By Megi Medzmariashvili
Is a harmonised technical standard (HTS) developed in response to the Commission’s mandate, a provision of EU Law? Up until recently, this issue has not been raised before the CJEU, much to academics’ surprise working in this field. Contractual litigation in James Elliott Construction became a trigger for the inquiry about the legal nature of HTS. The Court handed down its judgment on 27 October 2016, nine months after the Advocate General’s (AG) Opinion was published. Two blog posts discussed the AG’s Opinion and offered divergent analysis thereof.
The judgment, in essence, followed the AG’s Opinion resulting in the finding that an HTS is a part of EU law. The Court’s line of argumentation, as opposed to the AG’s, is remarkably cautious. In short, the Court regarded privately produced technical rule-HTS, as a provision of EU law. At the same time, the ECJ was extremely keen to prevent an HTS from having effects on a contractual relationship or on the Irish Law on Sale of Goods.
The case concerned a dispute between two parties: James Elliott Construction and Irish Asphalt. The former built a youth facility in Dublin using aggregates supplied by Irish Asphalt. Soon after completion of the building, cracks appeared in the floors and ceilings. Elliott Construction undertook remedial work at a total cost of EUR 1.5 million and consequently sued Irish Asphalt, arguing that the damage was caused by the presence of pyrite in aggregates. The case reached the Irish Supreme Court, which deemed it necessary to refer preliminary questions on the issues of EU law.
The Supreme Court asked questions with regard to the legal nature, scope and content of the HTS, its relevance to the contractual relationship, as well as the limits of the presumption created by compliance with the standard. The latter HTS laid down the technical requirements for aggregates which if followed, ensured the compliance with the essential requirements of the Directive 89/106/EEC on the approximation of laws, regulations and administrative provisions of the Member States relating to construction products.(The Directive)
Findings of the Court
The ECJ has long accepted to interpret non-binding EU acts such as recommendations or guidance documents within the framework of the preliminary ruling procedure. (e.g. Case C-322/88 Grimaldi.) Delivering a preliminary ruling on the interpretation of voluntary HTS reflects the continuity of this trend. In the Court’s words ‘… the fact that a measure of EU law has no binding effect does not preclude the Court from ruling on its interpretation in proceedings for a preliminary ruling under Article 267 TFEU.’ (para.35) However, a non-binding measure can be the subject of preliminary ruling only if it is part of EU law.
The verbatim reading of Article 267 TEFU suggests that the ECJ has jurisdiction to deliver a preliminary ruling concerning the Acts of the ‘institutions, bodies, offices and agencies of the Union.’ European Standard Bodies (ESBs) unlike the EU bodies and agencies were not set up to perform specific EU tasks. Rather, the ESBs had been found as private and non-profit associations under Belgian law, long before the New Approach was developed. It follows that the ESBs do not qualify as institutions, bodies, offices or agencies of the EU. Thus, a literal reading of Article 267 TFEU would restrict the Court’s jurisdiction with respect to HTSs.
The Court too admitted that ‘…indeed [these] bodies … cannot be described as ‘institutions, bodies, offices or agencies of the Union’, nevertheless, according to the ECJ it has ‘…jurisdiction to interpret acts which … are by their nature measures implementing or applying an act of EU law.’ (para. 34)
In other words, the nature of a measure and its relationship with an EU act are the determining factors to enable the Court to deliver a preliminary ruling on that measure. According to the ECJ, the rationale for this reasoning is to ensure the uniform application of HTSs throughout the union. (para. 34)
The Court also paid heed to the legal effects that the compliance with an HTS entails. Namely, products conforming to technical requirements of an HTS, enjoy the right to free circulation and market access within the territory of all Member States of the EU. (para. 39)
As a final point, according to the ECJ, the development of an HTS, is ‘strictly governed by the essential requirements defined by the Directive.’ In addition, the Commission plays an important role in this process, as it issues a mandate, approves the ESOs work programme, decides on the compliance of the draft HTS with the mandate and finally confers the legal effects on an HTS by publishing the reference to it in the Official Journal. (para. 43)
The remainder of the judgment tried to tame the overreaching effects of the finding that an HTS is a provision of EU law. The Court outlined the contours of the presumption of conformity entailed by an HTS. Particularly, conformity of products with an HTS provides a presumption of fitness for the purposes of free circulation of goods in the EU but does not affect the contractual obligation to supply products of ‘merchantable quality’ as required by the Irish law on sale of goods. Consequently, neither the Directive nor the HTS ‘…harmonises the national rules applicable to proof in the context of a contractual dispute,…or method establishing the conformity of a product with contractual specifications or the time of establishing conformity.’ (para. 52). This in practical terms means that conformity with an HTS could not shield Irish Asphalt from the contractual obligation to supply goods of merchantable quality and payment of damages for failing to comply with this duty.
