Insight: “EU Institutional Law in Times of Pandemic (Part I): the rule of law and the limits of law” by Dolores Utrilla
1. Introduction: EU Institutional Law in times of pandemic
While the manifold measures adopted by the EU in response to the COVID-19 pandemic have prompted extensive commentary and research by legal practitioners and academics, the overall meaning and implications of such measures from an institutional perspective is yet to be considered and reflected upon. This is undoubtedly an arduous task for the months and years to come, as the dust settles and cross-sectoral, structural transformations emerge from what were conceived mostly as sector-specific, conjunctural measures.
This Insight contains the first part of a preliminary attempt to contribute to that task by identifying some of the key (and ongoing) transformations triggered by the COVID-19 crisis in the area of EU institutional law. Here, this is understood as the part of the EU legal order dealing with the internal functioning of EU institutions, agencies, and bodies (including their decision-making processes and their budgetary foundations), as well as their mutual interactions and the overall relationship between the EU and its Member States, and among the Member States themselves.
More precisely, the impact of the COVID-19 pandemic on these matters will now be addressed from the cross-cutting perspective of the role of law, that is, the functions performed by legal rules and principles within the EU legal space. It will be argued that the ongoing crisis is fostering certain structural transformations as regards the mechanisms for enforcement of the rule of law (section 2 below) and also as regards the limits of law to steer the action of EU, national, and private actors (section 3 below). Another Insight on the challenges and transformations of EU institutional law from the perspective of the actors and interactions featuring the European composite legal order will follow shortly.
2. The Rule of Law
One of the most visible consequences of the COVID-19 pandemic has been the contribution of emergency powers provided by national legal orders to the rule of law backsliding already undergoing prior to the crisis in certain Member States, namely Poland and Hungary. A forthcoming Insight by Anjum Shabbir will address the human rights side of this problem. Here, attention will be drawn specifically to the way in which the COVID-19 pandemic is boosting the use of conditionality mechanisms linked to EU funds as a tool to foster respect for the rule of law.
The ‘no rule of law, no money’-logic has already been present in the European agenda for some time. In 2018, the European Commission strongly advocated for it in a (still pending) proposal for a regulation on the protection of the EU’s budget in case of generalised deficiencies as regards the rule of law in the Member States, which has recently been modified to extend its scope to the proposed EU Recovery Instrument.
In turn, this extension is linked to the fact that rule of law conditionality for the disbursement of European funds has been at the heart of interinstitutional discussions on the EU post-pandemic recovery plan over the past few months. On Tuesday 21 July 2020, and after its longest meeting in 20 years, the European Council reached an agreement on the two crucial tools for post-pandemic economic recovery in the EU, namely (i) the Recovery Fund ‘Next Generation EU’ and (ii) the updated proposal for the next long-term EU budget or Multiannual Financial Framework (MFF). The deal contained an apparently diminished degree of ‘rule of law’ conditionality by comparison to the Commission’s ambitious proposals, strongly supported by the German Presidency of the Council. The European Parliament’s Negotiation Team immediately responded by welcoming the agreement, but showed dissatisfaction with the agreed package on account of the lack of hard conditionality regarding rule of law requirements for EU funding.
In parallel with these Council-Parliament conversations, other EU institutions took steps advocating for different forms of rule of law conditionality for the access to EU money. In late July 2020, the Commission decided to reject the applications for funding under the twinning programme of the Europe for Citizens project in respect of six Polish towns that had declared themselves ‘LGBTI-free zones’. This was the first-ever Commission Decision with financial consequences in the context of the worrying steps toward LGBTI discrimination taken by Polish local authorities, in what can be understood as a manifestation of the Commission’s ‘no rule of law, no money’-logic. Soon afterwards, on 7 October 2020, the European Parliament adopted a broader legislative initiative for the establishment of an EU Mechanism on Democracy, the Rule of Law, and Fundamental Rights. The envisaged mechanism seeks to protect the EU legal order and the fundamental rights of its citizens from the deterioration of Article 2 TEU values. As explained in this Podcast by Michal Šimečka MEP (the initiative’s rapporteur), the proposed mechanism was based on a new ‘Annual Monitoring Cycle’ including preventive and corrective measures, ranging from country-specific recommendations to budgetary conditionality.
