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Wednesday, April 30, 2014

ECJ throws out UK's FTT challenge, raising questions about whether it can be trusted to police the EU treaties

This morning’s ECJ judgement that the UK’s legal challenge against a proposed Financial Transaction Tax (FTT) is premature was what many had expected. The UK had challenged the decision to authorise the use of so-called ‘enhanced cooperation’ (where a smaller group of EU members can move ahead with legislation even if it does not have broader EU support) for the FTT. For the UK Government, today’s result is not what it had hoped for (an annulment of the decision to authorise enhanced cooperation), but neither is it the worst outcome.

Today’s ruling effectively said that the court could not rule on the UK’s substantive objections to the FTT since the final shape of the tax is unknown and subject to further negotiation between those taking part. This does not prejudice the UK’s ability to mount a second challenge once the final FTT has been agreed and its implications are clearer.

The ECJ judgement (in full here) said:
“It is clear that the objective of the contested decision is to authorise 11 Member States to establish enhanced cooperation between themselves in the area of the establishment of a common system of FTT with due regard to the relevant provisions of the Treaties. The principles of taxation challenged by the United Kingdom are, however, not in any way constituent elements of that decision.”

“The two pleas in law relied on by the United Kingdom in support of its action must be rejected and, accordingly, that the action must be dismissed.”

“Those effects are dependent on the adoption of ‘the counterparty principle’ and the ‘issuance principle’, which are however not constituent elements of the contested decision, as stated in paragraph 36 of this judgement.”

“That review should not be confused with the review which may be undertaken, in the context of a subsequent action for annulment, of a measure adopted for the purposes of the implementation of the authorised enhanced cooperation.”
However, while the UK will get a second stab at challenging the FTT, today’s ruling poses major questions about how ‘enhanced cooperation’ works and how it is used in the future. The EU Treaties stipulate that authorisation of enhanced cooperation (which is given by a qualified majority vote of all EU member states) is conditional on the proposed legislation respecting the integrity of the single market and not impacting on those not taking part – this is meant to be a legally enforceable safeguard for those countries not participating.

Enhanced cooperation is a relatively new phenomenon that has only been used twice before (for a European Patent Office and divorce law), but it could have huge implications for the future of the EU and Britain’s place within it. In an increasingly multi-tier EU, enhanced cooperation may be used more often by countries that want to integrate further. For those that don’t wish to follow suit, it is vital that their rights in the single market are respected.

Let us start with an analogy. Imagine you had agreed to let your neighbour build a new house based on a certain agreement and set of plans. Halfway through building it becomes clear that he has adopted a new plan which will hamper your view or infringe on your land. You appeal to the council but they rule that it is too soon to tell where the house will end up and that they can only rule when the house is built. Tearing down a house is much messier and more costly than stopping one being built in the first place. Hardly seems efficient or fair, does it?

Yet, in this case, this seems to be what the ECJ has done. It has effectively decided that it could not decide whether the decision to authorise the FTT proposal does respect the rights of those not taking part because the final outcome of the FTT negotiations cannot be known now. This is strange because this is by definition true in pretty much all cases of enhanced cooperation, since the countries involved negotiate the finer points of the legislation amongst themselves after getting approval to go ahead.

While this may seem legalistic and technical it raises a fundamental question: are the authorisation criteria for enhanced cooperation worth anything? Surely, any decision on the use of enhanced cooperation should be made on the basis of the proposal that is on the table, irrespective of whether it might change (for the better or worse) by the time it is finally agreed as a legal act, which could still be challenged in any case. The potential spill-overs should be examined before those member states not involved give those involved the go ahead. Otherwise they are ultimately authorising an unknown piece of legislation, which once it has built up a political head of steam could be much harder to challenge later on.

By its very nature, enhanced cooperation will be used for controversial proposals but today’s ECJ judgement has increased uncertainty surrounding this procedure (it was already uncertain) and undermines the logic of the process for authorising its use. We cannot know what the long term implications of this will be for the EU and the UK but they could be important.

As for the FTT, the UK will have another chance to challenge the final legislation (which may end up being watered down anyway due to concerns from those taking part) but by the time it gets to that point, there will be so much political capital invested in it, it may make it harder for the court to strike it down, even if the UK has good legal grounds.


Rik said...

From a pure legal pov I cannot see so much wrong in this ruling.
The tax is simply still very unclear.

However (and a lot of howevers).