The James Elliott Construction case is certainly a significant step towards the clarification of legal aspects of European standardisation, however, at the same time, it leaves us pondering broader constitutional issues.
First and foremost, what is the legal basis for the development of an HTS, which according to the Court is a ‘necessary implementing measure’ forming part of EU law?(para.43) The Lisbon Treaty provides the procedure for adopting delegated and implementing acts envisaged respectively in Articles 290 and 291 TFEU. However, these Articles do not present a closed system of delegated rulemaking.
Is an HTS the result of lawful delegation of rule-making power in favour of ESBs? Noticeably, the Court, as opposed to the AG, did not use the phrase-‘controlled delegation’ to describe the relationship between the EU institutions and ESBs. Though it is unfair to criticise the Court for not addressing the delegation debate, this case is still a lost opportunity for reflecting on the lawfulness of delegation in the context of the New Approach, at least obiter dictum.
The ECJ has not questioned so far the legality of delegation in the context of European standardisation. One explanation for this could be that the Court has never been asked directly about it. The fact that the ECJ in the Cremonini case accepted the use of technical standards for legislative purposes without expressing obiter dictum any doubt about its legality, indicated the Court’s indirect support for this regulatory strategy. The Cremonini concerned the Low Voltage Directive, which introduced the reference to the technical standards in the legislative material. In this case, the ECJ urged Italy to comply with the Low Voltage Directive and did not question the legality of referring to technical standards, even obiter dictum. Will the judgment in the James Elliott Construction become a new Cremonini? And will it imply the ECJ’s support to the New Approach strategy which also uses the technical standards for the harmonisation of technical requirements for products?
Secondly, there is an inherent link between the legal nature of standards and their copyright protection. The ESOs enjoy copyright on standards as long as they are rules of self-regulation. But limiting the copyright over HTSs would be an obvious consequence of regarding the HTSs as part of EU law. This is because, as a general rule, the law cannot be copyrighted. This principle dates back to Roman times when public access to legal documents was made a key feature of law-based civilisation. Furthermore, the principle that laws should be accessible and free of charge to everyone is a basic standard of democracy.
Thirdly, the doctrine of supremacy of EU law demands that in a case of conflict with national law, EU law should prevail. Should an HTS as a provision of EU law be bestowed with such effect? The Court is wise to limit an unconditional reach of HTSs and does not allow an HTS to prevail over national laws on sales of goods or contractual relationships. This is reasonable because HTSs do not harmonise, for instance, the national law on sale of goods, but rather ensure unimpeded market access.
Finally, opening the ECJ’s door to an HTS in a preliminary ruling procedure does not automatically establish the ECJ’s jurisdiction over HTSs in an annulment action too. HTSs are not good candidates for annulment actions due to the fact that the ESBs are not ‘institutions, bodies, offices and agencies of the Union’ (see Article 263 TFEU). The less contentious path is to bring an annulment action against the legal instruments connecting standards to the relevant EU Directives. This is the case in particular because the Commission’s publication of the reference to an HTS in the Official Journal, according to the Court, carries legal significance.
Establishing the ECJ’s jurisdiction over an HTS creates the possibility to challenge each and every standard before the Court. Eventually, the Court’s over involvement might undermine the effectiveness of the New Approach directives, as feared by some. However, at the same time, European standardisation is without any doubt no longer immune from judicial intervention and the Court ‘…cannot shy away from technical questions.’
This judgment does not clarify all legal issues surrounding the use of HTSs for regulatory purposes. But, by establishing its jurisdiction over an HTS, the Court certainly paves the way for future questions concerning the legal aspects of European standardisation actually reaching the CJEU. Now, it remains to be seen whether the academic discussion raising various points on the public nature of standards will continue to move into the judicial realm.