European Law: The Impact of Soft Law on the Courts
Recommendations and guidelines are widely used in EU governance. Oana Stefan examines how they are used by EU courts in matters of competition and state aid, areas that lie at the heart of the EU treaties. She sheds light on the legal mechanisms that are at stake, and changes in these mechanisms at the judicial level over time.
The EU can regulate not only through legally binding instruments such as treaties, regulations, and directives—or “hard law”—but also through the various recommendations, opinions, communications, notices, and guidelines issued by the European Commission, known as “soft law.” Contrary to the rules of “hard law”, those of “soft law” lack legally binding force—but not legal effects!
THE INCREASING RECOURSE TO SOFT LAW INSTRUMENTS IN EUROPEAN COURTS
European soft law dates to 1962, when the “Christmas notices” were issued, dealing with commercial agents and intellectual property. Yet the first mention of soft law in Courts occurred only in the 1980s, and has greatly increased over the last decade. Why so?
• the context has recently been favorable to soft law: the White Paper on European governance in 2001 suggested that non-binding legal instruments should be coherently combined with hard legislation.
• the issuing of two soft law instruments in competition law. The Guidelines on fines and the Notice on Leniency notice both directly shape the way that the Commission fixes fines or exonerates whistle blowers. Applicants often make recourse to these particular soft law instruments. Hence, “the growing number of soft law instruments augments the likelihood of litigants bringing arguments based on these type of measures,” says Oana Stefan. Moreover, this tendency will probably soon reach national courts as well. Regulation 1/2003 calls on the courts of the Member States to handle European competition cases. This domain is thus no longer the exclusive domain of European Courts. The number of situations in which national courts are asked to grapple with European soft law is therefore likely to increase.
HOW ARE SOFT LAW INSTRUMENTS USED?
The Grimaldi case in 1989 was a turning point: Salvatore Grimaldi, the plaintiff, suffered from an occupational disease that wasn’t listed in the Belgian Fonds des maladies professionnelles, but was in the European list, along with a specific EU recommendation for Member States to introduce it into their national lists. The Court “took into consideration” this EU recommendation in its decision. It’s a part of European norms: European Courts insist on the distinction between “rules of law(règles de droit) and rules of practice (règles de conduite).” Their decisions cannot be directly based on soft law. “For instance, the Court always stresses the fact that the guidelines do not constitute the legal basis that determines the amount of fines,” says Oana Stefan. Furthermore, soft law cannot depart from hard law or previous case law: “The Courts treat soft law as an integral part […] of the body of European norms ...” Soft law is quoted to reinforce an argument, in footnotes, as part of the description of the legal framework invoked in a case. The creation of legal hybrids : Using the hybridity model recently developed in EU legal studies, Oana Stefan shows that “Courts have created ex post hybridity, the merging of soft and hard law that was not consciously planned by regulators, but evolved as a response to existing needs during the application of norms to concrete cases.” The Courts can decide to apply soft law, combining it with principles such as human rights, legal certainty, legitimate expectations, etc. … This combination of soft and constitutional principles produces legal hybrids.
WHAT DOES THIS LEGAL PRACTICE CHANGE?
• On the individual level: for European courts, the mere existence of notices creates legitimate expectations: for instance, companies “are entitled to assume that they are allowed to conclude agreements” satisfying the de minimis notice criteria.
• On the Commission level: It has to respect its own notices and guidelines. The courts have even annulled decisions from the Commission because they failed to comply with soft law. To depart from notices, it has to justify its action “in a satisfactory way.”
• On national courts: With their new role in competition law, “it would be difficult for national courts to ignore the soft law instruments in which the European Commission explains and further develops certain provisions of hard law,” notes Oana Stefan.
• On hard law: soft law can be used to grant direct effect to a hard law provision. One notice, for example, enables individuals to bring competition cases in front of their national courts and invoke EU hard law. Moreover, soft law can be used as a criterion to review an act of hard law: In BASF, Stefan explains, a decision of the Commission was considered to be ”vitiated of illegality” because of the misapplication of the Leniency Notice.
Based on an interview with Oana Andrea Stefan and her paper “European Competition Soft Law in European Courts: A Matter of Hard Principles?”, European Law Journal , November 2008.
Oana Stefan sees several advantages in soft law: “it can be rapidly adopted and changed, it promotes flexibility and accommodates variation in regulatory preferences.” • In-house counsels and lawyers can use soft law instruments both as a sword and a shield. Companies can, for example, rely on soft law in order to claim reductions in fines or even exoneration from liability. • A warning: The use of soft law is common at the European level, but not necessarily at the national level. There are reasons to believe that not all national courts will rely on EU soft law when judging on competition cases. These discrepancies might mean that companies placed in similar situations could face significantly different decisions depending on the country whose courts they face.
Oana Stefan based her study of the instruments of European soft law on 570 documents from the EU’s online databases of official documents: judgments and orders of the Luxembourg courts, as well as opinions of Advocates General. Keywords and summary sections were used to select documents relating to competition or state aid. Cases dealing with structural funds were not included, unless they related specifically to state aid. This research covers some taxation cases with a substantial state-aid dimension. The research covers a timeframe ranging from October 1953 to July 2010.