By Dr Katarzyna Granat (Durham Law School, Durham University)
This note analyses three opinions of the Advocate General (AG) Kokott in two preliminary references of UK High Court of Justice (C-547/14 Philip Morris and C-477/14 Pillbox 38) and the action for annulment brought by Poland (C-358/14) against Directive 2014/40/EU concerning the manufacture, presentation and sale of tobacco and related products. Among a number of aspects such as the legal basis, proportionality and fundamental rights, the AG assessed also the compatibility of the Directive with the subsidiarity principle. This note will deal specifically with this issue.
In April 2014 the EU adopted Directive 2014/40/EU (replacing the older Directive 2001/37/EC) based on Article 114 TFEU with the aim to ‘facilitate the smooth functioning of the internal market for tobacco and related products, taking as a base a high level of protection of human health’ (Art. 1). The novelty of the Commission proposal involves a number of elements. First, the Directive prohibits cigarettes with characterising flavours (e.g. menthol) (Art. 7). Second, it demands health warnings on packages of tobacco and related products, which consist of a picture and text health warnings covering 65% of the front and back of the packages (Art. 10). Third, it provides safety and quality requirements for electronic cigarettes (Art. 20).
The AG’s opinion
All the three cases raised the issue of the subsidiarity principle with regard to various aspects of the Directive: in relation to the prohibition of menthol cigarettes (Philip Morris and Poland v European Parliament and Council of the European Union) and the new rules on e-cigarettes (Pillbox 38). Because the Philip Morris and Pillbox 38 cases concern subsidiarity ‘only briefly’ (para 273 and para 159 respectively) the AG gave the most extensive explanation in the Polish case and referred to it for more details in the two other cases.
The AG started by indicating that the internal market competence is shared between the EU and the Member States and the principle of subsidiarity offers guidance into the level that is more appropriate to achieve the objectives (para 139). The subsidiarity review should include an analysis of the substance of the EU measure and of the statement of reasons (para 140). Within the substantive test, the AG outlines two stages: a negative and a positive one (para 142). The ‘negative component’ seeks to establish whether EU institutions act ‘only if and in so far as the objectives of the proposed action cannot be sufficiently achieved by the Member States’, while the ‘positive component’ allows EU action ‘only if and in so far as the objectives of the proposed action can, by reason of the scale or effects of the proposed action, be better achieved at Union level.’ According to the AG it is a ‘single question from two different angles, namely whether action should be taken at Union level or at national level in order to achieve the envisaged objectives’ (ibid).
The AG started with the negative limb of the subsidiarity test taking into account three aspects: 1) the technical and financial capabilities of the Member States to resolve the problem; 2) the national, regional and local features central to the issue at stake; 3) cross-border dimension of the problem impossible to address at national level; the last being one of the most important. (paras 151-153) The Opinion indicates that since the aim of Article 114 TFEU is to eliminate obstacles to cross-border trade, ‘as a rule’ Member States cannot sufficiently achieve it. (para 154) The main counter-argument of Poland here was that menthol flavoured tobacco does not have a cross-border dimension due to diverse consumption patterns and economic structures among the Member States; the biggest markets in this respect (Poland, Slovakia and Finland) can provide for ‘health-related action’ at the national level. (para 155) The AG did not agree with this reasoning pointing out that the objective of the Directive is to remove obstacles for the trade of tobacco products ensuring simultaneously a high level of health protection and this can be done only when all characterising flavours are prohibited. (para 157) Moreover, differences in the Member States do not matter as such. The core of the problem is whether there is or will be cross-border trade in this area and whether the obstacles can be ‘efficiently’ removed by the Member States on their own. (para 158) The AG concluded that there exists a ‘lively’ cross-border trade in the tobacco market, with differences between Member States on the rules of characterising flavours, and hence the EU did not commit a manifest error in the assessment of facts by the appraisal of the question of subsidiarity. (para 160)
With regard to the positive limb of the subsidiarity test the AG frames it as a question of ‘added value’ meaning that ‘the general interests of the European Union can be better served by action at that level than by action at national level.’ (para 162) Although, as the AG points out, this might be an ‘automatic’ case with regard to Article 114 TFEU legislation, it still demands a quantitative and qualitative test. (paras 164-165). The AG established that the market at stake has a ‘substantial trade volume and affects the lives of millions of Union citizens every day’ (‘quantitative test’) and that the issue at stake is ‘beyond national boundaries’ confirming a common European interest (‘qualitative test’). (para 167) Again, no manifest error of assessment was at stake and hence the Directive passed also the positive aspect of the subsidiarity test. (para 168)
Finally, the AG moved to assess the so-called ‘procedural subsidiarity’ since Poland claimed that the Directive lacks sufficient subsidiarity justification, more specifically that only one recital of the Directive’s preamble deals with subsidiarity. (para 175) The AG confirmed that the Directive only reproduces the text of Article 5(3) TEU. (para 177) Despite this ‘empty formula’ used by the EU legislator, the AG found other recitals in the Preamble that do not directly reference subsidiarity but rather justify the use of Article 114 TFEU; they are nonetheless relevant to the issue at stake due to the overlap in the reasoning applicable to internal market and subsidiarity provisions. (para 180) Moreover, the AG underlined that the explanatory memorandum in the Commission proposal [COM(2012)788] and the impact assessment discussed the insufficiency of national rules and the added value of EU action and were available to EU institutions and national parliaments in the legislative procedure. (paras 182-185) Still, the AG advised the EU legislature to avoid ‘empty formulas’ and substantiate the preamble with regard to the subsidiarity principle in the future legislative acts. (para 188)
In sum, the EU violated neither the substantial nor the procedural aspect of the subsidiarity principle. (para 189)
For any student of the role of national parliaments under the Lisbon Treaty this is an interesting AG opinion for two reasons: (i) it outlines detailed step-by-step subsidiarity reasoning, and (ii) it concerns a legislative instrument, which was heavily criticised by the national parliaments during the legislative procedure, with seven reasoned opinions being issued. (See Annual Report 2013 on Subsidiarity and Proportionality, COM(2014)506) Although the threshold to activate a ‘yellow card’ was not met, the number of opinions issued is testament to a significant level of involvement of national parliaments during the legislative procedure.
