Institutional Choice in the Internal Market

Jan Zglinksi, Europe's Passive Virtues: Deference to National Authorities in Free Movement Law, Oxford, OUP, 2020, 256 pp, hb £100.00 Eadaoin Ní Chaoimh, The Legislative Priority Rule and the EU Internal Market for Goods, Oxford, OUP, 2022, 320 pp, hb £87.00 Vilija Vėlyvytė, Judicial Authority in EU Internal Market Law, Oxford, Hart, 2022, 312 pp, hb £81.00 Who gets to decide how EU law is made and applied? One would think that this question is at the forefront of the study of EU law, but legal scholars are often more interested in the question of 'what' gets decided – what rights EU citizens (should) have, what obstacles to the four economic freedoms are justified, and so forth. Yet as three recently published monographs show, the answer to the 'what' question is influenced by, and depends on, 'who' gets to answer it.1 The monographs examine the institutional choices made in EU internal market law, affecting its interpretation and application. Each in its own way, with respect to the institutions studied and the methodological choices made, is concerned with the question of who decides and/or should decide on the development of internal market law and, relatedly, the interaction of market interests with competing public interests. This review essay puts these books into conversation with each other, inter alia by discussing what they collectively tell us about the institutional choices involved in the making of the internal market. In Europe's Passive Virtues, Zglinski studies to what extent and in what circumstances the EU Court of Justice (CJEU or Court) is willing to leave the application of internal market law to national authorities. He shows that the CJEU has over time become more deferential in its review of national measures, and he explores what might explain as well as justify this change. In The Legislative Priority Rule, Ní Chaoimh focuses our attention on the EU legislature, which is an actor that remains curiously understudied in legal scholarship. Studying the Court's doctrine of deference to EU legislation, she shows that, at least in free movement of goods case law, secondary legislation is usually prioritised over primary law when the Court assesses whether national law complies with EU law. In Judicial Authority in EU Internal Market Law, Vėlyvytė argues, nevertheless, that the Court has repeatedly engaged in judicial overreach, at least in highly sensitive and socially salient policy areas, thereby failing to respect the limits of EU competence. In this essay, I will analyse what the books, individually and jointly, teach us about the EU judiciary's authority relative to other institutions. As I will explain, they make several important contributions to our understanding of the Court. On the one hand, Vėlyvytė's findings align with the widely held view that some areas of EU law have been shaped by a considerable, and arguably problematic, degree of judicial activism (the second section). On the other hand, not only has the Court seemingly come to exercise more restraint in these areas, but Zglinski's and Ní Chaoimh's studies suggest its behaviour there is not representative of past and present behaviour elsewhere. On the contrary, their books indicate that non-deferential rulings are the exception rather than the norm. Zglinski shows that judicial deference to national authorities in internal market disputes has grown over time (the third section), while Ní Chaoimh shows that the Court normally has great respect for the choices of the legislature (the fourth section). Their studies, I will argue, challenge some widely held beliefs about EU law, such as that it is primarily judge-made and, relatedly, that this creates an imbalance between EU judicial and legislative authority. While each of the books offers a fascinating account of specific aspects of the institutional dynamics underlying the internal market and together greatly enhance our understanding of the institutional choices made in EU lawmaking, they struggle to formulate a satisfactory normative account of the proper allocation of authority in EU law. All try, but none succeeds, and the reason is the same in each book: they do not fully grasp the EU legislature's importance, because they either prioritise the Court's vertical relationship with national authorities over its horizontal relationship with the legislature or assume that this horizontal relationship is predetermined by, and hence inferable from, the relationship between EU primary and secondary law. In the fifth section, I explain that little can be said about how the Court must wield authority over national institutions unless we know how it should do so versus the legislature. Indeed, the debate on the legitimate exercise of EU judicial authority can only succeed if the legislature is placed at its centre. I will also explain why the relative authority of the EU legislature versus the judiciary cannot be settled by reference to primary law. Instead, the proper allocation of legislative versus judicial authority requires the exercise of political judgment on their relative institutional capacity and legitimacy. Few topics can provoke such heated debate among legal scholars as the legitimate exercise of EU judicial authority. Many scholars have accused the CJEU of repeatedly transgressing the limits of its authority, but just as many (and probably even more) have been prepared to defend it against accusations of improper behaviour. By exploring how the principles governing the division of EU powers ought to constrain the EU judiciary, Vėlyvytė attempts to offer a new perspective on this debate. Although it may sound evident that the CJEU should respect the limits of EU competence, she rightly observes that academics rarely ponder how the relevant principles apply to its judiciary; they much prefer to debate how the judiciary should use these principles to keep political institutions at bay.2 Nevertheless, few