This is a judgement that won't make the Court itself very popular. It put itself in the middle of a political discussion.
Probably better if it had made it as clear as possible what is and what isnot allowed. It simply goes confrontational here with the UK (and likely a few others). Never start a war if you donot have to and certainly one you are likely going to lose when it comes to it.

The law itself for what is known now looks moronic tbo. This legislator hasnot really got a clue about the technical matter at stake and it shows.
Looks also in the public opinion for a not unsubstantial part political facesaving.
Would have been a lot better if it was sort of replaced by legislation re HFT that is much more urgent and really needs legislation. And the public would probably have bought that.

The ECJ simply cannot be trusted. Period. Its legal skills are pretty poor for the highest Court in Europe to start with. And simply because of the pro-integration stuff one of the basics of the rule of law is simply missing. It gives (usually the strongest party EU 'government) standard an advantage. Simply no fair trial between equal parties.
And it is part of a political system that is coming under heavy scrutiny and make itself look as one of its defenders.
All things a decent court should stay away from as much as possible.

Hard to see how the Court itself can be reformed. Things donot work that way even if the pro-integration stuff was skipped. Organisations go back to their normal (may be not completely but usually a lot). And the normal is clearly pro integration.
You need a totally different set up. Like with the subsidiarity Court OE suggested.
Or clean up the whole court from top to bottom at the same time of the culturadjustment. All next to skipping the pro-integration part (and a few other things).

The good news is the legal organisation is this way also on the agenda. Courtsystems usually arenot.

christhai said...

It is time for the UK to leave the EU.

Nothing, no institution no spokesman for the EU is anything else but a fanatic.

All of us know where fanatics take us.

Enough - it is clear that our once trusted Westminster Parliament could be relied upon to take the best decisions for the British people. But they have been corrupted by the hyper-corrupt EU.

UKIP is the ONLY way out.

Freedom Lover said...

In fact, all the more grounds to leave the accursed EU!

But short of that, I wonder how many of the bonus-seeking elite in the City of London will suddenly change their adoration of the EU to rejection of it if the FTT tax when it comes begins to hamper their various money-making schemes?

Of course, this is all good grist to the mill for an EU-rejectionist party to take advantage of whenever an election is on offer - eg the one on May 22nd!

Jesper said...

It might be a classic example of rule of law supplemented by rule of lawyers.

Offer enough incentives and lawyers will find ways around any and all laws. The ECJ judgement ensures plenty of work for well paid lawyers - happy days for the lawyers. Cost-savings for all except the connected.

Average Englishman said...

All three bloggers currently posted are correct:-

@Rik - The ECJ cannot be trusted.
@Christhai - UK out is the answer!
@Freedom Lover - This will help the 'UK out' cause. By hurting the wallets of those in the City of London the ECJ will convince yet more influential people that UK must leave.

It was all so boringly predictable. As christhai said, the fantics are in charge and nothing will stop 'ever closer union' no matter what. The funny thing is, the more that someone tells the Average Englishman what to do, the less he is inclined to do it. Ask him nicely and give a good reason is one thing but not 'do as you are told because we know better'. Napoleon, Hitler and many others have tried and failed with this tack and the EUSSR Commissars with their friends in the ECJ will do no better.

Roll on the May elections!

christina speight said...

So far unanimity that the ECJ has proved something we all knew already that THE LAW is not the ECJ's concern - it never has been. It is only the relentless progression to ever closer union that concern it in the least.

The ECJ is perhaps the ultimaste reason why we must quit the EU at the earliest moment. Unfortunately this will not carry much weight with the majority of voters for the abstract concept of 'rule of law" is not a prime motivator.

Denis Cooper said...

To be honest, I read the headline and laughed out loud.

Of course the ECJ cannot be trusted to "police" the EU treaties in the way that you would like; the eurofederalists on that court will always do what they choose to believe the member state governments want them to do, which is to promote an unremitting unlimited and largely uncontrollable process of "ever closer union".

It has always been thus, right back to 1964 when the ECJ first deduced that what the member state governments had really wanted to do when they agreed their treaties was to set up a new EC legal order superior to their own national legal orders, a radical assertion which had no explicit basis in those treaties, and indeed still has no basis in the EU treaties despite the attempt to enshrine it in Article I-6 of the EU Constitution.


"The legal doctrine emerged from the European Court of Justice through a number of decisions."

