Wednesday, February 11, 2009

Why the source of regulation matters

The European Court of Justice yesterday delivered a controversial ruling on the EU's Data Retention Directive, which went largely unnoticed in the British media. The law requires telecoms operators across the EU to keep phone and internet data for up to two years, for the purpose of fighting terrorism and crime.

The UK, alongside Ireland, France and Sweden, tabled the proposal back in 2004. However, the Commission changed the
legal base of the directive - from justice and home affairs to the single market. In EU law, single market issues can be agreed in the Council of Ministers by qualified majority voting, while issues relating to justice and home affairs must be subject to unanimity.

The proposal was therefore agreed in the Council by majority voting, contrary to what the countries tabling the proposal had envisioned.

Ireland was particularly unhappy about this and asked the ECJ to rule that the decision had been made on the wrong legal base.

To little avail, it turns out. The ECJ essentially said in its verdict yesterday that differing rules between member states on data retention would distort the single market, and in the Court's mind it followed that the directive must be an issue for the single market.

Why is this shift important?

Well, we came across this issue when combing through 2,000 impact assessments, for our latest publication on EU regulation.

The impact assessment for the proposal noted that, although proposing the Directive, the UK government did not know what legal base the Directive rested on by the time it was transposed into UK law.

In other words, up til yesterday the Govenrment had no idea whether it in future could be outvoted in the EU on such a fundamental issue as data retention. This is curious, not least given the fundamental importance of the issue vis-a-vis individual liberty.

The Irish government is not happy, neither is the Swedish. As Svenska Dagbladet puts it, "The ruling means that the Swedish government will end up with a law which it doesn't really want" - despite originally tabling the proposal.

Examples like these are unhelpful for those who say that most laws now sourced to the EU would have been introduced anyway - such as Michael Connarty did on the Politics Show in reponse to our report showing that 72% of the regulatory cost in Britain is EU-sourced.

"Probably 90%", he said, of all regulations now attributed to the EU would have existed in the UK anyway, critisising us for including "everything that may at any time have touched a desk in the Commission".

Apart from it being somewhat strange that the Chairman of the European Scrutiny Committee is criticising us for scrutinising EU legislation, his claim is worryingly arbitrary. First, our estimates are based on what the Government's own impact assessments told us about the source - and no IA we came across said anything about commission desks.

Secondly, as the Data Retention Directive shows, once tabled, an EU proposal can take on a life of its own. Legal bases and objectives can change, or worse, governments can be outvoted or subject to complicated backroom deals, with the final product bearing little resemblence to the original proposal.

Fact is, the changed legal base of the Data Retention Directive means that the UK Government has lost siginficant control over its own proposal.

And that's why knowing the source matters.

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