will dispute that the Court too is bound by the principles governing the EU's division of competences, and the real question will be how to assess whether these principles have been observed. As we know from the legislature's usage of Article 114 TFEU, the legal basis for legislative measures promoting the establishment of the internal market, this question can be contentious. The Court has been hands-off in policing legislation adopted under this provision, granting the legislature 'broad discretion',3 but it remains disputed whether it has been too hands-off, allowing the legislature to pass measures breaching the limits of EU competence.4 The issue is that these principles are notoriously elastic and open-ended: so much depends on how they are operationalised. Vėlyvytė offers an engaging and thought-provoking take on how the principles governing the EU's vertical and horizontal division of powers should limit the Court's authority. Following an overview of these principles in Chapter 1, she explores what constraints are placed on the Court by these four principles: conferral (Chapter 2), subsidiarity and proportionality (Chapter 3), and institutional balance (Chapter 4). Each of these chapters highlights problems with compliance with these principles, after which the fifth chapter offers an alternative approach to solve and prevent the problems identified, exploring, inter alia, the application of a margin of appreciation doctrine in internal market law and exempting certain issues from the law's scope of application. She builds her argument through four case studies, selected for their social sensitivity at the national level and their constitutional sensitivity under EU law: healthcare, education, collective bargaining, and gambling.5 These areas are explored in depth, offering the reader both a wonderfully accessible overview and a critical exposition of the major legal developments in these areas. It is clear from the outset that Vėlyvytė agrees with those who accuse the CJEU of judicial overreach. She is almost consistently critical of, and occasionally deeply unimpressed by, the legal reasoning in the case law she analyses. In her view, the Court has 'systematically failed' to strike the correct balance between the internal market and national competences in the case law on the right to cross-border healthcare, access to education, and collective labour law.6 What makes her believe this? She interprets the principle of conferral as placing a twofold constraint on the Court: it may intervene only when the national measure under review is of an economic rather than social nature and when it undermines the functioning of the internal market.7 However, since the Court extended internal market law to healthcare and education, which have a primarily social function and are usually publicly financed, it breached this principle.8 It did so too by applying free movement law to collective bargaining since these practices 'fall squarely outside the scope of the EU's regulatory competence'.9 Regarding the principles of subsidiarity and proportionality, she argues, roughly, that appropriate weight must be given to the various non-market interests that can be impacted by free movement law, especially at the justification stage.10 Given that national measures in the areas of healthcare, education, and collective labour law have been consistently subject to strict review, with the Court sometimes going as far as to instruct national authorities on what kind of measures they may adopt instead, Vėlyvytė argues that the case law has violated both principles.11 The gambling jurisprudence provides an odd contrast to the other case studies. While the economic nature of the provision of gambling services is clear, it is settled case law that 'in the specific area of the organisation of games of chance, national authorities enjoy a wide measure of discretion'.12 A clear strength of the book's comparative analysis is, indeed, that it puts the focus on seeming inconsistencies in the case law. As Vėlyvytė argues, for example, the CJEU's acceptance that Member States, due to national differences in the regulation of gambling operators, need not open their market to foreign operators 'sits in marked contrast with that employed in relation to the regulation of healthcare', where such domestic differences could not justify a requirement of prior authorisation of foreign medical goods and services.13 There is arguably a partial justification for some of these differences (see the fifth section below), but the Court's deference to national gambling laws is indeed striking when compared to the strict scrutiny applied in the other areas. Another strength of the book lies in the awareness that is shown and conveyed regarding the judiciary's institutional limitations, especially when it comes to the regulation of complex political and socio-economic questions. Vėlyvytė is skeptical of the desirability of EU-wide rules 'borne out of litigation, made on an ad-hoc basis and by a body lacking the expertise to make highly sensitive, socio-economic policy choices'.14 Her scepticism occasionally seems too strong, as when she argues that weighing policy objectives 'would entail making policy judgments that no court should be expected to make, at least not openly, when delivering a judicial interpretation of the law'.15 This is a legitimate position, but one might question whether it can be avoided entirely given that courts sometimes have to decide complex political questions. Federal-type systems like the EU most likely need a judiciary to arbitrate conflicts between the centre and the States, and this may require judges to make complex political choices, such as when the CJEU assess the legality of a national measure using a proportionality test. It would therefore be better, in my view, if doubts about the judiciary's institutional capacities are coupled with the acceptance that intricate policy judgments must at times be made by