From Declaration 17 attached to the Treaty of Lisbon:

"At the time of the first judgment of this established case law (Costa/ENEL,15 July 1964, Case 6/641 (1) there was no mention of primacy in the treaty. It is still the case today. The fact that the principle of primacy will not be included in the future treaty shall not in any way change the existence of the principle and the existing case-law of the Court of Justice."

And of course those leading all three of the old pro-EU political parties in the UK have totally accepted that doctrine invented at the ECJ, even to the point where they will whip their MPs to vote against any assertion of the continuing sovereignty of our national Parliament and will brief journalists that a proposed amendment to a Bill would be "illegal".

Only a fool would expect justice from the EU's Court of Justice if what they want goes against its primary purpose, which is not to provide fair arbitration of any disputes which may arise but to constantly, stealthily, further the legal subjugation of national authorities to proto-federal EU authorities.

Denis Cooper said...

"Enhanced cooperation is a relatively new phenomenon"

Well, only insofar as its introduction by the Amsterdam Treaty is relatively new, and then the abolition of the power of any member state to veto it by the Nice Treaty is relatively new, and then it being made a bit easier to initiate by the Lisbon Treaty is relatively new.

Now let's think about which of the UK political parties bears most responsibility for allowing these changes: would it be the Tory party under Major, because it was his government that started negotiations on the Amsterdam Treaty in March 1996 and left it for the Labour government under Blair to finalise and get approved by Parliament, without a referendum of course; or would it be just the Labour party, because it was the Labour government which agreed to the Nice Treaty and the Lisbon Treaty and got them approved by Parliament, without any referendums of course; or would it partly be the Tory party which then agreed to swallow the Lisbon Treaty whole as a fait accompli, even though they had repeatedly said that it would give too much power to the EU, and it would lack democratic legitimacy in this country unless it had been approved by a referendum?

I know, why don't we blame them both, and chuck in the Liberal Democrats as well because they will always go along with these things; so if we don't like these things happening, which party should we vote for?

Rik said...

If you donot mind me eleborating on that.
Rule of Law as a subject is way too complicated for the average voter fully agree.
So if you want to attack the lack of it in the EU you have to do that more indirectly (and in more popular wording).

- by attacking the whole thing (just go for the whole EU elite. Elite does very well: selfproclaimed, burocratic, unelected, bit of incompetence);
- a funny (as in undesired) consequence of it;
- combination.

Undesired consequence is probably the most interesting in our present discussion.

1. First of all determine how the complete playingfield looks. Population fed up with traditional politics of which the EU is a centrepiece.

2. Where are you in the process.
Looks like the population is actually at this moment making the move. IP at 38% in some EP polls and going like lightning.
People are ready for EU negative news.

3. What is the other side doing.
Heavily confused to say it friendly (aka a bunch of headless chickens). Always put a mediocre enemy under stress he almost guaranteed will make all sorts of mistakes. And that is what they are doing now. Example: the present stupid counterproductive attacks on your friend Nigel. Started they attck and Farage goes 10% roughly up in the polls and they donot adkjust because it is not working (what did Einstein say on this).
Effectively they are moving all over the place without any long term stratregy.
Long term is essential here. Let the other side make a complete long term mess of it and you can start wiping it up somewhere further along the line.

4. Looks like an ideal climate to go in with a fully stretched leg btw (better even 2). (Potential) IP voters will definitely like it. Can play a bit dirty rather will do you more good than bad.
People like a Roy Keane tackle on a person they donot like or even hate.

Rik said...


5. Translate cases in real live stuff. No overruling of own judiciary, but more: allowing a bearded terrorist with 14 wives and 78 children all on UK (UK is essential here) entitlements plus taxpayer paid legal assistance and impossible to get out of the country. terrorist (especially the bearded ones and pedophiles always do the trick (of the dirty old man type preferably, the latter).
Serious stuff btw not wrong parking. You look like an idiot when you bring that up (like the media now with all the Nigel&Co stuff).

6. Establish target group. Who you want to adress. Sometimes your own voterbase. Sometimes a potential new voterbase. Like fruitcakey biased Labourvoters (roughly half of them probably).
Or both.

7. See if the case can properly be translated in real live stuff. Will it work with the target group?
Summarize in good headlines. Stress on the irritating stuff in the case (not on the most legal relevant for instance).

8. Repeat message. Could be done in several ways. As simple news but also parliamentary discussion, proposals for new laws etc. You need a repeat to stick things in people's mind.

