 28, 362 North Atlantic Treaty Organization (NATO) 2, 13 Norway

176, 178

O M Maastricht 226, 226 n. 112, 295, 359-361, 362 n. 71 416

Open Aviation Area

193

Index

Open Skies 196-197

186, 190-191, 191 n. 7,

Open Skies Treaty (OST) 194, 194 n. 13, 204-209

185-187,

Organisation of the Islamic Conference on Combating International Terrorism 179

348, 351-352, 358 n. 50, 361, 362 nn. 67-68 Private sector 36 n. 100, 156, 161, 163, 166-168 Proportionality 41, 134, 215, 236, 240, 243, 274, 306-307 Prudential Regulation 114, 118

Organization for Economic Cooperation and Development (OECD) 2, 13, 19, 35

Prudential Supervision 117 n. 65, 118-119

Organization of American States (OAS) 2, 13

Public interest 56, 103 n. 4, 154-155, 214-215, 218, 225, 230, 305, 313-314

Organisation of the Islamic Conference 179

P

R

Pacta sunt servanda

269, 273, 347

Pharmaceuticals 6, 30, 43, 47, 51-52, 55-56, 56 n. 18, 57-59, 62-63, 65, 68-71, 390 Pluralism 40, 259, 345 Poland

108 n. 27, 189, 295, 346

Police and Judicial Cooperation in Criminal Matters (PJCC) 261 Political questions doctrine 345, 352-353 Portugal

Public-private 24, 35, 150, 163-164, 393

19 n. 37, 189, 346

Preliminary ruling 239, 241, 273, 288-289, 289 n. 144, 296, 329-330, 342, 344, 357, 361 Primacy 14, 19, 269, 270 n. 50, 271-272, 274-276, 278, 282-284,

Reasoning 93 n. 106, 213, 218-219, 225, 229, 234, 256 Reform treaty 304, 395-396 Regulatory act 337 Regulatory capture 52, 56-57, 70 Regulatory dialogue 115, 126 Regulatory procedure 134-135, 135 n. 126, 136, 136 n. 130, 140, 143 Remedy 97, 158, 235, 255-257, 261-262, 269, 289, 289 n. 143 Responsibility 11, 16 n. 27, 26, 110, 131, 145, 149, 151, 159, 165-166, 184, 191, 213 n. *, 217, 223-224, 310, 359 n. 56, 363, 387, 390 417

Multilevel Regulation and the EU

Right of due process

255, 257

Right of resistance 181, 183 Right to access to justice 262 n. 4 Right to be heard 41, 224, 228, 238, 352 Right to property 216, 224, 228, 233-234, 239-240, 242, 262, 279, 302, 304-315, 320-321 Right to pursue a business activity 306 Romania 189 n. 2, 346 Rotterdam Convention on Prior Informed Consent 325, 325 n. 10 Rule of law 5-6, 10, 33, 39-40, 47, 55, 64, 88 n. 78, 181-182, 216, 286, 336, 359, 369, 374, 381, 402

S Sanctions 6, 16, 16-17 n. 28, 19, 39, 203, 226, 231-232, 232 n. 5, 235-236, 240, 241 n. 67, 242, 249, 253, 255, 257-258, 261-264, 264 n. 14, 265, 265 n. 23, 266-267, 267 n. 31, 268-269, 274-276, 279, 281, 284, 284 n. 114, 285, 291-293, 296-299, 309-310, 319, 319 n. 45, 320, 351-352, 372, 378, 381, 385, 388-390, 393-394, 399 Securities and Exchange Commission 80 n. 36, 116, 123, 126 Security 14, 16-17, 85 n. 65, 156, 165, 170, 197, 199-201, 208, 215, 227, 231, 255, 275, 287, 353, 356

418

Self-determination 179-180, 183 Self-regulation 23-24, 26, 28, 28 n. 78, 57, 66-68, 77, 77 n. 25, 146, 150, 164 Separation of powers

230, 353

Slovak Republic 346 Slovenia

189, 346

Soft Law 2, 52 n. 2, 63, 63-64 n. 37, 367, 377, 392 Sovereignty 10, 29 n. 83, 55, 77 n. 25, 161-163, 185, 208, 219, 224, 353, 361, 379, 395 Spain 106, 108 n. 27, 116 n. 61, 189, 331, 346, 356, 362 Standardization 27, 74 n. 5 Standards 2, 12-14, 19-20, 22-23, 28, 35, 41, 43, 46, 51, 51 n. 1, 52, 57-58, 62, 64, 66, 68, 69, 74-75, 75 nn. 14, 17, 76-77, 77 nn. 23, 25, 79-80, 82, 86-87, 89, 93, 97-104, 106-108, 108 n. 25, 109, 109 n. 31, 110, 110 nn. 31-33, 111, 113, 116 n. 60, 118, 120-121, 123-124, 126-127, 127 n. 98, 128, 128 n. 99, 137, 137 n. 133, 138, 138 n. 137, 139 nn. 143, 145, 140-141, 143, 216, 234, 234 n. 24, 237, 240, 243, 248, 254-258, 296, 299, 350, 354, 360, 366, 379, 382-383, 385, 389-392, 396 Standing Committee on the Food Chain and Animal Health 327 Stockholm Convention on Persistent Organic Pollutants Persistent Organic Pollutants (POPs) 325-326