it. Nevertheless, Vėlyvytė's critical stance toward litigation is a healthy and justified antidote to the enthusiasm EU lawyers often show for judge-made law. But above all, Vėlyvytė's criticism that the CJEU has overstepped the limits of its powers strikes me as largely correct, particularly as far as case law on the right to cross-border healthcare and access to education is concerned. That said, I believe that our criticism should be motivated by different concerns than those she offers, and I will explain in the fifth section below why this is so. I will use the remainder of this section to explain why Vėlyvytė's arguments strike me as contestable. First, as alluded to above, it will be difficult to command agreement on the correct application of the principles governing the division of EU competence. For example, the claim that the principle of conferral seals social policies from the reach of internal market law, even those which clearly inhibit cross-border trade, could reasonably be open to question. Moreover, even if EU lawyers would agree that the principle of conferral entails that internal market law can be applied only when a national measure is economic and not when social in nature, it is still not clear whether it extends to practices such as collective bargaining, which presumably has social and economic implications. Finally, her claim that collective bargaining should not be touched by internal market law because it falls outside the scope of the EU's regulatory competence is so restrictive that one wonders where the limits of the Court's authority should lie precisely. The loss and acquisition of citizenship, the regulation of same-sex marriage, and the position of churches and other religious communities are among the areas that have been affected by free movement law despite them being outside the sphere of EU competence.16 A priori, it seems uncontroversial that EU law can interfere with national competences. As de Witte reminds us, the 'obligations contained in an international Treaty surely restrict the exercise of state competences, without those competences themselves being transferred to the international level'.17 I am not saying that Vėlyvytė disputes this and goes as far as to suggest that the Court overstepped the boundaries of its jurisdiction in all these cases, but the examples show how difficult it is to provide a generally acceptable definition of what the principles governing the EU's vertical division of powers require of the Court. There would be a way around this problem, which is to enforce the principle of institutional balance between the EU legislature and judiciary. How much easier would the Court's tasks be if, instead of having to determine what a subsidiary and proportionate application of EU law requires in each case, it could just defer to legislation? Instead of having to weigh and balance competing policy choices, it could decide disputes in accordance with the choices made by the legislature. While one would think that anyone sceptical about judge-made law would rejoice in this thought, Vėlyvytė seems opposed to disputes being decided according to a doctrine of deference to EU legislation.18 Partly as a result, it remains unclear what work the principle of institutional balance does in her efforts to constrain the CJEU's authority. She assumes that the four constitutional principles she examines operate at the same level and are mutually reinforcing. In her view, 'these principles are interconnected in their functions and share common theoretical underpinnings',19 and she believes that 'a relaxed judicial review would also alter the institutional balance of powers between the EU's judiciary and legislature. By showing deference to national regulatory choices, the Court would give more space for the EU legislature'.20 Alas, this is not the case. For a start, her argument is prompted by a too-pessimistic view of the legislature's ability to harmonise national laws. It is inspired by Fritz Scharpf's work, including his claim that European integration is afflicted by an asymmetry between positive and negative integration. The credibility of his claims is, however, increasingly in doubt.21 For example, contrary to Scharpf's belief that the legislative process' veto points would hinder legislative agreement,22 the internal market has been harmonised to an astonishing extent.23 Moreover, while Scharpf thought that the CJEU enjoys a monopoly in the substantive interpretation of primary law, making legislative override of case law impossible,24 there are enough examples of legislative resistance to CJEU rulings. In fact, while Vėlyvytė claims that the case law on the right of residence of students and posting of workers demonstrates how the CJEU can prevent legislative override,25 both examples show the opposite. Her analysis of the regulation of students' right of residence does not mention that the legislature, by adopting the Citizenship Directive, allowed States to deny maintenance aid to students who have not resided in their territory for five years, which was a very restrictive interpretation of earlier case law, but nevertheless accepted by the Court in Jacqueline Förster v Hoofddirectie van de Informatie Beheer Groep.26 And while her claim that 'the amended version of the Posted Workers Directive (PWD) in no way challenges EU case law on the exercise of collective labour rights' is technically correct,27 it is, first, not the PWD's aim to regulate collective bargaining, and second, the amended PWD does overturn the unpopular Dirk Rüffert v Land Niedersachsen and Commission v Luxembourg verdicts28 (Rüffert). This suggests that the legislature can more autonomously steer the course of the internal market than Vėlyvytė assumes, which means that it is unclear to what extent it truly lacks the required space to enact its preferred regulatory choices. More importantly, contrary to Vėlyvytė's claim that deference to national law would create more