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The aim of the paper is to discuss some of the basic elements of the legal system in EC law in comparison with the EEA Agreement. The.
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Supervisor Peter Gjörtler Field EU Constitutional Law Spring 2002
undoubtedly more than an ordinary international agreement. This special nature of the Agreement will be discussed from the viewpoint whether direct effect and supremacy are somehow inherent in the ”EEA law” with citation to EC law. The situation regarding direct effect in EEA law seems at first sight to be quite different from that prevailing in EC law, because the depth of integration less is far-reaching than under the EC Treaty. This paper will cover the main provisions of the EEA Agreement and findings of the EFTA Court along the line that the EEA Agreement does not have direct effect, neither horizontally nor vertically, and that the question of such effects depends therefore on the substance of the national law of the EFTA States. But the questions encountered are not so easily answered, as will be discussed in the paper. The Agreement is a result of complicated and difficult negotiations, which had the aim of reaching common conclusions in matters, which were probably impossible to unify. On the one hand by establishing an international treaty under public international law, but on the other hand to be interpreted parallel with and producing similar results as the corresponding provision of Community law. It will be shown that some provisions under EEA Law can in fact have direct effect in some circumstances, in spite of statements from the EFTA States and regardless of provisions in the Agreement stating the opposite. This analysis is elementary and closely linked to the further discussion in the paper on comparison of State liability within EC law and EEA law. First the doctrine of State liability in EC law will be discussed, and explained why the establishment of that doctrine is considered to have been unthinkable if it were not for the doctrines of direct effect and supremacy. The establishment of that “same” doctrine within the EEA law will be covered in continuation. It will be explained why the findings of the EFTA Court lacks the same firm ground as exists in the EC law. It will also be argued that legal certainty calls for amendments of the unclear scope of the EEA Agreement and drastic decisions by the EFTA Court. Some remarks will as well be made about the possibility of EEA law
enjoying some kind of supremacy through the EEA implementing Acts of Norway and Iceland. These findings will be addressed in the light of the internationalisation of law and the judicialization of politics. The serious conflicts between the national courts in the Union and the ECJ seem to be over and the doctrine of supremacy of community law prevails regardless of the fact that some Member States still adhere to the doctrine of dualism. In comparison the debate in the EFTA States of conflicts between EEA law with the constitutions of the participating EFTA States has not yet reached any equilibrium. It will be argued that in the light of the legal integration following the EEA Agreement that the doctrine of dualism is retreating. That finding will take place with special focus on Icelandic legal system. It will be argued that in spite of this development the necessary changes on the Icelandic constitution has to be made. The main conclusion of this discussion is described by a practical example: If a client ask a lawyer in Iceland about some subject, that is covered by the EEA Agreement it is necessary for lawyer to look into the EC rules, because if they are not (correctly) implemented into Icelandic law a question of state liability rises, or sometimes the possibility of direct effect. So it is not longer a question for the lawyer of interpreting the Icelandic law, but also a question of "finding" the law, which could possible be unpublished and "alien" to the Iceland legal system. And the methods of interpretation of EEA (EC) law is in many ways different from the general interpretation methods the Icelanders got from Denmark, and have used for the last 100 years or so.
