By the Select Committee appointed to consider Community proposals, whether in draft or otherwise, to obtain all necessary information about them, and to make reports on those which, in the opinion of the Committee, raise important questions of policy or principle, and on other questions to which the Committee considers that the special attention of the House should be drawn.

ORDERED TO REPORT

5713/99

Draft Council Decision amending Decision 88/591/ECSC, EEC, Euratom establishing a Court of First Instance of the European Communities and designed to enlarge the Court's jurisdiction.

Introduction

1. There are two Community Courts, the Court of Justice (ECJ) and the Court of First Instance (CFI). Both Courts have jurisdiction to hear challenges to Community acts, such as decisions of the Commission, and to hear actions based on arbitration clauses.[1] Whether the proceedings are commenced in the ECJ or the CFI depends on the status of the applicant. This can give rise to problems. The ECJ has brought forward a proposal aimed at ensuring a better, more efficient, administration of justice. Jurisdiction in actions brought by Member States for annulment of Community acts within certain fields, and actions based on an arbitration clause, would be transferred from the ECJ to the CFI. That proposal is the subject of this Report.

2. At the present time the CFI hears direct actions[2] brought by natural and legal persons but not those brought by the Community institutions or the Member States. Anomalies and practical difficulties may arise as a consequence of some cases having to start in the ECJ whilst others begin in the CFI. This is a particular concern where the same act gives rise to proceedings in both Courts ("parallel actions"). For example a decision of the Commission under the Merger Control Regulation[3] may be challenged by undertakings affected as well as by a Member State[4]. In such cases, there are rules providing for the allocation of responsibility between the ECJ and the CFI for hearing such cases and for actions to be stayed in either Court in appropriate circumstances.

3. As a result of amendments to the EC Treaty made by the Treaty on European Union agreed at Maastricht it is, in principle, possible for all direct actions to be transferred to the CFI. But such a transfer might be considered to be objectionable on the grounds that some direct actions may raise issues of political significance. For example, a Member State might challenge the legality of Community legislation, such as a regulation or directive, made by the Council. Or one Member State may bring an action against another alleging breach of the Treaty. The present proposal advocates the transfer of only certain classes of case to the CFI.

The proposal

4. Under the ECJ's proposal the CFI would hear certain actions for annulment brought by Member States. Two limitations apply. First, actions would have to relate to certain specified fields of Community law: in particular the common transport policy, the competition rules applicable to undertakings, State aid, trade protection (anti-dumping) measures, and Community funds, financial instruments and action programmes providing for the grant of Community financial support. Secondly, a Member State could only challenge before the CFI certain categories of act, such as Commission decisions and other measures dealing with particular individual cases. Actions relating to legal instruments having general application, such as regulations and directives, would continue to be heard by the ECJ. The proposal would also transfer to the CFI jurisdiction over actions based on an arbitration clause[5] brought by a Community institution.

Other initiatives

5. The proposal should be seen against the background of two other documents that have recently been put forward by the Community Courts. The first is a formal proposal to deal with the imminent arrival in the CFI of a very substantial number of appeals relating to Community trade marks. If adopted, six more judges would be appointed to the CFI and other resources made available to it, some immediately. The second, a discussion paper entitled The Future of the Judicial System of the European Union, surveys the problems of the Community judicial system and presents a graduated list of wide-ranging and far-reaching proposals and ideas for reform, some requiring amendment to the Treaties.

The enquiry

6. The present proposal is important for at least three reasons. First, Member States have never before been required to commence litigation in the CFI. Secondly, if the CFI is to be given jurisdiction in certain limited types of direct actions brought by Member States, the categories concerned should be the right ones and should be defined as precisely as possible. Thirdly, there is the question whether more cases should be given to the CFI at a time when it is already overburdened (a fact to which the Committee drew attention in its 1998 Report, The Court of First Instance: Single Judge[6]).

The Committee's conclusions

7. The Committee supports the proposal, which will go some way in improving the allocation of cases between the two Community Courts and in reducing the possibility of parallel actions. Subject to one point, the Committee agrees that the proposal should be limited in the ways that are proposed. The six fields of Community law listed in the proposal are suitable for transfer, particularly clearance of account cases and state aid cases. They involve complex issues of fact, for which the CFI was established and with which it has shown itself well able to deal. We agree that the proposal should be limited to challenges relating to Commission decisions and other specific acts. Where a Member State challenges the legality of a measure of general application, then the proceedings should continue to be commenced and heard in the ECJ. However, further consideration should be given to extending the category of direct actions covered by the proposal to include actions for failure to act.

8. While the proposal is aimed at improving the efficiency of the administration of justice, it is not aimed at reducing the workload of the ECJ. The proposal is not generally considered to raise significant resources problems. In practice not many cases are likely to be involved. But the effect will be that cases will be transferred from one Court that is under strain to another that has similar difficulties. The Committee remains concerned about the current levels of workload of the two Community Courts and consequent delays in disposing of cases. Unless something is done urgently the situation can only get worse, with potentially serious implications for the coherence of the Community's legal order and for citizens' access to justice. Nothing was done at the time of the Amsterdam Treaty to improve the situation. The opportunity should be taken in the forthcoming Inter-Governmental Conference to address these problems in so far as their solution depends upon Treaty amendment. The Committee looks to the Government to take a positive lead in reform being placed on the agenda.

The structure of the Report

9. The structure of the Report is as follows. Part 2 (Background) describes the CFI and the proposal in more detail. Part 3 summarises the evidence. Part 4 contains the Opinion of the Committee. Sub-Committee E (Law and Institutions), whose members are listed in Appendix 1, carried out a short inquiry into the issues raised by the Court of Justice's proposal. The Sub-Committee heard evidence from Mr Paul Lasok QC, representatives of the Council of the Bars and Law Societies of the European Union (CCBE), and officials from the Foreign and Commonwealth Office and the Treasury Solicitor's Department. In addition the CFI supplied statistical tables and other factual information. The witnesses who gave oral or written evidence are listed in Appendix 2. The text of the proposal is reproduced in Appendix 3. The evidence is printed with the Report. We are grateful to all those who assisted in the enquiry.

2   A direct action is a contentious proceeding begun in the ECJ or CFI and decided in that court. It can be contrasted with a preliminary reference whereby a national court within the context of proceedings before it refers a question to the ECJ for interpretation. Back

3   Council Regulation (EEC) No. 4064/89 of 21 December 1989 on the control of concentrations between undertakings, as amended. The Merger Control Regulation has been the subject of two reports by the Select Committee: Merger Control, 6^th Report, Session 1988-89, HL Paper 31; and Review of the EC Merger Regulation, 4^th Report, Session 1996-97, HL Paper 30. Back

4   As happened in relation to the Commission's decision to approve the merger, Kali + Salz/Mdk/Treuhand. See Joined cases C-68/94 and 30/95, French Republic and Others v. Commission: [1998] E.C.R. I-1375. Back

5   The basis of the Community Courts' jurisdiction in such cases is Art. 238 EC, Art. 42 ECSC and Art. 153 Euratom. The nature of actions based on such clauses is described at para 19. Back

6   25th Report, 1997-98, HL Paper 114. Back