space for the EU legislature, it could, in fact, weaken the legislature's regulatory capacities. Borrowing from the European Court of Human Rights (ECtHR), she advocates the application of a margin of appreciation doctrine in internal market law, which, she says, would be 'a concrete application of the principle of subsidiarity in judicial practice'.29 What she overlooks is that its application could undermine the legislature's choices. Take Rüffert, a ruling against the public procurement laws of one of the German Länder. The Land awarded a contract that contained a declaration of compliance with collective agreements, including the agreed-upon minimum wage. The contract was terminated when it was found that the company in question had employed workers at a lower wage. Asked whether this decision was consistent with the freedom to provide services, the CJEU recognised that Article 3(1) of the old PWD, read in conjunction with Article 3(8), limits this freedom. According to these provisions, undertakings posting workers would have to guarantee rights such as minimum rates of pay, but only when such rates are laid down by law, administrative provision, or in collective agreements that have been 'declared universally applicable'.30 However, as the minimum wage was not laid down in any of these provisions, the CJEU held that the German Land could not enforce the minimum wage.31 This was unsurprising considering the PWD's text and objectives. As the German authorities had not used the opportunities the PWD offered them, they could not take advantage of these opportunities without first amending their domestic legislation.32 The argument that the Court should apply a margin of appreciation in such cases poses the question of why it should not, as it did, defer to the legislature's choices.33 It does so especially as Vėlyvytė argues that the principle of institutional balance should constrain the judiciary so that it does not usurp the legislative prerogative.34 As Rüffert demonstrates, however, this principle does not always offer the same orientation to the judicial process as the principles of subsidiarity and proportionality do. On the contrary, the Court would have narrowed the legislature's regulatory space, indeed overturned its choices, if it had deferred to the choices made by the German Land. Therefore, the all-important question in such disputes is this: should the Court exercise its authority from a position of deference to national authorities or the EU legislature? Vėlyvytė does not address this question head-on but ultimately assumes that national decision-makers must be given more discretion to regulate socially and politically sensitive issues. Her proposals to reorient the case law are almost exclusively informed by the principles of subsidiarity and proportionality, which, as we saw, lead her to advocate the application of a margin of appreciation doctrine in internal market disputes and leave it to national institutions to balance the competing interests involved in such cases.35 Whatever one's view of this proposal, it is not necessarily respectful of the EU legislature nor, for that matter, easy to square with the principle of institutional balance. At this point, it is interesting to return to the gambling case law. The reason why the Court affords States a margin of discretion as concerns the regulation of gambling is not just that this is a politically sensitive issue on which there are serious differences between the Member States. The reason is also that the legislature never harmonised this field. As the Court has said: 'The legislation on games of chance is one of the areas in which there are significant moral, religious and cultural differences between the Member States. In the absence of Community harmonisation in the field, it is for each Member State to determine in those areas, in accordance with its own scale of values, what is required in order to ensure that the interests in question are protected.'36 I cannot fault this argument and believe it is prima facie justified for the CJEU to show restraint in the face of socially sensitive issues that have not been harmonised at the EU level. The question is, however, how sensitive issues that are subject to secondary legislation must be adjudicated. Should Member States be given a margin of discretion even if this would undo the choices of the EU's political institutions, or should these choices instead be enforced even if this would mean interfering with politically sensitive issues at the national level? This is one of the most important institutional choices to be made in the regulation of EU law, to which we return in the fifth section below. While Vėlyvytė's book might strengthen the convictions of those who suspect the EU judiciary of being too activist, they will get a very different impression from Zglinski's book. He aims to show that the CJEU has 'over the past four decades, gradually lowered its level of scrutiny over Member State action',37 and wants to use his findings to 'revisit some old assumptions concerning judicial activism, centralization, and the uniformity of EU law'.38 His approach differs from Vėlyvytė's in two notable ways. Hers is prescriptive/evaluative from the outset, while Zglinski, while making an important conceptual and normative contribution to the debate on the limits of EU judicial authority, offers in the first place an empirical study of its jurisprudence. He does so, secondly, not by zooming in on select areas of free movement law, but by conducting an empirical analysis of all free movement jurisprudence of every complete fifth year between 1974 and 2013. His dataset thus yields a sample size of roughly one-fifth of the free movement cases decided during this period, which amounts to exactly 274 judgments. The two dependent variables selected to study how deferential the Court is in reviewing national measures are its two deference doctrines: the 'margin of appreciation' and 'decentralized