AG Advocate General CFI Court of First Instance ECHR European Convention on Human Rights ECtHR European Court of Human Rights ECJ European Court of Justice ECOSOC Economic and Social Committee ECR European Court Reports ECSC European Coal and Steel Community EC European Community EC Treaty European Community Treaty EEA European Economic Area EEA A The Agreement on the European Economic Area EEC European Economic Community EFTA European Free Trade Association EP European Parliament ESA EFTA Surveillance Authority Euratom European Atomic Energy Community EU European Union FTA Free Trade Agreements between the Community and each EFTA State. GATT General Agreement on Tariffs and Trade OJ Official Journal of the European Communities Para(s) Paragraph(s) Rep. EFTA Ct. Report of the EFTA Court. SCA Agreement between the EFTA States on the Establishment of a Surveillance Authority and a Court of Justice (ESA/Court Agreement) SEA Single European Act ToA Treaty of Amsterdam WTO World Trade Organization
The aim of this paper is to analyse^2 the concept of direct effect in EC Law with special reference to the doctrine of supremacy. An analysis of these doctrines is basic to any discussion on State liability within EC Law, a topic that is widely addressed today. The scope of this paper however, does not allow detailed discussion on the supremacy of Community law from the perspective of the EC Member States, specially regarding the different approach of the monist countries versus the dualism countries. 3 Instead the focus will be on problems of somewhat special nature that present themselves when the question is posed, whether direct effect and supremacy are somehow inherent in the ”EEA law” meaning the law according to the EEA Agreement which obtain on the EEA Area, which consists of the European Community and its Member States and the EFTA States. 4 This paper will seek some answers to such questions and it will also be discussed, on what grounds the doctrine of State liability can find application in EEA law, and if those grounds are sound enough. By comparing these basic elements of the two legal systems and specially by looking at the development in EC law through the years, some remarks regarding the future development of ”EEA law” will be made, with special comments regarding my homeland, Iceland.
(^2) Because this paper is restricted in volume it will primarily deal with the main features of these doctrines, and the most relevant points regarding the EEA Agreement. 3 For further reading see for example Craig and de Búrca, 1998, p. 264-295, Hartley, 1998, p. 233-257, and Kapteyn and VerLoren vanThemaat, 1998, p. 499-525. The basic thesis of the monist approach is that international law and national law are both part of the one world system. They operate under different spheres but are part of the same legal structure. The dualism approach adopts the view that international law and national laws are two fundamentally different things, and do not fit together into a single world system. See Hartley, 1998, p. 189-190. International agreements are either incorporated or transformed into national law. Pálsson, 1998, p. 125-126. That clear difference between these two poles of approaching international law, has in the opinion of some diminished, see discussion in chapter 4. 4 Norway, Iceland and Liechtenstein (but not Switzerland) are the EFTA States which are contracting parties to the EEA A. These three countries will be referred to as the “EFTA States.”
doctrine of direct effect has been relevant primarily to the Community legal system rather than that of the European Union as a whole. The main reason is that the ECJ lacks jurisdiction over all the three pillars.^10 The idea of creating an economic area made up of both Community and EFTA States is almost as old as the EEC itself. 11 This idea became reality when the EEA Agreement was signed in Oporto on May 2, 1992, and then came into force on January 1, 1994. The agreement extends the internal market beyond Community boundaries, by providing the participating states of EFTA with free access to the single European market. Even though the Agreement relates mainly to the adoption of EC rules on Free movements and Competition, the Agreement deals with integration in various fields other than these economic ones.^12 The EEA A repeatedly highlights its goal of creating and maintaining a homogeneous and dynamic European Economic Area, based on common rules and equal conditions of competition and providing for adequate means of enforcement including at the judicial level.^13 In order to do so, the EFTA States adopted EC law to a very large extent.^14 The Agreement was, however, also meant to retain its nature as an agreement made under public international law: It was neither intended to have the supranational character of the EC Treaty nor was it meant to force the EFTA States to surrender sovereignty rights or impinge on the autonomy of Community
(^10) Craig and de Búrca, 1998, p. 163. (^11) It is impossible in this short paper to go into the development of the EC and the history of the EEA The general picture of the development is however needed in order to understand the present situation better. In this relation one can cite the saying in English, which goes as follows: “If you don’t know from where you’re coming you’ll certainly end up elsewhere.” See further discussion in Baudenbacher, 1997, p. 171-173, and Norberg, 2000, p. 376-371 12 Such as research and development, the environment, education and social policy, see Article 1(2) EEA. 13 See in this relation for example the fourth paragraph of the preamble of the EEA A, and Article 1 EEA. Articles 1(1) and 2(c) EEA, which defines the Agreement as an Agreement of association. This makes it clear that the Agreement is considerably more far-reaching than the less ambitious bilateral FTA concluded between the Community and each EFTA State. This is thought to be the closest form of co-operation with EC and the legal basis on which it was concluded on the EC side was Article 310 and not Article 133 EC which is used for trade Agreements. Norberg, 2000, p. 371-372. 14 Some talk about “relevant acquis” in this connection which is to cover all internal legislation, see discussion in Forman, 1999, p. 755-761, where he mentions that the notion of relevance is not defined in the EEA A.
