The EU explained

There’s a lot of noise being made about whether Britain should remain in the EU, but facts are thin on the ground. Arguments are being flung around by politicians and business leaders, but they have their own agendas and little is being done to educate those of us who need to decide where to put our cross on the referendum paper on the 23 June.

With this in mind, I’ve dusted off my law text books to bring you a potted history of the European Union and a very brief overview of what it does. I’m not going to try and sway you either way– the politicians are doing enough of that. But I’ll break it down into facts so you can get a clearer picture of what the EU does and what it means to you as an individual and to businesses.

 

A very brief history

The European Union consists of 28 member states. Its origins go back to 1945, when the United Nations was formed to deal with the devastating aftermath of the Second World War. The UN’s 51 member states pledged to promote economic and political stability in an attempt to eliminate harmful national jealousies.

A series of treaties (the European Coal and Steel Community of 1951, the European Atomic Energy Community of 1957, and the European Economic Community, also known as the Treaty of Rome, of 1958) followed, with the intention of promoting free trade and the pooling of resources amongst European states. The simple reasoning behind these treaties was that unified trade would make war not only unthinkable, but materially impossible.

The countries which signed up to these treaties – France, Germany, Italy, Belgium, Luxemburg and Netherlands – became known as the European Economic Community (EEC). The UK declined to participate and instead, in 1959, it formed its own rival organisation with Austria, Denmark, Norway, Portugal, Sweden and Switzerland: the European Free Trade Association. The EFTA failed to thrive, and the UK experienced poor economic growth while EEC countries flourished.

So, in 1961, the UK government applied for membership of the EEC. The application was vetoed by France, as was a second attempt to join in 1967, on the grounds that the UK’s special relationship with the USA would obstruct a European community free from US dominance. In 1972, the UK was finally accepted into the EEC, and enacted the European Communities Act. This act allowed for all rights resulting from European Community treaties to be legally and directly enforceable in UK courts.

The Single European Act of 1986 officially created the single European market and a majority voting system to support it: an area without internal frontiers, in which the free movement of goods, persons and capital is ensured. In 1993, the Treaty of the European Union (the Maastricht treaty) came into force, which created two new ‘pillars’ in addition to the European Communities: the ‘Common Foreign and Security Policy ‘and ‘Cooperation in the fields of Justice and Home Affairs’.

The Maastricht treaty enhanced the role of the European Parliament, and declared that ‘every citizen who is a citizen of a member state is a citizen of the European Union.’ Its powers extended to cover matters relating to immigration and asylum, civil judicial co-operation, and police and judicial co-operation in criminal matters.

Further treaties in 1997 (Amsterdam), 2001 (Nice) and 2007 (Lisbon) defined and refined the scope of the EU’s powers. The Lisbon Treaty incorporated the Charter of Fundamental Rights, which entrenched the rights and freedoms enshrined in the European Convention of Human Rights into EU law and made them directly applicable to all citizens of EU member states.

 

The structure of the EU

By the mid 1970s and throughout the 1980s, the original objectives of the EEC treaties – concerns about war and displacement – had given way to anxieties about the natural environment and the protection of workers and consumers. The disjointed approach of individual member states to these issues resulted in vastly varying standards of goods and conditions that threatened the stability of a common market. The shift in focus resulted in the Single European Act of 1986 and subsequent treaties outlined above.

Today, all member states of the EU agree to uphold a set of fundamental principles and objectives: the promotion of peace and the well-being of the union´s citizens; to provide an area of freedom, security and justice without internal frontiers; to create sustainable development based on balanced economic growth and social justice; to operate a social market economy – highly competitive and aiming at full employment and social progress; to operate a free single market.

The EU’s broad priorities are set by the European Council (or the Council of the European Union), which is made up of the national heads of state or government of each of the EU’s 28 member states, its president (currently Donald Tusk) and the president of the European Commission (currently Jean-Claude Juncker).

The European Commission and the European Council are two separate bodies. The council doesn’t legislate – it can’t make or enforce laws. Its role is to define the priorities and broader policies of the EU.

