On Constitutional Mode

2018 has begun with a constitutional barrage from the Court of Justice. The pace of ground-breaking judgments on crucial points of principle is stunning. And it is very much appreciated that all these decisions are coming from the Grand Chamber, not from modest three judge-chambers with no Opinion of the AG.

The Lenaerts presidency seems to be in full mode now, with a constant pace of relevant decisions in Grand Chamber, important institutional developments (an enlarging General Court and no transfer of references for now) and a big increase in minor cases being handled by chambers of three judges. It seems as if the priorities have been well set at last: big cases must be granted due attention in Grand Chamber, complex cases with no issues of principle should be sent to chambers of five judges. The rest, whether they may be modest or not, should be left in the hands of three-judge chambers.

This is proving to be working so far. The Court is producing a vast amount of obscure decisions in highly technical areas, at the same time that it is managing an ambitious docket at the Grand Chamber with a considerable degree of quality in its reasoning. Only time will tell if this will last and if it is a strategic success story, or whether it is only a coincidence. For the time being, it looks more like a cleverly handled operation from the leadership of the Court.

A quick glimpse into the past two months provides an impressive insight into a Court that is unashemedly picking up the reins of EU constitutional principle-setting.

First, the Court delivered an apparently technical but hugely relevant judgment in the case of X NV, in which it was confronted with a devilish issue unsolved by the EU legislature: the scope of application of freedom of establishment rules in the Services Directive. This might not look like rocket science, but it’s a huge development in practical terms: to say that freedom of establishment rules apply in purely internal situations opens up Pandora’s box for many Member States with decentralized administrations, at the same time that it indirectly expands the scope of application of establishment rules in the Treaties by way of a Directive. And that is exactly what the Court did, to declare that the freedom of establishment provisions in the Services Directive apply to purely internal situations. According to the Court, that’s what the legislature wanted. But in all honesty, the legislature was very opaque about the issue, particularly after the social backlash of the Bolkestein Directive. Now the Court is willing to take the big step (which had been referred to the Court in the past, but which it cleverly rejected) and grant the Services Directive a phenomenal impact on Member States.

Shortly after, the Court gave a major ruling on the judicial review of EU soft law, and on the limits to the use of soft law instruments by EU Institutions, particularly the Commission. In Belgium/Commission the Court had to decide on the ouster clause provided in Article 263 TFEU, which excludes the review of Recommendations from actions of annulment. However, the Court stated that in exceptional circumstances, if a Recommendation can be considered to deploy legal effects, then the criteria of reviewability must be based on substance, not form, and the Union courts will have jurisdiction to hear the case. Thus, Recommendations can be reviewed in an action of annulment, although, in this particular case, the Court was cautious (in contrast with the AG’s excellent Opinion, which proposed an overall reasessment of the issue) and decided that the challenged Recommendation, although it followed a legislative initiative and it included several proposals that had been rejected in the course of the legislative debates, did not produce any legal effects. In any case, the stick and carrot strategy is quite clear and EU Institutions have been warned through the Court’s typically slowly-paced and incremental approach towards principle: soft law is all very well, but as long as it does not distort the legislative procedure and, consequently, the sources of EU law.

And then came the second round of the Western Sahara saga, in which the Court avoided the trickiest issue, but inevitably had to confront the point of direct review, by way of references of validity, of international agreements. The Court replied in the positive, opening the door to the judicial review of international agreements (through the Institution’s decision to enter into the agreement) by way of Article 267 TFEU. AG Wathelet, who considered that the international rules at stake were applicable to the Western Sahara and thus scrutinized them in light of substantive rules of EU and international law, proposed a bold interpretation of the jurisdiction of the Court when reviewing international agreements in light of international law. It’s unclear how far has the Court gone precisely this time, but it is certain that the principle has been laid down.

An apparently obscure case about judge’s remunerations turned into a huge constitutional dispute about judicial independence, in which the Court was happy to enter into. For several years, the Court was reluctant to rule on references about austerity measures in Member States subject to financial assistance programmes. However, in Associação Sindical dos Juízes Portugueses the Court went all the way and provided an intriguing judgment that is certainly not mostly about Portuguese judges, but rather about Polish and Hungarian judges. For the very first time, the Court stated that Article 19 TEU, as a self-standing rule, is a relevant parameter of review. And of all the principles enshrined in Article 19 TEU, the Court focused on independence, which, according to the Court, is not a principle only relevant for Union courts, but also for national courts. Article 19 TEU has thus been transformed into a crucial rule on the judiciary of the Union, understood in a federal sense, as a judiciary of the federation and its States. And the guarantor of the judiciary, the ultimate guarantor, is the Court of Justice. Quite a development indeed.

If you were already entertained, the best is still to come, because today, in Achmea, the Court has gone full circle with its notion of autonomy and has boldly stated that intra-EU bilateral investment treaty arbitration arrangements are in breach of Articles 267 TFEU and 344 TFEU. But in fact, if you read closely (particularly paragraph 59) the reader will notice that the case is not about preliminary references or sincere cooperation, but about the autonomy of EU law. Investment arbitration arrangements among Member States are in breach of the autonomy of EU law. The Court thus shuts down the chance of operating with BITs in intra-EU contexts, which is reasonable in light of developments in EU law, but not so much if the alternative left to an understaking is to rely on national courts’ good will to make references to Luxembourg, which is not an obvious scenario. In addition, the Commission’s selectiveness in bringing infringements against Member States makes it difficult for undertakings to have their cases heard in court, particularly when those cases raise points of EU law. But the principle is clear: no meddling with the jurisdiction of the Court, or otherwise autonomy will bite fiercely.

If the Brexit negotiators had any doubts as to how far the Court is willing to go in protecting the autonomy of EU law, Achmea is a good hint of how a future dispute settlement arrangement between the EU and the UK should not look like.

The trend is impressive. The Court of Justice has picked up the reins of the constitutional agenda, asserting its power as an authoritative interpreter of constitutional principle, willing to protect its jurisdiction and the autonomy of EU law vis-à-vis international courts, Member States and rogue Parliaments and governments interfering with the independence of national courts. It is also becoming a guarantor of the democratic process in the EU, standing as a willing overseer of the Institution’s actions with suspiciously ambiguous instruments of soft law that might distort the result of a legislative debate. If anyone wondered about the Court of Justice’s authority after its judgment in M.A.S., in which it bowed to the Italian Constitutional Court’s critique of past case-law, the early months of 2018 proves that the Luxembourg court is more than willing to pick a fight for the sake of constitutional principle.

So far, the only players who have been spared from the Court’s barrage are national Constitutional Courts. That might explain the long-term strategy behind M.A.S.. It appears as if the Court of Justice is choosing its allies carefully. And in light of the recent developments in Italy, particularly this weekend, keeping the Italian Constitutional Court on board might be a clever move, in case another round of EU constitutional principles are needed against the forces of populism.