law. 15 It was a tall order to reconcile these different aims as later development shows.
(^15) See further discussion Baudenbacher, 1997, p. 175-180. Baudenbacher cites for example Sevón regarding the current institutional structure of the EEA A as ”the result of compromises and of compromises on compromises”. See also Sevón, 1994, p. 350-351, and Friðfinnsson, 2001, p. 51-70, specially 51-55, where he mentions that SEA had much influence of the development by making the EFTA States realise the necessity to build up relations with a changed Community. Reference is also made to the significance of the Jacques Delors speech in the EP 17 January 1989. Regarding the earlier development of the European integration process see also for example Kapteyn and VerLoren vanThemaat, 1998, p. 1-44.
Some provisions of international law that are directly applicable are not capable of having direct effect. Such provisions can be regarded as binding on and enforceable by States alone. Other provisions are to vague to form a basis of rights and obligations for individuals, and still other provisions are to incomplete and require extended measures of implementation before they can be fully effective in law.^18 It should also be noted that direct effect is linked to the rights and duties of individuals and economic operators. Pescatore points out that most of the cases in which the Court was called upon to examine the question of direct effect involved litigation between private parties and public administration, especially in matters of taxation and commerce. However direct effect has also extended to relations between private parties. Article 81 and 82 of the Treaty is a good example of provisions applying in mutual relations between traders. 19 A ”vertical” direct effect reflects the relationship between an individual and the State, but ”horizontal” effect reflects the relationship between individual and individual. 20 The general principle which must be upheld for a legal provision to be directly effective, is that it is a part of the ”law of the land“ (it must be recognised as a valid and binding law), and the provision must be
points out like many others that in practice this problem seems not to have aroused any difficulties. See also Steiner and Woods, 1996, p. 38-39. 17 Sevón, 1994, p. 342. The development of direct effect and supremacy will be discussed together. 18 19 Steiner and Woods, 1996, p. 38. Pescatore, 1983, p. 163, where he also mentions that it applies in other fields as well. Thus the Court had for example occasion to underscore the applicability of the rules on free circulation of labour and the freedom to provide services in cases relating professional sporting activities. In that relation he mentions two cases. First Case 36/ B.N.O. Walrave and L.J.N. Koch v Association Union cycliste internationale, Koninklijke Nederlandsche Wielren Unie et Federación Española Ciclismo [1974] ECR 1405, and secondly Case 58/80 Dansk Supermarked A/S v A/S Imerco [1981] ECR 181. In the former case, the Court recalled that (para 19),”…the working conditions in the various Member States are governed sometimes by means of provisions laid down by law or regulation and sometimes by agreements and other acts concluded or adopted by private persons,…” and then ruled (in para 25) that Articles (old Article 7), and 39 and 49 ”…may be taken into account by national Court in judging the validity or the effects of a provision inserted in the rules of sporting organization.” In the latter case the Court stated (in para 17) that ”…it is impossible in any circumstances for agreements between individuals to derogate from the mandatory provisions of the Treaty on free movement of goods…” 20 Steiner and Woods, 1996, p. 41.