Like the council, the commission also has 28 members, one from each member state including the president (Jean-Claude Juncker). Although each state is represented, its members are bound to act in the interests of the EU as a whole, not their own state.

The European Commission is the EU’s executive body, and responsible for proposing and implementing EU laws, as well as monitoring the treaties and the day-to-day running of the EU.

The European Parliament is the only body which has members that are directly represented by members of the public in each member state. It has 751 elected members, who vote on laws that affect the daily lives of the union’s citizens, including freedom of travel, food safety and consumer protection, and the environment.

Simply, the council defines the scope of the EU’s objectives, the commission suggests the laws that are needed to implement the objectives, and parliament votes on whether to pass the laws.

The Court of Justice of the European Union (CJEU) consists of three separate courts. The Court of Justice, usually known as the European Court of Justice (ECJ) is the highest court in matters of EU law. It interprets and ensures equal application of EU law across all member states and can only hear applications from national courts, not individuals. The ECJ has 27 judges – one for each member state.

The General Court hears disputes against institutions of the EU from individuals and member states, and the Civil Court hears disputes between the institutions of the EU and its staff.

The CJEU is not the European Court of Human Rights (ECHR). The ECHR is nothing to do with the EU, and can’t adjudicate on its laws.

Finally, the Court of Auditors audits EU finances, and the European Central Bank oversees the euro.

 

The laws of the EU and how they’re implemented

There are two sources of law in the EU. Primary legislation is contained in the treaties outlined above. Secondary legislation consists of the regulations and directives issued by the European Parliament.

A regulation is binding on all member states: it requires no laws to be passed in individual countries to become applicable to citizens of that country. For example, regulation 2015/478 lays down the regulations for imports from outside of the EU which all member states must adhere to.

A directive is binding on all member states, but requires national laws to be passed in order to implement it. Directives are implemented into UK law by enacting acts of parliament to make them legally binding: the EU doesn’t impose the terms, but sets out the goals that must be achieved. The Working Time Directive, for example, requires EU countries to guarantee rights for all workers, including rest breaks, paid annual leave and a limit on the number of hours that can be worked each week. These rights have been implemented into UK law by the Working Time Regulations.

Decisions relate to specific cases and are binding only on those to who they are addressed; this could be a fine imposed on a company for breaching EU environmental laws, or an order to a member state to cease a breach of EU law. Recommendations, opinions and communications are known as soft law and are not binding: they serve to set out values, principles and guidance and provide a basis for further legislation (if necessary).

Any potential breaches of EU law are heard by the ECJ, which interprets the meaning of laws at the request of member states, or decides whether the national laws of member states are compatible with EU law.

The EU can only act within the powers it has been given within the treaties: it can’t interfere with the domestic laws of member states, or adjudicate on cases that are beyond its remit. Similarly, member states can’t interfere with laws that have been agreed to be adjudicated solely by the EU. These areas are customs unions (the single market free trade areas), competition law, marine biological resources (the common fisheries policy), common commercial policy (trade relations with third world countries), monetary policy for the Eurozone members, and international agreements for policies relating to each of these areas.

There are some areas where the EU and member states share responsibility. Member states can adjudicate on laws in these areas unless or until the EU has made decisions in relation to them. These areas include the internal market, social policy, the environment, consumer protection, transport, and matters of freedom, security and justice. However, if there’s a conflict between EU law and national law, EU law will prevail.

 

The judicial process

Contrary to popular belief, individual people or organisations cannot appeal the decision of a national court and refer it to the ECJ.

The ECJ exists to determine questions relating to EU laws. It’s commonly confused with the European Court of Human Rights (ECHR), to which individuals can refer cases if they believe their rights under the European Convention on Human Rights (also, confusingly, ECHR) have been violated. The ECHR (both versions) is entirely separate to the EU and its processes.

Although the ECJ can sometimes rule on cases brought by individuals, circumstances are very limited. An individual or organisation can only apply directly to the ECJ if a member state or an organisation has either failed to act in accordance with EU law, or implemented a measure in breach of EU law, and that act or failure to act directly affects the individual.