Index

Supremacy 14, 19, 104, 270 n. 50, 281, 283, 302, 355, 357, 358 n. 50, 359, 362, 362 n. 72, 365, 368 n. 2, 370, 374, 379, 392 Sweden 19, 106, 116 n. 61, 177-178, 189, 191, 191 n. 7, 258, 346

T Terrorism 6, 16, 31, 79, 169-171, 171 n. 6, 172, 172 n. 9, 173, 175-176, 176 n. 19, 177-184, 225-227, 231, 232 n. 5, 234-235, 261-262, 265-267, 286, 288, 299, 370, 391-392, 397 Terrorist 3, 6, 16, 18, 39, 169-170, 170 n. 3, 172-179, 181-182, 224, 227, 229, 235 n. 30, 261-262, 266-267, 285-286, 288-289, 289 n. 143, 294, 297, 319-320, 351 Top Level Domain (TLD) 145-148, 161 Torture 219-220, 220 n. 21, 221, 221 n. 29, 222-223 Traditional Air Service Agreement 186, 188-189, 195, 205 Transatlantic Common Aviation Area 6, 31, 185-186, 208 Transnational 9, 12 n. 11, 27, 27 n. 68, 35-36, 74 n. 11, 79-81, 100, 115, 221, 377 Transparency 24, 33, 35, 40-41, 47, 55-56, 64-65, 69-70, 74, 87,

110, 113, 133 n. 120, 155, 378, 380, 390-392, 394-395, 398 Treaty law 39, 317, 346, 351-352, 362 n. 68, 373

U United Kingdom (UK) 75 n. 13, 78 n. 26, 81, 81 n. 43, 82, 87, 88 n. 81, 94, 98, 106, 108 n. 27, 116 n. 61, 176, 189, 191, 191 n. 7, 195, 200, 203, 206-208, 219, 222-223, 263 n. 12, 314, 346-347, 354 n. 39, 363 United Nations (UN) 1-2, 16-17, 19, 21 n. 48, 39, 161, 163, 165, 169, 172, 172 n. 9, 174-175, 178-179, 184, 184 n. 45, 214-215, 223-225, 227-229, 231-232, 232 n. 5, 233-240, 240 n. 63, 241, 243-244, 253-258, 258 n. 156, 259, 261-262, 264-265, 267-269, 269 nn. 42, 44, 271-279, 281-282, 284-285, 297, 299, 309-310, 319, 319 n. 45, 320, 345, 351-352, 357, 365-366, 369-372, 374-375, 377, 393, 397 United Nations Charter (UNC) 269, 269 n. 44, 270, 277, 281 United Nations Children’s Fund (UNICEF) 29 United Nations Convention on the Law of the Sea (UNCLOS) 14 United Nations Development Program (UNDP) 29 United Nations Educational, Scientiﬁc and Cultural Organization (UNESCO) 29 419

Multilevel Regulation and the EU

United Nations Environmental Program (UNEP) 14, 29

W

United Nations General Assembly (UNGA) 171-172 United Nations Population Fund (UNFPA) 29

World Bank 109, 122

United States (US) 24, 34 n. 94, 36 n. 100, 51, 58, 60, 63 n. 36, 69, 71, 75 n. 16, 82, 82 n. 50, 83-87, 88 n. 79, 94 n. 109, 95-99, 106, 108 n. 27, 109, 115-116, 123, 126, 150-152, 157, 162, 165-169, 186, 188-191, 191 n. 7, 193, 194, 194 n. 13, 195-205, 207-208, 229, 268 n. 34, 353-354, 369 2,

V Voting 304

420

World Meteorological Organization (WMO) 2, 13 World Anti-Doping Agency

United Nations Security Council (UNSC) 15, 170, 182

Universal Postal Union (UPU) 13

Western European Union (WEU) 2, 13

2, 66, 119, 157, 200-202,

27

14, 19, 26 n. 64, 29,

World Health Organization (WHO) 2, 13, 19-20, 29, 29 n. 83, 58-59, 62 World Intellectual Property Organization (WIPO) 19 World Summit on the Information Society (WSIS) 161-163 World Trade Organization (WTO) 1, 3, 14, 14 n. 21, 15 n. 25, 18, 18 n. 33, 19, 19 n. 37, 20, 20 n. 39, 27, 34 n. 92, 39 n. 109, 44 n. 126, 62, 105 n. 10, 205, 272, 317, 345, 349-350, 356-357, 360, 368-370, 375