appropriate to provide rights to individuals. In this relation the issue of jurisdiction is also valid, that is, which court should decide the matter, the national courts or the European Court. 21 The test of whether a provision in Community law has direct effect is more readily fulfilled than probably was initially expected and it seems that it is rather a rule than the exception. 22
The question regarding direct effect first arose in 1956 in relation to the ECSC Treaty,^23 but was later posed on a much larger scale within the framework on the EEC Treaty, when the Court passed its ground breaking judgement Van Gend en Loos.^24 There a private firm sought to invoke Community law against the Dutch customs authorities. The question was raised in a preliminary ruling if Article 25 [old Article 12 25 ] EC has ”direct application in national law in the sense that nationals of Member States may on basis of this Article lay claim to rights which the national court
(^21) Which can be considered as one of the conditions for direct effect of EC law. See discussion in Hartley, 1998, p.189. National courts are now considered also to be the courts of the communities, Prechal in Guðmundsdóttir, 2000, p. 114-112. See further discussion in Hartley, 1998, p. 187-190, and Prechal, 2000, p. 1047-1048, which adds that ”non-directly effective” provisions cannot be ignored and treated as being non-existent. Prechal defines the concept direct effect as follows: ”direct effect is the obligation of a court or another authority to apply relevant provisions of Community law, either as a norm which governs the case or as a standard for legal review.” 22 Weatherill, 2000, p. 93, and Hartley, 1998, p. 195. As an example of that general development one can mention that Article 28 EC which has been regarded as not having horizontal direct effect can be considered to having in fact such effect, see inter alia Case 261/81 Walter Rau Lebensmittelwerke v De Smedt PVBA [1982] ECR 3961. See also Hartley, 1998, p. 206-211. 23 Joined cases 7 and 9/54 Groupment des Industries Sidérurgiques Luxembourgeoises v High Authority [1956] ECR 175, see Pescatore 1983, p.156, and Sevón and Johansson. 1999, p. 378-379. 24 Case 26/62, NV Algemene Transport- en Expeditie Onderneming van Gend en Loos v Nederlandse Administratie der Belastingen [1963] ECR 1. 25 Article 12 stated: ”Member States shall refrain from introducing between themselves any new customs duties on imports or exports or any charges having equivalent effect, and from increasing those which they already apply in their trade with each other.” Hartley points out that this provision was addressed to and imposed an obligation on Member States, but did not expressly grant any corresponding right to individuals, nor did it state explicitly that mentioned duties would be invalid. But the Court laid down a different test, see Hartley 1998, p. 191.
reservation on the part of the Member State, and not dependent on any national implementing measure. 28 One year later, in the Case Costa v ENEL^29 the Court affirmed and developed its constitutional theory of the Community where the national law was in conflict with a provision of EC law. In this case the Court concluded that Community law had to be given primacy by national Courts over any incompatible national law. The Court had before used similar reasoning in the Van Gend en Loos case regarding the aim and the spirit of the Treaty, and then stated that this new legal order immediately became ”…an integral part of the legal systems of the Member States and which their courts are bound to apply.”^30 Then the Court came to the conclusion that: ”By creating a Community of unlimited duration, 31 having its own institutions, its own personality, its own legal capacity and capacity of representation on the international plane and, more particularly, real powers stemming from a limitation of sovereignty or a transfer of powers from the States to the Community, the Member States have limited their sovereign rights and have thus created a body of law which binds both their nationals and themselves….”^32 That integration was considered to make it impossible for the states to accord primacy to domestic laws, the obligations undertaken by the Member States were unconditional, and finally the language of direct applicability in Article 249 demanded this conclusion. 33
