C-81/13 UK v Council – Third time and still no charm?

By Michal Kutlík

1.       Introduction

When rendering one of its last judgments of 2014, the Court of Justice of the European Union (Court) had the opportunity to end once and for all the dispute of (now) three rounds between the United Kingdom (UK) and the Council of the European Union (Council) over the legal basis to be used when the EU wishes to adopt jointly, within the framework of an association agreement with a third country, a social legislation benefitting the migrating workers of both parties.

As the UK did in earlier cases on this topic submitted to the Court, in case C-81/13 UK v Council it criticised the Council once more for using Article 48 TFEU as the substantive legal basis for the adoption of a social security measure implementing an association agreement, in this particular case the Council Decision 2012/776/EU, which aimed to update the obsolete implementing provisions on the coordination of social security systems as established by the EEC-Turkey Association Agreement (Agreement).

The following post discusses whether the judgment delivered by the Grand Chamber of the Court in this case has been successful in finally bringing the above-mentioned dispute to an end, and it also provides a closer look on the Court’s reasoning as regards the choice of legal basis in relation to the measures implementing association agreements.

2.       Background of the dispute and the case at hand

In order to provide a concise picture of the dispute and to grasp the meaning of case C-81/13 better, the previous two cases on the subject at issue shall be quickly recapitulated.

In a first case, C-431/11 UK v Council, the CJEU dealt with the choice of legal basis for a measure implementing an European Economic Area (EEA) Agreement as regards social security systems and ruled that it was precisely one of the measures by which the law governing the EU internal market is to be extended as far as possible to the EEA, with the result that nationals of the EEA States concerned benefit from the free movement of persons under the same social conditions as EU citizens. Article 48 TFEU was therefore correctly chosen as the sole legal basis.

Similarly, in case C-656/11 UK v Council, the CJEU ruled that the same applies to a measure implementing the association agreement between the EU and the Swiss Confederation, since the association agreement extended to the Switzerland the application of the EU legislation concerning coordination of social security systems, putting Switzerland in similar position as an EU Member State.

Turning to the case at hand, which can be considered as the third round of the discussion, the CJEU examined the legal basis for a measure updating provisions on the coordination of social security systems between EU and Turkey as established by the Agreement, taking into account the ‘state of play’ of a gradual extension of the free movement of workers between both contracting parties. As in the previous two cases, the UK’s main concern was again that the contested decision was adopted on the basis of Article 48 TFEU instead of Article 79 (2) (b) TFEU. If adopted under the latter, the application of Protocol No 21 (Protocol) would have resulted in the inapplicability of the measure to UK and Ireland by virtue of Article 1 of the Protocol, which allows the UK not to take part in the measures adopted pursuant to the Area of Freedom, Security and Justice (AFSJ).  Claiming that the choice of legal basis lead to a denial of its right under the Protocol, the UK decided to bring an action for annulment of the Council Decision 2012/776/EU.

3.       Assessment of the Court

The Court began by rejecting the UK’s argument that Article 79 (2) (b) TFEU should have been used as the proper legal basis. According to the Court, the aim of the contested decision was not to regulate the immigration of third country nationals, but to establish a further stage in securing freedom of movement for workers between the EU and Turkey by developing the links created by their association agreement.

Secondly, the Court continued its assessment by examining whether Article 48 TFEU should have been used as the sole substantive legal basis in this case. In that regard, recalling that the Agreement foresees only a gradual establishment of the freedom of movement for workers between EU and Turkey and that neither the Agreement nor the Additional Protocol extended to Turkey the freedom of movement for workers as established within the EU, the Court held that:

‘In the absence of any extension of the internal market or of the free movement of persons to Turkey, (…) and given that that non-Member State has not been placed on the same footing as a Member State for the purposes of those rules, the contested decision could not legitimately be adopted solely on the basis of Article 48 TFEU.’  (para. 59)

The Court concluded that Article 48 TFEU empowers the EU to adopt measures in this area only in the internal sphere of competences or of the external actions relating to third countries which can be placed on the same footing as EU Member State.

Thirdly, the Court went on to analyse whether Article 217 TFEU could have served as the correct legal basis for adopting Council Decision 2012/776/EU. The Court decided that the Council is entitled, on the basis of Article 217 TFEU, to adopt a measure in the framework of an association agreement on the condition that the measure relates to a specific area of EU competence and is also founded on the legal basis corresponding to that area.

In the light of these previous observations, the Court finally concluded in paragraphs 62 and 63 of the judgment that the contested decision should have been adopted on the basis of both Articles 217 TFEU and 48 TFEU, since it has been adopted in the framework of an association agreement and is aimed at the adoption of measures coordinating social security systems. However, the Court did not consider it necessary to annul the Decision because the omission of Article 217 TFEU had no effect on the content of the contested decision or the procedure by which it was adopted. Finally, since neither of the two legal bases falls under Title V of Part Three of the TFEU, the UK would have been in any case obliged to take part in the adoption of the contested decision, making the recourse to the Protocol irrelevant.

