European Union Directives
8th Company Law Directive
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European Union Directives

The European Union (EU) constitutes a new legal order of international law for the benefit of which the EU member states have limited their sovereign rights.
 
Independently of the legislation of member states, community law not only imposes obligations on individuals but is also intended to confer upon them rights which become part of their legal heritage.
 
The decision-making triangle
 
1. The Council (representing national governments)
This is the Council of Ministers from the national governments of all the EU countries. The member states take in turns the Council Presidency for a six-month period. Meetings are attended by ministers responsible for the items to be discussed
 
2. The European Parliament (representing the people)
It is elected every five years.
 
3. The European Commission
It drafts proposals for new European laws, which it presents to the European Parliament and the Council
 
The European Union is based on the rule of law. The rules and procedures for EU decision-making are laid down in the treaties. Every new European law is based on a specific treaty article. This is the ‘legal basis’ of the proposed law.
 
The Co-decision procedure
This is the main legislative procedure by which directives are adopted.
Parliament shares legislative power equally with the Council. Both the Parliament and the Council are required to agree on an identical legal text, and only after that it becomes law.
 
Directives
A directive is a collective legislative act of the EU.
It describes a result. Member states must develop their own national legislation and do whatever is needed to achieve this result. 
Directives are binding on the member states to which they are addressed.
 
The Court of Justice
If a member state fails to pass the required national legislation, or if the national legislation does not comply with the directive, the Commission can initiate legal action against the member state in the European Court of Justice.
 
The Court of Justice is the judicial institution of the Community: Examines the legality of Community measures and ensures the uniform interpretation and application of Community law. 
 

 
The European Union
 
On 9 May 1950, the Schuman Declaration proposed the establishment of a European Coal and Steel Community (ECSC), which became reality with the Treaty of Paris of 18 April 1951.
 
This put in place a common market in coal and steel between the six founding countries (Belgium, the Federal Republic of Germany, France, Italy, Luxembourg and the Netherlands).
 
The aim, in the aftermath of World War Two, was tosecure peace between Europe’s victorious and vanquished nations and bring them together as equals, cooperating within shared institutions.

The Six then decided, on 25 March 1957 with the Treaty of Rome, to build a European Economic Community (EEC) based on a wider common market covering a whole range of goods and services.
 
Customs duties between the six countries were completely abolished on 1 July 1968 and common policies, notably on trade and agriculture, were also put in place during the 1960s.

So successful was this venture that Denmark, Ireland and the United Kingdom decided to join the Community.
 
This first enlargement, from six to nine members, took place in 1973. At the same time, new social and environmental policies were implemented, and the European Regional Development Fund (ERDF) was established in 1975.

June 1979 saw a decisive step forward for the European Community, with the first elections to the European Parliament by direct universal suffrage.
 
These elections are held every five years.
 
In 1981, Greece joined the Community, followed by Spain and Portugal in 1986.

This strengthened the Community’s presence in southern Europe and made it all the more urgent to expand its regional aid programmes.

The worldwide economic recession in the early 1980s brought with it a wave of euro-pessimism’.
 
However, hope sprang anew in 1985 when the European Commission, under its President Jacques Delors, published a White Paper setting out a timetable for completing the European single market by 1 January 1993.
 
This ambitious goal was enshrined in the Single European Act, which was signed in February 1986 and came into force on 1 July 1987.

The political shape of Europe was dramatically changed when the Berlin Wall fell in 1989.
 
This led to the unification of Germany in October 1990 and the coming of democracy to the countries of central and eastern Europe as they broke away from Soviet control.
 
The Soviet Union itself ceased to exist in December 1991.

At the same time, the member states were negotiating the new Treaty on European Union, which was adopted by the European Council, composed of presidents and/or prime ministers, at Maastricht in December 1991.
 
The Treaty came into force on 1 November 1993.
 
By adding areas of intergovernmental cooperation to existing integrated Community structures, the Treaty created the European Union (EU).

This new European dynamism and the continent’s changing geopolitical situation led three more countries — Austria, Finland and Sweden — to join the EU on 1 January 1995.
 
By then, the EU was on course for its most spectacular achievement yet, creating a single currency. The euro was introduced for financial (non-cash) transactions in 1999, while notes and coins were issued three years later in the 12 countries of the euro area (also commonly referred to as the euro zone).
 
The euro is now a major world currency for payments and reserves alongside the US dollar.

Europeans are facing globalisation. New technologies and ever increasing use of the Internet transform the economies, but also bring social and cultural challenges.