First, the AG’s opinion provides for a very detailed analysis of subsidiarity as compared to the latest judgments of the CJEU. For example, in the recent case C-276/14 (Gmina Wrocław, para 41) the Court relies on a recital of the preamble to the VAT directive simply by repeating the text of Article 5(3) TEU as a confirmation of subsidiarity compliance. Even when compared to the opinion of the AG Maduro in the Vodafone case, where the AG referred to the cross-border character of the EU action (regulation of roaming) and the EU’s special interest in promoting it (C-58/08, para 34), the analysis provided by AG Kokott appears to be more systematic, going through all the steps of subsidiarity scrutiny. Furthermore, the labels of ‘negative’ and ‘positive’ aspects of the test are new within the jurisprudence of the CJEU. They were, however, previously discussed in the literature (See Calliess, Subsidiaritäts-und Solidaritätsprinzip in der Europäischen Union, Nomos 1999 at 104).
Second, the AG’s opinion offers insights into the role of the reasoned opinions of national parliaments before the CJEU. The AG indicated that the exercise of the internal market competence by the EU ‘involves political, economic and social choices in which complex assessments and evaluations have to be undertaken’ and reserved their scrutiny for national parliaments as per Protocol No. 2, leaving the Court with a limited judicial review searching for manifest errors in EU legislator’s assessment, with an exception of cases concerning national identity (paras 146-148). Nonetheless, the reasoned opinions of national parliaments do not play much role in the assessment of the Directive before the Court. The AG, in the Pillbox 38 case rejected as ‘not very convincing’ the argument that subsidiarity could be violated because of the number of reasoned opinions issued by national parliaments during the legislative procedure. (C-477/14 para 160-161) The AG underlined that there were not enough reasoned opinions to trigger a ‘yellow card.’ (C-477/14 para 161) Moreover, according to the AG, the reasoned opinions provide a political rather than a legal assessment of the draft Directive, which is ‘less meaningful for the purposes of the judicial review’. (C-477/14 para 161) In sum, the AG’s opinion shows that unless a ‘yellow card’ threshold is reached, the reasoned opinions will not be a valid source of reference for the Court. To counter this view, another avenue for national parliaments to raise their subsidiarity concerns before the CJEU would be an action for annulment brought by a Member State on behalf of its national parliament (or chamber thereof) on the basis of Article 8 of Protocol No. 2. (See K. Granat, ‘Institutional Design of Member States for Ex Post Subsidiarity Scrutiny’ in M. Cartabia, N. Lupo & A. Simoncini (eds.), Democracy and Subsidiarity in the EU. National Parliaments, Regions and Civil Society in the Decision-Making Process, Il Mulino 2013, pp 421-445).
Finally, in the Pillbox 38 case the AG pointed out that the reasoned opinions invoked in the reference had hardly any focus on e-cigarettes regulation and its compliance with the subsidiarity principle (C-477/14 para 161). In fact, national parliaments attacked a number of aspects of the tobacco Directive including the use of delegated and implementing acts that the AG tackles separately from the subsidiarity assessment. Their main concern was that the draft Directive empowers the Commission to adopt delegated acts with regard to essential elements of the proposal. (See A. Héritier, C. Moury, K. Granat, ‘The Contest for Power in Delegated Legislation’ in C.F. Bergström and D. Ritleng, Rule-making by the European Commission: the New System for Delegation of Powers, OUP 2016, at 122.) It should be recalled that Protocol No. 2 invests national parliaments with subsidiarity scrutiny of draft legislative acts only. Delegated or implementing acts themselves cannot be assessed within this procedure. Moreover, they are not forwarded to national parliaments under Article 1 of Protocol No. 1 to the Lisbon Treaty which includes Commission consultation documents (green and white papers and communications), the annual legislative programme and other instruments of legislative planning or policy. In fact, national parliaments receive only the already enacted non-legislative act. Hence the assessment of the delegations made in the reasoned opinions is the only way for national parliaments to assess them. The AG dealt with delegated and implementing acts in the Philip Morris case (C-547/14 para 251-258) and validated the conferral of power on the Commission. In sum, the reasoned opinions were not used in this context as a source for assessment of delegations to the Commission, which in any case were found to be lawful.
It remains to be seen what kind of approach the Court itself will take in its subsidiarity analysis. Will it be as structured and well-reasoned as the AG’s opinion? Taking into account this opinion, most probably the judgment will follow suit, in particular since the Court has never annulled any EU act for the lack of compliance with the subsidiarity principle, deferring instead on this point to the assessments made by the EU legislator.