(^28) Para II B. ”The wording of Article …[25] contains a clear and unconditional prohibition which is not a positive but a negative obligation. This obligation, moreover, is not qualified by any reservation on the part of the states which would make its implementation conditional upon a positive legislative measure enacted under national law. The very nature of this prohibition makes it ideally adapted to produce direct effects in the legal relationship between Member States and their subjects. …” 29 Case 6/64, Flamino Costa v ENEL [1964] ECR 585. Costa was a shareholder of a power company nationalised by the Italian government and its assets were transferred to ENEL. Costa refused to pay an electricity bill (just over 10 Swedish kronor) and was sued by ENEL. Costa argued that the law of nationalisation were contrary to various provisions of the Treaty. 30 31 Para 3. 32 That can not apply that argument to ECSC, which has limited duration. Para 3. Regarding argument against these findings and comparison with the laws of the United States of America see Mancini, 1989, p. 568-602. 33 The Court stated: ”The integration into the laws of each Member State of provisions which derive from the Community, and more generally the terms and the spirit of the
In Internationale Handelsgesellschaft^34 the Court went further by ruling that the legal status of a conflicting national measure was not relevant to the question whether Community law should take precedence, thus not even a fundamental rule of national constitutional law could be invoked to challenge the supremacy of directly applicable Community law. It held as well that it was only for ECJ to set EC measures aside and that the national courts had no power to do so.^35 In the Simmenthal^36 case the Court declared strongly that all national courts must directly and immediately enforce a clear and unconditional provision of Community law, even where there is a directly
Treaty, make it impossible for the States, as a corollary, to accord precedence to a unilateral and subsequent measure over a legal system accepted by them on a basis of reciprocity. Such a measure cannot therefore be inconsistent with that legal system. The executive force of Community law cannot vary from one state to another in deference to subsequent domestic laws, without jeopardizing the attainment of the objectives of the treaty set out in Article …[10(2)] and giving rise to the discrimination prohibited by Article …[12]. The obligation undertaken under the Treaty […]would not be unconditional, but merely contingent, if they could be called in question by subsequent legislative acts of the signatories […] The precedence of Community law is confirmed by Article… [249]… This provision, which is subject to no reservation, would be quite meaningless if a State could unilaterally nullify its effects by means of a legislative measure which could prevail over Community law. It follows from all these observations that the law stemming from the Treaty, an independent source of law, could not, because of its special and original nature, be overridden by domestic legal provisions, however framed, without being deprived of its character as Community law and without the legal basis of the Community itself being called into question. The transfer by the states from their domestic legal system to the Community legal system of the rights and obligations arising under the treaty carries with it a permanent limitation of their sovereign rights, against which a subsequent unilateral act incompatible with the concept of the Community cannot prevail. …” 34 Case 11/70 Internationale Handelsgesellschaft mbH v Einfuhr- und Vorratsstelle für Getreide und Futtermittel [1970] ECR 1125. A German exporter questioned the validity of a deposit system established by a Council regulation whereby deposit for export licences could be forfeited if the goods were not exported on time. The German thought that the system went against the German Constitutional principles. Later the German constitutional Court came to the conclusion that the EC measure violated the principle of proportionality and this was the start of the so-called Solange crisis between ECJ and German courts. For further reading regarding supremacy of Community law from the perspective of the Member States, see for example Craig and de Búrca, 1998, p. 264-294. 35 See discussion in Craig and de Búrca, 1998, p. 260-262, and Kapteyn and VerLoren vanThemaat, 1998, p. 85. 36 Case 106/77, Amministrazione delle Finanze dello Stato v Simmenthal SpA[1978] ECR 629, [1978] 3. There the question was about claim of repayment of fees charged because of veterinary inspection of imported beef. Italian authorities claimed that the national court could not just simply refuse to apply a national law conflicted with Community law, but must first bring the matter for the Italian Constitutional Court which could declare the Italian law unconstitutional.