In March 2000, the EU adopted the ‘Lisbon strategy’ for modernising the European economy and enabling it to compete on the world market with other major players such as the United States and the newly industrialised countries.
 
The Lisbon strategy involves encouraging innovation and business investment and adapting Europe’s education systems to meet the needs of the information society.

At the same time, unemployment and the rising cost of pensions are putting pressure on national economies, making reform all the more necessary.
 
Voters are increasingly calling on their governments to find practical solutions to these problems.

Scarcely had the European Union grown to 15 members when preparations began for a new enlargement on an unprecedented scale.
 
In the mid-1990s, the former Soviet-bloc countries (Bulgaria, the Czech Republic, Hungary, Poland, Romania and Slovakia), the three Baltic states that had been part of the Soviet Union (Estonia, Latvia and Lithuania), one of the republics of former Yugoslavia (Slovenia) and two Mediterranean countries (Cyprus and Malta) began knocking at the EU’s door.

The EU welcomed this chance to help stabilise the European continent and to extend the benefits of European integration to these young democracies.
 
Negotiations on future membership opened in December 1997. The EU enlargement to 25 countries took place on 1 May 2004 when 10 of the 12 candidates joined.
 
Bulgaria and Romania followed on 1 January 2007.
 


The legal nature of the EU

The EU is no longer merely a planned objective of the integration process, but rather an international organisation in its own right established by the Treaty of Maastricht.

What is unusual about this organisation is its function as an ‘umbrella’ for the three European Communities, its complementary policies and the forms of cooperation between the Member States.

The EU’s legal order nevertheless falls a long way short of that of the EC. For example, the principles of autonomy, direct applicability and primacy of Community law, which are so essential to the legal order of the EC, do not apply to the other two pillars of the EU.
 
Instead, these pillars basically consist of programmes and declarations of intent which are translated into practice through cooperation between governments and are deliberately not allowed to go beyond the preliminary stage of a subsequent, 24 ‘institutionalised’ Union.
 
The fact that the EU uses the institutions of the EC when carrying out its tasks does not alter this situation because, as ‘institutions of the Union’, these may only act in accordance with the Treaty on European Union, i.e. only in the context of cooperation between the Member States in the second and third pillars.
 
The Treaty on European Union does not constitute an ‘EU constitution’ regulating all aspects of that Union.

Distinctness from other types of political organisation

The EC and the EU have, by their very nature, certain features in common with the usual kind of international organisation or federal-type structure, and a number of differences.

The EU is itself not yet a ‘finished product’; it is in the process of evolving and the form it finally takes still cannot be predicted.

The only feature that the EU has in common with other international organisations is that it, too, came into being as a result of an international treaty.
 
However, the anchoring of the EC within the EU’s organisational structure has in itself made the EU a considerable departure from the traditional kind of international ties.
 
This is because, although the Treaties establishing the EC were based on international treaties, they led to the creation of independent Communities with their own sovereign rights and responsibilities. The Member States have ceded some of their sovereign powers to these Communities.

In addition, the tasks which have been allotted to the EC are very different from those of other international organisations.

While the latter mainly have clearly defined tasks of a technical nature, the EC has areas of responsibility which together constitute essential attributes of statehood.

Through these differences between the EC and the normal type of international organisation, the EC and thus also the EU, is in the process of acquiring a status similar to that of an individual State.
 
In particular, the Member States’ partial surrender of sovereign rights was taken as a sign that the EU was already structured along the lines of a federal State.

However, this view fails to take into account that the EU’s institutions only have powers in certain areas to pursue the objectives specified in the Treaties.
 
This means that they are not free to choose their objectives in the same way as a sovereign State; nor are they in a position to meet the challenges facing modern States today.
 
The EU has neither the comprehensive jurisdiction enjoyed by sovereign States nor the powers to establish new areas of responsibility (‘jurisdiction over jurisdiction’).

The EU is therefore neither an international organisation in the usual sense nor an association of States, but rather an autonomous entity somewhere in between the two. In legal circles, the term ‘supranational organisation’ is now used.

Sources of Community law

1. Primary legislation:
– Treaties establishing the Communities
– General principles of law

2. The EC’s international agreements

3. Secondary legislation:
– (Implementing) regulations
– Directives/ECSC recommendations
– General and individual decisions

4. General principles of administrative law

5. Conventions between the Member States

Directives

The EC/Euratom directive, which has the ECSC recommendation as its equivalent, is the most important legislative instrument alongside the regulation. Its purpose is to reconcile the dual objectives of both securing the necessary uniformity of Community law and respecting the diversity of national traditions and structures.

What the directive aims for, then, is not the unification of the law, which is the regulation’s purpose, but its harmonisation.