More commonly, the ECJ hears cases which have been referred by national courts: usually a question on whether a national law is compatible with EU law (known as a preliminary ruling).

The European Commission or another member state can bring claims against an EU country for failing to comply with EU law, and the ECJ can rule that the fault is put right or impose a fine. The ECJ can also be asked to annul legal acts in member states if they violate EU treaties or fundamental rights.

 

The EU in practice

So, with all that in mind, what does it mean for us and why should we care?

Freedom of movement of goods

The principle of freedom of movement of goods has three pillars: removal of custom duties and prohibition of discriminatory taxation; prohibition of quantitative restrictions; prohibition of measures having equivalent effect to quantitative restrictions.

In other words, no member state can impose penalties, sanctions or restrictions to those buying from outside the country that it wouldn’t impose on those buying inside the country. Not being in the EU means, in theory, UK traders could be subject to custom duties, extra taxation, and limitations on quantities bought and sold that wouldn’t be applied to traders within the EU. Penalties and limits mean increased costs, increased costs mean higher prices for consumers.

 

Competition law

Price fixing and anti-competitive agreements are illegal under EU law. The freedom of movement of goods regulations only apply to member states rather than individual organisations, so EU competition laws provide an extra layer of protection to prevent dominant companies carrying out commercial practices that would have the effect of restricting movement of goods.

For example, if competing organisations in France, Germany and Spain agree between themselves to only sell their own goods within their own country, the effect is to restrict movement of goods and with it the freedom of consumers to choose between the goods available. This will allow manufacturers to fix prices and keep them artificially high, with the consumer losing out.

 

EU citizenship and free movement rights

Citizens of the union have the right to move and reside freely between the territories of member states, subject to certain limitations and conditions. EU citizens can live in another EU country for up to three months without any conditions other than the requirement to hold a valid identity card or passport. After three months, EU citizens are required to meet certain conditions depending on their status (ie, worker, student, etc) and may also be required to meet certain administrative formalities depending on the rules of the member state.

All EU citizens have the right to leave or enter another member state if they have a valid identity card or passport. There are no conditions or formalities imposed within the first three months. After that, rights are subject to conditions including being engaged in an economic activity (on an employed or self-employed basis), provision for comprehensive sickness insurance and resources to ensure they don’t become a burden on the member state. After five years of continuous legal residence, EU citizens will acquire the right of permanent residence.

EU citizens have the right to work in any member state country, without being discriminated against on the grounds of nationality. A worker who is a national of a member state may not be treated differently from fellow workers in respect of any conditions of employment and work, including pay and conditions.

For UK citizens living and working in EU member states, these rights would cease to exist in the event of the UK leaving the EU. It would also throw doubt on the residency status of the estimated two million Brits living and working in other EU countries.

The right not to be discriminated against on the grounds of nationality also applies to EU citizens following a course of study (including vocational training) at a public or private organisation. This includes access to the same tuition fees and financial support as a member of the host country. Currently, UK students can enjoy rights to free tuition in countries including Austria, Denmark, Finland, Germany, Greece, Iceland, Ireland, Norway and Sweden. In Spain, France, Iceland and Portugal, fees range from 12.50 euros per credit to 260 euros per year.

If we’re out of the EU, our students will have to choose between the current £9,000 per year for UK courses or be classed as international students in EU member states and charged the full tuition fee. These can start at around 10,000 euros per year, depending on the country.

 

What next?

These are the broad principles of the EU – in practice, there are thousands of regulations, directives and decisions that affect every area of our lives. Employment law, consumer law and environmental law all owe a huge amount to EU treaties, regulations and directives.

There are currently around 40,000 legal acts in the EU, going back decades. Not all are legally binding – they include decisions (which are binding on those only to whom they relate) agreements and recommendations. But each of them will need to be looked at in the light of a UK exit from the EU – a huge administrative task that no-one knows for sure how to deal with, or what effect it will have.

 

Many thanks to Carlo Petrucci for the lecture slides that formed the basis of this post.