to consider indefinite legal concepts such as ”similar products” and ”indirect protection” in interpreting Article 90 EC, and found out that Article 90(2) had direct effect. 42 A provision will not have direct effect, on the other hand, if the concepts contained in a provision leave the Member States certain discretion in their application. An example of that is the SpA Salgoil^43 case where the Court concluded that the concepts ”national production” and ”total value” used in the relevant Treaty Article contained a margin of discretion, because the Treaty gave no indication of the data to be used in calculating these concepts or of the methods to be applied in regard of which several solutions could be envisaged. 44 The requirement of sufficient clarity is really a common condition to all provisions if they are to be suitable for application by a Court of law and in accordance with the maxim that any legal rule has to be devised so, that it can operate effectively (”effect utile”). 45 It therefore does not matter whether the provisions are a part of Community law or national legislation. 46 As a matter of course the degree of necessary precision varies according to the situation. It is recognised that a provision imposing
(^42) See paras 3-4. (^43) Case 13/68, SpA Salgoil v Italian Ministry of Foreign Trade, Rome [1968] ECR 453. (^44) Para II (d) :”… Some discretion does fall to be exercised by the Member States from the obligation to ´convert any bilateral quotas …into global quotas´ and from the concepts of ´total value´ and ´national production´. In fact, since the Treaty gives no indication as to the data on which these figures must be calculated or as to the methods applicable, several solutions may be envisaged. Therefore the last sentence of Article 32 and Article 33 does not apply in sufficiently precise way for it to be acknowledged that they have the above-mentioned direct effect.” See also Kapteyn and VerLoren vanThemaat, 1998, p. 530, where they mention that the national court is able to examine whether the margin of discretion has been exceeded, as in Case 51/76 Verbond van Nederlandse Ondernemingen v Inspecteur der Invoerrechten en Accijnzen [1977] ECR 113, paras 16-17 and 30. 45 Pescatore, 1983, p. 155, takes medical comparison and states that direct effect ”is the normal state of health of the law; it is only the absence of direct effect which causes concern and calls for the attention of legal doctors.” See further discussion in chapter 2.1.4. 46 Hartley, 1998, p. 192, where he takes Article 10 of the Treaty as a good example of such provision, which only lays down general objectives or a policy to be pursued, without specifying the appropriate means to attain it. In such cases further legislation is necessary before the provision in question can become operative. See also for example the Case 126/86, Zaera v Instituto Nacionale de la Seguridad Social [1987] ECR 3697. In Zaera the Court stated that Article 2 describes in general terms the tasks of the Community, but could not per se impose legal obligations on Member States or confer rights on individuals. See further discussion Craig and de Búrca, 1998, p. 174, where they quote AG Mancini´s opinion that the Treaty provision in question ”contains expressions of intent, purpose and motive rather than rules that are of direct operative effect.”
obligations on private citizens should attain a higher degree of precision than a provision granting them rights against national authorities. 47
2.1.2.2 Unconditional Unconditional means that the provision must not depend on something within the control of some independent authority, such as a Community institution, or a single Member State. It must not, in particular, be dependent on the judgement or discretion of such body.^48 Articles 87-89, concerning State Aid, are an example of a judgement or discretion 49 of the Commission.^50 The Von Colson^51 case is an example of circumstances
(^47) See Hartley 1998, p. 191-192. Regarding examples of a question if a Community provision is not designed to confer rights on individuals, see discussion in Craig and de Búrca 1998, p. 174-175, where they mention in this regard Case C-194/94 CIA Security International v Signalson SA and Securitel [1996] ECR I-2201 paras 42-44 (directive sufficiently precise), and Case C-72/95, Aannemersbedriif Kraaijeveld P.K. Kraaijeveld v Gedeputeerde Staten van Zuid-Holland [1996] ECR I- 5043, paras 55-56, that were a Community measures imposes a clear obligation on a Member State, a national court must not be prevented ”from taking into consideration as an element of Community law” e.g. in reviewing the compliance by that Member State with the obligation. They also mention Case C- 431/92 Commission v Germany [1995] ECR-I2189 (Grosskrotzenburg case), where the Court ruled that the question whether a sufficiently clear and precise obligation has been imposed by a Community provision was different from the question whether an individual can derive rights from those provisions. See also footnotes 92 and