The idea is to remove contradictions and conflicts between national laws and regulations or gradually iron out inconsistencies so that, as far as possible, the same material conditions obtain in all the Member States. The directive is one of the primary means deployed in building the single market.

A directive is binding on the Member States as regards the objective to be achieved but leaves it to the national authorities to decide on how the agreed Community objective is to be incorporated into their domestic legal systems.

The reasoning behind this form of legislation is that it allows intervention in domestic economic and legal structures to take a milder form. In particular, Member States can take account of special domestic circumstances when implementing Community rules.
 
What happens is that the directive does not supersede the laws of the Member States but places the Member States under an obligation to adapt their national law in line with Community rules.
 
The result is a two-stage law-making process.
 
First, at the Community stage, the directive lays down the objective that is to be achieved by any or all Member State(s) — or even by an individual Member State in the case of ECSC recommendations — to which it is addressed within a specified time-frame.
 
The Community institutions can actually spell out the objective in such detailed terms as to leave the Member States with scant room for manoeuvre, and this has in fact been done in directives on technical standards and environmental protection.

Second, at the national stage, the objective set at Community level is translated into actual legal or administrative provisions in the Member States.
 
Even if the Member States are in principle free to determine the form and methods used to transpose their Community obligations into domestic law, Community criteria are used to assess whether they have done so in accordance with Community law.

 
The general principle is that a legal situation must be generated in which the rights and obligations arising from the directive can be recognised with sufficient clarity and certainty to enable the Community citizen to rely on or, if appropriate, challenge them in the national courts.
 
This normally involves enacting mandatory provisions of national law or repealing or amending existing rules. Administrative custom on its own is not enough since it can, by its very nature, be changed at will by the authorities concerned; nor does it have a sufficiently high profile.

Rights and obligations for the citizen flow only from the measures enacted by the authorities of the Member States to implement the directive or recommendation.

This point is of no importance to the citizen as long as the Member States actually comply with their Community obligations.

But there are disadvantages for the Community citizen where a Member State does not take the requisite implementing measures to achieve an objective set in a directive or recommendation that would benefit him, or where the measures taken are inadequate.
 
The Court of Justice has refused to tolerate such disadvantages, and a long line of cases has determined that in such circumstances the Community citizen can plead that the directive or recommendation has direct effect in actions in the national courts to secure the rights conferred by it.
 
Direct effect is defined by the Court as follows:

• The provisions of the directive or ECSC recommendation must lay down the rights of the EU citizen/firm with sufficient clarity and precision;

• The alleged rights are not conditional;

• The national authorities may not be given any room for manoeuvre regarding the content of the rules to be
enacted;

• The time allowed for implementation of the directive/ECSC recommendation has expired.

The decisions of the Court of Justice concerning direct effect are based on the general view that the Member State is acting equivocally and unlawfully if it applies its old law without adapting it to the requirements of the directive or recommendation.
 
This is an abuse of rights by the State and the recognition of direct effect of the directive seeks to combat it by ensuring that the State derives no benefit from its violation of Community law. Direct effect thus has the effect of penalising the offending Member State.
 
In that context it is significant that the Court of Justice has applied the principle solely in cases between a citizen and a Member State, and then only when the directive was for the citizen’s benefit and not to his detriment — in other words when the citizen’s position under the law as amended under the directive was more favourable than under the old law (known as ‘vertical direct effect’).
 
The direct effect of directives/ECSC recommendations in relations between citizens themselves (‘horizontal direct effect’) has not been accepted by the Court of Justice.
 
The Court concludes from the punitive nature of the principle that it is not applicable to relations between private individuals since they cannot be held liable for the consequences of the State’s failure to act.
 
What the citizen needs to rely on is certainty in the law and the protection of legitimate expectations.
 
The citizen must be able to count on the effect of a directive being achieved by national implementation measures.

Nevertheless, once the period allowed for transposition has expired, the directives acquire full legal force and effect in that all State bodies are obliged to interpret and apply national law in accordance with the directives (‘interpretation in line with Community law’).

In its judgments in Francovich and Bonifaci in 1991, the European Court of Justice went further, holding that Member States are liable to pay damages where loss is sustained by reason of failure to transpose a directive in whole or in part.
 
Both cases were brought against Italy for failure to transpose Directive 80/987/EEC on the protection of employees in the event of the employer’s insolvency, which sought to protect the employee’s rights to remuneration in the period preceding insolvency and dismissal on grounds of insolvency.

To that end, guarantee funds were to be established with protection from creditors; they were to be funded by employers, the public authorities, or both.
 


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