- The Court annulled Council Decision 2011/853/EU on the signing of the European Convention on the legal protection of services based on, or consisting of, conditional access as a consequence of a choice of improper legal basis.
- The Court upheld in accordance with the settled case law that if a measure pursues a twofold purpose or it has a twofold regulatory component, and if one of those is identifiable as the main or predominant purpose or component, whereas the other is merely incidental, that measure must be based on a single legal basis, namely that required by the main or predominant purpose or component.
- In line with the main findings in Case C-414/11 Daiichi Sankyo and Sanofi-Aventis Deutschland, the Court maintained that the mere fact that an EU act is liable to have implications for international trade is not enough for it to be classified as falling within the Common Commercial Policy (hereinafter: CCP). An EU act falls within the CCP if it relates specifically to international trade, i.e. it is essentially intended to promote, facilitate or govern trade and has direct and immediate effects on trade, and therefore it has to have a specific connection with international trade.
- Accordingly, the Court found that the contested decision primarily pursues an objective that has a specific connection to the CCP, which determines its legal base providing its predominant purpose; in other words the signing of the Convention falls within the exclusive competence of the EU. By contrast, the improvement of the conditions for the functioning of the internal market is an ancillary objective of that decision, which on its own does not provide sufficient justification for the adoption of the measure, and consequently, the reference to the internal market has to be regarded as a choice of improper legal basis.
The judgment of the Court (Grand Chamber) has finished a new episode of the decades-long debate on the scope of the CCP and specified the extent of the EU competence in more detail. The Court essentially had to decide whether an international convention related to specific audio-visual services might be concluded alone within the scope of the CCP [Article 207(4) TFEU], or additionally, the convention needs to rely on the additional legal basis of the internal market as well [Article 114 TFEU]. Although this question seems to be rather technical, the adequate answer to that has significant consequence on the playing field of the Member States. If the Union has exclusive competence in the meaning of Article 2(2) TFEU, as the regulated area is covered by the CCP, the Union is entitled to conclude the convention alone. Conversely, if the exclusive competence of the Union could not be established, the Union is allowed to assume obligations only in a mixed agreement together with the Member States.
The dispute was triggered over the European Convention on the legal protection of services based on, or consisting of, conditional access [hereinafter: Convention]. The Convention was negotiated in the Council of Europe and it aims, first, at hindering the unlawful, i.e. ‘pirate’ access to protected audio-visual and information society services (e.g. TV programmes or radio broadcasts offered against payment); second, at prohibiting manufacture, production, importation, sale of illicit devices (e.g. equipment for password decoding); and third, it intends to determine the sanctions applicable to unlawful conduct under the Convention. The European Commission proposed to conclude the Convention on behalf of the European Union and it submitted the proposal for a Council decision in 2010 [COM (2010) 753 final]. The proposal was based on the exclusive competence provided under the CCP and the Convention was intended to be concluded in procedure regulated under Article 218(5) TFEU. The legal basis of the decision adopted – Council Decision 2011/853/EU of 29th November 2011 on the signing of the Convention [OJ 2011 L 336] – differed from the Commission’s proposal, since as its secondary legal basis it identified the Union’s competence in the field of the single market. For this reason, the Commission challenged the decision before the Court and raised two pleas in law in support of its action. Firstly, the Commission submitted that the choice of legal basis for the contested decision was inappropriate, and secondly, the decision infringed the European Union’s exclusive external competence as provided for in Articles 2(1) and (3) TFEU. In support of the action submitted by the Commission, the Parliament was granted leave to intervene.
The Commission argued that the primary aim of the Convention was not to improve the functioning of the EU internal market but to promote and facilitate trade between its EU and non-EU contracting parties. Therefore, the choice of a double legal basis of the Council Decision, which covered also the reference to the competence over the internal market, should be considered as a choice of improper legal basis. In contrast, the Council contested the Commission’s view, and denied that the decision could have been approved solely within the scope of the CCP. The Council argued that the primary aim of the Convention was to eliminate any obstacles to trade in the services concerned which required the approximation of the different national laws of the contracting parties. Moreover, the Council emphasised that the fact that the Convention also covers the supply of conditional access services between the EU and non-EU countries does not mean that it is intended to apply in a larger extent to those services than those supplied within the EU internal market. More specifically, it claimed that the impact of the Convention on international trade in services between EU and non-EU countries is only secondary of importance. The argumentation of the Council denying exclusive EU competence in a matter of high policy importance was supported by the French Republic, the Kingdom of the Netherlands, the Republic of Poland, the Kingdom of Sweden and the United Kingdom as interveners.
While the Commission and the Council agreed on the fact that the conclusion of the contested decision was correctly based on Article 218(5) TFEU, there was a significant difference of opinion on whether the material legal basis cited was appropriate for the adoption of that decision. The opinion of Advocate General Juliane Kokott proposed the annulment of the contested Council decision.