4.       Assessment of the judgment and the dispute in general

The following assessment shall be two-fold, covering firstly a more in-depth analysis of the judgment as being probably the last piece in the dispute and secondly, an overall evaluation of the Court’s argumentation from the beginning of the dispute.

In the judgment at hand, the Court rejected the opinion of the adamant Advocate General (AG), who insisted on using primarily Article 217 TFEU or, subsidiarily, Article 216 (1) TFEU, and opted instead for a third option: Article 217 TFEU in combination with an additional legal basis would have been the correct choice. Even though the AG suggested this approach under the ERTA doctrine and the possible use of Article 216 (1) TFEU as a bridge from ‘internal to external’ competencies (para. 104 of the Opinion), the Court apparently wanted to distinguish between situations where the measures implementing the association agreement aim to create a relationship equal to those between EU Member States and those where this is not the case. A possible option in view of the two previous cases was to require both the internal/specific and external/general legal basis, which in our case was the combination of Articles 48 and 217 TFEU.

However, one may wonder whether the Court does not contradict its own reasoning in the previous two cases, where it was sufficient to base the same measure, only with a different party, solely on Article 48 TFEU? Because, considering the general scope of the Court’s argumentation, it is perfectly applicable to each of the three cases in the dispute. If the Court wanted to distinguish, it could have been more specific, linking the reference to Article 217 TFEU with the unequal footing between an EU Member State and Turkey.

As for the overall dispute, the Court’s reasoning can be summarised as follows. For those countries, which can be placed on an equal footing, it suffices to use the sole provision corresponding to internal competences. For countries which cannot be placed on an equal footing, the specific Article corresponding to the specific internal competence has to be accompanied by Article 217 TFEU. It is apparent that the decisive factor for the choice of a legal basis and the introduction of Article 217 TFEU as a supplementary legal basis is the ‘equal footing of the associated country with an EU Member State’ criterion.

It is the author’s view that the Court interpreted the ‘aim and content’ doctrine in the entire dispute to such a degree that the very wording and purpose of the Treaty provisions is getting twisted. After all, Article 48 TFEU clearly falls under the third part of the TFEU dealing with internal policies, whereas Article 217 TFEU pertains to part five of the TFEU, covering the Union’s external action. Therefore, when the Union acts within its external competences and within the remit of an association agreement, the proper legal basis should be chosen from those Treaty provisions regulating such action (part V), irrespective of whether the aim and content of the external measure are to introduce cooperation equal to that between Member States or not. To put it simply, the choice of the correct substantive legal basis cannot depend on the quality of the association between the EU and the third country, and if so, only as a supportive or secondary argument. In that sense, it seems illogical that the presence of Article 217 TFEU as a legal basis depends on the quality of the association agreement or the implementing measures.

One of the possible approaches of the Court could have been to focus on the presence of the additional specific legal basis, instead of Article 217 TFEU, as the result of the differentiation. This would have led to a situation, where a measure implementing an association agreement would be based on Article 217 TFEU and an additional specific Article for those third parties which can be placed on an equal footing, and sole Article 217 TFEU for the other countries. Such a scenario would have allowed the Court to differentiate between the different categories of association agreements and thus follow its ‘equal footing’ approach.

However, it would have also been difficult to reconcile this approach with the legal framework of the Protocol, which allows UK not to take part in the AFSJ measures. If the legal basis had been sole Article 217 TFEU, this would have hardly triggered the application of the Protocol, even for the AFSJ acts, which would have led to a loss of the Protocol’s effet utile. Even though the AG addresses this consequence in paragraphs 114-120 of her opinion, the author does not find that argumentation persuasive. In that sense, the current approach taken by the Court complies better with the framework of the Protocol.

To sum up the assessment, the Court has so far resolved the cases of a correct substantive legal basis for the adoption of a measure implementing an association agreement between the EU and (i) EFTA member states participating in the EEA, (ii) Switzerland, and now also (iii) other third countries that do not enjoy the full extension of the EU internal market or one of the freedoms and thus cannot be ‘equated with an EU Member State’. It is the author’s view that the Court should not have focused to such an extent on the equal footing. It should have started with choosing Article 217 TFEU and additional specific provisions corresponding to the internal competence as the correct legal basis, or  continued with only one specific legal basis, as suggested by the Council and the Commission. Instead, focusing on the equal footing criterion, the Court opted for a rather unpredictable ad-hoc approach, which might be considered beneficial for academics and people interested in EU law in general, since it generates more case-law, but which is surely not beneficial to legal certainty. So to answer the question whether the Court has been successful in ending the dispute: it is the author’s view that the dispute has been concluded, but unfortunately not because of the Court’s unambiguous stance from the very beginning but probably because the applicant might be too fatigued to continue fighting…