On 5 November 2020, the Council and the European Parliament reached a provisional agreement on the general regime of conditionality for the protection of the EU budget proposed by the Commission in May 2018 to address the deficiencies related to the rule of law (modified to cover the post-pandemic economic recovery package). As explained in this Analysis by Aleksejs Dimitrovs, the agreement essentially maintains the Commission’s proposal, with an extended scope of application but with one important caveat: decision-making modalities are the ones agreed by the European Council. This means that the Commission’s proposals for implementing acts with financial measures to address the rule of law breaches in a given Member State will have to be approved by the Council by qualified majority (and not by reverse qualified majority, as proposed by the Commission and supported by the Parliament). Launching the procedure warrants two preconditions, namely that: (i) there are breaches of the principle of the rule of law, and that (ii) such breaches affect or seriously risk affecting the sound financial management of the EU budget or the protection of the financial interests of the EU in a sufficiently direct way.
Once adopted as a legally binding mechanism, this conditionality tool will be the first general instrument at the disposal of EU institutions specifically designed to prevent access to EU funding from Member States breaching the rule of law, thereby enhancing the enforcement of this paramount legal principle. However, the real efficiency of such a mechanism, as well as its consequences for legal certainty, will very much depend on how it is applied in practice by the EU institutions (see for example here, here, here, and here).
3. The limits of law
While fostering enhanced mechanisms for implementation of the rule of law in the sense described above, the unprecedented situation of emergency posed by the COVID-19 pandemic has simultaneously challenged the ability of EU law to accommodate the urgent needs posed by the crisis and to effectively govern the actions adopted by the EU institutions, as well as by other public or private actors, in response thereto. The mismatch between the ordinarily applicable rules and the scenario to which they were meant to be applied prompted a flexible approach to the interpretation and application of pre-existing legal rules, as well as to the creation of new ones. Two phenomena appertaining to the edges of the legal order have played a central role in this area, namely the rise of EU executive discretion (section 3.1 below) and of EU soft law (section 3.2 below).
3.1. The rise of EU executive discretion
Even in ordinary times, EU policy making is a highly discretionary space. In extraordinary (emergency) times, this is even more so. It is therefore not surprising that the COVID-19 pandemic has brought to the limelight – yet again – the discretion of the EU executive and the limits thereof.
This is particularly so regarding the European Commission, whose energetic and decisive approach to the crisis has prompted a debate primarily focused on its efficiency, rather than on its legal boundaries. On a more reflective note, however, the responses provided by the Commission to the ongoing pandemic apparently show that, in many instances, there were no legal provisions (narrowly) constraining the value judgments contained in the Commission’s choices as to how the crisis should be fought in the health, economic, and social arenas. A similar situation exists in respect of the ECB, although deeper reflection on the limits of its discretion in times of emergency has existed from the very beginning of the COVID-19 pandemic, as a result of the experience of the previous financial crisis and the consequent judicial saga – culminating, for the time being, in the BVerfG’s Weiss judgment.
In addition to its quantitative and qualitative importance for the management of the ongoing crisis, the use of discretionary powers by the EU executive during the pandemic is particularly relevant because it clearly points to the weakness of current procedural rules as instruments to shape the exercise of discretion in times of emergency. Indeed, one of the most prominent features of emergency law is the trend to neglect or to soften ordinarily applicable procedural requirements, which in turn results in an increased need for substantive legal tools steering the exercise of executive discretion in this kind of scenario. Likewise, the use of self-binding instruments such as soft law, despite being important to put certain boundaries to the exercise of clearly delineated discretionary powers, is not enough to constrain discretion whenever this was nearly unlimited in the first place.
What we have experienced during 2020 leaves no room for doubt that executive discretion is essential in order to adapt the legal order to the changing needs of the public interest, even more so in times of emergency. Discretionary policy choices made by the EU executive over these months have undoubtedly saved lives, jobs, and companies. However, and as argued early on by Joana Mendes, this landscape of enhanced margin of manoeuvre for the EU executive also calls for a serious reconsideration of the scope and limits of executive discretion within the EU legal order. Ensuring subordination thereof to a pre-established framework of legal provisions is a key requirement lying at the very heart of the European integration: it stems not only from the rule of law, but also from the principle of representative democracy on which the functioning of the EU as such is founded.
3.2. The new youth of EU soft law
To a very large extent, the EU (as well as its Member States) is dealing with the COVID-19 crisis through soft law instruments, that is, rules of conduct which, in principle, have no legally binding force but which nevertheless may have ‘practical’ effects (in the classical description by Francis Snyder). According to a recent study by Oana Stefan, 62% of the 384 COVID-19-related documents published on Eurlex up to June 2020 are soft law measures. Some examples thereof are the documents regarding coordination of economic responses to the crisis, management of clinical trials, restrictions on non-essential travel, temporary flexibilisation of State aid rules, relaxation of banking supervision standards, dividend distribution policies for credit institutions, moratoria in loan repayments, progressive lifting of containment measures, safeguarding health in air travel, economic recovery in the tourism and transport sectors, and the use of mobile apps to fight the spread of the pandemic.