judicial review'. His analysis includes 12 independent variables, including the affected policy field, the level of harmonisation, and the political sensitivity of the issues at stake, to try to illuminate under what circumstances the CJEU defers to national authorities.39 The first chapter makes a conceptual contribution. It explains the approaches the CJEU has at its disposal to review national measures, introduces the two deference doctrines, and explains what distinguishes these doctrines and what variation can observed in their application. The scope of the margin of appreciation doctrine, we learn, extends to national legislative and administrative actors, while decentralised judicial review is the tool used to afford deference to national courts. The precise degree of deference is affected, moreover, by how these doctrines are put into effect. How much freedom national authorities enjoy in the application of free movement law depends, for example, on whether they are granted a full or partial margin of appreciation, and the Court can be more or less deferential in exercising judicial review. What emerges is a complex picture, yet one that is drawn with great care, much improving our understanding of the precise nature and scope of judicial deference in EU law. The presentation and discussion of the empirical findings span the next four chapters. In essence, these chapters seek to prove that 'although the free movement rules in the Treaties have remained largely the same … the field has changed considerably'.40 An important part of this change is the increasingly deferential review of national measures that pose a potential obstacle to the mobility of goods, services, capital, and persons. Chapter 2 shows that the application of both deference doctrines has increased over time. Together, the use of the margin of appreciation doctrine and decentralised judicial review, found in only 12.5 per cent of decided cases in 1974, has risen from 30 per cent of the judgments handed down in the 1980s and 1990s to approximately 45 per cent of the internal market judgments of the last decade. These findings tell us the beginning of an interesting story, about how the judiciary perceives its role in regulating the internal market, how it views the role of national institutions, and possibly also about the influence these actors can exercise in the interpretation and application of EU internal market law. But, because the Court can be more or less deferential in applying both doctrines, the devil is in the details. The next three chapters seek to uncover these details, which they mostly do very well. Chapter 3 studies the margin of appreciation doctrine, examining the circumstances in which it is applied. Zglinski shows, among other things, that its use is much higher in free movement of goods case law than in other internal market case law,41 that it is concentrated in a select number of policy areas (public health, followed at some distance by games of chance, public policy/morality, and road safety), while it is almost absent in others (for example taxation and social policy),42 and that that the Court grants full and partial margins of appreciation in roughly equal measure.43 Perhaps most interestingly, he finds that of the many factors the Court has cited as influencing its decision on whether or not to defer, only a few significantly affect its behaviour. The most notable of these, in addition to the above-mentioned policy areas, is the level of legislative harmonisation, with a high level of harmonisation negatively affecting the likelihood of the Court granting a margin of appreciation.44 The analysis of decentralised review and, relatedly, proportionality review in Chapters 4 and 5 is equally interesting, although the findings presented here are less clear-cut (though maybe more fascinating for that reason). The conceptual work in these chapters should also be valuable for lawyers not interested in internal market law, and the discussion of proportionality as a double-edged sword is particularly insightful. Zglinski argues that while proportionality can be attractive for courts because it allows them to expand their authority, it obliges them to interfere in issues on which they may have no expertise or legitimacy. This, he suggests, can explain the rise of the margin of appreciation and decentralised judicial review, which offer the CJEU a solution to the dilemma posed by proportionality review.45 Yet his findings also pose an interesting puzzle. Zglinski finds no consistent pattern in the use of decentralised review. Of the independent variables tested, 'only proportionality shows a statistically significant effect on decentralized review',46 making him conclude that 'who decides on what in free movement law remains, to a large extent, a mystery'.47 But the real mystery is, in my view, that he finds no negative correlation between the level of harmonisation and the exercise of decentralised review or, at least, proportionality review (which has also increased over the last decades).48 Intuitively, one would think that the Court's willingness to exercise decentralised review decreases as the level of harmonisation increases. After all, when the Court assesses the compatibility of a national measure with the internal market Treaty provisions, it first examines whether that measure amounts to a possible restriction on free movement, and second, whether this restriction is proportionate. It can decide to decentralise its review at the proportionality stage. In contrast, an assessment of whether a national measure is consistent with secondary legislation can often be made without a proportionality test, since what matters is whether the measure is consistent with the rules laid down in the legislative act. In that case, the need for a proportionality analysis should not arise, unless mandated by the legislative act. In other words, given the fourfold increase of internal market legislation in