9. Actually this is not done badly here.
However big finance is a completely lousy topic for the average voter. Personal finance would be much great.
Of course this has an indirect effect but complicated indirect effects are pretty lousy to communicate as well.
Lousy topic to communicate to the average voter.

10. However there are no 1000s of cases to choose from. So it might be the best there is. If you wait for the optimum case it might be 2038 or so.

11. However great to put an important part of UK business behind you. They will not like it and will rethink their views of EU, reform and that sort of things.
This targetgroup needs a somewhat other approach.

12. Repeat the procedure. Which could mean also less great cases should be used. However never use absolute rubbish it simply works always counterproductive. Or you should be able to spin the rubbish in something useful.
Effectively here it is part of a bigger battle of course.

However have to be very careful with that.
You repeat to tank the image of the other side. Being found out as a liar yourself can destroy a lot of good work. Avoid when anyway possible.

Especially here, everybody main stream is looking for mistakes.

Rik said...

Knowing how to get things properly in the media cn be essential.

EU general media strategy. Utter rubbish. Worked well before when they were not under fire but now it is counterproductive.
-It makes the news that is about it.
-News however is totally boring (big minus).
-Often counterproductive. The United Europe stuff hardly will get them new votes while a lot of people will run the other way when they hear it.
-Their 'faces' look crap unappealing to most voters (spread over Europe not in one country anymore).
-Not adjust properly when the enviroment change.
-Moving all over the place. Nobody really knows which direction it will take so will go for the emotional argument (which is now basically negative).
Nutshell: Not attractive and donot know the market.

2. PutinNews.
He has clearly less lies than the other side however still get the bad press internationally.
There is a huge anti-Russia bias. Should have worked around that.
Would have worked much better if he had built up a network, that would give him a platform.
Could have been fully unpartial. But that would have been a lot better than now for him. People have a strong anti-Russia bias.
Putin had better played around that and in a more structural way not ad hoc like now.

Now it goes via media like RT which are a joke.
If you use own media make them impartial and quality. Takes some time but people will remember it in the long run.

Main mistake nearly all traditional media make. They only go for quantity. Like many viewers.
Newspapers should have looked much more to who wanted to pay for news and how much (quality) or who wants to pay for ads and how to make their readership more attractive for advertisers. So more Facebook or more specialised upmarket (and likely hispeed).
Same here for a Putin, go more for people who make the trend (determine public opinion). 100 businessleaders or important thinktanks are a lot more important than 1000000 fruitcakes like now. Fruitcakes work Redingish the rest pulls away because of them. A reverral by an idiot is a reason not to look. But news has to be quality. More like CNN did in 1990 Best coverage, fastest etc, quality reporters (no guys that look to have taken 2 gram coke before the show) and now completely has rubbished.
No dodgy 'translations' like AlJazeera as well.
So mainly wrong target audience and not playing around the bias.

3. US/EU media strategy there.
Works fine towards the media. But was a disaster in the making. It should longere term work towards the population.
They have been spinning the thing from the beginning and an awful lot on top of that.
This is a long term event spinning is very difficult there.
Spinning was over the top and not coherent (Putin undoubtedly also spinning is doing technically a much better job, much more difficult to find the gaps).
Too many PR mistakes rubbish mails, F the EU, Neo Nazis, very decent guy at the other side on top of that. Rubbish was certain to come out. As we see first via comments alternative sources. Now quality media are catching up.
Kerry believing that the majority of the people will believe him basically without any proper evidence is moronic. Too many things have happened.

Nobody at home gives a damm about the Ukraine (hard to hide it costs money (home money) as well.
Difficult sell from the start. was from that view always likely to end as a black eye like Syria. Should have kept a much lower profile. Repeating mistakes is even a more lousy strategy yhan hope.

More important focus is totally on the traditional media. But nearly all alternatives and most of the comments are going the other way. Media works when people are following the media, but if not you have to adjust.

Anonymous said...

More great posts Denis.

The ongoing bizarre findings of the ECJ (such as this one and the case last year of the UK v Iceland) underline to me the illegitimacy of the ECJ and the fact that it is a kangaroo court that is undermining our laws and sovereignty.

International finance and corporate law is based on UK law as it works well. The ECJ is ruining business confidence in the EU.

I reject all of its findings and will never respect it as I have never been asked if I wanted to surrender our laws in favour of theirs.

UKIP for me to get us out of this nightmare that our own politicians have signed us up to without our permission.

MPs and Lords : You have to face the music and go on trial once this is over. You have betrayed us.