Especially during the first months of the pandemic, the use of soft law proved to be a crucial instrument for reacting in an expeditious and flexible fashion to the fast-moving challenges posed by the crisis. Yet, this unprecedented large-scale and detailed use of soft law, a legal tool suffering from important legitimacy and accountability drawbacks, warrants a renewed debate on its legal framework within the European legal space, as already suggested by some prominent scholars. This need stems most prominently from the fact that the COVID-19 experience has made apparent, like never before, that in spite of lacking legally binding force, pandemic-soft law is clearly leading to other kinds of legal (and not only practical) effects. To quote just some of them, these instruments are apparently giving rise to legitimate expectations and conditioning the way in which public and private actors behave in a landscape governed by scientific and economic uncertainty.
Together with the need to clarify the processes through which soft law is issued, one of the main issues posed by this intensive use of non-binding measures is their reduced degree of justiciability, as manifested primarily (though not only) in the difficulties of challenging them before courts. These obstacles are apparent when considering the rules and the case law governing the admissibility of actions against soft law instruments before both national courts and the CJEU (on the latter, see this recent paper by Giulia Gentile). This state of affairs is thoroughly dysfunctional if it is to be applied to a scenario such as the one arising from the COVID-19 outbreak, where obstacles to judicial review of these measures may hamper the right to effective judicial protection to an extent unknown to date. The forecast worsens whenever the use of soft law instruments (and the resulting restrictions on judicial review) follows a phased pattern, with non-binding measures by national authorities relying directly on recommendations or guidelines issued by the EU institutions during the crisis.
The positive note is that, for that very reason, the current developments in soft law governance may represent an unparalleled opportunity to rethink the balance between non-binding instruments and effective judicial protection.
In this regard, the experience of the COVID-19 pandemic may, firstly, lead the CJEU to revisit its case law regarding the admissibility of actions for annulment against administrative action adopted in the form of non-binding instruments. At the very least, the likelihood of a rise in the number of attempts by affected parties to bring direct actions against soft law instruments will place the CJEU in an optimal scenario to revisit its ERTA (C-22/70) and Grimaldi (C-322/88) doctrine. This would be in line with the solution suggested by Advocate General Bobek in his Opinion in Belgium v Commission: in view of a changing legislative landscape, marked by a proliferation of soft law instruments, access to the EU Courts should be adapted in order to respond to those developments, recognising the fact that there are norms generating significant legal effects that find themselves beyond the binary logic of binding/non-binding legal rules. In fact, this would not be contrary to Article 263 TFEU: it must be recalled that this provision excludes judicial review of acts without legal effects, which is quite different to excluding acts which, even lacking binding force, do have legal effects vis-à-vis third parties.
Secondly, in view of the steering function of many EU soft law instruments adopted in response to the COVID-19 crisis, and their subsequent reception by Member States through hard law measures, it is reasonable to expect that challenges before national courts may give rise to a relevant number of requests for preliminary rulings on the validity of the underlying EU recommendations or guidelines. It remains to be seen whether and how the Court of Justice will actually make use of this mechanism to scrutinise EU soft law instruments. In spite of its potential lack of coherence from a systematic perspective (according to some authors: see for example this paper by Roberto Mastroianni), this course of action would be worth exploring as it may be useful to compensate for the Court’s strict admissibility test when it comes to actions for annulment.
Lastly, part of the soft law measures adopted by Member States in response to the COVID-19 crisis are in turn based on soft law instruments adopted by the EU institutions, agencies, and bodies. This raises the question of whether such national non-binding rules and/or decisions amount to measures adopted ‘in implementation of EU law’ and, therefore, whether they trigger the application of the Charter. That being so, this would offer the Court of Justice the opportunity to rule on whether shortcomings under national law for bringing direct actions against domestic soft law measures are in accordance with the right to effective judicial protection under Article 47 of the Charter. As I explained elsewhere, the potential effects of the Charter on the admissibility before domestic courts of actions against national soft law based (in turn) on EU soft law would be of particular relevance because it would facilitate indirect scrutiny of EU non-binding measures by the CJEU through the preliminary ruling procedure.
Dolores Utrilla is an Associate Professor at the University of Castilla-La Mancha and an Assistant Editor at EU Law Live.