The reasoning of the Court started with clarifying the principle of the choice of legal basis, which was then interpreted in context of the CCP, and finally, it explained the EU’s exclusive competence in the CCP in the light of the objectives and the scope of the Convention. In the previous case law of the Court, it is well-defined that the choice of legal basis for an EU measure must rest on objective factors that are amenable to judicial review. In this sense, objective factors are e.g. the aim and the content of that measure. It is also obvious in the permanent case law that if the measure in question pursues a twofold purpose or objective and if one of those is identifiable as the main or predominant purpose or objective, whereas the other is merely incidental, that measure must be based on a single legal basis, namely that required by the predominant purpose and objective. In accordance with its argumentation in C-414/11 Daiichi Sankyo and Sanofi-Aventis Deutschland [not yet reported], the Court emphasised that the CCP belongs within the context of the Union’s external action, thus the CCP relates to trade with non-EU countries and not to trade in the EU single market. The Court also held that the fact that the measure has implications for international trade is not quite enough for choosing the CCP as legal basis. The measure can be classified as falling within the scope of CCP, if it relates specifically to international trade, which means that the measure is essentially intended to promote, facilitate, govern trade and has direct and immediate effects on trade. In other words, analogically to the decision made in C-414/11 Daiichi Sankyo and Sanofi-Aventis Deutschland [see para. 53, not yet reported], the existence of a specific link between the measure and international trade has to be established. On this basis, the Court decided that the contested Council decision primarily pursues an objective that has a specific connection to international trade in services, which means that, the CCP must be cited as the legal basis of the decision adopting the Convention on behalf of the European Union. Therefore, the Court, in line with the Commission’s submission and the opinion of Advocate General Kokott, came to the conclusion that Article 207(4) TFEU establishes the legal basis of the decision, and the Convention has to be concluded in procedure as stated by Article 218(5) TFEU, which means that the signing of the Convention on behalf of the EU falls within exclusive EU competence pursuant to Article 3(1)(e) TFEU. This meant that the contested decision had to be annulled, however, for reasons of legal certainty the Court maintained the effects of the decision until the adoption of a new act within a reasonable period, no longer than six months, based on the appropriate legal bases.
From a conceptual point of view, the decision of the Court has made a novel contribution to a more precise separation of powers in the field of the internal market and the Common Commercial Policy. However, the underlying case also provides a good illustration of the legal impossibility of a complete isolation of these two regulatory fields in the EU. They both have impact on each other to some extent. The Union’s acts covered by the exclusive competence of CCP might affect indirectly the internal market. That indirect link, however, is alone insufficient to require the introduction of a double legal basis, namely the inclusion of the internal market competence alongside that under the CCP. In this respect, it is worth highlighting one of the main arguments submitted by the Council. Namely, the Council argued that the Convention was specifically designed to prohibit the export of illicit devices to the EU from non-EU countries, and as a consequence, the Convention primarily aimed at ensuring the proper functioning of the internal market. The Court, however, refused this logic and adopted an opposing interpretation which suggested that the ban on the export of illicit devices to the EU concerned primarily the defence of the European Union’s global interests and not the objectives of the internal market. In other terms, the concerns of the internal market can be represented at global level, which may, however, require the use of the EU’s external competences in the parallel area of the CCP. This relationship between the internal market and the CCP is well illustrated by the traditional trade defence measures, e.g. anti-dumping, or anti-subvention procedures, using which the Commission would examine the injury caused to EU industries, or it applies the so called ‘Union’s interest test’ in service of economic operators operating in the internal market. In other terms, all measures of the CCP are able to converse specific internal market interest into the context of the international, or to be more consistent with the Court’s wording, global trade relations.
The case has again shown that the most vital questions of the Common Commercial Policy are formulated as questions of competences, which is not surprising in light of the sophisticated nature of the Union itself, the conferral of competences on the Union, or the separation of powers between the Union and the Member States. Although the Treaty of Lisbon made a major step forward to clarify the limits of powers of the European Union, the new provisions of the TFEU can answer only the abstract questions regarding EU powers e.g. that under Article 3(1) TFEU the Common Commercial Policy falls within the category of exclusive competences of the EU. For the Member States, it is more pressing to reach beyond these abstract questions and have the scope of the CCP, namely the concrete subjects which are covered by the CCP, better defined at Treaty-level. This hiatus affects vital Member State interests in international trade and determines the policy leeway and the control available to the Member States. The questions raised in present case show that the Treaty of Lisbon has not been able to end the tedious legal disputes on the separation of EU competences, and it is expected that the material scope of the Article 207 TFEU will raise further questions of interpretation also in the future.
The views expressed above belong to the author and do not in any way represent the views of the HAS Centre for Social Sciences.